T
C
F
F
i
n
a
n
c
i
a
l
C
o
r
p
o
r
a
t
i
o
n
|
2
0
1
0
A
n
n
u
a
l
R
e
p
o
r
t
TCF Financial Corporation | 2010 Annual Report
Bold Thinking
Swift Decisions
Smart Banking
TCF Financial Corporation
200 Lake Street East
Wayzata, MN 55391-1693
www.tcfbank.com
TCFIR9347
Table of Contents
01 Financial Highlights
02 Letter to Our Stockholders
12 Board of Directors
Annual Report on Form 10-K
01 Business
08 Risk Factors
17 Selected Financial Data
18 Management’s Discussion and Analysis
52 Consolidated Financial Statements
56 Notes to Consolidated Financial Statements
95 Other Financial Data
Additional Information
108 Corporate Information
112 Stockholder Information
113 Corporate Philosophy
Despite a troubled economy and numerous legislative
and regulatory burdens, TCF has reported 63 consecutive
quarters of profitability and a record high level of
capital in 2010. We continue to focus on our conservative
banking philosophy, which has proven its sustainability
throughout the current economic cycle. We are seeing
encouraging signs on the credit front, such as a
decrease of nearly $20 million in non-performing assets
during the fourth quarter of 2010. Throughout 2010, we
have demonstrated an ability to meet our challenges
head-on. This proactive approach has proven to be
the right thing to do for our customers and stockholders.
2010 Annual Report
• 113 •
Corporate Philosophy
Profit Centers TCF’s focused profit center structure creates
superior financial performance. Day-to-day operations are organized
by profit centers within business lines: Wholesale Banking (commercial
banking, leasing and equipment finance, and inventory finance),
Retail Banking (branch banking and retail lending), Treasury Services
and Support Services, each with profit center goals and objectives.
TCF emphasizes net income, return on average assets and earnings per
share growth at acceptable levels of risk. We offer products that are
profitable and contribute to these goals. Our profit center structure
creates a highly responsive and performance driven culture.
Convenience TCF emphasizes convenience in banking; we’re
open 12 hours a day, seven days a week, 364 days per year. TCF
banks a large and diverse customer base. We provide customers
innovative products through multiple banking channels, including
traditional, supermarket and campus branches, TCF Express Teller®
and other ATMs, debit cards, phone banking, Internet banking
and mobile banking.
Checking Accounts TCF focuses on growing and retaining its
large number of low-interest cost checking accounts by offering
convenient hours and delivery channels, and products with many
free features. TCF uses the checking account as the anchor account
to build additional customer relationships.
Deposits TCF earns a significant portion of its profits from the
deposit side of the bank. We accumulate a large number of low cost
accounts through convenient services and products targeted to a
broad range of customers. As a result of the profits we earn from
the deposit business, we can minimize credit risk on the asset side.
Secured and Diversified Lender TCF maintains a secured
loan and lease portfolio that is well-diversified by type (consumer,
commercial, specialty finance) and by geography. We further diversify
our asset portfolio by industry, product and collateral type to minimize
concentration risk. In addition, we require our loans and leases to
be supported by collateral to provide an alternate repayment source
beyond cash flow from the borrower, which helps mitigate losses.
We emphasize credit quality over asset growth as the costs of poor
credit quality far outweigh the benefits of unwise asset growth.
Conservative Underwriting TCF’s diversified asset portfolio
and our extensive credit review practices reduce our credit risks
while creating profitability and sustainable growth, even in the
most challenging economic environments. We lend and lease to
high-quality customers and invest only in programs that add
value to the organization and yield solid returns.
Interest-rate Risk TCF believes interest-rate risk should be
minimized. Interest-rate speculation does not generate consistent
profits and is high risk.
Capital and Liquidity TCF focuses on prudent capital and
liquidity management which strengthens our capital position,
increases our borrowing capacity, and reduces our costs and risks.
We are solidly capitalized and have access to ample liquidity to
conduct business. TCF’s financial strength makes us a safe and
sound financial institution.
Expansion TCF grows both through de novo expansion and
acquisition. We are growing by starting new businesses, opening
new branches and offering new products and services.
The C ustomer F irst TCF strives to place The Customer First. We
believe providing great service helps to retain existing customers,
attract new customers, create value for our stockholders, and build
pride in our employees. We also respect customers’ concerns about
privacy and know they place their trust in us. TCF is committed to
protecting the private information of our customers and retaining
that trust is our priority.
Stock Ownership TCF encourages stock ownership by our
officers, directors and employees. We have a mutuality of interest
with our stockholders, and our goal is to earn for them an above-
average return.
Technology TCF places a high priority on the development of
technology to enhance productivity, customer service and new
products. Properly applied technology increases revenue, reduces
costs and enhances customer service. We centralize back office
activities and decentralize the banking process.
Conservative Accounting TCF utilizes conservative accounting
and financial reporting principles that accurately and honestly
report our financial condition and results of operations. We believe
good accounting drives good business decision-making.
Open Employee Communication TCF encourages open employee
communication and promotes from within whenever possible. TCF
places the highest priority on honesty, integrity and ethical behavior.
Equal Treatment TCF does not discriminate against anyone
in employment or the extension of credit. As a result of TCF’s
community banking philosophy, we market our products and
services to everyone in the communities we serve.
Community Participation TCF believes in community
participation, both financially and through volunteerism.
We feel a responsibility to help those less fortunate.
2010 Annual Report
• 1 •
Financial Highlights
(Dollars in thousands, except per-share data)
2010
2009
% Change
At or For the Year Ended December 31,
Operating Results:
Net interest income
Provision for credit losses
Net interest income after provision for credit losses
Non-interest income:
Fees and other revenue
Gains on securities, net
Total non-interest income
Non-interest expense
Income before income tax expense
Income tax expense
Income after income tax expense
Income (loss) attributable to non-controlling interests
Net income
Preferred stock dividends
Net income available to common stockholders
Per Common Share Information:
Basic earnings
Diluted earnings
Dividends declared
Stock price:
High
Low
Close
Book value
Price to book value
Financial Ratios:
Return on average assets
Return on average common equity
Net interest margin
Net charge-offs as a percentage of average loans and leases
Tier 1 common risk-based capital ratio(1)
N.M. Not Meaningful.
(1) See page 45 under Management’s Discussion and Analysis
for reconciliation of GAAP to non-GAAP measures.
$ 699,202
236,437
462,765
$633,006
258,536
374,470
508,862
29,123
537,985
763,124
237,626
87,765
149,861
3,297
146,564
–
$146,564
496,468
29,387
525,855
767,784
132,541
45,854
86,687
(410)
87,097
18,403
$ 68,694
$ 1.05
1.05
.20
$ .54
.54
.40
18.89
12.90
14.81
10.30
1.44 X
16.67
8.74
13.62
9.10
1.50 X
.82%
10.36
4.14
1.47
9.71
.49%
5.95
3.87
1.34
7.65
10.5%
(8.5)
23.6
2.5
(.9)
2.3
(.6)
79.3
91.4
72.9
N.M.
68.3
(100.0)
113.4
94.4%
94.4
(50.0)
13.3
47.6
8.7
13.2
(3.9)
67.3
74.1
7.0
9.7
26.9
William A. Cooper,
Chairman of the Board & Chief Executive Officer
Dear Stockholders:
As I finish my 25th year as Chairman
funded with low-cost retail deposits
At December 31, 2010, TCF’s stock price
of TCF, it is rewarding to see that we
and we don’t participate in nationally
closed at $14.81 per share, up from
have been able to create a successful
syndicated credits.
$13.62 per share on December 31,
company with sustained profitability
through the various economic cycles.
I attribute our success to a conservative
philosophy of banking, which is
embedded in everything we do at
TCF. At year end, TCF reported its 63rd
consecutive quarter of profitability.
This is a noteworthy achievement few
of our competitors can match. At TCF,
we value a large and growing customer
base and deliver on our core conve-
nience promise; we believe in secured
and diversified lending to minimize
risk; we focus on prudent capital and
2010 was yet another tumultuous year
in the financial services industry. Many
economists and bankers, including
myself, thought 2010 would be “The
Comeback Year” in which real signs of
economic improvement would be seen
throughout the country. Instead, we
continued to see elevated unemploy-
ment rates, depressed values on homes
and other assets, and businesses
postponing projects.
2009 and a 52-week low of $12.90 on
November 1, 2010. We have seen
significant volatility in the stock price
over the past 52 weeks and increased
short-selling activity, but by year-end
the pressure on our stock price was
related mainly to the uncertainty
around the regulatory environment,
which I expect to settle somewhat
in 2011 when we know more where
these new regulations will land.
Change in 2010 came mainly from
expansion of government intervention
A Look At 2010
• TCF management and staff spent a
liquidity management to create a safe
into the financial services industry.
great deal of time and effort around
and sound bank; and we manage our
Compliance with new legislation and
compliance with new and proposed
expenses very well. We have a business
regulation for all financial institutions
regulations in 2010, primarily around
model that works, despite the economic
has been significant in terms of both
the following items:
conditions we have faced.
As important as what we have done are
the things we have not done. TCF never
made any subprime loans. We never
securitized any loans. We did not
conduct business with Fannie Mae® or
Freddie Mac®. We don’t own any credit
default swaps. All of our assets are on
our balance sheet. Virtually all of our
loans are secured. We are largely
time and cost, but more painful for
institutions like TCF that never partici-
pated in the various activities that
caused the financial crisis in the
first place. This level of government
oversight is unlike any I have seen
in my career. However, I can say with
certainty that banks, including TCF, will
find ways to continue to address these
issues going forward.
Opt-in Initiative On August 15, 2010,
new regulations on overdraft fees
specific to ATM transactions and
one-time debit card transactions became
fully effective. TCF was one of the first
banks in the country to proactively
implement a highly successful customer
education program around this issue
and the number of opt-ins has been a
true testament of how our customers
2010 Annual Report
• 3 •
At year-end, TCF reported its 63rd consecutive quarter of profitability.
value the overdraft services provided
like TCF. Since the Fed announced its
by TCF. Since implementation, we have
proposal, we have seen more and more
seen a decline in overall fees and
parties express increased concern
service charges, but this decline has
about the potential implications of the
been less significant than that of most
Durbin Amendment. Our lawsuit has
of our competitors. Our success with
certainly been the right thing to do for
opt-in, as well as our implementation
our customers and stockholders and
of new account maintenance fees,
we remain confident that a favorable
demonstrates our willingness and ability
outcome can be achieved.
to meet regulatory challenges head-on.
• Despite the lingering economic crisis,
Dodd-Frank Act, particularly the Durbin
TCF earned $146.6 million in 2010, up
Amendment TCF senior management,
68 percent from the previous year.
with the assistance of third party
Diluted earnings per common share
experts, extensively researched the
was $1.05, up 94 percent from 2009.
legality of provisions of the Dodd-Frank
Act known as the Durbin Amendment,
that limit the ability of banks to receive
debit card interchange fees. On October
12, 2010, TCF filed a lawsuit challenging
the constitutionality of the Durbin
Amendment. We believe the provisions
of the Durbin Amendment clearly
violate multiple constitutional rights of
TCF and similarly situated banks. More
specifically, the rights that have been
compromised deal with our ability to
earn a fair rate of return on our invested
capital and to compete on even ground
with banks exempted by the law. In
December 2010, the Federal Reserve
Board issued a proposed regulation
based on the Durbin Amendment
creating proposed caps on interchange
fees that, if implemented, will result
in a significant revenue loss for banks
• TCF’s net interest margin was 4.14
percent for the full year of 2010 and
4.04 percent in the fourth quarter of
2010. Our industry leading deposit
strategies and continued reduction of
high interest-rate certificates of deposit
balances contributed significantly to net
interest margin. During 2010, we took
certain actions to increase the asset
sensitivity of the balance sheet in
anticipation of rising interest rates,
which included changing the mix of
fixed- and variable-rate loans. This has
limited expansion of the net interest
margin in the short-term, but is in the
best long-term interest of the company.
Overall, TCF’s net interest margin
continues to be better than the
average of the Top 50 Banks by
approximately 68 basis points.
• 4 • TCF Financial Corporation and Subsidiaries
• TCF has paid a common stock
of Vice Chairman Barry Winslow to lead
dividend 91 consecutive quarters and
a reorganized and improved risk
returning capital to our stockholders
management system.
continues to be an important part of
how we deliver value. In 2010, TCF’s
annual dividend rate was $.20 per
TCF Retail Banking
TCF’s Retail Banking division consists
share. The continued low dividend rate
of branch banking and retail lending.
currently accelerates the accumulation
In branch banking, we spent a lot of
of retained earnings, which adds to our
time this year evaluating our product
capital base for future growth. When
line-up and pricing structures in light
capital accumulation from earnings
of the changes in both the regulatory
exceeds capital required for asset
environment and competitive
growth and risk parameters permit,
landscape.
TCF will raise its dividend.
In early 2010, as a result of new
• TCF is financially strong and remains
Regulation E rules, we eliminated TCF
a safe and sound bank. We are solidly
Totally Free Checking and implemented
capitalized and have ample liquidity
a new anchor account, TCF Convenience
to conduct business. TCF’s tier 1
CheckingSM, that included a monthly
risk-based capital was $1.5 billion, or
maintenance fee. This monthly
10.59 percent of risk-weighted assets,
maintenance fee is waived for account
and total risk-based capital was
holders who meet certain minimum
$1.8 billion, or 12.98 percent of
requirements. While we experienced
risk-weighted assets. We continue to
increased attrition as a result of the
exceed the well-capitalized requirements
new checking product structure, we did
as defined by the regulatory agencies.
manage to increase total deposits to
At December 31, 2010, TCF had $415.5
$11.6 billion at December 31, 2010, up
million of excess total risk-based capital
slightly from last year.
over the stated well-capitalized
requirement. TCF’s total tier 1 common
capital ratio was 9.71 percent. We
anticipate exceeding the minimum
standards under the Basel III capital
guidelines, which are out for comment
as this letter was written.
We are committed to our convenience
promise and have been working hard
to simplify our product structures and
make them more transparent. After
listening carefully to our customers,
we reevaluated our checking product
line-up and made some important
• On February 26, 2010, TCF raised
net proceeds of approximately $164.5
million through a public common stock
offering of 12,322,250 shares. We chose
• The reorganization of TCF’s manage-
enhancements in January 2011. We
to take advantage of market conditions
ment structure was in effect for the full
now offer customers easy and straight-
to build our capital in preparation for
year of 2010 and resulted in improved
forward ways to waive the monthly
future growth opportunities to expand
efficiencies and cost effectiveness. With
maintenance fee and, most importantly,
our businesses, which we demon-
our day-to-day operations organized
we have eliminated the minimum
strated with our specialty finance
by business line, we have been able
balance requirement for most account
businesses in 2010. We are committed
to enhance our highly responsive and
types. These changes were designed to
to leveraging our capital to make
performance-driven culture.
provide most of our customers the
careful and wise investment decisions
that will increase TCF’s franchise value
in the long-term.
• We have strengthened our enterprise
risk management with the appointment
ability to use their checking account as
a primary account without being
charged a monthly maintenance fee.
2010 Annual Report
• 5 •
In addition, we will soon be piloting a
27 percent at December 31, 2009.
change to the structure of our overdraft
Despite the current economic condi-
services. The piloted product will result
tions, TCF provided lending to credit-
in a daily fee if the account balance
worthy customers and funded $879.2
is negative at the end of the day, not
million of new consumer real estate
a per item charge. The advantages
loans during 2010. These new loans
of this service are that it is simple to
have thus far performed well with low
understand and it eliminates a potential
delinquencies and minimal charge-offs.
pile-up of per item fees. We are being
proactive in the marketplace by
redesigning some of our product
TCF Wholesale Banking
TCF’s Wholesale Banking division
structures to be even more reasonable
consists of commercial banking and
and equitable to our customers as they
specialty finance (TCF Equipment
will better understand the charges
Finance, Winthrop Resources
they can expect on their accounts.
Corporation and TCF Inventory Finance).
TCF branch banking has seen the most
change of our business lines over the
past year with the imposition of new
regulations and legislation. While the
dust has yet to settle, we continue
to stay innovative while providing
competitive products and services
to our customers.
Loan balances in our retail lending
division decreased slightly in 2010
Loan balances decreased slightly during
the year in our commercial portfolio,
which totaled $3.6 billion at year-end.
Overall demand for commercial loans
was tempered by the sluggish economy.
Even though the number of new
commercial projects was minimal in
the market during the year, we did see
quite a bit of movement within the
sector with an increase of lenders
competing for business. Unfortunately,
as the portfolio totaled $7.2 billion at
in this low-rate environment, some of
year-end. With ongoing deterioration
our competitors chose to ease their
in home values and reductions in
underwriting standards and we saw
spending in the weakened economy,
increased prepayments. Our yields
we continued to reduce the consumer
were squeezed somewhat by the
real estate portfolio and made invest-
irrational pricing of some of these
ments in other higher-yielding asset
categories. We also concentrated on
changing the mix of our assets to
competitors. Our commercial portfolio
is performing well under these tough
economic conditions and I attribute this
emphasize variable-rate over fixed-rate
success to our conservative underwrit-
loans, contrary to the demand for
ing practices and our commitment to
fixed-rate loans in the low interest rate
relationship banking with long-term
Convenience
From our long-time standard
of being open 7 days and longer
hours to new and enhanced
products and services such
environment. While this effort reduces
customers. In 2011, we expect the
as TCF Mobile Banking, we
the margin in the short-term, we
reorganization efforts in commercial
continue to be at the forefront
believe when interest rates rise — as
lending to produce both positive results
of convenience banking.
they have always done in the past —
on the expense side and improved
the margin will benefit significantly.
prospecting efforts on the loan
At December 31, 2010, variable-rate
production side.
loans comprised 33 percent of total
consumer real estate loans, up from
Specialty finance, TCF’s nationally-
focused leasing, equipment and
• 6 • TCF Financial Corporation and Subsidiaries
inventory finance portfolio balances
Its acquisition of Fidelity National
increased $406.6 million, or 11 percent,
Capital, Inc. late in 2009 has yielded
during 2010. Growth momentum in
solid returns for us as we integrated
specialty finance stemmed from portfolio
the business and the new team of
purchases and program acquisitions
employees into the Winthrop culture.
as well as organic growth. Our highest
In 2010, Winthrop was recognized by
yielding loans and leases reside in
the Equipment Leasing and Finance
specialty finance, yet we are able to
Association (ELFA) as recipient of
minimize concentration risk by diversify-
the ELFA Operations and Technology
ing these businesses by industry,
Award for its successful implementa-
geography, product and collateral type.
tion of a lease accounting and
TCF’s leasing and equipment finance
management system.
business grew 3 percent in 2010. This
TCF’s newest specialty finance business
$3.2 billion portfolio is well-diversified
is TCF Inventory Finance, Inc. (TCFIF).
by equipment type and by geography.
TCFIF provides floorplan financing
Our leasing and equipment finance
principally for dealers of consumer
operation, which is comprised of TCF
products in the United States and
Equipment Finance and Winthrop
Canada. We started the business in late
Resources Corporation, is now the
2008 by entering into the consumer
29th largest in the United States, and is
electronics and household appliances
the 13th largest bank-affiliated leasing
industries, expanded into the lawn and
company in the United States.
garden industry in 2009, and further
In 2010, TCF Equipment Finance, Inc.
(TCFEF) expanded its capital markets
division, which focuses on portfolio and
company acquisition activities as well
as individual transactions on both the
buy and sell side. Expansion of the
capital markets activities has increased
our ability to acquire assets at a time
when the industry has been looking
for new sources of liquidity. TCFEF
completed a portfolio acquisition of
middle market leases toward the end
of the third quarter, which contributed
to increased leasing and equipment
expanded in 2010 into the power
sports industry with the assumption of
floorplan financing programs in Canada
for Arctic Cat Sales, Inc. We also entered
a relationship in the United States with
E-Z-GO®, a Textron, Inc. Company. It is
clear that TCFIF is focused on estab-
lishing relationships with suppliers,
dealer buying groups and manufacturers
that are leaders in the industries we
serve. Our joint venture established in
2009 with The Toro Company, a leader
in the lawn and garden industry based
in Minneapolis, Minnesota, continues
to be very strong and productive.
Asset
Diversification
We focus on diversifying
our assets by business line
and geography to minimize
concentration risk. An
example is the growth
of our specialty finance
businesses through portfolio
finance balances at the end of the year.
acquisitions — like TCF
Inventory Finance’s acquisition
of Arctic Cat® Canadian
power sports equipment
floorplan programs.
TCFEF employs 322 people and was
At year-end, the TCFIF portfolio balance
recognized as one of the Minneapolis
was $792.4 million with indirect credit
Star Tribune’s Top 100 Workplaces in
lines to 169 manufacturers and buying
the Twin Cities metro area in 2010.
groups and direct credit lines with
8,866 dealers in the United States
Winthrop Resources Corporation is our
and Canada. This management team
technology-oriented leasing company.
continues to work hard to position the
2010 Annual Report
• 7 •
We maintain a secured loan and lease portfolio that is
well-diversified, which both minimizes concentration
risk and helps mitigate losses.
company and find new opportunities
however, have allowed us the ability
to grow assets. Our next step is to look
to mitigate losses in the depressed
for additional niches and in 2011 we
economy.
expect to see significant returns on
our investments.
During the year, non-performing
assets increased $84.3 million, or
TCF has been focused on growing
21 percent. Unlike some other banks,
its higher-yielding specialty finance
TCF’s non-performing asset category is
business within its wholesale loan
not necessarily a leading indicator of
and lease portfolio. In just over a
future credit performance because
decade, we have changed the mix on
a significant amount of our credit
the asset side of the balance sheet
problems in this category have already
from 76 percent retail loans outstand-
been addressed through charge-offs
ing to an even mix between retail
or reserves. That being said, we were
loans and wholesale loans and leases.
pleased to see non-performing assets
We maintain a secured loan and lease
decline nearly $20 million during the
portfolio that is well-diversified, which
fourth quarter of 2010, the first decline
both minimizes concentration risk and
in 18 quarters. We cautiously view
helps mitigate losses. In addition, our
this as an early positive sign of credit
conservative underwriting practices
stabilization, which could be attribut-
result in lending and leasing to
able to our efforts to work out problem
high-quality customers and making
loans and leases and perhaps to an
investments only in programs that
improving economy.
add value to the organization.
Credit Quality
Credit losses — while better than most
of our peers — remained an issue and
significantly impacted TCF’s results
in 2010. Net charge-offs increased
15 percent, or 13 basis points, from last
year as adverse economic conditions
continued to impact some of our
consumer and commercial customers.
Our secured lending philosophy and
conservative under writing practices,
In 2010, TCF’s consumer real estate
delinquencies and net charge-offs
continued to increase, but at a slower
rate than in the previous two years
— an early sign of stabilization for this
portfolio. High unemployment rates
and lower home values continued to
persist in 2010, which led to continued
losses for TCF. To help our customers
avoid home foreclosure, we developed
loan modification programs that extend
payment dates, reduce interest rates
and/or reduce payment amounts.
• 8 • TCF Financial Corporation and Subsidiaries
percent of the outstanding balance. The
and leases, an increase of $21.3 million
over 60-day delinquency rate on these
from $244.5 million, or 1.68 percent of
loans was 5.3 percent at December 31,
loans and leases, at December 31, 2009.
2010. To date, our loan modification
The increase in allowance for loan and
programs are performing very well.
lease losses was primarily related
TCF also saw some credit deterioration
within its Wholesale Banking business,
primarily in commercial real estate,
attributable to the recessionary state
of the economy. We did see credit
quality improvement in specialty
finance with delinquencies down for
to increased reserve levels on loans
secured by real estate. The provision
for credit losses of $236.4 million,
however, decreased 9 percent from
last year mainly due to credit improve-
ments in the leasing and equipment
finance portfolio.
six consecutive quarters and non-
Overall, we have seen some improve-
accrual loans and leases down for three
ment in credit quality, most notably in
consecutive quarters at year-end. We
our leasing and equipment finance
continued to closely monitor our
portfolio. We have started to see early
wholesale customers, and in particular
signs of stabilization in our consumer
those customers in distressed indus-
real estate portfolio, which gives us
tries and geographies. Our relationship
some optimism about 2011, however,
banking strategy provided us the ability
it is still too early to claim victory. While
to effectively work out many distressed
still challenging, our credit losses
loans. Wholesale Banking continues
remain less than most of our peers
to be very profitable and is highly
and continue to be manageable.
diversified and well-managed.
Real estate owned properties and real
estate in judgment properties increased
over the past year as the length of time
in the foreclosure process continues to
expand. Delays in TCF’s foreclosure
process are not due to any failures in
our system to comply with regional
At December 31, 2010, TCF held
laws, like the robo-signer debacle at
$337.4 million of modified consumer
other banks, but were affected by an
real estate loans that are considered
overwhelmed legal system in some
troubled debt restructurings (TDRs) and
markets. The foreclosure crisis of 2010
continue to accrue interest, up from
involved misbehavior and documenta-
$252.5 million at December 31, 2009. In
tion mistakes by some of our larger
these cases, we granted a concession
competitors. TCF did not participate in
regarding the terms of the loan to help
any of these practices and continues to
homeowners with appropriate financial
follow prudent policies and procedures
means retain ownership of their house
around the foreclosure process.
Revenue
TCF’s total revenue in 2010 was
$1.2 billion, up 7 percent from last year
with an increase of 10 percent in net
interest income and an increase of
2 percent in non-interest income. Our
aggressive deposit pricing strategy and
growth in our specialty finance portfolio
in 2010 contributed to the increase in
net interest income. Net interest
income, however, was pressured by
increased non-accrual loans and leases
and TDRs, as well as management’s
efforts to change the mix of assets by
replacing the run-off of higher-yielding
fixed-rate loans with lower-yielding
variable-rate loans in anticipation of
future interest rate increases.
and to improve the likelihood that we
will collect the principal owed. Reserves
for losses on accruing consumer real
estate TDRs were $37 million, or 11
At December 31, 2010, TCF’s allowance
for loan and lease losses totaled
$265.8 million, or 1.80 percent of loans
Banking fees and service charges in
2010 decreased from last year primarily
due to the implementation of opt-in
2010 Annual Report
• 9 •
regulations in August 2010. This impact
costs increased significantly as a result
was partially offset by new monthly
of the administration of the company’s
maintenance fee income. We look
Bank Secrecy Act program. Legal costs
forward to 2011 as we believe our
increased as well due to the challenge of
banking customers will find value in the
the Durbin Amendment of the Dodd-
enhancements we have recently made
Frank Act. In addition, foreclosed real
to our anchor checking account, TCF
estate and repossessed asset expenses
Convenience Checking, as well as
increased $8.5 million, or 27 percent,
additional deposit account products
from last year as a result of increased
and enhancements yet to come in 2011.
levels of consumer real estate properties
TCF’s card revenue of $111.1 million
owned and the associated expenses.
in 2010 was up 6 percent from 2009,
Even during these difficult times, TCF is
which was attributable to an increase
committed to the ongoing professional
in consumer spending and a small
development of its employees and
increase in average interchange rates.
continues to recognize and motivate
TCF has a large checking account base
hard working individuals through job
contributing to our ranking as the 11th
promotions, incentive compensation,
largest Visa® Classic debit card issuer
tuition reimbursement and other
in the United States. Card revenue
reward programs. We strongly believe
could be impacted in 2011 depending
that maintaining an experienced and
upon the Federal Reserve’s final rules
motivated team creates a competitive
on debit card interchange rates and
advantage and is crucial to enhancing
the outcome of our lawsuit.
stockholder value.
A strong fee category in 2010 was
TCF also continues to support the
leasing and equipment finance
communities in which we serve, both
revenues, which totaled $89.2 million,
financially and through volunteerism.
up 29 percent, from the prior year.
During 2010, TCF and its employees
Both operating lease revenues and
contributed over $2 million to charitable
customer- driven sales-type lease
organizations in human services,
revenues increased in 2010.
education, community development
Expenses
TCF was very efficient in managing
and the arts. In addition, numerous TCF
employees generously gave their time
by volunteering and providing leader-
its operating expenses in 2010. We
ship to local nonprofit organizations.
continued to place an emphasis on our
TCF and its employees continue to
core businesses of deposit gathering and
express a commitment to make a
loan and lease production. In addition,
difference for people in need and for
Safe and Sound
We emphasize prudent capital
and liquidity management which
strengthens our capital position,
increases our borrowing capacity
and reduces our costs and risks.
our streamlined day-to-day operations
the communities we serve, and we have
Our customers and stockholders
via our recent company reorganization
an ongoing focus on organizations that
reduced redundancies, improved
have TCF employee involvement.
can be confident that they are
doing business with a safe and
efficiencies and created a highly
responsive and performance-driven
culture. Unfortunately, 2010 presented
some unusual charges that fell outside
of core operating expenses. Consulting
Expense control will be an ongoing
sound financial institution.
emphasis in 2011. TCF management and
employees will continue to find ways to
contribute to the bottom line while still
carefully monitoring expenses.
• 10 • TCF Financial Corporation and Subsidiaries
To Be Successful in
2011, We Must:
• Continue growth momentum in
loans, leases and deposits. With fewer
competitors in the market on both the
deposit side and the lending side, now
is an opportune time to capture deposit
customers through premium campaigns,
• Stay innovative in product and
service offerings within the constraints
of new regulations. We have shown
that we can be flexible and move
quickly in response to regulatory
changes imposed on our products
and services. We will continue to be
innovative to protect our future profits.
new products and services such as
• Continue to review and control
TCF Mobile Banking, and cross-sell
expenses. In this difficult operating
initiatives while lending to creditworthy
environment, it is important to focus
customers. Despite a decrease in the
on expense control, and in 2011 it will
number of deposit accounts in 2010,
be a team effort of all TCF employees.
we intend to earn them back in 2011.
We will continue to identify areas
Deposit gathering and loan and lease
within our business lines to improve
production are the bread and butter of
processes and efficiencies.
TCF, and a high priority for our entire
management team in 2011. Checking
account growth provides a low-cost
funding base and drives future deposit
fee income.
• Continue our longstanding commit-
ment to strong corporate governance.
Our customers and stockholders entrust
us with their money and confidential
information and, therefore, our
• Carefully monitor credit quality. Our
management practices demand the
objective in this area is to remain
highest of standards. Reputation for
conservative through controlled and
honesty and integrity continues to
thorough credit evaluation, secured
rank at the top of our priorities.
lending and prompt accounting for
credit losses and the related provision-
ing. I expect the economy to begin
to improve during the year, which
eventually should reduce the rate of
loan and lease defaults and reduce
credit losses. Credit quality, however,
will largely depend on the viability of
the U.S. economy, including home
prices and unemployment.
Risks to Our
Business Strategy
• Congressional and regulatory actions,
including the uncertainty surrounding
the Durbin Amendment, could have an
impact on our business and our ability
to generate future fee income. We do
not know what Congress will do next;
they may impose additional regulations
• Use capital wisely. TCF is solidly
on checking and card service fees.
capitalized. We will continue to be good
Litigation against Visa could also have
stewards of our stockholders’ capital
an impact on future card revenue.
and think in terms of the best long-term
Regulatory issues and the related
• The economic climate is a major
risk for all banks, including TCF.
Unemployment and depressed home
and commercial real estate values
reduce consumer spending and loan
demand, which impacts the ability of
banks to generate fee income and earn
interest on new loans.
interest of the company. Prudent capital
compliance burden continue to increase
• Managing interest-rate risk and the
management, which includes making
and impact TCF’s expenses. We continue
continued low levels of interest rates
wise investments, is a top priority as
to monitor these developments but a
with an eye toward the possibility of
well as staying cognizant of maintain-
growing amount of time and dollars
rapidly increasing inflation continues
ing a strong liquidity position for
are being spent on this effort.
to be very challenging.
unanticipated situations.
2010 Annual Report
• 11 •
We continue to be innovative and look for opportunities to create
and deliver value to our stockholders.
• Potential reductions in our borrowing
TCF has prudently managed these types
I would like to take this opportunity to
capacity because of restrictions put on
of risks in the past and we believe we
thank the board of directors for their
the Federal Home Loan Banks or the
are adequately prepared to manage
continued dedication, wise counsel
Federal Reserve Discount Window could
them in the future.
and support of TCF. It was very much
reduce our liquidity and inhibit growth
or force higher deposit costs. Growing
core deposits reduces this risk.
• Changes in customer behavior from
the slowing economy and advances in
technology could further impact fee
revenue. In addition, further changes
to our product and service offerings in
response to legislative changes could
impact customer banking preferences
in the future.
In Closing
TCF remains a safe and sound financial
appreciated in 2010. During the past
year, we welcomed Karen Grandstrand,
Ray Barton and Rick Zona to TCF board
institution. Our capital position is
membership. Karen has a wealth of
strong and we have ample liquidity to
knowledge and experience in law and
conduct business. I am proud we have
in the banking industry; Ray brings an
held tight to our conservative banking
entrepreneurial background and insight
principles and, as a result, TCF has
into the retail franchise business; and
remained profitable for an astounding
Rick provides us with his knowledge
63 consecutive quarters. We continue
and experience in the financial services
to be innovative and look for opportuni-
industry. We welcome their insights
ties to create and deliver value to
to assist TCF in our continued growth
• Growth expectations of our new
our stockholders despite the recession-
and success.
inventory finance business may not be
ary environment and government’s
achieved. This new line of business has
overreach into the banking industry.
been very successful for TCF, however,
We have also demonstrated an ability
the ability to retain existing business
to meet our regulatory challenges
relationships and attract new custom-
ers has become more challenging as
head-on. This proactive approach has
proven to be the right thing to do for
we find ourselves repeatedly compet-
our customers and stockholders.
ing with the nation’s largest inventory
finance provider.
We continue to have a mutuality of
accomplishments.
interest with our stockholders. Our
I would also like to give a special
thanks to our employees for their hard
work and efforts during another very
challenging year. Their exceptional
abilities, commitment and energy
make everything happen at TCF.
I am proud of the TCF Team and our
Thank you for your continued support
and investment in TCF.
William A. Cooper
Chairman and Chief Executive Officer
• A further deterioration of the public’s
senior management and board of
perception of banks. When public
perception sours as a result of bad
behavior from some of the largest
players, smaller community banks
directors own over 6.2 million shares,
or 4 percent of TCF stock. Eighty-two
percent of our match-eligible employees
participate in TCF’s Employees Stock
like TCF suffer the most. Therefore, it
Purchase Plan, which at year-end held
is important we continue to stick to
over 7.8 million shares.
our knitting and provide products
and services that appeal to all people.
• 12 • TCF Financial Corporation and Subsidiaries
Board of Directors
William A. Cooper
Chairman of the Board
and Chief Executive Officer,
TCF Financial Corporation
Chairman since 1987
Raymond L. Barton
Chairman and Chief
Executive Officer,
Great Clips, Inc.
Director since 2011
Peter Bell
Former Chair,
Metropolitan Council
Director since 2009
William F. Bieber
Chairman and Owner,
ATEK Companies, Inc.
Director since 1997
Theodore J. Bigos
Owner,
Bigos Management, Inc.
Thomas A. Cusick
Retired Vice Chairman,
TCF Financial Corporation
Director since 2008
Director since 1988
Luella G. Goldberg
Past Chair,
University of
Minnesota Foundation,
Former Acting President,
Wellesley College
Director since 1988
Karen L. Grandstrand
Partner,
Fredrikson & Byron PA
Director since 2010
George G. Johnson
CPA/Managing Director,
George Johnson & Company
Director since 1998
Vance K. Opperman
President and
Chief Executive Officer,
Key Investment, Inc.
Director since 2009
Gregory J. Pulles
Vice Chairman,
TCF Financial Corporation
Director since 2006
Gerald A. Schwalbach
Chairman,
Spensa Development
Group, LLC
Director since 1999
Ralph Strangis
Senior Partner,
Kaplan, Strangis and
Kaplan, P.A.
Director since 1991
Barry N. Winslow
Vice Chairman and
Chief Risk Officer,
TCF Financial Corporation
Director since 2008
Richard A. Zona
Retired Vice Chairman,
U.S. Bancorp
Director since 2011
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2010
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
x
For the transition period from to
Commission File No. 001-10253
TCF Financial Corporation
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of
incorporation or organization)
41-1591444
(I.R.S. Employer Identification No.)
200 Lake Street East, Mail Code EX0-03-A,
Wayzata, Minnesota 55391-1693
(Address of principal executive offices and zip code)
Registrant’s telephone number, including area code: 952-745-2760
Securities registered pursuant to Section 12(b) of the Act:
Common Stock (par value $.01 per share)
Warrants (expiring November 14, 2018)
(Title of each class)
New York Stock Exchange
New York Stock Exchange
(Name of each exchange on which registered)
No
No
No x
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes x
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter)
is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer,
or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting
company” in Rule 12b-2 of the Exchange Act.
No
Large accelerated filer x Accelerated filer
Non-accelerated filer
(Do not check if a smaller reporting company) Smaller reporting company
No x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes
The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the
average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed
second fiscal quarter as reported by the New York Stock Exchange, was $2,154,546,434.
As of January 31, 2011, there were 142,946,021 shares outstanding of the registrant’s common stock, par value $.01 per share,
its only outstanding class of common stock.
Specific portions of the Registrant’s definitive Proxy Statement for the 2011 Annual Meeting of Stockholders to be held on
April 27, 2011 are incorporated by reference into Part III hereof.
DOCUMENTS INCORPORATED BY REFERENCE
Table of Contents
Description
Part I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Part II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Part III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Market for Registrant’s Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm
Consolidated Financial Statements
Notes to Consolidated Financial Statements
Other Financial Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Controls and Procedures
Management’s Report on Internal Control Over Financial Reporting
Report of Independent Registered Public Accounting Firm
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Part IV
Item 15.
Signatures
Index to Exhibits
Exhibits, Financial Statement Schedules
Page
1
8
14
14
14
15
17
18
48
51
51
52
56
95
96
96
97
98
98
99
100
100
100
100
101
102
103
2010 Form 10-K
Part I
Item 1. Business
General
TCF Financial Corporation (“TCF” or the “Company”),
a Delaware Corporation incorporated on April 28, 1987,
is a national bank holding company based in Wayzata,
Minnesota. Its principal subsidiary is TCF National Bank
(“TCF Bank”), which is headquartered in Sioux Falls, South
Dakota. TCF Bank operates bank branches in Minnesota,
Illinois, Michigan, Colorado, Wisconsin, Indiana, Arizona
and South Dakota (TCF’s primary banking markets). TCF’s
focus is on the delivery of retail and commercial banking
products in markets served by TCF Bank, and commercial
equipment loans and leases and inventory finance loans
throughout the United States and Canada.
At December 31, 2010, TCF had total assets of $18.5 billion
and was the 35th largest publicly traded bank holding
company in the United States based on total assets as of
September 30, 2010. Unless otherwise indicated, references
herein to “TCF” include its direct and indirect subsidiaries.
References herein to the “Holding Company” or “TCF Financial”
refer to TCF Financial Corporation on an unconsolidated basis.
TCF’s core businesses include Retail Banking, Wholesale
Banking and Treasury Services. Retail Banking includes
branch banking and retail lending. Wholesale Banking
includes commercial banking, leasing and equipment
finance and inventory finance. TCF refers to its combined
leasing and equipment finance and inventory finance
businesses as Specialty Finance. Treasury Services includes
the Company’s investment and borrowing portfolios and
management of capital, debt and market risks, including
interest-rate and liquidity risks. See “Item 7. Management’s
Discussion and Analysis of Financial Condition and Results
of Operations — Results of Operations — Operating Segment
Results” and Note 24 of Notes to Consolidated Financial
Statements for information regarding TCF’s reportable
operating segments.
Retail Banking
At December 31, 2010, TCF had 442 retail banking branches,
consisting of 198 traditional branches, 234 supermarket
branches and 10 campus branches. TCF operates 201 branches
in Illinois, 111 in Minnesota, 55 in Michigan, 36 in Colorado, 26
in Wisconsin, 7 in Arizona, 5 in Indiana and 1 in South Dakota.
• 1 •
TCF makes consumer loans for personal, family or
household purposes, such as home purchases, debt consoli-
dation, financing of home improvements, automobiles,
vacations and education.
TCF’s retail lending origination activity primarily consists
of consumer real estate secured lending. It also includes
originating loans secured by personal property and, to a
limited extent, unsecured personal loans. Consumer loans
are made on a fixed-term basis or revolving line of credit.
TCF does not have any subprime lending programs nor did it
ever originate 2/28 adjustable-rate mortgages (ARM) or
option ARM loans.
Deposits from consumers and small businesses are a
primary source of TCF’s funds for use in lending and for
other general business purposes. Deposit inflows and
outflows are significantly influenced by economic and
competitive conditions, interest rates, money market
conditions and other factors. Consumer, small business
and commercial deposits are attracted from within TCF’s
primary banking market areas through the offering of a
broad selection of deposit instruments including consumer
interest-bearing checking accounts, money market
accounts, regular savings accounts, certificates of
deposit and retirement savings plans.
TCF’s marketing strategy emphasizes attracting core
deposits held in checking, savings, money market and
certificate of deposit accounts. These accounts are a source
of low-interest cost funds and provide significant fee
income, including banking fees and service charges.
Campus banking represents an important part of TCF’s
Retail Banking business. TCF has alliances with the University
of Minnesota, the University of Michigan, the University of
Illinois and four other colleges. These alliances include
exclusive marketing, naming rights and other agreements.
Branches have been opened on many of these college
campuses. TCF provides multi-purpose campus cards for
many of these colleges. These cards serve as a school
identification card, ATM card, library card, security card,
health care card, phone card and stored value card for
vending machines or similar uses. TCF is ranked 5th largest in
number of campus card banking relationships in the U.S. At
December 31, 2010, there were $264.8 million in campus
deposits. TCF has a 25-year naming rights agreement with the
University of Minnesota to sponsor its on-campus football
stadium called “TCF Bank Stadium®” which opened in 2009.
• 2 • TCF Financial Corporation and Subsidiaries
Non-interest income is a significant source of revenue
for TCF and an important factor in TCF’s results of operations.
Increasing fee and service charge revenue has been challeng-
ing as a result of the slowing of the economy and changing
customer behavior. Providing a wide range of retail bank-
ing services is an integral component of TCF’s business
philosophy and a major strategy for generating additional
non-interest income. TCF offers retail checking account
customers inexpensive, convenient access to funds at local
merchants and ATMs through its debit card programs. Costs
associated with TCF’s debit card programs are offset by
interchange fees charged to retailers and recorded as non-
interest income. Key drivers of non-interest income are the
number of deposit accounts and related transaction activ-
ity. New regulations that became fully effective on August
15, 2010 require consumer checking account customers to
elect if they want TCF to authorize debit card and ATM trans-
actions if, at the time of authorization, there are insufficient
funds in the account to cover the transaction (“opt-in”). TCF
has had a process in place to discuss this service with new
and existing consumer checking account customers since
early 2010. Under the new regulation, any account that
has not elected to opt-in is deemed by regulation to have
declined the service. The opt-in election is revocable by
customers at any time. Customers who have not elected to
opt-in may see an increase in the number of denied trans-
actions on their ATM or debit card transactions. These denied
transactions may impact consumer payment behavior and
reduce fees and service charges and card revenue. See
“Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations – Forward-Looking
Information – Other Risks Relating to Fee Income”.
Card revenues are anticipated to be further impacted by
the Durbin Amendment (the “Amendment”) to the Dodd-
Frank Wall Street Reform and Consumer Protection Act of
2010 (the “Act” or “Dodd-Frank Act”), which directs the
Board of Governors of the Federal Reserve System to estab-
lish rules by April 21, 2011, required to take effect by July
21, 2011, related to debit-card interchange fees. Federal
Reserve is defined as Federal Reserve Board or Federal
Reserve Bank. The proposed rule released by the Federal
Reserve on December 16, 2010 precludes the recovery of
costs other than those permitted by the Amendment, and the
resulting reduction in TCF’s average interchange rate after
July 21, 2011 could approach 85%. TCF Bank has filed a
lawsuit against the Federal Reserve and the Office of the
Comptroller of the Currency (“OCC”) challenging the
constitutionality of the Amendment on the grounds that it
violates TCF’s due process rights as it requires TCF to offer
the debit card product below its cost, denies TCF equal
protection under the law by exempting a large number of
institutions with assets less than $10 billion and violates
TCF’s rights under the takings clause of the Constitution
of the United States by causing TCF to bear a substantial
competitive and financial burden without just compensa-
tion. See “Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations – Consolidated
Income Statement and Analysis – Non-Interest Income” and
“Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations – Forward-Looking
Information” for additional information.
TCF does not engage in loan sales to securitizers of
asset-backed securities and as a result, is not subject to
any representations, warranties or other enforcement mecha-
nisms by investors in an asset-backed securities offering.
Wholesale Banking
Commercial Real Estate Lending Commercial real
estate loans are loans originated by TCF that are secured
by commercial real estate which includes retail centers,
multi-family housing, office buildings and, to a lesser
extent, commercial real estate construction loans, mainly
to borrowers based in its primary banking markets.
Commercial Business Lending Commercial business
loans are loans originated by TCF that are generally secured
by various types of business assets including inventory,
receivables, equipment and financial instruments. In very
limited cases, loans may be originated on an unsecured
basis. Commercial business loans are used for a variety
of purposes including working capital and financing the
purchase of equipment.
TCF concentrates on originating commercial business loans
to middle-market companies with borrowing requirements
of less than $25 million. Substantially all of TCF’s commercial
business loans outstanding at December 31, 2010 were to
borrowers based in its primary banking markets.
Commercial Banking Small business and commercial
deposits are attracted from within TCF’s primary banking
market areas through the offering of a broad selection
of deposit instruments including small business and
commercial demand deposit accounts, interest-bearing
checking accounts, money market accounts, regular
savings accounts and certificates of deposit.
2010 Form 10-K
• 3 •
Leasing and Equipment Finance TCF provides a broad
range of comprehensive lease and equipment finance
products addressing the financing needs of diverse types
of small to large companies. TCF’s leasing and equipment
finance businesses, TCF Equipment Finance, Inc. (“TCF
Equipment Finance”) and Winthrop Resources Corporation
(“Winthrop Resources”), finance equipment in all 50 states
and, to a limited extent, in foreign countries. TCF Equipment
Finance delivers equipment finance solutions to small and
mid-size companies in various industries with significant
diversity in the types of underlying equipment. Winthrop
Resources focuses on providing customized lease financing
to meet the special needs of mid-size and large companies
and health care facilities that procure high-tech equipment
such as computers, servers, telecommunication and other
technology equipment. During 2009, Winthrop Resources
acquired all of the outstanding shares of Fidelity National
Capital, Inc. (“FNCI”), which provided technology financing
through leasing solutions similar to those provided by
Winthrop, which broadened its market diversification.
Inventory Finance TCF’s Inventory Finance business
originates commercial variable-rate loans which are
secured by the underlying floorplan equipment and
supported by repurchase agreements from original equip-
ment manufacturers, with a focus on consumer electronics,
household appliances, lawn and garden products and power
sports products. TCF Inventory Finance operates primarily
in the U.S. with a presence in Canada. TCF Inventory
Finance commenced lending operations in December of
2008. In 2009, TCF Inventory Finance formed a joint
venture with The Toro Company (“Toro®”) called Red Iron
Acceptance, LLC (“Red Iron”). Red Iron provides U.S.
distributors and dealers and select Canadian distributors
of the Toro and Exmark® brands with reliable, cost-
effective sources of financing. TCF and Toro maintain a
55% and 45% ownership interest, respectively, in Red Iron.
Treasury Services
TCF Bank has authority to invest in various types of liquid
assets, including United States Department of the Treasury
(“U.S. Treasury”) obligations and securities of various
federal agencies and U.S. Government sponsored enterprises,
deposits of insured banks, bankers’ acceptances and federal
funds. TCF Bank’s investments do not include commercial
paper, asset-backed commercial paper, asset-backed secu-
rities secured by credit cards or auto loans, trust preferred
securities or preferred stock of Fannie Mae or Freddie Mac.
TCF Bank also has not participated in structured investment
vehicles and does not have any bank-owned life insurance.
TCF Bank must also meet reserve requirements of the Federal
Reserve, which are imposed based on amounts on deposit in
various deposit categories. TCF’s reserve requirements are
largely met through TCF’s vault cash levels.
Sources of Funds
Borrowings Borrowings may be used to compensate
for reductions in deposit inflows or net deposit outflows,
or to support expanded lending and leasing activities.
These borrowings may include Federal Home Loan Bank
(“FHLB”) advances, repurchase agreements, federal funds,
advances from the Federal Reserve Discount Window and
other borrowings.
TCF Bank, as a member of the FHLB system, is required
to own a minimum level of FHLB stock and is authorized to
apply for advances on the security of such stock, mortgage-
backed securities, loans secured by real estate and other
assets (principally securities which are obligations of, or
guaranteed by, the United States Government), provided
certain standards related to creditworthiness have been
met. FHLB advances are made pursuant to several different
credit programs. Each credit program has its own interest
rates and range of maturities. The FHLB prescribes the
acceptable uses to which the advances pursuant to each
program may be made as well as limitations on the size
of advances. In addition to the program limitations,
the amounts of advances for which an institution may be
eligible are generally based on the FHLB’s assessment of
the institution’s creditworthiness.
As an additional source of funds, TCF may sell securities
subject to its obligation to repurchase these securities
(repurchase agreements) with major investment banks or
the FHLB utilizing government securities or mortgage-
backed securities as collateral. Generally, securities with
a market value in excess of the amount borrowed are
required to be deposited as collateral with the counterparty
to a repurchase agreement. The creditworthiness of the
counterparty is important in establishing the overcollater-
alized amount of securities delivered by TCF is protected.
TCF only enters into repurchase agreements with institutions
having a satisfactory credit profile.
Information concerning TCF’s FHLB advances, repurchase
agreements, subordinated notes, junior subordinated notes
(trust preferred securities) and other borrowings is set
forth in “Item 7. Management’s Discussion and Analysis of
• 4 • TCF Financial Corporation and Subsidiaries
Financial Condition and Results of Operations — Consolidated
Financial Condition Analysis — Borrowings” and in Notes 10
and 11 of Notes to Consolidated Financial Statements.
Other Information
Activities of Subsidiaries of TCF Financial
Corporation TCF’s business operations include those
conducted by direct and indirect subsidiaries of TCF
Financial, all of which are consolidated for purposes of
preparing TCF’s consolidated financial statements. TCF does
not utilize unconsolidated subsidiaries or special purpose
entities to provide off-balance sheet borrowings. TCF Bank’s
subsidiaries principally engage in Leasing and Equipment
Finance and Inventory Finance activities. See “Item 1.
Business — Wholesale Banking” for more information.
Competition TCF competes with a number of depository
institutions and financial service providers in its market
areas, and experiences significant competition in attract-
ing and retaining deposits and in lending funds. Direct
competition for deposits comes primarily from banks,
savings institutions, credit unions and investment banks.
Additional significant competition for deposits comes from
institutions selling money market mutual funds and
corporate and government securities. TCF competes for
the origination of loans with banks, mortgage bankers,
mortgage brokers, consumer and commercial finance
companies, credit unions, insurance companies and
savings institutions. TCF also competes nationwide with
other companies and banks in the financing of equipment
and inventory. Expanded use of the Internet has increased
competition affecting TCF and its loan, lease and
deposit products.
Employees As of December 31, 2010, TCF had 7,363
employees, including 2,385 part-time employees. TCF
provides its employees with a comprehensive program of
benefits, some of which are provided on a contributory
basis, including comprehensive medical and dental plans,
a 401(k) savings plan with a company matching contribution,
life insurance and short- and long-term disability coverage.
Regulation
The banking industry is generally subject to extensive
regulatory oversight. TCF Financial, as a publicly held bank
holding company, and TCF Bank, which has deposits insured
by the Federal Deposit Insurance Corporation (“FDIC”), are
subject to a number of laws and regulations. Many of these
laws and regulations have undergone significant change in
recent years. These laws and regulations impose restric-
tions on activities, minimum capital requirements, lending
and deposit restrictions and numerous other requirements.
Future changes to these laws and regulations, and other
new financial services laws and regulations, are likely
and cannot be predicted with certainty. TCF Financial’s
primary regulator is the Federal Reserve and TCF Bank’s
primary regulator is the OCC.
Regulatory Capital Requirements TCF Financial and
TCF Bank are subject to regulatory capital requirements
of the Federal Reserve and the OCC, respectively, as
described below. These regulatory agencies are required by
law to take prompt action when institutions are viewed to be
unsafe or unsound or do not meet certain minimum capital
standards. The Federal Deposit Insurance Corporation
Improvement Act of 1991 (“FDICIA”) defines five levels
of capital condition, the highest of which is “well-capitalized”.
It requires that regulatory authorities subject undercapitalized
institutions to various restrictions such as limitations on
dividends or other capital distributions, limitations on
growth or restrictions on activities. Undercapitalized
banks must develop a capital restoration plan and the
parent bank holding company is required to guarantee
compliance with the plan. TCF Financial and TCF Bank are
“well-capitalized” under the FDICIA capital standards.
The Federal Reserve and the OCC also have adopted
rules that could permit them to quantify and account for
interest-rate risk exposure and market risk from trading
activity and reflect these risks in higher capital require-
ments. New legislation, additional rulemaking, or changes
in regulatory policies may affect future regulatory capital
requirements applicable to TCF Financial and TCF Bank.
The ability of TCF Financial and TCF Bank to comply with
regulatory capital requirements may be adversely affected
by legislative changes, future rulemaking or policies of
regulatory authorities, unanticipated losses or lower levels
of earnings.
Restrictions on Distributions TCF Financial’s ability
to pay dividends is subject to limitations imposed by the
Federal Reserve. In general, Federal Reserve regulatory
guidelines call upon a bank holding company’s board of
directors to take a number of factors into account when
considering the payment of dividends, including the quality
and level of current and future earnings.
2010 Form 10-K
• 5 •
Dividends or other capital distributions from TCF Bank
to TCF Financial are an important source of funds to enable
TCF Financial to pay dividends on its common stock, to make
payments on TCF Financial’s borrowings, or for its other
cash needs. The ability of TCF Financial and TCF Bank to pay
dividends is dependent on regulatory policies and regulatory
capital requirements. Payment of dividends may be subject
to regulatory approval. The ability to pay such dividends in
the future may be adversely affected by new legislation or
regulations, or by changes in regulatory policies.
In general, TCF Bank may not declare or pay a dividend
to TCF Financial in excess of 100% of its net retained profits
for the current year combined with its net retained profits
for the preceding two calendar years without prior approval
of the OCC. TCF Bank’s ability to make capital distributions
in the future may require regulatory approval and may be
restricted by its regulatory authorities. TCF Bank’s ability
to make any such distributions will also depend on its
earnings and ability to meet minimum regulatory capital
requirements in effect during future periods. These capital
adequacy standards may be higher in the future than exist-
ing minimum regulatory capital requirements, including the
U.S. regulatory rule-making relative to the implementation
of the capital and liquidity standards under Basel III, the
international regulatory framework for banks. The OCC also
has the authority to prohibit the payment of dividends by
a national bank when it determines such payments would
constitute an unsafe and unsound banking practice. In
addition, income tax considerations may limit the ability
of TCF Bank to make dividend payments in excess of its
current and accumulated tax “earnings and profits” (“E&P”).
Annual dividend distributions in excess of E&P could result
in a tax liability based on the amount of excess earnings
distributed and current tax rates. See “Item 7. Management’s
Discussion and Analysis of Financial Condition and Results
of Operations — Consolidated Financial Condition Analysis
— Liquidity Management” and Notes 13 and 14 of Notes to
Consolidated Financial Statements.
Regulation of TCF and Affiliates and Insider
Transactions TCF Financial is subject to Federal Reserve
regulations, examinations and reporting requirements
relating to bank holding companies. Subsidiaries of bank
holding companies like TCF Bank are subject to certain
restrictions in their dealings with holding company affiliates.
A holding company must serve as a source of strength
for its subsidiary banks, and the Federal Reserve may
require a holding company to contribute additional capital
to an under-capitalized subsidiary bank. In addition, the
OCC may assess TCF if it believes the capital of TCF Bank has
become impaired. If TCF were to fail to pay such an assess-
ment within three months, the Board of Directors must
cause the sale of TCF Bank’s stock to cover a deficiency
in the capital. In the event of a bank holding company’s
bankruptcy, any commitment by the bank holding company
to a federal bank regulatory agency to maintain the capital
of a subsidiary bank would be assumed by the bankruptcy
trustee and may be entitled to priority over other creditors.
Under the Bank Holding Company Act (“BHCA”), Federal
Reserve approval is required before acquiring more than
5% control, or substantially all of the assets, of another
bank, or bank or bank holding company, or merging or
consolidating with such a bank or holding company. The
BHCA also generally prohibits a bank holding company,
with certain exceptions, from acquiring direct or indirect
ownership or control of more than 5% of the voting
shares of any company which is not a bank or bank
holding company, or from engaging directly or indirectly
in activities other than those of banking, managing or
controlling banks, providing services for its subsidiaries,
or conducting activities permitted by the Federal Reserve
as being closely related to the business of banking. Further
restrictions or limitations on acquisitions or establishing
financial subsidiaries may also be imposed by TCF’s
regulators or examiners.
Restrictions on Change in Control Federal and state
laws and regulations contain a number of provisions which
impose restrictions on changes in control of financial
institutions such as TCF Bank, and which require regulatory
approval prior to any such changes in control. The Restated
Certificate of Incorporation of TCF Financial contains features
which may inhibit a change in control of TCF Financial.
Acquisitions and Interstate Operations Under federal
law, interstate merger transactions may be approved by
federal bank regulators without regard to whether such
transactions are prohibited by the law of any state, unless
the home state of one of the banks opted out of the
Riegle-Neal Interstate Banking and Branching Act of 1994
by adopting a law after the date of enactment of such act,
and prior to June 1, 1997, which applies equally to all out-
of-state banks and expressly prohibits merger transactions
involving out-of-state banks. Interstate acquisitions of
branches by banks are permitted only if the law of the state
in which the branches are located permits such acquisitions.
Interstate mergers and branch acquisitions may also
• 6 • TCF Financial Corporation and Subsidiaries
be subject to certain nationwide and statewide insured
deposit maximum concentration levels or other limitations.
Insurance of Accounts On November 9, 2010, the FDIC
issued a Final Rule implementing section 343 of the Dodd-
Frank Act that provides for unlimited insurance coverage
of certain non-interest bearing accounts. Beginning
December 31, 2010, through December 31, 2012, all non-
interest bearing transaction accounts are fully insured,
regardless of the balance of the account, at all FDIC-
insured institutions. The unlimited insurance coverage is
available to all depositors, including consumers, businesses,
and government entities. This unlimited insurance coverage
is separate from, and in addition to, the insurance coverage
provided to a depositor’s other deposit accounts held at an
FDIC-insured institution.
The FDIC has set a designated reserve ratio of 1.35%
($1.35 for each $100 of insured deposits) for the Deposit
Insurance Fund (“DIF”). The Federal Deposit Insurance Act
of 2005 (“FDIC Act”) provides the FDIC Board of Directors
the authority to set the designated reserve ratio between
1.15% and 1.50%. The FDIC must adopt a restoration plan
when the reserve ratio falls below 1.15% and begin paying
dividends when the reserve ratio exceeds 1.35%. There is
no requirement to achieve a specific ratio within a given
timeframe. The DIF reserve ratio calculated by the FDIC
at September 30, 2010 was a negative .15% and therefore,
the FDIC needs to increase premiums charged to banks.
In 2010, the annual insurance premiums on bank
deposits insured by the DIF varied between $.07 per $100
of deposits for banks classified in the highest capital
and supervisory evaluation categories to $.78 per $100
of deposits for banks classified in the lowest capital and
supervisory evaluation categories.
On November 12, 2009, the FDIC adopted a final rule
requiring depository institutions to prepay their estimated
quarterly insurance premium for fourth quarter 2009 and
all of 2010, 2011 and 2012. TCF Bank prepaid $77.6 million
of such premium on December 30, 2009 and $50.5 million
remained as a prepaid balance at December 31, 2010.
The expense related to this prepayment is anticipated to
be recognized over the next two years based on actual
calculations of quarterly premiums.
The Dodd-Frank Act requires changes to a number of
components of the FDIC insurance assessment, with an
implementation date of April 1, 2011. The changes amend
the current methodology used to determine the assess-
ments paid by institutions with assets greater than $10
billion, including changing the assessment base from
deposits to total average assets less tier one capital.
Additionally, the FDIC has developed a scorecard approach
to determine a separate assessment rate for each institution
with assets greater than $10 billion. As a result of these
changes, TCF’s FDIC insurance expense is expected to increase
by approximately $15 million in 2011.
In addition to risk-based deposit insurance premiums,
additional assessments may be imposed by the Financing
Corporation, a separate U.S. government agency affiliated
with the FDIC, on insured deposits to pay for the interest
cost of Financing Corporation bonds. Financing Corporation
assessment rates for 2010 ranged from $.0102 to $.0104 for
each $100 of deposits. Financing Corporation assessments
of $1.2 million, $1.2 million and $1.1 million were paid by
TCF Bank for 2010, 2009 and 2008, respectively.
Under federal law, deposits and certain claims for
administrative expenses and employee compensation
against an insured depository institution are afforded a
priority over other general unsecured claims against such
an institution, including federal funds and letters of credit,
in the liquidation or other resolution of such an institution
by any receiver appointed by regulatory authorities. Such
priority creditors would include the FDIC.
Examinations and Regulatory Sanctions TCF is
subject to periodic examination by the Federal Reserve,
OCC and the FDIC. Bank regulatory authorities may impose
a number of restrictions or new requirements on institu-
tions, including, but not limited to, growth limitations,
dividend restrictions, individual increased regulatory
capital requirements, increased loan, lease and real estate
loss reserve requirements, increased supervisory assess-
ments, activity limitations or other restrictions that could
have an adverse effect on such institutions, their holding
companies or holders of their debt and equity securities.
Certain enforcement actions may not be publicly disclosed
by TCF or its regulatory authorities. Various enforcement
remedies, including civil money penalties, may be assessed
against an institution or an institution’s directors, officers,
employees, agents or independent contractors. Under the
Bank Secrecy Act (“BSA”), the OCC is obligated to take
enforcement action where it finds a statutory or regulatory
violation that would constitute a program violation.
In its 2009 examinations of TCF’s compliance with
the BSA, the OCC identified instances of non-compliance
that constitute a program violation. On July 20, 2010,
TCF National Bank agreed to the issuance of a
2010 Form 10-K
• 7 •
Consent Order (the “Order”) by the OCC, the Bank’s primary
banking regulator, addressing certain matters related to the
BSA. The Order requires the Bank to address deficiencies
in the Bank’s BSA program identified by the OCC, including
review and revision of the Bank’s BSA risk assessment, BSA
Compliance Program, and Suspicious Activity Report filing
procedures and processes. The OCC did not identify any
systemic undetected criminal activity or money laundering.
The Bank is also required to address performing appropri-
ate due diligence when an account is opened, and to review
transactions since November 2008 for compliance. The
Bank is implementing or has implemented corrective
action for each deficiency and expects to satisfy all of the
requirements of the Order in a timely fashion. The Order
does not call for the payment of a civil money penalty.
Material failure to comply with the Order could result in
enforcement actions by the OCC.
Subsidiaries of TCF may also be subject to state and/
or self-regulatory organization licensing, regulation and
examination requirements in connection with certain
insurance activities.
National Bank Investment Limitations Permissible
investments by national banks are limited by the National
Bank Act and by rules of the OCC. Non-traditional bank
activities permitted by the Gramm-Leach-Bliley Act will
subject a bank to additional regulatory limitations or
requirements, including a required regulatory capital
deduction and application of transactions with affiliates
limitations in connection with such activities.
Dodd-Frank Wall Street Reform and Consumer
Protection Act The Act was signed into law on July 21,
2010. Generally, the Act is effective the day after it was
signed into law, but different effective dates apply to
specific provisions of the Act. Uncertainty remains as to the
ultimate impact of the Act, which could have a material
adverse impact either on the financial services industry
as a whole, or on TCF’s business, results of operations
and financial condition.
The Act, among other things:
• Directs the Federal Reserve to issue rules which
are expected to limit debit-card interchange fees
(see “Item 7. Management’s Discussion and Analysis
of Financial Condition and Results of Operations –
Consolidated Income Statement Analysis –
Non-Interest Income – Card Revenue”);
• After a three-year phase-in period which begins
January 1, 2013, removes trust preferred securities
as a permitted component of a holding company’s
tier 1 capital;
• Provides for an increase in the FDIC assessment for
depository institutions with assets of $10 billion
or more, increases in the minimum reserve ratio
for the deposit insurance fund from 1.15% to 1.35%
and changes in the basis for determining FDIC
premiums from deposits to assets;
• Creates a new consumer financial protection bureau
that will have rulemaking authority for a wide range
of consumer protection laws that would apply to all
banks and have broad powers to supervise and enforce
consumer protection laws;
• Provides for new disclosure and other requirements
relating to executive compensation and corporate
governance;
• Changes standards for Federal preemption of state
laws related to federally chartered institutions and
their subsidiaries;
• Provides for mortgage reform addressing a customer’s
ability to repay, restricts variable-rate lending by
requiring the ability to repay to be determined for
variable-rate loans by using the maximum rate that
will apply during the first five years of a variable-rate
loan term, and makes more loans subject to require-
ments for higher-cost loans, new disclosures, and
certain other restrictions;
• Creates a financial stability oversight council that will
recommend to the Federal Reserve increasingly strict
rules for capital, leverage, liquidity, risk management
and other requirements as companies grow in size and
complexity;
• Permanently increases the deposit insurance coverage
to $250 thousand and allows depository institutions
to pay interest on business checking accounts starting
July 2011; and
• Requires publicly-traded bank holding companies
with assets of $10 billion or more to establish a risk
committee of the Board of Directors responsible for
enterprise-wide risk management practices.
Taxation
Federal Taxation The statute of limitations on TCF’s con-
solidated federal income tax return is closed through 2006.
• 8 • TCF Financial Corporation and Subsidiaries
State Taxation TCF and/or its subsidiaries currently file
tax returns in all states which impose corporate income and
franchise taxes and local tax returns in certain cities and
other taxing jurisdictions. TCF’s primary banking activities
are in the states of Minnesota, Illinois, Michigan, Colorado,
Wisconsin, Indiana, Arizona and South Dakota. The methods
of filing, and the methods for calculating taxable and
apportionable income, vary depending upon the laws of
the taxing jurisdiction. See “Risk Factors”.
See “Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations — Consolidated
Income Statement Analysis — Income Taxes” and Notes 1
and 12 of Notes to Consolidated Financial Statements for
additional information regarding TCF’s income taxes.
Available Information
TCF’s website, ir.tcfbank.com, includes free access to
Company news releases, investor presentations, conference
calls to discuss published financial results, TCF’s Annual
Report and periodic filings required by the Securities and
Exchange Commission (“SEC”), including annual reports on
Form 10-K, quarterly reports on Form 10-Q, current reports
on Form 8-K and amendments to those reports as soon as
reasonably practicable after electronic filing or furnishing
of such material to the SEC.
TCF’s Compensation/Nominating/Corporate Governance
Committee and Audit Committee charters, Corporate
Governance Guidelines, Codes of Ethics and changes to
Codes of Ethics and information on all TCF’s securities are
also available on this website. Stockholders may request
these documents in print free of charge by contacting the
Corporate Secretary at TCF Financial Corporation, 200 Lake
Street East, Mail Code EX0-03-A, Wayzata, MN 55391-1693.
Item 1A. Risk Factors
Enterprise Risk Management
In the normal course of business, TCF is exposed to various
risks. Management balances the Company’s strategic goals,
including revenue and profitability objectives, with the
associated risks.
In defining the Company’s risk profile, management
organizes risks into three main categories: Credit Risk,
Market Risk (which includes interest-rate risk, liquidity
risk, foreign currency risk and price risk) and Operational
Risk (which includes transaction risk and compliance risk).
Policies, systems and procedures have been adopted which
are intended to identify, assess, control, monitor, and
manage risk in each of these areas.
TCF appointed a dedicated Chief Risk Officer (“CRO”)
in 2010 to further enhance its enterprise risk management
governance process. The CRO is a senior executive, report-
ing directly to both the Company’s Chief Executive Officer
and Audit Committee Chairman. The CRO has primary
responsibility for enterprise wide risk management and
Integrated Risk Control Services (formerly referred to as
Internal Audit) department across all lines of business at
TCF. Additionally, the heads of the various business lines
within the company are responsible for identifying the
most significant risks in their respective areas. Risk officers
are assigned to key business units. The risk officers, while
reporting directly to their respective line of business,
facilitate implementation of the enterprise risk manage-
ment and governance process. Each business line within
the Company maintains policies, systems and procedures
which are intended to identify, assess, control, monitor,
and manage risk within each area. Management continually
reviews the adequacy and effectiveness of these policies,
systems and procedures. An Enterprise Risk Management
Committee consisting of senior executives within the
Company supports the CRO.
As an integral part of the risk management process,
management has established various committees consisting
of senior executives and others within the Company. The
purpose of these committees is to closely monitor risks
and ensure that adequate risk management practices exist
within their respective areas of authority. Some of the
principal committees include the Credit Policy Committee,
Concentration Credit Risk Management Committee, Asset/
Liability Management Committee (“ALCO”), Investment
Committee, Capital Planning Committee and various
financial reporting and compliance-related committees.
Overlapping membership of these committees helps provide
a unified view of risk on an enterprise-wide basis.
The Board of Directors, through its Audit Committee,
has overall responsibility for oversight of the Company’s
enterprise risk management governance process.
Credit Risk Management Credit risk is defined as the
risk to earnings or capital if an obligor fails to meet the
terms of any contract with the Company or otherwise fails
to perform as agreed. This includes failure of customers and
counterparties to meet their contractual obligations, and
contingent exposures from unfunded loan commitments
and letters of credit. Credit risk also includes failure of a
2010 Form 10-K
• 9 •
counterparty to settle a securities transaction on agreed-
upon terms (such as the counterparty in a repurchase
transaction) or failure of an issuer in connection with
mortgage-backed securities held in the Company’s securities
available for sale portfolio.
TCF has a Concentration Credit Risk Management
Committee that meets regularly and is responsible for
monitoring the loan and lease portfolio composition and
risk tolerance within the various segments of the portfolio.
The Concentration Credit Risk Management Committee and
the Board of Directors have adopted a Concentration Policy
to direct management of the Company’s concentration risk.
To manage credit risk arising from lending and leasing
activities, management has adopted and maintains
underwriting policies and procedures, and periodically
reviews the appropriateness of these policies and procedures.
Customers and guarantors or recourse providers are
evaluated as part of the initial underwriting processes and
through periodic reviews. For consumer loans, credit scoring
models are used to help determine eligibility for credit and
terms of credit. These models are periodically reviewed to
verify they are predictive of borrower performance. Limits
are established on the exposure to a single customer
(including their affiliates) and on concentrations for
certain categories of customers. Loan and lease credit
approval levels are established so that larger credit
exposures receive managerial review at the appropriate
level through various credit committees.
Management continuously monitors asset quality in
order to manage the Company’s credit risk and to determine
the appropriateness of valuation allowances. This includes,
in the case of commercial loans and leases, a risk rating
methodology under which a rating (1 through 9) is assigned
to every loan and lease. The rating reflects management’s
assessment of the level of the customer’s financial and
operational condition which may impact repayment. Asset
quality is monitored separately based on the type or cat-
egory of loan or lease. This allows management to better
define the Company’s loan and lease portfolio risk profile.
Management also uses various risk models to estimate
probable impact on payment performance under various
expected or unexpected scenarios.
If the weak economic conditions continue to prevail
throughout 2011 and beyond, credit risk will continue to be
elevated. A weakening economy, increasing unemployment
or further deterioration of housing markets could result in
increased credit losses.
The Company manages securities transaction risk by
monitoring all unsettled transactions. All counterparties
and transaction limits are reviewed and approved annually
by both ALCO and the Company’s senior credit committee.
To further manage credit risk in the securities portfolio,
over 99% of the securities held in the securities available
for sale portfolio are issued and guaranteed by Fannie Mae,
Freddie Mac or Ginnie Mae.
Market Risk Management (Including Interest-Rate
Risk and Liquidity Risk) Market risk is defined as the
potential for losses arising from changes in interest rates,
equity prices, and other relevant market rates or prices, and
includes interest-rate risk, liquidity risk, foreign currency
risk and price risk. Interest-rate risk and liquidity risk are
the Company’s primary market risks.
Interest-Rate Risk Interest-rate risk is defined as the
exposure of net interest income and fair value of financial
instruments (interest-earning assets, deposits and borrow-
ings) to adverse movements in interest rates. Interest-rate risk
arises mainly from the structure of the balance sheet. The pri-
mary goal of interest-rate risk management is to control expo-
sure to changes in market interest-rates within acceptable
tolerances established by ALCO and the Board of Directors.
The major sources of the Company’s interest-rate risk
are timing differences in the maturity and repricing
characteristics of assets and liabilities, changes in the
shape of the yield curve, changes in customer behavior and
changes in relationships between rate indices (basis risk).
Management measures these risks and their impact in
various ways, including use of simulation analyses and
valuation analyses.
Simulation analyses are used to model net interest
income from asset and liability positions over a specified
time period (generally one and two years), and the
sensitivity of net interest income under various interest
rate scenarios. The interest rate scenarios may include
gradual or rapid changes in interest rates, spread narrowing
and widening, yield curve twists, and changes in assumptions
about customer behavior in various interest rate scenarios.
The simulation analyses are based on various key assump-
tions which relate to the behavior of interest rates and
spreads, changes in product balances, the repricing
characteristics of products, and the behavior of loan and
deposit customers in different rate environments. The
simulation analyses do not necessarily take into account
all actions management may undertake in response to
anticipated changes in interest rates.
• 10 • TCF Financial Corporation and Subsidiaries
In addition to valuation analyses, management utilizes
an interest rate gap measure (difference between interest-
earning assets and interest-bearing liabilities repricing within
a given period). While the interest rate gap measurement has
some limitations, including no assumptions regarding future
asset or liability production and a static interest rate
assumption, the interest rate gap represents the net asset
or liability sensitivity at a point in time. An interest rate gap
measure could be significantly affected by external factors
such as loan prepayments, early withdrawals of deposits,
changes in the correlation of various interest-bearing
instruments, competition or a rise or decline in interest rates.
See “Item 7A. Quantitative and Qualitative Disclosures About
Market Risk” for further information about TCF’s interest-
rate risk, gap analysis and simulation analyses.
Management also uses valuation analyses to measure
risk in the balance sheet that might not be taken into
account in the net interest income simulation analyses.
Net interest income simulation highlights exposure over a
relatively short time period (12 or 24 months), and valua-
tion analysis incorporates all cash flows over the estimated
remaining life of all balance sheet positions. The valuation
of the balance sheet, at a point in time, is defined as the
discounted present value of asset cash flows minus the
discounted value of liability cash flows. Valuation analysis
addresses only the current balance sheet and does not
incorporate the growth assumptions that are used in the
net interest income simulation model. As with the net
interest income simulation model, valuation analysis is
based on key assumptions about the timing and variability
of balance sheet cash flows and does not take into account
actions management may undertake in response to antici-
pated changes in interest rates.
ALCO meets regularly and is responsible for reviewing the
Company’s interest rate sensitivity position and establishing
policies to monitor and limit exposure to interest-rate risk.
Liquidity Risk Liquidity risk is defined as the risk to
earnings or capital arising from the Company’s inability to
meet its obligations when they come due without incurring
unacceptable losses.
ALCO and the Board of Directors have adopted a
Liquidity Management Policy to direct management of
the Company’s liquidity risk. The objective of the liquidity
management policy is to ensure that TCF meets its cash and
collateral obligations promptly, in a cost-effective manner
and with the highest degree of reliability. The maintenance
of adequate levels of asset and liability liquidity will
provide TCF with the ability to meet both expected and
unexpected cash flows and collateral needs. Key liquidity
ratios, level of asset liquidity, and the amount available
from available funding sources are reported to ALCO on a
monthly basis. At year end, TCF’s Liquidity Management
Policy and current operating practices established a
minimum on-balance sheet asset liquidity target of $350
million, a maximum unsecured short-term daily borrowing
limit of $225 million, and collateral pledged at the Federal
Reserve Discount Window having a borrowing capacity of
$500 million.
TCF’s asset liquidity may be held in the form of
on-balance sheet cash invested with the Federal Reserve
or the use of overnight Federal Funds Sold to highly rated
counterparties or short-term U.S. Treasury Bills or Notes.
Other asset liquidity can be provided by unpledged, AAA
rated securities which could be sold or pledged to various
counterparties under established TCF lines. At December 31,
2010, TCF had asset liquidity of $507 million.
Deposits are TCF’s primary source of funding. In addition,
TCF maintains secured sources of funding, which include
$1.7 billion in secured borrowing capacity at the FHLB of Des
Moines and $529 million of secured borrowing capacity at the
Federal Reserve Discount Window. TCF’s secured borrowing
capacity with the FHLB is dependent upon the maintenance by
TCF of a Borrowing Base Certificate which pledges consumer
and commercial real estate loans to the FHLB under a blanket
lien. In addition, the FHLB relies upon its own internal credit
analysis of TCF’s financial results when determining TCF’s
secured borrowing capacity. Should the FHLB lower its internal
issuer credit rating on TCF, TCF’s secured borrowing capacity
could be reduced, TCF could be required to change collateral
from a blanket lien to physically delivering loan files which
would be held at the FHLB, or both.
Additionally, diminished borrowing capacity could
result from TCF credit rating downgrades and unfavorable
conditions in the credit markets that restrict or limit
various funding sources.
TCF has developed and maintains a contingency funding
plan should certain liquidity needs arise.
Other Market Risks The Company is also exposed to
foreign currency risk as changes in foreign exchange rates
may impact the Company’s investment in TCF Commercial
Finance Canada, Inc. (“TCFCFC”) or results of other
transactions in countries outside of the United States.
During 2010, TCF entered into forward foreign exchange
contracts in order to minimize the risk of changes in foreign
exchange rates on its investment in and loans to TCFCFC and
on certain other foreign lease transactions. The value of
2010 Form 10-K
• 11 •
forward foreign exchange contracts vary over their contrac-
tual lives as the related currency exchange rates fluctuate.
TCF may also experience realized and unrealized gains or
losses on forward foreign exchange contracts as a result of
changes in foreign exchange rates.
The investments in FHLB stock are required investments
related to TCF’s borrowings from these banks. FHLBs obtain
their funding primarily through issuance of consolidated
obligations of the FHLB system. The U.S. Government does
not guarantee these obligations, and each of the 12 FHLBs
are generally jointly and severally liable for repayment of
each other’s debt. The FHLB system has experienced finan-
cial stress in recent years, and some of the regional banks
within the FHLB system have suspended or reduced their
dividends, or eliminated the ability of members to redeem
capital stock. The ultimate impact of these developments on
the FHLB system or its programs for advances to members is
not clear. TCF’s investments in the FHLB and ability to obtain
FHLB funds could be adversely impacted if the financial
health of the FHLB system worsens.
Operational Risk Management Operational risk is
defined as the risk of loss resulting from inadequate or
failed internal processes, people, incorrect or inadequate
execution, and systems, or external events. This definition
includes transaction risk, which includes losses from fraud,
error, the inability to deliver products or services, and loss
or theft of information. Transaction risk encompasses
product development and delivery, transaction processing,
information technology systems, and the internal control
environment. The definition of operational risk also
includes compliance risk, which is the risk of loss from
violations of, or nonconformance with laws, rules, regulations,
prescribed practices, or ethical standards.
The Company’s Integrated Risk Control Services department
periodically assesses the adequacy and effectiveness of
the Company’s processes for controlling and managing risks
in all core areas of operations. This includes determining
whether internal controls and information systems are
properly designed and adequately tested and reviewed.
This also includes determining whether the system of internal
controls over financial reporting is appropriate for the type and
level of risks posed by the nature and scope of the Company’s
activities. Audit plans are prepared using a risk- based
methodology as well as any concerns identified by manage-
ment, the Audit Committee, regulators or the Company’s
independent registered public accounting firm. Significant
issues related to the adequacy of controls, together with
recommendations for improvements to those controls, are
reported to management and the Audit Committee.
The Company’s Compliance Department and others
charged with compliance responsibilities periodically
assess the adequacy and effectiveness of the Company’s
processes for controlling and managing its principal
compliance risks. Compliance Department audit plans are
prepared using a risk-based methodology as well as any
concerns identified by management, the Audit Committee,
or regulators. Significant issues related to the adequacy of
controls, together with recommendations for improvements
to those controls, are reported to management and the
Audit Committee.
In July 2010, TCF National Bank entered into a consent
order with the OCC directing the Bank to address certain
deficiencies relating to the BSA. See “Item 1. Business –
Regulation – Examinations and Regulatory Sanctions”.
Other Risks
Declines in Real Estate Values Declines in home and
real estate values in TCF’s markets have adversely impacted
results of operations. Like all banks, TCF is subject to the
effects of any economic downturn, and in particular, a
continued decline in real estate values in TCF’s markets
could have a further negative effect on results of opera-
tions. A significant further decline in home values would
likely lead to an additional decrease in new consumer real
estate loan originations, increased delinquencies, defaults,
non-accrual and accruing modified loans, as well as increased
losses in this portfolio. A significant further decline in commer-
cial real estate values would likely lead to an additional
reduction of TCF’s secured interest levels and potentially
increase accruing modified loans or non-accrual loans.
Economic Conditions In addition to the declines in home
values, the weak economy has also adversely impacted
TCF’s results of operations. Continued weakness of the
economy coupled with high unemployment and decreased
consumer spending could have a further negative effect
on results of TCF’s operations through higher credit losses,
lower transaction-related revenues and lower average
deposit balances.
Soundness of Other Financial Institutions Financial
services institutions are interrelated as a result of trad-
ing, clearing, counterparty or other relationships. TCF has
exposure to many different industries and counterparties,
and routinely executes transactions with counterparties
in the financial services industry, including brokers and
• 12 • TCF Financial Corporation and Subsidiaries
dealers, commercial banks, investment banks, and other
institutional clients. Many of these transactions expose
TCF to credit risk in the event of default of a counterparty
or client. In addition, TCF’s credit risk may be exacerbated
when collateral held cannot be realized upon or is liquidated
at prices not sufficient to recover the full amount of the
loan or derivative exposure due. Any such losses could have
a material and adverse effect on TCF’s financial condition
and results of operations.
Customer Behavior Changes in customers’ behavior
regarding use of deposit accounts could result in lower fee
revenue, higher borrowing costs, and higher operational
costs for TCF. TCF obtains a large portion of its revenue
from its deposit accounts and depends on low-interest
cost deposits as a significant source of funds.
In addition, competition from other financial institutions
or adverse customer reaction to changes in TCF’s products,
in response to new regulations, could result in higher numbers
of closed accounts and increased account acquisition costs.
New Products In 2010, TCF introduced a new anchor retail
deposit account product that replaced TCF Totally Free
Checking, and that calls for a monthly maintenance fee on
accounts not meeting certain requirements. After gauging
the impact and response from customers and competition,
TCF amended the fee waiver criteria in early 2011 to be more
customer-friendly and to generate and retain accounts. TCF
also implemented new regulatory requirements that prohibit
financial institutions from charging NSF fees on point-of-
sale and ATM transactions unless customers opt-in. The
opt-in election is revocable by customers at any time. In
2011, TCF is considering retail checking account changes
that include charging a daily negative balance fee in lieu of
a per item NSF fee. This is a unique product that TCF hopes
will simplify this process for customers by eliminating fees
for each item presented and assessing a single fee for each
day an account is overdrawn. TCF continually seeks to react
to changes in competitive conditions and customer behav-
ior, but uncertainties relating to customer acceptance
of new products and competitive conditions could adversely
impact TCF’s new account origination activity and fee income.
Card Revenue Future card revenues may be impacted by
class action litigation against Visa USA Inc. (Visa USA) and
MasterCard®. Under Visa USA’s Bylaws, TCF has a contingent
obligation to indemnify Visa USA for certain litigation
unrelated to TCF. See page 28 under “Management’s
Discussion and Analysis of Financial Condition and Results
of Operations” for details of TCF’s contingent obligation to
indemnify Visa USA for certain litigation.
Merchants are also seeking to develop independent card
products or payment systems that would serve as alterna-
tives to TCF Visa card products. The continued success of
TCF’s various card programs is dependent on the success
and viability of Visa and the continued use by customers
and acceptance by merchants of its cards.
Card revenues are anticipated to be further impacted
by the Durbin Amendment to the Dodd-Frank Act, which
directs the Federal Reserve to establish rules by April 21,
2011, required to take effect by July 21, 2011, related to
debit-card interchange fees which preclude the recovery
of costs other than those permitted by the Amendment. The
Federal Reserve issued proposed regulations implementing
the Durbin Amendment in December 2010. If the proposed
regulations are adopted, the reduction in TCF’s average
interchange rate after July 21, 2011 could approach 85%.
TCF has filed a lawsuit against the Federal Reserve and
OCC challenging the constitutionality of the Amendment
on the grounds that it violates TCF’s due process rights as it
requires TCF to offer the debit card product below cost and
thus not earn a full return on invested capital, denies TCF
equal protection under the law by exempting institutions with
assets less than $10 billion and violates TCF’s rights under the
takings clause of the Constitution of the United States by caus-
ing TCF to bear a substantial competitive and financial burden
without just compensation.
Supermarket Branches The success of TCF’s supermarket
branches is dependent on the continued long-term success
and viability of TCF’s supermarket partners and TCF’s ability
to maintain licenses or lease agreements for its supermarket
locations. A significant financial decline of one of our
supermarket partners could result in the loss of supermarket
branches or increase costs to operate the supermarket
branches. At December 31, 2010, TCF had 234 supermarket
branches. Supermarket banking continues to play an
important role in TCF’s growth, as these branches have been
consistent generators of account growth and deposits. TCF
is subject to the risk, among others, that its license or lease
for a location or locations will terminate upon the sale or
closure of that location or locations by the supermarket
partner. Also, an economic slowdown, or financial or labor
difficulties in the supermarket industry, may reduce activ-
ity in TCF’s supermarket branches.
2010 Form 10-K
• 13 •
Leasing and Equipment Finance Activities TCF’s
leasing and equipment finance activities are subject to
the risk of cyclical downturns and other adverse economic
developments. In an adverse economic environment,
there may be a decline in the demand for some types of
equipment which TCF leases and/or finances, resulting in
a decline in the amount of new equipment being placed
in service as well as the decline in equipment values for
equipment previously placed in service. TCF, like all owners
and lessors of commercial equipment, may also be exposed
to liability claims resulting from injuries or accidents
involving that equipment. TCF seeks to mitigate its overall
exposure to lessor’s liability risk by requiring certain lessees
to furnish evidence of liability insurance prior to lease
inception and to maintain that insurance throughout the
term of the lease and through its own insurance programs.
Inventory Finance TCF has strategic and execution risk
associated with expanding the inventory finance business
as the ability to attract and retain manufacturers and
dealers may not achieve expectations. The core operating
risks of this business, except for foreign currency risk, are
similar to other existing TCF businesses, but also include
the risk that inventory could be sold without the dealer
remitting payment to TCF as required.
FDIC Insurance The FDIC is authorized to terminate a
depository institution’s deposit insurance if it finds that
the institution is being operated in an unsafe and unsound
manner or has violated any rule, regulation, order or
condition administered by the institution’s regulatory
authorities. Any such termination of deposit insurance
would likely have a material adverse effect on TCF, the
severity of which would depend on the amount of deposits
affected by such a termination.
Income Taxes TCF is subject to income tax laws which
are often complex and require interpretation. Changes in
income tax laws could negatively impact TCF’s results of
operations. If TCF’s Real Estate Investment Trust (“REIT”)
affiliate fails to qualify as a REIT, or should states enact
legislation taxing REITs or related entities, TCF’s tax
expense would increase. The REIT and related companies
must meet specific provisions of the Internal Revenue Code
and state tax laws. Use of REITs is and has been the subject
of federal and state audits, litigation with state taxing
authorities and tax policy debates by various state
legislatures. Additional unfavorable tax law changes or
unfavorable audit results could increase TCF’s income
taxes. See “Item 7. Management’s Discussion and Analysis
of Financial Condition and Results of Operations —
Consolidated Income Statement Analysis — Income Taxes”
and Note 12 of Notes to Consolidated Financial Statements
for additional information.
Rules and Regulations Uncertainty remains as to the
ultimate impact of the Dodd-Frank Act, which was signed
into law on July 21, 2010. Significant regulatory and legal
consequences may arise as provisions of the Act are
interpreted and implemented by designated regulatory
agencies. Along with the Act, new or revised tax, accounting,
and other laws, regulations, rules and standards could
significantly impact strategic initiatives, results of
operations, and financial condition. The financial services
industry is extensively regulated. Federal and state laws
and regulations are designed primarily to protect the
deposit insurance funds and consumers, and not necessarily
to benefit a financial company’s stockholders. These laws
and regulations may impose significant limitations on
operations. These limitations, and sources of potential
liability for the violation of such laws and regulations, are
described in “Item 1. Business – Regulation”. These regula-
tions, along with tax and accounting laws, regulations, rules
and standards, have a significant impact on the ways that
financial institutions conduct business, implement strategic
initiatives, engage in tax planning and make financial
disclosures. These laws, regulations, rules and standards
are constantly evolving and may change significantly over
time. The nature, extent, and timing of the adoption of
significant new laws, changes in existing laws, or repeal of
existing laws may have a material impact on TCF’s business,
results of operations, and financial condition, the effect of
which is impossible to predict. Violations of these laws can
result in enforcement actions which can impact operations.
Future Legislative and Regulatory Change;
Litigation and Enforcement Activity There are a
number of respects in which future legislative or regulatory
change, or changes in enforcement practices or court
rulings, could adversely affect TCF, and it is generally
not possible to predict when or if such changes may
have an impact on TCF. TCF’s income in future periods
may be negatively impacted by pending state and federal
legislative proposals which, if enacted, could limit interest
rates or loan, deposit or other fees and service charges.
Financial institutions have also increasingly been the
subject of class action lawsuits or in some cases regulatory
actions challenging a variety of practices involving
• 14 • TCF Financial Corporation and Subsidiaries
consumer lending and retail deposit-taking activity.
Increased litigation brought on the basis of state law,
including litigation brought by state attorneys general,
or enforcement actions by the new Consumer Financial
Protection Bureau, are possible as a result of the enactment
of the Act. See Business — Regulation — Dodd-Frank Wall
Street Reform and Consumer Protection Act.
The Community Reinvestment Act (“CRA”) and fair
lending laws and regulations impose nondiscriminatory
lending requirements on financial institutions. The
Department of Justice and other federal agencies are
responsible for enforcing these laws and regulations. A suc-
cessful challenge to an institution’s performance under the
CRA or fair lending laws and regulations could result in a wide
variety of sanctions, including the required payment of dam-
ages and civil money penalties, injunctive relief, imposition
of restrictions on mergers and acquisitions activity, and
restrictions on expansion activity. Private parties may also
have the ability to challenge an institution’s performance
under fair lending laws in private class action litigation.
USA Patriot and Bank Secrecy Acts The USA Patriot
and Bank Secrecy Acts require financial institutions to
develop programs to prevent financial institutions from
being used for money laundering and terrorist activities.
If such activities are detected, financial institutions are
obligated to file suspicious activity reports with the U.S.
Treasury’s Office of Financial Crimes Enforcement Network.
These rules require financial institutions to establish proce-
dures for identifying and verifying the identity of customers
seeking to open new accounts. Failure to comply with these
regulations could result in sanctions and possibly fines.
In recent years, several banking institutions have
received sanctions and some have incurred large fines
for non-compliance with these laws and regulations.
Disruption to Infrastructure The extended disruption of
vital infrastructure could negatively impact TCF’s business,
results of operations, and financial condition. TCF’s opera-
tions depend upon, among other things, its technological
and physical infrastructure, including its equipment and
facilities. Extended disruption of its vital infrastructure
by fire, power loss, natural disaster, telecommunications
failure, computer hacking and viruses, terrorist activity
or the domestic and foreign response to such activity, or
other events outside of TCF’s control, could have a mate-
rial adverse impact either on the financial services industry
as a whole, or on TCF’s business, results of operations, and
financial condition.
Estimates and Assumptions TCF’s consolidated financial
statements conform with generally accepted accounting
principles, which require management to make estimates
and assumptions that affect amounts reported in the
consolidated financial statements. These estimates are
based on information available to management at the
time the estimates are made. Actual results could differ
from those estimates. For further information relating to
critical accounting estimates, see “Item 7. Management’s
Discussion and Analysis of Financial Condition and Results
of Operations – Summary of Critical Accounting Estimates”.
Item 1B. Unresolved Staff
Comments
None.
Item 2. Properties
Offices At December 31, 2010, TCF owned the buildings
and land for 144 of its bank branch offices, owned the
buildings but leased the land for 25 of its bank branch
offices and leased or licensed the remaining 273 bank
branch offices, all of which are functional and appropriately
maintained. Bank branch properties owned by TCF had an
aggregate net book value of approximately $282.7 million at
December 31, 2010. At December 31, 2010, the aggregate
net book value of leasehold improvements associated
with leased bank branch office facilities was $26 million.
In addition to the branch offices, TCF owned and leased
other facilities with an aggregate net book value of $46.2
million at December 31, 2010. For more information
on premises and equipment, see Note 7 of Notes to
Consolidated Financial Statements.
Item 3. Legal Proceedings
In August 2010, TCF was named in a putative class action
challenging TCF’s checking account posting practices. The
plaintiffs seek damages and other relief, including restitution.
TCF’s account agreement with the customer contains an
arbitration provision under which the named plaintiffs agreed
to arbitrate disputes such as this in an individual arbitration,
as opposed to class action. On November 24, 2010, the United
States District Court of Minnesota granted TCF’s motion to
compel individual arbitration of all claims by plaintiffs and
stayed further proceedings in the legal action. TCF believes
its arbitration provision is valid and enforceable and that in
2010 Form 10-K
• 15 •
any event it has meritorious defenses to the claims brought
by the plaintiffs. At this stage of the litigation, it is not
possible for management of TCF to determine the probability
of a material adverse outcome or reasonably estimate the
amount of any potential loss.
From time to time, TCF is also a party to other legal
proceedings arising out of its lending, leasing and deposit
operations. TCF is, and expects to become, engaged in a
number of foreclosure proceedings and other collection
actions as part of its lending and leasing collections
activities. TCF may also be subject to enforcement action
by federal regulators, including the Securities and Exchange
Commission, the Federal Reserve and the OCC. From time to
time, borrowers and other customers, or employees or
former employees, have also brought actions against TCF,
in some cases claiming substantial damages. Financial
services companies are subject to the risk of class action
litigation, and TCF is subject to such actions brought
against it from time to time. Litigation is often
unpredictable and the actual results of litigation cannot
be determined with certainty, and therefore the ultimate
resolution of a matter and the possible range of loss
associated with certain potential outcomes cannot be
established with confidence. Based on our current
understanding of these pending legal proceedings,
management does not believe that judgments or
settlements arising from pending or threatened legal
matters, individually or in the aggregate, would have a
material adverse effect on the consolidated financial
position, operating results or cash flows of TCF.
Part II
Item 5. Market for Registrant’s
Common Equity, Related
Stockholder Matters and Issuer
Purchases of Equity Securities
TCF’s common stock trades on the New York Stock Exchange
under the symbol “TCB”. The following table sets forth the
high and low prices and dividends declared for TCF’s com-
mon stock. The stock prices represent the high and low
sale prices for the common stock on the New York Stock
Exchange Composite Tape, as reported by Bloomberg.
As of January 31, 2011, there were 7,299 holders of
record of TCF’s common stock.
2010
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
2009
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
High
Dividends
Low Declared
$16.63
17.66
18.89
16.83
$14.72
15.83
16.67
14.31
$12.90
13.87
14.95
13.40
$11.36
12.71
11.37
8.74
$.05
.05
.05
.05
$.05
.05
.05
.25
The Board of Directors of TCF Financial and TCF Bank
have adopted a Capital Plan and Dividend Policy. The
policies define how enterprise risk related to capital will be
managed, how the adequacy of capital will be measured
and the process by which capital strategy, capital manage-
ment and common stock dividend recommendations will be
presented to TCF’s Board of Directors. TCF’s management
is charged with ensuring that capital strategy actions,
including the declaration of common stock dividends, are
prudent, efficient and provide value to TCF’s shareholders,
while ensuring that past and prospective earnings retention
is consistent with TCF’s capital needs, asset quality and
overall financial condition. The Board of Directors intends
to continue its practice of paying quarterly cash dividends
on TCF’s common stock as justified by the financial condition
of TCF. The declaration and amount of future dividends will
depend on circumstances existing at the time, including
TCF’s earnings, level of internally generated common
capital excluding earnings, financial condition and capital
requirements, the cash available to pay such dividends
(derived mainly from dividends and distributions from TCF
Bank), as well as regulatory and contractual limitations
and such other factors as the Board of Directors may deem
relevant. In general, TCF Bank may not declare or pay a
dividend to TCF in excess of 100% of its net retained profits
for that year combined with its net retained profits for the
preceding two calendar years without prior approval of the
OCC. Restrictions on the ability of TCF Bank to pay cash
dividends or possible diminished earnings of TCF may limit
the ability of TCF Financial to pay dividends in the future to
holders of its common stock. In addition, the ability of TCF
Financial and TCF Bank to pay dividends is dependent on
regulatory policies and capital requirements and may be
subject to regulatory approval. See “Item 1. Business
— Regulation — Regulatory Capital Requirements”, “Item 1.
Business — Regulation — Restrictions on Distributions”
and Note 14 of Notes to Consolidated Financial Statements.
• 16 • TCF Financial Corporation and Subsidiaries
The following graph compares the cumulative total stockholder return on TCF Stock over the last five fiscal years with the
cumulative total return of the Standard and Poor’s 500 Stock Index, the SNL All Bank and Thrift Index, and a TCF Financial-
selected group of peer institutions over the same period (assuming the investment of $100 in each index on December 31,
2005 and reinvestment of all dividends).
TCF Stock Performance Chart
Total Return Performance
TCF Financial Corporation
SNL Bank and Thrift Index(1)
S&P 500 Index
TCF 2010 Peer Group (2)
$140
120
100
80
60
40
e
u
l
a
V
x
e
d
n
I
12/31/05
12/31/06
12/31/07
12/31/08
12/31/09
12/31/10
Index
TCF Financial Corporation
SNL Bank and Thrift (1)
S&P 500 Index
TCF 2010 Peer Group (2)
12/31/05
100.00
100.00
100.00
100.00
Period Ending
12/31/06
104.67
116.85
115.79
109.80
12/31/07
71.14
89.10
122.16
86.03
12/31/08
57.60
51.24
76.96
70.45
12/31/09
59.13
50.55
97.33
61.42
12/31/10
65.13
56.44
111.99
71.52
(1) Includes all major exchange (NYSE, NYSE Amex, NASDAQ) banks and thrifts in SNL’s converage universe (503 companies as of December 31, 2010).
(2) Consists of the 30 publicly-traded banks and thrifts, 15 of which are immediately larger than and 15 of which are immediately smaller than TCF Financial Corporation in
total assets as of September 30, 2010. The 2010 Peer Group includes: Marshall & Ilsley Corporation; Zions Bancorporation; New York Community Bancorp, Inc.; Popular,
Inc.; Synovus Financial Corporation; First Horizon National Corporation; BOK Financial Corporation; Associated Banc-Corp; People’s United Financial, Inc.; City National
Corporation; First Citizens BancShares, Inc.; First Niagara Financial Group, Inc.; East West Bancorp, Inc.; Astoria Financial Corporation; Commerce Bancshares, Inc.;
Webster Financial Corporation; Cullen/Frost Bankers, Inc.; First BanCorp.; Fulton Financial Corporation; SVB Financial Group; FirstMerit Corporation; Wintrust Financial
Corporation; Valley National Bancorp; Susquehanna Bancshares, Inc.; Flagstar Bancorp, Inc.; BancorpSouth, Inc.; Washington Federal, Inc.; Bank of Hawaii Corporation;
PrivateBancorp, Inc.; and International Bancshares Corporation. Five of the companies which were in the 2009 Peer Group are not in the 2010 Peer Group due to the failure
of the company or changes in asset size. Those five companies are: Huntington Bancshares, Inc.; CapitalSource, Inc.; MB Financial, Inc.; W Holding Company, Inc.; and
South Financial Group, Inc.
Source: SNL Financial LC and Standard & Poor’s © 2011
The following table summarizes share repurchase activity for the quarter ended December 31, 2010.
Period
October 1 to October 31, 2010
Share repurchase program (1)
Employee transactions (2)
November 1 to November 30, 2010
Share repurchase program (1)
Employee transactions (2)
December 1 to December 31, 2010
Share repurchase program (1)
Employee transactions (2)
Total
Share repurchase program (1)
Employee transactions (2)
Total Number
of Shares
Purchased
Average
Price Paid
Per Share
Total Number of
Shares Purchased
as Part of Publicly
Announced Plan
Maximum Number
of Shares that May
Yet be Purchased
Under the Plan
–
3,332
–
–
–
–
–
3,332
$ –
$16.37
$ –
$ –
$ –
$ –
$ –
$16.37
5,384,130
N.A.
5,384,130
N.A.
5,384,130
N.A.
–
N.A.
–
N.A.
–
N.A.
–
N.A.
N.A. Not Applicable.
(1) The current share repurchase authorization was approved by the Board of Directors on April 14, 2007. The authorization was for a repurchase of up to an additional 5% of
TCF’s common stock outstanding at the time of the authorization, or 6.5 million shares. This authorization does not have an expiration date.
(2) Shares withheld pursuant to the terms of awards under the TCF Financial Incentive Stock Program to offset tax withholding obligations that occur upon vesting and release
of restricted shares. The TCF Financial Incentive Stock Program provides that the value of shares withheld shall be the average of the high and low prices of common stock
of TCF Financial Corporation on the date the relevant transaction occurs.
2010 Form 10-K
• 17 •
Item 6. Selected Financial Data
The selected five-year financial summary presented below should be read in conjunction with the Consolidated Financial
Statements and related notes.
Five-Year Financial Summary
Consolidated Income:
Year Ended December 31,
(Dollars in thousands, except per-share data)
Total revenue
Net interest income
Provision for credit losses
Fees and other revenue
Gains on securities, net
Visa share redemption
Gains on sales of branches
2010
$ 1,237,187
$ 699,202
236,437
508,862
29,123
–
2009
$1,158,861
$ 633,006
258,536
496,468
29,387
–
2008
$1,092,108
$ 593,673
192,045
474,061
16,066
8,308
2007
$1,091,634
$ 550,177
56,992
490,285
13,278
–
2006
$1,026,994
$ 537,530
20,689
485,276
–
–
and real estate
Non-interest expense
Income before income tax expense
Income tax expense
Income after income tax expense
Income (loss) attributable to
non-controlling interest
Net income
Preferred stock dividends
Net income available to
common stockholders
Per common share:
Basic earnings
Diluted earnings
Dividends declared
Consolidated Financial Condition:
–
763,124
237,626
87,765
149,861
3,297
146,564
–
–
767,784
132,541
45,854
86,687
(410)
87,097
18,403
–
694,403
205,660
76,702
128,958
–
128,958
2,540
37,894
662,124
372,518
105,710
266,808
–
266,808
–
4,188
649,197
357,108
112,165
244,943
–
244,943
–
$ 146,564
$ 68,694
$ 126,418
$ 266,808
$ 244,943
113.4
$ 1.05
$ 1.05
$ .20
$ .54
$ .54
$ .40
$ 1.01
$ 1.01
$ 1.00
$ 2.09
$ 2.09
$ .97
$ 1.90
$ 1.90
$ .92
94.4
94.4
(50.0)
(Dollars in thousands, except per-share data)
Loans and leases
Securities available for sale
Total assets
Checking, savings and money
market deposits
Certificates of deposit
Total deposits
Borrowings
Equity
Book value per common share
Key Ratios and Other Data:
2009
2010
2006
$14,788,304 $14,590,744 $13,345,889 $12,494,370 $11,478,255
1,816,126
14,669,734
1,931,174
18,465,025
1,963,681
15,977,054
1,966,104
16,740,357
1,910,476
17,885,175
2007
2008
10,556,788
1,028,327
11,585,115
4,985,611
1,471,663
7,285,615
2,483,635
9,769,250
3,588,540
1,033,374
$ 10.30 $ 9.10 $ 8.99 $ 8.68 $ 7.92
10,380,814
1,187,505
11,568,319
4,755,499
1,175,362
7,647,069
2,596,283
10,243,352
4,660,774
1,493,776
7,322,014
2,254,535
9,576,549
4,973,448
1,099,012
Return on average assets
Return on average common equity
Net interest margin(1)
Net charge-offs as a percentage of average loans and leases
Average total equity to average assets
Number of bank branches
(1) Net interest income divided by average interest-earning assets.
N.M. Not Meaningful.
2010
.82%
10.36
4.14
1.47
7.83
442
At or For the Year Ended December 31,
2008
2009
.49%
5.95
3.87
1.34
7.20
443
.79%
11.46
3.91
.78
7.04
448
Compound Annual
Growth Rate
1-Year
2010/2009
5-Year
2010/2005
6.8%
10.5
(8.5)
2.5
(.9)
– –
–
(.6)
79.3
91.4
72.9
N.M.
68.3
(100.0) –
1.4%
1.1
3.2
1.7
(13.4)
.1
4.8
25.2
13.2
2007
1.76%
25.82
3.94
.29
6.82
453
4.4%
6.2
94.1
2.3
22.2
(100.0)
4.7
(9.0)
(5.3)
(10.8)
N.M.
(11.2)
(11.2)
(12.1)
(12.1)
(25.1)
7.2%
3.2
6.6
7.9
(11.7)
4.9
10.8
8.1
6.7
2006
1.74%
24.37
4.16
.16
7.15
453
At December 31,
Compound Annual
Growth Rate
1-Year
2010/2009
5-Year
2010/2005
• 18 • TCF Financial Corporation and Subsidiaries
Item 7. Management’s Discussion
and Analysis of Financial Condition
and Results of Operations
Table of Contents
Overview
Results of Operations
Performance Summary
Operating Segment Results
Consolidated Income Statement Analysis
Net Interest Income
Provision for Credit Losses
Non-Interest Income
Non-Interest Expense
Income Taxes
Consolidated Financial Condition Analysis
Securities Available for Sale
Loans and Leases
Allowance for Loan and Lease Losses
Other Real Estate Owned and Repossessed
and Returned Equipment
Liquidity Management
Deposits
Borrowings
Contractual Obligations and Commitments
Stockholders’ Equity
Summary of Critical Accounting Estimates
Recent Accounting Developments
Fourth Quarter Summary
Legislative, Legal and Regulatory Developments
Forward-Looking Information
Page
18
20
20
20
20
20
24
24
26
28
29
29
29
39
40
42
42
42
43
43
45
46
46
47
47
Management’s discussion and analysis of the consolidated
financial condition and results of operations of TCF Financial
Corporation should be read in conjunction with the
consolidated financial statements in Item 8 and selected
financial data in Item 6.
Overview
TCF Financial Corporation, a Delaware corporation, is
a national bank holding company based in Wayzata,
Minnesota. Its principal subsidiary, TCF National Bank, is
headquartered in South Dakota. TCF had 442 branches in
Minnesota, Illinois, Michigan, Colorado, Wisconsin, Indiana,
Arizona and South Dakota (TCF’s primary banking markets)
at December 31, 2010.
TCF provides convenient financial services through
multiple channels in its primary banking markets. TCF has
developed products and services designed to meet the
needs of all consumers. The Company focuses on attracting
and retaining customers through service and convenience,
including branches that are open seven days a week and
on most holidays, extensive full-service supermarket
branches, automated teller machine (“ATM”) networks
and internet, mobile and telephone banking. TCF’s philoso-
phy is to generate interest income, fees and other revenue
growth through business lines that emphasize higher
yielding assets and low or no interest-cost deposits. The
Company’s growth strategies include the development
of new products and services, new branch expansion and
acquisitions. New products and services are designed to
build on existing businesses and expand into complemen-
tary products and services through strategic initiatives.
TCF’s core businesses include Retail Banking, Wholesale
Banking and Treasury Services. Retail Banking includes
branch banking and retail lending. Wholesale Banking
includes commercial banking, leasing and equipment
finance and inventory finance. TCF refers to its combined
leasing and equipment finance and inventory finance
businesses as Specialty Finance. Treasury Services includes
the Company’s investment and borrowing portfolios and
management of capital, debt and market risks, including
interest-rate and liquidity risks.
TCF’s lending strategy is to originate high credit quality
and primarily secured loans and leases. TCF’s retail lending
operation offers fixed- and variable-rate loans and lines
of credit secured by residential real estate properties.
Commercial loans are generally made on properties or to
customers located within TCF’s primary banking markets.
The leasing and equipment finance businesses consist of
TCF Equipment Finance, a company that delivers equipment
finance solutions to businesses in select markets, and
Winthrop Resources, a company that primarily leases
technology and data processing equipment. TCF’s leasing
and equipment finance businesses have equipment
installations in all 50 states and, to a limited extent, in
foreign countries. In December 2008, TCF Inventory Finance
commenced lending operations to originate commercial
variable-rate loans which are secured by equipment under
a floorplan arrangement and supported by repurchase
agreements from original equipment manufacturers to
businesses in the United States and Canada.
2010 Form 10-K
• 19 •
Net interest income, the difference between interest
income earned on loans and leases, securities available
for sale, investments and other interest-earning assets
and interest paid on deposits and borrowings, represented
56.5% of TCF’s total revenue in 2010. Net interest income
can change significantly from period to period based on
general levels of interest rates, customer prepayment
patterns, the mix of interest-earning assets and the mix
of interest-bearing and non-interest bearing deposits and
borrowings. TCF manages the risk of changes in interest
rates on its net interest income through an Asset/Liability
Management Committee and through related interest-rate
risk monitoring and management policies. See “Item 1A.
Risk Factors” and “Item 7A. Quantitative and Qualitative
Disclosures about Market Risk” for further discussion.
Non-interest income is a significant source of revenue
for TCF and an important factor in TCF’s results of operations.
Increasing fee and service charge revenue has been
challenging as a result of the slowing of the economy,
changing customer behavior and the impact of the imple-
mentation of new regulation. Providing a wide range of
retail banking services is an integral component of TCF’s
business philosophy and a major strategy for generating
additional non-interest income. Key drivers of non-interest
income are the number of deposit accounts and related
transaction activity.
New regulations that became fully effective on August
15, 2010 require consumer checking account customers
to elect if they want TCF to authorize debit card and ATM
transactions if, at the time of authorization, there are
insufficient funds in the account to cover the transaction
(“opt-in”). TCF has had a process in place to discuss this
service with new and existing consumer checking account
customers since early 2010. Under the new regulations,
any account that has not elected to opt-in is deemed by
regulation to have declined the service. The opt-in election
is revocable by customers at any time. Customers who have
not elected to opt-in may see an increase in the number
of denied transactions on their debit card or ATM transac-
tions. These denied transactions may impact consumer
payment behavior and reduce fees and service charges
and card revenue.
In response to these new regulations, TCF introduced a
new anchor checking account product that replaced the
TCF Totally Free Checking product. The new product car-
ries a monthly maintenance fee on accounts not meeting
certain specific requirements. TCF is considering future
retail deposit account changes that could include charging
a daily negative balance fee in lieu of per item NSF fees or
other significant charges. The impact of such changes on
TCF’s fee revenues is uncertain. See “Item 7. Management’s
Discussion and Analysis of Financial Condition and Results
of Operations — Consolidated Income Statement Analysis
— Non-Interest Income” and “Item 7. Management’s
Discussion and Analysis of Financial Condition and Results
of Operations — Forward-Looking Information” for addi-
tional information.
The Company’s Visa debit card program has grown
significantly since its inception in 1996. TCF is the 11th
largest issuer of Visa Classic debit cards in the United
States, based on sales volume for the three months ended
September 30, 2010, as published by Visa. TCF earns
interchange revenue from customer card transactions paid
primarily by merchants, not TCF’s customers. Card products
represent 25.3% of banking fee revenue for the year ended
December 31, 2010. Visa has significant litigation against
it regarding interchange pricing and there is a risk this
revenue could be impacted by any settlement or adverse
rulings in such litigation.
Card revenues are anticipated to be impacted by the
Durbin Amendment to the Dodd-Frank Act, which directs the
Federal Reserve to establish rules by April 21, 2011, required
to take effect by July 21, 2011, related to debit-card
interchange fees which preclude the recovery of costs other
than those permitted by the Amendment. The Federal Reserve
issued proposed regulations implementing the Durbin
Amendment in December 2010. If the proposed regulations
are adopted, the reduction in TCF’s average interchange
rate after July 21, 2011 could approach 85%. TCF has filed a
lawsuit against the Federal Reserve and OCC challenging the
constitutionality of the Durbin Amendment on the grounds
that it violates TCF’s due process rights as it requires TCF to
offer the debit card product below cost and thus not earn a
full return on invested capital, denies TCF equal protection
under the law by exempting institutions with assets less than
$10 billion and violates TCF’s rights under the takings clause
of the Constitution of the United States by causing TCF to
bear a substantial competitive and financial burden without
just compensation. See “Item 1A. Risk Factors — Other Risks
— Card Revenue” for further discussion.
The following portions of Management’s Discussion and
Analysis of Financial Condition and Results of Operations
focus in more detail on the results of operations for 2010,
2009 and 2008 and on information about TCF’s balance
sheet, loan and lease portfolio, liquidity, funding
resources, capital and other matters.
• 20 • TCF Financial Corporation and Subsidiaries
Results of Operations
Performance Summary TCF reported diluted earnings
per common share of $1.05 for 2010, compared with $.54
for 2009 and $1.01 for 2008. Net income was $146.6 million
for 2010, compared with $87.1 million for 2009 and $129
million for 2008. Net income for 2009 includes a non-cash
deemed preferred stock dividend of $12 million, or 10 cents
per common share.
Return on average assets was .82% in 2010, compared
with .49% in 2009 and .79% in 2008. Return on average
common equity was 10.36% in 2010, compared with 5.95%
in 2009 and 11.46% in 2008. The effective income tax rate
for 2010 was 36.9%, compared with 34.6% in 2009 and
37.3% in 2008.
Operating Segment Results RETAIL BANKING — Consisting
of branch banking and retail lending, reported net income
of $93 million for 2010, up from $26.6 million in 2009 as
a result of lower costs of deposits in branch banking and
lower operating expenses. Retail Banking net interest
income for 2010 was $443 million, up 9.9% from $403.2
million for 2009.
The Retail Banking provision for credit losses totaled
$140.6 million in 2010, down 21% from $178 million in
2009. This decrease was primarily due to decreased levels
of provision in excess of net charge-offs in the consumer
real estate portfolio. Refer to the “Item 7. Management’s
Discussion and Analysis of Financial Condition and Results
of Operations — Consolidated Income Statement Analysis
— Provision for Credit Losses” section for further discussion.
Retail Banking non-interest income totaled $409.6
million in 2010, compared with $418 million in 2009. Fees
and service charges were $267.5 million for 2010, down
5.2% from $282.3 million in 2009, primarily due to changes
in customer banking and spending behavior resulting in less
fee income and to a lesser extent, the implementation of
“opt-in” regulations. Card revenues were $111 million for
2010, up 6% from $104.7 million in 2009. The increase in
card revenues was primarily attributable to an increase in
spending per active account. See “Item 7. Management’s
Discussion and Analysis of Financial Condition and Results
of Operations — Consolidated Income Statement Analysis –
Non-Interest Income” for further discussion.
Retail Banking non-interest expense totaled $562.8
million in 2010, down 6% from $599 million in 2009. The
decrease was primarily due to decreased compensation and
employee benefit expense due to headcount reductions,
decreased deposit account premiums and the 2009 FDIC
special assessment.
WHOLESALE BANKING — Consisting of commercial bank-
ing, leasing and equipment finance and inventory finance,
reported net income of $39.5 million for 2010, up 25.2%
from $31.6 million in 2009. Net interest income for 2010
was $251.7 million, up 22% from $206.3 million in 2009,
as a result of an $801 million, or 12.1%, increase in average
interest-earning assets, primarily within the specialty
finance businesses.
The provision for credit losses for this operating segment
totaled $94 million in 2010, up from $78.7 million in 2009.
The increase in the provision for credit losses from 2009 was
primarily due to increased net charge-offs and increased
non-accrual loans in commercial lending.
Wholesale Banking non-interest income totaled $98.7
million in 2010, up $21.5 million from $77.2 million in 2009.
The increase in Wholesale Banking revenues in 2010, was
primarily due to an increase in operating lease revenues
resulting from the acquisition of FNCI in 2009.
Wholesale Banking non-interest expense totaled $191.3
million in 2010, up $35.1 million from $156.2 million in
2009, primarily as a result of increased compensation
expense and operating lease depreciation related to the
FNCI acquisition in 2009 and increased expense for fore-
closed real estate and repossessed assets.
TREASURY SERVICES — Treasury services reported net
income of $16.2 million in 2010, down from $27.4 million in
2009. The $11.2 million decrease was primarily due to the
impact of TCF becoming more asset sensitive, and lower
balances of securities available for sale.
Consolidated Income Statement Analysis
Net Interest Income Net interest income, the differ-
ence between interest earned on loans and leases, invest-
ments and other interest-earning assets (interest income),
and interest paid on deposits and borrowings (interest
expense), represented 56.5% of TCF’s total revenue in
2010, 54.6% in 2009 and 54.4% in 2008. Net interest income
divided by average interest-earning assets is referred to
as the net interest margin, expressed as a percentage. Net
interest income and net interest margin are affected by
changes in prevailing short and long-term interest rates,
loan and deposit pricing strategies and competitive condi-
tions, the volume and the mix of interest-earning assets
and interest-bearing liabilities, the level of non-performing
assets, and the impact of modified loans and leases.
2010 Form 10-K
• 21 •
The following tables summarize TCF’s average balances, interest, dividends and yields and rates on major categories of TCF’s
interest-earning assets and interest-bearing liabilities.
(Dollars in thousands)
Assets:
Investments and other
U.S. Government sponsored entities:
Mortgage-backed securities
Debentures
U.S. Treasury Bills
Other securities
Total securities available for sale (2)
Loans and leases:
Consumer real estate:
Fixed-rate
Variable-rate
Consumer — other
Total consumer real estate and other
Commercial real estate:
Fixed- and adjustable-rate
Variable-rate
Total commercial real estate
Commercial business:
Fixed- and adjustable-rate
Variable-rate
Total commercial business
Total commercial
Leasing and equipment finance
Inventory finance
Total loans and leases (3)
Total interest-earning assets
Other assets (4)
Total assets
Liabilities and Equity:
Non-interest bearing deposits:
Retail
Small business
Commercial and custodial
Total non-interest bearing deposits
Interest-bearing deposits:
Checking
Savings
Money market
Subtotal
Certificates of deposit
Total interest-bearing deposits
Total deposits
Borrowings:
Short-term borrowings
Long-term borrowings
Total borrowings
Total interest-bearing liabilities
Total deposits and borrowings
Other liabilities
Total liabilities
Total TCF Financial Corp. stockholders’ equity
Non-controlling interest in subsidiaries
Total equity
Total liabilities and equity
Year Ended
December 31, 2010
Year Ended
December 31, 2009
Average
Yields
and
Interest(1) Rates
Average
Balance
Average
Yields
and
Interest (1) Rates
Average
Balance
Average
Balance
Change
Average
Yields
and
Rates
Interest(1) (bps)
$ 337,279
$ 5,509
1.63%
$ 375,396
$ 4,370
1.16%
$ (38,117)
$ 1,139
47
1,817,413
–
71,233
454
1,889,100
5,082,487
2,148,171
26,576
7,257,234
2,816,201
495,433
3,311,634
140,498
234,892
375,390
3,687,024
3,056,006
677,214
14,677,478
16,903,857
1,286,683
$18,190,540
$ 1,429,436
641,412
284,750
2,355,598
2,071,990
5,410,681
656,691
8,139,362
1,054,179
9,193,541
11,549,139
124,891
4,580,786
4,705,677
13,899,218
16,254,816
511,589
16,766,405
1,415,161
8,974
1,424,135
$18,190,540
$
80,332
–
93
20
80,445
313,573
116,437
2,303
432,313
167,757
21,559
189,316
7,447
8,521
15,968
205,284
196,445
49,881
883,923
969,877
4.42
–
.13
4.41
4.26
6.17
5.42
8.67
5.96
5.96
4.35
5.72
5.30
3.63
4.25
5.57
6.43
7.37
6.02
5.74
6,466
40,023
4,532
51,021
10,208
61,229
61,229
474
208,972
209,446
270,675
270,675
.31
.74
.69
.63
.97
.67
.53
.38
4.56
4.45
1.95
1.66
80,902
8,487
12
26
89,427
348,400
106,988
3,061
458,449
155,812
22,544
178,356
9,581
10,644
20,225
198,581
192,557
14,797
864,384
958,181
8,137
58,556
7,006
73,699
48,413
122,112
122,112
233
202,830
203,063
325,175
325,175
4.92
2.18
.07
5.26
4.36
6.43
5.75
8.54
6.26
6.05
4.01
5.69
5.75
3.45
4.25
5.50
6.81
8.22
6.20
5.85
.45
1.24
1.03
1.02
2.53
1.34
1.07
.27
4.64
4.55
2.39
2.05
1,645,544
389,245
17,123
494
2,052,406
5,421,081
1,862,267
35,849
7,319,197
2,574,818
561,881
3,136,699
166,745
308,929
475,674
3,612,373
2,826,835
179,990
13,938,395
16,366,197
1,157,314
$17,523,511
$ 1,402,442
584,605
265,681
2,252,728
1,802,694
4,732,316
683,030
7,218,040
1,915,467
9,133,507
11,386,235
85,228
4,373,182
4,458,410
13,591,917
15,844,645
416,555
16,261,200
1,261,219
1,092
1,262,311
$17,523,511
(570)
(8,487)
81
(6)
(8,982)
(50)
(218)
6
(85)
(10)
(34,827)
9,449
(758)
(26,136)
11,945
(985)
10,960
(2,134)
(2,123)
(4,257) –
6,703
3,888
35,084
19,539
11,696
(26)
(33)
13
(30)
(9)
34
3
(45)
18
7
(38)
(85)
(18)
(11)
(1,671)
(18,533)
(2,474)
(22,678)
(38,205)
(60,883)
(60,883)
241
6,142
6,383
(54,500)
(54,500)
(14)
(50)
(34)
(39)
(156)
(67)
(54)
11
(8)
(10)
(44)
(39)
171,869
(389,245)
54,110
(40)
(163,306)
(338,594)
285,904
(9,273)
(61,963)
241,383
(66,448)
174,935
(26,247)
(74,037)
(100,284)
74,651
229,171
497,224
739,083
537,660
129,369
$ 667,029
$ 26,994
56,807
19,069
102,870
269,296
678,365
(26,339)
921,322
(861,288)
60,034
162,904
39,663
207,604
247,267
307,301
410,171
95,034
505,205
153,942
7,882
161,824
$ 667,029
Net interest income and margin
bps = basis points.
(1) Interest income excludes the taxable equivalent adjustments (based on the U.S. federal statutory rate of 35%) of $1.6 million and $494 thousand during the years ended
$633,006
699,202
$66,196
4.14%
3.87%
27
December 31, 2010 and 2009, respectively.
(2) Average balance and yield of securities available for sale are based upon the historical amortized cost.
(3) Average balance of loans and leases includes non-accrual loans and leases, and is presented net of unearned income.
(4) Includes operating leases.
• 22 • TCF Financial Corporation and Subsidiaries
Year Ended
December 31, 2009
Year Ended
December 31, 2008
Average
Yields
and
Interest(1) Rates
Average
Balance
Average
Yields
and
Interest (1) Rates
Average
Balance
Average
Balance
Change
Average
Yields
and
Rates
Interest(1) (bps)
$ 375,396
$ 4,370
1.16%
$ 155,839
$ 5,937
3.81%
$ 219,557
$ (1,567)
(265)
1,645,544
389,245
17,123
494
2,052,406
80,902
8,487
12
26
89,427
4.92
2.18
.07
5.26
4.36
2,100,291
–
8,929
3,745
2,112,965
110,502
–
294
150
110,946
5.26
–
3.29
4.01
5.25
6.73
6.36
6.95
6.65
6.21
5.21
5.99
5.93
4.95
5.26
5.87
7.32
10.00
6.57
6.36
372,067
109,115
9,233
490,415
132,014
31,110
163,124
9,988
18,143
28,131
191,255
165,838
4
847,512
964,395
12,933
48,601
10,099
71,633
85,141
156,774
156,774
8,990
204,958
213,948
370,722
370,722
.71
1.73
1.65
1.37
3.44
2.03
1.58
2.18
4.60
4.39
2.94
2.50
(454,747)
389,245
8,194
(3,251)
(60,559)
(29,600)
8,487
(282)
(124)
(21,519)
(34)
218
(322)
125
(89)
(23,667)
(2,127)
(6,172)
(31,966)
23,798
(8,566)
15,232
(407)
(7,499)
(7,906)
7,326
26,719
14,793
16,872
(6,214)
(30)
(61)
159
(39)
(16)
(120)
(30)
(18)
(150)
(101)
(37)
(51)
(178)
(37)
(51)
(4,796)
9,955
(3,093)
2,066
(36,728)
(34,662)
(34,662)
(8,757)
(2,128)
(10,885)
(45,547)
(45,547)
(26)
(49)
(62)
(35)
(91)
(69)
(51)
(191)
4
16
(55)
(45)
(111,117)
147,440
(97,042)
(60,719)
447,382
(35,190)
412,192
(1,809)
(57,664)
(59,473)
352,719
561,444
179,950
1,033,394
1,192,392
(1,231)
$1,191,161
$ (6,215)
994
33,778
28,557
(27,667)
1,920,201
69,487
1,962,021
(556,890)
1,405,131
1,433,688
(326,535)
(86,521)
(413,056)
992,075
1,020,632
57,332
1,077,964
112,105
1,092
113,197
$1,191,161
348,400
106,988
3,061
458,449
155,812
22,544
178,356
9,581
10,644
20,225
198,581
192,557
14,797
864,384
958,181
8,137
58,556
7,006
73,699
48,413
122,112
122,112
233
202,830
203,063
325,175
325,175
6.43
5.75
8.54
6.26
6.05
4.01
5.69
5.75
3.45
4.25
5.50
6.81
8.22
6.20
5.85
.45
1.24
1.03
1.02
2.53
1.34
1.07
.27
4.64
4.55
2.39
2.05
5,421,081
1,862,267
35,849
7,319,197
2,574,818
561,881
3,136,699
166,745
308,929
475,674
3,612,373
2,826,835
179,990
13,938,395
16,366,197
1,157,314
$17,523,511
$ 1,402,442
584,605
265,681
2,252,728
1,802,694
4,732,316
683,030
7,218,040
1,915,467
9,133,507
11,386,235
85,228
4,373,182
4,458,410
13,591,917
15,844,645
416,555
16,261,200
1,261,219
1,092
1,262,311
$17,523,511
5,532,198
1,714,827
132,891
7,379,916
2,127,436
597,071
2,724,507
168,554
366,593
535,147
3,259,654
2,265,391
40
12,905,001
15,173,805
1,158,545
$16,332,350
$ 1,408,657
583,611
231,903
2,224,171
1,830,361
2,812,115
613,543
5,256,019
2,472,357
7,728,376
9,952,547
411,763
4,459,703
4,871,466
12,599,842
14,824,013
359,223
15,183,236
1,149,114
–
1,149,114
$16,332,350
(Dollars in thousands)
Assets:
Investments and other
U.S. Government sponsored entities:
Mortgage-backed securities
Debentures
U.S. Treasury Bills
Other securities
Total securities available for sale (2)
Loans and leases:
Consumer real estate:
Fixed-rate
Variable-rate
Consumer — other
Total consumer real estate and other
Commercial real estate:
Fixed- and adjustable-rate
Variable-rate
Total commercial real estate
Commercial business:
Fixed- and adjustable-rate
Variable-rate
Total commercial business
Total commercial
Leasing and equipment finance
Inventory finance
Total loans and leases (3)
Total interest-earning assets
Other assets (4)
Total assets
Liabilities and Equity:
Non-interest bearing deposits:
Retail
Small business
Commercial and custodial
Total non-interest bearing deposits
Interest-bearing deposits:
Checking
Savings
Money market
Subtotal
Certificates of deposit
Total interest-bearing deposits
Total deposits
Borrowings:
Short-term borrowings
Long-term borrowings
Total borrowings
Total interest-bearing liabilities
Total deposits and borrowings
Other liabilities
Total liabilities
Total TCF Financial Corp. stockholders’ equity
Non-controlling interest in subsidiaries
Total equity
Total liabilities and equity
Net interest income and margin
bps = basis points.
(1) Interest income excludes the taxable equivalent adjustments (based on the U.S. federal statutory rate of 35%) of $494 thousand and $593 thousand during the years ended
$633,006
$593,673
$ 39,333
3.87%
3.91%
(4)
December 31, 2009 and 2008, respectively.
(2) Average balance and yield of securities available for sale are based upon the historical amortized cost.
(3) Average balance of loans and leases includes non-accrual loans and leases, and is presented net of unearned income.
(4) Includes operating leases.
2010 Form 10-K
• 23 •
The following table presents the components of the changes in net interest income by volume, rate and number of days.
(In thousands)
Interest income:
Investments
U.S. Government sponsored entities:
Mortgage-backed securities
Debentures
U.S. Treasury Bills
Other securities
Total securities available for sale
Loans and leases:
Consumer home equity:
Fixed-rate
Variable-rate
Consumer - other
Total consumer real estate and other
Commercial real estate:
Fixed- and adjustable-rate
Variable-rate
Total commercial real estate
Commercial business:
Fixed- and adjustable-rate
Variable-rate
Total commercial business
Total commercial
Leasing and equipment finance
Inventory finance
Total loans and leases
Total interest income
Interest expense:
Checking
Savings
Money market
Certificates of deposit
Borrowings:
Short-term borrowings
Long-term borrowings
Total borrowings
Total interest expense
Net interest income
Year Ended
December 31, 2010
Versus Same Period in 2009
Increase (Decrease) Due to
Year Ended
December 31, 2009
Versus Same Period in 2008
Increase (Decrease) Due to
Volume(1)
Rate(1)
Total
Volume(1)
Rate (1)
# Days
Total
$ (480)
$ 1,619
$ 1,139
$ 4,478
$ (6,038) $ (7)
$ (1,567)
8,017
(8,487)
64
(2)
(6,990)
(8,587)
-
17
(4)
(1,992)
(570)
(8,487)
81
(6)
(8,982)
(22,721)
8,487
142
(132)
(3,102)
(6,879)
-
(424)
8
(18,417)
-
-
-
-
-
(29,600)
8,487
(282)
(124)
(21,519)
(21,230)
15,747
(803)
(3,853)
(13,597)
(6,298)
45
(22,283)
(34,827)
9,449
(758)
(26,136)
14,412
(2,798)
9,995
(1,430)
(2,662)
(4,266)
4,136
15,092
36,778
44,977
31,087
1,093
7,507
(261)
(16,107)
131
9,556
11,123
8,230
21,250
(2,467)
1,813
965
(704)
539
9
2,567
(11,204)
(1,694)
(25,438)
(19,391)
(2,764)
(26,040)
(2,213)
(22,098)
110
(3,414)
(4,740)
(62,730)
44,946
11,945
(985)
10,960
(2,134)
(2,123)
(4,257)
6,703
3,888
35,084
19,539
11,696
(1,671)
(18,533)
(2,474)
(38,205)
241
6,142
6,383
(54,500)
66,196
(7,072)
9,091
(7,911)
(3,849)
27,528
(1,735)
24,115
(99)
(2,548)
(2,886)
20,214
38,870
14,794
66,698
73,704
(192)
26,643
1,049
(16,795)
(4,164)
(3,674)
(18,273)
24,450
47,130
(15,640)
(10,925)
1,747
(26,861)
(955)
(293)
(8)
(1,256)
(23,667)
(2,127)
(6,172)
(31,966)
(3,303)
(6,769)
(8,394)
(427)
(62)
(489)
(282)
(4,922)
(4,965)
(12,344)
(12,151)
(1)
(48,026)
(78,111)
(4,582)
(16,527)
(4,123)
(19,800)
(4,593)
2,027
7,869
(69,181)
(6,806)
(26)
(29)
(55)
(544)
-
-
(1,800)
(1,807)
(22)
(161)
(19)
(133)
-
(481)
(481)
(816)
(991)
23,798
(8,566)
15,232
(407)
(7,499)
(7,906)
7,326
26,719
14,793
16,872
(6,214)
(4,796)
9,955
(3,093)
(36,728)
(8,757)
(2,128)
(10,885)
(45,547)
39,333
(1) Changes attributable to the combined impact of volume and rate have been allocated proportionately to the change due to volume and the change due to rate. Changes
due to volume and rate are calculated independently for each line item presented.
Net interest income was $699.2 million for 2010, up
10.5% from $633 million in 2009. The increase in net
interest income in 2010 was primarily due to a $793.1
million, or 5.3%, increase in average loans and leases
and a 27 basis point increase in net interest margin. The
increase in the net interest margin, from 3.87% in 2009 to
4.14% in 2010, was primarily due to lower average costs of
deposits, partially offset by lower yields on new loan and
lease production and the impact of higher average balances
of non-accrual loans and leases.
Net interest income was $633 million for 2009, up
6.6% from $593.7 million in 2008. The increase in net
interest income in 2009 primarily reflects the growth in
average interest-earning assets, up $1.2 billion over
2008, partially offset by a 4 basis point reduction in net
interest margin. The decrease in the net interest margin,
• 24 • TCF Financial Corporation and Subsidiaries
from 3.91% in 2008 to 3.87% in 2009, is primarily due to
declines in yields of interest earning assets, resulting from
lower market interest rates, the effect of higher average
balances of non-accrual and modified loans and leases
and investments in lower yielding debentures as a result
of excess liquidity, partially offset by declines in rates on
average deposits and an improvement in deposit mix.
Provision for Credit Losses TCF provided $236.4 million
for credit losses in 2010, compared with $258.5 million
in 2009 and $192 million in 2008. The decrease in provi-
sion from 2009 to 2010 was driven by decreased levels of
provision in excess of net charge-offs in the consumer real
estate portfolio.
Consumer real estate charge-off rates increased
throughout 2010. As a result, TCF increased consumer
real estate allowance levels. Higher consumer real estate
net charge-offs are primarily due to continued weak
residential real estate market conditions and persistent
high unemployment in TCF’s markets, particularly in the
Chicago market. The increase in provision from 2008 to 2009
was due to increased net charge-offs in the consumer real
estate, commercial lending and leasing and equipment
finance portfolios. Higher consumer real estate provisions
also include portfolio reserve rate increases due to higher
expected charge-offs and reserves for restructured
consumer real estate loans.
Net loan and lease charge-offs were $215.1 million,
or 1.47% of average loans and leases, in 2010, compared
with $186.5 million, or 1.34% of average loans and leases,
in 2009 and $100.5 million, or .78% of average loans and
leases, in 2008.
The provision for credit losses is calculated as part
of the determination of the allowance for loan and lease
losses. The determination of the allowance for loan and
lease losses and the related provision for credit losses is
a critical accounting estimate which involves a number
of factors such as historical trends in net charge-offs,
delinquencies in the loan and lease portfolio, year of loan
or lease origination, value of collateral, general economic
conditions and management’s assessment of credit risk in
the current loan and lease portfolio. Also see “Item 7.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations — Consolidated
Financial Condition Analysis — Allowance for Loan and
Lease Losses”.
Non-Interest Income Non-interest income is a signifi-
cant source of revenue for TCF, representing 43.5% of total
revenues in 2010, 45.4% in 2009 and 45.6% in 2008, and is
an important factor in TCF’s results of operations. Providing
a wide range of retail banking services is an integral com-
ponent of TCF’s business philosophy and a major strategy
for generating additional non-interest income. Total fees
and other revenue was $508.9 million for 2010, compared
with $496.5 million in 2009 and $474.1 million in 2008.
The following table presents the components of non-interest income.
(Dollars in thousands)
Fees and service charges
Card revenue
ATM revenue
Subtotal
Leasing and equipment finance
Other
Fees and other revenue
Gains on securities, net
Gains on sales of branches
and real estate
Visa share redemption
Total non-interest income
Fees and other revenue
Year Ended December 31,
2009
$286,908
104,770
30,438
422,116
69,113
5,239
496,468
29,387
–
–
$525,855
2008
$270,739
103,082
32,645
406,466
55,488
12,107
474,061
16,066
–
8,308
$498,435
2007
$278,046
98,880
35,620
412,546
59,151
18,588
490,285
13,278
37,894
–
$541,457
2010
$273,181
111,067
29,836
414,084
89,194
5,584
508,862
29,123
–
–
$537,985
Compound Annual
Growth Rate
2006
$270,166
92,084
37,760
400,010
53,004
32,262
485,276
–
4,188
–
$489,464
1-Year
2010/2009
(4.8)%
6.0
(2.0)
(1.9)
29.1
6.6
2.5
(.9)
–
– _
2.3
5-Year
2010/2005
.8%
6.8
(6.0)
1.6
13.5
(24.9)
2.3
22.2
(100.0)
2.4
as a percentage of total revenue
41.1%
42.8%
43.4%
44.9%
47.3%
2010 Form 10-K
• 25 •
Fees and Service Charges Fees and service charges
decreased $13.7 million, or 4.8%, to $273.2 million for
2010, compared with $286.9 million for 2009. The decrease
in banking fees and service charges from 2009 was primarily
due to a decrease in activity-based fee revenue as a result
of the implementation of recent overdraft fee regulations
and changes in customer banking and spending behavior,
partially offset by increased monthly maintenance fee
income. During 2009, fees and service charges increased
$16.2 million, or 6%, to $286.9 million, compared with
$270.7 million for 2008 primarily due to an increased
number of checking accounts and related fee income.
New regulations that became fully effective on August
15, 2010 require consumer checking account customers
to elect if they want TCF to authorize debit card and ATM
transactions if, at the time of authorization, there are
insufficient funds in the account to cover the transaction
(“opt-in”). TCF has had a process in place to discuss this
service with new and existing consumer checking account
customers since early 2010. The opt-in election is revocable
by customers at any time. Customers who have not elected
to opt-in may see an increase in the number of denied
transactions on their ATM or debit card transactions. These
denied transactions may impact consumer payment behavior
and reduce fees and service charges and card revenue. See
“Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations — Forward-Looking
Information — Other Risks Related to Fee Income”.
Card Revenue During 2010, card revenue, primarily
interchange fees, totaled $111.1 million, up from $104.8
million in 2009 and $103.1 million in 2008. The increases
in card revenue in 2010 and 2009 were primarily the result
of an increase in average spending per active account and
a small increase in interchange rates, partially offset by a
decrease in active accounts.
The following table sets forth information about TCF’s card business.
(Dollars in thousands)
Average number of checking accounts with a TCF card
Average active card users
Average number of transactions per card per month
Sales volume for the year ended:
Off-line (Signature)
On-line (PIN)
Total
Average transaction size (in dollars)
Percentage off-line
Average interchange rate
Average interchange per transaction
At or For the Year Ended December 31,
Percentage Increase (Decrease)
2010
1,399,730
807,519
22.2
$6,645,374
984,134
$7,629,508
$ 35
2009
1,533,234
843,825
20.7
$6,394,041
914,302
$7,308,343
$ 35
2008
1,449,501
812,385
20.3
$6,429,265
850,719
$7,279,984
$ 37
87.10%
1.38%
87.49%
1.34%
88.31%
1.34%
$ .49
$ .47
$ .49
2010/2009
(8.7)%
(4.3)
7.2
3.9
7.6
4.4
–
(39)bps
4 –
4.3%
2009/2008
5.8%
3.9
2.0
(.5)
7.5
.4
(5.4)
(82)bps
(4.1)%
The continued success of TCF’s debit card program is
highly dependent on the success and viability of Visa and the
continued use by customers and acceptance by merchants
of its cards. On December 16, 2010, the Federal Reserve
released a proposal for comment that would establish
standards for determining whether a debit card interchange
fee received by a card issuer is reasonable and proportional
to the cost incurred by the issuer for the transaction.
These standards would apply to issuers that, together with
their affiliates, have assets of $10 billion or more. The
Federal Reserve is requesting comment on two alternative
interchange fee standards that would apply to all covered
issuers: one based on each issuer’s cost, with a safe harbor
(initially set at 7 cents per transaction) and a cap (initially
set at 12 cents per transaction); and the other a stand-
alone cap (initially set at 12 cents per transaction). See
“Item 1A. Risk Factors — Other Risks — Card Revenue” and
“Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations — Overview” for more
information.
ATM Revenue ATM revenue totaled $29.8 million for 2010,
down from $30.4 million in 2009 and $32.6 million in 2008. The
declines in ATM revenue were primarily due to a decrease in fee
generating transactions by TCF customers using non-TCF ATMs.
Leasing and Equipment Finance Revenue Leasing and
equipment finance revenues in 2010 increased $20.1
million, or 29.1%, from 2009. Leasing and equipment
• 26 • TCF Financial Corporation and Subsidiaries
finance revenues in 2009 increased $13.6 million, or 24.6%,
from 2008. The increase in leasing and equipment finance
revenues for both years was primarily due to increased
operating lease revenue primarily from the acquisition of
FNCI in 2009, which also had a corresponding increase in
operating lease depreciation of $14.4 million in 2010.
Leasing and equipment finance revenues may fluctuate
from period to period based on customer-driven factors not
within TCF’s control.
Other Non-Interest Income Total other non-interest income
in 2010 increased $345 thousand from 2009 compared with a
decrease in 2009 of $6.9 million from 2008. The increase from
2009 to 2010 was primarily due to a gain on a non-marketable
investment of $538 thousand. The decrease from 2008 to 2009
was primarily due to TCF no longer selling investment and
insurance products in the branches and a decrease in gains
on the sales of education loans in 2008, partially offset by
servicing fees generated by TCF Inventory Finance.
The following table presents the components of other non-interest income.
(Dollars in thousands)
Investments and insurance
Gains on sales of education loans
Mortgage banking
Other
Total other earnings
N.M. Not Meaningful.
Year Ended December 31,
2010
$1,111
–
–
4,473
$5,584
2009
$ 643
–
–
4,596
$5,239
2008
$ 9,405
1,456
–
1,246
$12,107
2007
$10,318
2,011
–
6,259
$18,588
2006
$10,695
7,224
4,734
9,609
$32,262
Compound Annual
Growth Rate
1-Year
2010/2009
72.8%
–
–
(2.7)
6.6
5-Year
2010/2005
(36.4)%
(100.0)
(100.0)
(2.5)
(24.9)
Gains on Securities, Net In 2010, TCF recognized net gains of $29.1 million, on of sales of $1.3 billion in mortgage-backed
securities and agency U.S. Treasury Bills and other than temporary losses on certain investments of $2.4 million. In 2009, TCF
recognized net gains of $29.4 million, on sales of $2.1 billion of mortgage-backed securities and agency debentures and U.S.
Treasury Bills and other than temporary losses on certain investments of $2.4 million. In 2008, net gains of $16.1 million were
recognized, which included sales of $1.5 billion in mortgage-backed securities and other than temporary losses on certain
investments of $613 thousand.
Non-Interest Expense Non-interest expense decreased $4.7 million, or .6%, in 2010, and increased $73.4 million, or 10.6%,
in 2009 and $32.3 million, or 4.9%, in 2008. The following table presents the components of non-interest expense.
(Dollars in thousands)
Compensation and employee benefits
Occupancy and equipment
FDIC insurance
Deposit account premiums
Advertising and marketing
Other
Subtotal
Foreclosed real estate and
repossessed assets, net
Operating lease depreciation
Other credit costs, net
FDIC special assessment
Visa indemnification expense
Total non-interest expense
2010
$352,861
126,551
23,584
17,304
13,062
147,884
681,246
40,385
37,106
6,018
–
(1,631)
$763,124
Year Ended December 31,
2009
$356,996
126,292
19,109
30,682
17,134
143,698
693,911
31,886
22,368
12,137
8,362
(880)
$767,784
2008
$341,203
127,953
2,990
16,888
19,150
150,061
658,245
19,170
17,458
3,296
–
(3,766)
$694,403
2007
$346,468
120,824
1,145
4,849
16,829
139,249
629,364
5,673
17,588
1,803
–
7,696
$662,124
Compound Annual
Growth Rate
2006
$341,857
114,618
1,139
5,047
21,879
145,732
630,272
4,181
14,347
397
–
–
$649,197
1-Year
2010/2009
(1.2)%
.2
23.4
(43.6)
(23.8)
2.9
(1.8)
26.7
65.9
(50.4)
(100.0) –
85.3 –
(.6)
5-Year
2010/2005
1.6%
4.0
85.3
24.3
(8.0)
1.1
2.7
72.3
38.3
172.6
4.7
2010 Form 10-K
• 27 •
Compensation and Employee Benefits Compensation
and employee benefits represented 46.2%, 46.5% and
49.1% of total non-interest expense in 2010, 2009 and
2008, respectively. Compensation and employee benefits
decreased $4.1 million, or 1.2%, in 2010, compared with an
increase of $15.8 million, or 4.6%, in 2009 and a decrease of
$5.3 million, or 1.5%, in 2008. The decrease in compensation
and benefits in 2010 was primarily due to headcount
reductions and decreased employee medical plan expenses,
partially offset by increased costs in the Specialty
Finance businesses as a result of expansion and growth.
The increase in compensation and benefits in 2009 was
primarily due to increases in leasing and equipment finance
and the inventory finance compensation costs as a result
of expansion and growth and increased employee medical
plan expenses. The decreases in compensation and benefits
in 2008 were primarily due to headcount reductions,
decreased performance-based compensation and lower
benefit related costs, partially offset by expenses from
branch expansion and the new inventory finance business.
Occupancy and Equipment Occupancy and equipment
expenses increased $259 thousand in 2010, decreased
$1.7 million in 2009 and increased $7.1 million in 2008. The
increase in 2010 was primarily due to increased amortization
of software offset by decreased building expenses. The
decrease in 2009 was primarily due to the closing of six
branches. The increase in 2008 was primarily due to costs
associated with branch expansion and increased real
estate taxes.
FDIC Insurance FDIC premiums expense totaled $23.6
million in 2010, up $4.5 million from $19.1 million in 2009.
FDIC premiums totaled $19.1 million in 2009, up $16.1 million
from $3 million in 2008. The increase in 2010 was primarily
due to higher deposit insurance rates. The increase in 2009
was primarily due to higher insurance rates and deposit
growth. In 2009, the FDIC charged banks a special assess-
ment which totaled $8.4 million for TCF.
The Dodd-Frank Act requires changes to a number of
components of the FDIC insurance assessment, with an
implementation date by the FDIC of April 1, 2011. The
changes amend the current methodology used to determine
the assessments paid by institutions with assets greater
the $10 billion, including changing the assessment base
from deposits to total average assets less tier 1 capital.
Additionally, the FDIC has developed a scorecard approach
to determine a separate assessment rate for each
institution with assets greater than $10 billion. As a result
of these changes, TCF’s FDIC insurance expense is expected
to increase by approximately $15 million in 2011.
Deposit Account Premiums Deposit account premium
expense decreased $13.4 million to $17.3 million in 2010,
increased $13.8 million to $30.7 million in 2009 and
increased $12 million to $16.9 million in 2008. The decrease
in deposit account premium expense from 2009 to 2010 was
primarily due to revised marketing strategies and lower
checking account production. The increases in deposit
account premium expense in 2009 and 2008 were primarily
due to successful marketing campaigns, commencing in
June of 2008, which resulted in increased checking account
production. New checking accounts decreased 37% in
2010 compared with 2009 and grew 24.4% in 2009 compared
with 2008.
Other Non-Interest Expense Other non-interest
expense totaled $147.9 million in 2010, up $4.2 million
from 2009, primarily attributable to increased consulting
costs related to the administration of the company’s Bank
Secrecy Act program and other legal costs related to the
challenge of the Durbin Amendment of the Dodd-Frank Act.
Other non-interest expense totaled $143.7 million in 2009,
down $6.4 million from 2008, primarily due to decreased
separation costs.
Foreclosed Real Estate and Repossessed Assets, Net
Foreclosed real estate and repossessed assets expense, net
totaled $40.4 million in 2010, compared to $31.9 million in
2009 and $19.2 million in 2008. The increases were primarily
due to an increase in the number of consumer real estate
properties owned and the associated expenses and an
increase in the loss on sale of real estate properties.
Operating Lease Depreciation Operating lease
depreciation totaled $37.1 million in 2010, up $14.7 million
from 2009. Operating lease depreciation totaled $22.4
million in 2009, up $4.9 million from $17.5 million in 2008.
The increases in 2009 and 2010 were primarily due to the
acquisition of FNCI in 2009.
Other Credits Costs, Net Other credit costs, net is
comprised of consumer real estate loan pool insurance,
write-downs on carrying values of operating leases due
to customer defaults and reserve requirements for
expected losses on unfunded commitments. Other credit
• 28 • TCF Financial Corporation and Subsidiaries
costs, net totaled $6 million for 2010, down from $12.1
million in 2009. The decrease for 2010 as compared to
2009 was primarily attributable to the reversal of reserves
on several unfunded commitments that were closed and
lower premium costs related to consumer real estate loan
pool insurance. Other credit costs, net totaled $12.1
million in 2009, up $8.8 million from 2008. The increase for
2009 as compared to 2008 was primarily attributable to
higher premium costs related to consumer real estate loan
pool insurance.
Visa Indemnification Expense TCF is a member of Visa
U.S.A. for issuance and processing of its card transactions.
As a member of Visa, TCF has an obligation to indemnify
Visa U.S.A. under its bylaws and Visa under a retrospective
responsibility plan, for contingent losses in connection
with certain covered litigation (“the Visa indemnification”)
disclosed in Visa’s public filings with the SEC based on its
membership proportion. TCF is not a party to the lawsuits
brought against Visa U.S.A. TCF’s membership proportion in
Visa U.S.A. is .16234% at December 31, 2010.
As of December 31, 2010, TCF held 308,219 Visa Inc.
Class B shares with no recorded value that are generally
restricted from sale, other than to other Class B share-
holders, and are subject to dilution as a result of TCF’s
indemnification obligation.
At December 31, 2010, TCF’s estimated remaining Visa
contingent indemnification obligation was $1.4 million.
During the fourth quarter of 2010, TCF, based on informa-
tion made public by Visa U.S.A., reduced the contingency
obligation related to the Visa indemnification for certain
covered litigation matters by $1 million. The remaining
covered litigation against Visa is primarily with card retailers
and merchants, mostly related to fees and interchange rates.
TCF’s remaining indemnification obligation for Visa’s covered
litigation is a highly judgmental estimate. TCF must rely on
Visa’s public disclosures about the covered litigation in mak-
ing estimates of this contingent indemnification obligation.
Income Taxes Income tax expense represented 36.93% of
income before income tax expense during 2010, compared
with 34.60% and 37.30% in 2009 and 2008, respectively. The
higher effective income tax rate for 2010 as compared with
2009 and the lower effective income tax rate for 2009 as
compared with 2008 are primarily due to significant favor-
able developments in uncertain tax positions in 2009.
The determination of current and deferred income taxes
is a critical accounting estimate which is based on com-
plex analyses of many factors including interpretation of
income tax laws, the evaluation of uncertain tax positions,
differences between the tax and financial reporting bases
of assets and liabilities (temporary differences), estimates
of amounts due or owed such as the timing of reversal of
temporary differences and current financial accounting
standards. Additionally, there can be no assurance that
estimates and interpretations used in determining income
tax liabilities may not be challenged by taxing authorities.
Actual results could differ significantly from the estimates
and tax law interpretations used in determining the current
and deferred income tax liabilities.
In addition, under generally accepted accounting
principles, deferred income tax assets and liabilities are
recorded at the income tax rates expected to apply to
taxable income in the periods in which the deferred income
tax assets or liabilities are expected to be realized. If such
rates change, deferred income tax assets and liabilities
must be adjusted in the period of change through a charge
or credit to the Consolidated Statements of Income. Also, if
current period income tax rates change, the impact on the
annual effective income tax rate is applied year-to-date in
the period of enactment.
As discussed under “Item 1A. Risk Factors — Other Risks
— Income Taxes”, TCF uses a REIT and related companies in
the management of qualified real estate secured assets. In
the third quarter of 2009, TCF received notice from a state
taxing authority challenging use of the REIT and related
companies based on a recent court decision unrelated to
TCF and unrelated to the laws in place for the years in the
notice. In May 2010, the state’s Supreme Court unanimously
overturned the lower court’s decision on which the state
taxing authority relied. In September 2010, the state
taxing authority informed TCF it was conceding its position
and withdrawing its notice. This closure had no effect on
TCF’s liability for uncertain tax positions.
2010 Form 10-K
• 29 •
Consolidated Financial Condition Analysis
Securities Available for Sale Securities available for sale were $1.9 billion, or 10.5% of total assets, at December 31,
2010. During 2010, TCF recognized gains of $31.5 million on the sale of $598.5 million of mortgage-backed securities in the
available for sale securities portfolio. TCF’s securities available for sale portfolio primarily consists of fixed-rate mortgage-
backed securities issued by Fannie Mae and Freddie Mac. Net unrealized pre-tax losses on securities available for sale totaled
$25.8 million at December 31, 2010, compared with gains of $2.2 million at December 31, 2009. TCF may, from time to time,
sell treasury and agency securities and utilize the proceeds to reduce borrowings, fund growth in loans and leases or for other
corporate purposes.
TCF’s securities portfolio does not contain commercial paper, asset-backed commercial paper or asset-backed securities
secured by credit cards or automobile loans. TCF also has not participated in structured investment vehicles.
Loans and Leases The following tables set forth information about loans and leases held in TCF’s portfolio.
(Dollars in thousands)
At December 31,
2010
2009
2008
2007
2006
$ 4,893,887 $ 4,961,347 $ 4,881,662 $ 4,706,568 $ 4,409,247
2,101,211
6,510,458
206,984
2,262,194
7,156,081
39,188
2,344,113
7,050,681
223,691
2,319,222
7,280,569
51,422
2,420,116
7,301,778
62,561
7,195,269
3,328,216
317,987
3,646,203
3,154,478
792,354
6,717,442
2,390,653
551,995
2,942,648
1,818,165
–
$14,788,304 $14,590,744 $13,345,889 $12,494,370 $11,478,255
7,331,991
3,269,003
449,516
3,718,519
3,071,429
468,805
7,274,372
2,557,330
558,325
3,115,655
2,104,343
–
7,364,339
2,984,156
506,887
3,491,043
2,486,082
4,425
Compound Annual
Growth Rate
1-Year
2010/2009
5-Year
2010/2005
(1.4)%
(2.5)
(1.7)
(23.8)
(1.9)
1.8
(29.3)
(1.9)
2.7
69.0
1.4
3.4%
5.0
3.9
(32.9)
3.0
7.7
(6.1)
5.9
16.0
N.M.
7.2
Consumer
Real Estate
and Other
$2,816,387
2,180,769
1,038,430
476,683
571,446
2,651
1,795
3,682
3,342
24,089
3,537
–
54,115
18,343
$7,195,269
At December 31, 2010
Leasing and
Equipment
Finance(1)
$ 84,346
105,479
114,830
54,964
44,985
400,813
251,376
181,229
132,975
62,310
175,109
4,275
68,634
1,473,153
$3,154,478
Commercial
$ 882,343
891,780
752,337
551,937
139,552
18,102
2,765
62,729
53,373
104,682
3,400
–
35,770
147,433
$3,646,203
Inventory
Finance
$ 15,848
22,527
24,026
20,768
6,701
17,274
43,782
34,994
33,580
21,302
28,332
189,949
7,616
325,655
$792,354
Total
$ 3,798,924
3,200,555
1,929,623
1,104,352
762,684
438,840
299,718
282,634
223,270
212,383
210,378
194,224
166,135
1,964,584
$14,788,304
Portfolio Distribution:
Consumer real estate and other:
Consumer real estate:
First mortgage lien
Junior lien
Total consumer real estate
Other
Total consumer real estate
and other
Commercial real estate
Commercial business
Total commercial
Leasing and equipment finance (1)
Inventory finance
Total loans and leases
N.M. Not Meaningful.
(In thousands)
Geographic Distribution:
Minnesota
Illinois
Michigan
Wisconsin
Colorado
California
Texas
Florida
Ohio
Indiana
New York
Canada
Arizona
Other
Total
(1) Excludes operating leases included in other assets.
• 30 • TCF Financial Corporation and Subsidiaries
Loans and leases outstanding at December 31, 2010 are shown by contractual maturity in the following table.
(In thousands)
Amounts due:
Within 1 year
After 1 year:
1 to 2 years
2 to 3 years
3 to 5 years
5 to 10 years
10 to 15 years
Over 15 years
Total after 1 year
Total
Amounts due after 1 year on:
Fixed-rate loans and leases
Variable- and adjustable-
rate loans (1)
Total after 1 year
At December 31, 2010(3)
Consumer
Real Estate
and Other
Commercial
Real Estate
Commercial
Business
Leasing and
Equipment
Finance(2)
Inventory
Finance
Total Loans
and Leases
$ 636,817
$ 577,505
$177,886
$1,200,395
$792,354
$ 3,384,957
427,786
392,319
700,771
1,675,308
1,349,979
2,012,289
6,558,452
$7,195,269
381,029
724,495
1,034,704
554,791
52,576
3,116
2,750,711
$3,328,216
86,828
30,145
10,746
1,436
10,946
–
140,101
$317,987
825,384
586,305
482,227
60,167
–
–
1,954,083
$3,154,478
–
–
–
–
–
–
–
$792,354
1,721,027
1,733,264
2,228,448
2,291,702
1,413,501
2,015,405
11,403,347
$14,788,304
$4,403,794
$1,550,637
$ 62,372
$1,950,077
$ –
$ 7,966,880
2,154,658
$6,558,452
1,200,074
$2,750,711
77,729
$140,101
4,006
$1,954,083
–
$ –
3,436,467
$11,403,347
(1) Excludes fixed-term amounts under lines of credit which are included in closed-end loans.
(2) Excludes operating leases included in other assets.
(3) This table does not include the effect of prepayments, which is an important consideration in management’s interest-rate risk analysis. Company experience indicates
that loans and leases remain outstanding for significantly shorter periods than their contractual terms.
Retail Lending TCF’s consumer real estate loan portfolio
represents 48.4% of its total loan and lease portfolio. The
consumer real estate portfolio decreased 1.7% in 2010
and was flat in 2009 from 2008. Consumer real estate loan
originations were $1.1 billion in 2010, compared to $1.2
billion in 2009 and $1.6 billion in 2008, reflecting lower
consumer demand for financing due in part to declines in
home values and reduced levels of consumer spending in
the weak economy.
TCF’s consumer real estate portfolio is secured by
mortgages filed on residential real estate. At December 31,
2010, 68% of loan balances were secured by first mortgages
with 32% secured by second mortgages. The average loan
size secured by a first mortgage was $117 thousand and the
average balance of loans secured by a junior lien position
was $37 thousand at December 31, 2010. At December 31,
2010, 33% of the consumer real estate portfolio carried a
variable interest rate tied to the prime rate, compared with
27% at December 31, 2009.
At December 31, 2010, 75% of TCF’s consumer real estate
loan balance consisted of closed-end loans, compared with
76% at December 31, 2009. TCF’s closed-end consumer real
estate loans require payments of principal and interest
over a fixed term. The average home value, which is based
on original values securing the loans and lines of credit in
this portfolio, was $255 thousand as of December 31, 2010.
Substantially all of TCF’s consumer real estate loans are in
TCF’s primary banking markets. TCF’s consumer real estate
lines of credit require regular payments of interest and do
not require regular payments of principal. The average Fair
Isaac Corporation (“FICO”) credit score at loan origination
for the retail lending portfolio was 726 as of December 31,
2010 and 725 as of December 31, 2009. As part of TCF’s
credit risk monitoring, TCF obtains updated FICO score
information quarterly. The average updated FICO score for
the retail lending portfolio was 725 at December 31, 2010,
compared with 724 at December 31, 2009.
TCF’s consumer real estate underwriting standards are
intended to produce adequately secured loans to customers
with good credit scores at the origination date. Beginning in
2008, TCF generally has not made new loans in excess of 90%
loan-to-value (LTV) at origination. TCF does not have any
subprime lending programs and did not originate 2/28
adjustable-rate mortgages (ARM) or Option ARM loans. TCF
also has not originated consumer real estate loans with
multiple payment options or loans with “teaser” interest
rates. Although TCF does not have any programs
2010 Form 10-K
• 31 •
that target subprime borrowers, in the normal course of
lending to customers, loans at lower LTV ratios have been
originated to borrowers with FICO scores below 620. TCF
originated $2 billion of new loans since January 1, 2009;
of these loans, net charge-offs during 2010 totaled $472
thousand, or .03%. TCF’s consumer real estate portfolio is
subject to the risk of falling home values and to the general
economic environment, particularly unemployment.
At December 31, 2010, total consumer real estate lines
of credit outstanding were $2.2 billion, unchanged from
$2.2 billion at December 31, 2009. Outstanding balances
on consumer real estate lines of credit were 61% of total
lines of credit at December 31, 2010, compared with 58%
at December 31, 2009. At December 31, 2010, 28% of retail
lending accruing loans over 30-days delinquent made a
payment during the last month of the year, compared to
14.5% at December 31, 2009.
Commercial Banking Commercial real estate loans
increased $59.2 million from December 31, 2009 to $3.3
billion at December 31, 2010. Variable- and adjustable-rate
loans represented 38% of commercial real estate loans
outstanding at December 31, 2010. Commercial business
loans decreased $131.5 million in 2010 to $318 million at
December 31, 2010. TCF continues to expand its commer-
cial lending activities generally to borrowers located in its
primary banking markets. With a focus on secured lending,
approximately 99% of TCF’s commercial real estate and
commercial business loans were secured either by proper-
ties or other business assets at December 31, 2010. At
December 31, 2010, approximately 92% of TCF’s commercial
real estate loans outstanding were secured by properties
located in its primary banking markets.
The following table summarizes TCF’s commercial real estate loan portfolio by property and loan type.
At December 31,
(Dollars in thousands)
Retail services (1)
Apartments
Office buildings
Warehouse/industrial buildings
Hotels and motels
Health care facilities
Residential home builders
Other
Total
Number
of Loans
463
716
256
262
41
35
31
119
1,923
2010
Construction
and
Permanent Development
$ 11,767
$ 865,784
20,338
754,915
32,851
564,631
10,475
459,904
28,387
203,794
24,961
111,543
19,810
32,071
133,195
53,790
$3,125,837
Total
$ 877,551
775,253
597,482
470,379
232,181
136,504
51,881
186,985
$202,379 $3,328,216
Number
of Loans
481
699
275
284
42
23
38
130
1,972
2009
Construction
and
Permanent Development
$ 853,004
715,391
550,606
457,752
186,983
60,127
35,637
157,018
$3,016,518
Total
$ 23,867 $ 876,871
751,953
599,728
466,101
241,012
62,935
58,308
212,095
$252,485 $3,269,003
36,562
49,122
8,349
54,029
2,808
22,671
55,077
(1) Primarily retail shopping centers and stores, convenience stores, gas stations, restaurants and automobile dealerships.
• 32 • TCF Financial Corporation and Subsidiaries
Leasing and Equipment Finance The following tables summarize TCF’s leasing and equipment finance portfolio by market-
ing segment and by equipment type, excluding operating leases.
(Dollars in thousands)
Marketing Segment
Middle market (1)
Small ticket (2)
Winthrop
Other
Total
At December 31,
2010
2009
Balance
$1,632,829
833,053
530,063
158,533
$3,154,478
Percent
of Total
51.8%
26.4
16.8
5.0
100.0%
Balance
$1,465,122
872,904
577,972
155,431
$3,071,429
Percent
of Total
47.7%
28.4
18.8
5.1
100.0%
(1) Middle market consists primarily of loan and lease financing of construction and manufacturing equipment and specialty vehicles.
(2) Small ticket includes loan and lease financings to small- and mid-size companies through programs with vendors, manufacturers, distributors, buying groups, and
franchise organizations.
(Dollars in thousands)
Equipment Type
Specialty vehicles
Manufacturing
Medical
Construction
Technology and data processing
Golf cart and turf
Furniture and fixtures
Exercise equipment
Printing
Other
Total
At December 31,
2010
Balance
$ 624,149
567,622
432,973
349,841
321,279
211,796
162,131
99,342
84,187
301,158
$3,154,478
Percent
of Total
19.8%
18.0
13.7
11.1
10.2
6.7
5.1
3.1
2.7
9.6
100.0%
Balance
$ 547,444
469,291
446,340
416,518
379,971
181,546
178,571
73,221
81,467
297,060
$3,071,429
2009
Percent
of Total
17.8%
15.3
14.5
13.6
12.4
5.9
5.8
2.4
2.7
9.6
100.0%
The leasing and equipment finance portfolio increased
to $3.2 billion at December 31, 2010, up 2.7% from
December 31, 2009 and consisted of $2.2 billion of leases
and $939.5 million of loans. Total loan and lease originations
for TCF Equipment Finance and Winthrop Resources were
$1.1 billion for 2010, a decrease of 6.8% from $1.2 billion
in 2009. Total loan and lease purchases by TCF Equipment
Finance and Winthrop Resources decreased to $186.8 million
for 2010, from $563.9 million for 2009. Loan and lease
purchases during 2010 included $186.8 million of loans
and leases in the middle market segment compared with
purchases during 2009 which included $339.9 million
of loans and leases in the small ticket segment and $224
million in the Winthrop segment. The backlog of approved
transactions was $402.6 million at December 31, 2010,
compared with $322.6 million at December 31, 2009. The
average size of transactions originated during 2010 was
$81.6 thousand, compared with $82.7 thousand during
2009. TCF’s leasing and equipment finance activity is
subject to risk of cyclical downturns and other adverse
economic developments. In an adverse economic environ-
ment, there may be a decline in the demand for some types
of equipment, resulting in a decline in the amount of new
equipment being placed into service as well as a decline
in equipment values for equipment previously placed in
service. Declines in the value of leased equipment increase
the potential for impairment losses and credit losses due to
diminished collateral value, and may result in lower sales-
type revenue at the end of the contractual lease term.
See Note 1 of Notes to Consolidated Financial Statements
— Summary of Significant Accounting Policies — Policies
Related to Critical Accounting Estimates for information on
lease accounting.
At December 31, 2010 and 2009, $212.4 million and
$254.9 million, respectively, of TCF’s lease portfolio were
discounted on a non-recourse basis with third-party
financial institutions and, consequently, TCF retains no
credit risk on such amounts. The leasing and equipment
2010 Form 10-K
• 33 •
finance portfolio tables above include lease residuals.
Lease residuals represent the estimated fair value of the
leased equipment at the expiration of the initial term of
the transaction and are reviewed on an ongoing basis. Any
downward revisions in estimated fair value are recorded in
the periods in which they become known. At December 31,
2010, lease residuals totaled $109.6 million, or 10.1% of
original equipment value, compared with $106.3 million,
or 8.7% of original equipment value, at December 31, 2009.
TCF Inventory Finance The following table summarizes the TCF Inventory Finance portfolio by marketing segment.
(Dollars in thousands)
Equipment Type
Lawn and garden
Power sports and other
Electronics and appliances
Total
At December 31,
2010
2009
Balance
$441,691
220,472
130,191
$792,354
Percent
of Total
55.8%
27.8
16.4
100.0%
Balance
$346,509
–
122,296
$468,805
Percent
of Total
73.9%
–
26.1
100.0%
In the third quarter of 2010, TCF expanded into the power
• Performing loans that are 60+ days delinquent
sports industry by entering into an agreement with Arctic
Cat Sales Inc. to become the exclusive inventory finance
source for Arctic Cat’s Canadian dealers. This agreement
led to the acquisition of $125.8 million in loans towards
the end of the third quarter of 2010.
In the third quarter of 2009, TCF formed a joint
venture with The Toro Company (“Toro”) called Red Iron
Acceptance, LLC (“Red Iron”). Red Iron provides U.S.
distributors and dealers and select Canadian distributors
of the Toro and Exmark brands with reliable, cost-effective
sources of financing. TCF and Toro maintain a 55% and 45%
ownership interest, respectively, in Red Iron. As TCF has
a controlling financial interest in Red Iron, its financial
results are consolidated in TCF’s financial statements.
Toro’s interest is reported as a non-controlling interest
within equity and qualifies as tier 1 regulatory capital.
Credit Quality The following tables summarize TCF’s loan
and lease portfolio based on the most important credit
quality data that should be used to understand the overall
condition of the portfolio.
• Within the performing loans and leases, TCF classifies
customers within regulatory classification guidelines.
Loans and leases that are “classified” mean that
management has concerns regarding the ability of the
borrowers to meet existing loan or lease terms and
conditions but may never become non-performing
or result in a loss.
have a higher potential to become non-performing
and generally are a leading indicator for future
charge-off trends.
• Accruing troubled debt restructurings (“TDRs”) are
loans to borrowers that have been modified such
that TCF has granted a concession in terms to improve
the likelihood of collection of all principal and
interest owed.
• Non-accrual loans and leases generally have been
charged down to the estimated fair value of the
collateral less selling costs or reserved for expected
loss upon workout.
Included in Note 6 of Notes to Consolidated Financial
Statements, “Allowance for Loan and Lease Losses and Credit
Quality Information”, are disclosures of loans considered
to be “impaired” for accounting purposes. Impaired loans
comprise a portion of non-accrual loans and accruing TDRs
and therefore are not additive to the information in the
table below. Impaired loan accounting policies prescribe
specific methodologies for determining a portion of the
allowance for loan and lease losses. In addition, TCF has
modified certain loans and leases to troubled borrowers
where a concession was not granted and thus are not
considered TDRs. These other modified loans and leases
totaled $135.5 million and $101.5 million at December 31,
2010 and 2009, respectively, and are further discussed on
page 35 under “Loan Modifications”.
• 34 • TCF Financial Corporation and Subsidiaries
(Dollars in thousands)
Consumer real estate
and other
Commercial real estate
and commercial business
Leasing and equipment finance
Inventory finance
Total loans and leases
Percent of total loans and leases
(Dollars in thousands)
Consumer real estate
and other
Commercial real estate
and commercial business
Leasing and equipment finance
Inventory finance
Total loans and leases
Percent of total loans and leases
December 31, 2010
Performing Loans and Leases
Non-classified
Classified(1)
Total
60+ Days
Delinquent
and
Accruing(2)
Accruing
TDRs
Non-accrual
Loans and
Leases
Total Loans
and Leases
$ 6,613,610
$ – $ 6,613,610
$76,711
$337,401
$167,547
$ 7,195,269
3,091,911
3,073,347
785,245
$13,564,113
91.7%
354,185
35,695
5,710
3,446,096
3,109,042
790,955
$395,590 $13,959,703
94.4%
2.7%
9,021
11,029
344
$97,105
.7%
48,838
–
–
$386,239
2.6%
142,248
34,407
1,055
$345,257
2.3%
3,646,203
3,154,478
792,354
$14,788,304
100.0%
December 31, 2009
Performing Loans and Leases
Non-classified
Classified(1)
Total
60+ Days
Delinquent
and
Accruing(2)
Accruing
TDRs
Non-accrual
Loans and
Leases
Total Loans
and Leases
$ 6,863,222
$ – $ 6,863,222
$76,959
$252,510
$139,300
$ 7,331,991
3,280,957
2,967,540
467,319
$13,579,038
93.1%
331,298
31,767
–
3,612,255
2,999,307
467,319
$363,065 $13,942,103
95.6%
2.5%
68
22,114
715
$99,856
.7%
–
–
–
$252,510
1.7%
106,196
50,008
771
$296,275
2.0%
3,718,519
3,071,429
468,805
$14,590,744
100.0%
(1) Excludes classified loans and leases that are 60+ days delinquent or accruing TDRs.
(2) Excludes accruing TDRs that are 60+ days delinquent.
Past Due Loans and Leases The following tables set forth information regarding TCF’s delinquent loan and lease
portfolio, excluding non-accrual loans and leases, and will not agree to the above table, as these amounts include accruing
TDRs that are delinquent. Delinquent balances are determined based on the contractual terms of the loan or lease. See Note 6
of Notes to Consolidated Financial Statements, “Allowance for Loan and Lease Losses and Credit Quality Information”, for
additional information.
(In thousands)
Principal Balances
60-89 days
90 days or more
Total
(In thousands)
Percentage of Loans and Leases
60-89 days
90 days or more
Total
2010
2009
At December 31,
2008
2007
2006
$ 55,618
59,425
$115,043
$ 54,073
52,056
$106,129
$41,851
37,619
$79,470
$20,445
15,384
$35,829
$24,872
12,214
$37,086
2010
2009
At December 31,
2008
2007
2006
.39%
.41
.80%
.38%
.36
.74%
.32%
.28
.60%
.17%
.12
.29%
.22%
.11
.33%
2010 Form 10-K
• 35 •
(Dollars in thousands)
Consumer real estate and other:
First mortgage lien
Junior lien
Consumer other
Total consumer real estate and other
Commercial real estate
Commercial business
Total commercial real estate and other
Leasing and equipment finance:
Middle market
Small ticket
Winthrop
Other
Total leasing and equipment finance
Inventory finance
Subtotal (1)
Delinquencies in acquired portfolios (2)
Total
At December 31,
2010
2009
Principal
Balances
Percentage
of Portfolio
Principal
Balances
Percentage
of Portfolio
$ 73,848
20,763
39
94,650
8,856
165
9,021
2,589
2,003
462
–
5,054
318
109,043
6,000
$115,043
1.55%
.93
.10
1.35
.27
.06
.26
.18
.30
.13
–
.19
.05
.79
1.00
.80%
$ 65,074
17,942
215
83,231
22
46
68
8,387
2,612
231
33
11,263
705
95,267
10,862
$106,129
1.34%
.78
.42
1.16
–
.01
–
.59
.43
.06
.02
.44
.19
.69
1.93
.74%
(1) Excludes delinquencies and non-accrual loans in acquired portfolios as delinquency and non-accrual migration in these portfolios is not expected to result in losses
exceeding the credit reserves netted against the loan balances.
(2) At December 31, 2010, includes $600.5 million of loans and leases.
Loan Modifications TCF may modify certain loans to
retain customers or to maximize collection of loan balances.
If, for economic or legal reasons related to the customer’s
financial difficulties, TCF grants a concession that it would
not have otherwise considered, the loan is classified as
a TDR. TDRs generally continue to accrue interest if the
loan was accruing interest at the time of the modification,
although at lower rates than the original loans, and
if customers have demonstrated a willingness and ability
to make modified loan payments.
TCF has maintained several programs designed to assist
consumer real estate customers by extending payment
dates or reducing customers’ contractual payments. All
loan modifications are made on a case-by-case basis.
Under these programs, TCF typically reduces customer’s
contractual payments for a period of 12 to 18 months.
If TCF has not granted a concession, compared to the
original terms and conditions, the loan is not considered a
TDR. Concessions related to TDRs generally do not include
the forgiveness of principal balances. Modifications which
are not classified as TDRs primarily involve interest rate
changes to current market rates for similarly situated
borrowers. Loan modifications to borrowers who are not
experiencing financial difficulties are not included in the
following reporting of loan modifications. Loan modifica-
tions are not reported in calendar years after modification
if the loans were modified at an interest rate equal to or
greater than the rate that TCF was willing to accept at the
time of modification for a new loan with comparable risk
and the loans are no longer impaired based on the terms of
the restructuring agreements. Reserves for losses on accru-
ing restructured consumer real estate loans were $36.8
million, or 10.9% of the outstanding balance, at December
31, 2010 and $27 million, or 10.7% of the outstanding bal-
ance at December 31, 2009. TCF utilized its historical 16%
re-default rate on restructured consumer real estate loans
in determining its assumed 20% re-default rate included
in the estimated cash flows. Due to the secured nature of
these loans, reserves for losses on accruing restructured
commercial real estate loans were $695 thousand, or 1.4%
of the outstanding balance at December 31, 2010.
• 36 • TCF Financial Corporation and Subsidiaries
Commercial loan modifications which are not classified
as TDRs primarily involve loans where interest rates were
changed to current market rates for borrowers with similar
credit characteristics or where TCF received additional
collateral or loan conditions. Loans that are 90 or more
days past due and not well secured at the time of modifica-
tion remain on non-accrual status. Regardless of whether
contractual principal and interest payments are well-
secured at the time of modification, equipment finance
loans that are 90 or more days past due remain on non-
accrual status. Loans modified when on non-accrual status
continue to be reported as non-accrual loans until there is
sustained repayment performance for six months.
The balance of modified loans as of December 31, 2010 and 2009 are summarized in the following tables.
(Dollars in thousands)
TDRs:
Accruing
Non-accruing
Total TDRs
Other loan modifications:
Accruing
Non-accruing
Total other loan modifications
Total loan modifications
Over 60-day delinquency as a percentage of balance:
Accruing TDRs
Accruing other loan modifications
Total accruing loan modifications
(Dollars in thousands)
TDRs:
Accruing
Non-accruing
Total TDRs
Other loan modifications:
Accruing
Non-accruing
Total other loan modifications
Total loan modifications
Over 60-day delinquency as a percentage of balance:
Accruing TDRs
Accruing other loan modifications
Total accruing loan modifications
December 31, 2010
Consumer
Real Estate
and Other
Commercial
Real Estate
and Business
Leasing and
Equipment
Finance
$337,401
30,511
367,912
24,145
3,394
27,539
$395,451
$ 48,838
17,487
66,325
68,484
10,622
79,106
$145,431
$ –
1,284
1,284
22,624
6,231
28,855
$30,139
Total
$386,239
49,282
435,521
115,253
20,247
135,500
$571,021
5.32%
5.82
5.35
–%
–
–
–%
.55
.55
4.64%
1.33
3.88
December 31, 2009
Consumer
Real Estate
and Other
Commercial
Real Estate
and Business
Leasing and
Equipment
Finance
$252,510
15,416
267,926
32,717
1,506
34,223
$302,149
$ –
9,586
9,586
33,272
–
33,272
$42,858
$ –
–
–
31,925
2,059
33,984
$33,984
Total
$252,510
25,002
277,512
97,914
3,565
101,479
$378,991
2.48%
11.19
3.48
–%
–
–
–%
3.08
3.08
2.48%
4.74
3.11
2010 Form 10-K
• 37 •
At December 31, 2010, all consumer real estate TDRs
were temporary modifications, except for $31.1 million
which were permanent modifications. Temporary modifica-
tions are no longer classified as TDRs once they complete
the temporary modification term (typically 12 to 18 months)
and the customer is performing for three months under the
original contractual terms.
Non-accrual Loans and Leases The increase in
non-accrual loans and leases from December 31, 2009
was primarily due to increases in commercial and consumer
real estate non-accrual loans. There were fewer addi-
tions and higher repayments in 2010, as compared with
2009. Consumer real estate loans are charged-off to their
estimated realizable values upon entering non-accrual sta-
tus. Any necessary additional reserves are established for
commercial, leasing and equipment finance and inventory
finance loans and leases when reported as non-accrual.
Most of TCF’s non-accrual loans and past due loans are
secured by real estate. Given the nature of these assets
and the related mortgage foreclosure, property sale and,
if applicable, mortgage insurance claims processes, it can
take 18 months or longer for a loan to migrate from initial
delinquency to final disposition. This resolution process
generally takes much longer for loans secured by real
estate than for unsecured loans or loans secured by other
property primarily due to state real estate foreclosure laws.
Non-accrual loans and leases are summarized in the following table.
(In thousands)
Consumer real estate
First mortgage lien
Junior lien
Total consumer real estate
Consumer other
Total consumer real estate and other
Commercial real estate
Commercial business
Total commercial real estate
and commercial business
Leasing and equipment finance
Inventory finance
Total non-accrual loans and leases
2010
2009
At December 31,
2008
2007
2006
$140,871
26,626
167,497
50
167,547
104,305
37,943
142,248
34,407
1,055
$345,257
$118,313
20,846
139,159
141
139,300
77,627
28,569
106,196
50,008
771
$296,275
$ 71,078
11,793
82,871
65
82,936
54,615
14,088
68,703
20,879
–
$172,518
$23,750
5,391
29,141
6
29,147
19,999
2,658
22,657
8,050
–
$59,854
$14,001
5,291
19,292
27
19,319
12,849
3,421
16,270
7,596
–
$43,185
• 38 • TCF Financial Corporation and Subsidiaries
The changes in amount of non-accrual loans and leases for the years ended December 31, 2010 and 2009 are summarized in
the following table.
(In thousands)
Balance, at beginning of year
Additions
Charge-offs
Transfers to other assets
Return to accrual status
Payments received
Other, net
Balance, at end of year
(In thousands)
Balance, at beginning of year
Additions
Charge-offs
Transfers to other assets
Return to accrual status
Payments received
Other, net
Balance, at end of year
Consumer
$139,300
245,695
(57,194)
(98,446)
(48,999)
(8,576)
(4,233)
$167,547
Consumer
$ 82,936
223,785
(43,180)
(85,944)
(30,274)
(6,136)
(1,887)
$139,300
At or For the Year Ended December 31, 2010
Leasing and
Equipment
Finance
$ 50,008
56,033
(27,938)
(15,291)
(4,364)
(24,041)
–
$ 34,407
Commercial
$106,196
137,585
(45,804)
(33,127)
–
(26,546)
3,944
$142,248
Inventory
Finance
$ 771
6,278
(79)
(288)
(4,115)
(1,575)
63
$ 1,055
At or For the Year Ended December 31, 2009
Leasing and
Equipment
Finance
$ 20,879
97,260
(27,616)
(20,179)
(3,927)
(15,905)
(504)
$ 50,008
Commercial
$ 68,703
127,951
(41,663)
(28,151)
(3,304)
(15,754)
(1,586)
$106,196
Inventory
Finance
$ –
2,515
(64)
–
–
(1,680)
–
$ 771
Total
$ 296,275
445,591
(131,015)
(147,152)
(57,478)
(60,738)
(226)
$ 345,257
Total
$ 172,518
451,511
(112,523)
(134,274)
(37,505)
(39,475)
(3,977)
$ 296,275
Charge-offs and allowance recorded to date against the non-accrual loan and lease portfolio as a percentage of the remaining
contractual loan balance prior to non-accrual status as of December 31, 2010 is summarized in the following table.
(Dollars in thousands)
Consumer
Commercial
Leasing and equipment finance
Inventory finance
Total
(Dollars in thousands)
Consumer
Commercial
Leasing and equipment finance
Inventory finance
Total
Contractual
Balance
$212,809
200,619
34,458
1,055
$448,941
Contractual
Balance
$170,818
131,384
50,008
771
$352,981
At December 31, 2010
Charge-offs
and Allowance
Recorded
$ 46,780
86,446
8,384
185
$141,795
Net
Exposure
$166,029
114,173
26,074
870
$307,146
At December 31, 2009
Charge-offs
and Allowance
Recorded
$33,044
33,776
14,976
22
$81,818
Net
Exposure
$137,774
97,608
35,032
749
$271,163
Impairment(1)
22.0%
43.1
24.3
17.5
31.6%
Impairment(1)
19.3%
25.7
29.9
2.9
23.2%
(1) Represents the ratio of charge-offs and allowance recorded to the contractual loan balances prior to non-accrual status.
2010 Form 10-K
• 39 •
Allowance for Loan and Lease Losses The determina-
tion of the allowance for loan and lease losses is a critical
accounting estimate. TCF’s methodologies for determin-
ing and allocating the allowance for loan and lease losses
focus on ongoing reviews of larger individual loans and
leases, historical net charge-offs, delinquencies in the loan
and lease portfolio, the level of impaired and non-accrual
assets, values of underlying loan and lease collateral,
the overall risk characteristics of the portfolios, changes
in character or size of the portfolios, geographic loca-
tion, year of origination, prevailing economic conditions
and other relevant factors. The various factors used in the
methodologies are reviewed on a periodic basis.
The Company considers the allowance for loan and lease
losses of $265.8 million appropriate to cover losses incurred
in the loan and lease portfolios as of December 31, 2010.
However, no assurance can be given that TCF will not, in any
particular period, sustain loan and lease losses that are
sizable in relation to the amount reserved, or that subse-
quent evaluations of the loan and lease portfolio, in light
of factors then prevailing, including economic conditions,
TCF’s ongoing credit review process or regulatory require-
ments, will not require significant changes in the balance of
the allowance for loan and lease losses. Among other fac-
tors, a continued economic slowdown, increasing levels of
unemployment and/or a decline in commercial or residen-
tial real estate values in TCF’s markets may have an adverse
impact on the current adequacy of the allowance for loan
and lease losses by increasing credit risk and the risk of
potential loss.
The total allowance for loan and lease losses is gener-
ally available to absorb losses from any segment of the
portfolio. The allocation of TCF’s allowance for loan and
lease losses disclosed in the following table is subject to
change based on changes in the criteria used to evaluate
the allowance and is not necessarily indicative of the trend
of future losses in any particular portfolio.
In conjunction with Note 6 of Notes to Consolidated
Financial Statements, “Allowance for Loan and Lease
Losses and Credit Quality Information”, the following
includes detailed information regarding TCF’s allowance
for loan and lease losses and net charge-offs.
The allocation of TCF’s allowance for loan and lease losses and credit loss reserves are as follows.
At December 31,
2010
2009
2008
2007
2006
Allowance as a Percentage of Total
Loans and Leases Outstanding by Type
At December 31,
2008
2009
2007
2010
2006
$105,634 $ 89,542 $ 47,279
51,157
75,424
98,436
164,966
2,664
2,476
101,100
167,442
39,386
37,274
11,865
6,230
51,251
43,504
67,216
172,850
1,653
174,503
50,788
11,690
62,478
$16,494
15,102
31,596
2,059
33,655
25,891
7,077
32,968
$ 7,069
6,108
13,177
2,211
15,388
22,662
7,503
30,165
2.16%
2.97
2.42
4.22
2.43
1.53
3.68
1.71
1.80%
3.25
2.27
4.82
2.28
1.14
1.39
1.17
.97%
2.11
1.35
4.26
1.37
1.32
2.34
1.47
26,301
2,537
32,063
1,462
20,058
33
14,319
–
12,990
–
.83
.32
1.04
.31
.81
.75
265,819
244,471
172,442
80,942
58,543
1.80
1.68
1.29
.35%
.64
.45
.92
.46
1.01
1.27
1.06
.68
–
.66
.16%
.29
.20
1.07
.23
.95
1.36
1.03
.71
–
.51
2,353
3,850
1,510
399
402
N.A.
N.A.
N.A.
N.A.
N.A.
$268,172 $248,321 $173,952
$81,341
$58,945
1.81
1.70
1.30
.66
.52
(Dollars in thousands)
Consumer real estate:
First mortgage lien
Junior lien
Consumer real estate
Consumer other
Total consumer
Commercial real estate
Commercial business
Total commercial
Leasing and equipment
finance
Inventory finance
Total allowance for loan
and lease losses
Other credit loss reserves:
Reserves for unfunded
commitments
Total credit loss
reserves
N.A. Not Applicable.
• 40 • TCF Financial Corporation and Subsidiaries
The increase in the consumer real estate allowance from
December 31, 2009 to December 31, 2010, is primarily due
to increased provision for credit losses as the balance of
consumer real estate TDRs increased. The level of commer-
cial lending allowances is generally volatile due to reserves
for specific loans based on individual facts as loans
migrate to classified commercial loans or to non-accrual.
Charge-offs are taken against such specific reserves. The
commercial allowance increased in 2010 from 2009 due
to these factors. The increase in the inventory finance
allowance was primarily due to the growth of the inventory
finance business.
The following table sets forth information detailing the allowance for loan and lease losses.
(Dollars in thousands)
Balance, at beginning of year
Charge-offs:
Consumer real estate
First mortgage lien
Junior lien
Total real estate
Consumer other
Total consumer
Commercial real estate
Commercial business
Total commercial
Leasing and equipment finance
Inventory finance
Total charge-offs
Recoveries:
Consumer real estate
First mortgage lien
Junior lien
Total consumer real estate
Consumer other
Total consumer
Commercial real estate
Commercial business
Total commercial
Leasing and equipment finance
Inventory finance
Total recoveries
Net charge-offs
Provision charged to operations
Balance, at end of year
Net charge-offs as a percentage
of average loans and leases
2010
$ 244,471
2009
$ 172,442
Year Ended December 31,
2008
$ 80,942
2007
$ 58,543
(78,605)
(56,125)
(134,730)
(16,377)
(151,107)
(45,682)
(4,045)
(49,727)
(34,745)
(1,484)
(237,063)
2,237
2,633
4,870
11,338
16,208
724
603
1,327
4,100
339
21,974
(215,089)
236,437
$ 265,819
(55,420)
(53,137)
(108,557)
(18,498)
(127,055)
(35,956)
(9,810)
(45,766)
(29,372)
(205)
(202,398)
808
1,129
1,937
10,741
12,678
440
697
1,137
2,053
23
15,891
(186,507)
258,536
$ 244,471
(30,262)
(32,937)
(63,199)
(20,830)
(84,029)
(11,884)
(5,731)
(17,615)
(13,156)
–
(114,800)
210
625
835
11,525
12,360
30
130
160
1,735
–
14,255
(100,545)
192,045
$ 172,442
(9,809)
(11,977)
(21,786)
(19,455)
(41,241)
(2,409)
(1,264)
(3,673)
(7,507)
–
(52,421)
260
948
1,208
13,019
14,227
–
16
16
3,585
–
17,828
(34,593)
56,992
$ 80,942
2006
$ 55,823
(3,419)
(4,479)
(7,898)
(18,423)
(26,321)
(228)
(555)
(783)
(6,117)
–
(33,221)
114
167
281
13,621
13,902
39
86
125
1,225
–
15,252
(17,969)
20,689
$ 58,543
1.47%
1.34%
.78%
.29%
.16%
Other Real Estate Owned and Repossessed and Returned Equipment Other real estate owned and repossessed and
returned equipment are summarized in the following table.
(In thousands)
Other real estate owned:
Residential real estate
Commercial real estate
Total other real estate owned
Repossessed and returned equipment
Total other real estate owned and
repossessed and returned equipment
2010
2009
At December 31,
2008
2007
2006
$ 90,115
50,950
141,065
8,325
$ 66,956
38,812
105,768
17,166
$38,632
23,033
61,665
10,927
$28,752
17,013
45,765
2,292
$19,899
2,554
22,453
2,090
$149,390
$122,934
$72,592
$48,057
$24,543
2010 Form 10-K
• 41 •
Other real estate owned is recorded at the lower of
cost or fair value less estimated costs to sell the property.
At December 31, 2010, TCF owned 520 consumer real estate
properties, an increase of 222 from December 31, 2009 due
to the addition of 1,019 new properties exceeding sales of
797 properties. The average amount of time to sell consumer
real estate properties once they are listed for sale was
4.2 months in 2010. The consumer real estate portfolio
is secured by a total of 82,543 properties of which 813,
or .98%, were owned or in the process of foreclosure and
included within other real estate owned as of December 31,
2010. This compares with 504 properties, or .57%, owned or
in the process of foreclosure and included within other real
estate owned as of December 31, 2009.
The changes in amount of other real estate owned for the years ended December 31, 2010 and 2009 are summarized in the
following table.
(In thousands)
Balance, at beginning of year
Transferred in, net of charge-offs
Sales
Write-downs
Other, net
Balance, at end of year
(In thousands)
Balance, at beginning of year
Transferred in, net of charge-offs
Sales
Write-downs
Other, net
Balance, at end of year
At or For the Year Ended December 31, 2010
Commercial
$ 38,812
29,541
(10,617)
(4,040)
(2,746)
$ 50,950
Consumer
$ 66,956
121,555
(88,358)
(12,640)
2,602
$ 90,115
Total
$105,768
151,096
(98,975)
(16,680)
(144)
$141,065
At or For the Year Ended December 31, 2009
Commercial
$23,033
28,604
(9,616)
(3,485)
276
$38,812
Consumer
$ 38,632
102,744
(66,901)
(9,731)
2,212
$ 66,956
Total
$ 61,665
131,348
(76,517)
(13,216)
2,488
$105,768
The charge-offs and write-downs recorded to date on other real estate owned compared to the contractual loan balances
prior to non-accrual status at December 31, 2010 and 2009 are summarized in the following table.
(Dollars in thousands)
Consumer
Commercial
Total
(Dollars in thousands)
Consumer
Commercial
Total
Contractual
Loan Balance
Prior to Non-
performing Status
$134,529
69,438
$203,967
Contractual
Loan Balance
Prior to Non-
performing Status
$ 91,305
53,738
$145,043
December 31, 2010
Charge-offs
and Write-downs
Recorded
$44,414
18,488
$62,902
Other
Real Estate
Owned Balance
$ 90,115
50,950
$141,065
December 31, 2009
Charge-offs
and Write-downs
Recorded
$24,349
14,926
$39,275
Other
Real Estate
Owned Balance
$ 66,956
38,812
$105,768
Impairment(1)
33.0%
26.6
30.8%
Impairment(1)
26.7%
27.8
27.1%
(1) Represents the ratio of charge-offs and write-downs recorded to the contractual loan balances prior to non-performing status.
• 42 • TCF Financial Corporation and Subsidiaries
At December 31, 2010 and December 31, 2009, TCF had
$8.3 million and $17.2 million, respectively, of repossessed
and returned equipment held for sale in its Wholesale
Banking segment. The overall economic environment
influences the level of repossessed and returned equipment,
the demand for these types of used equipment in the
marketplace and the fair value or ultimate sales prices at
disposition. TCF periodically determines the fair value of
this equipment and, if fair value is lower than its recorded
basis, makes adjustments.
Liquidity Management TCF manages its liquidity position
to ensure that the funding needs of depositors and borrowers
are met promptly and in a cost-effective manner. Asset
liquidity arises from the ability to convert assets to cash
as well as from the maturity of assets. Liability liquidity
results from the ability of TCF to maintain a diverse set of
funding sources to promptly meet funding requirements.
ALCO and the Board of Directors have adopted a
Liquidity Management Policy to direct management of
the Company’s liquidity risk. See Item 1A. Risk Factors —
Enterprise Risk Management — Market Risk Management
(including Interest Rate Risk and Liquidity Risk) – Liquidity
Risk for more information. Given the current economic
condition and continued emergence of regulatory guidance,
the Company increased asset liquidity by $356.6 million
during 2010 to $507.3 million by increasing interest-bearing
deposits held at the Federal Reserve. At December 31, 2010,
TCF had $371.3 million of interest-bearing deposits at the
Federal Reserve.
Deposits are the primary source of TCF’s funds for use in
lending and for other general business purposes. In addition
to deposits, TCF derives funds from loan and lease repay-
ments and borrowings. Deposit inflows and outflows are
significantly influenced by general interest rates, money
market conditions, competition for funds, customer ser-
vice and other factors. TCF’s deposit inflows and outflows
have been and will continue to be affected by these factors.
Borrowings may be used to compensate for reductions in
normal sources of funds, such as deposit inflows at less than
projected levels, net deposit outflows or to fund balance
sheet growth. Historically, TCF has borrowed primarily from
the FHLB, institutional sources under repurchase agree-
ments and other sources. At December 31, 2010, TCF had $2.4
billion in unused secured borrowing capacity under these
funding sources. See “Item 7. Management’s Discussion and
Analysis of Financial Condition and Results of Operations —
Consolidated Financial Condition Analysis — Borrowings”.
Potential sources of liquidity for TCF include secured
borrowings from FHLB and the Federal Reserve Discount
Window or other unsecured and uncommitted short-term
federal funds purchased lines, and issuance of debt and
equity securities. TCF Bank’s ability to pay dividends or
make other capital distributions to TCF is restricted by
regulation and may require regulatory approval.
TCF executes all of its foreign exchange contracts in the
over-the-counter market with large, international financial
institutions. These contracts also may include credit risk-
related contingent features that enhance the creditworthi-
ness of these instruments as compared to other obligations
of the respective counterparty with whom TCF has trans-
acted. These contingent features may be for the benefit of
TCF, as well as its counterparties with respect to changes
in TCF’s creditworthiness.
Deposits Deposits totaled $11.6 billion at December 31,
2010, up $16.8 million from December 31, 2009. Checking,
savings and money market deposits are an important
source of low-cost funds and fee income for TCF. Checking,
savings and money market deposits totaled $10.6 billion,
up $176 million from December 31, 2009, and comprised
91% of total deposits at December 31, 2010, compared with
90% of total deposits at December 31, 2009. The average
balance of these deposits for 2010 was $10.5 billion, an
increase of $1 billion over the $9.5 billion average balance
for 2009. Certificates of deposit totaled $1 billion at
December 31, 2010, down $159.2 million from December 31,
2009. Non-interest bearing deposits represented 21%
of total deposits at both December 31, 2010 and 2009.
TCF’s weighted-average cost for deposits, including non-
interest bearing deposits, was .41% at December 31, 2010,
compared with .65% at December 31, 2009. The decrease in
the weighted-average rate for deposits was due to pricing
strategies on certain deposit products and mix changes. TCF
had no brokered deposits at December 31, 2010 or 2009.
Borrowings Borrowings totaled $5 billion at December 31,
2010, up $230.1 million from December 31, 2009.
See Notes 10 and 11 of Notes to Consolidated Financial
Statements for detailed information on TCF’s borrowings.
The weighted-average rate on borrowings was 4.17% at
December 31, 2010, and 4.42% at December 31, 2009.
The decrease in the weighted-average rate on borrowings
was primarily due to an increase in low rate short-term
borrowings. TCF does not utilize unconsolidated
subsidiaries or special purpose entities to provide
off-balance sheet borrowings.
2010 Form 10-K
• 43 •
Contractual Obligations and Commitments As disclosed in the Notes to Consolidated Financial Statements, TCF has
certain obligations and commitments to make future payments under contracts. At December 31, 2010, the aggregate
contractual obligations (excluding bank deposits) and commitments are as follows.
(In thousands)
Contractual Obligations
Total borrowings (1)
Annual rental commitments under
non-cancelable operating leases
Campus marketing agreements
Construction contracts
Visa indemnification expense (2)
Total
(In thousands)
Commitments
Commitments to lend:
Consumer real estate and other
Commercial
Leasing and equipment finance
Total commitments to lend
Standby letters of credit and guarantees
on industrial revenue bonds
Total
(1) Total borrowings excludes interest.
Payments Due by Period
Less than
1 Year
$629,563
25,995
4,221
30
1,420
$661,229
1-3
Years
$400,000
3-5
Years
$1,042,694
After 5
Years
$2,730,194
46,029
5,915
–
–
$451,944
39,509
5,991
–
–
$1,088,194
98,295
33,695
–
–
$2,862,184
Amount of Commitment – Expiration by Period
3-5
Less than
Years
1 Year
1-3
Years
After 5
Years
$ 22,434
162,239
148,597 –
333,270
$165,815
42,928
–
208,743
$ 94,273
49,272
–
143,545
$1,162,097
22,988
1,185,085
Total
$4,802,451
209,828
49,822
30
1,420
$5,063,551
Total
$1,444,619
277,427
148,597
1,870,643
31,062
$1,901,705
22,566
$355,836
2,639
$211,382
5,857 –
$149,402
$1,185,085
(2) The payment time is estimated to be less than one year; however, the exact date of the payment cannot be determined.
Commitments to lend are agreements to lend to a
customer provided there is no violation of any condition
in the contract. These commitments generally have fixed
expiration dates or other termination clauses and may
require payment of a fee. Since certain of the commitments
are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future
cash requirements. By contract, the Company, in its sole
discretion, may terminate or otherwise modify the credit
arrangement in place with a customer. Collateral predomi-
nantly consists of residential and commercial real estate.
The credit facilities established for inventory finance
customers are discretionary credit arrangements which
do not obligate the Company to lend.
Campus marketing agreements consist of fixed or
minimum obligations for exclusive marketing and naming
rights with seven campuses. TCF is obligated to make
various annual payments for these rights in the form of
royalties and scholarships through 2029. TCF also has vari-
ous renewal options, which may extend the terms of these
agreements. Campus marketing agreements are an impor-
tant element of TCF’s campus banking strategy.
See Note 17 of Notes to Consolidated Financial Statements
for information on standby letters of credit and guarantees
on industrial revenue bonds.
Stockholders’ Equity Stockholders’ equity at
December 31, 2010 was $1.5 billion, or 7.97% of total
assets, up from $1.2 billion, or 6.57% of total assets, at
December 31, 2009. The increase in stockholders’ equity
was primarily the result of TCF’s public offering of common
stock in February of 2010, which raised net proceeds of
$164.6 million, as well as an increase in retained earnings.
Dividends to common shareholders on a per share basis
totaled 20 cents in 2010, a decrease of 50% from 40 cents
in 2009. TCF’s dividend payout ratio was 19% in 2010.
The Company’s primary funding sources for dividends
are earnings and dividends received from TCF Bank.
At December 31, 2010, TCF had 5.4 million shares
remaining in its stock repurchase program authorized by
its Board of Directors.
For the year ended December 31, 2010, average total
equity to average assets was 7.83%, compared with 7.20%
for the year ended December 31, 2009. For the year ended
• 44 • TCF Financial Corporation and Subsidiaries
December 31, 2010, tangible realized common equity to
tangible assets was 7.37%, compared with 5.86% for the
year ended December 31, 2009. Tangible realized common
equity is a non-GAAP measure and represents common
equity less goodwill, other intangible assets, accumulated
other comprehensive income and non-controlling interest
in subsidiaries. Tangible realized common equity was
$1.3 billion at December 31, 2010, compared with $1 billion
at December 31, 2009. Tangible assets represent common
equity less goodwill and other intangible assets. Tangible
assets were $18.3 billion at December 31, 2010, compared
with $17.7 billion at December 31, 2009. Management reviews
tangible realized common equity to tangible assets as an
ongoing measure and has included this information because
of current interest by investors, rating agencies and banking
regulators. The methodology for calculating tangible realized
common equity may vary between companies.
The following table is a reconciliation of the non-GAAP measure of tangible realized common equity to tangible assets to the
GAAP measure of total equity to total assets.
(Dollars in thousands)
Computation of total equity to total assets:
Total equity
Total assets
Total equity to total assets
Computation of tangible realized common equity to tangible assets:
Total equity
Less: Non-controlling interest in subsidiaries
Total TCF Financial Corporation stockholders’ equity
Less:
Goodwill
Other intangibles
Add:
Accumulated other comprehensive loss
Tangible realized common equity
Total assets
Less:
Goodwill
Other intangibles
Tangible assets
Tangible realized common equity to tangible assets
At December 31, 2010, TCF Financial and TCF Bank
exceeded their regulatory capital requirements and are
considered “well-capitalized” under guidelines established
by the Federal Reserve and the OCC. See Notes 13 and 14 of
Notes to Consolidated Financial Statements.
At December 31,
2010
2009
$ 1,480,163
18,465,025
8.02%
$ 1,179,755
17,885,175
6.60%
$ 1,480,163
8,500
1,471,663
$ 1,179,755
4,393
1,175,362
152,599
1,232
152,599
1,405
31,514
$ 1,349,346
$18,465,025
18,545
$ 1,039,903
$17,885,175
152,599
1,232
$18,311,194
7.37%
152,599
1,405
$17,731,171
5.86%
Tier 1 risk-based capital at December 31, 2010 was
$1.5 billion, or 10.59% of risk-weighted assets, compared
with $1.2 billion, or 8.52% of risk-weighted assets, at
December 31, 2009. Tier 1 common capital at December 31,
2010 was $1.4 billion, or 9.71%, of the risk-weighted assets
compared to $1 billion, or 7.65%, of risk-weighted assets
at December 31, 2009.
2010 Form 10-K
• 45 •
In contrast to GAAP-basis measures, the total tier 1 common risk-based capital ratio excludes the effect of qualifying trust
preferred securities, qualifying non-controlling interest in subsidiaries and cumulative perpetual preferred stock. Management
reviews the total tier 1 common risk-based capital ratio as an ongoing measure and has included this information because of
current interest by investors, rating agencies and banking regulators. The methodology for calculating total tier 1 common
risk-based capital may vary between companies. The following table is a reconciliation of GAAP to non-GAAP measures.
At December 31,
2010
2009
$ 1,475,525
13,929,097
$ 1,161,750
13,627,871
10.59%
8.52%
$ 1,475,525
115,000
8,500
$ 1,352,025
$13,929,097
$ 1,161,750
115,000
4,393
$ 1,042,357
$13,627,871
9.71%
7.65%
Summary of Critical Accounting Estimates
Critical accounting estimates occur in certain accounting
policies and procedures and are particularly susceptible to
significant change. Policies that contain critical account-
ing estimates include the determination of the allowance
for loan and lease losses, lease financing and income taxes.
See Note 1 of Notes to Consolidated Financial Statements
for further discussion of critical accounting estimates.
(Dollars in thousands)
Computation of tier 1 risk-based capital ratio:
Total tier 1 capital
Total risk-weighted assets
Total tier 1 risk-based capital ratio
Computation of tier 1 common risk-based capital ratio:
Total tier 1 capital
Less: Qualifying trust preferred securities
Less: Qualifying non-controlling interest in subsidiaries
Total tier 1 common capital
Total risk-weighted assets
Total tier 1 common risk-based capital ratio
One factor considered in TCF’s capital planning process
is the amount of dividends paid to common stockholders as
a component of common capital generated.
TCF’s common capital generated for the year ended
December 31, 2010 is as follows.
(Dollars in thousands)
Net income available to common stockholders
Treasury shares sold to TCF employee benefit plans
Common shares purchased by TCF employee benefit plans
Amortization of stock compensation
Cancellation of common shares
Other
Total internally generated capital
Issuance of common stock
Total common capital generated
Less: Common stock dividends
Net common capital generated
Common dividend as a percentage of total
common capital generated
2010
$146,564
11,727
6,362
9,534
(2,165)
298
172,320
164,567
336,887
(27,617)
$309,270
8.2%
• 46 • TCF Financial Corporation and Subsidiaries
Recent Accounting Developments
On July 21, 2010, the Financial Accounting Standards Board
(“FASB”) issued Accounting Standards Update (“ASU”)
No. 2010-20, Disclosures about the Credit Quality of
Financing Receivables and the Allowance for Credit Losses,
which requires significant new disclosures about the
allowance for credit losses and the credit quality of
financing receivables. The FASB has elected to defer
the disclosures related to TDRs included within ASU No.
2010-20. The disclosures related to TDRs are expected to
be effective for the second quarter 2011. The remaining
disclosures under ASU No. 2010-20 were not deferred and
are included in Note 6 of Notes to Consolidated Financial
Statements, “Allowance for Loan and Lease Losses and
Credit Quality Information”.
Fourth Quarter Summary
In the fourth quarter of 2010, TCF reported net income of
$30.7 million, compared with $19.5 million in the fourth
quarter of 2009. Diluted earnings per common share was
22 cents for the fourth quarter of 2010, compared with 15
cents for the same 2009 period.
Net interest income was $174.3 million for the quarter
ended December 31, 2010, up $4.6 million, or 2.7%, from
the quarter ended December 31, 2009. The increase in net
interest income was primarily due to decreased rates paid
on deposits and increases in Specialty Finance loans and
leases, partially offset by the impact of increased asset
liquidity and decreased income from consumer loans. The
net interest margin was 4.04% and 4.07% for the fourth
quarter of 2010 and 2009, respectively.
TCF provided $77.6 million for credit losses in the fourth
quarter of 2010, compared with $77.4 million in the fourth
quarter of 2009. The net increase was primarily due to
increased reserves and charge-offs in the commercial real
estate portfolio partially offset by decreased levels of
provision in excess of net charge-offs in the consumer real
estate portfolio. For the fourth quarter of 2010, net loan
and lease charge-offs were $64.9 million, or 1.75% of aver-
age loans and leases outstanding, compared with $48.7
million, or 1.35% of average loans and leases outstanding
during the same 2009 period. The increase was primarily
due to in commercial loan and consumer real estate net
charge-offs.
Total non-interest income in the fourth quarter of
2010 was $141.5 million, compared with $143.1 million in
the fourth quarter of 2009. The decrease in non-interest
income was primarily due to a decrease in leasing revenues
and fees and service charges. Fees and service charges were
$61.5 million, down 17.9% from the fourth quarter of 2009,
primarily due to a decrease in activity-based fee revenue
as a result of the implementation of recent overdraft fee
regulations, partially offset by increased monthly
maintenance fee income. Card revenues totaled $27.6
million for the fourth quarter of 2010, up 3% over the same
2009 period. Leasing and equipment finance revenues were
$23.4 million for the fourth quarter of 2010, down $1 million
from the fourth quarter of 2009 primarily due to decreased
operating lease revenue as a result of operating lease
runoff from the FNCI acquisition that occurred during 2009,
which was partially offset by a corresponding decrease in
operating lease depreciation.
Non-interest expense totaled $190.5 million for the 2010
fourth quarter, a decrease of $16.3 million, or 7.9%, from
$206.8 million for the 2009 fourth quarter. Compensation
and employee benefits decreased $2 million, or 2.2%, from
the fourth quarter of 2009, primarily due to headcount
reductions and decreased employee medical plan expenses,
partially offset by increased costs in the Specialty Finance
businesses as a result of expansion and growth. Deposit
account premium expense decreased $7.7 million from the
fourth quarter of 2009, primarily due to revised marketing
strategies and lower checking account production. Other
expense in the fourth quarter of 2010 decreased $2.9 million,
or 7.2%, from the fourth quarter of 2009 primarily attribut-
able to a decrease in severance costs, as a result of the reor-
ganization of the company’s structure and business segments
in the fourth quarter of 2009. Other credit costs, net in the
fourth quarter of 2010 decreased $2.8 million, or 64.8%, from
the fourth quarter of 2009 primarily due to the reversal of
reserves on several unfunded commitments that were closed
and lower costs of consumer real estate loan pool insurance.
In the fourth quarter of 2010, the effective income tax
rate was 33.61% of income before tax expense, up from
32.77% for the fourth quarter of 2009. The effective tax rate
for the fourth quarter of both 2010 and 2009 included the
effects of year-to-date changes in the estimated annual
effective tax rate of approximately $1 million.
2010 Form 10-K
• 47 •
Legislative, Legal and Regulatory Developments
Federal and state legislation imposes numerous legal
and regulatory requirements on financial institutions.
Future legislative or regulatory change, or changes in
enforcement practices or court rulings, may have a dramatic
and potentially adverse impact on TCF and its bank and
other subsidiaries. TCF expects that the Patient Protection
and Affordable Care Act, as amended by the Health Care
and Education Reconciliation Act, will not have a significant
effect on future results.
Forward-Looking Information
This annual report on Form 10-K and other reports issued
by the Company, including reports filed with the SEC,
may contain “forward-looking” statements that deal
with future results, plans or performance. In addition,
TCF’s management may make such statements orally to
the media, or to securities analysts, investors or others.
Forward-looking statements deal with matters that do not
relate strictly to historical facts. TCF’s future results may
differ materially from historical performance and forward-
looking statements about TCF’s expected financial results or
other plans and are subject to a number of risks and uncer-
tainties. These include, but are not limited to the following:
Adverse Economic or Business Conditions, Credit
and Other Risks Continued or deepening deterioration
in general economic and banking industry conditions, or
continued increases in unemployment in TCF’s primary
banking markets; adverse economic, business and com-
petitive developments such as shrinking interest margins,
deposit outflows, deposit account attrition, or an inabil-
ity to increase the number of deposit accounts; adverse
changes in credit and other risks posed by TCF’s loan, lease,
investment, and securities available for sale portfolios,
including continuing declines in commercial or residential
real estate values or changes in the allowance for loan
and lease losses dictated by new market conditions or
regulatory requirements; interest rate risks resulting from
fluctuations in prevailing interest rates or other factors
that result in a mismatch between yields earned on TCF’s
interest-earning assets and the rates paid on its deposits
and borrowings; and foreign currency exchange risks.
Earnings/Capital Constraints, Liquidity Risks
Limitations on TCF’s ability to pay dividends or to increase
dividends in the future because of financial performance
deterioration, regulatory restrictions or limitations;
increased deposit insurance premiums, special assessments
or other costs related to adverse conditions in the banking
industry, the economic impact on banks of the Dodd-Frank
Act and Emergency Economic Stabilization Act of 2008, as
amended (“EESA”), and other regulatory reform legislation;
the impact of financial regulatory reform, including the
phase out of trust preferred securities in tier 1 capital called
for by the Act, or additional capital, leverage, liquidity and
risk management requirements or changes in the composi-
tion of qualifying regulatory capital; adverse changes in
securities markets directly or indirectly affecting TCF’s
ability to sell assets or to fund its operations; diminished
unsecured borrowing capacity resulting from TCF credit rating
downgrades and unfavorable conditions in the credit markets
that restrict or limit various funding sources; costs associ-
ated with new regulatory requirements or interpretive
guidance relating to liquidity.
Legislative and Regulatory Requirements New con-
sumer protection and supervisory requirements, including
the Dodd-Frank Act’s creation of a new consumer protection
bureau and limits on Federal preemption for state laws
that could be applied to national banks; the imposition
of requirements with an adverse impact relating to TCF’s
lending, loan collection and other business activities as
a result of the EESA and the Dodd-Frank Act, or other
legislative or regulatory developments such as mortgage
foreclosure moratorium laws or imposition of underwriting
or other limitations that impact the ability to use certain
variable-rate products; reduction of interchange revenue
from debit card transactions resulting from the so-called
Durbin Amendment to the Dodd-Frank Act, which limits
debit card interchange fees to amounts that will only
allow issuers to recover incremental costs of authorization,
clearance and settlement of debit card transactions,
plus possibly some costs relating to fraud prevention;
impact of legislative, regulatory or other changes
affecting customer account charges and fee income;
changes to bankruptcy laws which would result in the loss
of all or part of TCF’s security interest due to collateral
value declines (so-called “cramdown” provisions); any
material failure of TCF to comply with the terms of its
consent order with the Office of the Comptroller of the
Currency relating to TCF’s Bank Secrecy Act compliance,
which may result in regulatory enforcement action
including monetary penalties; increased health care costs
• 48 • TCF Financial Corporation and Subsidiaries
resulting from recently enacted Federal health care reform
legislation; adverse regulatory examinations and resulting
enforcement actions or other adverse consequences such as
increased capital requirements or higher deposit insurance
assessments; heightened regulatory practices, requirements
or expectations, including, but not limited to, requirements
related to the Bank Secrecy Act and anti-money laundering
compliance activity.
Other Risks Relating to Fee Income Uncertainties
relating to TCF’s implementation of new regulatory require-
ments that prohibit financial institutions from charging
NSF fees on point-of-sale and ATM transactions unless
customers opt-in, including customer opt-in preferences
which may have an adverse impact on TCF’s fee revenue;
and uncertainties relating to future retail deposit account
changes such as charging a daily negative balance fee
in lieu of per item NSF fees or other significant changes,
including limitations on TCF’s ability to predict customer
behavior and the impact on TCF’s fee revenues.
Litigation Risks Results of litigation, including class
action litigation concerning TCF’s lending or deposit
activities including account servicing processes or fees or
charges, or employment practices, and possible increases
in indemnification obligations for certain litigation against
Visa U.S.A. (“covered litigation”) and potential reductions
in card revenues resulting from covered litigation or other
litigation against Visa.
Competitive Conditions; Supermarket Branching Risk
Reduced demand for financial services and loan and lease
products; adverse developments affecting TCF’s supermar-
ket banking relationships or any of the supermarket chains
in which TCF maintains supermarket branches.
Accounting, Audit, Tax and Insurance Matters
Changes in accounting standards or interpretations of
existing standards; federal or state monetary, fiscal or
tax policies, including adoption of state legislation that
would increase state taxes; adverse state or Federal tax
assessments or findings in tax audits; lack of or inadequate
insurance coverage for claims against TCF.
Technological and Operational Matters Technological,
computer-related or operational difficulties or loss or theft
of information and the possibility that deposit account
losses (fraudulent checks, etc.) may increase.
Item 7A. Quantitative and
Qualitative Disclosures About
Market Risk
TCF’s results of operations are dependent to a large
degree on its net interest income and its ability to manage
interest-rate risk. Although TCF manages other risks, such
as credit risk, liquidity risk, operational and other risks, in
the normal course of its business, the Company considers
interest-rate risk to be one of its most significant market
risks. See “Item 1A. Risk Factors – Enterprise Risk
Management — Market Risk Management (Including
Interest-Rate and Liquidity Risk)” for further discussion.
Since TCF does not hold a trading portfolio, the Company
is not exposed to market risk from trading activities. A
mismatch between maturities, interest rate sensitivities
and prepayment characteristics of assets and liabilities
results in interest-rate risk. TCF, like most financial institu-
tions, has material interest-rate risk exposure to changes
in both short-term and long-term interest rates as well as
variable interest rate indices (e.g., the prime rate).
TCF’s Asset/Liability Management Committee (ALCO)
manages TCF’s interest-rate risk based on interest rate
expectations and other factors. The principal objective of
TCF’s asset/liability management activities is to provide
maximum levels of net interest income while maintaining
acceptable levels of interest-rate risk and liquidity risk
and facilitating the funding needs of the Company.
TCF utilizes net interest income simulation models to
estimate the near-term effects (next 1-2 years) of chang-
ing interest rates on its net interest income. Net interest
income simulation involves forecasting net interest income
under a variety of scenarios, including the level of interest
rates, the shape of the yield curve, and spreads between
market interest rates. At December 31, 2010, net interest
income is estimated to increase slightly by 1% compared
with the base case scenario, over the next 12 months if
short- and long-term interest rates were to sustain an
immediate increase of 100 basis points.
Management exercises its best judgment in making
assumptions regarding events that management can influ-
ence such as non-contractual deposit repricings and events
outside management’s control such as customer behavior
on loan and deposit activity, counterparty decisions on
callable borrowings and the effect that competition has
on both loan and deposit pricing. These assumptions are
2010 Form 10-K
• 49 •
inherently uncertain and, as a result, net interest income
simulation results will differ from actual results due the
timing, magnitude and frequency of interest rate changes,
changes in market conditions, customer behavior and
management strategies, among other factors.
In addition to the net interest income simulation model,
management utilizes an interest rate gap measure
(difference between interest-earning assets and interest-
bearing liabilities re-pricing within a given period). While
the interest rate gap measurement has some limitations,
including no assumptions regarding future asset or liability
production and a static interest rate assumption (large
quarterly changes may occur related to these items),
the interest rate gap represents the net asset or liability
sensitivity at a point in time. An interest rate gap measure
could be significantly affected by external factors such as
loan prepayments, early withdrawals of deposits, changes
in the correlation of various interest-bearing instruments,
competition, or a rise or decline in interest rates.
TCF’s one-year interest rate gap was a positive $515.5
million, or 2.8% of total assets, at December 31, 2010,
compared with a negative $1.2 billion, or 6.6% of total
assets, at December 31, 2009. The change in the gap from
year-end is primarily due to decreased levels of fixed-rate
loans, an increase in non-contractual deposits and
increased equity. A positive interest rate gap position
exists when the amount of interest-earning assets
maturing or re-pricing exceeds the amount of interest-
bearing liabilities maturing or re-pricing, including
assumed prepayments, within a particular time period. A
negative interest rate gap position exists when the amount
of interest-bearing liabilities maturing or re-pricing
exceeds the amount of interest-earning assets maturing
or re-pricing, including assumed prepayments, within a
particular time period.
TCF estimates that an immediate 25 basis point decrease
in current mortgage loan interest rates would increase
prepayments on the $6.7 billion of fixed-rate mortgage-
backed securities and consumer real estate loans at
December 31, 2010, by approximately $44 million, or 7.7%,
in the first year. An increase in prepayments would decrease
the estimated life of the portfolios and may adversely
impact net interest income or net interest margin in the
future. Although prepayments on fixed-rate portfolios are
currently at a relatively low level, TCF estimates that an
immediate 100 basis point increase in current mortgage
loan interest rates would reduce prepayments on the
fixed-rate mortgage-backed securities, residential real
estate loans and consumer loans at December 31, 2010, by
approximately $144 million, or 25.1%, in the first year. A
slowing in prepayments would increase the estimated life
of the portfolios and may also adversely impact net
interest income or net interest margin in the future. The
level of prepayments that would actually occur in any
scenario will be impacted by factors other than interest
rates. Such factors include lenders’ willingness to lend
funds, which can be impacted by the value of assets under-
lying loans and leases.
• 50 • TCF Financial Corporation and Subsidiaries
The following table summarizes TCF’s interest-rate gap position at December 31, 2010.
(Dollars in thousands)
Interest-earning assets:
Consumer loans (1) (2)
Commercial loans (1) (2)
Leasing and equipment finance (2)
Securities available for sale (2)
Investments
Inventory finance
Total
Interest-bearing liabilities:
Checking deposits (3)
Savings deposits (3)
Money market deposits (3)
Certificates of deposit
Short-term borrowings
Long-term borrowings (4)
Total
Interest-earning assets (under)
over interest-bearing liabilities
Cumulative gap
Cumulative gap as a percentage
of total assets:
At December 31, 2010
At December 31, 2009
Within
30 Days
30 Days to
6 Months
Maturity/Rate Sensitivity
6 Months
to 1 Year
1 to 3 Years
3+ Years
Total
$1,022,951
452,911
155,630
38,273
371,407
360,646
2,401,818
575,930
1,592,682
330,149
100,451
126,790
8,107
2,734,109
$ 391,684
301,442
626,474
64,272
141,567
253,204
1,778,643
62,673
462,632
9,837
412,856
–
548,460
1,496,458
$ 441,042
324,193
577,485
88,414
62
178,504
1,609,700
67,230
470,622
10,349
357,483
–
138,389
1,044,073
$2,157,678
1,395,466
1,356,257
333,026
368
–
5,242,795
$ 3,181,914
1,172,191
438,632
1,407,189
37,761
–
6,237,687
$ 7,195,269
3,646,203
3,154,478
1,931,174
551,165
792,354
17,270,643
860,831
1,589,703
250,466
146,837
–
501,152
3,348,989
2,963,400
1,275,163
35,121
10,700
–
3,662,713
7,947,097
4,530,064
5,390,802
635,922
1,028,327
126,790
4,858,821
16,570,726
(332,291)
$ (332,291)
282,185
$ (50,106)
565,627
$ 515,521
1,893,806
$2,409,327
(1,709,410)
$ 699,917
699,917
$ 699,917
(1.8)%
(12.9)%
(0.3)%
(8.9)%
2.8 %
(6.6)%
13.0%
4.2%
3.8%
1.9%
3.8%
1.9%
(1) At January 1, 2011, $1.4 billion of variable-rate consumer loans and $397 million of variable-rate commercial loans were modeled as fixed-rate loans as their current interest
rate is below their contractual interest rate floor. An increase in short-term interest rates may not result in a change in the interest rate on these variable-rate loans.
(2) Based upon contractual maturity, repricing date, if applicable, scheduled repayments of principal and projected prepayments of principal based upon experience and
third-party projections.
(3) Includes non-interest bearing deposits. At December 31, 2010, 16% of checking deposits, 47% of savings deposits, and 55% of money market deposits are included in
amounts repricing within one year. At December 31, 2009, 18% of checking deposits, 51% of savings deposits, and 54% of money market deposits are included in amounts
repricing within one year.
(4) Includes $700 million of callable borrowings.
2010 Form 10-K
• 51 •
Item 8. Financial Statements and Supplementary Data
Repo rt of I ndependent Registered
P ubli c Ac co unting Firm
The Board of Directors and Stockholders
TCF Financial Corporation:
We have audited the accompanying consolidated statements
of financial condition of TCF Financial Corporation and
subsidiaries (the Company) as of December 31, 2010 and
2009, and the related consolidated statements of income,
equity, and cash flows for each of the years in the three-
year period ended December 31, 2010. These consolidated
financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards
of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by manage-
ment, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects,
the financial position of TCF Financial Corporation and
subsidiaries as of December 31, 2010 and 2009, and the
results of their operations and their cash flows for each
of the years in the three-year period ended December 31,
2010, in conformity with U.S. generally accepted
accounting principles.
We also have audited, in accordance with the standards
of the Public Company Accounting Oversight Board (United
States), TCF Financial Corporation’s internal control over
financial reporting as of December 31, 2010, based on criteria
established in Internal Control — Integrated Framework
issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO), and our report dated
February 15, 2011 expressed an unqualified opinion on
the effectiveness of the Company’s internal control over
financial reporting.
Minneapolis, Minnesota
February 15, 2011
• 52 • TCF Financial Corporation and Subsidiaries
Consolidated Statements of Financial Condition
(Dollars in thousands, except per-share data)
Assets
Cash and due from banks
Investments
Securities available for sale
Loans and leases:
Consumer real estate and other
Commercial
Leasing and equipment finance
Inventory finance
Total loans and leases
Allowance for loan and lease losses
Net loans and leases
Premises and equipment, net
Goodwill
Other assets
Total assets
Liabilities and Equity
Deposits:
Checking
Savings
Money market
Certificates of deposit
Total deposits
Short-term borrowings
Long-term borrowings
Total borrowings
Accrued expenses and other liabilities
Total liabilities
Equity:
Preferred stock, par value $.01 per share, 30,000,000 shares authorized;
none issued and outstanding
Common stock, par value $.01 per share, 280,000,000 shares authorized;
142,965,012 and 130,339,500 shares issued
Additional paid-in capital
Retained earnings, subject to certain restrictions
Accumulated other comprehensive loss
Treasury stock at cost, 51,160 and 1,136,688 shares, and other
Total TCF Financial Corporation stockholders’ equity
Non-controlling interest in subsidiaries
Total equity
Total liabilities and equity
See accompanying notes to consolidated financial statements.
At December 31,
2010
2009
$ 663,901
179,768
1,931,174
7,195,269
3,646,203
3,154,478
792,354
14,788,304
(265,819)
14,522,485
443,768
152,599
571,330
$18,465,025
$ 4,530,064
5,390,802
635,922
1,028,327
11,585,115
126,790
4,858,821
4,985,611
414,136
16,984,862
– –
1,430
459,884
1,064,978
(31,514)
(23,115)
1,471,663
8,500
1,480,163
$18,465,025
$ 299,127
163,692
1,910,476
7,331,991
3,718,519
3,071,429
468,805
14,590,744
(244,471)
14,346,273
447,930
152,599
565,078
$17,885,175
$ 4,400,290
5,339,955
640,569
1,187,505
11,568,319
244,604
4,510,895
4,755,499
381,602
16,705,420
1,303
297,429
946,002
(18,545)
(50,827)
1,175,362
4,393
1,179,755
$17,885,175
2010 Form 10-K
• 53 •
Consolidated Statements of Income
(In thousands, except per-share data)
Interest income:
Loans and leases
Securities available for sale
Investments and other
Total interest income
Interest expense:
Deposits
Borrowings
Total interest expense
Net interest income
Provision for credit losses
Net interest income after provision for credit losses
Non-interest income:
Fees and service charges
Card revenue
ATM revenue
Subtotal
Leasing and equipment finance
Other
Fees and other revenue
Gains on securities, net
Visa share redemption
Total non-interest income
Non-interest expense:
Compensation and employee benefits
Occupancy and equipment
FDIC insurance
Deposit account premiums
Advertising and marketing
Other
Subtotal
Foreclosed real estate and repossessed assets, net
Operating lease depreciation
Other credit costs, net
FDIC special assessment
Total non-interest expense
Income before income tax expense
Income tax expense
Income after income tax expense
Income (loss) attributable to non-controlling interest
Net income
Preferred stock dividends
Non-cash deemed preferred stock dividend
Net income available to common stockholders
Net income per common share:
Basic
Diluted
Dividends declared per common share
See accompanying notes to consolidated financial statements.
Year Ended December 31,
2010
2009
2008
$883,923
80,445
5,509
969,877
61,229
209,446
270,675
699,202
236,437
462,765
273,181
111,067
29,836
414,084
89,194
5,584
508,862
29,123
–
537,985
352,861
126,551
23,584
17,304
13,062
146,253
679,615
40,385
37,106
6,018
–
763,124
237,626
87,765
149,861
3,297
146,564
–
–
$146,564
$ 1.05
$ 1.05
$ .20
$864,384
89,427
4,370
958,181
122,112
203,063
325,175
633,006
258,536
374,470
286,908
104,770
30,438
422,116
69,113
5,239
496,468
29,387
–
525,855
356,996
126,292
19,109
30,682
17,134
142,818
693,031
31,886
22,368
12,137
8,362
767,784
132,541
45,854
86,687
(410)
87,097
6,378
12,025
$ 68,694
$ .54
$ .54
$ .40
$847,512
110,946
5,937
964,395
156,774
213,948
370,722
593,673
192,045
401,628
270,739
103,082
32,645
406,466
55,488
12,107
474,061
16,066
8,308
498,435
341,203
127,953
2,990
16,888
19,150
146,295
654,479
19,170
17,458
3,296
–
694,403
205,660
76,702
128,958
–
128,958
2,540
–
$126,418
$ 1.01
$ 1.01
$ 1.00
• 54 • TCF Financial Corporation and Subsidiaries
Consolidated Statements of Equity
TCF Financial Corporation
Number of
Common
Shares
Issued
(Dollars in thousands)
Balance as of December 31, 2007 131,468,699
Pension and postretirement
measurement date change
–
131,468,699
Subtotal
Comprehensive income:
Income after income tax expense
Other comprehensive income
Comprehensive income
Dividends on preferred stock
Dividends on common stock
Issuance of preferred shares
and common warrant
Grants of restricted stock, 755,838 shares
Treasury shares sold to TCF employee
benefit plans, 683,787 shares
Cancellation of shares of restricted stock
Cancellation of common shares
for tax withholding
–
–
–
–
–
–
–
–
(223,647)
(405,674)
–
–
–
–
–
–
–
–
–
Amortization of stock compensation
Exercise of stock options, 13,000 shares
Stock compensation tax benefits
Change in shares held in trust for
deferred compensation plans, at cost
–
Balance as of December 31, 2008 130,839,378
Comprehensive income (loss):
Income after income tax expense
Other comprehensive loss
Comprehensive income (loss)
–
–
–
Investment by non-controlling interest
Dividends on preferred stock
Dividends on common stock
Non-cash deemed preferred
stock dividend
Redemption of preferred stock
Grants of restricted stock, 719,727 shares
Treasury shares sold to TCF employee
benefit plans, 1,448,640 shares
Cancellation of shares of restricted stock
Cancellation of common shares
for tax withholding
Amortization of stock compensation
Exercise of stock options, 108,800 shares
Stock compensation tax expense
Change in shares held in trust for
–
deferred compensation plans, at cost
Cost of issuance of common warrants
–
Balance as of December 31, 2009 130,339,500
Comprehensive income (loss):
Income after income tax expense
Other comprehensive loss
(18,878)
–
–
–
–
(481,000)
Comprehensive income (loss)
Public offering of common stock
Investment by non-controlling interest
Dividends on common stock
Grants of restricted stock, 347,916 shares
Common shares purchased by TCF
employee benefit plans
Treasury shares sold to TCF employee
benefit plans, 757,612 shares
Cancellation of shares of restricted stock
Cancellation of common shares for
tax withholding
Amortization of stock compensation
Stock compensation tax benefits
Change in shares held in trust for
deferred compensation plans, at cost
Balance as of December 31, 2010
–
–
–
12,322,250
–
–
20,000
442,579
–
(23,723)
(135,594)
–
–
–
142,965,012
Preferred
Stock
$ –
Common
Stock
$1,315
Accumulated
Other
Comprehensive
(Loss)/
Income
Additional
Paid-in
Capital
Retained
Earnings
$354,563 $ 926,875
Treasury
Stock
Total
and Other
$ (18,055) $(165,686) $ 1,099,012
Non-
controlling
Interests
Total
Equity
$ – $ 1,099,012
–
–
–
–
–
283
–
348,154
–
–
–
–
–
–
–
–
1,315
–
354,563
65
926,940
–
(18,055)
–
65
(165,686) 1,099,077
–
–
–
–
–
–
–
–
(3)
(4)
–
–
–
–
–
–
–
–
128,958
–
128,958
(2,540)
(126,447)
–
14,363
14,363
–
–
12,850
(19,573)
(7,530)
(4,217)
(6,474)
8,344
(173)
10,110
–
–
–
982
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
19,573
17,707
–
–
–
336
–
128,958
14,363
143,321
(2,257)
(126,447)
361,004
–
10,177
(3,238)
(6,478)
8,344
163
10,110
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
65
1,099,077
128,958
14,363
143,321
(2,257)
(126,447)
361,004
–
10,177
(3,238)
(6,478)
8,344
163
10,110
–
$ 348,437
–
$1,308
(17,426)
–
$330,474 $ 927,893
–
–
17,426
$ (3,692) $(110,644) $ 1,493,776
–
–
$ – $ 1,493,776
–
–
–
–
710
–
12,025
(361,172)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(18,638)
–
(5)
(18,367)
(818)
–
–
–
–
(250)
8,615
(1,279)
(1,058)
87,097
–
87,097
–
(6,378)
(50,828)
(12,025)
–
–
–
243
–
–
–
–
–
(14,853)
(14,853)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
18,638
37,514
–
–
–
2,817
–
87,097
(14,853)
72,244
–
(5,668)
(50,828)
–
(361,172)
–
19,147
(580)
(250)
8,615
1,538
(1,058)
–
–
$ –
–
–
$1,303
(848)
(402)
–
–
$297,429 $ 946,002
–
–
–
(402)
$ (18,545) $ (50,827) $ 1,175,362
848
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
124
–
–
–
4
–
–
(1)
–
–
–
–
–
164,443
–
–
(8,491)
6,358
(7,893)
(247)
(1,946)
9,534
298
146,564
–
146,564
–
–
(27,617)
–
–
(12,969)
(12,969)
–
–
–
–
–
–
29
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
8,491
146,564
(12,969)
133,595
164,567
–
(27,617)
–
–
6,362
19,620
–
11,727
(218)
–
–
–
(1,947)
9,534
298
(410)
–
(410)
4,803
–
–
–
–
–
–
–
–
–
–
–
86,687
(14,853)
71,834
4,803
(5,668)
(50,828)
–
(361,172)
–
19,147
(580)
(250)
8,615
1,538
(1,058)
–
–
–
(402)
$ 4,393 $ 1,179,755
3,297
–
3,297
–
810
–
–
–
–
–
–
–
–
149,861
(12,969)
136,892
164,567
810
(27,617)
–
6,362
11,727
(218)
(1,947)
9,534
298
–
$ –
–
$1,430
399
–
$459,884 $1,064,978
–
$(31,514)
(399)
–
$ (23,115) $1,471,663
–
–
$8,500 $1,480,163
See accompanying notes to consolidated financial statements.
2010 Form 10-K
• 55 •
Consolidated Statements of Cash Flows
(In thousands)
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for credit losses
Depreciation and amortization
Net increase (decrease) in other assets and accrued
expenses and other liabilities
Gains on sales of assets, net
Other, net
Total adjustments
Net cash provided by operating activities
Cash flows from investing activities:
Principal collected on loans and leases
Originations and purchases of loans
Purchases of equipment for lease financing
Purchase of leasing and equipment finance portfolios
Purchase of inventory finance portfolios
Proceeds from sales of loans
Proceeds from sales of leases
Proceeds from sales of securities available for sale
Purchases of securities available for sale
Proceeds from maturities of and principal collected
on securities available for sale
Purchases of Federal Home Loan Bank stock
Redemptions of Federal Home Loan Bank stock
Proceeds from sales of real estate owned
Purchases of premises and equipment
Acquisition of Fidelity National Capital, Inc.
Other, net
Net cash used by investing activities
Cash flows from financing activities:
Net increase in deposits
Net (decrease) increase in short-term borrowings
Proceeds from long-term borrowings
Payments on long-term borrowings
Net proceeds from public offering of common stock
Redemption of preferred stock
Net investment by non-controlling interest
Proceeds from issuance of preferred stock and common warrant
Dividends paid on common stock
Dividends paid on preferred stock
Stock compensation tax benefits (costs)
Common shares sold to TCF employee benefit plans
Other, net
Net cash provided by financing activities
Net increase (decrease) in cash and due from banks
Cash and due from banks at beginning of year
Cash and due from banks at end of year
Supplemental disclosures of cash flow information:
Cash paid for:
Interest on deposits and borrowings
Income taxes
Transfer of loans and leases to other assets
See accompanying notes to consolidated financial statements.
Year Ended December 31,
2010
2009
2008
$ 146,564
$ 87,097
$ 128,958
236,437
86,632
62,397
(32,508)
16,202
369,160
515,724
4,877,210
(4,447,982)
(802,587)
(186,779)
(168,612)
1,456
10,670 –
1,330,955
(1,788,142)
436,574
(34,925)
26,042
103,236
(36,088)
–
32,420
(646,552)
16,796
(117,814)
574,876
(135,704)
164,567 –
–
810
–
(27,617)
–
298
18,089
1,301
495,602
364,774
299,127
$ 663,901
258,536
69,632
(34,882)
(30,539)
9,419
272,166
359,263
3,380,198
(3,340,040)
(801,569)
(339,860)
(274,722)
937
–
2,293,739
(2,436,163)
327,856
(18,882)
11,129
25,913
(40,276)
(57,728)
28,758
(1,240,710)
1,324,967
17,743
31,393
(141,012)
–
(361,172)
4,803
–
(50,828)
(7,925)
(1,058)
19,147
2,136
838,194
(43,253)
342,380
$ 299,127
192,045
64,813
14,397
(13,986)
9,468
266,737
395,695
3,041,757
(3,494,969)
(850,459)
(15,001)
–
245,884
1,707,821
(1,888,527)
219,017
(144,611)
140,196
43,324
(49,556)
–
18,297
(1,026,827)
666,803
(329,209)
344,258
(323,348)
–
–
361,004
(126,447)
–
10,110
10,177
1,976
615,324
(15,808)
358,188
$ 342,380
$ 258,750
$ 72,777
$ 214,079
$ 329,609
$ 7,788
$ 135,682
$ 378,132
$ 42,957
$ 103,359
• 56 • TCF Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Note 1. Summary of Significant
Accounting Policies
Basis of Presentation The consolidated financial
statements include the accounts of TCF Financial Corporation
and its wholly owned subsidiaries. TCF Financial Corporation,
a Delaware corporation, is a national bank holding company
engaged primarily in retail banking and wholesale banking
through its primary subsidiary, TCF National Bank (“TCF
Bank”). TCF Bank owns leasing and equipment finance,
inventory finance and REIT subsidiaries. These subsidiaries
are consolidated with TCF Bank and are included in the
consolidated financial statements of TCF Financial
Corporation. All significant intercompany accounts and
transactions have been eliminated in consolidation.
Certain reclassifications have been made to prior
years’ financial statements to conform to the current year
presentation. For Consolidated Statements of Cash Flows
purposes, cash and cash equivalents include cash and due
from banks.
The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that
affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amount of
revenues and expenses during the reporting period. These
estimates are based on information available to manage-
ment at the time the estimates are made. Actual results
could differ from those estimates.
Policies Related to Critical Accounting Estimates
Summary of Critical Accounting Estimates Critical
accounting estimates occur in certain accounting policies
and procedures and are particularly susceptible to
significant change. Policies that contain critical account-
ing estimates include the determination of the allowance
for loan and lease losses, lease financings and income
taxes. Critical accounting policies are discussed with and
reviewed by TCF’s Audit Committee.
Allowance for Loan and Lease Losses The allowance
for loan and lease losses is maintained at a level believed
by management to be appropriate to provide for probable
loan and lease losses incurred in the portfolio as of the
balance sheet date, including known or anticipated problem
loans and leases, as well as for loans and leases which
are not currently known to require specific allowances.
TCF evaluates the allowance for loans and lease losses on
impaired loans, non-accrual leases and certain classified
loans on an individual basis, with the exception of consumer
real estate troubled debt restructurings (“TDR”). Loans
evaluated on an individual basis are classified as
“individually evaluated for loss potential”. The allowance
for all other loans and leases is evaluated collectively and
classified as “collectively evaluated for loss potential”.
Management’s judgment as to the amount of the allowance
is a result of ongoing review of larger individual loans and
leases, the overall risk characteristics of the portfolios,
changes in the character or size of the portfolios, geographic
location and prevailing economic conditions. Additionally,
the level of impaired and non-accrual loans, historical net
charge-off amounts, delinquencies in the loan and lease
portfolios, values of underlying loan and lease collateral and
other relevant factors are reviewed to determine the amount
of the allowance. Impaired loans include non-accrual
commercial loans, equipment finance loans, inventory finance
loans and TDRs. Loan impairment is generally based upon the
present value of the expected future cash flows discounted at
the loan’s initial effective interest rate. The fair value of the
collateral for fully collateral-dependent loans may be used
to measure loan impairment. Consumer real estate loans,
other than troubled debt restructurings, and all leases are
collectively excluded from the definition of an impaired loan
and are collectively evaluated for potential loss.
Loans and leases are charged off to the extent they are
deemed to be uncollectible. Charge-offs related to confirmed
losses are utilized in the historical data which is used in the
allowance for loan and lease losses calculations. Consumer
real estate loans are charged-off to the estimated fair
value of underlying collateral, less estimated costs to sell,
when they are placed on non-accrual status. Additional
review of the fair value, less cost to sell, compared with
the recorded value occurs upon foreclosure and additional
charge-offs are recorded if necessary. Valuation adjust-
ments on residential properties made within 90 days after
foreclosure are recorded as charge-offs. Subsequent
2010 Form 10-K
• 57 •
valuation adjustments are recorded as real estate owned
expense. Consumer other consists primarily of deposit
account overdrafts, which are charged-off no later than 60
days past due. Commercial loans, leasing and equipment
finance and inventory finance loans, which are considered
collateral dependent, are charged-off to estimated fair
value, less estimated costs to sell, when it becomes prob-
able, based on current information and events, all principal
and interest amounts will not be collectible in accordance
with the contractual terms. Loans which are not dependent
on underlying collateral are charged-off when deemed
uncollectible based on specific facts and circumstances.
The amount of the allowance for loan and lease losses is
highly dependent upon management’s estimates of variables
affecting valuation, appraisals of collateral, evaluations
of performance and status, and the amounts and timing of
future cash flows expected to be received. Such estimates,
appraisals, evaluations and cash flows may be subject to
frequent adjustments due to changing economic prospects
of borrowers, lessees or properties. These estimates are
reviewed periodically and adjustments, if necessary, are
recorded in the provision for credit losses in the periods in
which they become known.
Lease Financing TCF provides various types of lease
financing that are classified for accounting purposes as
direct financing, sales-type or operating leases. Leases
that transfer substantially all of the benefits and risks of
ownership to the lessee are classified as direct financing
or sales-type leases and are included in loans and leases.
Direct financing and sales-type leases are carried at the
combined present value of the future minimum lease
payments and the lease residual values. The determination
of the lease classification requires various judgments and
estimates by management including the fair value of the
equipment at lease inception, useful life of the equipment
under lease, estimate of the lease residual value and
collectability of minimum lease payments.
Sales-type leases generate dealer profit which is
recognized at lease inception by recording lease revenue
net of the lease cost. Lease revenue consists of the present
value of the future minimum lease payments. Lease cost
consists of the leased equipment’s book value, less the
present value of its residual. The revenues associated
with other types of leases are recognized over the term of
the underlying leases. Interest income on direct financing
and sales-type leases is recognized using methods which
approximate a level yield over the fixed, non-cancelable
term of the lease. TCF receives pro rata rent payments for
the interim period until the lease contract commences and
the fixed non-cancelable, lease term begins. TCF recognizes
these interim payments in the month they are earned and
records the income in interest income on direct finance
leases. Management has policies and procedures in place for
the determination of lease classification and review of the
related judgments and estimates for all lease financings.
Some lease financings include a residual value com-
ponent, which represents the estimated fair value of the
leased equipment at the expiration of the initial term of
the transaction. The estimation of residual values involves
judgment regarding product and technology changes,
customer behavior, shifts in supply and demand and other
economic assumptions. TCF reviews residual assumptions
on the portfolio at least annually and downward adjust-
ments, if necessary, are charged to non-interest expense
in the periods in which they become known.
For certain leases, TCF sells minimum lease payments to
third-party financial institutions, at fixed rates, on a non-
recourse basis. For those transactions which achieve sale
treatment, the related lease cash flow stream and the non-
recourse financing are not recognized on TCF’s Statements
of Financial Condition. For those transactions which do not
achieve sale treatment, the underlying lease remains on
TCF’s Statements of Financial Condition and non-recourse
debt is recorded in the amount of the proceeds received.
TCF retains servicing of these assets and it will bill,
collect and remit funds to the third-party financial
institution. Upon default by the lessee, the third-party
financial institutions may take control of the underlying
collateral which TCF would otherwise retain as residual
value within the Statements of Financial Condition.
Leases which do not transfer substantially all benefits
and risks of ownership to the lessee are classified as
operating leases. Such leased equipment and related
initial direct costs are included in other assets on the
balance sheet and depreciated on a straight-line basis
over the term of the lease to its estimated salvage value.
Depreciation expense is recorded as operating lease
expense and included in non-interest expense. Operating
lease rental income is recognized when it is due and is
reflected as a component of non-interest income. An allow-
ance for lease losses is not provided on operating leases.
• 58 • TCF Financial Corporation and Subsidiaries
Income Taxes Income taxes are accounted for using the
asset and liability method. Under this method, deferred
tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the
financial statement carrying amounts of existing assets
and liabilities and their respective tax-basis carrying
amounts. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences
are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period in which the enactment
date occurs.
The determination of current and deferred income taxes
is a critical accounting estimate which is based on complex
analyses of many factors including interpretation of federal
and state income tax laws, the evaluation of uncertain
tax positions, differences between the tax and financial
reporting bases of assets and liabilities (temporary
differences), estimates of amounts due or owed such as
the timing of reversal of temporary differences and current
financial accounting standards. Additionally, there can be
no assurance that estimates and interpretations used in
determining income tax liabilities will not be challenged by
federal and state taxing authorities. Actual results could
differ significantly from the estimates and tax law inter-
pretations used in determining the current and deferred
income tax liabilities.
In the preparation of income tax returns, tax positions are
taken based on interpretation of federal and state income
tax laws for which the outcome is uncertain. Management
periodically reviews and evaluates the status of uncertain tax
positions and makes estimates of amounts ultimately due or
owed. The benefits of tax positions are recorded in income
tax expense in the consolidated financial statements, net of
the estimates of ultimate amounts due or owed including any
applicable interest and penalties. Changes in the estimated
amounts due or owed may result from closing of the statute
of limitations on tax returns, new legislation, clarification
of existing legislation through government pronouncements,
the courts and through the examination process. TCF’s policy
is to report interest and penalties, if any, related to unrecog-
nized tax benefits in income tax expense in the Consolidated
Statements of Income.
Other Significant Accounting Policies
Investments Investments are carried at cost, adjusted for
amortization of premiums or accretion of discounts, using
a level yield method. TCF periodically evaluates investments
for “other than temporary” impairment with losses, if any,
recorded in non-interest income as a loss on securities.
Securities Available for Sale Securities available for
sale are carried at fair value with the unrealized holding
gains or losses, net of related deferred income taxes,
reported as accumulated other comprehensive income
(loss), a separate component of equity. The cost of securities
sold is determined on a specific identification basis and
gains or losses on sales of securities available for sale
are recognized on trade dates. TCF periodically evaluates
securities available for sale for “other than temporary”
impairment. Declines in the value of securities available for
sale that are considered other than temporary are recorded
in non-interest income as a loss on securities. Discounts and
premiums on securities available for sale are amortized using
a level yield method over the expected life of the security.
Loans and Leases Loans and leases are reported at
historical cost including net direct fees and costs associ-
ated with originating and acquiring loans and leases. The
net direct fees and costs for sales-type leases are offset
against revenues recorded at the commencement of sales-
type leases. Discounts and premiums on loans purchased,
net direct fees and costs, unearned discounts and finance
charges, and unearned lease income are amortized to
interest income using methods which approximate a level
yield over the estimated remaining lives of the loans and
leases. Net direct fees and costs on all lines of credit are
amortized on a straight line basis over the contractual life
of the line of credit and adjusted for payoffs. Net deferred
fees and costs on consumer real estate lines of credit are
amortized to service fee income.
Loans and leases, including loans or leases that are
considered to be impaired, are reviewed regularly by
management. Consumer real estate loans are placed on
non-accrual status when the collection of interest and
principal is 150 days or more past due or six payments are
owed. Consumer real estate loans are also placed on
non-accrual status if, upon notification of bankruptcy,
the loan is 60 days or more past due. If the loan is current
at notification of bankruptcy, the loan is placed on
2010 Form 10-K
• 59 •
non-accrual status at 90 days or when four payments are
owed, or after a partial charge-off, which management
feels is appropriate based on the experience of TCF’s cus-
tomer activity and loan type. Commercial real estate and
commercial business, leasing and equipment finance and
inventory finance loans and leases are generally placed on
non-accrual status when the collection of interest or prin-
cipal is 90 days or more past due, unless the loan or lease is
adequately secured and in the process of collection.
When a loan or lease is placed on non-accrual status,
uncollected interest accrued in prior years is charged off
against the allowance for loan and lease losses and interest
accrued in the current year is reversed. For non-accrual
leases that have been funded on a non-recourse basis
by third-party financial institutions, the related liability
is also placed on non-accrual status. Interest payments
received on loans and leases in non-accrual status are
generally applied to principal unless the remaining prin-
cipal balance has been determined to be fully collectible.
Loans on non-accrual status are reported as non-accrual
loans until there is sustained repayment performance for
six months.
Premises and Equipment Premises and equipment,
including leasehold improvements, are carried at cost and
are depreciated or amortized on a straight-line basis over
estimated useful lives of owned assets and for leasehold
improvements over the estimated useful life of the related
asset or the lease term, whichever is shorter. Maintenance
and repairs are charged to expense as incurred. Rent
expense for leased land with facilities is recognized in
occupancy and equipment expense. Rent expense for
leases with free rent periods or scheduled rent increases
is recognized on a straight-line basis over the lease term.
Other Real Estate Owned Other real estate owned is
recorded at the lower of cost or fair value less estimated
costs to sell the property at the date of transfer to other
real estate owned. The fair value of other real estate is
determined through independent third-party appraisals,
automated valuation methods or broker opinions. Within
90 days of a loan transferring to other real estate owned,
any carrying amount in excess of the fair value less
estimated costs to sell the property is charged off to the
allowance for loan and lease losses. Subsequently, if the
fair value of an asset, less the estimated costs to sell,
declines to less than the carrying amount of the asset, the
deficiency is recognized in the period in which it becomes
known and is included in other non-interest expense. Net
operating expenses of properties and recoveries on sales
of other real estate owned are recorded in foreclosed real
estate owned and repossessed assets, net.
Investments in Affordable Housing Limited
Partnerships Investments in affordable housing consist
of investments in limited partnerships that operate qualified
affordable housing projects or that invest in other limited
partnerships formed to operate affordable housing
projects. TCF generally utilizes the effective yield method
to account for these investments with the tax credits net
of the amortization of the investment reflected in the
Consolidated Statements of Income as a reduction of
income tax expense. However, depending on circumstances,
the equity or cost methods may be utilized. The amount
of the investment along with any unfunded equity
contributions which are unconditional and legally binding
are recorded in other assets. A liability for the unfunded
equity contributions is recorded in other liabilities. At
December 31, 2010, TCF’s investments in affordable housing
limited partnerships were $30.2 million, compared with
$37 million at December 31, 2009, and were recorded in
other assets.
Five of these investments in affordable housing limited
partnerships are considered variable interest entities.
These partnerships are not consolidated with TCF. As
of December 31, 2010 and 2009, the carrying amount
of these five investments was $29.4 million and $36.2
million, respectively. The maximum exposure to loss on
these five investments was $29.4 million at December 31,
2010; however, the general partner of these partnerships
provides various guarantees to TCF including guaranteed
minimum returns. These guarantees are backed by a BBB
credit-rated company and limit any risk of loss. In addition
to the guarantees, the investments are supported by the
performance of the underlying real estate properties which
also mitigates the risk of loss.
Intangible Assets Goodwill is tested for impairment
annually. Other intangibles are amortized over their esti-
mated useful life. The Company reviews the recoverability of
these assets at least annually or earlier whenever an event
occurs indicating that they may be impaired.
• 60 • TCF Financial Corporation and Subsidiaries
Stock-Based Compensation The fair value of restricted
stock and stock options is determined on the date of grant
and amortized to compensation expense, with a correspond-
ing increase in additional paid-in capital, over the longer
of the service period or performance period, but in no event
beyond an employee’s retirement date. For performance-
based restricted stock, TCF estimates the degree to which
performance conditions will be met to determine the number
of shares that will vest and the related compensation
expense. Compensation expense is adjusted in the period
such estimates change. Non-forfeitable dividends, if any,
paid on shares of restricted stock are recorded to retained
earnings for shares that are expected to vest and to compen-
sation expense for shares that are not expected to vest.
Income tax benefits related to stock compensation
in excess of grant date fair value less any proceeds on
exercise are recognized as an increase to additional
paid-in capital upon vesting or exercising and delivery of
the stock. Any income tax benefits that are less than grant
date fair value less any proceeds on exercise would be
recognized as a reduction of additional paid in capital to
the extent of previously recognized income tax benefits
and then as income tax expense for the remaining amount.
See Note 15 for additional information concerning stock-
based compensation.
Deposit Account Overdrafts Deposit account overdrafts
are reported in consumer or commercial loans. Net losses
on uncollectible overdrafts are reported as net charge-offs
in the allowance for loan and lease losses within 60 days
from the date of overdraft. Uncollectible deposit fees are
reversed against fees and service charges and a related
reserve for uncollectible deposit fees is maintained in other
liabilities. Other deposit account losses are reported in
other non-interest expense.
Note 2. Cash and Due from Banks
At December 31, 2010, TCF was required by Federal Reserve
regulations to maintain reserves of $41.2 million in cash on
hand or at the Federal Reserve.
Note 3. Investments
The carrying values of investments consist of the following.
(In thousands)
Federal Home Loan Bank stock, at cost:
Des Moines
Chicago
Subtotal
Federal Reserve Bank stock, at cost
Other
Total investments
At December 31,
2009
2010
$136,899
4,617
141,516
30,684
7,568
$179,768
$128,016
4,617
132,633
22,972
8,087
$163,692
The investments in Federal Home Loan Bank (“FHLB”)
stock are required investments related to TCF’s current
and previous borrowings from these banks. FHLBs obtain
their funding primarily through issuance of consolidated
obligations of the Federal Home Loan Bank system. The
U.S. Government does not guarantee these obligations,
and each of the 12 FHLBs are generally jointly and severally
liable for repayment of each other’s debt. Therefore, TCF’s
investments in these banks could be adversely impacted
by the financial operations of the FHLBs and actions of
their regulator, the Federal Housing Finance Agency. Other
investments primarily consist of non-traded mortgage-
backed securities and other bonds which qualify for
investment credit under the Community Reinvestment Act.
During 2010, TCF recorded an impairment charge of
$241 thousand on other investments, which had a carrying
value of $7.6 million at December 31, 2010, as full recovery
is not expected. During 2009, TCF recorded an impairment
charge of $405 thousand on other investments, which had
a carrying value of $8.1 million at December 31, 2009.
The carrying values and yields on investments at
December 31, 2010, by contractual maturity, are shown below.
(Dollars in thousands)
Due in one year or less
Due in 1-5 years
Due in 5-10 years
Due after 10 years
No stated maturity
Total
Carrying
Value
$ –
600
2,100
4,868
172,200
$179,768
Yield
–%
2.67
3.24
5.66
2.66
2.75
2010 Form 10-K
Note 4. Securities Available for Sale
Securities available for sale consist of the following.
2010
2009
At December 31,
Gross
Amortized Unrealized Unrealized
Losses
Gains
Gross
Cost
Fair
Value
Gross
Amortized Unrealized Unrealized
Losses
Gains
Gross
Cost
• 61 •
Fair
Value
(Dollars in thousands)
Mortgage-backed securities:
U.S. Government sponsored
enterprises and federal
agencies
Other
U.S. Treasury Bills
Other securities
Total
Weighted-average yield
$1,929,098
222
24,999
2,610
$1,956,929
3.87%
$16,579
–
1
–
$16,580
$42,141
–
–
194
$42,335
$1,903,536
222
25,000
2,416
$1,931,174
$1,903,201
263
–
4,783
$1,908,247
4.54%
$21,138
–
–
221
$21,359
$19,130 $1,905,209
263
–
5,004
$19,130 $1,910,476
–
–
–
Gross gains of $31.5 million and $31.8 million were recognized on sales of securities during 2010 and 2009, respectively.
Mortgage-backed securities of $1.9 billion and $1.8 billion were pledged as collateral to secure certain deposits and borrow-
ings at December 31, 2010 and 2009, respectively (see Notes 10 and 11 for additional information). During 2010, TCF recorded
an impairment charge of $2.1 million on other securities as full recovery is not expected. The other securities had a fair value
of $2.4 million at December 31, 2010.
The following table shows the securities available for sale portfolio’s gross unrealized losses and fair value, aggregated by
investment category and length of time individual securities have been in a continuous unrealized loss position. Unrealized
losses on securities available for sale are due to lower values for equity securities or changes in interest rates and not due to
credit quality issues. TCF has the ability and intent to hold these investments until a recovery of fair value occurs.
(In thousands)
Mortgage-backed securities:
U.S. Government sponsored
enterprises and federal agencies
Other securities
Total
(In thousands)
Mortgage-backed securities:
U.S. Government sponsored
enterprises and federal agencies
Less than 12 Months
Fair Value
Unrealized
Losses
At December 31, 2010
12 Months or More
Fair Value
Unrealized
Losses
Total
Fair Value
Unrealized
Losses
$988,753
2,216
$990,969
$42,141
194
$42,335
$ –
–
$ –
$ –
–
$ –
$988,753
2,216
$990,969
$42,141
194
$42,335
Less than 12 Months
At December 31, 2009
12 Months or More
Total
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
$1,082,197
$19,130
$ –
$ –
$1,082,197
$19,130
The amortized cost and fair value of securities available for sale at December 31, 2010, by contractual maturity, are shown below.
(In thousands)
Due in one year or less
Due in 1-5 years
Due in 5-10 years
Due after 10 years
No stated maturity
Total
At December 31, 2010
Amortized Cost
$ 25,099
127
342
1,928,951
2,410
$1,956,929
Fair Value
$ 25,100
127
357
1,903,374
2,216
$1,931,174
• 62 • TCF Financial Corporation and Subsidiaries
Note 5. Loans and Leases
The following table sets forth information about loans and leases.
(Dollars in thousands)
Consumer real estate and other:
Consumer real estate:
First mortgage lien
Junior lien
Total consumer real estate
Other
Total consumer real estate and other
Commercial:
Commercial real estate:
Permanent
Construction and development
Total commercial real estate
Commercial business
Total commercial
Leasing and equipment finance: (1)
Equipment finance loans
Lease financings:
Direct financing leases
Sales-type leases
Lease residuals
Unearned income and deferred lease costs
Total lease financings
Total leasing and equipment finance
Inventory finance
Total loans and leases
At December 31,
2010
2009
Percentage
Change
$ 4,893,887
2,262,194
7,156,081
39,188
7,195,269
$ 4,961,347
2,319,222
7,280,569
51,422
7,331,991
3,125,837
202,379
3,328,216
317,987
3,646,203
3,016,518
252,485
3,269,003
449,516
3,718,519
939,474
868,830
2,277,753
29,728
109,555
(202,032)
2,215,004
3,154,478
792,354
$14,788,304
2,305,945
24,714
106,391
(234,451)
2,202,599
3,071,429
468,805
$14,590,744
(1.4)%
(2.5)
(1.7)
(23.8)
(1.9)
3.6
(19.8)
1.8
(29.3)
(1.9)
8.1
(1.2)
20.3
3.0
13.8
.6
2.7
69.0
1.4 %
(1) Operating leases of $77.4 million and $105.9 million at December 31, 2010 and 2009, respectively, are included in Other Assets on the Consolidated Statements of
Financial Condition.
During the year ended December 31, 2010, TCF sold
$10.7 million of minimum lease payment receivables,
receiving cash of $10.7 million and recognizing a loss of $25
thousand. The retained residual values reported within the
Statements of Financial Condition at December 31, 2010
totaled $183 thousand.
Future minimum lease payments receivable for direct
financing, sales-type leases and operating leases as of
December 31, 2010, are as follows.
(In thousands)
2011
2012
2013
2014
2015
Thereafter
Total
Total
$ 910,363
636,486
408,759
207,209
77,826
26,290
$2,266,933
The aggregate amount of loans to non-management
directors of TCF and their related interests was $7.4
million and $7.5 million at December 31, 2010 and 2009,
respectively. During 2010, $2.5 million in new loans were
made and $2.7 million of loans were repaid. All loans to
outside directors and their related interests were made
in the ordinary course of business on normal credit terms,
including interest rates and collateral, as those prevailing
at the time for comparable transactions with unrelated
persons. The aggregate amount of loans to executive
officers of TCF was $97 thousand at December 31, 2010 and
2009. In the opinion of management, the above mentioned
loans to outside directors and their related interests and
executive officers do not represent more than a normal risk
of collection.
2010 Form 10-K
• 63 •
Acquired Loans and Leases During the year ended 2010,
TCF paid $186.8 million to acquire leasing and equipment
finance loans and leases having remaining contractual
principal cash flows including residual on leases of $186.8
million and paid $168.6 million to acquire inventory finance
loans having remaining contractual principal cash flows
of $168.6 million. In total, TCF paid $355.4 million during
the year ended 2010 to acquire loans and leases having
remaining contractual principal cash flows including residual
on leases of $355.4 million. At the time of acquisition,
the expected principal cash flows including residual on
leases to be collected over the life of the contracts was
$355.2 million. As of December 31, 2010, it was probable
that TCF would not collect all contractual principal remain-
ing cash flows, but it was probable that TCF would collect
more than the expected principal cash flows including
residual on leases.
During the year ended 2009, TCF paid $339.9 million to
acquire leasing and equipment finance loans and leases
having remaining contractual principal cash flows including
residual on leases of $353.9 million and paid $274.7 million
to acquire inventory finance loans having remaining
contractual principal cash flows of $277.7 million. In
total, TCF paid $614.6 million during the year ended 2009
to acquire loans and leases having remaining contractual
principal cash flows including residual on leases of $631.6
million. At the time of acquisition, the expected principal
cash flows including residual on leases to be collected over
the life of the contracts was $615.2 million. For these loans
and leases, it was probable that TCF would not collect all of
the contractual principal amounts due, but was probable
that TCF would collect more than the expected principal
cash flows including residual on leases.
These loans and leases were initially recorded at fair
value and a non-accretable discount was established for
the difference between the contractual principal cash flows
and the expected principal cash flows determined at the
time of acquisition.
Non-accretable discounts of $4.2 million and $10.2
million remained on these portfolios at December 31, 2010,
and December 31, 2009, respectively. In the future, if TCF
is unable to collect the expected cash flows or revises its
expectations below the current level, an allowance for credit
losses will be established on these acquired portfolios.
The excess of expected principal cash flows to be col-
lected over the initial fair value of the acquired portfolios
is referred to as the accretable yield and is accreted into
interest income over the estimated life of the acquired
portfolios using the effective yield method. The accretable
yield is affected by changes in interest rate indices for
variable-rate acquired portfolios, changes in prepayment
assumptions and changes in the expected principal and
interest payments over the estimated life of the loan. These
loans and leases are classified as accruing and interest
income continues to be recognized unless expected losses
exceed the non-accretable discount.
The following table provides a rollforward of unamortized
accretable yield for all acquired loan and lease portfolios
during the years ended December 31, 2010 and 2009.
(In thousands)
Balance, at beginning of year
Portfolio acquisitions
Reclassification from non-accretable
discount for loans with improving
cash flows
Accretion
Balance, at end of year
Year Ended
December 31,
2010
$ (13)
(214)
221 –
(183)
$(189)
2009
$ –
833
(846)
$ (13)
Within the loan and lease portfolios acquired in 2009,
there were certain loans which had experienced deterioration
in credit quality at the time of acquisition. These loans
had outstanding principal balances of $13.7 million and
$21.6 million at December 31, 2010 and 2009, respectively.
The non-accretable discount on loans acquired with
deteriorated credit quality was $769 thousand and $1
million at December 31, 2010 and 2009, respectively. The
remaining accretion to be recognized in expense for these
loans was $207 thousand at December 31, 2010, and $376
thousand at December 31, 2009. Accretion of $169 thousand
and $149 thousand was recorded during the years ended
December 31, 2010 and 2009, respectively.
• 64 • TCF Financial Corporation and Subsidiaries
Note 6. Allowance for Loan and Lease Losses and Credit Quality Information
Allowance for Loan and Lease Losses The following tables provide the allowance for loan and lease losses, other credit
loss reserves and other information regarding the allowance for loan and leases losses and balances by type of allowance
methodology. TCF’s key credit quality indicator is the receivable’s performance status, defined as accruing or non-accruing.
(In thousands)
Allowance for loan and lease losses:
Balance, at beginning of year
Charge-offs
Recoveries
Net charge-offs
Provision for credit losses
Balance, at end of year
Other credit loss reserves:
Reserves for unfunded commitments
Total credit loss reserves
Allowance for loan and lease losses:
Individually evaluated for loss potential
Collectively evaluated for loss potential
Total
Loans and leases outstanding:
For the Year Ended December 31, 2010
Consumer
Real Estate
and Other
$ 167,442
(151,107)
16,208
(134,899)
141,960
174,503
Commercial
Real Estate
and
Commercial
Business
$ 43,504
(49,727)
1,327
(48,400)
67,374
62,478
Leasing and
Equipment
Finance
$ 32,063
(34,745)
4,100
(30,645)
24,883
26,301
Inventory
Finance
$ 1,462
(1,484)
339
(1,145)
2,220
2,537
Total
$ 244,471
(237,063)
21,974
(215,089)
236,437
265,819
1,147
$ 175,650
1,206
$ 63,684
–
$ 26,301
–
$ 2,537
2,353
$ 268,172
$ 777
173,726
$ 174,503
$ 35,550
26,928
$ 62,478
$ 8,823
17,478
$ 26,301
$ 440
2,097
$ 2,537
$ 45,590
220,229
$ 265,819
Individually evaluated for loss potential
Collectively evaluated for loss potential
Loans acquired with deteriorated credit quality
Total
$ 12,516
7,182,753
–
$7,195,269
$ 712,737
2,933,466
–
$3,646,203
$ 38,243
3,102,581
13,654
$3,154,478
$ 7,123
785,231
–
$792,354
$ 770,619
14,004,031
13,654
$14,788,304
(In thousands)
Allowance for loan and lease losses:
Balance, at beginning of year
Charge-offs
Recoveries
Net charge-offs
Provision for credit losses
Balance, at end of year
Other credit loss reserves:
Reserves for unfunded commitments
Total credit loss reserves
Allowance for loan and lease losses:
Individually evaluated for loss potential
Collectively evaluated for loss potential
Total
Loans and leases outstanding:
For the Year Ended December 31, 2009
Commercial
Real Estate
and
Commercial
Business
$ 51,251
(45,766)
1,138
(44,628)
36,881
43,504
Leasing and
Equipment
Finance
$ 20,058
(29,372)
2,052
(27,320)
39,325
32,063
Consumer
Real Estate
and Other
$ 101,100
(127,055)
12,678
(114,377)
180,719
167,442
Inventory
Finance
$ 33
(205)
23
(182)
1,611
1,462
Total
$ 172,442
(202,398)
15,891
(186,507)
258,536
244,471
1,434
$ 168,876
2,416
$ 45,920
–
$ 32,063
–
$ 1,462
3,850
$ 248,321
$ 941
166,501
$ 167,442
$ 15,171
28,333
$ 43,504
$ 14,930
17,133
$ 32,063
$ 309
1,153
$ 1,462
$ 31,351
213,120
$ 244,471
Individually evaluated for loss potential
Collectively evaluated for loss potential
Loans acquired with deteriorated credit quality
Total
$ 4,266
7,327,725
–
$7,331,991
$ 677,981
3,040,538
–
$3,718,519
$ 50,008
2,999,831
21,590
$3,071,429
$ 1,086
467,719
–
$468,805
$ 733,341
13,835,813
21,590
$14,590,744
2010 Form 10-K
• 65 •
Performing and Non-accrual Loans and Leases The following table sets forth information regarding TCF’s performing
and non-accrual loans and leases. Performing loans and leases are considered to have a lower risk of loss and are on accruing
status. Non-accrual loans and leases are those which management believes have a higher risk of loss than performing loans
and leases. Delinquent balances are determined based on the contractual terms of the loan or lease.
At December 31, 2010(1)
(In thousands)
Consumer real estate and other:
0-59 Days
Delinquent
and
Accruing
90 Days
or More
Total
60+ Days
60-89 Days
Delinquent Delinquent Delinquent
and
Accruing
and
Accruing
and
Accruing
Total
Performing
Non-
Accrual
Total
First mortgage lien
Junior lien
Other
$ 4,679,168
2,214,805
39,099
$30,910
7,398
30
$42,938
13,365
9
$ 73,848
20,763
39
$ 4,753,016
2,235,568
39,138
$140,871
26,626
50
$ 4,893,887
2,262,194
39,188
Total consumer real estate
and other
Commercial real estate and
commercial business:
Real estate
Business
Total commercial real estate
and commercial business
Leasing and equipment finance:(1)
Middle market
Small ticket
Winthrop
Other
Total leasing and
equipment finance
Inventory finance
Subtotal
Portfolios acquired with
deteriorated credit quality
Total
6,933,072
38,338
56,312
94,650
7,027,722
167,547
7,195,269
3,215,055
279,879
8,856
165
3,494,934
9,021
1,606,125
695,491
529,467
158,431
2,989,514
790,955
14,208,475
3,221
3,172
462
–
6,855
189
54,403
–
–
–
330
727
–
–
8,856
165
3,223,911
280,044
104,305
37,943
3,328,216
317,987
9,021
3,503,955
142,248
3,646,203
3,551
3,899
462
–
1,609,676
699,390
529,929
158,431
23,153
11,018
134
102
1,632,829
710,408
530,063
158,533
1,057
155
57,524
7,912
344
111,927
2,997,426
791,299
14,320,402
34,407
1,055
345,257
3,031,833
792,354
14,665,659
119,529
$14,328,004
1,215
$55,618
1,901
$59,425
3,116
$115,043
122,645
$14,443,047
–
$345,257
122,645
$14,788,304
(1) Operating leases of $77.4 million at December 31, 2010 are included in Other Assets on the Consolidated Statements of Financial Condition.
• 66 • TCF Financial Corporation and Subsidiaries
At December 31, 2009(1)
0-59 Days
Delinquent
and
Accruing
60-89 Days
Delinquent
and
Accruing
90 Days
or More
Delinquent
and
Accruing
Total
60+ Days
Delinquent
and
Accruing
Total
Performing
Non-
accrual
Total
(In thousands)
Consumer real estate and other:
First mortgage lien
Junior lien
Other
$ 4,777,960
2,280,434
51,066
$30,631
8,259
154
$34,443
9,683
61
$ 65,074 $ 4,843,034
2,298,376
51,281
17,942
215
$ 118,313 $ 4,961,347
2,319,222
51,422
20,846
141
Total consumer real estate
and other
Commercial real estate and
commercial business:
Real estate
Business
Total commercial real estate
and commercial business
Leasing and equipment finance:(1)
Middle market
Small ticket
Winthrop
Other
Total leasing and
equipment finance
Inventory finance
Subtotal
Portfolios acquired with
deteriorated credit quality
Total
7,109,460
39,044
44,187
83,231
7,192,691
139,300
7,331,991
3,191,354
420,901
3,612,255
1,424,197
657,734
572,209
154,981
2,809,121
467,319
13,998,155
22
46
68
8,387
2,458
231
33
11,109
350
50,571
–
–
–
–
154
2,975
–
3,129
365
47,681
22
46
68
3,191,376
420,947
77,627
28,569
3,269,003
449,516
3,612,323
106,196
3,718,519
8,387
2,612
3,206
33
1,432,584
660,346
575,415
155,014
32,538
14,496
2,557
417
1,465,122
674,842
577,972
155,431
14,238
715
98,252
2,823,359
468,034
14,096,407
50,008
771
296,275
2,873,367
468,805
14,392,682
190,185
$14,188,340
3,502
$54,073
4,375
$52,056
7,877
198,062
$106,129 $14,294,469
–
198,062
$296,275 $14,590,744
(1) Operating leases of $105.9 million at December 31, 2009 are included in Other Assets on the Consolidated Statements of Financial Condition.
The following table provides interest income recognized on loans and leases in non-accrual status and contractual interest
that would have been recorded had the loans and leases performed in accordance with their original contractual terms.
(In thousands)
Contractual interest due on non-accrual loans and leases
Interest income recognized on loans and leases in non-accrual status
Net reduction in interest income
For the Year Ended December 31,
2009
$31,368
3,010
$28,358
2008
$17,953
1,956
$15,997
2010
$40,016
6,773
$33,243
Consumer real estate loans to customers in bankruptcy
totaled $109.2 million at December 31, 2010, compared
with $77 million at December 31, 2009. Of these amounts,
$23.3 million and $16 million were in non-accrual sta-
tus at December 31, 2010 and 2009, respectively. As of
December 31, 2010 and 2009, approximately 76% and 77%,
respectively, of TCF consumer real estate loan customers
in bankruptcy were less than 60 days past due on their
payments. For the years ended December 31, 2010 and
December 31, 2009, interest income would have been
reduced by approximately $62 thousand and $45 thousand,
respectively, had the accrual of interest income been dis-
continued upon notification of bankruptcy.
2010 Form 10-K
• 67 •
Loan Modifications for Borrowers with Financial
Difficulties Included within the loans and leases above
are certain loans that have been modified in order to
maximize collection of loan balances. If, for economic or
legal reasons related to the customer’s financial difficulties,
TCF grants a concession compared to the original terms
and conditions on the loan that it would not have otherwise
considered, the modified loan is classified as a TDR.
Concessions related to TDRs generally do not include
forgiveness of principal balances. All TDRs are considered
to be impaired. TCF held consumer real estate loan TDRs
of $367.9 million and $267.9 million at December 31, 2010
and December 31, 2009, respectively. Of these loans,
$337.4 million and $252.5 million were accruing at
December 31, 2010 and December 31, 2009, respectively.
TCF also held $66.3 million and $9.6 million of commercial
real estate loan TDRs at December 31, 2010 and December
31, 2009, respectively. Of these loans, $48.8 million were
accruing at December 31, 2010. There were no accruing
commercial loan TDRs at December 31, 2009. The amount
of additional funds committed to borrowers who are in TDR
status was $2.2 million at December 31, 2010 and $3 million
at December 31, 2009.
TDRs are evaluated separately in TCF’s allowance
methodology based on the expected cash flows for loans
in this status. Reserves for losses on accruing consumer
real estate loan TDRs were $36.8 million, or 10.9% of the
outstanding balance, at December 31, 2010 and $27 million,
or 10.7% of the outstanding balance at December 31, 2009.
TCF utilized its historical 16% re-default rate on consumer
real estate loan TDRs in determining its assumed 20% re-
default rate included in the estimated cash flows. Reserves
for losses on accruing commercial real estate loan TDRs were
$695 thousand, or 1.42% of the outstanding balance, at
December 31, 2010.
Consumer real estate loans that are less than 150 days
past due, or six payments owing, at the time of modifica-
tion remain on accrual status if there is demonstrated
performance under a reduced payment amount prior to the
actual legal modification and payment in full under the
modified loan is expected. Otherwise, the loans are placed
on non-accrual status and reported as non-accrual until
there is sustained repayment performance for six con-
secutive payments. An accruing modified loan is re-aged
to current delinquency status after the receipt of three
consecutive modified payments.
The following table provides interest income recognized
on TDRs and contractual interest that would have been
recorded had the loans performed in accordance with their
original contractual terms.
(In thousands)
Contractual interest due on TDRs
Interest income recognized on TDRs
Net reduction in interest income
For the Year Ended December 31,
2008
$1,331
495
$ 836
2010
$21,297
11,318
$ 9,979
2009
$6,308
3,215
$3,093
Impaired Loans TCF considers impaired loans to include
non-accrual commercial loans, equipment finance loans,
inventory finance loans and consumer real estate or
commercial TDRs. Non-accrual impaired loans are included
in the previous tables within the amounts disclosed as
non-accrual and the accruing consumer real estate and
commercial TDRs have been previously disclosed as
performing within the tables of performing and non-accrual
loans and leases. The loan balance of impaired loans
represents the amount recorded within loans and leases on the
Consolidated Statements of Financial Condition whereas the
unpaid contractual balance represents the balances legally
owed by the borrowers, excluding write-downs.
• 68 • TCF Financial Corporation and Subsidiaries
The following impaired loans were included in previous amounts disclosed as performing and non-accrual and loan
modifications for Borrowers with Financial Difficulty, as explained above.
(In thousands)
Impaired loans with an allowance recorded:
Consumer real estate:
First mortgage lien
Junior lien
Total consumer real estate
Commercial real estate and commercial business:
Commercial real estate
Commercial business
Total commercial real estate
and commercial business
Leasing and equipment finance:
Middle market
Small ticket
Other
Total leasing and equipment finance
Inventory finance
Total impaired loans with
an allowance recorded
Impaired loans without an allowance recorded:
Consumer real estate:
First mortgage lien
Junior lien
Total consumer real estate
Total impaired loans
(In thousands)
Impaired loans with an allowance recorded:
Consumer real estate:
First mortgage lien
Junior lien
Total consumer real estate
Commercial real estate and commercial business:
Commercial real estate
Commercial business
Total commercial real estate
and commercial business
Leasing and equipment finance:
Middle market
Small ticket
Other
Total leasing and equipment finance
Inventory finance
Total impaired loans with
an allowance recorded
Impaired loans without an allowance recorded:
Consumer real estate:
First mortgage lien
Junior lien
Total consumer real estate
Total impaired loans
Unpaid
Contractual
Balance
Loan
Balance
At December 31, 2010
Related
Allowance
Recorded
Year-to-Date
Year-to-Date
Average Loan Interest Income
Recognized
Balance
$315,289
21,679
336,968
$314,852
21,717
336,569
$35,340
3,006
38,346
$279,167
18,248
297,415
$10,311
687
10,998
192,426
41,168
153,143
37,943
20,214
8,558
115,385
33,256
233,594
191,086
28,772
148,641
13,181
524
102
13,807
1,055
13,181
524
102
13,807
1,055
2,745
155
2
2,902
185
13,147
599
260
14,006
913
115
4
119
80
1
8
89
48
585,424
542,517
70,205
460,975
11,254
37,822
2,972
40,794
$626,218
29,688
1,655
31,343
$573,860
–
–
–
$70,205
19,232
1,300
20,532
$481,507
664
65
729
$11,983
Unpaid
Contractual
Balance
$243,735
15,018
258,753
90,765
33,339
Loan
Balance
$243,481
14,779
258,260
77,627
28,569
124,104
106,196
13,112
674
417
14,203
771
13,112
674
418
14,204
771
At December 31, 2009
Related
Allowance
Recorded
Year-to-Date
Year-to-Date
Average Loan Interest Income
Recognized
Balance
$26,889
1,650
28,539
$134,928
7,977
142,905
$3,741
208
3,949
7,287
1,310
8,597
3,231
144
100
3,475
22
66,121
21,329
87,450
9,317
347
213
9,877
385
35
9
44
16
–
2
18
–
397,831
379,431
40,633
240,617
4,011
10,961
1,385
12,346
$410,177
8,722
944
9,666
$389,097
–
–
–
$40,633
8,108
1,270
9,378
$249,995
279
27
306
$4,317
2010 Form 10-K
• 69 •
The increase in impaired loans from December 31, 2009,
TCF leases certain premises and equipment under
operating leases. Net lease expense including utilities and
other operating expenses was $34.7 million, $35.3 million
and $35.5 million in 2010, 2009 and 2008, respectively.
At December 31, 2010, the total minimum rental payments
for operating leases were as follows.
(In thousands)
2011
2012
2013
2014
2015
Thereafter
Total
$ 25,995
23,818
22,211
20,776
18,733
98,295
$209,828
was primarily due to a $84.9 million increase in accruing
consumer real estate TDRs resulting from TCF’s expanded
consumer modification activity and an increase in accru-
ing commercial real estate loan TDRs. Included in impaired
loans were $326.1 million and $249.6 million of accruing
consumer real estate loan TDRs less than 90 days past due
as of December 31, 2010 and 2009, respectively.
Note 7. Premises and Equipment
Premises and equipment are summarized as follows.
(In thousands)
Land
Office buildings
Leasehold improvements
Furniture and equipment
Subtotal
Less accumulated depreciation
and amortization
Total
At December 31,
2009
2010
$142,024
$145,304
266,210
272,155
59,284
62,433
305,276
323,745
772,794
803,637
359,869
$443,768
324,864
$447,930
• 70 • TCF Financial Corporation and Subsidiaries
Note 8. Goodwill and Other Intangible Assets
Goodwill and intangible assets are summarized as follows.
(In thousands)
Amortizable intangible assets:
Other intangibles related to
wholesale banking segment
Unamortizable intangible assets:
Goodwill related to retail
banking segment
Goodwill related to wholesale
banking segment
Total
At December 31,
Gross
Amount
2010
Accumulated
Amortization
Net
Amount
Gross
Amount
2009
Accumulated
Amortization
Net
Amount
$ 1,450
$218
$ 1,232
$ 1,450
$45
$ 1,405
$141,245
11,354
$152,599
$141,245
$141,245
11,354
$152,599
11,354
$152,599
$141,245
11,354
$152,599
Other intangibles of $1.5 million was recorded as a result of the acquisition of Fidelity National Capital, Inc. in 2009.
Amortization expense for intangible assets is estimated to be $172 thousand for 2011, $168 thousand for 2012, $156 thousand
for 2013, $156 thousand for 2014 and $156 thousand for 2015. There was no impairment of goodwill or intangible assets for
the years ended December 31, 2010, 2009, or 2008.
Note 9. Deposits
Deposits are summarized as follows.
(Dollars in thousands)
Checking:
Non-interest bearing
Interest bearing
Total checking
Savings
Money market
Total checking, savings,
and money market
Certificates of deposit
Total deposits
Rate at
Year-End
2010
Amount
–% $ 2,429,061
2,101,003
.26
.12
.55
.54
.37
.84
.41
4,530,064
5,390,802
635,922
10,556,788
1,028,327
$11,585,115
At December 31,
% of
Total
21.0%
18.1
39.1
46.5
5.5
91.1
8.9
100.0%
Rate at
Year-End
2009
Amount
–%
.35
.16
.92
.71
$ 2,382,007
2,018,283
4,400,290
5,339,955
640,569
.58
1.22
.65%
10,380,814
1,187,505
$11,568,319
% of
Total
20.6%
17.4
38.0
46.2
5.5
89.7
10.3
100.0%
Certificates of deposit had the following remaining maturities at December 31, 2010.
(In thousands)
Maturity
0-3 months
4-6 months
7-12 months
13-24 months
Over 24 months
Total
$100,000+
$120,529
91,963
93,936
28,559
3,136
$338,123
Other
$138,610
162,208
263,546
110,249
15,591
$690,204
Total
$ 259,139
254,171
357,482
138,808
18,727
$1,028,327
2010 Form 10-K
• 71 •
Note 10. Short-term Borrowings
The following table sets forth selected information for short-term borrowings (borrowings with an original maturity of less
than one year) for each of the years in the three year period ended December 31, 2010.
2010
2009
2008
Amount
Rate
Amount
Rate
Amount
Rate
(Dollars in thousands)
At December 31,
Federal Home Loan Bank advances
Federal funds purchased
Securities sold under
repurchase agreements
U.S. Treasury, tax and
loan borrowings
Line of credit — TCFCFC
Total
Year ended December 31,
Average daily balance
$100,000
15,000
7,534
3,054
1,202
$126,790
Federal Home Loan Bank advances $ 63,548
Federal funds purchased
43,151
Securities sold under
repurchase agreements
12,211
U.S. Treasury, tax and
loan borrowings
Line of credit — TCFCFC
Line of credit — holding company
Total
Maximum month-end balance
Federal funds purchased
Federal Home Loan Bank advances
Securities sold under
repurchase agreements
Line of credit — TCFCFC
Line of credit — holding company
U.S. Treasury, tax and
loan borrowings
N.A. Not Applicable.
3,139
2,842
–
$124,891
$205,000
200,000
19,913
10,202
–
5,029
.27%
.15
.10
–
4.00
.27
.25%
.21
.16
–
7.07
–
.38
N.A.
N.A.
N.A.
N.A.
–
N.A.
$200,000
17,000
24,485
3,119
–
$244,604
$ 15,959
45,795
20,934
2,540
–
–
$ 85,228
$228,000
200,000
24,994
–
–
3,119
.22%
.11
$ –
200,000
.20
–
–
.20
24,980
1,881
–
$226,861
.22%
.14
$133,538
208,307
.61
.20
–
–
.27
N.A.
N.A.
N.A.
N.A.
–
N.A.
36,666
27,255
–
5,997
$411,763
$395,000
400,000
57,485
–
17,500
255,715
–%
.03
2.75
–
–
.33
1.97%
2.14
2.47
2.55
–
5.17
2.18
N.A.
N.A.
N.A.
–
N.A.
N.A.
Securities underlying repurchase agreements are book
entry securities. During the borrowing period, book entry
securities were delivered by entry into the counterparties’
accounts through the Federal Reserve System. The dealers
may sell, loan or otherwise dispose of such securities to
other parties in the normal course of their operations, but
have agreed to resell to TCF identical or substantially identi-
cal securities upon the maturities of the agreements. At
December 31, 2010, all of the securities sold under short-
term repurchase agreements provided for the repurchase of
identical securities and were collateralized by mortgage-
backed securities having a fair value of $25.6 million.
• 72 • TCF Financial Corporation and Subsidiaries
Note 11. Long-term Borrowings
Long-term borrowings consist of the following.
(Dollars in thousands)
Federal Home Loan Bank advances and securities
sold under repurchase agreements
Subtotal
Subordinated bank notes
Subtotal
Junior subordinated notes (trust preferred)
Senior unsecured term note
Discounted lease rentals
Subtotal
Total long-term borrowings
At December 31,
2010
Year of
Maturity
2010
2011
2013
2015
2016
2017
2018
2014
2015
2016
2068
2012
2010
2011
2012
2013
2014
2015
2016
2017
Amount
$ –
300,000
400,000
900,000
1,100,000
1,250,000
300,000
4,250,000
71,020
50,000
74,589
195,609
111,061
89,787
–
84,101
61,829
39,155
16,463
5,211
3,818
1,787
212,364
$4,858,821
Weighted-
Average
Rate
–%
4.64
.97
4.18
4.49
4.60
3.51
4.07
1.96
1.89
5.63
3.34
12.28
3.83
–
5.30
5.31
5.28
5.12
5.02
4.98
4.98
5.27
4.27
Amount
$ 100,000
300,000
–
900,000
1,100,000
1,250,000
300,000
3,950,000
71,020
49,969
74,522
195,511
110,441
–
108,795
69,420
43,968
25,657
6,500
402
201
–
254,943
$4,510,895
2009
Weighted-
Average
Rate
6.02%
4.64
–
4.18
4.49
4.60
3.51
4.43
1.91
5.37
5.63
4.21
11.20
–
5.42
5.55
5.62
5.72
5.84
5.89
5.91
–
5.53
4.65
At December 31, 2010, TCF has pledged loans secured by
residential real estate, commercial real estate loans and
FHLB stock with an aggregate carrying value of $7.4 billion
as collateral for FHLB advances. Included in FHLB advances
and repurchase agreements at December 31, 2010 are $300
million of fixed-rate FHLB advances and repurchase agree-
ments, which are callable quarterly by counterparties at
par until maturity. In addition, TCF has $200 million of FHLB
advances and $200 million of repurchase agreements which
contain one-time call provisions through 2011.
The probability that the advances and repurchase
agreements will be called by counterparties depends
primarily on the level of related interest rates during the
call period. If FHLB advances are called, replacement fund-
ing will be available from the FHLB at the then-prevailing
market rate of interest for the term selected by TCF, subject
to standard terms and conditions. Subordinated bank notes
with stated maturities in 2014 and 2015 are callable quar-
terly by TCF and have variable interest rates which reset
quarterly.
The next call year and stated maturity year for the call-
able FHLB advances and repurchase agreements outstanding
at December 31, 2010 were as follows.
(Dollars in thousands)
Next
Call
$700,000
–
–
–
–
$700,000
Weighted-
Average
Rate
3.92%
–
–
–
–
3.92
Year
2011
2015
2016
2017
2018
Total
Stated
Maturity
$ –
200,000
100,000
100,000
300,000
$700,000
Weighted-
Average
Rate
–%
3.88
4.82
4.37
3.51
3.92
2010 Form 10-K
• 73 •
The effective income tax rate differs from the federal
income tax rate of 35% as a result of the following.
Federal income tax rate
Increase (decrease) in income
tax expense resulting from:
State income tax,net
of federal income
tax benefit
Investments in
affordable housing
Deductible stock dividends
Changes in uncertain
tax positions
Compensation deduction
limitations
Deferred tax adjustments
due to law changes
Non-controlling interest
Year Ended December 31,
2008
2009
35.00%
35.00%
2010
35.00%
3.71
3.81
1.86
(.78)
(.25)
(1.42)
(.85)
(.77)
(1.60)
(.15)
(3.42)
.18
–
.75
.35
.57
.77
1.40
tax effect
Other, net
Effective income tax rate
(.49)
(.29)
36.93%
.11
.27
34.60%
–
.07
37.30%
A reconciliation of the change in the gross amount,
before related tax effects, of unrecognized tax benefits
from January 1, 2010 to December 31, 2010 is as follows:
(In thousands)
Balance at January 1, 2010
Increases for tax positions related to the current year
Decreases for tax positions related to prior years
Decreases related to lapses of applicable statutes
of limitation
Balance at December 31, 2010
$2,857
562
(251)
(704)
$2,464
The total amount of unrecognized tax benefits that,
if recognized, would affect the tax provision and the
effective income tax rate is $1 million, net of related
tax benefit effects. The gross amount of accrued interest
on unrecognized tax benefits was $218 thousand at
December 31, 2010. TCF recorded a reduction of accrued
interest of $154 thousand and $419 thousand during 2010
and 2009, respectively.
The $71 million of subordinated notes due 2014 will
reprice quarterly at the three-month LIBOR rate plus 1.63%.
These subordinated notes may be redeemed by TCF Bank at
par once a quarter at TCF’s discretion. The $50 million of
subordinated notes due 2015 will reprice quarterly at the
three-month LIBOR rate plus 1.56%. These subordinated
notes may be redeemed by TCF Bank at par once a quarter at
TCF’s discretion. The $74.6 million of subordinated notes due
2016 have a fixed-rate coupon of 5.5% until February 1, 2016.
All of these subordinated notes qualify as Tier 2 or supple-
mentary capital for regulatory purposes, subject to certain
limitations.
TCF’s trust preferred securities are callable, with Federal
Reserve approval, at par beginning August 15, 2013 or within
90 days of the occurrence of a Capital Treatment Event, as
defined by TCF’s trust preferred securities Supplemental
Indenture dated August 19, 2008.
During the second quarter of 2010, TCF entered into a $90
million senior unsecured variable-rate term note maturing in
July 2012. The loan is prepayable and contains certain cov-
enants common to such agreements. TCF was not in default
with respect to any covenants at December 31, 2010.
For certain equipment leases, TCF sells its minimum
lease rentals to other financial institutions at fixed rates
on a non-recourse basis with its underlying equipment as
collateral as a credit risk reduction tool and such transaction
did not qualify as sales. In the event of a default by customer
on these leases, the other financial institution has a first lien
on the underlying leased equipment and TCF is only entitled
to residual proceeds in excess of the outstanding borrowing
balance. In these non-recourse financings, the other financial
institution has no further recourse against TCF.
Note 12. Income Taxes
(In thousands)
Year ended December 31, 2010:
Current
Deferred
Total
Federal
State
Total
Year ended December 31, 2009:
Federal
State
Total
Year ended December 31, 2008:
Federal
State
Total
$49,462
11,695
$61,157
$ 4,311
6,285
$10,596
$46,627
1,715
$48,342
$24,740
1,868
$26,608
$33,775
1,483
$35,258
$24,191
4,169
$28,360
$74,202
13,563
$87,765
$38,086
7,768
$ 45,854
$70,818
5,884
$ 76,702
• 74 • TCF Financial Corporation and Subsidiaries
TCF’s federal income tax returns are open and subject
to examination from the 2007 tax return year and forward.
TCF’s various state income tax returns are generally open
from the 2006 and later tax return years based on individual
state statutes of limitation. Changes in the amount of
unrecognized tax benefits within the next twelve months
from normal expirations of statutes of limitation are not
expected to be material.
The significant components of the Company’s deferred
tax assets and deferred tax liabilities are as follows.
(In thousands)
Deferred tax assets:
Allowance for loan and lease losses
Stock compensation and
deferred compensation plans
Securities available for sale
Net operating losses
Valuation allowance
Accrued expenses
Other
Total deferred tax assets
Deferred tax liabilities:
Lease financing
Loan fees and discounts
Premises and equipment
Prepaid expenses
Investment in FHLB stock
Investments in affordable housing
Securities available for sale
Other
Total deferred tax liabilities
Net deferred tax liabilities
At December 31,
2010
2009
$ 91,730
$ 81,510
18,620
9,442
8,988
(4,159)
3,151
8,507
136,279
18,558
–
11,891
(3,832)
1,841
7,177
117,145
249,072
22,769
16,182
9,286
3,134
2,554
–
7,461
310,458
$174,179
211,360
22,926
14,068
8,595
3,134
2,960
812
8,851
272,706
$155,561
Note 13. Equity
Restricted Retained Earnings Retained earnings at TCF
National Bank, a wholly owned subsidiary of TCF Financial
Corporation, at December 31, 2010 includes approximately
$134.4 million for which no provision for federal income
taxes has been made. This amount represents earnings
legally appropriated to thrift bad debt reserves and deducted
for federal income tax purposes in prior years and is generally
not available for payment of cash dividends or other distri-
butions to shareholders. Future payments or distributions
of these appropriated earnings could invoke a tax liability
for TCF based on the amount of the distributions and the
tax rates in effect at that time.
Treasury Stock and Other Treasury stock and other
consists of the following.
(In thousands)
Treasury stock, at cost
Shares held in trust for deferred
compensation plans, at cost
Total
At December 31,
2010
2009
$ (1,325) $(29,435)
(21,790)
(21,392)
$(23,115) $(50,827)
No repurchases of common stock were made in 2010,
2009 or 2008. At December 31, 2010, TCF had 5.4 million
shares remaining in its stock repurchase programs autho-
rized by the Board.
Public Offering of Common Stock In February of 2010,
TCF completed a public offering of common stock which
raised net proceeds of $164.6 million through the issuance
of 12,322,250 common shares.
Shares Held in Trust for Deferred Compensation
Plans TCF has maintained certain deferred compensation
plans that previously allowed eligible executives, senior
officers and certain other employees to defer payment of
up to 100% of their base salary and bonus as well as grants
of restricted stock. In October of 2008, TCF terminated
these plans for those participants who elected to do so.
Directors are allowed to defer up to 100% of their fees and
restricted stock awards. TCF also has a supplemental
nonqualified Employee Stock Purchase Plan in which certain
employees can contribute from 0% to 50% of their salary
and bonus. TCF matching contributions to this plan totaled
$807 thousand and $463 thousand in 2010 and 2009,
respectively. The company made no other contributions
to these plans, other than payment of administrative
2010 Form 10-K
• 75 •
expenses. The amounts deferred were invested in TCF stock
or other publicly traded stocks, bonds or mutual funds. At
December 31, 2010, the fair value of the assets in the plans
totaled $31.4 million and included $22.3 million invested in
TCF common stock compared with a total fair value of $28
million, including $20.5 million invested in TCF common
stock at December 31, 2009. The cost of TCF common stock
held by TCF’s deferred compensation plans is reported
separately in a manner similar to treasury stock (that
is, changes in fair value are not recognized) with a
corresponding deferred compensation obligation reflected
in additional paid-in capital.
Preferred Stock On April 22, 2009, TCF redeemed all of the
361,172 outstanding shares of its Fixed-Rate Cumulative
Perpetual Preferred Stock, Series A, $.01 Par Value. Upon
redemption, the difference of $12 million between the pre-
ferred stock redemption amount and the recorded amount
was charged to retained earnings as a non-cash deemed
preferred stock dividend. This non-cash deemed preferred
stock dividend had no impact on total equity, but reduced
earnings per diluted common share by 10 cents.
Warrants At December 31, 2010, TCF had 3,199,988
warrants outstanding with a strike price of $16.93 per
share, which expire on November 14, 2018. Upon the
completion of the U.S. Treasury’s secondary public offering
of the warrants issued under the Capital Purchase Program
(CPP), in December of 2009, the warrants became publicly
traded on the New York Stock Exchange under the symbol
“TCB WS”. As a result, TCF has no further obligations to the
Federal Government in connection with the CPP.
Note 14. Regulatory Capital Requirements
TCF is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to
meet minimum capital requirements can initiate certain
mandatory, and possible additional discretionary, actions
by the federal banking agencies that could have a material
adverse effect on TCF. In general, TCF Bank may not declare
or pay a dividend to TCF in excess of 100% of its net retained
profits for the current year combined with its retained net
profits for the preceding two calendar years, which was
$239.9 million at December 31, 2010, without prior approval
of the OCC. TCF Bank’s ability to make capital distributions
in the future may require regulatory approval and may be
restricted by its regulatory authorities. TCF Bank’s ability to
make any such distributions will also depend on its earnings
and ability to meet minimum regulatory capital requirements
in effect during future periods. These capital adequacy
standards may be higher in the future than existing minimum
regulatory capital requirements.
• 76 • TCF Financial Corporation and Subsidiaries
The following table sets forth TCF’s and TCF National Bank’s regulatory tier 1 leverage, tier 1 risk-based and total risk-based
capital levels, and applicable percentages of adjusted assets, together with the stated minimum and well-capitalized capital
ratio requirements.
(Dollars in thousands)
As of December 31, 2010:
Tier 1 leverage capital
TCF
TCF National Bank
Tier 1 risk-based capital
TCF
TCF National Bank
Total risk-based capital
TCF
TCF National Bank
As of December 31, 2009:
Tier 1 leverage capital
TCF
TCF National Bank
Tier 1 risk-based capital
TCF
TCF National Bank
Total risk-based capital
TCF
TCF National Bank
N.A. Not Applicable.
Actual
Amount
Ratio
Minimum
Capital Requirement(1)
Ratio
Amount
Well-Capitalized
Capital Requirement(1)
Ratio
Amount
$1,475,525
1,519,201
8.00%
8.24
$ 553,448
553,146
3.00%
3.00
N.A.
$ 921,909
1,475,525
1,519,201
1,808,412
1,851,962
$1,161,750
1,103,875
1,161,750
1,103,875
1,514,940
1,456,858
10.59
10.91
12.98
13.31
557,164
556,756
1,114,328
1,113,511
4.00
4.00
8.00
8.00
835,746
835,133
1,392,910
1,391,889
6.59%
6.27
$ 528,681
527,836
3.00%
3.00
N.A.
$ 879,727
8.52
8.11
11.12
10.70
545,115
544,648
1,090,230
1,089,297
4.00
4.00
8.00
8.00
817,672
816,972
1,362,787
1,361,621
N.A.
5.00%
6.00
6.00
10.00
10.00
N.A.
5.00%
6.00
6.00
10.00
10.00
(1) The minimum and well capitalized requirements are determined by the Federal Reserve for TCF and by the OCC for TCF National Bank pursuant to the FDIC Improvement Act
of 1991. At December 31, 2010, TCF and TCF National Bank exceeded their regulatory capital requirements and are considered “well-capitalized”.
Note 15. Stock Compensation
The TCF Financial Incentive Stock Program (the “Program”)
was adopted to enable TCF to attract and retain key
personnel. At December 31, 2010, there were 4,760,019
shares reserved for issuance under the Program.
At December 31, 2010, there were 207,194 shares of
performance-based restricted stock that will vest only
if certain return on equity goals or service conditions, as
defined in the Program, are achieved. Failure to achieve
the goals and service conditions will result in all or a por-
tion of the shares being forfeited. Other restricted stock
grants vest over periods from one year to seven years. The
weighted-average grant date fair value of restricted stock
was $13.36, $10.33 and $12.50 for shares granted in 2010,
2009 and 2008, respectively. Compensation expense for
restricted stock and stock options totaled $9.1 million,
$7.9 million and $5.7 million in 2010, 2009 and 2008,
respectively. The recognized tax benefit for stock compen-
sation expense was $3.5 million, $3 million and $2 million
in 2010, 2009 and 2008, respectively. Unrecognized stock
compensation expense for restricted stock awards and
stock options were $12.4 million with a weighted-average
remaining amortization period of .9 years at December 31,
2010, compared with $17.3 million with a weighted-average
remaining amortization period of 1.6 years at December 31,
2009 and $20.8 million with a weighted-average remaining
amortization period of 2.4 years at December 31, 2008.
TCF has also issued stock options under the Program that
generally become exercisable over a period of one to ten
years from the date of the grant and expire after ten years.
All outstanding options have a fixed exercise price equal to
the market price of TCF common stock on the date of grant.
2010 Form 10-K
• 77 •
The following table reflects TCF’s stock option and restricted stock transactions under the Program since December 31, 2007.
Outstanding at December 31, 2007
Granted
Exercised
Forfeited
Vested
Outstanding at December 31, 2008
Granted
Exercised
Forfeited
Vested
Outstanding at December 31, 2009
Granted
Forfeited
Vested
Outstanding at December 31, 2010
Exercisable at December 31, 2010
N.A. Not Applicable.
Restricted Stock
Stock Options
Exercise Price
Shares
2,525,216
753,650
–
(222,850)
(1,168,499)
1,887,517
718,761
–
(481,000)
(254,433)
1,870,845
307,433
(20,000)
(387,653)
1,770,625
N.A.
Price Range
$ 9.87 - 30.28
9.41 - 17.37
–
17.37 - 30.28
9.87 - 28.02
9.41 - 30.28
8.29 - 13.43
–
10.37 - 28.71
17.33 - 30.28
7.57 - 30.28
11.50 - 14.60
10.37 - 28.02
8.29 - 28.71
7.57 - 30.13
N.A.
Shares
144,050
2,626,000
(13,000)
(383,631)
–
2,373,419
–
(108,800)
(56,000)
–
2,208,619
–
–
–
2,208,619
–
Range
$11.78 - 16.09
12.85 - 15.75
11.78 - 14.30
15.03 - 16.09
–
11.78 - 15.75
–
11.78 - 14.52
11.78 - 15.75
–
12.85 - 15.75
–
–
–
12.85 - 15.75
–
Weighted-
Average
$13.91
14.65
12.56
15.74
–
14.44
–
14.14
14.95
–
14.44
–
–
14.44
–
The following table summarizes information about stock options outstanding at December 31, 2010.
Exercise price range
$12.85-$15.75
Stock Options Outstanding
Stock Options Exercisable
Weighted-
Average
Exercise
Price
$14.44
Weighted-
Average
Remaining
Contractual
Life in Years
7.26
Shares
2,208,619
Weighted-
Average
Exercise
Price
$ –
Shares
–
• 78 • TCF Financial Corporation and Subsidiaries
Additional valuation and related assumption informa-
tion for TCF’s stock option plans related to options issued
in 2008 is presented below. No stock options were issued in
2009 or 2010.
Expected volatility
Weighted-average volatility
Expected dividend yield
Expected term (in years)
Risk-free interest rate
28.5%
28.5%
3.5%
6.25 – 6.75
2.58 – 2.91%
Note 16. Employee Benefit Plans
Employees Stock Purchase Plan The TCF Employees
Stock Purchase Plan, a qualified 401(K) and employee
stock ownership plan, generally allows participants to make
contributions of up to 50% of their covered compensation
on a tax-deferred basis, subject to the annual covered
compensation limitation imposed by the Internal Revenue
Service (“IRS”). TCF matches the contributions of all
participants with TCF common stock at the rate of 50 cents
per dollar for employees with one through four years of
service, up to a maximum company contribution of 3% of
the employee’s covered compensation, 75 cents per dollar
for employees with five through nine years of service, up to
a maximum company contribution of 4.5% of the employ-
ee’s covered compensation, and $1 per dollar for employees
with 10 or more years of service, up to a maximum company
contribution of 6% of the employee’s covered compensation,
subject to the annual covered compensation limitation
imposed by the IRS. Employee contributions vest immediately
while the Company’s matching contributions are subject to
a graduated vesting schedule based on an employee’s years
of service with full vesting after five years. Employees have
the opportunity to diversify and invest their account
balance, including matching contributions, in various
mutual funds or TCF common stock. At December 31, 2010,
the fair value of the assets in the plan totaled $163.4
million and included $116 million invested in TCF common
stock. The Company’s matching contributions are expensed
when made. TCF’s contributions to the plan were $6.9
million in 2010, 2009 and 2008, respectively.
Pension Plan The TCF Cash Balance Pension Plan (the
“Pension Plan”) is a qualified defined benefit plan covering
eligible employees who are at least 21 years old and have
completed a year of eligibility service with TCF. Employees
hired after June 30, 2004 are not eligible to participate in
the Pension Plan. Effective March 31, 2006, TCF amended
the Pension Plan to discontinue compensation credits
for all participants. Interest credits will continue to be
paid until participants’ accounts are distributed from the
Pension Plan. Each month TCF credits participant accounts
with interest on the account balance based on the five-
year Treasury rate plus 25 basis points determined at the
beginning of each year. All participant accounts are vested.
The measurement of the projected benefit obligation,
prepaid pension asset, pension liability and annual pension
expense involves complex actuarial valuation methods and
the use of actuarial and economic assumptions. Due to the
long-term nature of the pension plan obligation, actual
results may differ significantly from the actuarial-based
estimates. Differences between estimates and actual
experience are required to be deferred and under certain
circumstances amortized over the future expected working
lifetime of plan participants. As a result, these differences
are not recognized when they occur. TCF closely monitors
all assumptions and updates them annually. The Company
does not consolidate the assets and liabilities associated
with the Pension Plan.
Postretirement Plan TCF provides health care benefits
for eligible retired employees (the “Postretirement Plan”).
Effective January 1, 2000, TCF modified the Postretirement
Plan for employees not yet eligible for benefits under the
Postretirement Plan by eliminating the Company subsidy.
The plan provisions for full-time and retired employees then
eligible for these benefits were not changed. Employees
retiring after December 31, 2009 are no longer eligible to
participate in the Postretirement Plan. The Postretirement
Plan is not funded.
2010 Form 10-K
• 79 •
The following table sets forth the status of the Pension Plan and the Postretirement Plan at the dates indicated.
(In thousands)
Benefit obligation:
Accrued participant balance — vested
Present value of future service and benefits
Total projected benefit obligation
Accumulated benefit obligation
Change in benefit obligation:
Benefit obligation at beginning of year
Service cost — benefits earned during the year
Interest cost on projected benefit obligation
Actuarial loss
Benefits paid
Projected benefit obligation at end of year
Change in fair value of plan assets:
Fair value of plan assets at beginning of year
Actual return on plan assets
Benefits paid
TCF contributions
Fair value of plan assets at end of year
Funded status of plans at end of year
Amounts recognized in the Statements of Financial Condition:
Prepaid (accrued) benefit cost at end of year
Amounts not yet recognized in net periodic benefit cost and included
in accumulated other comprehensive loss, before tax:
Transition obligation
Accumulated actuarial net loss
Accumulated other comprehensive loss, before tax
Total recognized asset (liability)
N.A. Not Applicable.
Pension Plan
Year Ended December 31,
2009
2010
Postretirement Plan
Year Ended December 31,
2009
2010
$48,473
443
$48,916
$48,916
$48,824
–
2,554
1,726
(4,188)
48,916
50,605
9,938
(4,188)
–
56,355
$ 7,439
$50,933
(2,109)
$48,824
$48,824
$49,049
–
2,918
935
(4,078)
48,824
38,624
13,559
(4,078)
2,500
50,605
$ 1,781
N.A.
N.A.
N.A.
N.A.
$ 9,166
2 7
455
460
(528)
9,555
– –
– –
(528)
528
– –
$(9,555)
N.A.
N.A.
N.A.
N.A.
$ 8,384
495
892
(612)
9,166
(612)
612
$(9,166)
$ 7,439
$ 1,781
$(9,555)
$(9,166)
–
20,083
20,083
$27,522
–
27,020
27,020
$28,801
7
4,423
4,430
$(5,125)
11
4,277
4,288
$(4,878)
• 80 • TCF Financial Corporation and Subsidiaries
At December 31, 2010, assets held in trust for the Pension Plan included investments in mutual funds and money market
funds. The fair value of these assets is based upon quotes from independent asset pricing services for identical assets
based on active markets, which are considered level 1 under Fair Value Measurements and are measured on a recurring basis.
The following table sets forth the changes recognized in accumulated other comprehensive loss at the dates indicated.
(In thousands)
Accumulated other comprehensive loss
at the beginning of the year
Net actuarial (gain) loss arising
during the period
Amortizations (recognized in net
periodic benefit cost):
Transition obligation
Actuarial loss
Settlement expense
Measurement date change
Total recognized in other
comprehensive (income) loss
Accumulated other comprehensive loss
at end of year, before tax
Pension Plan
Year Ended December 31,
2010
2009
2008
2010
Postretirement Plan
Year Ended December 31,
2009
2008
$27,020
$ 38,788
$ 7,221
$4,288
$3,652
$4,538
(3,266)
(7,495)
33,130
460
892
(492)
–
(1,595)
(2,076)
–
–
(1,263)
(3,010)
–
–
(859)
(490)
(214)
(6,937)
(11,768)
31,567
(4)
(314)
– –
–
142
(4)
(252)
–
–
636
(4)
(311)
(79)
(886)
$20,083
$ 27,020
$38,788
$4,430
$4,288
$3,652
The measurement dates used for determining the Pension Plan and the Postretirement Plan projected and accumulated
benefit obligations and the dates used to value plan assets were December 31, 2010 and December 31, 2009. The discount
rate used to measure the benefit obligation of the Pension Plan was 4.75% for the year ended December 31, 2010 and 5.5%
for the year ended December 31, 2009. The discount rate used to measure the benefit obligation of the Postretirement Plan
was 4.75% for the year ended December 31, 2010 and 5.25% for the year ended December 31, 2009.
Net periodic benefit cost (income) included in compensation and employee benefits expense consists of the following.
Pension Plan
Year Ended December 31,
(In thousands)
Interest cost
Expected return on plan assets
Service cost
Recognized actuarial loss
Settlement expense
Amortization of transition obligation
Net periodic benefit cost (income)
2010
$ 2,554
(4,946)
–
1,595
2,076
–
$ 1,279
2009
$ 2,918
(5,129)
–
1,263
3,010
–
$ 2,062
2008
$ 2,934
(5,059)
–
859
490
–
$ (776)
Postretirement Plan
Year Ended December 31,
2009
$495
–
7
252
–
4
$758
2010
$455
– –
2
314
– –
4 4
$775
2008
$537
12
310
$863
The discount rate, the expected long-term rate of return on plan assets and the rate of increase in future compensation used
to determine the net benefit cost were as follows.
Assumptions used to
determine net benefit cost
Discount rate
Expected long-term rate of
return on plan assets
N.A. Not Applicable.
Pension Plan
Year Ended December 31,
2009
6.25%
8.50
2010
5.50%
8.50
2008
6.00%
8.50
2010
5.25%
N.A.
Postretirement Plan
Year Ended December 31,
2009
6.25%
N.A.
2008
6.00%
N.A.
2010 Form 10-K
• 81 •
The amounts in accumulated other comprehensive loss that are expected to be recognized as components of net periodic
benefit cost during 2011 are as follows.
(In thousands)
Actuarial net loss
Settlement expense
Transition obligation
Net loss
TCF’s Pension Plan assets are invested in index mutual
funds that are designed to mirror the performance of the
Standard and Poor’s 500 (equally weighted) and the Morgan
Stanley Capital International U.S. Mid-Cap 450 indexes, at
targeted weightings of 50% and 50%, respectively.
The actuarial assumptions used in the Pension Plan
valuation are reviewed annually. The expected long-term
rate of return on plan assets is determined by reference
to historical market returns and future expectations. The
10-year weighted-average return of the indexes consistent
with the Plan’s current investment strategy was 5.4%, net
of administrative expenses. Although past performance is
no guarantee of the future results, TCF is not aware of any
reasons why it should not be able to achieve the assumed
future average long-term annual returns of 5.0%, net of
administrative expenses, on plan assets over complete
market cycles. A 1% difference in the expected return on
plan assets would result in a $553 thousand change in net
periodic pension expense.
The discount rate used to determine TCF’s pension and
postretirement benefit obligations as of December 31,
2010 and December 31, 2009, was determined by matching
estimated benefit cash flows to a yield curve derived from
corporate bonds rated AA by Moody’s. Bonds containing
call or put provisions were excluded. The average estimated
duration of TCF’s Pension and Postretirement Plans varied
between seven and eight years.
The actual return on plan assets, net of administra-
tive expenses was 21.1% for the year ended December 31,
2010, and 32.8% for the year ended December 31, 2009. The
actual gain on plan assets for the year ended December 31,
2010, decreased the actuarial loss by $5 million. The
decrease in the discount rate from 5.5% at December 31,
2009 to 4.75% at December 31, 2010 increased the actu-
arial loss by $2.3 million. Various plan participant census
Pension Plan
$1,917
1,473
–
$3,390
Postretirement
Plan
$324
–
4
$328
Total
$2,241
1,473
4
$3,718
changes decreased the actuarial loss by $606 thousand
during the year ended December 31, 2010. The accumulated
other comprehensive loss in excess of 10% of the greater of
the accumulated benefit obligation or fair value of the plan
assets is amortized over approximately seven years.
For 2010, TCF is eligible to contribute up to $15.5 million
to the Pension Plan until the 2010 federal income tax return
extension due date under various IRS funding methods.
During 2010, TCF made no cash contributions to the Pension
Plan. TCF does not expect to be required to contribute
to the Pension Plan in 2011. TCF expects to contribute
$979 thousand to the Postretirement Plan in 2011. TCF
contributed $528 thousand to the Postretirement Plan for
the year ended December 31, 2010. TCF currently has no
plans to pre-fund the Postretirement Plan in 2011.
The following are expected future benefit payments used
to determine projected benefit obligations.
(In thousands)
2011
2012
2013
2014
2015
2016-2020
Pension Postretirement
Plan
$ 979
958
938
912
882
3,859
Plan
$ 4,254
4,457
3,640
4,088
3,248
16,177
The following table presents assumed health care cost
trend rates for the Postretirement Plan at December 31,
2010 and 2009.
Health care cost trend rate
assumed for next year
Final health care cost trend rate
Year that final health care
trend rate is reached
2010
2009
7.50%
5%
7.75%
5%
2023
2023
• 82 • TCF Financial Corporation and Subsidiaries
Assumed health care cost trend rates have an effect on
the amounts reported for the Postretirement Plan. A 1%
change in assumed health care cost trend rates would have
the following effects:
(In thousands)
Effect on total of service and
interest cost components
Effect on postretirement
benefits obligations
1-Percentage-Point
Decrease
Increase
$ 17
$ (16)
$410
$(371)
Note 17. Financial Instruments
with Off-Balance Sheet Risk
TCF is a party to financial instruments with off-balance sheet
risk, primarily to meet the financing needs of its customers.
These financial instruments, which are issued or held for
purposes other than trading, involve elements of credit and
interest-rate risk in excess of the amount recognized in the
Consolidated Statements of Financial Condition.
TCF’s exposure to credit loss, in the event of non-
performance by the counterparty to the financial instru-
ment, for commitments to extend credit and standby
letters of credit is represented by the contractual amount
of the commitments. TCF uses the same credit policies in
making these commitments as it does for making direct
loans. TCF evaluates each customer’s creditworthiness on
a case-by-case basis. The amount of collateral obtained
is based on a credit evaluation of the customer.
Financial instruments with off-balance sheet risk are
summarized as follows:
(In thousands)
Commitments to extend credit:
At December 31,
2010
2009
Consumer real estate and other
Commercial
Leasing and equipment finance
$1,444,619
277,427
148,597
$1,596,706
336,428
124,898
Total commitments
to extend credit
1,870,643
2,058,032
Standby letters of credit and guarantees
on industrial revenue bonds
Total
31,062
$1,901,705
39,281
$2,097,313
Commitments to Extend Credit Commitments to extend
credit are agreements to lend provided there is no violation
of any condition in the contract. These commitments gen-
erally have fixed expiration dates or termination clauses
and may require payment of a fee. Since certain of the
commitments are expected to expire without being drawn
upon, the total commitment amounts do not necessarily
represent future cash requirements. Collateral to secure
these commitments predominantly consists of residential
and commercial real estate.
Standby Letters of Credit and Guarantees on
Industrial Revenue Bonds Standby letters of credit
and guarantees on industrial revenue bonds are conditional
commitments issued by TCF guaranteeing the performance
of a customer to a third-party. These conditional commit-
ments expire in various years through 2015. Collateral
held primarily consists of commercial real estate mort-
gages. Since the conditions under which TCF is required
to fund these commitments may not materialize, the
cash requirements are expected to be less than the total
outstanding commitments.
Note 18. Foreign Exchange Contracts
Forward foreign exchange contracts to sell a foreign currency
are used to manage the foreign exchange risk associated
with certain assets, liabilities and forecasted transactions.
Forward foreign exchange contracts represent agreements
to exchange a foreign currency for U.S. dollars at an agreed-
upon price on an agreed-upon settlement date.
All forward foreign exchange contracts are recognized
within other assets or other liabilities at fair value on the
Statement of Financial Condition. These typically settle
within 30 days with the exception of contracts associated
with cash flow hedges which have maturities as long as seven
months. The following table summarizes the forward foreign
exchange contracts, recorded at fair value, that are reflected
within other assets and other liabilities on TCF’s Consolidated
Statements of Financial Condition. See Note 20 Fair Values of
Financial Instruments for additional information.
2010 Form 10-K
(In thousands)
Forward foreign exchange contracts
Netting adjustments (1)
Carrying value of contracts
Receivables
Not
Notional Designated Designated
as Hedges
as Hedges
Amount
$ 3
$ 12
$185,540
(3)
(12)
$ –
$ –
At December 31, 2010
Payables
Not
Designated Designated
as Hedges
$1,659
(3)
$1,656
as Hedges
$198
(12)
$186
Total
$ 15
(15)
$ –
• 83 •
Total
$1,857
(15)
$1,842
(1) Foreign exchange contract receivables and payables, and the related cash collateral received and paid are netted when a legally enforceable master netting agreement
exists between TCF and a counterparty.
The value of forward foreign exchange contracts will
vary over their contractual lives as the related currency
exchange rates fluctuate. The accounting for changes in the
fair value of a forward foreign exchange contract depends
on whether or not the contract has been designated and
qualifies as a hedge. To qualify as a hedge, a contract must
be highly effective at reducing the risk associated with the
exposure being hedged. In addition, for a contract to be
designated as a hedge, the risk management objective and
strategy must be documented. Hedge documentation must
also identify the hedging instrument, the asset or liability
and type of risk to be hedged and how the effectiveness of
the contract is assessed prospectively and retrospectively.
To assess effectiveness, TCF uses statistical methods such
as regression analysis. The extent to which a contract
has been, and is expected to continue to be effective
at offsetting changes in cash flows or the net investment
must be assessed and documented at least quarterly. If
it is determined that a contract is not highly effective at
hedging the designated exposure, hedge accounting
is discontinued.
Upon origination of a forward foreign exchange contract,
the contract is designated either as a hedge of a forecasted
transaction or the variability of cash flows to be paid related
to a recognized asset or liability (“cash flow hedge”); or a
hedge of the volatility of an investment in foreign operations
driven by changes in foreign currency exchange rates (“net
investment hedge”). To the extent that a hedge is effective,
changes in fair value are recorded within accumulated other
comprehensive income (loss), with any ineffectiveness
recorded in non-interest expense. Changes in cash flow
hedges recorded within other comprehensive income (loss)
are subsequently reclassified to non-interest expense
upon completion of the sale. Changes in net investment
hedges recorded within other comprehensive income
(loss) are subsequently reclassified to non-interest
expense during the period in which the foreign investment
is substantially liquidated or when other elements of the
currency translation adjustment are reclassified to income.
If a hedged forecasted transaction is no longer probable,
hedge accounting is ceased and any gain or loss included in
other comprehensive income (loss) is reported in earnings
immediately. Changes in the values of forward foreign
exchange contracts that are not designated as hedges are
reflected in non-interest expense.
Cash Flow Hedges Foreign exchange contracts, which
include forward contracts, are used to manage the foreign
exchange risk associated with the TCF’s minimum lease
payment stream. These foreign exchange contracts are
hedges of the forecasted cash flows from the underlying
lease agreement expected through June 30, 2011. At
December 31, 2010, the Company had $1 thousand of
unrealized losses on derivatives classified as cash flow
hedges recorded in other comprehensive income (loss).
The estimated amount to be reclassified from other
comprehensive income (loss) into earnings during the next
12 months is a loss of $1 thousand.
Net Investment Hedges Foreign exchange contracts,
which include forward contracts and currency options, are
used to manage the foreign exchange risk associated with
the Company’s net investment in TCF Commercial Finance
Canada, Inc., a wholly-owned Canadian subsidiary,
along with certain assets, liabilities and forecasted
transactions of that subsidiary. The net amount of related
gains or losses included in the cumulative translation
adjustment for the year ended December 31, 2010 was a
loss of $195 thousand.
• 84 • TCF Financial Corporation and Subsidiaries
The following table summarizes the pre-tax impact
of foreign exchange activity on other non-interest
expense within the Consolidated Statements of Income
and Consolidated Statements of Financial Condition, by
accounting designation.
(In thousands)
Foreign exchange gains
Forward foreign exchange contract losses:
Net investment hedge
Cash flow hedge
Not designated as hedges
Total
Accumulated other comprehensive income (loss):
Foreign currency translation adjustment
Net investment hedge
Cash flow hedge
Total
Year Ended
December 31, 2010
$ 1,720
–
–
(1,976)
(1,976)
575
(195)
(1)
$ 379
TCF executes all of its foreign exchange contracts in
the over-the-counter market with large, international
financial institutions. These contracts also include credit
risk-related contingent features, primarily in the form
of International Swaps and Derivatives Association, Inc.
(“ISDA”) master agreements that enhance the credit-
worthiness of these instruments as compared to other
obligations of the respective counterparty with whom TCF
has transacted. These contingent features may be for the
benefit of TCF, as well as its counterparties with respect to
changes in TCF’s creditworthiness. At December 31, 2010,
TCF had posted $854 thousand of U.S. Treasury securities
as collateral in the normal course of business under such
agreements. The amount of collateral required depends on
the contract and is determined daily based on market and
currency exchange rate conditions.
In connection with certain over-the-counter forward
foreign exchange contracts, TCF could be required to provide
additional collateral or to terminate transactions with
certain counterparties in the event that, among other
things, TCF National Bank’s long-term debt is rated less than
BB- by Standard and Poor’s ratings group. At December 31,
2010, approximately $1.3 million of additional collateral
would be required if the credit risk-related contingent
features were triggered, which would bring the total
collateral required to $2.1 million at December 31, 2010.
There were $349 thousand of forward foreign exchange
contracts containing credit risk related features in a net
liability position at December 31, 2010.
Note 19. Fair Value Measurement
Fair values represent the estimated price that would
be received from selling an asset or paid to transfer a
liability, otherwise known as an “exit price”. The following
is a description of valuation methodologies used for
assets recorded at fair value on a recurring basis at
December 31, 2010.
Securities Available for Sale Securities available
for sale consist primarily of U.S. Government sponsored
enterprise securities and U.S. Treasury bills. The fair
value of U.S. Government sponsored enterprise securities
is recorded using prices obtained from independent
asset pricing services that are based on observable
transactions, but not quoted markets, and are classified
as Level 2 assets. The fair value of U.S. Treasury bills is
recorded using prices obtained from independent asset
pricing services that obtain prices from brokers and active
market participants, and are classified as Level 1 assets.
Management reviews the prices obtained from independent
asset pricing services for unusual fluctuations and
comparisons to current market trading activity. However,
management does not adjust these prices.
Other securities, for which there is little or no market
activity, are categorized as Level 3 assets. Other securities
classified as Level 3 assets include equity investments
in other thinly traded financial institutions and foreign
debt securities. The fair value of these assets is determined
by using quoted prices, when available, and incorporating
results of internal pricing techniques and observable
market information, which is adjusted for security
specific information, such as financial statement strength,
earnings history, disclosed fair value measurements,
recorded impairments and key financial ratios, to
determine fair value.
Assets Held in Trust for Deferred Compensation
Assets held in trust for deferred compensation plans
included investments in publicly traded stocks, excluding
TCF common stock reported in treasury and other in equity,
and mutual funds. The fair value of these assets is based
upon prices obtained from independent asset pricing
services based on active markets.
2010 Form 10-K
• 85 •
At December 31, 2010, the fair value of assets measured on a recurring basis are:
(In thousands)
Securities available for sale:
Mortgage-backed securities:
U.S. Government sponsored enterprises
and federal agencies
Other
U.S. Treasury bills
Other securities
Forward foreign currency contracts
Assets held in trust for deferred compensation plans(4)
Total assets
Forward foreign currency contracts
Total liabilities
At December 31, 2009:
Securities available for sale:
Mortgage-backed securities:
U.S. Government sponsored enterprises
and federal agencies
Other
Other securities
Assets held in trust for deferred compensation plans(4)
Total assets
(1) Considered Level 1 under ASC 820, Fair Value Measurements and Disclosures.
(2) Considered Level 2 under ASC 820, Fair Value Measurements and Disclosures.
Readily
Available
Market Prices(1)
Observable
Market
Prices(2) Market Prices(3)
Company
Determined
Total at
Fair Value
$ –
–
25,000
–
–
9,178
$34,178
$ –
$ –
$1,903,536
–
–
–
15
–
$1,903,551
$ 1,856
$ 1,856
$ –
222
–
2,416
–
–
$2,638
$ –
$ –
$1,903,536
222
25,000
2,416
15
9,178
$1,940,367
$ 1,856
$ 1,856
$ –
–
–
7,511
$ 7,511
$ 1,905,209
–
–
–
$ 1,905,209
$ –
263
5,004
–
$5,267
$ 1,905,209
263
5,004
7,511
$ 1,917,987
(3) Considered Level 3 under ASC 820, Fair Value Measurements and Disclosures, and is based on valuation models that use significant assumptions that are not observable
in an active market.
(4) A corresponding liability is recorded in other liabilities for TCF’s obligation to the participants in these plans.
• 86 • TCF Financial Corporation and Subsidiaries
The change in the financial assets carried at fair value
using Company Determined Market Prices from $5.3 million
at December 31, 2009, to $2.6 million at December 31,
2010, was the result of impairment charges totaling $2.1
million recorded through gains on securities, net, decreases
in fair values of $417 thousand recorded through other
comprehensive income and reductions due to principal
paydowns of $90 thousand.
The following is a description of valuation methodologies
used for assets measured on a non-recurring basis.
Loans Impaired loans for which repayment of the loan
is expected to be provided solely by the value of the
underlying collateral are considered collateral dependent
and are valued based on the fair value of such collateral.
Long-lived Assets Held for Sale Long-lived assets
held for sale include real estate owned and repossessed
and returned equipment. The fair value of real estate
owned is based on independent full appraisals, real
estate broker’s price opinions, or automated valuation
methods, less estimated selling costs. Certain properties
require assumptions that are not observable in an active
market in the determination of fair value. The fair value of
repossessed and returned equipment is based on available
pricing guides, auction results or price opinions, less
estimated selling costs. Assets that are acquired through
foreclosure, repossession or return are initially recorded
at the lower of the loan or lease carrying amount or fair
value less estimated selling costs at the time of transfer to
real estate owned or repossessed and returned equipment.
Long-lived assets held for sale were written down $20
million, which is included in foreclosed real estate and
repossessed assets, net expense, during the year ended
December 31, 2010.
The table below presents the balances of assets measured at fair value on a non-recurring basis at December 31, 2010.
(In thousands)
Loans (4)
Real estate owned (5)
Repossessed and returned equipment (5)
Investments (6)
Total
At December 31, 2009:
Loans (4)
Real estate owned (5)
Repossessed and returned equipment (5)
Total
Readily
Available
Market Prices(1)
$ –
–
–
–
$ –
$ –
–
–
$ –
Observable
Market
Prices(2) Market Prices(3)
Company
Determined
$ –
–
5,731
–
$ 5,731
$ –
–
14,861
$14,861
$ 42,683
127,295
1,180
4,296
$175,454
$ 62,794
71,272
527
$134,593
Total at
Fair Value
$ 42,683
127,295
6,911
4,296
$181,185
$ 62,794
71,272
15,388
$149,454
(1) Considered Level 1 under ASC 820, Fair Value Measurements and Disclosures.
(2) Considered Level 2 under ASC 820, Fair Value Measurements and Disclosures.
(3) Considered Level 3 under ASC 820, Fair Value Measurements and Disclosures, and is based on valuation models that use significant assumptions that are not observable in
an active market.
(4) Represents the carrying value of loans for which adjustments are based on the appraisal value of the collateral.
(5) Amounts do not include assets held at cost at December 31, 2010.
(6) Represents the carrying value of other investments which were recorded at fair value determined by using quoted prices, when available, and incorporating results of
internal pricing techniques and observable market information during the year ended December 31, 2010.
2010 Form 10-K
• 87 •
Note 20. Fair Values of Financial Instruments
TCF is required to disclose the estimated fair value of
financial instruments, both assets and liabilities on
and off the balance sheet, for which it is practicable
to estimate fair value. These fair value estimates were
made at December 31, 2010 and 2009, based on relevant
market information and information about the financial
instruments. Fair value estimates are intended to represent
the price at which an asset could be sold or a liability could
be settled. However, given there is no active market or
observable market transactions for many of TCF’s financial
instruments, the Company has made many estimates of fair
values which are subjective in nature, involve uncertainties
and matters of significant judgment and therefore cannot
be determined with precision. Changes in assumptions
could significantly affect the estimated values.
The carrying amounts and fair values of the Company’s remaining financial instruments are set forth in the following table.
This information represents only a portion of TCF’s balance sheet and not the estimated value of the Company as a whole.
Non-financial instruments such as the value of TCF’s branches and core deposits, leasing operations and the future revenues
from TCF’s customers are not reflected in this disclosure. Therefore, this information is of limited use in assessing the value of TCF.
At December 31,
2010
2009
Carrying
Amount
Estimated
Fair Value
Carrying
Amount
Estimated
Fair Value
$ 663,901
179,768
1,931,174
$ 663,901
179,768
1,931,174
$ 299,127
163,692
1,910,476
$ 299,127
163,692
1,910,476
7,195,269
3,328,216
317,987
939,474
792,354
(265,819)
$15,082,324
6,907,960
3,222,201
303,172
942,167
792,940
–
$14,943,283
7,331,991
3,269,003
449,516
868,830
468,805
(244,471)
$14,516,969
$10,556,788
1,028,327
126,790
4,858,821
1,842
$16,572,568
$10,556,788
1,031,090
126,790
5,280,615
1,842 –
$16,997,125
$10,380,814
1,187,505
244,604
4,510,895
–
$16,323,818
7,090,772
3,112,313
424,122
878,168
468,746
–
$14,347,416
$10,380,814
1,191,176
244,604
4,816,727
$16,633,321
$ 33,909
(92)
$ 33,909
(92)
$ 35,860
(55)
$ 35,860
(55)
$ 33,817
$ 33,817
$ 35,805
$ 35,805
(In thousands)
Financial instrument assets:
Cash and due from banks
Investments
Securities available for sale
Loans:
Consumer real estate and other
Commercial real estate
Commercial business
Equipment finance loans
Inventory finance loans
Allowance for loan and lease losses (1)
Total financial instrument assets
Financial instrument liabilities:
Checking, savings and money market deposits
Certificates of deposit
Short-term borrowings
Long-term borrowings
Forward foreign currency contracts
Total financial instrument liabilities
Financial instruments with off-balance-sheet risk: (2)
Commitments to extend credit (3)
Standby letters of credit (4)
Total financial instruments with
off-balance-sheet risk
(1) Expected credit losses are included in the estimated fair values.
(2) Positive amounts represent assets, negative amounts represent liabilities.
(3) Carrying amounts are included in other assets.
(4) Carrying amounts are included in accrued expenses and other liabilities.
• 88 • TCF Financial Corporation and Subsidiaries
The carrying amounts of cash and due from banks and
accrued interest payable and receivable approximate
their fair values due to the short period of time until their
expected realization. Securities available for sale and
assets held in trust for deferred compensation plans are
carried at fair value (see Note 19). Certain financial instru-
ments, including lease financings, discounted lease rentals
and all non-financial instruments are excluded from fair
value of financial instrument disclosure requirements.
The following methods and assumptions are used by
TCF in estimating fair value for its remaining financial
instruments, all of which are issued or held for purposes
other than trading.
Investments The carrying value of investments in FHLB
stock and Federal Reserve stock approximates fair value.
The fair value of other investments is estimated based on
discounting cash flows at current market rates and consid-
eration of credit exposure.
Loans The fair value of loans is estimated based on
discounted expected cash flows. These cash flows include
assumptions for prepayment estimates over the loans’
remaining life, consideration of the current interest rate
environment compared to the weighted average rate of each
portfolio, a credit risk component based on the historical
and expected performance of each portfolio and a liquidity
adjustment related to the current market environment.
Forward Foreign Currency Contracts Forward foreign
currency contract assets and liabilities are carried at fair
value, which is net of the related cash collateral received
and paid, when a legally enforceable master netting agree-
ment exists between TCF and the counterparty.
Deposits The fair value of checking, savings and money
market deposits is deemed equal to the amount payable
on demand. The fair value of certificates of deposit is
estimated based on discounted cash flows using currently
offered market rates. The intangible value of long-term
relationships with depositors is not taken into account in
the fair values disclosed.
Borrowings The carrying amounts of short-term
borrowings approximate their fair values. The fair values
of TCF’s long-term borrowings are estimated based on
observable market prices and discounted cash flows using
interest rates for borrowings of similar remaining maturities
and characteristics.
Financial Instruments with Off-Balance Sheet Risk
The fair value of TCF’s commitments to extend credit and
standby letters of credit are estimated using fees currently
charged to enter into similar agreements, as commitments
and standby letters of credit similar to TCF’s are not
actively traded. Substantially all commitments to extend
credit and standby letters of credit have floating rates and
do not expose TCF to interest rate risk; therefore fair value
is approximately equal to carrying value.
Note 21. Earnings Per Common Share
TCF’s restricted stock awards that pay non-forfeitable
common stock dividends meet the criteria of a participating
security. Accordingly, earnings per share is calculated using
the two-class method, under which earnings are allocated
to both common shares and participating securities.
2010 Form 10-K
• 89 •
The computation of basic and diluted earnings per common share is presented in the following table.
(In thousands, except per-share data)
Basic Earnings Per Common Share
Net income
Preferred stock dividends
Non-cash deemed preferred stock dividend
Net income available to common stockholders
Earnings allocated to participating securities
Earnings allocated to common stock
Weighted-average shares outstanding
Restricted stock
Weighted-average common shares outstanding for basic earnings
per common share
Basic earnings per common share
Diluted Earnings Per Common Share
Earnings allocated to common stock
Weighted-average number of common shares outstanding adjusted
for effect of dilutive securities:
Weighted-average common shares outstanding used in basic earnings
per common share calculation
Net dilutive effect of:
Non-participating restricted stock
Stock options
Warrants
Weighted-average common shares outstanding for diluted
earnings per common share
Diluted earnings per common share
Year Ended December 31,
2010
2009
2008
$ 146,564
–
–
146,564
729
$ 145,835
139,681,722
(1,065,206)
$ 87,097
6,378
12,025
68,694
215
$ 68,479
127,592,824
(999,580)
$ 128,958
2,540
–
126,418
488
$ 125,930
125,226,553
(283,880)
138,616,516
$ 1.05
126,593,244
$ .54
124,942,673
$ 1.01
$ 145,835
$ 68,479
$ 125,930
138,616,516
126,593,244
124,942,673
56,844
139,155
– –
229
167
–
–
18,872
138,812,515
$ 1.05
126,593,640
$ .54
124,961,545
$ 1.01
All shares of restricted stock are deducted from weighted-
average shares outstanding for the computation of basic
earnings per common share. Shares of performance-based
restricted stock are included in the calculation of diluted
earnings per common share, using the treasury stock method,
at the beginning of the quarter in which the performance
goals have been achieved. All other shares of restricted
stock, which vest over specified time periods, stock options
and warrants are included in the calculation of diluted
earnings per common share, using the treasury stock method.
For the years ended December 31, 2010, 2009 and
2008, 4.1 million, 6.5 million and 4.4 million shares were
outstanding, respectively, related to non-participating
restricted stock, stock options, and warrants that were not
included in the computation of diluted earnings per share
because they were anti-dilutive.
• 90 • TCF Financial Corporation and Subsidiaries
Note 22. Comprehensive Income
Comprehensive income is the total of net income and other comprehensive income. The following table summarizes the
components of comprehensive income.
(In thousands)
Net income
Other comprehensive (loss) income:
Unrealized holding gains (losses) arising during the year
on securities available for sale
Recognized pension and postretirement actuarial gain (loss),
settlement expense and transition obligation
Pension and postretirement measurement date change
Reclassification adjustment for securities gains included in net income
Foreign currency translation adjustment
Net investment hedge
Cash flow hedge
Income tax benefit (expense)
Total other comprehensive (loss) income
Comprehensive income
Note 23. Other Expense
Other expense consists of the following.
(In thousands)
Card processing and issuance
Professional fees
Deposit account losses
Postage and courier
Telecommunications
Outside processing
Office supplies
ATM processing
Other
Total other expense
Year Ended December 31,
2010
$146,564
2009
$ 87,097
2008
$128,958
3,343
(3,253)
69,754
6,795
–
(31,484)
575
(195)
(1)
7,998
(12,969)
$133,595
11,132
–
(31,828)
251
–
–
8,845
(14,853)
$ 72,244
(30,974)
293
(16,066)
1
–
–
(8,645)
14,363
$143,321
Year Ended December 31,
2010
$ 19,167
17,742
12,590
11,926
11,915
11,487
8,342
5,820
47,264
$146,253
2009
$ 19,792
8,504
14,076
13,816
11,726
10,821
9,281
6,615
48,187
$142,818
2008
$ 19,262
7,474
14,709
13,380
11,860
10,450
9,664
6,881
52,615
$146,295
Note 24. Business Segments
Retail Banking, Wholesale Banking, Treasury Services
and Support Services have been identified as reportable
operating segments. Retail Banking includes branch banking
and retail lending. Wholesale Banking includes commercial
banking, leasing and equipment finance and inventory
finance. Treasury Services includes TCF’s investment and
borrowing portfolios and management of capital, debt and
market risks, including interest-rate and liquidity risks.
Support Services includes holding company and corporate
functions that provide data processing, bank operations
and other professional services to the operating segments.
TCF evaluates performance and allocates resources
based on the segments’ net income. The business segments
follow generally accepted accounting principles as
described in the Summary of Significant Accounting
Policies. TCF generally accounts for inter-segment sales
and transfers at cost.
2010 Form 10-K
• 91 •
The following table sets forth certain information of each of TCF’s reportable segments, including a reconciliation of TCF’s
consolidated totals.
Retail
Banking
Wholesale
Banking
Treasury
Services
Support
Services
Eliminations
Consolidated
(In thousands)
At or For the Year Ended
December 31, 2010:
Revenues from external customers:
Interest income
Non-interest income
Total
Net interest income
Provision for credit losses
Non-interest income
Non-interest expense
Income tax expense (benefit)
$ 412,038
409,601
$ 821,639
$ 442,984
140,616
409,601
562,799
56,124
93,046
Income (loss) after income tax expense
Income attributable to
non-controlling interest
Net income (loss)
Total assets
At or For the Year ended
December 31, 2009:
Revenues from external customers:
Interest income
Non-interest income
Total
Net interest income
Provision for credit losses
Non-interest income
Non-interest expense
Income tax expense (benefit)
Income after income tax expense
Loss attributable to
non-controlling interest
Net income
Total assets
At or For the Year Ended
December 31, 2008:
Revenues from external customers:
Interest income
Non-interest income
Total
Net interest income
Provision for credit losses
Non-interest income
Non-interest expense
Income tax expense
Net income (loss)
Total assets
–
$ 93,046
$7,590,149
$ 433,304
418,046
$ 851,350
$ 403,180
178,029
418,046
599,045
17,526
26,626
–
$ 26,626
$ 7,655,815
$ 459,639
419,948
$ 879,587
$ 378,722
136,646
419,948
571,831
28,244
$ 61,949
$ 7,583,605
$ 454,154
98,714
$ 552,868
$ 251,660
94,040
98,714
191,320
22,169
42,845
3,297
$ 39,548
$7,823,331
$ 408,876
77,238
$ 486,114
$ 206,277
78,693
77,238
156,204
17,432
31,186
$ 103,685
33,188
$ 136,873
$ 5,725
1,781
33,188
9,767
11,138
16,227
$ –
(3,518)
$ (3,518)
$ (1,167)
–
138,369
141,125
(1,666)
(2,257)
$ –
–
$ –
$ –
–
(141,887)
(141,887)
–
–
$ 969,877
537,985
$ 1,507,862
$ 699,202
236,437
537,985
763,124
87,765
149,861
–
$ 16,227
$ 6,200,121 $
–
$ (2,257)
216,869 $
–
$ –
(3,365,445) $
3,297
$ 146,564
18,465,025
$ 116,001
32,292
$ 148,293
$ 22,988
1,814
32,292
8,255
17,790
27,421
$ –
(1,721)
$ (1,721)
$ 561
–
142,261
148,262
(6,894)
1,454
$ –
–
$ –
$ –
–
(143,982)
(143,982)
–
–
$ 958,181
525,855
$ 1,484,036
$ 633,006
258,536
525,855
767,784
45,854
86,687
(410)
$ 31,596
$ 7,544,398
–
$ 27,421
$ 5,549,107
–
$ 1,454
$124,578
–
$ –
$ (2,988,723)
(410)
$ 87,097
$ 17,885,175
$ 359,914
60,639
$ 420,553
$ 147,139
52,834
60,639
119,072
14,018
$ 21,854
$ 6,200,288
$ 144,842
17,113
$ 161,955
$ 66,981
2,565
17,113
6,920
26,044
$ 48,565
$ 5,108,534
$ –
735
$ 735
$ 831
–
141,309
137,154
8,396
$ (3,410)
$ 94,605
$ –
–
$ –
$ –
–
(140,574)
(140,574)
–
$ –
$ (2,246,675)
$ 964,395
498,435
$ 1,462,830
$ 593,673
192,045
498,435
694,403
76,702
$ 128,958
$ 16,740,357
• 92 • TCF Financial Corporation and Subsidiaries
Note 25. Parent Company Financial Information
TCF Financial Corporation’s (parent company only) condensed statements of financial condition as of December 31, 2010 and 2009,
and the condensed statements of income and cash flows for the years ended December 31, 2010, 2009 and 2008 are as follows.
Condensed Statements of Financial Condition
(In thousands)
Assets:
Cash and cash equivalents
Investment in bank subsidiaries
Accounts receivable from affiliates
Other assets
Total assets
Liabilities and Stockholders’ Equity:
Junior subordinated notes (trust preferred)
Senior unsecured term note
Other liabilities
Total liabilities
Equity
Total liabilities and equity
Condensed Statements of Income
(In thousands)
Interest income
Interest expense
Net interest expense
Dividends from TCF National Bank
Other non-interest income:
Affiliate service fees
Other
Total other non-interest income
Non-interest expense:
Compensation and employee benefits
Occupancy and equipment
Other
Total non-interest expense
(Loss) income before income tax benefit and equity in undistributed earnings of subsidiaries
Income tax benefit
(Loss) income before equity in undistributed earnings of subsidiaries
Equity in undistributed earnings of bank subsidiaries
Net income
Preferred stock dividends
Non-cash deemed preferred stock dividend
Net income available to common stockholders
At December 31,
2010
2009
$ 17,772
1,630,341
20,571
15,421
$1,684,105
$ 111,061
89,787
11,594
212,442
1,471,663
$1,684,105
$ 32,062
1,232,346
16,060
12,963
$1,293,431
$ 110,441
–
7,628
118,069
1,175,362
$1,293,431
Year Ended December 31,
2009
$ 44
12,369
(12,325)
32,000
2008
$ –
4,826
(4,826)
122,797
2010
$ 37
14,789
(14,752)
4,000
12,712
(1,549)
11,163
13,058
298
2,182
15,538
(15,127)
6,442
(8,685)
155,249
146,564
–
–
$146,564
9,127
(1,984)
7,143
9,844
365
1,487
11,696
15,122
5,169
20,291
66,806
87,097
6,378
12,025
$ 68,694
6,922
85
7,007
5,833
362
6,279
12,474
112,504
2,282
114,786
14,172
128,958
2,540
–
$126,418
2010 Form 10-K
• 93 •
Condensed Statements of Cash Flows
(In thousands)
Cash flows from operating activities:
Year Ended December 31,
2010
2009
2008
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
$146,564
$ 87,097
$ 128,958
Equity in undistributed earnings of bank subsidiaries
Other, net
Total adjustments
Net cash provided by operating activities
Cash flows from investing activities:
Purchases of premises and equipment, net
Net cash used by investing activities
Cash flows from financing activities:
Dividends paid on common stock
Dividends paid on preferred stock
Recission of capital contribution to TCF National Bank
Issuance of common stock
(Redemption)/Issuance of preferred stock
Interest paid on trust preferred securities
Sale of trust preferred securities
Capital infusions to TCF National Bank
Shares sold to Employees Stock Purchase Plans
Net decrease in short-term borrowings
Stock compensation tax (expense) benefits
Proceeds from senior unsecured term note
Other, net
Net cash used by financing activities
Net (decrease) increase in cash
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
(155,249)
16,743
(138,506)
8,058
(142)
(142)
(27,617)
–
–
164,748 –
–
(12,364)
–
(255,000)
18,089
–
298
89,640 –
–
(22,206)
(14,290)
32,062
$17,772
(66,806)
29,795
(37,011)
50,086
(40)
(40)
(50,828)
(7,926)
361,172
–
(361,172)
(12,364)
–
(50)
19,147
–
(1,058)
–
1,538
(51,541)
(1,495)
33,557
$ 32,062
(14,172)
(6,394)
(20,566)
108,392
(40)
(40)
(126,447)
–
–
361,004
–
111,378
(434,092)
10,178
(9,500)
9,638
163
(77,678)
30,674
2,883
$ 33,557
TCF Financial Corporation’s (parent company only)
operations are conducted through its banking subsidiaries
and other subsidiaries. As a result, TCF’s cash flow and ability
to make dividend payments to its common stockholders
depend on the earnings of its subsidiaries. The ability of
TCF’s banking subsidiaries to pay dividends or make other
payments to TCF is limited by their obligations to maintain
sufficient capital and by other regulatory restrictions on
dividends. At December 31, 2010, TCF’s banking subsidiaries
could pay a total of approximately $239.9 million in
dividends to TCF without prior regulatory approval.
Additionally, retained earnings at TCF National Bank,
a wholly owned subsidiary of TCF Financial Corporation,
at December 31, 2010 includes approximately $134.4
million for which no provision for federal income taxes
has been made. This amount represents earnings legally
appropriated to thrift bad debt reserves and deducted
for federal income tax purposes in prior years and is
generally not available for payment of cash dividends
or other distributions to shareholders. Future payments
or distributions of these appropriated earnings could
invoke a tax liability for TCF based on the amount of the
distributions and the tax rates in effect at that time.
• 94 • TCF Financial Corporation and Subsidiaries
Note 26. Litigation Contingencies
From time to time, TCF is also a party to other legal
proceedings arising out of its lending, leasing and deposit
operations. TCF is and expects to become engaged in a
number of foreclosure proceedings and other collection
actions as part of its lending and leasing collections
activities. TCF may also be subject to enforcement action by
federal regulators, including the Securities and Exchange
Commission, the Federal Reserve and the Comptroller of
the Currency. From time to time, borrowers and other
customers, or employees or former employees, have also
brought actions against TCF, in some cases claiming
substantial damages. Financial services companies are
subject to the risk of class action litigation, and TCF is
subject to such actions brought against it from time to
time. Litigation is often unpredictable and the actual
results of litigation cannot be determined with certainty,
and therefore the ultimate resolution of a matter and the
possible range of loss associated with certain potential
outcomes cannot be established with confidence. Based
on our current understanding of these pending legal
proceedings, management does not believe that judgments
or settlements arising from pending or threatened legal
matters, individually or in the aggregate, would have a
material adverse effect on the consolidated financial
position, operating results or cash flows of TCF.
2010 Form 10-K
• 95 •
Other Financial Data
The selected quarterly financial data presented below should be read in conjunction with the Consolidated Financial
Statements and related notes.
Selected Quarterly Financial Data (Unaudited)
(Dollars in thousands,
except per-share data)
Selected Financial Condition Data:
Loans and leases
Securities available for sale
Goodwill
Total assets
Total deposits
Short-term borrowings
Long-term borrowings
Total equity
Selected Operations Data:
Net interest income
Provision for credit losses
Net interest income after provision
for credit losses
Non-interest income:
Fees and other revenue
Gains (losses) on securities, net
Total non-interest income
Non-interest expense
Income before income tax expense
Income tax expense
Income after income tax expense
Income (loss) attributable to
non-controlling interest
Net income
Preferred stock dividends
Net income available to
common stockholders
Per common share:
Basic earnings
Diluted earnings
Dividends declared
Financial Ratios:
Return on average assets (1)
Return on average common equity (1)
Net interest margin (1)
Net charge-offs as a percentage of
average loans and leases (1)
Average total equity to average assets
(1) Annualized.
Dec. 31,
2010
Sept. 30,
2010
June 30,
2010
March 31,
2010
Dec. 31,
2009
Sept. 30,
2009
June 30,
2009
March 31,
2009
At
$14,788,304 $14,896,601 $14,639,893 $14,706,423 $14,590,744 $14,329,264 $13,962,656 $13,795,617
2,098,628
152,599
18,082,341
11,647,203
26,299
4,311,568
1,499,956
1,931,174
152,599
18,465,025
11,585,115
126,790
4,858,821
1,480,163
2,087,406
152,599
17,475,721
11,619,053
25,829
4,307,098
1,142,535
1,899,825
152,599
18,187,314
11,882,373
17,590
4,496,574
1,393,617
2,060,227
152,599
17,743,009
11,626,011
21,397
4,524,955
1,179,839
1,940,331
152,599
18,030,045
11,523,043
14,805
4,600,820
1,474,536
1,910,476
152,599
17,885,175
11,568,319
244,604
4,510,895
1,179,755
1,947,462
152,599
18,313,608
11,461,519
344,681
4,581,511
1,505,962
Dec. 31,
2010
Sept. 30,
2010
June 30,
2010
March 31,
2010
Dec. 31,
2009
Sept. 30,
2009
June 30,
2009
March 31,
2009
Three Months Ended
$ 174,286 $ 173,755 $ 176,499 $ 174,662 $ 169,641 $ 161,489 $ 156,463 $ 145,413
43,712
77,389
50,491
59,287
75,544
49,013
61,891
77,646
96,640
114,468
127,486
124,171
92,252
85,945
94,572
101,701
120,309
21,185
141,494
190,500
47,634
16,011
31,623
898
30,725
–
129,437
8,505
137,942
191,753
60,657
22,852
37,805
912
36,893
–
136,043
(137)
135,906
189,069
74,323
28,112
46,211
1,186
45,025
–
123,073
(430)
122,643
191,802
55,012
20,790
34,222
301
33,921
–
135,866
7,283
143,149
206,763
28,638
9,385
19,253
128,057
–
128,057
190,267
23,735
6,491
17,244
(203)
19,456
–
(207)
17,451
–
129,814
10,556
140,370
196,546
38,396
14,853
23,543
–
23,543
13,218
102,731
11,548
114,279
174,208
41,772
15,125
26,647
–
26,647
5,185
$ 30,725 $ 36,893 $ 45,025 $ 33,921 $ 19,456 $ 17,451 $ 10,325 $ 21,462
$ .22 $ .26 $ .32 $ .26 $ .15 $ .14 $ .08 $ .17
$ .22 $ .26 $ .32 $ .26 $ .15 $ .14 $ .08 $ .17
$ .05 $ .05 $ .05 $ .05 $ .05 $ .05 $ .05 $ .25
.68%
8.25
4.04
1.75
8.05
.84%
9.95
4.12
1.58
8.28
1.02%
12.71
4.18
1.30
7.88
.76%
10.68
4.20
1.22
7.10
.43%
6.57
4.07
1.35
6.69
.39%
6.03
3.92
1.52
6.61
.53%
3.61
3.80
1.43
6.94
.62%
7.58
3.66
1.04
8.64
• 96 • TCF Financial Corporation and Subsidiaries
Item 9. Changes in and
Disagreements With Accountants
on Accounting and Financial
Disclosure
None.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures The Company
carried out an evaluation, under the supervision and with
the participation of the Company’s management, including
the Company’s Chief Executive Officer (Principal Executive
Officer), the Company’s Chief Financial Officer (Principal
Financial Officer) and its Controller and Assistant Treasurer
(Principal Accounting Officer), of the effectiveness of the
design and operation of the Company’s disclosure controls
and procedures pursuant to Exchange Act Rule 13a-15 and
15d-15 of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”). Based upon that evaluation, manage-
ment concluded that the Company’s disclosure controls and
procedures are effective, as of December 31, 2010.
Disclosure controls and procedures are designed to
ensure that information required to be disclosed by TCF
in reports filed or submitted under the Exchange Act is
recorded, processed, summarized and reported within
the time periods specified in the SEC’s rules and forms.
Disclosure controls are also designed with the objective
of ensuring that such information is accumulated and
communicated to the Company’s management, including
the Chief Executive Officer (Principal Executive Officer),
the Chief Financial Officer (Principal Financial Officer)
and the Controller and Assistant Treasurer (Principal
Accounting Officer), as appropriate, to allow for timely
decisions regarding required disclosure. TCF’s disclosure
controls also include internal controls that are designed to
provide reasonable assurance that transactions are properly
authorized, assets are safeguarded against unauthorized or
improper use and that transactions are properly recorded
and reported.
Changes in Internal Control Over Financial Reporting
There were no changes to TCF’s internal controls over finan-
cial reporting (as defined in Rule 13a-15(f) of the Exchange
Act) during the quarter ended December 31, 2010 that
materially affected, or are reasonably likely to materially
affect, TCF’s internal control over financial reporting.
2010 Form 10-K
• 97 •
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining
adequate internal control over financial reporting for TCF
Financial Corporation (the Company). Internal control
over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for
external purposes in accordance with generally accepted
accounting principles.
Internal control over financial reporting includes those
policies and procedures that pertain to the maintenance
of records that in reasonable detail accurately and fairly
reflect the transactions and dispositions of the assets of
the Company; provide reasonable assurance that transac-
tions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures
of the Company are only being made in accordance with
authorizations of management and directors of the
Company; and provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition,
use, or disposition of the Company’s assets that could have
a material effect on the financial statements.
Management completed an assessment of TCF’s internal
control over financial reporting as of December 31, 2010.
This assessment was based on criteria for evaluating inter-
nal control over financial reporting established in Internal
Control — Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission.
Based on this assessment, management concluded that
TCF’s internal control over financial reporting was effective
as of December 31, 2010.
KPMG LLP, TCF’s independent registered public
accounting firm that audited the consolidated financial
statements included in this annual report, has issued an
unqualified attestation report on the effectiveness of the
Company’s internal control over financial reporting as of
December 31, 2010.
Any control system, no matter how well conceived
and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met.
The design of a control system inherently has limitations,
and the benefits of controls must be weighed against their
costs. Additionally, controls can be circumvented by the
individual acts of some persons, by collusion of two or more
people, or by management override of the controls. Therefore,
no assessment of a cost-effective system of internal controls
can provide absolute assurance that all control issues and
instances of fraud, if any, will be detected.
William A. Cooper
Chairman and Chief Executive Officer
Thomas F. Jasper
Executive Vice President and Chief Financial Officer
David M. Stautz
Senior Vice President, Controller and Assistant Treasurer
February 15, 2011
• 98 • TCF Financial Corporation and Subsidiaries
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
TCF Financial Corporation:
We have audited TCF Financial Corporation’s internal control
over financial reporting as of December 31, 2010, based
on criteria established in Internal Control — Integrated
Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). TCF
Financial Corporation’s management is responsible for
maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of
internal control over financial reporting, included in the
accompanying Management Report. Our responsibility is to
express an opinion on TCF Financial Corporation’s internal
control over financial reporting based on our audit.
We conducted our audit in accordance with the standards
of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting
was maintained in all material respects. Our audit included
obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness
exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk.
Our audit also included performing such other procedures
as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a
process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of
the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation
of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of
the company are being made only in accordance with
authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition,
use, or disposition of the company’s assets that could have
a material effect on the financial statements.
Because of its inherent limitations, internal control
over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes
in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
In our opinion, TCF Financial Corporation maintained, in
all material respects, effective internal control over financial
reporting as of December 31, 2010, based on criteria estab-
lished in Internal Control — Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).
We also have audited, in accordance with the standards
of the Public Company Accounting Oversight Board (United
States), the consolidated statements of financial condition
of TCF Financial Corporation and subsidiaries as of
December 31, 2010 and 2009, and the related consolidated
statements of income, equity, and cash flows for each of the
years in the three-year period ended December 31, 2010, and
our report dated February 15, 2011 expressed an unqualified
opinion on those consolidated financial statements.
Minneapolis, Minnesota
February 15, 2011
Item 9B. Other Information
None.
2010 Form 10-K
Part III
• 99 •
Item 10. Directors, Executive
Officers and Corporate Governance
Information regarding directors and executive officers of
TCF is set forth in the following sections of TCF’s definitive
Proxy Statement for the 2011 Annual Meeting of
Stockholders to be held on April 27, 2011 (the “2011 Proxy
Statement”): and incorporated herein by reference:
Election of Directors: Background of the Nominees;
Section 16(a) Beneficial Ownership Reporting Compliance
and Background of Executive Officers Who are Not Directors.
Information regarding procedures for nominations of
Directors is set forth in the section entitled Election of
Directors: Corporate Governance – Director Nominations
and Additional Information in TCF’s 2011 Proxy Statement and
is incorporated herein by reference.
Audit Committee and Financial Expert
Information regarding TCF’s separately standing Audit
Committee, its members and financial experts is set forth in
the section of TCF’s 2011 Proxy Statement entitled Election
of Directors: Background of the Nominees and Election of
Directors: Board Committees, Committee Memberships, and
Meetings in 2010 and is incorporated herein by reference.
TCF’s Board of Directors is required to determine
whether it has at least one Audit Committee financial
expert and that the expert is independent. An Audit
Committee financial expert is a committee member who
has an understanding of generally accepted accounting
principles and financial statements and has the ability
to assess the general application of these principles in
connection with the accounting for estimates, accruals
and reserves. Additionally, this individual should have
experience preparing, auditing, analyzing or evaluating
financial statements that present the breadth and level
of complexity of accounting issues that are generally
comparable to the breadth and complexity of issues that
can reasonably be expected to be raised by TCF’s Financial
Statements, or experience actively supervising one or
more persons engaged in such activities. The member
should also have an understanding of internal control over
financial reporting as well as an understanding of audit
committee functions.
The Board has determined that Gerald A. Schwalbach,
the Audit Committee Chairman, George G. Johnson and
Vance K. Opperman meet the requirements of audit com-
mittee financial experts. The Board has also determined
that Mr. Schwalbach, Mr. Johnson and Mr. Opperman
are independent. Additional information regarding
Mr. Schwalbach, Mr. Johnson and Mr. Opperman, and other
directors is set forth in the section Election of Directors:
Background of the Nominees in TCF’s 2011 Proxy Statement
and is incorporated herein by reference.
Code of Ethics for Senior Financial Management
TCF has adopted a Code of Ethics applicable to the Principal
Executive Officer (“PEO”), Principal Financial Officer (“PFO”)
and Principal Accounting Officer (“PAO”) (the “Senior
Financial Management Code of Ethics”) as well as a code of
ethics generally applicable to all officers (including the PEO,
PFO and PAO), directors and employees of TCF (the “Code of
Ethics”). The Code of Ethics and Senior Financial Management
Code of Ethics are both available for review at TCF’s website
at www.tcfbank.com by clicking on “Investor Relations” and
then “Corporate Governance”. Any changes to the Code of
Ethics or Senior Financial Management Code of Ethics will be
posted on this site, and any waivers granted to or violations
by the PEO, PFO and PAO of the Code of Ethics or Senior Financial
Management Code of Ethics will also be posted on this site.
• 100 • TCF Financial Corporation and Subsidiaries
Item 11. Executive Compensation
Information regarding compensation of directors and
executive officers of TCF is set forth in the following
sections of TCF’s 2011 Proxy Statement, and is incorporated
herein by reference: Election of Directors: Compensation
of Directors; Compensation Discussion and Analysis;
Compensation Committee Report; Summary Compensation
Table; Grants of Plan-Based Awards in 2010; Outstanding
Equity Awards at December 31, 2010; Option Exercises and
Stock Vested in 2010; Pension Benefits in 2010; Nonqualified
Deferred Compensation in 2010 and Potential Payments
Upon Termination or Change in Control.
Item 12. Security Ownership
of Certain Beneficial Owners
and Management and Related
Stockholder Matters
Information regarding ownership of TCF’s common stock
by TCF’s directors, executive officers, and certain other
shareholders and shares authorized under plans is set forth
in the sections entitled Election of Directors: TCF Stock
Ownership of Directors, Officers and 5% Owners and Equity
Compensation Plans Approved by Stockholders of TCF’s 2011
Proxy Statement, and is incorporated herein by reference.
Item 13. Certain Relationships
and Related Transactions, and
Director Independence
Information regarding certain relationships and transactions
between TCF and management is set in the section entitled
Election of Directors: Director Independence and Related
Party Transactions of TCF’s 2011 Proxy Statement, and is
incorporated herein by reference.
Item 14. Principal Accounting
Fees and Services
Information regarding principal accounting fees and
services and the Audit Committee’s pre-approval policies
and procedures relating to audit and non-audit services
provided by the Company’s independent registered
public accounting firm is set forth in the section entitled
Independent Registered Public Accountants in TCF’s 2011
Proxy Statement, and is incorporated herein by reference.
2010 Form 10-K
Part IV
• 101 •
Item 15. Exhibits, Financial Statement Schedules
(a) Financial Statements, Financial Statement Schedules and Exhibits
1. F inancial Statements
The following consolidated financial statements of TCF and its subsidiaries, are filed as part of this report:
Description
Selected Financial Data
Consolidated Statements of Financial Condition at December 31, 2010 and 2009
Consolidated Statements of Income
for each of the years in the three-year period ended December 31, 2010
Consolidated Statements of Equity
for each of the years in the three-year period ended December 31, 2010
Consolidated Statements of Cash Flows
for each of the years in the three-year period ended December 31, 2010
Notes to Consolidated Financial Statements
Other Financial Data
Management’s Report on Internal Control Over Financial Reporting
P ag e
17
52
53
54
55
56
95
97
Reports of Independent Registered Public Accounting Firm
51, 98
2. F inancial Statement Schedules
All schedules to the Consolidated Financial Statements normally required by the applicable accounting
regulations are included in the Consolidated Financial Statements or the Notes thereto.
3. E xhibits
See Index to Exhibits on page 103 of this report.
• 102 • TCF Financial Corporation and Subsidiaries
Signatures
Pursuant to the requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
TCF Financial Corporation
Registrant
By /s/ William A. Cooper
William A. Cooper
Chairman and Chief Executive Officer
Dated: February 15, 2011
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.
N ame
Title
/s/ William A. Cooper
William A. Cooper
/s/ Thomas F. Jasper
Thomas F. Jasper
/s/ David M. Stautz
David M. Stautz
/s/ Raymond L. Barton
Raymond L. Barton
/s/ Peter Bell
Peter Bell
/s/ William F. Bieber
William F. Bieber
/s/ Theodore J. Bigos
Theodore J. Bigos
/s/ Thomas A. Cusick
Thomas A. Cusick
/s/ Luella G. Goldberg
Luella G. Goldberg
/s/ Karen L. Grandstrand
Karen L. Grandstrand
/s/ George G. Johnson
George G. Johnson
/s/ Vance K. Opperman
Vance K. Opperman
/s/ Gregory J. Pulles
Gregory J. Pulles
/s/ Gerald A. Schwalbach
Gerald A. Schwalbach
/s/ Ralph Strangis
Ralph Strangis
/s/ Barry N. Winslow
Barry N. Winslow
/s/ Richard A. Zona
Richard A. Zona
Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
Senior Vice President, Controller
and Assistant Treasurer (Principal Accounting Officer)
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director and Vice Chairman
Director
Director
Da te
February 15, 2011
February 15, 2011
February 15, 2011
February 15, 2011
February 15, 2011
February 15, 2011
February 15, 2011
February 15, 2011
February 15, 2011
February 15, 2011
February 15, 2011
February 15, 2011
February 15, 2011
February 15, 2011
February 15, 2011
Director, Vice Chairman and Chief Risk Officer
February 15, 2011
Director
February 15, 2011
2010 Form 10-K
• 103 •
Index to Exhibits
Ex h ibit
N o.
3(a)
3(b)
4(a)
4(b)
4(c)
4(d)
4(e)
4(f)
4(g)
4(h)
4(i)
4(j)
4(k)
Description
Amended and Restated Certificate of Incorporation of TCF Financial Corporation, as amended through
November 13, 2008 [incorporated by reference to Exhibit 3.1 to TCF Financial Corporation’s Registration
Statement on Form S-3 filed December 11, 2008]
Amended and Restated Bylaws of TCF Financial Corporation [incorporated by reference to Exhibit 3(b)
to TCF Financial Corporation’s Current Report on Form 8-K filed April 28, 2008]
Form of Certificate for Fixed Rate Cumulative Perpetual Preferred Stock, Series A [incorporated by
reference to Exhibit 4.1 to TCF Financial Corporation’s Current Report on Form 8-K filed November 14, 2008]
Warrant Agreement dated December 15, 2009 by and among TCF Financial Corporation, Computershare,
Inc. and Computershare Trust Company, N.A. [incorporated by reference to Exhibit 4.1 to TCF Financial
Corporation’s Form 8-A filed December 16, 2009]
Specimen Warrant to Purchase Shares of Common Stock of TCF Financial Corporation [incorporated by
reference to Exhibit 4.2 to TCF Financial Corporation’s Form 8-A filed December 16, 2009]
Indenture dated August 19, 2008 between TCF Financial Corporation and Wilmington Trust Company, as
Trustee [incorporated by reference to Exhibit 4.1 to TCF Financial Corporation’s Current Report on Form 8-K
filed August 19, 2008]
Supplemental Indenture dated August 19, 2008 between TCF Financial Corporation and Wilmington Trust
Company, as Trustee [incorporated by reference to Exhibit 4.2 to TCF Financial Corporation’s Current Report
on Form 8-K filed August 19, 2008]
Form of 10.75% Junior Subordinated Note, Series I [incorporated by reference to Exhibit 4.3 to TCF Financial
Corporation’s Current Report on Form 8-K filed August 19, 2008]
Certificate of Trust of TCF Capital I [incorporated by reference to Exhibit 4.2 to TCF Financial Corporation’s
Registration Statement on Form S-3, filed August 11, 2008]
Amended and Restated Trust Agreement of TCF Capital I dated August 19, 2008 by and among TCF Financial
Corporation, as Depositor, Wilmington Trust Company, as Property Trustee, Wilmington Trust Company, as
Delaware Trustee and the Administrative Trustees named therein and the Several Holders named therein
[incorporated by reference to Exhibit 4.4 to TCF Financial Corporation’s Current Report on Form 8-K filed
August 19, 2008]
Form of 10.75% Capital Security, Series I for TCF Capital I [incorporated by reference to Exhibit 4.5 to TCF
Financial Corporation’s Current Report on Form 8-K filed August 19, 2008]
Guarantee Agreement for TCF Capital I dated August 19, 2008 by and between TCF Financial Corporation and
Wilmington Trust Company, as Guarantee Trustee [incorporated by reference to Exhibit 4.6 to TCF Financial
Corporation’s Current Report on Form 8-K filed August 19, 2008]
Copies of instruments with respect to long-term debt will be furnished to the Securities and Exchange
Commission upon request
• 104 • TCF Financial Corporation and Subsidiaries
E xh ibit
No .
10(a)
10(b)
10(b)-1*
10(b)-2
10(b)-3
10(b)-4*
10(b)-5*
10(b)-6*
10(b)-7*
10(b)-8*
Description
Stock Option and Incentive Plan of TCF Financial Corporation, as amended [incorporated by reference
to Exhibit 10.1 to TCF Financial Corporation’s Registration Statement on Form S-4, No. 33-14203 filed
May 12, 1987]; Second Amendment, Third Amendment and Fourth Amendment to the Plan [incorporated
by reference to Exhibit 10(a) to TCF Financial Corporation’s Annual Report on Form 10-K for the fiscal
year ended December 31, 1987, No. 0-16431]; Fifth Amendment to the Plan [incorporated by reference
to Exhibit 10(a) to TCF Financial Corporation’s Annual Report on Form 10-K for the fiscal year ended
December 31, 1989]; amendment dated January 21, 1991 [incorporated by reference to Exhibit 10(a)
to TCF Financial Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 1990];
and as further amended by amendment dated January 28, 1992 and amendment dated March 23, 1992
(effective April 15, 1992) [incorporated by reference to Exhibit 10(a) to TCF Financial Corporation’s
Annual Report on Form 10-K for the fiscal year ended December 31, 1991]
Amended and Restated TCF Financial Incentive Stock Program (as amended and restated October 20, 2008)
[incorporated by reference to Exhibit 10(b) to TCF Financial Corporation’s Current Report on Form 8-K filed
May 5, 2009]
Form of TCF Financial Corporation Incentive Stock Program Performance-Based Restricted Stock Agreement
[incorporated by reference to Exhibit 10(b)-1 of TCF Financial Corporation’s Current Report on Form 8-K
filed April 29, 2005]
Form of TCF Financial Corporation Restricted Stock Agreement and Non-Solicitation/Confidentiality
Agreement [incorporated by reference to Exhibit 10(b)-2 to TCF Financial Corporation’s Annual Report
on Form 10-K for the fiscal year ended December 31, 2005]
Summary of Stock Award Program for Consumer Lending and Business Banker Divisions [incorporated by
reference to Exhibit 10(b)-3 to TCF Financial Corporation’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2005]
Form of Year 2006 Executive Stock Grant Award Agreement dated January 23, 2006 [incorporated by reference
to Exhibit 10(b)-4 to TCF Financial Corporation’s Current Report on Form 8-K filed January 25, 2006]
TCF Financial Corporation Restricted Stock Agreement and Non-Solicitation/Confidentiality Agreement
dated January 22, 2007 (“Performance-Based Stock Award”) [incorporated by reference to Exhibit 10(b)-5
to TCF Financial Corporation’s Current Report on Form 8-K filed January 25, 2007]
TCF Financial Corporation Restricted Stock Agreement and Non-Solicitation/Confidentiality Agreement,
dated January 22, 2007 [incorporated by reference to Exhibit 10(b)-6 to TCF Financial Corporation’s Current
Report on Form 8-K filed January 25, 2007]
Form of the 2008 Restricted Stock Agreement as executed by certain executives effective January 21, 2008
[incorporated by reference to Exhibit 10(b)-9 to TCF Financial Corporation’s Current Report on Form 8-K
filed January 25, 2008]
Form of the 2008 Nonqualified Stock Option Agreement as executed by certain executives effective
January 21, 2008 [incorporated by reference to Exhibit 10(b)-10 to TCF Financial Corporation’s Current
Report on Form 8-K filed January 25, 2008]
2010 Form 10-K
• 105 •
Ex h ibit
N o.
10(b)-9*
10(b)-10*
10(b)-11*
10(b)-12*
10(b)-13*
10(b)-14*
10(b)-15*
10(c)
10(d)
Description
Nonqualified Stock Option Agreement as executed by Mr. Cooper, effective July 31, 2008 [incorporated by
reference to Exhibit 10(b)-11 to TCF Financial Corporation’s Current Report on Form 8-K filed August 6, 2008]
Amended and Restated Restricted Stock Agreement as executed by Mr. Cooper, effective January 20, 2009
[incorporated by reference to Exhibit 10(b)-13 to TCF Financial Corporation’s Current Report on Form 8-K
filed January 23, 2009]
Form of Amended and Restated Restricted Stock Agreement as executed by certain executives, effective
January 20, 2009 [incorporated by reference to Exhibit 10(b)-14 to TCF Financial Corporation’s Current
Report on Form 8-K filed January 23, 2009]
Form of Year 2009 Executive Stock Award as executed by certain executives, effective January 20, 2009
[incorporated by reference to Exhibit 10(b)-15 to TCF Financial Corporation’s Current Report on Form 8-K
filed January 23, 2009]
Form of Letter Agreement entered into by certain executive officers effective December 14, 2009
[incorporated by reference to Exhibit 10(b)-15 to TCF Financial Corporation’s Current Report on Form 8-K
filed December 18, 2009]
Form of Agreement Termination Award Agreement entered into by certain executive officers effective
December 14, 2009 [incorporated by reference to Exhibit 10(b)-16 to TCF Financial Corporation’s Current
Report on Form 8-K filed December 18, 2009]
Form of 2010 Restricted Stock Award Agreement entered into by certain executive officers effective
December 14, 2009 [incorporated by reference to Exhibit 10(b)-17 to TCF Financial Corporation’s Current
Report on Form 8-K filed December 18, 2009]
TCF Financial Corporation Executive Deferred Compensation Plan as amended and restated through
January 24, 2005 [incorporated by reference to Exhibit 10(c) to TCF Financial Corporation’s Current Report
on Form 8-K filed January 27, 2005]
Restated Trust Agreement as executed with First National Bank in Sioux Falls as trustee effective as of
October 1, 2000 [incorporated by reference to Exhibit 10(d) of TCF Financial Corporation’s Annual Report on
Form 10-K for the fiscal year ended December 31, 2000]; as amended by amendment adopted April 30, 2001
[incorporated by reference to Exhibit 10(d) of TCF Financial Corporation’s Quarterly Report on Form 10-Q
for the quarter ended June 30, 2001]; and as amended by amendments adopted May 3, 2002 [incorporated
by reference to Exhibit 10(d) of TCF Financial Corporation’s Quarterly Report on Form 10-Q for the quarter
ended June 30, 2002]; and as amended by Third Amendment of Trust Agreement for TCF Executive Deferred
Compensation Plan effective as of June 30, 2003 [incorporated by reference to Exhibit 10(d) of TCF
Financial Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003]
10(e)*
Amended on Restated agreement between Mr. William A. Cooper and TCF Financial Corporation effective as
of July 31, 2009 [incorporated by reference to Exhibit 10(e)-6 to TCF Financial Corporation’s Current Report
on Form 8-K filed August 4, 2009]
• 106 • TCF Financial Corporation and Subsidiaries
E xh ibit
No .
10(j)
10(j)-1
10(k)
10(l)
10(m)
10(n)
10(n)-1
10(o)
10(p)
10(r)
10(r)-1
Description
TCF Financial Corporation Supplemental Employee Retirement Plan — Employees Stock Purchase Plan
(“ESPP”) as amended and restated through January 24, 2005 [incorporated by reference to Exhibit 10(j)
of TCF Financial Corporation’s Current Report on Form 8-K filed January 27, 2005]
TCF ESPP — Supplemental Plan (as amended and restated effective January 1, 2008) [incorporated by
reference to Exhibit 10(j)-2 to TCF Financial Corporation’s Current Report on Form 8-K filed October 24, 2008]
Trust Agreement for TCF ESPP Supplemental Executive Retirement Plan (“SERP”) effective January 1, 2009
and dated November 20, 2008 [incorporated by reference to Exhibit 10(k) to TCF Financial Corporation’s
Annual Report on Form 10-K for the fiscal year ended December 31, 2008]
TCF Financial Corporation Senior Officer Deferred Compensation Plan as amended and restated through
January 24, 2005 [incorporated by reference to Exhibit 10(l) to TCF Financial Corporation’s Current Report
on Form 8-K filed January 27, 2005]
Trust Agreement for TCF Financial Senior Officer Deferred Compensation Plan as executed with First National
Bank in Sioux Falls as trustee effective as of October 1, 2000 [incorporated by reference to Exhibit 10(m) of
TCF Financial Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2000]; as
amended by amendment adopted April 30, 2001 [incorporated by reference to Exhibit 10(m) of TCF Financial
Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2001]; and as amended by Second
Amendment of Trust Agreement for TCF Financial Senior Officers Deferred Compensation Plan effective as of
June 30, 2003 [incorporated by reference to Exhibit 10(m) of TCF Financial Corporation’s Quarterly Report
on Form 10-Q for the quarter ended June 30, 2003]
Directors Stock Grant Program [incorporated by reference to Exhibit 10(n) of TCF Financial Corporation’s
Quarterly Report on Form 10-Q filed for the quarter ended September 30, 2010]
Resolution adopting Directors Stock Grant Program goal for fiscal year 2009 and after [incorporated by
reference to Exhibit 10(n)-1 of TCF Financial Corporation’s Current Report on Form 8-K filed January 23, 2009]
Form of 2010 Management Incentive Plan effective January 1, 2010 [incorporated by reference to
Exhibit 10(o) of TCF Financial Corporation’s Current Report on Form 8-K filed December 18, 2009]
TCF Performance-Based Compensation Policy for Covered Executive Officers (as re-approved effective
January 1, 2009) [incorporated by reference to Exhibit 10(p) to TCF Financial Corporation’s Current Report
on Form 8-K filed May 5, 2009]
TCF Financial Corporation TCF Directors Deferred Compensation Plan as amended and restated through
January 24, 2005 [incorporated by reference to Exhibit 10(r) of TCF Financial Corporation’s Current Report
on Form 8-K filed January 27, 2005]
TCF Financial Corporation TCF Directors 2005 Deferred Compensation Plan, adopted effective as of
January 6, 2005, as amended and restated through January 24, 2005 [incorporated by reference to
Exhibit 10(r)-1 of TCF Financial Corporation’s Current Report on Form 8-K filed January 27, 2005];
and as amended by Amendment of Directors 2005 Deferred Compensation Plan effective July 19, 2010
[incorporated by reference to Exhibit 10(r)-1 of TCF Financial Corporation’s Quarterly Report on Form 10-Q
for the quarter ended September 30, 2010]
2010 Form 10-K
• 107 •
Ex h ibit
N o.
10(s)
10(t)
12(a)#
12(b)#
21#
23#
31#
32#
101#
* Executive Contract
# Filed herein
Description
Trust Agreement for TCF Directors Deferred Compensation Plan [incorporated by reference to Exhibit 10(d)
to TCF Financial Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2000];
as amended by amendment adopted April 30, 2001 [incorporated by reference to Exhibit 10(s) of TCF
Financial Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2001]; as amended
by amendment adopted October 10, 2001 [incorporated by reference to Exhibit 10(s) of TCF Financial
Corporation’s Annual Report on Form 10-K for the year ended December 31, 2001]; and as amended by
amendments adopted May 3, 2002 [incorporated by reference to Exhibit 10(s) of TCF Financial Corporation’s
Quarterly Report on Form 10-Q for the quarter ended June 30, 2002]; and as amended by Third Amendment
of TCF Directors Deferred Compensation Trust effective as of June 30, 2003 [incorporated by reference to
Exhibit 10(s) of TCF Financial Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003]
TCF Director Retirement Plan effective as of October 24, 1995 [incorporated by reference to Exhibit 10(y)
to TCF Financial Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 1995];
and as amended by Amendment of Director Retirement Plan effective July 19, 2010 [incorporated by
reference to Exhibit 10(t) of TCF Financial Corporation’s Quarterly Report on Form 10-Q for the quarter
ended September 30, 2010]
Computation of Ratios of Earnings to Fixed Charges for periods ended December 31, 2010, 2009, 2008,
2007 and 2006
Computation of Ratios of Earnings to Fixed Charges and Preferred Stock Dividends for periods ended
December 31, 2010, 2009, 2008, 2007 and 2006
Subsidiaries of TCF Financial Corporation (as of December 31, 2010)
Consent of KPMG LLP dated February 15, 2011
Rule 13a-14(a)/15d-14(a) Certifications (Section 302 Certifications)
Statement Furnished Pursuant to Title 18 United States Code Section 1350 (Section 906 Certifications)
Financial Statements of the Company for the period ended December 31, 2010, formatted in XBRL:
(i) the Consolidated Statements of Income, (ii) the Consolidated Statements of Financial Condition,
(iii) the Consolidated Statements of Equity, (iv) the Consolidated Statements of Cash Flows and (v) the
Notes to Consolidated Financial Statements tagged as blocks of text
• 108 • TCF Financial Corporation and Subsidiaries
Board of Directors
Senior Officers
William A. Cooper 5
Chairman of the Board and Chief Executive Officer
Raymond L. Barton 4,6,7
Chairman and Chief Executive Officer, Great Clips, Inc.
Peter Bell 2,3,4,6,7
Former Chair, Metropolitan Council
William F. Bieber 2,3,4,6,7
Chairman and Owner, ATEK Companies, Inc.
Theodore J. Bigos 2,3,4,6,7
Owner, Bigos Management, Inc.
Thomas A. Cusick 4,6,7
Retired Vice Chairman
Luella G. Goldberg 1,2,3,4,5,6,7
Past Chair, University of Minnesota Foundation,
Former Acting President, Wellesley College
Karen L. Grandstrand 1,4,6,7
Partner, Fredrikson & Byron PA
George G. Johnson 1,4,6,7
CPA/Managing Director, George Johnson & Company
Vance K. Opperman 1,2,3,4,6,7
President and Chief Executive Officer, Key Investment, Inc.
Gregory J. Pulles
Vice Chairman
Gerald A. Schwalbach 1,2,3,4,6,7
Chairman, Spensa Development Group, LLC
Ralph Strangis 2,3,4,5,6,7
Senior Partner, Kaplan, Strangis and Kaplan, P.A.
Barry N. Winslow
Vice Chairman and Chief Risk Officer
Richard A. Zona 4,6,7
Retired Vice Chairman, U.S. Bancorp
1 Audit Committee
2 Compensation/Nominating/
Corporate Governance Committee
3 Advisory Committee —
TCF Employees Stock Purchase Plan
4 Shareholder Relations/
Capital and Expansion Committee
5 Executive Committee
6 Asset Liability Management Committee
7 BSA Compliance Committee
TCF Financial Corporation
TCF Retail Bank
Chairman of the Board
and Chief Executive Officer
William A. Cooper
President and
Chief Operating Officer
Neil W. Brown
Executive Vice President
and Chief Financial Officer
Thomas F. Jasper
Vice Chairman
Gregory J. Pulles
Vice Chairman
and Chief Risk Officer
Barry N. Winslow
Executive Vice President
and Chief Information Officer
Earl D. Stratton
Executive Vice President,
Wholesale Banking
Craig R. Dahl
Senior Vice Presidents
James S. Broucek
Steven D. Christensen
Joseph T. Green
Jason E. Korstange
Barbara E. Shaw
David M. Stautz
President and
Chief Operating Officer,
TCF Financial Corporation
Neil W. Brown
TCF Branch Banking
Managing Director
Mark L. Jeter
Executive Vice Presidents
Robert C. Borgstrom
Luis J. Campos
Timothy G. Doyle
Timothy B. Meyer
Michael J. Olson
Senior Vice Presidents
Ross R. Allen
Delia M. Conrad
Peter R. Daugherty
James T. Dowiak
Mark W. Gault
Jennifer K. Rohling
TCF Retail Lending
Managing Director
Mark W. Rohde
Executive Vice Presidents
Joseph W. Doyle
Claire M. Graupmann
James L. Koon
Paul R. Tokarczyk
Matthew R. Wiley
Senior Vice Presidents
Bradley C. Barthels
Robert J. Brueggeman
Rose M. Dickey
Michael A. Dill
CaIvin E. Fuoss
Donald J. Hawkins
Daniel B. Hoffman
Vicki L. Makowka
Carol B. Schirmers
Raymond J. Swidron
Thomas K. Torossian
Jason R. Voronyak
Katrina Williams
2010 Annual Report
• 109 •
Winthrop Resources
Corporation
Executive Vice Presidents
Paul L. Gendler
Michael S. Jones
Richard J. Pieper
Senior Vice Presidents
Gary W. Anderson
Abigail R. Nesbitt
Mark D. Nyquist
Dean J. Stinchfield
TCF Inventory Finance, Inc.
President and
Chief Executive Officer
Rosario A. Perrelli
Executive Vice Presidents
Howard J. Hentz
Vincent E. Hillery
Michael S. Jones
Peter D. Kelley
Christopher Meals
Senior Vice Presidents
Peter J. Baranowski
Kevin L. Harrington
James S. Raymond
Larry M. Tagli
Mark J. Wrend
Dornett Wright
TCF Commercial Finance
Canada, Inc.
President
Peter D. Kelley
TCF Wholesale Bank
Executive Vice President,
TCF Financial Corporation
Craig R. Dahl
TCF Commercial Lending
Managing Director
James J. Urbanek
Executive Vice Presidents
Douglas W. Benner
Michael R. Klemz
David J. Veurink
Senior Vice Presidents
Wesley M. Anderson
John E. Boyle
Michael Y. Chin
Jeffrey T. Doering
Scott A. Fedie
Russell P. McMinn
Douglas A. Ortyn
William R. Patterson
Guy J. Rau
Janelle Rietz-Kamenar
Michael Roidt
Elisabeth A. Rojas
Patrick P. Skiles
TCF Equipment Finance, Inc.
Executive Vice Presidents
Bradley C. Gunstad
William S. Henak
Michael S. Jones
Mark D. Nyquist
Senior Vice Presidents
Gary W. Anderson
Gloria J. Charley
Richard J. Chenitz
Peter C. Darin
Walter E. Dzielsky
Michael A. Kloos
Brick W. Moore
Abigail R. Nesbitt
Jodie L. Palmer
Gary A. Peterson
Charles A. Sell, Jr.
Robert J. Stark
Mark H. Valentine
Frederick M. Van Etten
TCF Corporate Functions
TCF Legal
Vice Chairman,
TCF Financial Corporation
Gregory J. Pulles
Executive Vice President,
General Counsel
and Secretary,
TCF National Bank
Joseph T. Green
Executive Vice Presidents
Bradley C. Gunstad
Brian J. Hurd
Senior Vice Presidents
Gary L. Fineman
Linda J. Firth
Shelley A. Fitzmaurice
Douglass B. Hiatt
Charles P. Hoffman, Jr.
Kirk D. Johnson
Gloria J. Karsky
Beth A. Paulson
Heather B. Thayer
R. Elizabeth Topoluk
TCF Credit Quality
Vice Chairman
and Chief Credit Officer,
TCF National Bank
Timothy P. Bailey
Executive Vice Presidents
Paul B. Brawner
Robert A. Henry
Senior Vice Presidents
Barbara L. Buss
Scott D. Campbell
Andrew D. Clark
Larry M. Czekaj
Gregory W. Drehmel
Martin J. Krogman
Kathleen M. Wacker
TCF Finance / Treasury
Executive Vice President and
Treasurer, TCF National Bank
James S. Broucek
Executive Vice President and
Controller, TCF National Bank
David M. Stautz
Senior Vice Presidents
Susan D. Bode
James M. Dunne
Brian P. Engels
Christy A. Powers
Michelle O. Wright
TCF Support Services
Executive Vice President
and Chief Information Officer,
TCF Financial Corporation
Earl D. Stratton
Executive Vice Presidents
Gregg R. Goudy
James C. LaPlante
Senior Vice Presidents
Michael J. Beier
Ronald L. Britz
Beverly L. Burman
Patricia A. Buss
Beverly M. Craig
Carol Jean F. Felth
Christopher N. Germann
James M. Matheis
Anton J. Negrini
Richard J. Nelson
Leonard D. Steele
Cathleen L. Wilkins
TCF Human Resources
Executive Vice President and
Corporate Human Resources
Director, TCF National Bank
Barbara E. Shaw
Senior Vice Presidents
Edward J. Gallagher
Viane R. Hoefs
Roger T. Sorensen
• 110 • TCF Financial Corporation and Subsidiaries
Offices
Executive Offices
TCF Financial Corporation
200 Lake Street East
Mail Code EX0-03-A
Wayzata, MN 55391-1693
(952) 745-2760
TCF National Bank
Headquarters
2508 South Louise Avenue
Sioux Falls, SD 57106
Minnesota/South Dakota
TCF Equipment Finance, Inc.
Headquarters
11100 Wayzata Boulevard
Suite 801
Minnetonka, MN 55305
(952) 656-5080
Winthrop Resources Corporation
Headquarters
11100 Wayzata Boulevard
Suite 800
Minnetonka, MN 55305
(952) 936-0226
TCF Inventory Finance, Inc.
Headquarters
2300 Barrington Road
Suite 600
Hoffman Estates, IL 60169
(877) 872-8234
TCF Commercial Finance Canada, Inc.
Headquarters
700 Dorval Drive
Suite 705
Oakville, Ontario L6K 3V3
Canada
(877) 800-4430
Traditional Branches
Minneapolis/St. Paul Area (46)
Greater Minnesota (2)
South Dakota (1)
Supermarket Branches
Minneapolis/St. Paul Area (55)
Greater Minnesota (4)
Campus Branches
Minneapolis/St. Paul Area (2)
Greater Minnesota (2)
Illinois/Wisconsin/Indiana
Traditional Branches
Chicagoland (41)
Milwaukee Area (10)
Kenosha /Racine Area (6)
Supermarket Branches
Chicagoland (156)
Milwaukee Area (8)
Kenosha /Racine Area (2)
Indiana (5)
Campus Branches
Chicagoland (3)
Greater Illinois (1)
Michigan
Traditional Branches
Metro Detroit Area (51)
Supermarket Branches
Metro Detroit Area (1)
Greater Michigan (1)
Campus Branches
Metro Detroit Area (2)
Colorado/Arizona
Traditional Branches
Metro Denver Area (26)
Colorado Springs (8)
Metro Phoenix Area (7)
Supermarket Branches
Metro Denver Area (2)
2010 Annual Report
• 111 •
Stockholder Information
Stock Data
Year
2010
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
2009
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
2008
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
2007
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
2006
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
Close
High
Dividends
Paid
Low Per Share
$14.81
16.19
16.61
15.94
$13.66
13.04
13.37
11.76
$13.66
18.00
12.03
17.92
$17.93
26.18
27.80
26.36
$27.42
26.29
26.45
25.75
$16.63
17.66
18.89
16.83
$14.72
15.83
16.67
14.31
$20.00
28.00
19.31
22.04
$27.95
28.25
28.99
27.91
$27.89
28.10
27.70
28.41
$12.90
13.87
14.95
13.40
$11.36
12.71
11.37
8.74
$11.22
9.25
11.91
14.65
$17.17
22.69
25.39
24.93
$25.16
24.94
24.91
24.23
$ .05
.05
.05
.05
$ .05
.05
.05
.25
$ .25
.25
.25
.25
$.2425
.2425
.2425
.2425
$ .23
.23
.23
.23
For more historical information on TCF’s stock price and
dividend, visit ir.tcfbank.com.
Trading of Common Stock
The common stock of TCF Financial Corporation is listed on
the New York Stock Exchange under the symbol TCB. At
December 31, 2010, TCF had approximately 142.9 million
shares of common stock outstanding.
2011 Common Stock Dividend Dates
Expected Record:
January 28
April 29
July 29
October 28
Expected Payment:
February 28
May 31
August 31
November 30
Annual Meeting
The annual meeting of stockholders of TCF will be held
on Wednesday, April 27, 2011, 10:00 a.m. (local time) at
the Marriott Minneapolis West, 9960 Wayzata Boulevard,
St. Louis Park, Minnesota.
Transfer Agent and Registrar
Computershare Trust Company, N.A.
PO Box 43078
Providence, RI 02940-3078
(800) 443-6852
www.computershare.com
Direct Stock Purchase and Dividend Reinvestment Plan
Computershare Trust Company, N.A. offers the Computershare
Investment Plan, a direct stock purchase and dividend
reinvestment plan for TCF Financial Corporation common
stock. This shareholder-paid program provides a low-cost
alternative to traditional retail brokerage methods of
purchasing, holding and selling TCF common stock. The Plan
is sponsored and administered by our Transfer Agent,
Computershare, Inc. Information is available from:
Computershare Investment Plan for TCF Financial Corporation
c/o Computershare
PO Box 43078
Providence, RI 02940-3078
(800) 443-6852
www.computershare.com
Note to Stockholders
It is important for registered stockholders to keep the
transfer agent informed of their current address and to
cash their dividend payments; otherwise, TCF may be
required by state law to report and deliver (or “escheat”)
these shares and any unclaimed dividends as unclaimed
property, even if TCF does not have physical possession
of the stock certificate. In other words, TCF is required to
escheat shares and un-cashed dividends if there has been
no stockholder-initiated activity or no stockholder contact
with the transfer agent within the state’s dormancy period.
Unclaimed property rules vary by state. Some states do
not consider the act of reinvesting dividends in a dividend
reinvestment plan as account activity that would signify a
stockholder’s continued interest in the underlying shares of
stock. Your failure to keep an active account can result in
the escheatment of your shares and any un-cashed
dividends to the state, in which case you will need to
request a refund of the unclaimed property from the state.
Stockholders holding shares in street name should contact
their broker regarding questions about escheatment and
unclaimed property laws.
TCF is not providing legal advice on unclaimed property laws.
• 112 • TCF Financial Corporation and Subsidiaries
Investor/Analyst Contact
Jason Korstange
Senior Vice President
Corporate Communications
(952) 745-2755
Justin Horstman
Assistant Vice President
Investor Relations
(952) 745-2756
Credit Ratings
Available Information
Please visit our website at ir.tcfbank.com for free access
to TCF investor information, news releases, investor
presentations, quarterly conference calls, annual reports,
and SEC filings. Information may also be obtained, free of
charge, from:
TCF Financial Corporation
Corporate Communications
200 Lake Street East
EX0-01-C
Wayzata, MN 55391-1693
(952) 745-2760
Standard & Poor’s
Outlook
TCF Financial Corporation:
Long-term Counterparty
Short-term Counterparty
TCF National Bank:
Long-term Counterparty
Short-term Counterparty
Trust Preferred
Last Review
December 2010
Negative
Fitch Ratings
Outlook
TCF Financial Corporation:
Last Review
September 2010
Stable
BBB
A-2
BBB+
A-2
BB
Long-term IDR
Short-term IDR
TCF National Bank:
Long-term IDR
Short-term IDR
Trust Preferred
A-
F1
A-
F1
BBB
Moody’s
Outlook
TCF National Bank:
Long-term Issuer
Long-term Deposits
Short-term Deposits
Bank Financial Strength
Trust Preferred
Last Review
January 2011
Stable
A2
A2
Prime-1
C+
Baa2
Stock Price Performance (In Dollars)
$35
30
25
20
15
10
5
Year
Ending
Stock Price*
Dividends*
4
0
/
3
/
9
t
i
l
p
S
k
c
o
t
S
5
9
/
0
3
/
1
1
t
i
l
p
S
k
c
o
t
S
7
9
/
8
2
/
1
1
t
i
l
p
S
k
c
o
t
S
$1.50
1.25
1.00
0.75
0.50
0.25
0.00
6-86
12-86
12-88
12-90
12-92
12-94
12-96
12-98
12-00
12-02
12-04
12-06
12-08
12-10
*Stock split adjusted
For more historical information on TCF’s stock price and dividend, visit ir.tcfbank.com.
Table of Contents
01 Financial Highlights
02 Letter to Our Stockholders
12 Board of Directors
Annual Report on Form 10-K
01 Business
08 Risk Factors
17 Selected Financial Data
18 Management’s Discussion and Analysis
52 Consolidated Financial Statements
56 Notes to Consolidated Financial Statements
95 Other Financial Data
Additional Information
108 Corporate Information
112 Stockholder Information
113 Corporate Philosophy
Despite a troubled economy and numerous legislative
and regulatory burdens, TCF has reported 63 consecutive
quarters of profitability and a record high level of
capital in 2010. We continue to focus on our conservative
banking philosophy, which has proven its sustainability
throughout the current economic cycle. We are seeing
encouraging signs on the credit front, such as a
decrease of nearly $20 million in non-performing assets
during the fourth quarter of 2010. Throughout 2010, we
have demonstrated an ability to meet our challenges
head-on. This proactive approach has proven to be
the right thing to do for our customers and stockholders.
2010 Annual Report
• 113 •
Corporate Philosophy
Profit Centers TCF’s focused profit center structure creates
superior financial performance. Day-to-day operations are organized
by profit centers within business lines: Wholesale Banking (commercial
banking, leasing and equipment finance, and inventory finance),
Retail Banking (branch banking and retail lending), Treasury Services
and Support Services, each with profit center goals and objectives.
TCF emphasizes net income, return on average assets and earnings per
share growth at acceptable levels of risk. We offer products that are
profitable and contribute to these goals. Our profit center structure
creates a highly responsive and performance driven culture.
Convenience TCF emphasizes convenience in banking; we’re
open 12 hours a day, seven days a week, 364 days per year. TCF
banks a large and diverse customer base. We provide customers
innovative products through multiple banking channels, including
traditional, supermarket and campus branches, TCF Express Teller®
and other ATMs, debit cards, phone banking, Internet banking
and mobile banking.
Checking Accounts TCF focuses on growing and retaining its
large number of low-interest cost checking accounts by offering
convenient hours and delivery channels, and products with many
free features. TCF uses the checking account as the anchor account
to build additional customer relationships.
Deposits TCF earns a significant portion of its profits from the
deposit side of the bank. We accumulate a large number of low cost
accounts through convenient services and products targeted to a
broad range of customers. As a result of the profits we earn from
the deposit business, we can minimize credit risk on the asset side.
Secured and Diversified Lender TCF maintains a secured
loan and lease portfolio that is well-diversified by type (consumer,
commercial, specialty finance) and by geography. We further diversify
our asset portfolio by industry, product and collateral type to minimize
concentration risk. In addition, we require our loans and leases to
be supported by collateral to provide an alternate repayment source
beyond cash flow from the borrower, which helps mitigate losses.
We emphasize credit quality over asset growth as the costs of poor
credit quality far outweigh the benefits of unwise asset growth.
Conservative Underwriting TCF’s diversified asset portfolio
and our extensive credit review practices reduce our credit risks
while creating profitability and sustainable growth, even in the
most challenging economic environments. We lend and lease to
high-quality customers and invest only in programs that add
value to the organization and yield solid returns.
Interest-rate Risk TCF believes interest-rate risk should be
minimized. Interest-rate speculation does not generate consistent
profits and is high risk.
Capital and Liquidity TCF focuses on prudent capital and
liquidity management which strengthens our capital position,
increases our borrowing capacity, and reduces our costs and risks.
We are solidly capitalized and have access to ample liquidity to
conduct business. TCF’s financial strength makes us a safe and
sound financial institution.
Expansion TCF grows both through de novo expansion and
acquisition. We are growing by starting new businesses, opening
new branches and offering new products and services.
The C ustomer F irst TCF strives to place The Customer First. We
believe providing great service helps to retain existing customers,
attract new customers, create value for our stockholders, and build
pride in our employees. We also respect customers’ concerns about
privacy and know they place their trust in us. TCF is committed to
protecting the private information of our customers and retaining
that trust is our priority.
Stock Ownership TCF encourages stock ownership by our
officers, directors and employees. We have a mutuality of interest
with our stockholders, and our goal is to earn for them an above-
average return.
Technology TCF places a high priority on the development of
technology to enhance productivity, customer service and new
products. Properly applied technology increases revenue, reduces
costs and enhances customer service. We centralize back office
activities and decentralize the banking process.
Conservative Accounting TCF utilizes conservative accounting
and financial reporting principles that accurately and honestly
report our financial condition and results of operations. We believe
good accounting drives good business decision-making.
Open Employee Communication TCF encourages open employee
communication and promotes from within whenever possible. TCF
places the highest priority on honesty, integrity and ethical behavior.
Equal Treatment TCF does not discriminate against anyone
in employment or the extension of credit. As a result of TCF’s
community banking philosophy, we market our products and
services to everyone in the communities we serve.
Community Participation TCF believes in community
participation, both financially and through volunteerism.
We feel a responsibility to help those less fortunate.
T
C
F
F
i
n
a
n
c
i
a
l
C
o
r
p
o
r
a
t
i
o
n
|
2
0
1
0
A
n
n
u
a
l
R
e
p
o
r
t
TCF Financial Corporation | 2010 Annual Report
Bold Thinking
Swift Decisions
Smart Banking
TCF Financial Corporation
200 Lake Street East
Wayzata, MN 55391-1693
www.tcfbank.com
TCFIR9347