Foundational strength. Visionary future.
TCF Financial Corporation | 2011 Annual Report
Financial Highlights
(Dollars in thousands, except per-share data)
2011
2010
% 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
Gains on auto loans held for sale, net
Total non-interest income
Non-interest expense
Income before income tax expense
Income tax expense
Income after income tax expense
Income attributable to non-controlling interests
$699,688
$699,202
200,843
498,845
436,038
7,263
1,133
444,434
764,451
178,828
64,441
114,387
4,993
236,437
462,765
508,862
29,123
537,985
756,335
244,415
90,171
154,244
3,297
–
N.M.
Net income available to common stockholders
$109,394
$150,947
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 47 under Management’s Discussion and Analysis
for reconcilation of GAAP to non-GAAP measures.
$
.71
$
.71
.20
17.37
8.61
10.32
11.65
1.08
1.08
.20
18.89
12.90
14.81
10.30
.89 X
1.44 X
.61%
.85%
6.32
3.99
1.45
11.74
10.67
4.15
1.47
9.59
.1%
(15.1)
7.8
(14.3)
(75.1)
(17.4)
1.1
(26.8)
(28.5)
(25.8)
51.4
(27.5)
(34.3)%
(34.3)
–
(8.0)
(33.3)
(30.3)
13.1
(38.4)
(28.2)
(40.8)
(3.9)
(1.4)
22.4
1923
Twin City Building
and Loan Association
begins business
1972
First $1 billion in
assets achieved
1986
TCF becomes a
publicly-traded
company
1997
TCF enters leasing business
with acquisition of Winthrop
Resources Corporation
1999
One-millionth
retail checking
account opened
2008
2011
TCF expands into
inventory finance business
in the U.S. and Canada
TCF enters auto finance business
with acquisition of Gateway One
Lending & Finance, LLC
2012
Evolution of TCF focusing
on disciplined asset growth,
especially national specialty
finance programs
Throughout its history, TCF has maintained
its strong foundation of a conservative banking
philosophy emphasizing convenience, conservative
underwriting and a secured lending portfolio.
As a result of today’s legislative and regulatory
environment, TCF is taking proactive steps to
position itself for success in the changing banking
world while staying true to the philosophy that
has made it the successful and profitable bank
it is today.
Table of Contents
02 Letter to Our Stockholders
12 Board of Directors
Annual Report on Form 10-K
01 Business
08 Risk Factors
18 Selected Financial Data
19 Management’s Discussion and Analysis
56 Consolidated Financial Statements
60 Notes to Consolidated Financial Statements
103 Other Financial Data
Additional Information
116 Corporate Information
119 Stockholder Information
121 Corporate Philosophy
2011 Annual Report
01
Dear Stockholders:
2011 was one of the most challenging
regional and national lending businesses
that the current financial crisis we are
years I’ve experienced in my 39 years
funded by a regional, core deposit
experiencing was largely the result of
in the banking industry. For the past
platform. We have implemented a new
the risky lending practices demonstrated
couple of years, we have all believed
functional management structure that
by many of our peers. TCF is not
that the “next year” will be the year
will better support this growth strategy.
entirely blameless for some of the
everything turns around. This has not
proven to be the case as economic
issues such as high unemployment
and deflated home values have shown
minimal improvement. Also, legislation
such as the Dodd-Frank Act, is
negatively impacting revenues. In
addition, record low interest rates are
impacting the margin. All in all, the
banking industry is changing and it
will be those banks that can adapt
and stay ahead of the curve that will
come out ahead.
Despite this evolution of TCF, we are
committed to staying true to the
conservative banking philosophy that
has made TCF the successful and
profitable company it is today. This
year marked TCF’s 21st consecutive year
problems we have experienced. For
example, we should have foreseen the
burst of the rapidly expanding housing
bubble. However, we did not engage
in many of the risky activities used by
other financial institutions.
of profitability. Our commitment to
• As a result of the continued imple-
convenience, conservative underwriting,
mentation of legislative and regulatory
and secured and diversified loan and
requirements, TCF again spent a
lease portfolios are just part of the
significant amount of time and money,
philosophy that has been the foundation
not only on compliance, but research-
of our company for so many years.
ing and implementing various new
I believe that applying this philosophy to
strategies to allow us to be successful
2012 will be a year in which we pro-
the changing banking environment will
in the new banking environment.
actively build and invest in TCF’s future,
allow us to stay ahead of the curve and
Considerations of strategic shift include
regardless of the state of the economy.
make TCF a premier investment choice.
the following:
An evolution is already taking place at
TCF that will position us to take advan-
tage of new marketplace opportunities
A Look at 2011
• Throughout 2011, we continued to see
and be successful in the changing
the same economic problems that have
banking environment. We are now
affected us since the financial crisis
focused on growing our diversified
began. It is important to remember
Durbin Amendment Impact TCF spent
a great deal of effort with its legal
challenge of the constitutionality of
the Durbin Amendment and its impact
on debit card interchange. While we
ultimately decided to drop our lawsuit,
we felt that it highlighted many key
areas of concern in the Durbin
Amendment that proved to be a factor
in the Federal Reserve’s final rule
allowing for banks to receive more than
double the interchange compared to
their initial proposed rule. That being
said, the Durbin Amendment will still
cost TCF approximately $60 million
per year in lost interchange revenue.
We have to look to recover this lost
revenue where we can.
William A. Cooper,
Chairman of the Board & Chief Executive Officer
02 TCF Financial Corporation and Subsidiaries
Asset Growth and Diversification
As a result of competition from large
national banks in our markets, it has
become more difficult for regional
banks to continue to add high-quality
loans and leases within a regional
footprint. To be successful, regional
banks must be able to make loans on
a national platform. As a result, over
the last several years TCF has begun
shifting its lending focus toward its
already successful national niche
lending programs. These national
platforms include equipment finance,
inventory finance, mortgage lending
and now auto finance. In 2011, TCF
announced an agreement to provide
inventory financing to the dealers of
Bombardier Recreational Products, Inc.
(BRP) in the U.S. and Canada as well as
an acquisition of Gateway One Lending
& Finance, Inc. (Gateway One), an
indirect auto finance company head-
quartered in California. While these
new programs will result in additional
operational risks, I am confident that
with the extensive due diligence
completed, their experienced manage-
ment teams, and TCF’s successful track
record of integrating and operating
national specialty finance programs,
we will be able to manage these risks.
These high-quality, secured lending
programs will provide TCF with an
avenue for growth in 2012. These new
programs will be a great complement
to our current specialty finance
portfolio and accretive to our business,
all while staying true to our conserva-
tive lending philosophy.
Functionally Organized Management
Structure As a result of the evolution
taking place at TCF, it was necessary to
Net Interest Margin
Net Interest Margin
Percent
Percent
%
4
9
.
3
%
1
9
.
3
%
7
8
.
3
%
5
1
.
4
%
9
9
.
3
Diluted Earnings Per
Diluted Earnings
Common Share
Per Common Share
Dollars
Dollars
3
1
.
2
$
8
8
.
$
0
6
.
$
8
0
.
1
$
1
7
.
$
07
08
09
10
11
07
08
09
10
11
Diluted EPS
Dividends Paid
reevaluate the responsibilities of our
and a slowly improving economy, I
experienced executive management
look forward to improving these results.
team to more efficiently manage and
implement strategies moving forward.
Our new functionally organized
management structure will allow us to
better manage our four key initiatives:
1) Enterprise Risk Management,
2) Lending, 3) Funding and 4) Corporate
Development. This structure is well
suited to both protect and increase
shareholder value into the future.
• TCF’s net interest margin was 3.99
percent for the full year of 2011, down
16 basis points from the full year of
2010. In 2011, we continued to take
actions to increase the asset sensitivity
of the balance sheet, such as changing
the mix of fixed- and variable-rate
loans, in anticipation of rising interest
rates. Despite recent guidance from the
Federal Reserve suggesting rates will
• TCF continued its consistency of
likely not rise until late 2014, rates will
profitability in 2011, earning $109.4
eventually rise and we will be ready to
million, down 28 percent from 2010.
take advantage when they do. In the
Diluted earnings per common share
meantime, with our increased focus on
was $.71. These results remain below
national specialty finance programs, we
TCF’s historical performance while
have laid the groundwork for significant
we continue to operate in a difficult
growth in our higher-yielding portfolios.
economic and regulatory environment.
Overall, TCF’s net interest margin
With the continued evolution of TCF
continues to be strong when compared
to the Top 50 Banks.
2011 Annual Report
03
• On March 15, 2011, TCF raised gross
We actively review these factors on a
• At December 31, 2011, TCF’s stock
proceeds of $230 million through a
quarterly basis as returning capital to
price closed at $10.32 per share, down
public common stock offering of
our stockholders remains an important
from $14.81 per share on December 31,
15,081,968 shares. As we have done
part of how we deliver value.
2010. Several key factors weighed
in the past, we chose to take advantage
of market conditions and raised the
capital when we could. This additional
capital allowed us to pay off our senior
unsecured notes and continue the
growth of our very successful specialty
finance businesses. TCF’s capital
management strategy is prudent and
provides flexibility to take advantage
of balance sheet opportunities.
• TCF is financially strong and remains
a safe and sound bank. We are solidly
capitalized and have ample liquidity
to conduct business. TCF’s tangible
realized common equity, which we feel
is the most important capital metric,
was $1.6 billion, or 8.42 percent of
tangible assets at December 31, 2011.
We continue to exceed all well-capital-
ized requirements as defined by the
• With TCF’s annual dividend rate of
regulatory agencies. At December 31,
$.20 per share in 2011, TCF has paid a
2011, TCF had $647.3 million of total
common stock dividend 95 consecutive
risk-based capital in excess of the
quarters. When capital accumulation
stated well-capitalized requirement.
from earnings exceeds capital required
We also anticipate exceeding the
for asset growth and risk parameters
minimum standards under the Basel III
permit, TCF will raise its dividend.
capital guidelines.
Tangible Realized
Tangible Realized
Common Equity
Common Equity
Millions of Dollars
Millions of Dollars
Total Deposits
Total Deposits
Billions of Dollars
Billions of Dollars
9
7
5
,
1
$
4
3
3
,
1
$
6
.
1
1
$
6
.
1
1
$
2
.
2
1
$
2
.
0
1
$
6
.
9
$
7
5
9
$
9
6
9
$
0
2
0
,
1
$
07
08
09
10
11
07
08
09
10
11
Tangible Realized Common Equity
Certificates of Deposit
Tangible Realized Common Equity Ratio
Core Deposits
04 TCF Financial Corporation and Subsidiaries
heavily on stock prices across the
industry in 2011, including regulatory
uncertainty such as the Durbin
Amendment and macroeconomic
concerns including depressed home
values, elevated unemployment and
the European debt crisis. Until the
economy shows more consistent
signs of improvement, pressure
on the stock price may continue.
Retail Banking
TCF’s Retail Banking division consists
of branch banking and retail lending.
In branch banking, our focus has been
on growing low-cost deposits to fund
both our regional and national lending
programs. Similar to 2010, we have
recently spent a significant amount of
time developing products that can help
increase the level of convenience for
our customers in the ever-changing
competitive environment. Deposit
balances totaled $12.2 billion at
year-end, up 5.3 percent from 2010.
We are committed to providing our
customers with the most convenient
products possible, including the launch
of free TCF Mobile Banking in early
2011. Our recent product changes have
increased the simplicity and conve-
nience to our customers with the
intention of also increasing profitability
for the bank, however, changes to our
deposit account products are still
evolving. We are currently evaluating
additional ideas and expect to make
further enhancements in 2012.
Retail lending loan balances totaled
$6.9 billion at year-end, down 3.7
percent from 2010. With the continued
depressed home values and a more
competitive environment for borrowers
who meet TCF’s underwriting criteria,
we have reduced the consumer real
estate portfolio and made investments
in other higher-yielding asset catego-
ries. Despite the current economic
conditions, TCF continued to fund new
consumer real estate loans to credit-
worthy customers during 2011. The
new loans have performed well with
low delinquencies and minimal
1972
In 1972, TCF eclipsed $1 billion in total assets. Today, TCF
has nearly $19 billion in total assets including a loan and lease
charge-offs. We expect to have more
portfolio that is well-diversified by both type and geography.
opportunities to add loans in this
portfolio as home values stabilize.
Wholesale Banking
TCF’s Wholesale Banking division
consists of commercial banking and
specialty finance (TCF Equipment
Finance, Winthrop Resources
Corporation, TCF Inventory Finance
and Gateway One). Loan balances
in the current economic environment
this run-off activity, the core portfolio
largely as a result of our conservative
continues to grow as balances increased
underwriting philosophy and our
6 percent from 2010. Our $3.1 billion
commitment to relationship banking
leasing and equipment finance portfolio
with long-term customers.
is well-diversified by equipment type,
decreased 5.4 percent in our commercial
Loan and lease balances in specialty
portfolio, which totaled $3.4 billion at
finance decreased 4.5 percent to $3.8
year-end, largely due to higher levels
billion at year-end. In specialty finance,
of payments exceeding increased
new origination volume. Demand
home to TCF’s highest yielding loans
and leases, we were able to minimize
for commercial loans has remained
concentration risk by diversifying our
somewhat tempered by the sluggish
businesses by industry, transaction
economy but we are seeing some signs
size, geography and collateral type.
of growing demand. We saw many of
We continue to emphasize specialty
our peers being much more competi-
finance as a key vehicle for asset
tive from a pricing perspective on the
growth because of our proven expertise
commercial deals that were available
in acquiring, integrating and operating
these national niche businesses.
transaction size and geography.
Our leasing and equipment finance
operation, which is comprised of TCF
Equipment Finance and Winthrop
Resources Corporation, is the 28th
largest in the U.S. and the 13th largest
bank-affiliated leasing company in
the U.S. Despite the overall decrease
in leasing and equipment finance
balances, 2011 originations were up
19.2 percent from 2010. Future growth
opportunities are strong as we have an
uninstalled backlog of $455.3 million
at year-end. The portfolio is currently
during the year. As a result of our
various avenues for asset growth
in specialty finance, we have not
been forced to compete for deals
with substandard pricing. Overall, our
commercial portfolio is performing well
TCF’s leasing and equipment finance
yielding 6 percent.
business balances decreased by
.4 percent from 2010 as past portfolio
purchases continue to run off. Excluding
TCF Inventory Finance, Inc. (TCFIF)
continues to be a business where we
2011 Annual Report
05
are seeing opportunity for growth.
the program matures. In addition,
In November 2011, TCF acquired
TCFIF ended the year with a portfolio
TCFIF entered the recreation vehicle
Gateway One Lending & Finance.
balance of $625 million, down 21.2
and marine products industries in 2011
Gateway One originates and services
percent from 2010, at an average yield
through agreements with Jayco, Inc.
primarily used retail auto loans
of 7.19 percent. The portfolio decrease
and Alumacraft Boat Co. in 2011.
acquired from over 3,400 franchised
during the year was largely due to
the termination of a lawn and garden
program and the transitioning of an
electronics and appliance program to a
servicing-only program. Following the
entrance into the powersports industry
in 2010 with the acquisition of Arctic
Cat® Canadian powersports equipment
floorplan programs, TCF built on its
powersports market share in 2011
through an agreement with BRP to
finance BRP’s Ski-Doo®, Sea-Doo® and
Can-Am® dealers across the U.S. and
Canada. The BRP agreement has the
potential for approximately $600
million in average net receivables when
TCFIF, which TCF started in 2008, is
now becoming a significant player in
the inventory finance marketplace.
TCFIF has proven that it can provide
excellent service and financing for
some of the largest manufacturers in
their respective industries. Our proven
track record is now resonating with
some of the smaller manufacturers
as well. Our increased presence and
credibility in the market will only help
as we continue to grow this profitable
business for TCF. We are continuing
to pursue future programs as well as
renew contracts with existing manu-
facturers in a very competitive market.
1986
In 1986, TCF became one of the first banks to offer free
and independent dealers across the
country. The acquisition of Gateway
One was another step toward the
further diversification of TCF by
growing high-quality assets with
strong risk-adjusted returns through
national specialty finance lending
programs in the second largest
consumer finance market in the U.S.
The lower cost of funding that TCF
provides will allow Gateway One to
reach more dealers and compete for
higher quality loans. The experienced
management team from Gateway One,
along with the TCF’s proven track
record of integrating and operating
these types of businesses, make this
acquisition an ideal fit.
At December 31, 2011, Gateway One
had managed assets totaling $437.7
million and loan balances of $3.6
million. We expect to see asset balances
ramp up throughout 2012 with start-up
expenses in the near-term. Gateway
One will be an important component
of TCF’s 2012 success.
Credit Quality
While we started to see some stabiliza-
tion, credit losses continued to be a
challenge for TCF in 2011 and impacted
TCF’s results. Net charge-offs decreased
only 2 percent, or 2 basis points, in
2011. Overall, credit metrics showed
some improvement from peak 2010
levels, but until we see unemployment
checking. To this day, TCF continues to develop convenient
decline and home values start to recover,
and innovative deposit account products.
credit costs are likely to remain elevated.
06 TCF Financial Corporation and Subsidiaries
Non-performing assets declined
steadily throughout 2011, down $53.1
million, or 10.9 percent, from 2010 and
have now decreased five consecutive
quarters. This decline in non-performing
assets is primarily due to decreases in
commercial and leasing and equipment
finance non-accrual loans and leases.
Despite the continued economic stress
on unemployment and home values,
we saw some stabilization in consumer
real estate delinquencies. To help our
customers avoid home foreclosure, TCF
Net Charge-Offs & Allowance
Net Charge-Offs & Allowance
for Loan & Lease Losses
for Loan & Lease Losses
Non-Performing Assets
Non-Performing Assets
Millions of Dollars
Percent
Percent
%
9
2
.
1
%
5
6
.
%
0
8
.
1
%
1
8
.
1
%
8
6
.
1
Millions of Dollars
6
8
4
$
3
3
4
$
2
0
4
$
4
3
2
$
6
0
1
$
has continued its program of providing
07
08
09
10
11
07
08
09
10
11
loan modifications which are accounted
for as troubled debt restructurings
(TDRs). The TDRs extend payment
dates, reduce interest rates and/or
reduce payment amounts for a term
of up to five years. These TDRs are
underwritten individually. Our goal is
to extend these TDRs to customers who
can make a payment and truly want to
stay in their homes.
At December 31, 2011, TCF held $433.1
million of accruing modified consumer
TDRs, up 28.4 percent from 2010, with
a weighted average interest rate of
3.7 percent. The TDR reserves are
based on the present value of expected
cash flows, or 13.5 percent, with a
fourth quarter annualized net charge-off
rate of 6.5 percent. To date, these TDRs
are performing as expected and have
proven to be an effective way to help
mitigate losses.
TCF’s Wholesale Banking division saw
some credit stabilization throughout
2011. Commercial net charge-offs and
provision tend to be lumpy as credits
are worked out, especially in this
Allowance for Loan & Lease Losses
Net Charge-Offs
challenging workout environment.
At December 31, 2011, TCF’s allowance
Overall, our specialty finance loans and
for loan and lease losses totaled $255.7
leases continue to perform very well.
million, or 1.81 percent of loans and
We continue to closely monitor our
leases, a decrease of $10.1 million from
wholesale customers, and in particular,
December 31, 2010. The decrease in
those customers in distressed indus-
allowance for loan and lease losses
tries and geographies. Our relationship
was primarily due to charge-offs of
banking strategy provided us with the
commercial loans during the first
ability to effectively work out many
quarter of 2011 that had previously been
distressed loans. Wholesale Banking
specifically reserved for. TCF’s provision
continues to be a very profitable,
for credit losses of $200.8 million
well-managed and highly diversified
decreased 15.1 percent from last year.
segment.
Overall, we saw some good signs of
Real estate owned properties decreased
credit stabilization in 2011, not the least
throughout 2011. This was an encour-
of which was the consistent decline in
aging sign as the length of time in the
non-performing assets. That being said,
foreclosure process continues to be
we still experienced elevated levels of
lengthy. At December 31, 2011, TCF
credit losses and delinquencies due to
owned 465 consumer real estate
the persistent economic conditions.
properties and 33 commercial real
We are encouraged by the trends and
estate properties, compared with
feel we are on the right track, but
520 and 28 properties, respectively,
ultimate success will only occur when
at December 31, 2010.
the economy gets back on track.
2011 Annual Report
07
Revenue
TCF’s total revenue in 2011 was $1.1
billion, down 8 percent from last year
with net interest income remaining flat
and non-interest income decreasing
17 percent.
Banking fees and service charges
declined 20 percent from 2010 primarily
due to the full annual impact in 2011
of Regulation E, the opt-in regulations
regarding ATM transactions and
one-time debit card transactions that
became effective in August 2010. While
I feel TCF did a good job educating
customers on opt-in, this regulation still
had a sizeable impact on overdraft
revenue in 2011. The full impact is
now built in and the opt-in initiative is
largely behind us. The fee revenue lost
to Regulation E was partially offset
by the implementation of monthly
Leasing and equipment finance
maintenance fees for retail customers
continued to be an important revenue
not meeting certain account criteria. In
source for TCF in 2011. These revenues
late 2011, we implemented the new
totaled $89.2 million, which remained
fee waiver criteria which included a
flat compared with 2010.
minimum of 15 qualifying transactions
per month to waive the monthly
maintenance fee. This product is
Expenses
TCF’s operating expenses were again
different than many of our competitors.
very well controlled in 2011. We
Instead of requiring a high minimum
continued to streamline our business
balance, we are just asking that our
processes and operations to make
customers simply use their account.
them as efficient as possible. Our new
TCF’s card revenue of $96.1 million in
2011 was down 13 percent from 2010,
which was attributable to the imple-
mentation of the Durbin Amendment
in October 2011. The impact of the
Durbin Amendment in the fourth
quarter of 2011 resulted in decreased
revenue of $14.7 million.
functionally organized management
structure will provide more opportuni-
ties for TCF to improve efficiencies
and reduce operating expenses
moving forward. During the third
quarter of 2011, TCF discontinued its
debit card reward program as a result
of the implementation of the Durbin
Amendment. We continue to look
for additional expense savings opportu-
nities as a way to help contribute to
the bottom line in the challenging
economic and regulatory environment.
Non-Interest expense totaled $764.5
million in 2011, up slightly from 2010. We
saw increased FDIC insurance expenses
related to changes in the rate calculations
for banks over $10 billion in total assets,
which were implemented in April 2011.
Foreclosed real estate and repossessed
asset expenses also increased in 2011
primarily due to valuation writedowns
on commercial real estate.
Even during this difficult operating
environment, TCF remains committed
to the ongoing professional develop-
ment of its employees and continues to
recognize and motivate hard working
individuals through job promotions,
incentive compensation, tuition
reimbursement and other reward
Total Revenue
Total Revenue
Millions of Dollars
Fees & Service Charges
Fees & Services Charges
Millions of Dollars
Millions of Dollars
Millions of Dollars
2
9
0
,
1
$
2
9
0
,
1
$
7
3
2
,
1
$
9
5
1
,
1
$
4
4
1
,
1
$
8
7
2
$
1
7
2
$
7
8
2
$
3
7
2
$
9
1
2
$
07
08
09
10
11
07
08
09
10
11
Fees & Other Revenue
Net Interest Income
08 TCF Financial Corporation and Subsidiaries
programs. We strongly believe that
maintaining an experienced and
motivated team creates a competitive
advantage and is crucial to enhancing
stockholder value.
TCF also continues to support the
communities in which we serve, both
financially and through volunteerism.
During 2011, TCF and its employees
contributed nearly $2.8 million to
charitable organizations in human
services, education, community
1997
In 1997, TCF entered the specialty finance market through
development and the arts. In addition,
its acquisition of Winthrop Resources Corporation. Today,
numerous TCF employees generously
gave their time by volunteering and
providing leadership to local nonprofit
TCF Specialty Finance is made up of a diverse group of
nationally-oriented businesses and is the fastest growing
organizations. TCF and its employees
division at TCF.
continue to express a commitment to
make a difference for people in need
and for the communities we serve.
Keys to Success in 2012
In 2011, TCF laid the groundwork for
more efficient. We must also continue
enhancements. As the economy
to look for additional asset growth
improves, there will also be opportuni-
success in 2012. We have taken proactive
opportunities in specialty finance. Our
ties to reduce credit costs, such as
steps to position ourselves for success in
proven track record and increased
foreclosed real estate expenses.
the future. This process will continue into
credibility in the industry will benefit
2012. While 2011 was a transition year for
us with this initiative.
• Carefully monitor credit quality. It will
be important for TCF to stay true to our
TCF, 2012 will be a building and investing
year. Below are some of the keys to
success for TCF in 2012:
• Implement company-wide, revenue-
conservative lending philosophy. We
producing and expense reduction
are a secured and diversified lender
strategies. We must successfully
with conservative underwriting and this
• Execute strategy of growing assets
implement various revenue-producing
will continue going forward. We will
through national lending programs.
and expense reduction strategies
continue to extend loan modifications
TCF made significant investments in
throughout the company. Revenue-
to qualified borrowers and work
this strategy in late 2011 with the
producing strategies could include new
through commercial real estate non-
addition of BRP’s inventory finance
deposit account products and features
performing assets in this challenging
program and the acquisition of the
as well as revenues related to TCF’s
environment. In 2012, we expect to see
Gateway One auto lending business.
new specialty finance programs.
continued declines in non-performing
In 2012, we will need to successfully
The implementation of new deposit
assets through sales of real estate
integrate these businesses to take
account products will be influenced by
owned, paydowns and loans returning
advantage of the growth prospects
the competitive landscape as a whole.
to accrual status based on performance.
they provide. Our new management
Expense reductions will likely come
We also expect delinquencies and
structure will make this process much
from various productivity
charge-offs to remain elevated in the
2011 Annual Report
09
near-term due to the sluggish economy.
• Continue our longstanding commit-
• With the current economy and TCF’s
Despite our efforts, we will need to see
ment to strong corporate governance.
changing product structure, customer
significant improvement in the economy
Our customers and stockholders entrust
behavior is still an unknown and could
to see more substantial improvement in
us with their money and confidential
impact future fee revenue. We spent time
credit quality.
information and therefore, our manage-
researching, testing and piloting our
• Demonstrate strong enterprise risk
management. In today’s regulatory
environment, a strong enterprise risk
management program is essential.
At TCF, we have enhanced our program
under our new management structure.
It will be important to appropriately
manage our risks and maintain clear and
open communication with our regulators.
ment practices demand the highest of
various product changes but it generally
standards. Reputation for honesty and
takes an extended period of time to fully
integrity continues to rank at the top of
understand how customer behavior will
our priorities.
Risks to Our
Business Strategy
• Congressional and regulatory actions
continue to produce a cloud of uncer-
tainty over the banking industry. While
respond in the long run. This will be the
case with any additional changes we
make. We will monitor how our customers
respond and react accordingly.
• Managing interest-rate risk and the
continued low levels of interest rates
with an eye toward the possibility of
rapidly increasing inflation continues
to be a challenge.
• Use capital wisely. TCF is solidly
the Durbin Amendment has been
capitalized. We will continue to be good
implemented, uncertainty continues as
stewards of our stockholders’ capital
Congress has introduced a bill to repeal
and think in terms of the best long-term
it while the retailers have filed a lawsuit
• Potential reductions in our borrowing
interest of the company. It will be
stating the Federal Reserve did not
capacity because of restrictions put on
important that we prudently monitor
reduce debit card interchange enough.
the Federal Home Loan Banks or the
our capital position to ensure we are in
a position to take advantage of various
balance sheet opportunities. Prudent
capital management, which includes
making wise investment decisions, is a
top priority as well as staying cognizant
of maintaining a strong liquidity
position for unanticipated situations.
• Monitor corporate development
opportunities. Under the new function-
ally organized management structure,
corporate development will be key.
With this evolution of TCF comes the
need for an executive presence to
oversee corporate development issues
on both the asset and liability sides of
the balance sheet, as well as evaluate
potential new business lines. In 2012,
we must actively monitor and be ready
to act on these opportunities that will
increase stockholder value.
• The economic climate remains a
major risk for all banks, including TCF.
Unemployment and depressed home
and commercial real estate values
Federal Reserve Discount Window could
reduce our liquidity and inhibit growth
or force higher deposit costs. Growing
core deposits reduces this risk.
reduce consumer spending and loan
• Growth expectations of our new
demand, which impacts the ability of
specialty finance businesses may not
banks to generate fee income and earn
be achieved. While we have the track
interest on new loans.
record and experience to successfully
operate national specialty finance
businesses, the ability to retain existing
business relationships and attract new
customers is challenging in the current
competitive environment. We will also
have to work to mitigate the integration
and operational risks associated with
these new businesses.
• The competitive landscape in the
banking industry is changing. With
banks exploring various ways to
recover lost revenue, trends may
emerge with the types of fees charged
going forward. Fee strategies may be
impacted by the changes we make as
well as the ensuing public perception.
We already saw this in 2011 when
public outcry caused Bank of America
to back off of their plan to charge a
debit card usage fee.
10 TCF Financial Corporation and Subsidiaries
In Closing
Despite the troubled economy and
Total Loans & Leases
Total Loans & Leases
Billions of Dollars
Specialty Finance1
Specialty Finance1
Billions of Dollars
legislative and regulatory environment,
TCF has continued to be a profitable
and successful bank. Our conservative
philosophy and hard work have made
us the bank we are today and this will
not change. The business strategies
around this philosophy and hard work
are evolving to allow us to stay ahead
of the curve in the newly forming banking
environment. Given the new wave of
regulations, it is not likely banks will
ever be as profitable as they once were.
But this will not stop us from positioning
ourselves to continue to be successful
and profitable as times change.
I am confident and excited about the
direction we are heading. Once our new
specialty finance programs fully take off
in the second half of 2012, I think we
will be in a great position for growth
and success. My role at TCF has been
and will continue to be to maintain and
increase stockholder value.
We continue to have a mutuality of
interest with our stockholders. Our
senior management and board of
directors own over 6.8 million shares,
or 4.3 percent of TCF stock. Eighty
percent of our match-eligible employees
participate in TCF’s Employees Stock
Purchase Plan, which at year-end held
over 8.2 million shares.
Billions of Dollars
Billions of Dollars
6
.
4
1
$
8
.
4
1
$
2
.
4
1
$
3
.
3
1
$
5
.
2
1
$
0
.
4
$
8
.
3
$
6
.
3
$
5
.
2
$
2
.
2
$
07
08
09
10
11
07
08
09
10
11
1 Leasing & Equipment Finance
(includes operating leases),
Inventory Finance & Gateway One
years and have provided invaluable
now take over as Vice Chairman of
contributions to TCF and our stockhold-
Lending. I am excited about these
ers during their tenure. We appreciate
new additions to the board and
the exceptional leadership and guidance
welcome their insights and counsel.
they have provided over the years.
I would also like to give a special thank
With these changes come opportunities
you to all of our employees for all of
to welcome new members to the board.
their hard work during another challeng-
During the past year, we welcomed
ing year. Without their hard work and
Jim Ramstad to the board of directors.
dedication, TCF would not be able to
Jim brought with him a wealth of
provide a high level of convenience
knowledge and experience in the
and service to our customers and the
political arena from his nine terms as
returns to our stockholders. I am proud
a Minnesota Congressman in the U.S.
of our team and the accomplishments
House of Representatives. In addition,
we have achieved in 2011 and I look
Tom Jasper and Craig Dahl were also
forward to a successful 2012.
I would like to take a moment to thank
added to the board of directors at the
our board of directors for their hard
beginning of 2012. Tom has previously
work and guidance. I am very proud
served as TCF’s Chief Financial Officer
of this group. I especially want to thank
and has now assumed the role of Vice
Ralph Strangis and Luella Goldberg,
Chairman of Funding, Operations and
who decided to leave the board in early
Finance. Craig was previously Executive
Thank you for your continued support
and investment in TCF.
2012. Ralph and Luella have each served
Vice President overseeing TCF’s
William A. Cooper
on TCF’s board of directors for 20-plus
specialty finance division and will
Chairman and Chief Executive Officer
2011 Annual Report
11
Board of Directors
William A. Cooper
Chairman of the Board
and Chief Executive Officer,
TCF Financial Corporation
Chairman since 1987
Raymond L. Barton
Chairman,
Great Clips, Inc.
Director since 2011
Peter Bell
Former Chair,
Metropolitan Council
William F. Bieber
Chairman and Owner,
ATEK Companies, Inc.
Director since 2009
Director since 1997
Theodore J. Bigos
Owner,
Bigos Management, Inc.
Director since 2008
Thomas A. Cusick
Retired Vice Chairman,
TCF Financial Corporation
Director since 1988
Craig R. Dahl
Vice Chairman and
Executive Vice President,
Lending,
TCF Financial Corporation
Director since 2012
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
Thomas F. Jasper
Vice Chairman and
Executive Vice President,
Funding, Operations
and Finance,
TCF Financial Corporation
Director since 2012
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
James M. Ramstad
Former U.S. Congressman
Director since 2011
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,
Corporate Development,
TCF Financial Corporation
Director since 2008
Richard A. Zona
Retired Vice Chairman,
U.S. Bancorp
Director since 2011
12 TCF Financial Corporation and Subsidiaries
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
x Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2011
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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 exchange on which registered)
No
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.
Large accelerated filer x
Non-accelerated filer
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 $2,013,384,593.
As of January 31, 2012, there were 161,737,391 shares outstanding of the registrant’s common stock, par value $.01 per share,
its only outstanding class of common stock.
Accelerated filer
Smaller reporting company
(Do not check if a smaller reporting company)
No x
Specific portions of the Registrant’s definitive Proxy Statement for the 2012 Annual Meeting of Stockholders to be held on
April 25, 2012 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.
Item 4.
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
Mine Safety Disclosures
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
15
15
15
18
19
51
55
55
56
60
103
104
104
105
106
107
107
107
108
108
108
109
110
111
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. TCF also conducts
commercial leasing and equipment finance business in all
50 states and, to a limited extent, in foreign countries,
commercial inventory finance in the U.S. and Canada, and
indirect auto finance business in over 30 states.
At December 31, 2011, TCF had total assets of $19 billion
and was the 34th largest publicly traded bank holding
company in the United States based on total assets as of
September 30, 2011. 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, inventory finance and auto finance. TCF refers to
its combined leasing and equipment finance, inventory
finance and auto 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 25 of
Notes to Consolidated Financial Statements for information
regarding TCF’s reportable operating segments.
Retail Banking
At December 31, 2011, TCF had 434 retail banking branches,
consisting of 195 traditional branches, 231 supermarket
branches and 8 campus branches. TCF operates 196
branches in Illinois, 110 in Minnesota, 53 in Michigan,
36 in Colorado, 26 in Wisconsin, 7 in Arizona, 5 in Indiana
and 1 in South Dakota.
TCF makes consumer loans for personal, family or
household purposes, such as home purchases, debt
consolidation, financing of home improvements, autos,
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 markets through the offering of a broad
selection of deposit products 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 deposits,
primarily in checking and savings accounts. These accounts
are a source of low-interest cost funds and provide 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 2 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, 2011, there were $274.3 million
in campus deposits. TCF has a 25-year naming rights
2011 Form 10-K
1
agreement with the University of Minnesota to sponsor its
on-campus football stadium called “TCF Bank Stadium®”
which opened in 2009.
Non-interest income is a significant source of revenue
for TCF and an important factor in TCF’s results of operations.
Maintaining fee and service charge revenue has been
challenging as a result of economic conditions, changing
customer behavior and the impact of regulations. 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.
TCF offers retail checking account customers inexpensive,
convenient access to funds at local merchants and ATMs
through its debit card programs. TCF’s debit card programs
are supported by interchange fees charged to retailers. Key
drivers of non-interest income are the number of deposit
accounts and related transaction activity.
TCF’s card revenues have been impacted by the Durbin
Amendment (the “Amendment”) to the Dodd-Frank Wall
Street and Consumer Protection Act of 2010 (the “Dodd-
Frank Act”), which regulated debit-card interchange fees.
The final rule, which became effective on October 1, 2011,
sets a base interchange fee limit of 21 cents, plus a per
transaction component of 5 basis points, and a one cent
charge if issuers comply with certain fraud protection
provisions. The impact of the rule resulted in a $14.7 million,
or slightly more than 50%, decrease in TCF’s card revenue
in the fourth quarter of 2011. 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.
Wholesale Banking
Commercial Real Estate lending Commercial real
estate loans are loans originated by TCF that are secured
by commercial real estate including 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 or 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, 2011 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.
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 primarily 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 business
essential 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 equipment financing
through leasing solutions similar to those provided by
Winthrop, which broadened its market diversification.
2 TCF Financial Corporation and Subsidiaries
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
equipment manufacturers. The operation is focused on
establishing relationships with distributors, dealer buying
groups and manufacturers, giving access to thousands of
independent lawn and garden, electronics and appliance,
powersports, recreation vehicle, marine, and specialty
vehicle retailers. TCF Inventory Finance operates in the
U.S. and 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.
Auto Finance On November 30, 2011, TCF entered the
auto lending market with the acquisition of Gateway One
Lending & Finance, LLC (“Gateway One”). Headquartered
in Anaheim, California, Gateway One originates and
services loans on new and used autos to customers through
relationships established with over 3,400 independent
dealers in 30 states. While auto finance is considered a
component of TCF’s specialty finance business, which is
included in wholesale banking, the loans in this business are
either a component of consumer loans or loans held for sale.
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 securities 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
Deposits Deposits from customers are a primary source of
TCF’s funds for use in lending and for other general business
purposes. Consumer, small business and commercial
deposits are a source of low-interest cost funds attracted
from within TCF’s primary banking markets through the
offering of a broad selection of deposit instruments
including consumer interest-bearing checking accounts,
regular savings accounts, money market accounts and
certificates of deposits.
Borrowings Borrowings may be used to compensate for
reductions in deposit inflows or net deposit outflows, or
to support expanded lending, leasing and other expansion
activities. These borrowings may include Federal Home
Loan Bank (“FHLB”) advances, repurchase agreements,
federal funds, other borrowings and advances from the
Federal Reserve Discount Window. 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
U.S. 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 maintained as collateral with the counter-
party to a repurchase agreement. The creditworthiness
of the counterparty is important in establishing that the
overcollateralized 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
2011 Form 10-K
3
in “Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations — Consolidated
Financial Condition Analysis — Borrowings” and in Notes 11
and 12 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, inventory finance and auto 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 primary
banking market areas and nationally, and experiences
significant competition in attracting 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,
commercial and auto finance companies, credit unions,
insurance companies and savings institutions. TCF also
competes nationwide with other companies and banks in
the financing of autos, 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, 2011, TCF had 7,143
employees, including 2,172 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 restrictions 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 Office of
the Comptroller of the Currency (“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 undercapitalized institutions
be subjected 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.
Additionally, the Federal Reserve and the OCC have
adopted rules that could permit them to quantify and
account for interest-rate risk exposure and market risk
from trading activity and to potentially reflect these risks
in higher capital requirements. New legislation, additional
rulemaking, or changes in regulatory policies may affect
future regulatory capital requirements applicable to TCF
Financial and TCF Bank.
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 require the board of directors of a bank holding
company to consider a number of factors when considering
the payment of dividends, including the quality and level of
current and future earnings.
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 to meet
4 TCF Financial Corporation and Subsidiaries
its other cash needs. The ability of TCF Financial and TCF
Bank to pay dividends depends on regulatory policies and
regulatory capital requirements and may be subject to
regulatory approval.
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 future
capital distributions will depend on its earnings and ability
to meet minimum regulatory capital requirements in effect
during current and future periods. These capital adequacy
standards may be higher in the future than existing
minimum regulatory capital requirements, including
the potential effects of any U.S. regulatory rule-making
relating 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. Annual
dividend distributions in excess of earnings and profits
could result in a tax liability based on the amount of
excess earnings distributed and current tax rates.
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 assessment 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 of 1956 (“BHCA”),
Federal Reserve approval is required before acquiring
more than 5% control, or substantially all of the assets,
of another bank, or bank holding company, or merging
or consolidating with such a bank or bank 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 Acquisitions and Changes in Control
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 if the
law of the state in which the branches are located permits
such acquisitions for a state bank chartered in such state.
Interstate mergers and branch acquisitions may also
be subject to certain nationwide and statewide insured
deposit maximum concentration levels or other limitations.
In addition, 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.
Insurance of Accounts As a result of the FDIC issuing
a Final Rule implementing section 343 of the Dodd-Frank
Act in 2010, all non-interest bearing transaction accounts
at all FDIC-insured institutions are fully insured through
December 31, 2012, regardless of the balance of the
account. 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
2011 Form 10-K
5
provided to a depositor’s other deposit accounts held at an
FDIC-insured institution.
The FDIC reserve ratio will be increased to 1.35% ($1.35
for each $100 of insured deposits) by September 30, 2020
for the Deposit Insurance Fund (“DIF”), pursuant to the
requirements of the Dodd-Frank Act. The Federal Deposit
Insurance Reform Act of 2005 provides the FDIC Board of
Directors the authority to set the designated reserve ratio
and it cannot be less than 1.35%. The FDIC must adopt a
restoration plan when the reserve ratio falls below 1.35%
and may begin paying dividends when the reserve ratio
exceeds 1.50%. The DIF reserve ratio calculated by the
FDIC at September 30, 2011 was .12%. In 2011, the annual
insurance premiums on bank deposits insured by the DIF for
banks with at least $10 billion in total assets ranged from
$.025 to $.45 per $100 of deposits.
On April 1, 2011, the FDIC adopted a final rule requiring
changes in the FDIC insurance rate calculations for banks
over $10 billion in total assets. 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 2011 ranged from $.0066 to $.0100 for each $100 of
deposits. Financing Corporation assessments of $1.2 million
in each of 2011, 2010 and 2009 were paid by TCF Bank.
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, the OCC,
the FDIC, and the Consumer Financial Protection Bureau
(“CFPB”). Bank regulatory authorities may impose a
number of restrictions or new requirements on institutions,
including, but not limited to, growth limitations, dividend
restrictions, increased regulatory capital requirements,
increased loan, lease and real estate loss reserve
requirements, increased supervisory assessments, 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 of 1970 (the “BSA” or “Bank Secrecy
Act”), 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 Consent Order
(the “Order”) by the OCC, TCF Bank’s primary banking
regulator, addressing certain matters related to the BSA.
The Order requires TCF Bank to address deficiencies in
TCF Bank’s BSA program identified by the OCC, including
review and revision of TCF 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.
TCF Bank is also required to address performing appropriate
due diligence when an account is opened, and to review
transactions since November 2008 for compliance. TCF
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. While
the Order does not call for the payment of a civil money
penalty, material failure to comply with the Order could
result in additional enforcement actions by the OCC,
including payment of a civil money penalty. Such penalties
could be required for identified program violations, for
violating the Order, or for other deficiencies in TCF’s
compliance with the BSA in past or future periods, and
TCF believes the OCC will be issuing a written notice to TCF
related to TCF’s BSA compliance deficiencies. Under this
notice, TCF will be provided the opportunity to respond to
the OCC and its findings outlined in this notice. After the
OCC’s review of TCF’s response to the notice, the OCC may
impose a penalty related to these findings.
Subsidiaries of TCF may also be subject to state
and/or self-regulatory organization licensing, regulation
and examination requirements in connection with
certain activities.
National Bank Investment limitations Permissible
investments by national banks are limited by the National
Bank Act of 1864 and by rules of the OCC. Non-traditional
bank activities permitted by the Gramm-Leach-Bliley Act of
1999 will subject a bank to additional regulatory limitations
6 TCF Financial Corporation and Subsidiaries
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 Congress enacted the Dodd-Frank Act in
July 2010. The Dodd-Frank Act created the CFPB and gave
it broad rulemaking authority to administer and carry
out the purposes and objectives of the federal consumer
financial laws, with respect to all financial institutions
that offer financial products and services to consumers.
The CFPB is authorized to prescribe rules identifying and
prohibiting acts or practices that are unfair, deceptive or
abusive in connection with any transaction with a consumer
for a consumer financial product or service, or the offering
of a consumer financial product or service. The CFPB has
examination and enforcement authority over all banks and
savings institutions with more than $10 billion in assets,
which includes TCF Bank.
Additionally, the Dodd-Frank Act:
• Directed the Federal Reserve to issue rules limiting
debit-card interchange fees;
• After a three-year phase-in period beginning
January 1, 2013, removes trust preferred securities
as a permitted component of a holding company’s
tier 1 capital;
• Provided for an increase in the FDIC assessment for
depository institutions with assets of $10 billion or
more, increased the minimum reserve ratio for the
deposit insurance fund to 1.35% and changed the
basis for determining FDIC premiums from deposits
to assets;
• Changes standards for federal preemption that have
been applicable for national banks and federal savings
associations;
• Provided for new disclosure and other requirements
relating to executive compensation and corporate
governance, including requiring an advisory vote on
executive compensation (“Say on Pay”);
• 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, and
makes more loans subject to requirements for higher cost
loans, new disclosures and certain other restrictions;
• Permanently increased the maximum amount of
deposit insurance for banks, savings institutions and
credit unions to $250,000 per depositor, retroactive to
January 1, 2008, provided that non-interest bearing
transaction accounts have unlimited deposit insurance
through December 31, 2012 and allows depository
institutions to pay interest on business checking
accounts; and
• Required 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
consolidated federal income tax return is closed
through 2007.
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 “Item 1A. 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 13 of Notes to Consolidated Financial Statements for
additional information regarding TCF’s income taxes.
Available Information
TCF’s website, http://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
United States 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.
2011 Form 10-K
7
Item 1A. Risk Factors
Various risks and uncertainties may affect TCF’s business.
Any of the risks described below or elsewhere in this Annual
Report on Form 10-K or TCF’s other SEC filings may have
a material impact on TCF’s financial condition or results
of operations.
TCF’s earnings are significantly affected by
general economic conditions.
TCF’s operations and profitability are impacted by general
business and economic conditions in the local markets
in which TCF operates, the U.S. generally and abroad.
Economic conditions have a significant impact on the
demand for TCF’s products and services, as well as the
ability of its customers to repay loans, the value of the
collateral securing loans and the stability of its deposit
funding sources. A significant decline in general economic
conditions caused by inflation, recession, unemployment,
changes in securities markets, changes in housing market
prices or other factors could impact economic conditions
and, in turn, could have a material adverse effect on TCF’s
financial condition and results of operations.
Additionally, adverse economic conditions may result
in a decline in demand for some types of equipment that
TCF leases or finances, which could result in a decline in the
amount of new equipment being placed in service, as well
as declines in equipment values for equipment already in
service. Adverse economic conditions may also hinder TCF
from expanding the specialty finance businesses by limiting
its ability to attract and retain customers as expected. Any
such difficulties in TCF’s specialty finance businesses could
have a material adverse effect on its financial condition
and results of operations.
Proposed and future legislative and regulatory
initiatives may substantially increase compliance
burdens, which could have a material adverse
effect on TCF’s financial condition and results
of operations.
Future legislative and regulatory initiatives cannot be
fully or accurately predicted. Such proposals may impose
more stringent standards than currently applicable
or anticipated with respect to capital and liquidity
requirements for depository institutions. For example,
Congress enacted the Dodd-Frank Act in July 2010.
Uncertainty remains as to its ultimate impact, which could
have a material adverse effect on the financial services
industry as a whole and, specifically, on TCF’s financial
condition and results of operations.
In addition, the Dodd-Frank Act created the Consumer
Financial Protection Bureau (the “CFPB”) and gave the CFPB
broad rulemaking authority to administer and carry out the
purposes and objectives of the federal consumer financial
laws, with respect to all financial institutions that offer
financial products and services to consumers. The CFPB is
authorized to prescribe rules identifying and prohibiting
acts or practices that are unfair, deceptive or abusive in
connection with any transaction with a consumer for a
consumer financial product or service, or the offering of a
consumer financial product or service. The term “abusive”
is new and untested, and TCF cannot predict how it will
be enforced. The CFPB has examination and enforcement
authority over all banks and savings institutions with more
than $10 billion in assets, which includes TCF Bank.
Based on the provisions of the Dodd-Frank Act and
anticipated implementing regulations, it is highly likely
that banks and bank holding companies will be subject
to significantly increased regulation and compliance
obligations that expose TCF to noncompliance risk and
consequences, which could have a material adverse effect
on TCF’s financial condition and results of operations.
An inability to obtain needed liquidity could
have a material adverse effect on TCF’s financial
condition and results of operations.
TCF’s liquidity could be limited by an inability to access
the capital markets or unforeseen outflows of cash, which
could arise due to circumstances outside of its control
such as a general market disruption or an operational
problem that affects TCF or third parties. TCF’s credit
rating is important to its liquidity. A reduction or
anticipated reduction in TCF’s credit ratings could adversely
affect its liquidity and competitive position, increase its
borrowing costs, limit its access to the capital markets,
affect its ability to hedge foreign currency exposure or
trigger unfavorable contractual obligations. An inability
to meet its funding needs on a timely basis could have a
material adverse effect on TCF’s financial condition and
results of operations.
8 TCF Financial Corporation and Subsidiaries
Loss of customer deposits could increase TCF’s
funding costs.
TCF relies on bank deposits to be a low cost and stable
source of funding. TCF competes with banks and other
financial institutions for deposits. If TCF’s competitors
raise the rates they pay on deposits, TCF’s funding costs may
increase through either a loss of deposits or an increase in
rates paid by TCF to avoid losing deposits. Increased funding
costs could reduce TCF’s net interest margin and net interest
income, which could have a material adverse effect on TCF’s
financial condition and results of operations.
TCF is subject to interest-rate risk.
TCF’s earnings and cash flows largely depend upon its net
interest income. Interest rates are highly sensitive to many
factors that are beyond TCF’s control, including general
economic conditions and policies of various governmental
and regulatory agencies, including the Federal Reserve.
Changes in monetary policy, including changes in interest
rates, could influence not only the interest TCF receives on
loans and other investments and the amount of interest TCF
pays on deposits and other borrowings, but such changes
could also affect: (i) TCF’s ability to originate loans
and obtain deposits; (ii) the fair value of TCF’s financial
assets and liabilities; and (iii) the average duration of
TCF’s interest-earning assets. If the interest rates paid
on deposits and other borrowings increase at a faster
rate than the interest rates received on loans and other
investments, then TCF’s net interest income and earnings
could be adversely affected. Earnings could also be
adversely affected if the interest rates received on loans
and other investments fall more quickly than the interest
rates paid on deposits and other borrowings. Although
management believes it has implemented effective asset
and liability management strategies, any substantial,
unexpected and prolonged change in market interest
rates could have a material adverse effect on its financial
condition and results of operations.
The soundness of other financial institutions
could adversely affect TCF.
TCF’s ability to engage in routine funding transactions
could be adversely affected by the actions and commercial
soundness of other financial institutions. TCF routinely
executes transactions with counterparties in the financial
industry, including brokers and dealers, commercial banks
and other institutional clients. As a result, defaults by, or
even rumors regarding, any financial institutions, or the
financial services industry generally, could lead to losses
or defaults by TCF. Many of these transactions expose TCF
to credit risk in the event of default of the counterparty or
client. In addition, TCF’s credit risk may be exacerbated when
the collateral held by TCF cannot be realized or is liquidated at
prices not sufficient to recover the full amount of the financial
exposure. Any such losses could have a material adverse
effect on TCF’s financial condition and results of operations.
TCF’s framework for managing risks may not be
effective in mitigating risk and any resulting loss.
TCF’s risk management framework seeks to mitigate risk
and any resulting loss. TCF has established processes
intended to identify, measure, monitor, report and analyze
the types of risk to which TCF is subject, including liquidity,
credit, market, interest rate, operational, legal and
compliance and reputational risk. However, as with any
risk management framework, there are inherent limitations
to TCF’s risk management strategies. There may exist, or
develop in the future, risks that TCF has not appropriately
anticipated or identified. Any future breakdowns in TCF’s
risk management framework could have a material adverse
effect on its financial condition and results of operations.
TCF is subject to extensive government
regulation and supervision.
TCF, its subsidiary TCF Bank and certain indirect subsidiaries
are subject to extensive federal and state regulation and
supervision. Banking regulations are primarily intended
to protect depositors’ funds, federal deposit insurance
funds and the banking system as a whole, not stockholders.
These regulations affect TCF’s lending practices, capital
structure, investment practices, dividend policy and growth,
among other things. While TCF has policies and procedures
designed to prevent violations of the extensive federal and
state regulation it is subject to, there can be no assurance
that such violations will not occur and failure to comply
with these statutes, regulations or policies could result in
sanctions against TCF by regulatory agencies, civil money
penalties and reputational damage, any of which could
have a material adverse effect on its financial condition
and results of operations.
Further, the Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism Act of 2001 (the “Patriot Act”) and the
Bank Secrecy Act require financial institutions to develop
2011 Form 10-K
9
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 procedures
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 July 2010, TCF Bank agreed to the issuance of a
Consent Order (the “Order”) by the OCC requiring TCF Bank
to address deficiencies in its BSA program. The Order does
not call for the payment of a civil money penalty, however
such penalties could be required for identified program
violations, for violating the Order, or for other deficiencies
in TCF Bank’s compliance with the BSA in past or future
periods. TCF believes the OCC will be issuing a written notice
to TCF related to TCF’s BSA deficiencies. Under this notice,
TCF will be provided the opportunity to respond to the OCC
and its findings outlined in this notice. After the OCC’s
review of TCF’s Response to the Notice, the OCC may impose
a penalty related to these findings.
Increased competition in an already highly
competitive financial services industry could have
a material adverse effect on TCF’s financial
condition and results of operations.
The financial services industry is highly competitive
and could become even more competitive as a result of
legislative, regulatory and technological changes, as well
as continued industry consolidation which may increase in
connection with current economic and market conditions.
TCF competes with other commercial banks, savings
and loan associations, mutual savings banks, finance
companies, mortgage banking companies, credit unions
and investment companies. In addition, technology has
lowered barriers to entry and made it possible for non-
banks to offer products and services traditionally only
provided by banks. Some of TCF’s competitors have fewer
regulatory constraints or lower cost structures. Also, the
potential need to adapt to industry changes in information
technology systems, on which TCF and the financial services
industry generally are highly dependent, could present
operational issues and require considerable capital
spending. As a result, any increased competition in the
already highly competitive financial services industry could
have a material adverse effect on TCF’s financial condition
and results of operations.
The allowance for loan and lease losses
maintained by TCF may not be sufficient.
All borrowers carry the potential to default and TCF’s
remedies to recover may not fully satisfy the obligations
owed to TCF. TCF maintains an allowance for loan losses,
which is a reserve established through a provision for loan
losses charged to expense, which represents management’s
best estimate of probable credit losses that have been
incurred within the existing portfolio of loans. The level
of the allowance for loan losses reflects management’s
continuing evaluation of industry concentrations, specific
credit risks, loan loss experience, current loan portfolio
quality, present economic, political and regulatory
conditions and unidentified losses in the current loan
portfolio. The determination of the appropriate level of
the allowance for loan losses involves a high degree of
subjectivity and requires management to make significant
estimates of current credit risks using qualitative and
quantitative factors, each of which is subject to significant
change. Changes in economic conditions affecting
borrowers, new information regarding existing loans,
identification of additional problem loans and other
factors may require an increase in the allowance for loan
losses. In addition, bank regulatory agencies periodically
review TCF’s allowance for loan losses and may require an
increase in the provision for loan losses or the recognition
of additional loan charge-offs, based on judgments
different than those of management. An increase in the
allowance for loan losses would result in a decrease in net
income, and possibly risk-based capital, and could have
a material adverse effect on TCF’s financial condition and
results of operations.
TCF’s earnings are significantly affected by
the fiscal and monetary policies of the federal
government and its agencies.
The policies of the Federal Reserve impact TCF significantly.
The Federal Reserve regulates the supply of money and
credit in the U.S. Its policies directly and indirectly
influence the rate of interest earned on loans and paid on
borrowings and interest-bearing deposits and also affect
the value of financial instruments that TCF holds. Those
policies determine to a significant extent the cost of funds
for lending and investing. Changes in those policies are
beyond TCF’s control and are difficult to predict. Federal
Reserve policies can also affect TCF’s borrowers, potentially
increasing the risk that they may fail to repay their loans.
10 TCF Financial Corporation and Subsidiaries
For example, a tightening of the money supply by the
Federal Reserve could reduce the demand for a borrower’s
products and services. This could adversely affect the
borrower’s earnings and ability to repay its loan. As a
result, changes to the fiscal and monetary policies by the
Federal Reserve could have a material adverse effect on
TCF’s financial condition and results of operations.
The success of TCF’s supermarket branches
depends 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 TCF’s supermarket
partners could result in the loss of supermarket branches or
could increase costs to operate the supermarket branches.
At December 31, 2011, TCF had 231 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, continued difficult economic conditions, or financial
or labor difficulties in the supermarket industry, may
reduce activity in TCF’s supermarket branches. As a result,
economic difficulties for any of TCF’s supermarket partners
could have a material adverse effect on its financial
condition and results of operations.
New lines of business or new products and
services may subject TCF to additional risk.
From time to time, TCF may implement new lines of business
or offer new products and services within existing lines
of business. There are substantial risks and uncertainties
associated with these efforts, particularly in instances
where the markets are not fully developed. In developing
and marketing new lines of business and new products or
services, TCF may invest significant time and resources.
Initial timetables for the introduction and development
of new lines of business and new products or services may
not be achieved and price and profitability targets may
not prove feasible. External factors, such as compliance
with regulations, competitive alternatives and shifting
market preferences may also impact the successful
implementation of a new line of business or a new product
or service. Furthermore, any new line of business or new
product or service could have a significant impact on the
effectiveness of TCF’s system of internal controls. Failure
to successfully manage these risks in the development and
implementation of new lines of business and new products
or services could have a material adverse effect on TCF’s
financial condition and results of operations.
Consumers may decide not to use banks to
complete their financial transactions.
Technology and other changes are allowing consumers
to complete financial transactions through alternative
methods that historically have involved banks. For
example, consumers can now maintain funds that would
have historically been held as bank deposits in brokerage
accounts, mutual funds or general-purpose reloadable
prepaid cards. Consumers can also complete transactions
such as paying bills and transferring funds directly without
the assistance of banks. The process of eliminating banks
as intermediaries could result in the loss of fee income,
as well as the loss of customer deposits and the related
income generated from those deposits. The loss of these
revenue streams and the lower cost of deposits as a source
of funds could have a material adverse effect on TCF’s
financial condition and results of operations.
Failure to keep pace with technological change
could adversely affect TCF’s business.
The financial services industry is continually undergoing
rapid technological change with frequent introductions
of new technology-driven products and services. TCF’s
future success depends, in part, upon its ability to address
the needs of its customers by using technology to provide
products and services that will satisfy customer demands,
as well as to create additional efficiencies in its operations.
Many of TCF’s competitors have substantially greater
resources to invest in technological improvements. TCF
may not be able to effectively implement new technology-
driven products and services or be successful in marketing
these products and services to its customers. Failure to
successfully keep pace with technological change affecting
the financial services industry could have a material adverse
effect on TCF’s financial condition and results of operations.
2011 Form 10-K
11
TCF relies on its systems and counterparties,
and any failures could have a material
adverse effect on its financial condition and
results of operations.
TCF settles funds on behalf of financial institutions,
other businesses and consumers and receives funds from
payment networks, consumers and other paying agents.
TCF’s businesses depend on their ability to process, record
and monitor a large number of complex transactions. If
any of TCF’s financial, accounting or other data processing
systems fail or are otherwise compromised, or if personal
information of TCF’s customers or clients were mishandled,
misused (whether by employees, counterparties or
hackers), TCF could suffer regulatory consequences,
reputational damage and financial losses, any of which
could have a material adverse effect on its financial
condition and results of operations.
Additionally, TCF may be subject to disruptions of its
operating systems arising from events that are wholly or
partially beyond its control, which may include, for example,
computer viruses, electrical or telecommunications
outages, natural disasters, terrorist acts or other damage
to property or physical assets. Such disruptions may give rise
to loss of services to customers and loss or liability to TCF.
Any system failure could have a material adverse effect on
TCF’s financial condition and results of operations.
Financial institutions depend on the accuracy
and completeness of information about customers
and counterparties.
In deciding whether to extend credit or enter into other
transactions, TCF may rely on information furnished by
or on behalf of customers and counterparties, including
financial statements, credit reports and other financial
information. TCF may also rely on representations of those
customers, counterparties or other third parties, such as
independent auditors, as to the accuracy and completeness
of that information. Reliance on inaccurate or misleading
financial statements, credit reports or other financial
information could cause TCF to enter into unfavorable
transactions, which could have a material adverse effect
on TCF’s financial condition and results of operations.
Negative publicity could damage TCF’s reputation.
Reputation risk, or the risk to earnings and capital from
negative public opinion, is inherent in TCF’s business.
Negative public opinion could adversely affect TCF’s
ability to keep and attract customers and expose it to
adverse legal and regulatory consequences. Negative
public opinion could result from TCF’s actual or alleged
conduct in any number of activities, including lending
practices, corporate governance, regulatory compliance,
mergers and acquisitions, disclosure, sharing or inadequate
protection of customer information or from actions taken
by government regulators and community organizations in
response to that conduct. Because TCF conducts most of its
businesses under the “TCF” brand, negative public opinion
about one business could affect its other businesses.
TCF’s internal controls may be ineffective.
Management regularly reviews and updates the internal
controls, disclosure controls and procedures and corporate
governance policies and procedures. Any system of
controls, however well designed and operated, is based
in part on certain assumptions and can provide only
reasonable, not absolute, assurances that the objectives
of the system are met. Any failure or circumvention of
TCF’s controls and procedures or failure to comply with
regulations related to controls and procedures could have
a material adverse effect on its financial condition and
results of operations.
Failure to attract and retain key personnel could
have a material adverse effect on TCF’s financial
condition and results of operations.
TCF’s success depends to a large extent upon its ability
to attract and retain key personnel. The loss of key
personnel could have a material adverse impact on TCF’s
business because of their skills, market knowledge, industry
experience and the difficulty of promptly finding a qualified
replacement. Additionally, portions of TCF’s business
are relationship driven, and many of its key personnel
have extensive customer relationships. Loss of such key
personnel to a competitor could result in the loss of some
of TCF’s customers. As a result, a failure to attract and
retain key personnel could have a material adverse effect
on TCF’s financial condition and results of operations.
12 TCF Financial Corporation and Subsidiaries
TCF relies on other companies to provide key
components of its business infrastructure.
Third party vendors provide key components of TCF’s
business infrastructure, such as internet connections,
network access and transaction and other processing
services. While TCF has selected these third party vendors
carefully, it does not control their actions. Any problems
caused by these third parties, including as a result of
inadequate or interrupted service, could adversely
affect TCF’s ability to deliver products and services to its
customers and otherwise to conduct its business. Replacing
these third party vendors could also entail significant delay
and expense.
TCF relies on dividends from TCF Bank for
most of its revenue.
TCF is a separate and distinct legal entity from its banking
and other subsidiaries. A substantial portion of TCF’s
revenue comes from dividends from TCF Bank. These
dividends are the principal source of funds to pay dividends
and interest and principal on its debt. Various federal and
state laws and regulations limit the amount of dividends
that TCF Bank may pay to it. In the event TCF Bank is unable
to pay dividends to it, TCF may not be able to pay obligations
or pay dividends, which would have a material adverse
effect on TCF’s financial condition and results of operations.
Changes in accounting policies or in
accounting standards could materially affect
how TCF reports its financial condition and
results of operation.
TCF’s accounting policies are fundamental to the
understanding its financial condition and results of
operations. Some of these policies require the use of
estimates and assumptions that may affect the value of
TCF’s assets or liabilities and results of operations. Some of
TCF’s accounting policies are critical because they require
management to make difficult, subjective and complex
judgments about matters that are inherently uncertain
and because materially different amounts would be
reported if different estimates or assumptions were used.
If such estimates or assumptions underlying the financial
statements are incorrect, TCF could experience material
losses. From time to time, the Financial Accounting
Standards Board (“FASB”) and the SEC change the financial
accounting and reporting standards or the interpretation
of those standards that govern the preparation of TCF’s
external financial statements. These changes are beyond
TCF’s control, can be difficult to predict and could
materially impact how TCF reports its financial condition
and results of operations. Additionally, TCF could be
required to apply a new or revised standard retrospectively,
resulting in the restatement of prior period financial
statements in material amounts.
TCF is subject to examinations and challenges
by tax authorities.
TCF is subject to federal and state income tax regulations,
which often require interpretation due to their complexity.
Changes in income tax regulations or in how the regulations
are interpreted could have a material adverse effect on
TCF’s results of operations. In the normal course of business,
TCF is routinely subject to examinations and challenges
from federal and state taxing authorities regarding the
amount of taxes due in connection with investments TCF
has made and the businesses in which it has engaged.
Recently, federal and state taxing authorities have become
increasingly aggressive in challenging tax positions taken
by financial institutions. These tax positions may relate to
tax compliance, sales and use, franchise, gross receipts,
payroll, property and income tax issues, including tax base,
apportionment and tax credit planning. The challenges
made by taxing authorities may result in adjustments to the
timing or amount of taxable income or deductions, or the
allocation of income among tax jurisdictions. If any such
challenges are made and are not resolved in TCF’s favor,
they could have a material adverse effect on its financial
condition and results of operations.
Additionally, 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
of 1986, as amended, 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.
2011 Form 10-K
13
Significant legal actions could subject TCF
to substantial uninsured liabilities.
TCF is subject to various claims related to its operations.
These claims and legal actions, including supervisory
actions by its regulators, could involve large monetary
claims or monetary penalties, as well as significant
defense costs. To protect itself from the cost of these
claims, TCF maintains insurance coverage in amounts and
with deductibles that it believes are appropriate for its
operations. However, TCF’s insurance coverage only covers
certain types of liability, and such insurance may not
continue to be available to TCF at a reasonable cost, or at
all. As a result, TCF may be exposed to substantial uninsured
liabilities, which could have a material adverse effect on
TCF’s financial condition and results of operations.
In addition, customers may make claims and take
legal action pertaining to the performance by TCF of its
fiduciary responsibilities. Whether customer claims and
legal action related to the performance of TCF’s fiduciary
responsibilities are founded or unfounded, such claims and
legal actions may result in significant financial liability and
could adversely affect the market perception of TCF and its
products and services, as well as impact customer demand
for those products and services. Any financial liability or
reputational damage could have a material adverse effect
on TCF’s financial condition and results of operations.
TCF is subject to environmental liability risk
associated with lending activities.
A significant portion of TCF’s loan portfolio is secured
by real property. In the ordinary course of business, TCF
may foreclose on and take title to properties securing
certain loans. In doing so, there is a risk that hazardous
or toxic substances could be found on these properties.
If hazardous or toxic substances are found, TCF may be
liable for remediation costs, as well as for personal injury
and property damage. Environmental laws may require TCF
to incur substantial expenses and may materially reduce
the affected property’s value or limit TCF’s ability to use
or sell the affected property. In addition, future laws or
more stringent interpretations or enforcement policies
with respect to existing laws may increase TCF’s exposure
to environmental liability. The remediation costs and any
other financial liabilities associated with an environmental
hazard could have a material adverse effect on TCF’s
financial condition and results of operations.
Acquisitions may disrupt TCF’s business
and dilute stockholder value.
TCF regularly evaluates merger and acquisition
opportunities and conducts due diligence activities
related to possible transactions with banks or other
financial institutions. As a result, negotiations may take
place and future mergers or acquisitions involving cash,
debt or equity securities may occur at any time. TCF
seeks merger or acquisition partners that are culturally
similar, have experienced management and possess
either significant market presence or have potential for
improved profitability through financial management,
economies of scale or expanded services. Acquiring other
banks, businesses or branches involves potential adverse
impact to TCF’s results of operations and various other
risks commonly associated with acquisitions, such as:
difficulty in estimating the value of the target company;
payment of a premium over book and market values that
may dilute TCF’s tangible book value and earnings per share
in the short and long term; potential exposure to unknown
or contingent liabilities of the target company; exposure
to potential asset quality issues of the target company;
volatility in reported income as goodwill impairment losses
could occur irregularly and in varying amounts; difficulty
and expense of integrating the operations and personnel
of the target company; inability to realize the expected
revenue increases, cost savings, increases in geographic
or product presence or other projected benefits; potential
disruption to TCF’s business; potential diversion of TCF
management’s time and attention; potential loss of key
employees and customers of the target company; and
potential changes in banking or tax laws or regulations
that may affect the target company.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Offices At December 31, 2011, TCF owned the buildings
and land for 144 of its bank branch offices, owned the
buildings but leased the land for 23 of its bank branch
offices and leased or licensed the remaining 266 bank
branch offices, all of which are functional and appropriately
maintained. Bank branch properties owned by TCF had an
14 TCF Financial Corporation and Subsidiaries
aggregate net book value of approximately $281.2 million at
December 31, 2011. At December 31, 2011, the aggregate
net book value of leasehold improvements associated with
leased bank branch office facilities was $20.3 million. In
addition to the branch offices, TCF owned and leased other
facilities with an aggregate net book value of $49.5 million
at December 31, 2011. For more information on premises
and equipment, see Note 8 of Notes to Consolidated
Financial Statements.
Item 3. Legal Proceedings
None.
Item 4. Mine Safety Disclosures
Not applicable.
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
common 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, 2012, there were 7,016 holders of
record of TCF’s common stock.
High
$11.68
17.37
16.04
17.37
$16.63
17.66
18.89
16.83
Dividends
Declared
Low
$ 8.61
8.66
13.37
14.60
$12.90
13.87
14.95
13.40
$.05
.05
.05
.05
$.05
.05
.05
.05
2011
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
2010
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
2011 Form 10-K
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 management 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 stockholders, while ensuring that
past and prospective earnings retention is consistent with
TCF’s capital needs, asset quality, risk profile 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 15 of Notes to Consolidated Financial Statements.
15
Total Return Performance
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, 2006 and reinvestment of
all dividends).
The New TCF Peer Group for 2012 consists of the publicly-
traded banks and thrifts with total assets ranging from
$10 billion to $50 billion as of December 31, 2011. This
is a change from TCF’s previously defined peer group
which consisted of 30 publicly-traded banks and thrifts,
15 immediately larger than and 15 immediately smaller
than TCF. TCF changed its peer group to align itself with
financial institutions that are similarly impacted by
recent regulatory and legislative changes because TCF
believes that the New Peer Group represents a more
relevant group of companies in the financial services
industry. The New and Old TCF Peer Groups are shown
below for comparison purposes.
TCF Stock Performance Chart
Total Return Performance
TCF Financial Corporation
SNL Bank and Thrift Index(1)
S&P 500 Index
New TCF Peer Group(2)
Old TCF Peer Group(3)
$140
120
100
80
60
40
e
u
l
a
V
x
e
d
n
I
12/31/06
12/31/07
12/31/08
12/31/09
12/31/10
12/31/11
Index
TCF Financial Corporation
SNL Bank and Thrift (1)
S&P 500 Index
New TCF Peer Group (2)
Old TCF Peer Group (3)
12/31/06
100.00
100.00
100.00
100.00
100.00
12/31/07
67.96
76.26
105.49
84.38
80.30
Period Ending
12/31/08
55.03
43.85
66.46
77.39
71.95
12/31/09
56.49
43.27
84.05
71.04
64.65
12/31/10
62.23
48.30
96.71
78.72
71.79
12/31/11
44.01
37.56
98.76
65.64
61.86
(1) Includes all major exchange (NYSE, NYSE Amex, NASDAQ) banks and thrifts in SNL’s coverage universe (476 companies as of December 31, 2011).
(2) The New TCF Peer Group consists of the publicly-traded banks and thrifts with total assets ranging from $10 billion to $50 billion as of December 31, 2011. The New TCF
Peer Group includes: Hudson City Bancorp, Inc.; New York Community Bancorp, Inc.; Popular, Inc.; First Niagara Financial Group, Inc.; First Republic Bank; People’s
United Financial, Inc.; Synovus Financial Corp.; BOK Financial Corporation; First Horizon National Corporation; City National Corporation; East West Bancorp, Inc.;
Associated Banc-Corp; First Citizens BancShares, Inc.; Commerce Bancshares, Inc.; Cullen/Frost Bankers, Inc.; SVB Financial Group; Hancock Holding Company; Webster
Financial Corporation; Astoria Financial Corporation; Fulton Financial Corporation; Wintrust Financial Corporation; Susquehanna Bancshares, Inc.; Signature Bank; First
Merit Corporation; Valley National Bancorp; Bank of Hawaii Corporation; Washington Federal, Inc.; Flagstar Bancorp, Inc.; UMB Financial Corporation; First BanCorp.;
BancorpSouth, Inc.; PrivateBancorp, Inc.; IBERIABANK Corporation; International Bancshares Corporation; Umpqua Holdings Corporation; BankUnited, Inc.; TFS Financial
Corporation (MHC); Investors Bancorp, Inc. (MHC); and Cathay General Bancorp.
(3) The Old TCF Peer Group consisted of 30 publicly-traded banks and thrifts, 15 immediately larger than and 15 immediately smaller than TCF Financial Corporation in total
assets as of September 30, 2011. The Old Peer Group included: Popular, Inc.; First Niagara Financial Group, Inc.; Synovus Financial Corporation; People’s United Financial, Inc.;
First Republic Bank; First Horizon National Corporation; BOK Financial Corporation; City National Corporation; Associated Banc-Corp; East West Bancorp, Inc.; First Citizens
BancShares, Inc.; Commerce Bancshares, Inc.; Cullen/Frost Bankers, Inc.; Hancock Holding Company; SVB Financial Group; Webster Financial Corporation; Astoria Financial
Corporation; Fulton Financial Corporation; Wintrust Financial Corporation; FirstMerit Corporation; Susquehanna Bancshares, Inc.; Valley National Bancorp; Signature Bank;
Flagstar Bancorp, Inc.; First BanCorp.; Washington Federal, Inc.; Bank of Hawaii Corporation; BancorpSouth, Inc.; UMB Financial Corporation; and PrivateBancorp, Inc.
Source: SNL Financial LC and Standard & Poor’s ©2012
16 TCF Financial Corporation and Subsidiaries
Repurchases of TCF Stock
The following table summarizes common stock share repurchase activity for the quarter ended December 31, 2011.
Period
October 1 to October 31, 2011
Share repurchase program (1)
Employee transactions (2)
November 1 to November 30, 2011
Share repurchase program (1)
Employee transactions (2)
December 1 to December 31, 2011
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
–
6,564
–
–
–
–
–
6,564
$ –
$9.45
$ –
$ –
$ –
$ –
$ –
$9.45
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 and was announced in a press release dated April 16, 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.
2011 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. Prior period financial data has been revised, as applicable, for a retrospective change in
accounting principle. See Note 28 of Notes to Consolidated Financial Statements for additional information.
Five-Year Financial Summary
Consolidated Income:
(Dollars in thousands, except per-share data)
Total revenue
Net interest income
Provision for credit losses
Fees and other revenue
Gains on securities, net
Gains on auto loans held for sale, net
Visa share redemption
Gains on sales of branches
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:
(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
Stockholders’ equity
Book value per common share
Key Ratios and Other Data:
Year Ended December 31,
2011
$ 1,144,122
$ 699,688
200,843
436,038
7,263
1,133
–
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
–
–
–
764,451
178,828
64,441
114,387
4,993
109,394
–
–
756,335
244,415
90,171
154,244
3,297
150,947
–
–
756,655
143,670
49,811
93,859
(410)
94,269
18,403
–
718,853
181,210
68,096
113,114
–
113,114
2,540
37,894
653,887
380,755
108,535
272,220
–
272,220
–
Compound Annual
Growth Rate
1-Year
2011/2010
5-Year
2011/2006
(7.5)%
.1
(15.1)
(14.3)
(75.1)
N.M.
–
–
1.1
(26.8)
(28.5)
(25.8)
51.4
(27.5)
–
2.2%
5.4
57.6
(2.1)
N.M.
N.M.
–
(100.0)
3.5
(13.2)
(9.3)
(15.0)
N.M.
(15.8)
–
$ 109,394
$ 150,947
$ 75,866
$ 110,574
$ 272,220
(27.5)
(15.8)
$ 1.08
$ .71
$ .71 $ 1.08
$ .20
$ .20
$ .60
$ .60
$ .40
$ .88
$ .88
$ 1.00
$ 2.13
$ 2.13
$ .97
(34.3)
(34.3)
–
(18.4)
(18.4)
(26.3)
Compound Annual
Growth Rate
1-Year
2011/2010
5-Year
2011/2006
At December 31,
2011
$14,150,255
2,324,038
18,979,388
2010
$14,788,304
1,931,174
18,465,025
2009
$14,590,744
1,910,476
17,885,175
2008
2007
$13,345,889 $12,494,370
1,963,681
15,977,054
1,966,104
16,740,357
11,136,389
1,065,615
12,202,004
4,388,080
1,868,133
$ 11.65
10,556,788
1,028,327
11,585,115
4,985,611
1,471,663
$ 10.30
10,380,814
1,187,505
11,568,319
4,755,499
1,175,362
$ 9.10
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
$ 8.99 $ 8.68
(4.3)%
20.3
2.8
5.5
3.6
5.3
(12.0)
26.9
13.1
Return on average assets
Return on average common equity
Net interest margin
Net charge-offs as a percentage of average loans and leases
Average total equity to average assets
N.M. Not Meaningful.
18 TCF Financial Corporation and Subsidiaries
2011
.61%
6.32
3.99
1.45
9.24
2008
.69%
2010
.85%
At or For the Year Ended December 31,
2009
.54%
6.57
3.87
1.34
7.20
10.67
4.15
1.47
7.83
10.03
3.91
.78
7.04
4.3%
5.1
5.3
8.9
(15.6)
4.5
4.1
12.6
8.0
2007
1.80%
26.34
3.94
.29
6.82
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
Credit Quality
Other Real Estate Owned and Repossessed
and Returned Equipment
Liquidity Management
Deposits
Borrowings
Contractual Obligations and Commitments
Equity
Summary of Critical Accounting Estimates
Recent Accounting Pronouncements
Fourth Quarter Summary
Legislative, Legal and Regulatory Developments
Forward-Looking Information
Page
19
20
20
21
21
21
25
25
28
29
30
30
30
34
42
44
44
44
45
45
47
48
48
49
49
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 (“TCF” or
the “Company”), is a national bank holding company based
in Wayzata, Minnesota. Its principal subsidiary, TCF National
Bank (“TCF Bank”), is headquartered in South Dakota. TCF
had 434 branches in Minnesota, Illinois, Michigan, Colorado,
Wisconsin, Indiana, Arizona and South Dakota (TCF’s primary
banking markets) at December 31, 2011.
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 philosophy 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 complementary 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, inventory finance and auto finance. TCF refers to
its combined leasing and equipment finance, inventory
finance and auto 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, Inc., which delivers equipment finance
solutions to businesses in select markets, and Winthrop
Resources Corporation, which 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.
TCF Inventory Finance originates 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. In November 2011, TCF
entered into the auto finance business with its acquisition
of Gateway One Lending & Finance, LLC (“Gateway One”).
Gateway One currently originates and services loans on new
and used autos in 30 states and is expected to expand into
a nationwide business.
2011 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
61.2% of TCF’s total revenue in 2011. 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 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 economic conditions,
changing customer behavior and the impact of the
implementation 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.
In response to new regulations, TCF introduced a new
anchor checking account product that replaced the TCF
Totally Free Checking product. The new product carries
a monthly maintenance fee on accounts not meeting
certain specific requirements. In addition, the success of
the Michigan pilot of TCF’s daily overdraft product did not
transfer well to other markets. As a result, TCF introduced
additional overdraft product options in 2012.
The Company’s Visa® debit card program has grown
significantly since its inception in 1996. TCF is the 15th
largest issuer of Visa consumer debit cards in the United
States, based on payments volume for the three months
ended September 30, 2011, as published by Visa. TCF earns
interchange revenue from customer card transactions paid
primarily by merchants, not TCF’s customers. Card products
represent 27.1% of banking fee revenue for the year ended
December 31, 2011. 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.
TCF’s card revenues have been impacted by the Durbin
Amendment to the Dodd-Frank Wall Street and Consumer
Protection Act of 2010 (the “Dodd-Frank Act”), which
directed the Board of Governors of the Federal Reserve
System (“Federal Reserve”) to establish rules related to
debit-card interchange fees. The final rule, which became
effective on October 1, 2011, sets a base interchange fee
limit of 21 cents, plus a per transaction component of 5
basis points, and a one cent charge if issuers comply with
certain fraud protection provisions. This rule resulted in a
$14.7 million, or slightly more than 50%, reduction in TCF’s
card interchange revenue during the fourth quarter of 2011.
See “Item 1A. Risk Factors” and “Item 7. Management’s
Discussion and Analysis of Financial Condition and Results
of Operations — Consolidated Income Statement Analysis”
for more information.
On November 30, 2011, TCF’s wholly-owned subsidiary,
TCF Bank, completed the acquisition of Gateway One.
Headquartered in Anaheim, California, Gateway One utilizes
its more than 3,400 active dealer relationships to originate
loans and services to consumers in 30 states on new and
used autos. As part of the acquisition, TCF is retaining
Gateway One’s seasoned executive management team. The
addition of Gateway One further diversifies TCF’s lending
business and provides ample growth opportunities within
the U.S. auto lending marketplace, the second largest
consumer finance market in the U.S.
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 2011,
2010 and 2009 and on information about TCF’s balance
sheet, loan and lease portfolio, liquidity, funding resources,
capital and other matters.
Results of Operations
Performance Summary TCF reported diluted earnings
per common share of $.71 for 2011, compared with $1.08
for 2010 and $.60 for 2009. Net income was $109.4 million
for 2011, compared with $150.9 million for 2010 and
$94.3 million for 2009. Net income available to common
stockholders for 2009 includes a non-cash deemed
preferred stock dividend of $12 million, or 9 cents per
common share.
Return on average assets was .61% in 2011, compared with
.85% in 2010 and .54% in 2009. Return on average common
equity was 6.32% in 2011, compared with 10.67% in 2010
and 6.57% in 2009. The effective income tax rate for 2011
was 36%, compared with 36.9% in 2010 and 34.7% in 2009.
20 TCF Financial Corporation and Subsidiaries
Operating Segment Results RETAIL BANKING — Retail
Banking, consisting of branch banking and retail lending,
reported net income of $49.6 million for 2011, down from
$93 million in 2010 primarily due to decreased fee income in
branch banking. Retail Banking net interest income for 2011
was $448.1 million, up 1.2% from $443 million for 2010.
The Retail Banking provision for credit losses totaled
$162.2 million in 2011, up 15.3% from $140.6 million
in 2010. This increase was primarily due to higher net
charge-offs and troubled debt restructuring (“TDR”)
reserves for consumer real estate loans. Refer to “Item
7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations — Consolidated Income
Statement Analysis — Provision for Credit Losses” for
further discussion.
Retail Banking non-interest income totaled $337.7
million in 2011, compared with $409.6 million in 2010. Fees
and service charges were $213 million for 2011, down 20.4%
from $267.5 million in 2010. Card revenues were $96.1
million for 2011, down 13.4% from $111 million in 2010.
The decrease in card revenues was primarily attributable
to debit card interchange regulation which took effect on
October 1, 2011. 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 $545.3
million in 2011, down 3.1% from $562.8 million in 2010. The
decrease was primarily due to decreases in compensation
and employee benefit expenses and occupancy expenses as
a result of certain branch closures during 2011.
WHOLESALE BANKING — Wholesale Banking, consisting
of commercial banking, leasing and equipment finance,
inventory finance and auto finance, reported net income of
$76.5 million for 2011, up 93.4% from $39.5 million in 2010.
Net interest income for 2011 was $274.7 million, up 8.5%
from $253.1 million in 2010, as a result of increased income
from inventory finance loans primarily due to average
balance growth of $179 million, partially offset by decreases
in leasing and equipment finance and commercial real
estate portfolio balances and average yields.
The provision for credit losses for Wholesale Banking
totaled $36.1 million in 2011, down from $94 million in
2010. The decrease in the provision for credit losses from
2010 was primarily due to decreased net charge-offs and
decreased non-accrual loans in commercial lending and
leasing and equipment finance.
Wholesale Banking non-interest income totaled $98.7
million in 2011, essentially flat from 2010. Decreases in
operating lease revenues and floorplan inventory inspection
fees were offset by increases resulting from gains on
sales-type lease activity, gains on sales of auto loans and
increases in commercial loan prepayment fees.
Wholesale Banking non-interest expense totaled $208.7
million in 2011, up $17.4 million from $191.3 million in
2010, primarily as a result of increased FDIC insurance
premiums resulting from changes in the FDIC insurance
rate calculations for banks over $10 billion in total assets,
increased valuation write-downs of commercial real
estate properties owned, and the ramp-up of expenses
related to the exclusive financing program for Bombardier
Recreational Products (“BRP”) that will begin funding
early in 2012, partially offset by decreased operating lease
depreciation due to the reduction in the operating lease
portion of the portfolio.
TREASURY SERVICES — Treasury Services reported a
net loss of $17 million in 2011, down from net income
of $16.2 million in 2010. The $33.2 million change was
primarily due to gains on sales of securities of $31.5 million
in 2010 compared with gains of $8 million in 2011, along
with the impact of increased asset liquidity and increased
asset sensitivity, partially offset by a lower average cost
of borrowing.
Consolidated Income Statement Analysis
Net Interest Income Net interest income, the difference
between interest earned on loans and leases, investments
and other interest-earning assets (interest income), and
interest paid on deposits and borrowings (interest expense),
represented 61.2% of TCF’s total revenue in 2011, 56.5%
in 2010 and 54.6% in 2009. 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 conditions, 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.
2011 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 on a fully tax equivalent basis.
(Dollars in thousands)
Assets:
Investments and other
U.S. Government sponsored entities:
Mortgage-backed securities
U.S. Treasury securities
Other securities
Total securities available for sale (1)
Loans and leases held for sale
Loans and leases:
Consumer real estate:
Fixed-rate
Variable-rate
Consumer — other
Total consumer real estate and other
Commercial:
Fixed- and adjustable-rate
Variable-rate
Total commercial
Leasing and equipment finance
Inventory finance
Total loans and leases (2)
Total interest-earning assets
Other assets (3)
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
Year Ended
December 31, 2011
Year Ended
December 31, 2010
Average
Balance
Interest
Average
Yields
and
Rates
Average
Balance
Interest
Average
Yields
and
Rates
Change
Average
Balance
Interest
Average
Yields and
Rates
(bps)
$ 820,981
$ 7,836
.95%
$ 337,279
$ 5,509
1.63%
$ 483,702
$ 2,327
(68)
2,198,188
48,178
329
2,246,695
1,215
85,138
34
16
85,188
131
3.87
.07
4.86
3.79
10.78
1,817,413
71,233
454
1,889,100
–
80,332
93
20
80,445
–
281,427
122,532
1,715
405,674
164,368
30,742
195,110
184,575
61,583
846,942
940,097
4,451
28,942
2,951
36,344
8,764
45,108
45,108
171
192,984
193,155
238,263
238,263
6.08
5.13
8.71
5.77
5.76
4.33
5.47
6.00
7.19
5.83
5.34
.21
.51
.45
.43
.79
.47
.38
.35
4.29
4.24
1.69
1.44
4,627,047
2,386,234
19,687
7,032,968
2,854,327
710,758
3,565,085
3,074,207
856,271
14,528,531
17,597,422
1,194,550
$18,791,972
$ 1,414,659
698,903
291,986
2,405,548
2,114,098
5,671,889
658,693
8,444,680
1,103,231
9,547,911
11,953,459
49,442
4,500,564
4,550,006
14,097,917
16,503,465
551,206
17,054,671
1,729,660
7,641
1,737,301
$18,791,972
313,573
116,436
2,303
432,312
176,018
30,604
206,622
196,570
49,881
885,385
971,339
6,466
40,023
4,532
51,021
10,208
61,229
61,229
474
208,972
209,446
270,675
270,675
5,082,487
2,148,171
26,576
7,257,234
2,956,699
730,325
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
4.42
.13
4.41
4.26
–
6.17
5.42
8.67
5.96
5.95
4.19
5.60
6.43
7.37
6.03
5.75
.31
.74
.69
.63
.97
.67
.53
.38
4.56
4.45
1.95
1.66
380,775
(23,055)
(125)
357,595
1,215
4,806
(59)
(4)
4,743
131
(55)
(6)
45
(47)
1,078
(9)
(29)
4
(19)
(19)
14
(13)
(43)
(18)
(20)
(41)
(10)
(23)
(24)
(20)
(18)
(20)
(15)
(3)
(27)
(21)
(26)
(22)
(32,146)
6,096
(588)
(26,638)
(11,650)
138
(11,512)
(11,995)
11,702
(38,443)
(31,242)
(2,015)
(11,081)
(1,581)
(14,677)
(1,444)
(16,121)
(16,121)
(303)
(15,988)
(16,291)
(32,412)
(32,412)
(455,440)
238,063
(6,889)
(224,266)
(102,372)
(19,567)
(121,939)
18,201
179,057
(148,947)
693,565
(92,133)
$ 601,432
$ (14,777)
57,491
7,236
49,950
42,108
261,208
2,002
305,318
49,052
354,370
404,320
(75,449)
(80,222)
(155,671)
198,699
248,649
39,617
288,266
314,499
(1,333)
313,166
$ 601,432
$701,834
3.99%
$700,664
4.15%
$ 1,170
(16)
(1) Average balances and yields of securities available for sale are based upon the historical amortized cost and exclude equity securities.
(2) Average balances of loans and leases include non-accrual loans and leases, and are presented net of unearned income.
(3) Includes operating leases.
22 TCF Financial Corporation and Subsidiaries
(Dollars in thousands)
Assets:
Investments and other
U.S. Government sponsored entities:
Mortgage-backed securities
Debentures
U.S. Treasury securities
Other securities
Total securities available for sale (1)
Loans and leases:
Consumer real estate:
Fixed-rate
Variable-rate
Consumer — other
Total consumer real estate and other
Commercial:
Fixed- and adjustable-rate
Variable-rate
Total commercial
Leasing and equipment finance
Inventory finance
Total loans and leases (2)
Total interest-earning assets
Other assets (3)
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
Year Ended
December 31, 2010
Year Ended
December 31, 2009
Average
Balance
Interest
Average
Yields
and
Rates
Average
Balance
Interest
Average
Yields
and
Rates
Change
Average
Balance
Interest
Average
Yields and
Rates
(bps)
$ 337,279
$ 5,509
1.63%
$ 375,396
$ 4,370
1.16%
$ (38,117)
$ 1,139
47
4.42
–
.13
4.41
4.26
6.17
5.42
8.67
5.96
5.95
4.19
5.60
6.43
7.37
6.03
5.75
.31
.74
.69
.63
.97
.67
.53
.38
4.56
4.45
1.95
1.66
1,817,413
–
71,233
454
1,889,100
80,332
–
93
20
80,445
313,573
116,436
2,303
432,312
176,018
30,604
206,622
196,570
49,881
885,385
971,339
6,466
40,023
4,532
51,021
10,208
61,229
61,229
474
208,972
209,446
270,675
270,675
5,082,487
2,148,171
26,576
7,257,234
2,956,699
730,325
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
4.92
2.18
.07
5.26
4.36
6.43
5.74
8.54
6.26
6.05
3.81
5.51
6.81
8.22
6.21
5.86
.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
80,902
8,487
12
26
89,427
348,400
106,987
3,061
458,448
165,999
33,221
199,220
192,575
14,797
865,040
958,837
8,137
58,556
7,006
73,699
48,413
122,112
122,112
233
202,830
203,063
325,175
325,175
5,421,081
1,862,267
35,849
7,319,197
2,741,563
870,810
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
(50)
N.M.
6
(85)
(10)
(26)
(32)
13
(30)
(10)
38
9
(38)
(85)
(18)
(11)
(14)
(50)
(34)
(39)
(156)
(67)
(54)
11
(8)
(10)
(44)
(39)
171,869
(389,245)
54,110
(40)
(163,306)
(570)
(8,487)
81
(6)
(8,982)
(338,594)
285,904
(9,273)
(61,963)
(34,827)
9,449
(758)
(26,136)
10,019
(2,617)
7,402
3,995
35,084
20,345
12,502
(1,671)
(18,533)
(2,474)
(22,678)
(38,205)
(60,883)
(60,883)
241
6,142
6,383
(54,500)
(54,500)
215,136
(140,485)
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
$700,664
4.15%
$633,662
3.87%
$ 67,002
28
N.M. Not Meaningful.
(1) Average balances and yields of securities available for sale are based upon the historical amortized cost and exclude equity securities.
(2) Average balances of loans and leases include non-accrual loans and leases, and are presented net of unearned income.
(3) Includes operating leases.
2011 Form 10-K
23
The following table presents the components of the changes in net interest income by volume and rate.
(In thousands)
Interest income:
Investments and other
U.S. Government sponsored entities:
Mortgage-backed securities, fixed rate
Debentures
U.S. Treasury securities
Other securities
Total securities available for sale
Loans and leases held for sale
Loans and leases:
Consumer home equity:
Fixed-rate
Variable-rate
Consumer — other
Total consumer real estate and other
Commercial:
Fixed- and adjustable-rate
Variable-rate
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, 2011
Versus Same Period in 2010
Increase (Decrease) Due to
Year Ended
December 31, 2010
Versus Same Period in 2009
Increase (Decrease) Due to
Volume(1)
Rate(1)
Total
Volume(1)
Rate(1)
Total
$ 5,355
$ (3,028)
$ 2,327
$ (480)
$ 1,619
$ 1,139
15,522
–
(24)
(8)
14,171
131
(27,755)
12,443
(600)
(13,151)
(5,992)
(832)
(6,740)
1,165
12,903
(8,915)
38,821
129
1,851
14
460
(10,716)
–
(35)
2
(9,428)
–
(4,391)
(6,347)
12
(13,487)
(5,658)
970
(4,772)
(13,160)
(1,201)
(29,528)
(70,063)
(2,144)
(12,932)
(1,595)
(1,904)
4,806
–
(59)
(6)
4,743
131
(32,146)
6,096
(588)
(26,638)
(11,650)
138
(11,512)
(11,995)
11,702
(38,443)
(31,242)
(2,015)
(11,081)
(1,581)
(1,444)
(264)
(3,614)
(6,802)
4,081
$ 28,190
(39)
(12,374)
(9,489)
(36,493)
$ (27,020)
(303)
(15,988)
(16,291)
(32,412)
$ 1,170
8,017
(8,487)
64
(2)
(6,990)
–
(21,230)
15,747
(803)
(3,853)
12,846
(5,687)
4,154
15,096
36,778
45,028
31,118
1,093
7,507
(261)
(16,107)
131
9,556
11,123
8,230
$ 21,274
(8,587)
–
17
(4)
(1,992)
–
(13,597)
(6,298)
45
(22,283)
(2,827)
3,070
3,248
(11,101)
(1,694)
(24,683)
(18,616)
(2,764)
(26,040)
(2,213)
(22,098)
(570)
(8,487)
81
(6)
(8,982)
–
(34,827)
9,449
(758)
(26,136)
10,019
(2,617)
7,402
3,995
35,084
20,345
12,502
(1,671)
(18,533)
(2,474)
(38,205)
110
(3,414)
(4,740)
(62,730)
$ 45,728
241
6,142
6,383
(54,500)
$ 67,002
(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, including the impact of tax
equivalent adjustments, was $701.8 million for 2011, up
.2% from $700.7 million in 2010, which was up 10.6% from
$633.7 million in 2009. The increase in net interest income
in 2011 was primarily due to reductions in deposit rates,
reduced interest expense on long-term borrowings and
additional interest earned due to loan growth in inventory
finance, mostly offset by decreases in interest earned on
consumer loans and equipment finance loans and leases.
The increase in 2010 was primarily due to a $739.1 million,
or 5.3%, increase in average loans and leases and a 28 basis
point increase in net interest margin. Net interest margin
was 3.99% in 2011, down from 4.15% in 2010, which was up
from 3.87% in 2009. The decrease in 2011 was primarily due
to increased asset liquidity and decreased levels of higher
yielding loans and leases as a result of the lower interest
rate environment, partially offset by lower average cost
of deposits and borrowings. The increase 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.
24 TCF Financial Corporation and Subsidiaries
Provision for Credit losses The following table summarizes the composition of TCF’s provision for credit losses and
percentage of the total provision for the years ended December 31, 2011, 2010 and 2009.
(Dollars in thousands)
Consumer real estate and other
Commercial
Leasing and equipment finance
Inventory finance
2011
$166,575 82.9%
25,555 12.7
3.7
7,395
.7
1,318
Total
$200,843 100.0%
Change
Year Ended December 31,
2010
$141,960 60.1%
67,374 28.5
24,883 10.5
.9
2,220
2009
$180,719 69.9%
36,881 14.3
39,325 15.2
.6
1,611
$236,437 100.0% $258,536 100.0% $(35,594) (15.1)% $(22,099)
$ 24,615 17.3% $(38,759) (21.4)%
(41,819) (62.1)
(17,488) (70.3)
(902) (40.6)
82.7
30,493
(14,442) (36.7)
609 37.8
2010/2009
2011/2010
(8.5)%
TCF provided $200.8 million for credit losses in 2011,
compared with $236.4 million in 2010 and $258.5 million
in 2009. The decrease in 2011 was driven by decreases
in commercial and leasing and equipment finance net
charge-offs and reserves as customer performance
improved, partially offset by higher net charge-offs and
TDR reserves for consumer real estate loans. The increase
in provision for TDRs was primarily due to growth in TDRs,
in part due to a new accounting standard, and use of longer
term modifications. The decrease in 2010 was primarily due
to decreased levels of provision in excess of net charge-offs
in the consumer real estate portfolio.
Net loan and lease charge-offs were $211 million, or
1.45% of average loans and leases, in 2011, compared
with $215.1 million, or 1.47% of average loans and leases,
in 2010 and $186.5 million, or 1.34% of average loans and
leases, in 2009.
Consumer real estate charge-off rates increased
throughout 2011 due primarily to increased delinquencies
and declines in real estate values. As a result, TCF increased
consumer real estate allowance levels. The increase in
consumer real estate net charge-offs was partially due to
a policy modification to require more frequent valuations
after loans are moved to non-accrual status until clear
title is received, in response to longer foreclosure timelines
due to court backlogs. The initial impact of the non-accrual
loan policy change accelerated the timing of charge-offs
on non-accrual consumer real estate loans by $2.2 million
in the third quarter of 2011. It had no impact on TCF’s
provision or net income since these losses were previously
provided for in the allowance for loan and lease losses.
The decrease in 2010 was driven by decreased levels of
provision in excess of net charge-offs in the consumer real
estate portfolio.
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 — Credit Quality — Allowance
for Loan and Lease Losses”.
Non-Interest Income Non-interest income is a
significant source of revenue for TCF, representing 38.8%
of total revenues in 2011, 43.5% in 2010 and 45.4% in 2009,
and is an important factor in TCF’s results of operations.
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. Total
fees and other revenue was $436 million for 2011, compared
with $508.9 million in 2010 and $496.5 million in 2009.
2011 Form 10-K
25
The following table presents the components of non-interest income.
Year Ended December 31,
(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 auto loans held for sale, net
Gains on sales of branches
and real estate
Visa share redemption
Total non-interest income
Fees and other revenue as a
percentage of total revenue
N.M. Not Meaningful.
2011
$219,363
96,147
27,927
343,437
89,167
3,434
436,038
7,263
1,133
–
–
$444,434
2010
$273,181
111,067
29,836
414,084
89,194
5,584
508,862
29,123
–
–
–
$537,985
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
38.1%
41.1%
42.8%
43.4%
44.9%
Compound Annual
Growth Rate
1-Year
2011/2010
5-Year
2011/2006
(19.7)%
(13.4)
(6.4)
(17.1)
–
(38.5)
(14.3)
(75.1)
N.M.
–
–
(17.4)
(4.1)%
.9
(5.9)
(3.0)
11.0
(36.1)
(2.1)
N.M.
N.M.
(100.0)
–
(1.9)
Fees and Service Charges Fees and service charges
decreased $53.8 million, or 19.7%, to $219.4 million for
2011, compared with $273.2 million for 2010 and $286.9
million in 2009. Retail Banking activity based fee revenue
was $173.3 million, down from $217.6 million in 2010
and $254.3 million in 2009. During 2011, Retail Banking
activity-based fee revenues decreased 20.4%, compared
with a decrease of 14.4% in 2010 and an increase of 8.4%
in 2009. The decrease in fees and service charges in 2011
was primarily due to changes in customer behavior and
increased levels of checking account attrition, some of
which is in connection with new fees and service charges
introduced in the fourth quarter of 2011. The decrease in
fees and service charges in 2010 was primarily due to a
decrease in activity-based fee revenue as a result of the
implementation of overdraft fee regulations and changes in
customer banking and spending behavior, partially offset
by increased monthly maintenance fee income.
Card Revenue During 2011, card revenue, primarily
interchange fees, totaled $96.1 million, down from $111.1
million in 2010 and $104.8 million in 2009. The decrease
in card revenue in 2011 was primarily due to a decrease in
the average interchange rate per transaction as a result
of regulation that took effect during the fourth quarter
of 2011 and, to a lesser extent, a decrease in the number
of average active card users. The increase in card revenue
in 2010 was primarily the result of increases in average
spending per active account, transaction volume 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 fee per transaction
26 TCF Financial Corporation and Subsidiaries
At or For the Year Ended December 31,
2011
1,233,271
764,331
23.4
2010
1,399,730
807,519
22.2
2009
1,533,234
843,825
20.7
$6,723,989
962,615
$7,686,604
$ 36
$6,645,374
984,134
$7,629,508
$ 35
87.48%
1.18%
87.10%
1.38%
$6,394,041
914,302
$7,308,343
$ 35
87.49%
1.34%
$ .42
$ .49
$ .47
Percentage Increase
(Decrease)
2011/2010
2010/2009
(11.9)%
(5.3)
5.4
1.2
(2.2)
.7
2.9
38 bps
(20)
(14.3)%
(8.7)%
(4.3)
7.2
3.9
7.6
4.4
–
(39)bps
4
4.3%
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 June 29, 2011, the Federal Reserve issued its
final debit card interchange rule, establishing a debit card
interchange fee cap. These rules became effective October
1, 2011, and apply to issuers that, together with their
affiliates, have assets of $10 billion or more. Compared with
the fourth quarter of 2010, the average interchange rate per
transaction decreased slightly more than 50% during the
fourth quarter of 2011 and resulted in a reduction of TCF’s
interchange revenue of $14.7 million. See “Item 1A. Risk
Factors” for more information.
ATM Revenue ATM revenue totaled $27.9 million for 2011,
down from $29.8 million in 2010 and $30.4 million in 2009.
The declines in ATM revenue were primarily due to fewer fee
generating transactions and reduced ATM fleet.
Leasing and Equipment Finance Revenue Leasing
and equipment finance revenue in 2011 was relatively
flat compared with 2010. Leasing and equipment finance
revenues in 2010 increased $20.1 million, or 29%, from 2009.
The increase in 2010 from 2009 was primarily due to increased
operating lease revenue resulting from the acquisition
of Fidelity National Capital, Inc (“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 2011 decreased $2.2 million from 2010 compared
with an increase in 2010 of $345 thousand from 2009. The
decrease in 2011 from 2010 was primarily due to reduced
inventory finance inspection fees. The increase in 2010
from 2009 was primarily due to a gain on a non-marketable
investment of $538 thousand.
The following table presents the components of other non-interest income.
Year Ended December 31,
(Dollars in thousands)
Investments and insurance
Gains on sales of education loans
Other
Total other earnings
2011
$1,105
–
2,329
$3,434
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
Compound Annual
Growth Rate
1-Year
2011/2010
5-Year
2011/2006
–
(.5)%
47.9
(38.5)
(36.5)%
(100.0)
(30.5)
(36.1)
Gains on Securities, Net In 2011, TCF recognized gross gains of $8 million on sales of $522.5 million in mortgage-backed
securities and recognized other-than-temporary losses on certain investments of $768 thousand. In 2010, TCF recognized gross
gains of $31.5 million on sales of $1.3 billion in mortgage-backed securities and agency U.S. Treasury Bills and recognized
other-than-temporary losses on certain investments of $2.1 million. In 2009, TCF recognized gross gains of $31.9 million, on
sales of $2.1 billion of mortgage-backed securities and agency debentures and U.S. Treasury Bills and recognized other-than-
temporary losses on certain investments of $2 million.
Gains on Auto Loans Held for Sale, Net Following the acquisition of Gateway One on November 30, 2011, TCF sold
$37.4 million of auto loans and recognized $1.1 million in associated gains. TCF increased its portfolio of managed auto
assets, which include auto loans held for investment, auto loans held for sale and auto loans sold and serviced to $437.7
million at December 31, 2011.
2011 Form 10-K
27
Non-Interest Expense Non-interest expense increased $8.1 million, or 1.1%, in 2011, decreased $320 thousand in 2010,
and increased $37.8 million, or 5.3%, in 2009. The following table presents the components of non-interest expense.
2011
(Dollars in thousands)
Compensation and employee benefits $348,792
Occupancy and equipment
126,437
FDIC insurance
28,747
Deposit account premiums
22,891
Advertising and marketing
10,034
Other
146,909
Subtotal
683,810
Foreclosed real estate and
repossessed assets, net
Operating lease depreciation
Other credit costs, net
FDIC special assessment
Visa indemnification expense
Total non-interest expense
49,238
30,007
2,816
–
(1,420)
$764,451
N.M. Not Meaningful.
Year Ended December 31,
2010
$346,072
126,551
23,584
17,304
13,062
147,884
674,457
40,385
37,106
6,018
–
(1,631)
$756,335
2009
$345,868
126,292
19,109
30,682
17,134
143,697
682,782
31,886
22,368
12,137
8,362
(880)
$756,655
2008
$365,653
127,953
2,990
16,888
19,150
150,061
682,695
19,170
17,458
3,296
–
(3,766)
$718,853
Compound Annual
Growth Rate
1-Year
2011/2010
5-Year
2011/2006
.8%
(.1)
21.9
32.3
(23.2)
(.7)
1.4
21.9
(19.1)
(53.2)
–
(12.9)
1.1
.8%
2.0
90.7
35.3
(14.4)
.2
1.8
63.8
15.9
48.0
–
N.M.
3.5
2007
$338,232
120,824
1,145
4,849
16,829
139,248
621,127
5,673
17,588
1,803
–
7,696
$653,887
Compensation and Employee Benefits
Compensation and employee benefits represented 45.6%,
45.8% and 45.7% of total non-interest expense in 2011,
2010 and 2009, respectively. Compensation and employee
benefits increased $2.7 million, or .8%, in 2011, compared
with a slight increase of $204 thousand, or .1%, in 2010 and
a decrease of $19.8 million, or 5.4%, in 2009. The increase
in 2011 was primarily due to an increase in commissions
and incentives due to growth in Specialty Finance, which
continued to expand its core business with new programs
during 2011, the ramp-up of expenses related to the
exclusive financing program for BRP that will begin
funding in early 2012, and increased payroll taxes. These
increases were partially offset by a decrease in employee
medical costs, an increase in net gains recognized on the
re-measurement of retirement benefit plan assets and
liabilities during the fourth quarter of 2011 and decreases
in branch banking compensation expense as a result of
branch closures during 2011. The increase in 2010 was
primarily due to an increase in net losses recognized on
the annual re-measurement of retirement benefit plan
assets and liabilities during the fourth quarter of 2010,
and increased costs in the Specialty Finance businesses
as a result of expansion and growth, partially offset by
headcount reductions in branch banking and decreased
employee medical plan expenses.
Occupancy and Equipment Occupancy and equipment
expenses decreased $114 thousand in 2011, increased
$259 thousand in 2010 and decreased $1.7 million in 2009.
The decrease in 2011 was primarily due to a decrease in
cash servicing expenses as a result of streamlining the
process of balancing cash and deposits and a decrease in
facility expenses, partially offset by increased software
amortization expense in the Specialty Finance businesses
as new technologies are implemented to better service
customers. 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.
FDIC Insurance FDIC premiums expense totaled $28.7
million in 2011, up $5.2 million from $23.6 million in 2010,
which was up $4.5 million from $19.1 million in 2009. The
increase in 2011 was primarily the result of changes in the
FDIC insurance rate calculations for banks over $10 billion
in total assets, which were implemented on April 1, 2011.
The increase in 2010 was primarily due to higher deposit
insurance rates.
Deposit Account Premiums Deposit account
premium expense increased $5.6 million to $22.9 million
in 2011, decreased $13.4 million to $17.3 million in 2010
and increased $13.8 million to $30.7 million in 2009. The
28 TCF Financial Corporation and Subsidiaries
increase in 2011 was primarily due to changes in the account
premium programs beginning in April 2011, which increased
the premiums paid for each qualified account opening. The
decrease in 2010 was primarily due to revised marketing
strategies and lower checking account production. New
checking accounts increased 3.1% in 2011 compared with
2010 and decreased 37% in 2010 compared with 2009.
Advertising and Marketing Advertising and marketing
expenses totaled $10 million in 2011, compared to $13.1
million in 2010 and $17.1 million in 2009. The decrease
in 2011 was primarily due to the discontinuation of the
debit card rewards program in the third quarter of 2011 in
response to new federal regulation regarding debit card
interchange fees. The decrease in 2010 was primarily the
result of retail banking product strategies and a related
decrease in spending on media advertisements.
Other Non-Interest Expense Other non-interest
expense totaled $146.9 million in 2011, relatively flat
compared with 2010. 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.
Foreclosed Real Estate and Repossessed Assets, Net
Foreclosed real estate and repossessed assets expense,
net totaled $49.2 million in 2011, compared to $40.4
million in 2010 and $31.9 million in 2009. The increase
in 2011 was primarily due to increased valuation write-
downs on commercial real estate properties. The increase
in 2010 was primarily due to an increase in the average
number of consumer real estate properties owned and the
associated expenses, continued valuation write-downs of
both consumer and commercial real estate properties, and
increased property tax expenses.
Operating Lease Depreciation Operating lease
depreciation totaled $30 million in 2011, down $7.1 million
from $37.1 million in 2010, which was up $14.7 million from
$22.4 million in 2009. The decrease in 2011 was primarily
due to the reduction in the operating lease portion of the
portfolio. The increase in 2010 was 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 costs, net
totaled $2.8 million for 2011, down from $6 million in 2010,
which was down from $12.1 million in 2009. The decrease
in 2011 was primarily due to reduced premium related
expense on consumer real estate loan pool insurance. The
decrease in 2010 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.
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 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, 2011.
As of December 31, 2011, 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, 2011, TCF had no remaining Visa
contingent indemnification obligation. TCF’s 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 making estimates of the Visa
contingent indemnification obligation.
Income Taxes Income tax expense represented 36.04% of
income before income tax expense during 2011, compared
with 36.89% and 34.67% in 2010 and 2009, respectively.
The lower effective income tax rate for 2011 as compared
to 2010 is primarily due to changes in state income tax
expense related to tax return filings. The lower effective
income tax rate for 2009 as compared to 2010 is primarily
due to significant favorable developments in uncertain tax
positions in 2009.
2011 Form 10-K
29
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
income tax laws, the evaluation of uncertain tax positions,
differences between the tax and financial reporting basis
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.
Consolidated Financial Condition Analysis
Securities Available for Sale Securities available for
sale were $2.3 billion, or 12.2% of total assets, at December
31, 2011. 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 gains on securities available for sale totaled $88.8
million at December 31, 2011, compared with unrealized
pre-tax losses of $25.8 million at December 31, 2010. 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 auto 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)
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
Year Ended December 31,
2011
2010
2009
2008
Compound Annual
Growth Rate
1-Year
2011/2010
5-Year
2011/2006
2007
$ 4,742,423
2,152,868
6,895,291
38,513
$ 4,893,887
2,262,194
7,156,081
39,188
$ 4,961,347
2,319,222
7,280,569
51,422
$ 4,881,662
2,420,116
7,301,778
62,561
$ 4,706,568
2,344,113
7,050,681
223,691
6,933,804
3,198,698
250,794
3,449,492
3,142,259
624,700
$14,150,255
7,195,269
3,328,216
317,987
3,646,203
3,154,478
792,354
$14,788,304
7,331,991
3,269,003
449,516
3,718,519
3,071,429
468,805
$14,590,744
7,364,339
2,984,156
506,887
3,491,043
2,486,082
4,425
$13,345,889
7,274,372
2,557,330
558,325
3,115,655
2,104,343
–
$12,494,370
(3.1)%
(4.8)
(3.6)
(1.7)
(3.6)
(3.9)
(21.1)
(5.4)
(.4)
(21.2)
(4.3)
1.5%
.5
1.2
(28.6)
.6
6.0
(14.6)
3.2
11.6
N.M.
4.3
N.M. Not Meaningful.
(1) Excludes operating leases included in other assets.
30 TCF Financial Corporation and Subsidiaries
(In thousands)
Geographic Distribution:
Minnesota
Illinois
Michigan
Wisconsin
Colorado
California
Texas
Florida
Ohio
Indiana
New York
Canada
Arizona
Pennsylvania
Other
Total
Consumer
Real Estate
and Other
$2,750,344
2,118,618
924,252
459,741
574,569
2,395
209
3,694
2,268
23,417
2,162
–
53,461
57
18,617
$6,933,804
At December 31, 2011
leasing and
Equipment
Finance(1)
$ 91,258
102,565
124,583
57,573
42,950
395,319
248,477
167,160
128,136
58,945
175,707
3,069
73,983
137,162
1,335,372
$3,142,259
Commercial
$ 873,759
794,389
671,296
621,271
104,749
17,505
2,549
55,592
46,838
101,912
–
–
33,702
–
125,930
$3,449,492
Inventory
Finance
$ 14,755
17,814
16,484
16,708
4,093
18,176
32,171
29,358
25,378
15,653
18,948
168,405
5,992
23,579
217,186
$624,700
Total
$ 3,730,116
3,033,386
1,736,615
1,155,293
726,361
433,395
283,406
255,804
202,620
199,927
196,817
171,474
167,138
160,798
1,697,105
$14,150,255
(1) Excludes operating leases included in other assets.
Loans and leases outstanding at December 31, 2011 are shown by contractual maturity in the following table.
(In thousands)
Amounts due:
Within 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
Consumer
Real Estate
and Other
$ 317,606
268,127
248,567
498,476
1,296,687
1,272,697
3,031,644
6,616,198
$6,933,804
At December 31, 2011(3)
leasing and
Equipment
Finance(2)
Commercial
$ 613,488
670,565
594,613
958,330
569,477
39,540
3,479
2,836,004
$3,449,492
$ 1,183,709
831,993
568,939
485,217
72,401
–
–
1,958,550
$ 3,142,259
Inventory
Finance
$624,700
–
–
–
–
–
–
–
$624,700
Total
$ 2,739,503
1,770,685
1,412,119
1,942,023
1,938,565
1,312,237
3,035,123
11,410,752
$14,150,255
$4,242,325
2,373,873
$6,616,198
$1,657,383
1,178,621
$2,836,004
$ 1,954,544
4,006
$ 1,958,550
$ –
–
$ –
$ 7,854,252
3,556,500
$11,410,752
(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) Gross of deferred fees and costs. 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 48.7% of its total loan and lease
portfolio. The consumer real estate portfolio decreased
3.6% in 2011 and 1.7% in 2010. TCF’s consumer real estate
portfolio is secured by mortgages filed on residential real
estate. At December 31, 2011, 69% of loan balances were
secured by first mortgages with 31% secured by second
mortgages. The average loan size secured by a first
mortgage was $116 thousand and the average balance of
loans secured by a junior lien position was $37 thousand
at December 31, 2011. At December 31, 2011, 35% of the
consumer real estate portfolio carried a variable interest
rate tied to the prime rate, compared with 33% at
December 31, 2010.
2011 Form 10-K
31
At December 31, 2011, 74% of TCF’s consumer real estate
loan balance consisted of closed-end loans, compared with
75% at December 31, 2010. 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 $258 thousand as of December 31, 2011.
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 727 as of December 31,
2011 and 726 as of December 31, 2010. 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 727 at December 31, 2011,
compared with 725 at December 31, 2010.
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
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. At
December 31, 2011, 26% of the consumer real estate loan
balance had been originated since January 1, 2009, with net
charge-offs of .20%. 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, 2011, total consumer real estate lines
of credit outstanding were $2.1 billion, down from $2.2
billion at December 31, 2010. Outstanding balances on
consumer real estate lines of credit were 61% of total lines
of credit at both December 31, 2011 and 2010.
Commercial Banking Commercial real estate
loans decreased $129.5 million in 2011 to $3.2 billion
at December 31, 2011. Variable- and adjustable-rate
loans represented 42% of commercial real estate loans
outstanding at December 31, 2011. Commercial business
loans decreased $67.2 million in 2011 to $250.8 million
at December 31, 2011. Decreases in commercial loan
balances were primarily due to higher levels of payments
in excess of new origination volume. With a focus on
secured lending, approximately 99% of TCF’s commercial
real estate and commercial business loans were secured
either by properties or other business assets at December
31, 2011. At December 31, 2011, approximately 93% of
TCF’s commercial real estate loan portfolio was 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,
2011
2010
(Dollars in thousands)
Apartments
Retail services (1)
Office buildings
Warehouse/industrial buildings
Hotels and motels
Health care facilities
Residential home builders
Other
Total
Number
of loans
797
441
232
238
39
24
41
97
1,909
Permanent
$ 861,504
793,515
508,330
395,188
205,697
126,136
31,540
117,578
$3,039,488
Construction
and
Development
Total
$ 54,379 $ 915,883
799,044
532,216
408,134
205,703
145,357
49,430
142,931
$3,198,698
5,529
23,886
12,946
6
19,221
17,890
25,353
$159,210
Number
of Loans
Permanent
716 $ 754,915
865,784
463
564,631
256
459,904
262
203,794
41
111,543
35
32,071
31
119
133,195
$3,125,837
1,923
(1) Primarily retail shopping centers and stores, convenience stores, gas stations, restaurants and auto dealerships.
32 TCF Financial Corporation and Subsidiaries
Construction
and
Development
Total
$ 20,338 $ 775,253
877,551
597,482
470,379
232,181
136,504
51,881
186,985
$202,379 $3,328,216
11,767
32,851
10,475
28,387
24,961
19,810
53,790
Leasing and Equipment Finance The following tables summarize TCF’s leasing and equipment finance portfolio by
marketing segment and by equipment type, excluding operating leases.
(Dollars in thousands)
Market Segment
Middle market (1)
Small ticket (2)
Winthrop
Other
Total
At December 31,
2011
Balance
$1,641,898
865,169
448,822
186,370
$3,142,259
Percent
of Total
52.3%
27.5
14.3
5.9
100.0%
2010
Balance
$1,632,829
833,053
530,063
158,533
$3,154,478
(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
Golf cart and turf
Technology and data processing
Furniture and fixtures
Exercise equipment
Printing
Other
Total
At December 31,
2011
2010
Balance
$ 693,435
476,963
424,591
336,563
296,871
286,596
169,004
95,981
74,309
287,946
$3,142,259
Percent
of Total
22.1%
15.2
13.5
10.7
9.4
9.1
5.4
3.1
2.4
9.1
100.0%
Balance
$ 624,149
567,622
432,973
349,841
211,796
321,279
162,131
99,342
84,187
301,158
$3,154,478
Percent
of Total
51.8%
26.4
16.8
5.0
100.0%
Percent
of Total
19.8%
18.0
13.7
11.1
6.7
10.2
5.1
3.1
2.7
9.6
100.0%
The leasing and equipment finance portfolio was
$3.1 billion at December 31, 2011, relatively flat with
December 31, 2010, and consisted of $2 billion of leases
and $1.1 billion of loans. Total loan and lease originations
within TCF’s leasing and equipment finance portfolios
were $1.5 billion for 2011, an increase of 17.8% from
$1.3 billion in 2010. Total loan and lease purchases within
TCF’s leasing and equipment finance portfolios were
$67.1 million within the small ticket segment during 2011,
compared with $186.8 million within the middle market
segment during 2010. The backlog of approved transactions
was $455.3 million at December 31, 2011, compared with
$402.6 million at December 31, 2010. The average size of
transactions originated during 2011 was $93.9 thousand,
compared with $81.6 thousand during 2010. TCF’s leasing
and equipment finance activity is subject to 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, 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, 2011 and 2010, $121.7 million and
$212.4 million, respectively, of TCF’s lease portfolio was
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
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,
2011, lease residuals totaled $129.1 million, or 11.2% of
original equipment value, compared with $109.6 million, or
10.1% of original equipment value, at December 31, 2010.
2011 Form 10-K
33
TCF Inventory Finance The following table summarizes the TCF Inventory Finance portfolio by marketing segment.
(Dollars in thousands)
Equipment Type
Lawn and garden
Powersports and other
Electronics and appliances
Total
At December 31,
2011
Balance
$324,607
247,490
52,603
$624,700
Percent
of Total
52.0%
39.6
8.4
100.0%
2010
Balance
$441,691
220,472
130,191
$792,354
Percent
of Total
55.8%
27.8
16.4
100.0%
TCF Inventory Finance continues to expand its core
• Accruing TDRs include loans to borrowers where a
programs during 2011 and signed exclusive agreements with
Alumacraft Boat Co. (“Alumacraft”) and BRP. TCF expects
to ramp-up funding of BRP dealers during the first half of
2012. Decreases in inventory finance loans were primarily
due to the termination of one lawn and garden program and
the transitioning of an electronics and appliance program to
a servicing-only program. In the third quarter of 2010, TCF
expanded into the powersports 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.
Credit Quality The following tables summarize TCF’s loan
and lease portfolio based on what TCF believes are 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.
• Performing loans that are 60+ days delinquent have
a higher potential to become non-performing and
generally are a leading indicator for future charge-
off trends.
payment modification (but not a reduction of principal)
has been made 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 7 of Notes to Consolidated Financial
Statements 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 following table. Impaired loan accounting policies
prescribe specific methodologies for determining the
related 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 $39.4 million and $135.5 million at December
31, 2011 and 2010, respectively, and are further discussed
under “Loan Modifications”.
34 TCF Financial Corporation and Subsidiaries
December 31, 2011
Performing loans and leases
Non-
classified
$ 6,271,575
Classified(1)
$ –
Total
$ 6,271,575
60+ Days
Delinquent
and
Accruing(2)
$79,765
2,987,876
3,093,194
616,677
$12,969,322
234,501
21,451
7,040
$262,992
3,222,377
3,114,645
623,717
$13,232,314
1,148
6,255
160
$87,328
Accruing
TDRs
$433,078
98,448
776
–
$532,302
Non-accrual
loans and
leases
$149,386
Total loans
and leases
$ 6,933,804
127,519
20,583
823
$298,311
3,449,492
3,142,259
624,700
$14,150,255
(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
91.6%
1.9%
93.5%
.6%
3.8%
2.1%
100.0%
December 31, 2010
Performing Loans and Leases
Non-
classified
$ 6,613,610
Classified(1)
$ –
Total
$ 6,613,610
3,091,911
3,073,347
785,245
$ 13,564,113
91.7%
354,185
35,695
5,710
$ 395,590
2.7%
3,446,096
3,109,042
790,955
$ 13,959,703
94.4%
60+ Days
Delinquent
and
Accruing(2)
$ 76,711
9,021
11,029
344
$ 97,105
Accruing
TDRs
$ 337,401
48,838
–
–
$386,239
Non-accrual
Loans and
Leases
$ 167,547
Total Loans
and Leases
$ 7,195,269
142,248
34,407
1,055
$345,257
3,646,203
3,154,478
792,354
$14,788,304
.7%
2.6%
2.3%
100.0%
(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
(1) Excludes classified loans and leases that are 60+ days delinquent and accruing or accruing TDRs.
(2) Excludes accruing TDRs that are 60+ days delinquent.
The combined balance of performing classified loans and leases, over 60-day delinquent and accruing loans and leases,
accruing TDRs and non-accrual loans and leases, was $1.2 billion at December 31, 2011, a decrease of $43.3 million from
December 31, 2010. This was primarily due to decreases in classified and non-accrual commercial loans and decreases in
consumer non-accrual loans, partially offset by increases in accruing TDRs both in the commercial real estate and consumer
real estate portfolios due to higher levels of modifications and implementation of new TDR accounting standards in the third
quarter of 2011.
2011 Form 10-K
35
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 7 of Notes to Consolidated Financial Statements for additional information.
(Dollars in thousands)
Principal Balance
60-89 days
90 days or more
Total
Percentage of Loans and Leases
60-89 days
90 days or more
Total
2011
$ 45,531
72,105
$117,636
2011
.33%
.52
.85%
At December 31,
2009
2010
2008
2007
$ 55,618
59,425
$115,043
$ 54,073
52,056
$106,129
$41,851
37,619
$79,470
$20,445
15,384
$35,829
At December 31,
2009
2010
.39%
.41
.80%
.38%
.36
.74%
2008
.32%
.28
.60%
2007
.17%
.12
.29%
The following table summarizes TCF’s over 60-day delinquent loan and lease portfolio by loan type, excluding non-accrual
loans and leases.
(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
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,
2011
2010
Principal
Balances
Percentage
of Portfolio
Principal
Balances
Percentage
of Portfolio
$ 87,358
22,277
41
109,676
1,099
49
1,148
1,061
2,018
235
198
3,512
160
114,496
3,140
$117,636
1.89%
1.04
.12
1.62
.04
.02
.03
.07
.28
.07
.11
.13
.03
.85
.84
.85%
$ 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%
(1) Excludes delinquencies and non-accrual loans in acquired portfolios as delinquency and non-accrual migration in these portfolios are not expected to result in losses
exceeding the credit reserves netted against the loan balances.
(2) Remaining balances of acquired loans and leases were $368.3 million and $600.5 million at December 31, 2011 and December 31, 2010, respectively.
36 TCF Financial Corporation and Subsidiaries
Loan Modifications TCF has maintained several
programs designed to assist consumer real estate
customers by extending payment dates or reducing
customers’ contractual payments (but not forgiving
principal). Under these programs, TCF reduces a customer’s
contractual payments for a period of time appropriate
for the borrower’s condition. All loan modifications are
made on a case-by-case basis. Loan modifications are not
reported in the calendar years after modification if the
loans were modified at an interest rate equal to or greater
than the yields of new loan originations with comparable
risk and the loan is performing based on the terms of the
restructuring agreements.
If TCF has not granted a concession as a result of the
modification, compared with the original terms, the
loan is not considered a TDR. Modifications that are not
classified as TDRs primarily involve interest rate changes
to current market rates for similarly situated borrowers
who have access to alternative funds. Loan modifications
to borrowers who are not experiencing financial
difficulties are not included in the following reporting
of loan modifications.
Although loans classified as TDRs are considered
impaired, TCF was able to receive more than 50% of the
contractual interest due on accruing consumer real estate
TDRs during 2011 by modifying the loan to a qualified
customer instead of foreclosing on the property. Only 7%
of accruing consumer real estate TDRs were more than
60-days delinquent at December 31, 2011, compared
with 5.3% at December 31, 2010. Approximately 10% of
the $316.6 million accruing consumer real estate TDR
modifications during the 24 months preceding December
31, 2011 defaulted during 2011. Of the $479.8 million
of consumer real estate TDRs at December 31, 2011,
$183.2 million were permanent modifications. Temporary
modifications are no longer classified as TDRs once
they complete the temporary modification term and the
customer is performing for three months under the original
contractual terms.
A commercial loan may be modified through a term
extension with a reduction of contractual payments or a
change in interest rate. Commercial loan modifications
which are not classified as TDRs primarily involve loans
on which interest rates were modified to current market
rates for similarly situated borrowers who have access
to alternative funds or on which TCF received additional
collateral or loan conditions. Reserves for losses on
accruing commercial loan TDRs were $1.4 million, or
1.4% of the outstanding balance, at December 31, 2011,
and $695 thousand, or 1.4% of the outstanding balance,
at December 31, 2010.
Commercial loans that are 90 or more days past due
and not well secured at the time of modification 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. All
loans modified when on non-accrual status continue to
be reported as non-accrual loans until there is sustained
repayment performance for six months. At December 31,
2011, over 54% of total commercial TDRs were accruing and
TCF was able to recognize essentially all of the contractual
interest due on accruing commercial TDRs during 2011. Only
five of the 63 accruing commercial TDRs that were modified
within the 24 months preceding December 31, 2011,
totaling $32.2 million, defaulted during 2011.
See Note 7 of Notes to Consolidated Financial
Statements for additional information.
2011 Form 10-K
37
The following tables summarize the balance of accruing modified loans as of December 31, 2011 and 2010.
(Dollars in thousands)
TDRs
Other loan modifications
Total accruing loan modifications
Over 60-day delinquency as a percentage of balance:
TDRs
Other loan modifications
Total accruing loan modifications
(Dollars in thousands)
TDRs
Other loan modifications
Total accruing loan modifications
Over 60-day delinquency as a percentage of balance:
TDRs
Other loan modifications
Total accruing loan modifications
Consumer
Real Estate
and Other
$433,078
13,397
$446,475
7.00%
20.66
7.41
Consumer
Real Estate
and Other
$337,401
24,145
$361,546
At December 31, 2011
Commercial
$ 98,448
13,318
$111,766
leasing and
Equipment
Finance
$ 776
4,829
$ 5,605
Total
$532,302
31,544
$563,846
– %
–
–
–%
2.40
2.07
5.69%
9.14
5.89
At December 31, 2010
Commercial
$ 48,838
68,484
$117,322
Leasing and
Equipment
Finance
$ –
22,624
$22,624
5.32%
9.22
5.58
–%
–
–
–%
.55
.55
Total
$386,239
115,253
$501,492
4.64%
2.04
4.05
Non-accrual Loans and Leases Non-accrual
loans and leases decreased $46.9 million, or 13.6%, from
December 31, 2010, primarily due to a $28.6 million
decrease in commercial and leasing and equipment
finance loans and leases as fewer loans and leases were
placed on non-accrual status and customer payments
increased on commercial non-accrual loans in 2011,
compared with 2010, and an $18.1 million decrease in
consumer real estate loans, as fewer loans were placed
on non-accrual status and more loans returned to accrual
status. Consumer real estate loans are charged-off to their
estimated realizable values upon entering non-accrual
status. Any necessary additional reserves are established for
commercial loans, leasing and equipment finance loans and
leases and inventory finance loans 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
Leasing and equipment finance
Inventory finance
Total non-accrual loans and leases
38 TCF Financial Corporation and Subsidiaries
2011
$129,114
20,257
149,371
15
149,386
104,744
22,775
127,519
20,583
823
$298,311
At December 31,
2009
2010
2008
2007
$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
At December 31, 2011 and 2010, non-accrual loans and leases include $130.9 million and $49.3 million, respectively, of
loans that were modified and categorized as TDRs. The increase in non-accrual TDRs in 2011 was primarily due to an increase
in commercial non-accrual TDRs of $65.7 million and an increase in consumer real estate non-accrual TDRs.
Changes in the amount of non-accrual loans and leases for the years ended December 31, 2011 and 2010 are summarized
in the following tables.
(In thousands)
Balance, beginning of year
Additions
Charge-offs
Transfers to other assets
Return to accrual status
Payments received
Other, net
Balance, end of year
(In thousands)
Balance, beginning of year
Additions
Charge-offs
Transfers to other assets
Return to accrual status
Payments received
Other, net
Balance, end of year
Consumer Real
Estate and
Other
$167,547
231,104
(72,043)
(83,138)
(79,602)
(13,273)
(1,209)
$149,386
Consumer Real
Estate and
Other
$139,300
245,695
(57,194)
(98,446)
(48,999)
(8,576)
(4,233)
$167,547
At or For the Year Ended December 31, 2011
leasing and
Equipment
Finance
$ 34,407
29,261
(13,217)
(6,724)
(2,943)
(20,113)
(88)
$ 20,583
Commercial
$142,248
106,259
(42,098)
(23,142)
–
(60,859)
5,111
$127,519
Inventory
Finance
$ 1,055
6,875
(61)
(755)
(4,278)
(2,100)
87
$ 823
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
Total
$ 345,257
373,499
(127,419)
(113,759)
(86,823)
(96,345)
3,901
$ 298,311
Total
$296,275
445,591
(131,015)
(147,152)
(57,478)
(60,738)
(226)
$345,257
Total additions to non-accrual loans and leases decreased $72.1 million and consumer loans that returned to accrual
status increased $30.6 million for the year ended December 31, 2011, compared with 2010.
Charge-offs and allowance recorded to date against non-accrual loans and leases as a percentage of the remaining
contractual loan balance as of December 31, 2011 and 2010 are summarized in the following tables.
(Dollars in thousands)
Consumer
Commercial
Leasing and equipment finance
Inventory finance
Total at December 31, 2011
(Dollars in thousands)
Consumer
Commercial
Leasing and equipment finance
Inventory finance
Total at December 31, 2010
At December 31, 2011
Charge-offs
and Allowance
Recorded
$ 62,744
45,435
3,651
44
$111,874
Net
Exposure
$146,770
111,093
16,932
779
$275,574
Impairment(1)
29.9%
29.0
17.7
5.3
28.9%
At December 31, 2010
Charge-offs
and Allowance
Recorded
$ 46,780
71,182
8,384
185
$126,531
Net
Exposure
$ 166,029
114,173
26,074
870
$ 307,146
Impairment(1)
22.0%
38.4
24.3
17.5
29.2%
Contractual
loan Balance
$209,514
156,528
20,583
823
$387,448
Contractual
Loan Balance
$212,809
185,355
34,458
1,055
$433,677
(1) Represents the ratio of charge-offs and allowance recorded to the contractual loan balances for the respective period.
2011 Form 10-K
39
Allowance for Loan and Lease Losses The
determination of the allowance for loan and lease losses
is a critical accounting estimate. TCF’s methodologies for
determining 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
location, 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 $255.7 million appropriate to cover
probable losses incurred in the loan and lease portfolios
as of December 31, 2011. 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 subsequent evaluations of the
loan and lease portfolio, in light of factors then prevailing,
including economic conditions, TCF’s ongoing credit
review process or regulatory requirements, will not require
significant changes in the balance of the allowance for
loan and lease losses. Among other factors, an economic
slowdown, increasing levels of unemployment and/or a
decline in commercial or residential 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 generally
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 7 of Notes to Consolidated
Financial Statements, 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 is as follows.
At December 31,
2011
2010
2009
2008
2007
Allowance as a Percentage of Total
Loans and Leases Outstanding
At December 31,
2009
2008
2010
2011
2007
$115,740
67,695
183,435
1,114
$105,634
67,216
172,850
1,653
$ 89,542
75,424
164,966
2,476
$ 47,279
51,157
98,436
2,664
$16,494
15,102
31,596
2,059
2.44%
3.14
2.66
2.89
2.16%
2.97
2.42
4.22
1.80%
3.25
2.27
4.82
.97%
2.11
1.35
4.26
.35%
.64
.45
.92
184,549
40,446
6,508
46,954
21,173
2,996
174,503
50,788
11,690
62,478
26,301
2,537
167,442
37,274
6,230
43,504
32,063
1,462
101,100
39,386
11,865
51,251
20,058
33
33,655
25,891
7,077
32,968
14,319
–
2.66
1.26
2.59
1.36
.67
.48
2.43
1.53
3.68
1.71
.83
.32
2.28
1.14
1.39
1.17
1.04
.31
1.37
1.32
2.34
1.47
.81
.75
.46
1.01
1.27
1.06
.68
–
$255,672
$265,819
$244,471
$172,442
$80,942
1.81
1.80
1.68
1.29
.66
1,829
$257,501
2,353
$268,172
3,850
$248,321
1,510
$173,952
399
$81,341
N.A.
1.82%
N.A.
N.A.
1.81% 1.70% 1.30%
N.A.
N.A.
.66%
(Dollars 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
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 was
primarily due to increases in the provision for credit losses
as a result of increased levels of TDRs. The increased level
of allowance on TDRs was primarily due to growth in TDRs,
in part due to a new required accounting standard, and
use of longer term modifications. The adoption of
this standard during the third quarter of 2011 increased
accruing consumer real estate TDRs by $20.7 million,
and reserves on impaired consumer real estate loans by
$2.2 million, related to loans that were modified in 2011,
but were not TDRs under standards in place at that time.
The level of commercial lending allowances is generally
volatile due to reserves for specific loans based on
individual facts and collateral values as loans migrate to
classified commercial loans or to non-accrual. Charge-offs
are taken against such specific reserves. The decrease in
the allowance for commercial lending in 2011 was primarily
due to charge-offs of commercial loans that had previously
been specifically reserved. The leasing and equipment
finance allowance decreased $5.1 million compared to
2010 primarily due to improved customer performance in
the middle market and small ticket segments.
The following tables set 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 consumer real estate
Consumer other
Total consumer real estate and other
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 real estate and other
Commercial real estate
Commercial business
Total commercial
Leasing and equipment finance
Inventory finance
Total recoveries
Net charge-offs
Provision charged to operations
Other
Balance, at end of year
Net charge-offs as a percentage
of average loans and leases
Year Ended December 31,
2011
$ 265,819
2010
$ 244,471
2009
$ 172,442
2008
$ 80,942
2007
$ 58,543
(94,724)
(62,130)
(156,854)
(12,680)
(169,534)
(32,890)
(9,843)
(42,733)
(16,984)
(1,044)
(230,295)
510
3,233
3,743
9,262
13,005
1,502
152
1,654
4,461
193
19,313
(210,982)
200,843
(8)
$ 255,672
(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
1.45%
1.47%
1.34%
.78%
.29%
2011 Form 10-K
41
Consumer real estate net charge-offs during 2011
increased $23.3 million from 2010, including Illinois where
economic conditions are lagging other TCF markets and
where foreclosure times are longer, thus exposing TCF to
continued losses caused by declining home values. TCF’s
consumer real estate charge-off policy was recently
modified to require an increase in the frequency of
valuations after loans are moved to non-accrual status
until clear title is received. While the initial impact of the
policy change accelerated the timing of charge-offs on
non-accrual consumer real estate loans by $2.2 million
in the third quarter of 2011, it had no impact on TCF’s
provision for credit losses or net income, since these
losses were previously provided for in the allowance
for loan and lease losses. During 2011, commercial net
charge-offs decreased $7.3 million from 2010, primarily due
to decreased net charge-offs on office buildings and land
development. Leasing and equipment finance net charge-
offs in 2011 decreased $18.1 million from 2010, primarily
due to decreases in the middle market and small ticket
segments, as customer performance continued to improve
in these areas.
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 (1):
Consumer real estate
Commercial real estate
Total other real estate owned
Repossessed and returned equipment
Total other real estate owned
Year Ended December 31,
2011
2010
2009
2008
2007
$ 87,792
47,106
134,898
4,758
$ 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
and repossessed and returned equipment
$139,656
$149,390
$122,934
$72,592
$48,057
(1) Includes properties owned and foreclosed properties subject to redemption.
Other real estate owned is recorded at the lower of
cost or fair value less estimated costs to sell the property.
At December 31, 2011, TCF owned 465 consumer real
estate properties, a decrease of 55 from 2010, due to the
sale of 1,077 properties exceeding the addition of 1,022
properties. The average length of time to sell consumer
real estate properties during 2011 was 6.1 months from
the date they were classified as other real estate owned.
The consumer real estate portfolio is secured by a total
of 83,761 properties of which 723, or .86%, were owned or
foreclosed properties subject to redemption and included
within other real estate owned as of December 31, 2011.
This compares with 813, or .94%, owned or in the process of
foreclosure and included within other real estate owned as
of December 31, 2010.
42 TCF Financial Corporation and Subsidiaries
The changes in the amount of other real estate owned for the years ended December 31, 2011 and 2010 are summarized in the
following tables.
(In thousands)
Balance, beginning of year
Transferred in, net of charge-offs
Sales
Write-downs
Other, net
Balance, end of year
(In thousands)
Balance, beginning of year
Transferred in, net of charge-offs
Sales
Write-downs
Other, net
Balance, end of year
At or For the Year Ended December 31, 2011
Commercial
Consumer
$ 50,950
$ 90,115
22,293
99,639
(15,070)
(97,021)
(12,030)
(13,033)
963
8,092
$ 47,106
$ 87,792
Total
$ 141,065
121,932
(112,091)
(25,063)
9,055
$ 134,898
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
Transfers into other real estate owned decreased by $29.2 million and sales of other real estate owned increased
$13.1 million for the year ended December 31, 2011, compared with the same 2010 period.
The charge-offs and write-downs recorded to date on other real estate owned compared with the contractual loan balances
prior to non-performing status at December 31, 2011 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(1)
$137,605
82,058
$219,663
December 31, 2011
Charge-offs and
Write-downs
Recorded
$49,813
34,952
$84,765
Other Real
Estate Owned
Balance
$ 87,792
47,106
$134,898
Contractual Loan
Balance Prior to Non-
performing Status(1)
$ 134,437
65,473
$ 199,910
December 31, 2010
Charge-offs and
Write-downs
Recorded
$ 44,322
14,523
$58,845
Other Real
Estate Owned
Balance
$ 90,115
50,950
$141,065
Impairment (2)
36.2%
42.6
38.6%
Impairment (2)
33.0%
22.2
29.4%
(1) Net of any inflows or outflows during non-performing status, excluding charge-offs and write-downs.
(2) Represents the ratio of charge-offs and write-downs recorded to the contractual loan balances prior to non-performing status, net of any inflows or outflows during
non-performing status, excluding charge-offs and write-downs.
2011 Form 10-K
43
At December 31, 2011 and December 31, 2010, TCF had
$4.8 million and $8.3 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.
TCF’s Asset/Liability Committee (“ALCO”) and the
Board of Directors have adopted a Liquidity Management
Policy to direct management of the Company’s liquidity
risk. See Item 7A. Quantitative and Qualitative Disclosures
About Market Risk for more information. Given the current
economic condition and continued emergence of regulatory
guidance, the Company increased asset liquidity by
$905 million during 2011 to $1.4 billion by increasing
interest-bearing deposits held at the Federal Reserve
and unencumbered securities. At December 31, 2011,
TCF had $914 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 repayments and borrowings. Deposit inflows and
outflows are significantly influenced by general interest
rates, money market conditions, competition for funds,
customer service 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 from the FHLB, institutional sources under
repurchase agreements and other sources. At December
31, 2011, TCF had $2.4 billion in unused secured borrowing
capacity under these funding sources.
Deposits Deposits totaled $12.2 billion at December 31,
2011, up $616.9 million from December 31, 2010. 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 $11.1 billion at
December 31, 2011, up $579.6 million from December 31,
2010, and comprised 91.3% of total deposits at December
31, 2011, compared with 91.1% of total deposits at
December 31, 2010. The average balance of these deposits
for 2011 was $10.9 billion, an increase of $355.2 million
over the $10.5 billion average balance for 2010. Certificates
of deposit totaled $1.1 billion at December 31, 2011, up
$37.3 million from December 31, 2010. Non-interest bearing
deposits represented 20% of total deposits at December
31, 2011, compared with 21% at December 31, 2010. TCF’s
weighted-average cost for deposits, including non-
interest bearing deposits, was .29% at December 31, 2011,
compared with .41% at December 31, 2010. 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, 2011 or 2010.
Borrowings Borrowings totaled $4.4 billion at December
31, 2011, down $597.5 million from December 31, 2010.
See Notes 11 and 12 of Notes to Consolidated Financial
Statements for detailed information on TCF’s borrowings.
The weighted-average rate on borrowings was 4.26% at
December 31, 2011 and 4.17% at December 31, 2010.
The increase in the weighted-average rate on borrowings
was primarily due to a decrease in low rate short-
term borrowings. TCF does not utilize unconsolidated
subsidiaries or special purpose entities to provide off-
balance sheet borrowings.
44 TCF Financial Corporation and Subsidiaries
Contractual Obligations and Commitments As disclosed in Notes 11 and 12 of Notes to Consolidated Financial
Statements, TCF has certain obligations and commitments to make future payments under contracts. At December 31, 2011,
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
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
$ 64,038
26,193
3,159
$ 93,390
1-3 Years
$523,671
3-5 Years
$2,134,348
More than
5 Years
$1,666,023
52,359
7,164
$583,194
44,964
6,033
$2,185,345
90,615
30,858
$1,787,496
Amount of Commitment – Expiration by Period
less than
1 Year
$ 89,852
156,461
177,534
423,847
1-3 Years
3-5 Years
More than
5 Years
$106,718
49,401
–
156,119
$ 79,754
47,239
–
126,993
$1,073,455
25,975
–
1,099,430
Total
$4,388,080
214,131
47,214
$4,649,425
Total
$1,349,779
279,076
177,534
1,806,389
26,964
$1,833,353
19,842
$443,689
415
$156,534
6,707
$ 133,700
–
$1,099,430
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
predominantly 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
various renewal options, which may extend the terms of
these agreements. Campus marketing agreements are an
important element of TCF’s campus banking strategy.
See Note 18 of Notes to Consolidated Financial
Statements for information on standby letters of credit
and guarantees on industrial revenue bonds.
Equity Total equity at December 31, 2011 was $1.9 billion,
or 9.90% of total assets, up from $1.5 billion, or 8.02% of
total assets, at December 31, 2010. The increase in total
equity was primarily the result of TCF’s public offering
of common stock in March 2011 and increased retained
earnings. Dividends to common stockholders on a per share
basis totaled 20 cents in both 2011 and 2010. TCF’s dividend
payout ratio was 28.1% and 18.3% in 2011 and 2010,
respectively. The Company’s primary funding sources for
dividends are dividends received from TCF Bank.
At December 31, 2011, TCF had 5.4 million shares
remaining in its stock repurchase program authorized by its
Board of Directors, but would need approval from the Federal
Reserve before repurchasing stock under this authorization.
2011 Form 10-K
45
For the year ended December 31, 2011, average total
equity to average assets was 9.24%, compared with 7.83%
for 2010. For the year ended December 31, 2011, tangible
realized common equity to tangible assets was 8.42%,
compared with 7.28% for 2010. 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 $1.6
billion at December 31, 2011, compared with $1.3 billion
at December 31, 2010. Tangible assets represent common
equity less goodwill and other intangible assets. Tangible
assets were $18.7 billion at December 31, 2011, compared
with $18.3 billion at December 31, 2010. 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
Accumulated other comprehensive income
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,
2011
2010
$ 1,878,627
18,979,388
9.90%
$ 1,878,627
10,494
1,868,133
225,640
7,134
56,826
–
$ 1,578,533
$18,979,388
225,640
7,134
$18,746,614
8.42%
$ 1,480,163
18,465,025
8.02%
$ 1,480,163
8,500
1,471,663
152,599
1,232
–
15,692
$ 1,333,524
$18,465,025
152,599
1,232
$18,311,194
7.28%
At December 31, 2011, 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 14 and 15 of Notes to
Consolidated Financial Statements.
Tier 1 risk-based capital at December 31, 2011 was $1.7 billion, or 12.67% of risk-weighted assets, compared with $1.5
billion, or 10.47% of risk-weighted assets, at December 31, 2010. Tier 1 common capital at December 31, 2011 was $1.6 billion,
or 11.74% of the risk-weighted assets, compared to $1.3 billion, or 9.59% of risk-weighted assets, at December 31, 2010.
46 TCF Financial Corporation and Subsidiaries
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,
2011
2010
$ 1,706,926
13,475,330
12.67%
$ 1,459,703
13,936,629
10.47%
$ 1,706,926
$ 1,459,703
115,000
10,494
$ 1,581,432
$13,475,330
115,000
8,500
$ 1,336,203
$13,936,629
11.74%
9.59%
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 accounting
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)
Total 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 capital ratio:
Total tier 1 capital
Less:
Qualifying trust preferred securities
Qualifying non-controlling interest in subsidiaries
Total tier 1 common capital
Total risk-weighted assets
Total tier 1 common 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, 2011 is as follows.
(Dollars in thousands)
Net income available to common stockholders
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
2011
$109,394
17,971
11,105
(3,692)
280
25,664
219,666
354,724
(30,772)
$323,952
8.7%
2011 Form 10-K
47
Recent Accounting Developments
On April 29, 2011, the FASB issued Accounting Standards
Update (“ASU”) No. 2011-03, Reconsideration of Effective
Control for Repurchase Agreements (Topic 860), which
removes the collateral maintenance provision that is
currently required when determining whether a transfer of a
financial instrument is accounted for as a sale or a secured
borrowing. The adoption of the ASU will be required for TCF’s
Quarterly Report on Form 10-Q for the first quarter of 2012
and is not expected to have a material impact on TCF.
On May 12, 2011, the FASB issued ASU No. 2011-04,
Amendments to Achieve Common Fair Value Measurement
and Disclosure Requirements in U.S. GAAP and IFRS
(Topic 820), which is a joint effort between the FASB and
International Accounting Standards Board (“IASB”) to
converge fair value measurement and disclosure guidance.
The ASU permits measuring financial assets and liabilities
on a net credit risk basis, if certain criteria are met. The ASU
also increases disclosure surrounding company determined
fair values for level 3 financial instruments and also requires
the fair value hierarchy disclosure of financial assets
and liabilities that are not recognized at fair value in the
statement of financial position but included in disclosures
at fair value. The adoption of the ASU will be required for
TCF’s Quarterly Report on Form 10-Q for the first quarter of
2012 and is not expected to have a material impact on TCF.
On June 16, 2011, the FASB issued ASU No. 2011-05,
Presentation of Comprehensive Income (Topic 220),
which requires companies to report total net income,
each component of comprehensive income including
reclassifications between net income and other
comprehensive income, and total comprehensive income
on the face of the income statement, or as two consecutive
statements. The components of comprehensive income will
not be changed, nor does the ASU affect how earnings per
share is calculated or reported. These amendments will be
reported retrospectively upon adoption. The adoption of
the ASU will be required for TCF’s Quarterly Report on Form
10-Q for the first quarter of 2012 and is not expected to
have a material impact on TCF.
On December 16, 2011, the FASB issued ASU No. 2011-11,
Disclosures about Offsetting Assets and Liabilities
(Topic 210), which requires companies that have financial
and derivative instruments subject to a master netting
agreement to disclose the gross amount of the financial
assets and liabilities, the amounts that are offset on
the balance sheet, the net amounts presented, and the
amounts subject to a master netting arrangement that are
not offset. The adoption of the ASU will be required for TCF’s
Quarterly Report on Form 10-Q for the first quarter of 2013
and is not expected to have a material impact on TCF.
On December 23, 2011, the FASB issued ASU No. 2011-12,
Deferral of the Effective Date for Amendments to the
Presentation of Reclassifications of Items out of Accumulated
Other Comprehensive Income in Accounting Standards Update
No. 2011-05 (Topic 220), which defers the requirement within
ASU No. 2011-05 to present the reclassification amounts from
other comprehensive income to net income as a separate
component on the income statement. The FASB has not yet
established a new effective date for these provisions. The
remaining requirements of ASU No. 2011-05 were not deferred.
Fourth Quarter Summary
For the quarter ended December 31, 2011, TCF reported net
income of $16.4 million, compared with $33.9 million for
the quarter ended December 31, 2010. Diluted earnings
per common share was 10 cents for the quarter ended
December 31, 2011, compared with 24 cents for the quarter
ended December 31, 2010.
Net interest income was $173.4 million for the quarter
ended December 31, 2011, down $852 thousand, or .5%,
from the quarter ended December 31, 2010. The decrease
in net interest income was primarily due to the following
changes in loans and leases: reduced levels of higher
yielding fixed-rate consumer real estate loans and
decreases in leasing and equipment finance and commercial
real estate portfolio balances and average yields, partially
offset by reductions in average deposit rates. Net interest
margin for the quarter ended December 31, 2011 was 3.92%,
compared with 4.05% for the quarter ended December 31,
2010. The decrease in net interest margin was primarily due
to increased asset liquidity and decreased levels of higher
yielding loans and leases as a result of the lower interest
rate environment. These changes were partially offset by
a lower average cost of deposits and borrowings.
TCF provided $59.2 million for credit losses in the
quarter ended December 31, 2011, compared with $77.6
million in the quarter ended December 31, 2010. The
decrease was primarily due to decreased net charge-offs
and reserves in the commercial real estate and leasing
and equipment finance portfolios. For the quarter ended
December 31, 2011, net loan and lease charge-offs were
$57.9 million, or 1.63%, annualized, of average loans and
leases outstanding, compared with $64.9 million, or 1.75%,
annualized, of average loans and leases outstanding during
the quarter ended December 31, 2010. The decrease was
48 TCF Financial Corporation and Subsidiaries
primarily due to decreases in charge-offs in commercial
real estate and leasing and equipment finance, partially
offset by increases in charge-offs in consumer real estate.
Total non-interest income in the quarter ended December
$325 thousand and $1 million, respectively, along with
the effects of favorable developments in uncertain tax
positions and changes in state taxes of $1.3 million and
$577 thousand, respectively.
31, 2011 was $98.3 million, compared with $141.5 million in
the quarter ended December 31, 2010. The decrease in non-
interest income was primarily due to net gains on sales of
securities of $21.2 million in 2010, compared with net gains
on sales of securities of $5.8 million in 2011. In addition,
during the quarter ended December 31, 2011, TCF’s card
revenues decreased $14 million, or 50.6% from the quarter
ended December 31, 2010. The average interchange rate
per transaction decreased slightly more the 50%, compared
to the quarter ended December 31, 2010, due to new debit
card interchange regulations which took effect on October
1, 2011. Leasing and equipment finance revenues were $18.5
million in the quarter ended December 31, 2011, down $4.9
million or 21%, from the quarter ended December 31, 2010
due to lower levels of customer initiated lease activity.
Non-interest expense totaled $187.5 million for the
quarter ended December 31, 2011, an increase of $1.6
million, or .8%, from $186 million for the quarter ended
December 31, 2010. Compensation and employee benefits
decreased $248 thousand, or .3%, for the quarter ended
December 31, 2011, primarily due to compensation
decreases in branch banking as the result of branch
closures during 2011, offset by compensation related to
increased headcount from the acquisition of Gateway One.
Deposit account premiums increased $4.8 million to $6.5
million for the quarter ended December 31, 2011 primarily
due to changes in the account premium programs beginning
in April 2011, that increased the premiums paid for each
qualifying account. Advertising and marketing expense
decreased $904 thousand or 28.7% for the quarter ended
December 31, 2011 primarily due to the discontinuation
of the debit card rewards program in the third quarter of
2011 in response to a new Federal regulation regarding
debit card interchange fees. Foreclosed real estate and
repossessed asset expense decreased $1.5 million, or
11.4%, for the quarter ended December 31, 2011 primarily
due to decreases in the number of consumer real estate
properties owned and the associated expense.
In the quarter ended December 31, 2011, the effective
income tax rate was 29.8% of income before tax expense,
down from 33.3% for the quarter ended December 31, 2010.
The effective tax rate for the quarter ended December 31,
2011 and 2010 included the effects of year-to-date changes
in the estimated annual effective tax rate of approximately
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
Any statements contained in this Annual Report on Form
10-K regarding the outlook for the Company’s businesses
and their respective markets, such as projections of future
performance, guidance, statements of the Company’s
plans and objectives, forecasts of market trends and
other matters, are forward-looking statements based on
the Company’s assumptions and beliefs. Such statements
may be identified by such words or phrases as “will likely
result,” “are expected to,” “will continue,” “outlook,”
“will benefit,” “is anticipated,” “estimate,” “project,”
“management believes” or similar expressions. These
forward-looking statements are subject to certain risks
and uncertainties that could cause actual results to
differ materially from those discussed in such statements
and no assurance can be given that the results in any
forward-looking statement will be achieved. For these
statements, TCF claims the protection of the safe harbor
for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995. Any forward-
looking statement speaks only as of the date on which it
is made, and we disclaim any obligation to subsequently
revise any forward-looking statement to reflect events or
circumstances after such date or to reflect the occurrence
of anticipated or unanticipated events.
Certain factors could cause the Company’s future results
to differ materially from those expressed or implied in
any forward-looking statements contained herein. These
factors include the factors discussed in Part I, Item 1A of
this report under the heading “Risk Factors,” the factors
discussed below and any other cautionary statements,
2011 Form 10-K
49
written or oral, which may be made or referred to in
connection with any such forward-looking statements. Since
it is not possible to foresee all such factors, these factors
should not be considered as complete or exhaustive.
Adverse Economic or Business Conditions, Credit
and Other Risks Deterioration in general economic and
banking industry conditions, including defaults, anticipated
defaults or rating agency downgrades of sovereign debt
(including debt of the U.S.), or continued high rates of
or increases in unemployment in TCF’s primary banking
markets; adverse economic, business and competitive
developments such as shrinking interest margins, deposit
outflows, deposit account attrition or an inability to
increase the number of deposit accounts; adverse changes
in credit quality and other risks posed by TCF’s loan, lease,
investment and securities available for sale portfolios,
including 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;
foreign currency exchange risks; counterparty risk, including
the risk of defaults by our counterparties or diminished
availability of counterparties who satisfy our credit
quality requirements; decreases in demand for the types of
equipment that TCF leases or finances; limitations on TCF’s
ability to attract and retain manufacturers and dealers to
expand the inventory finance business.
legislative and Regulatory Requirements New
consumer protection and supervisory requirements and
regulations, including those resulting from action by the
CFPB and changes in the scope of Federal preemption
of 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 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 Durbin
Amendment to the Dodd-Frank Act; 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; deficiencies in
TCF’s compliance under the Bank Secrecy Act in past or
future periods, which may result in regulatory enforcement
action including monetary penalties; increased health
care costs resulting from 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.
Earnings/Capital Risks and 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 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 Dodd-Frank Act, or additional capital, leverage,
liquidity and risk management requirements or changes in
the composition of qualifying regulatory capital (including
those resulting from U.S. implementation of Basel III
requirements); 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 associated with new regulatory
requirements or interpretive guidance relating to liquidity;
uncertainties relating to customer opt-in preferences with
respect to NSF fees on point of sale and ATM transactions
which may have an adverse impact on TCF’s fee revenue;
uncertainties relating to future retail deposit account
changes, including limitations on TCF’s ability to predict
customer behavior and the impact on TCF’s fee revenues.
Competitive Conditions; Supermarket Branching
Risk; Growth Risks Reduced demand for financial
services and loan and lease products; adverse
developments affecting TCF’s supermarket banking
relationships or any of the supermarket chains in which TCF
maintains supermarket branches; customers completing
financial transactions without using a bank; the effect of
any negative publicity; slower than anticipated growth in
50 TCF Financial Corporation and Subsidiaries
existing or acquired businesses; inability to successfully
execute on TCF’s growth strategy through acquisitions or
cross-selling opportunities; failure to expand or diversify
our balance sheet through programs or new opportunities;
failure to successfully attract and retain new customers.
Technological and Operational Matters Technological
or operational difficulties, loss or theft of information,
counterparty failures and the possibility that deposit
account losses (fraudulent checks, etc.) may increase;
failure to keep pace with technological change.
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. and potential reductions in card revenues
resulting from such litigation or other litigation against Visa.
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; ineffective internal controls; adverse
state or Federal tax assessments or findings in tax audits;
lack of or inadequate insurance coverage for claims against
TCF; potential for claims and legal action related to TCF’s
fiduciary responsibilities.
Item 7A. Quantitative and
Qualitative Disclosures about
Market Risk
The Company’s market risk profile consists of four main
categories: credit risk, interest-rate risk, liquidity risk and
foreign currency risk.
Credit Risk
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, such as
the failure of customers and counterparties to meet their
contractual obligations, as well as contingent exposures from
unfunded loan commitments and letters of credit. Credit
risk also includes the failure of counterparties to settle a
securities transaction on agreed-upon terms or the failure of
issuers 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 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 that they are predictive
of borrower performance. Limits are established on the
exposure to a single customer (including 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 the credit committees.
Management continuously monitors asset quality
in order to manage the Company’s credit risk and to
determine the appropriateness of valuation allowances,
including, in the case of commercial loans and leases, a
risk rating methodology under which a rating of one through
nine is assigned to each loan or lease. The rating reflects
management’s assessment of the potential impact on
repayment of the customer’s financial and operational
condition. Asset quality is monitored separately based on
the type or category of loan or lease. The rating process
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 scenarios, both
expected and unexpected.
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 Bank Credit Committee of TCF Bank.
To further manage credit risk in the securities portfolio,
99.9% of the securities held in the securities available for
sale portfolio are issued and guaranteed by the Federal
National Mortgage Association (“Fannie Mae”), the Federal
Home Loan Mortgage Corporation (“Freddie Mac”) or the
Government National Mortgage Association (“Ginnie Mae”).
2011 Form 10-K
51
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 borrowings) to adverse
movements in interest rates. TCF’s results of operations
are dependent to a large degree on its net interest income
and its ability to manage interest-rate risk. As such, the
Company considers interest-rate risk to be one of its
most significant market risks. 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. 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.
Interest-rate risk arises mainly from the structure
of the balance sheet. Since TCF does not hold a trading
portfolio, the Company is not exposed to market risk
from trading activities. As such, 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 through the
use of simulation and valuation analyses. 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.
TCF utilizes net interest income simulation models to
estimate the near-term effects (next one to two years)
of changing interest rates on its net interest income.
Net interest income simulation involves forecasting net
interest income under a variety of scenarios, including
through variation of interest rate levels, the shape of
the yield curve and the spreads between market interest
rates. Management exercises its best judgment in making
assumptions regarding both events that management can
influence, such as non-contractual deposit repricings,
and events outside of its control, such as customer
behavior on loan and deposit activity, and the effect that
competition has on both loan and deposit pricing. These
assumptions are inherently uncertain and, as a result, net
interest income simulation results will likely differ from
actual results due to the timing, magnitude and frequency
of interest rate changes, changes in market conditions,
customer behavior and management strategies, among
other factors.
At December 31, 2011, net interest income is estimated to
increase by 2% 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 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), while
valuation 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 any potential responses by management to
anticipated changes in interest rates.
Additionally, management utilizes an interest-rate
gap measurement, which is calculated by taking the
difference between interest-earning assets and interest-
bearing liabilities repricing within a given period. While
the interest-rate gap measurement has some limitations,
including a lack of assumptions regarding future asset or
liability production and a static interest rate assumption,
it represents the net asset or liability sensitivity at a
point in time. An interest-rate gap measurement 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 $2.1
billion, or 10.9% of total assets, at December 31, 2011,
compared with a positive $515.5 million, or 2.8% of total
assets at December 31, 2010. The change in the gap
from 2010 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
52 TCF Financial Corporation and Subsidiaries
exists when the amount of interest-earning assets
maturing or repricing exceeds the amount of interest-
bearing liabilities maturing or repricing, including
assumed prepayments, within a particular time period.
A negative interest-rate gap position exists when the
amount of interest-bearing liabilities maturing or repricing
exceeds the amount of interest-earning assets maturing
or repricing, 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 $6.8 billion of fixed-rate
mortgage-backed securities and consumer real estate
loans at December 31, 2011, by approximately $120 million,
or 15.4%, 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, 2011, by approximately $269 million, or
34.5%, 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 as lenders’ willingness to lend funds,
which can be impacted by the value of assets underlying
loans and leases.
(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
Loans and leases held for sale
Total
Interest-bearing liabilities:
Checking deposits(3)
Savings deposits(3)
Money market deposits(3)
Certificates of deposits(3)
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, 2011
At December 31, 2010
Maturity/Rate Sensitivity
Within
30 Days
30 Days to
6 Months
6 Months
to 1 Year
1-3 Years
3+ Years
Total
$1,252,747
422,300
167,546
33,812
1,049,126
284,338
14,321
3,224,190
602,242
268,264
318,655
165,011
6,416
5,957
1,366,545
$ 438,998
297,840
621,443
151,785
119,114
199,628
–
1,828,808
44,379
1,155,534
13,811
418,020
–
261,638
1,893,382
$ 476,545
381,710
584,807
172,275
35
140,734
–
1,756,106
50,488
1,054,016
14,530
336,050
–
27,521
1,482,605
$1,899,673
1,397,195
1,336,363
521,416
251
–
–
5,154,898
$ 2,865,841
950,447
432,100
1,444,750
38,375
–
–
5,731,513
$ 6,933,804
3,449,492
3,142,259
2,324,038
1,206,901
624,700
14,321
17,695,515
919,985
1,656,405
255,166
136,657
–
455,274
3,423,487
3,012,655
1,721,044
49,215
9,877
–
3,631,274
8,424,065
4,629,749
5,855,263
651,377
1,065,615
6,416
4,381,664
16,590,084
1,857,645
$1,857,645
(64,574)
$1,793,071
273,501
$2,066,572
1,731,411
$3,797,983
(2,692,552)
$ 1,105,431
1,105,431
$ 1,105,431
9.8 %
(1.8)%
9.4 %
(.3)%
10.9%
2.8%
20.0%
13.0%
5.8%
3.8%
5.8%
3.8%
(1) At January 1, 2012, $1.2 billion of variable-rate consumer loans and $338 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, 2011, 15% of checking deposits, 42% of savings deposits, and 53% of money market deposits are included in
amounts repricing within one year. 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.
(4) Includes $300 million of callable borrowings.
2011 Form 10-K
53
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, asset liquidity levels and the amount available
from existing funding sources are reported to ALCO on a
monthly basis. At year end, TCF’s Liquidity Management
Policy and current operating practices established a daily
asset liquidity, in excess of the daily market risk collateral
requirement of $800 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 through 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,
highly rated securities which could be sold or pledged to
various counterparties under existing master repurchase
agreements. At December 31, 2011, TCF had asset liquidity
of $1.4 billion.
Deposits are TCF’s primary source of funding. In
addition, TCF maintains secured sources of funding,
which include $1.9 billion in secured borrowing capacity
at the FHLB of Des Moines and $518 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. The
FHLB also relies upon its own internal credit analysis of
TCF’s financial results when determining TCF’s secured
borrowing capacity. Additionally, TCF has developed and
maintains a contingency funding plan should certain
liquidity needs arise.
Foreign Currency Risk
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. or results of other transactions in countries outside
of the United States. TCF has 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 TCF Commercial Finance Canada and on certain
other foreign lease transactions. The value of forward
foreign exchange contracts vary over their contractual 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.
54 TCF Financial Corporation and Subsidiaries
Item 8. Financial Statements and Supplementary Data
Repo rt of I ndependent Registered Pub li c
Acc ounti ng 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, 2011 and 2010, and the related consolidated
statements of income, equity and cash flows for each
of the years in the three-year period ended December
31, 2011. 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 management, 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, 2011 and 2010, and
the results of their operations and their cash flows
for each of the years in the three year period ended
December 31, 2011, 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,
2011, 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 21, 2012 expressed
an unqualified opinion on the effectiveness of the
Company’s internal control over financial reporting.
As discussed in Notes 1 and 28 to the consolidated
financial statements, the Company has elected to
change its method of accounting for pension and other
postretirement benefits in 2011. All periods have been
retrospectively restated for this accounting change.
Minneapolis, Minnesota
February 21, 2012
2011 Form 10-K
55
Consolidated Statements of Financial Condition
At December 31,
2011
2010
$ 1,389,704
157,780
2,324,038
14,321
6,933,804
3,449,492
3,142,259
624,700
14,150,255
(255,672)
13,894,583
436,281
225,640
537,041
$18,979,388
$ 4,629,749
5,855,263
651,377
1,065,615
12,202,004
6,416
4,381,664
4,388,080
510,677
17,100,761
$ 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
–
–
1,604
715,247
1,127,823
56,826
(33,367)
1,868,133
10,494
1,878,627
$18,979,388
1,430
459,884
1,049,156
(15,692)
(23,115)
1,471,663
8,500
1,480,163
$18,465,025
(Dollars in thousands, except per-share data)
Assets
Cash and due from banks
Investments
Securities available for sale
Loans and leases held 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;
160,366,380 and 142,965,012 shares issued, respectively
Additional paid-in capital
Retained earnings, subject to certain restrictions
Accumulated other comprehensive income (loss)
Treasury stock at cost, 42,566 and 51,160 shares, respectively, 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.
56 TCF Financial Corporation and Subsidiaries
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
Gains on auto loans held for sale, net
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,
2011
2010
2009
$844,796
85,188
7,967
937,951
45,108
193,155
238,263
699,688
200,843
498,845
219,363
96,147
27,927
343,437
89,167
3,434
436,038
7,263
1,133
444,434
348,792
126,437
28,747
22,891
10,034
145,489
682,390
49,238
30,007
2,816
–
764,451
178,828
64,441
114,387
4,993
109,394
–
–
$109,394
$ .71
$ .71
$ .20
$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
346,072
126,551
23,584
17,304
13,062
146,253
672,826
40,385
37,106
6,018
–
756,335
244,415
90,171
154,244
3,297
150,947
–
–
$150,947
$ 1.08
$ 1.08
$ .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
345,868
126,292
19,109
30,682
17,134
142,817
681,902
31,886
22,368
12,137
8,362
756,655
143,670
49,811
93,859
(410)
94,269
6,378
12,025
$ 75,866
$ .60
$ .60
$ .40
2011 Form 10-K
57
Consolidated Statements of Equity
TCF Financial Corporation
(Dollars in thousands)
Balance, December 31, 2008
Change in accounting principle
Subtotal
Comprehensive income (loss):
Income after income tax expense
Other comprehensive loss
Comprehensive income (loss)
Net investment by non–controlling interest
Dividends on preferred stock
Dividends on common stock
Non-cash deemed preferred stock dividend
Redemption of preferred stock
Issuance of 719,727 common shares
Treasury shares sold to TCF employee
benefit plans, 1,448,640 shares
Cancellation of common shares
Cancellation of common shares for
tax withholding
Amortization of stock compensation
Exercise of stock options,
108,800 shares
Stock compensation tax benefits
Change in shares held in trust for
deferred compensation plans, at cost
Cost of issuance of common warrants
Balance, December 31, 2009
Comprehensive income (loss):
Income after income tax expense
Other comprehensive loss
Comprehensive income (loss)
Public offering of common stock
Net 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, December 31, 2010
Comprehensive income:
Income after income tax expense
Other comprehensive income
Comprehensive income
Public offering of common stock
Net distribution to non-controlling interest
Dividends on common stock
Grants of restricted stock, 1,256,094 shares
Common shares purchased by TCF
employee benefit plans
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, December 31, 2011
Number of
Common
Shares
Issued
130,839,378
–
130,839,378
Preferred
Stock
$ 348,437
–
348,437
Common
Stock
$ 1,308
–
1,308
Additional
Paid-in
Capital
Retained
Earnings
$ 330,474 $ 927,893
(27,377)
900,516
–
330,474
Accumulated
Other
Comprehensive
(Loss)/Income
Treasury
Stock
Total
and Other
$ (3,692) $(110,644) $ 1,493,776
–
(110,644) 1,493,776
27,377
23,685
–
–
–
–
–
–
–
–
–
–
–
–
–
–
710
–
12,025
(361,172)
–
–
(481,000)
(18,878)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(18,638)
94,269
–
94,269
–
(6,378)
(50,828)
(12,025)
–
–
–
(5)
(18,367)
(818)
–
243
–
–
–
–
(250)
8,615
(1,279)
(1,058)
–
–
–
–
–
(22,025)
(22,025)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
18,638
37,514
–
–
–
2,817
–
94,269
(22,025)
72,244
–
(5,668)
(50,828)
–
(361,172)
–
19,147
(580)
(250)
8,615
1,538
(1,058)
–
–
–
–
130,339,500 $ –
–
–
$1,303
(848)
(402)
$297,429
–
–
$ 925,797
–
–
–
(402)
$ 1,660 $ (50,827) $1,175,362
848
–
–
–
–
12,322,250
–
–
20,000
442,579
–
(23,723)
(135,594)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
124
–
–
–
4
–
–
(1)
–
–
–
–
–
164,443
–
–
(8,491)
6,358
(7,893)
(247)
(1,946)
9,534
298
150,947
–
150,947
–
–
(27,617)
–
–
(17,352)
(17,352)
–
–
–
–
–
–
29
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
8,491
150,947
(17,352)
133,595
164,567
–
(27,617)
–
–
6,362
19,620
–
–
–
–
11,727
(218)
(1,947)
9,534
298
–
142,965,012
–
$ –
–
$ 1,430
399
–
$ 459,884 $ 1,049,156
–
–
$(15,692) $ (23,115) $1,471,663
(399)
Non-
controlling
Interests
Total
$ – $ 1,493,776
–
1,493,776
–
–
(410)
–
(410)
4,803
–
–
–
–
–
–
–
–
–
–
–
93,859
(22,025)
71,834
4,803
(5,668)
(50,828)
–
(361,172)
–
19,147
(580)
(250)
8,615
1,538
(1,058)
–
–
$ 4,393
–
(402)
$1,179,755
3,297
–
3,297
–
810
–
–
–
–
–
–
–
–
154,244
(17,352)
136,892
164,567
810
(27,617)
–
6,362
11,727
(218)
(1,947)
9,534
298
–
$ 8,500
–
$ 1,480,163
–
–
–
15,081,968
–
–
1,247,500
1,402,505
(120,886)
(209,719)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
151
–
–
12
14
(1)
(2)
–
–
–
–
–
219,515
–
–
(234)
17,957
(620)
(3,114)
11,105
280
109,394
–
109,394
–
–
(30,772)
–
–
45
–
–
–
–
72,518
72,518
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
222
–
–
–
–
–
109,394
72,518
181,912
219,666
–
(30,772)
–
17,971
(576)
(3,116)
11,105
280
4,993
–
4,993
–
(2,999)
–
–
–
–
–
–
–
114,387
72,518
186,905
219,666
(2,999)
(30,772)
–
17,971
(576)
(3,116)
11,105
280
–
160,366,380
–
$ –
–
$1,604
10,474
–
$715,247 $1,127,823
–
–
(10,474)
$ 56,826 $ (33,367) $1,868,133
–
$10,494
–
$1,878,627
See accompanying notes to consolidated financial statements.
58 TCF Financial Corporation and Subsidiaries
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
Proceeds from sales of auto loans held for sale
Originations of auto loans held for sale
Net increase (decrease) in other assets and accrued expenses and other liabilities
Gains on sales of assets and deposits, net
Net income (loss) attributable to non-controlling interest
Other, net
Total adjustments
Net cash provided by operating activities
Cash flows from investing activities:
Principal collected on loans and leases, net of loan originations and purchases
Purchases of equipment for lease financing
Purchases of leasing and equipment financing portfolios
Purchase of inventory finance portfolios
Acquisition of Gateway One Lending & Finance, LLC, net of cash acquired
Proceeds from sales of loans
Proceeds from sales of lease receivables
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., net of cash acquired
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 (distribution to) investment by non-controlling interest
Dividends paid on common stock
Dividends paid on preferred stock
Stock compensation tax benefits (expenses)
Common shares sold to TCF employee benefit plans
Treasury 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 (received) for:
Interest on deposits and borrowings
Income taxes
Transfer of loans and leases to other assets
See accompanying notes to consolidated financial statements.
2011 Form 10-K
Year Ended December 31,
2011
2010
2009
$ 109,394
$ 150,947
$ 94,269
200,843
73,183
37,395
(32,987)
92,176
(16,465)
4,993
28,011
387,149
496,543
812,988
(894,593)
(68,848)
(5,905)
(94,323)
168,834
125,072
181,696
(1,039,379)
586,816
(6,663)
29,093
107,428
(34,865)
–
34,334
(98,315)
616,889
(120,374)
1,898
(376,087)
219,666
–
(2,999)
(30,772)
–
280
17,971
–
1,103
327,575
725,803
663,901
$1,389,704
236,437
77,135
–
–
62,397
(32,483)
3,297
17,994
364,777
515,724
429,228
(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
6,362
11,727
1,301
495,602
364,774
299,127
$ 663,901
258,536
68,491
–
–
(34,882)
(30,539)
(410)
3,798
264,994
359,263
40,158
(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
$ 231,353
$ (12,012)
$ 175,361
$ 258,750
$ 72,777
$ 214,079
$ 329,609
$ 7,788
$ 135,682
59
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 (“TCF” or the “Company”), 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, auto finance and
Real Estate Investment Trust (“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 U.S. Generally Accepted Accounting Principles
(“GAAP”) 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 management 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 accounting
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 commercial, equipment finance and
inventory finance loans, as defined in Note 7, Allowance for
Loan and Lease Losses and Credit Quality Information, non-
accrual leases and certain accruing classified commercial,
equipment finance, and inventory finance loans and leases
on an individual basis. Loans evaluated on an individual
basis are classified as “individually evaluated for loss
potential.” Loan impairment on commercial, equipment
finance and inventory finance loans 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. Accruing
consumer real estate loans classified as troubled debt
restructurings (“TDRs”) are also considered to be impaired
loans, as defined, with the allowance for loan losses for
such loans being determined using the present value of
expected future cash flows. See the discussion in Note 7 for
further information on the determination of the allowance
for losses on accruing consumer real estate TDRs.
The allowance for all other loans and leases is evaluated
collectively by portfolio type and classified as “collectively
evaluated for loss potential.” The collective evaluation
of incurred losses in these portfolios is based upon 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 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.
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
60 TCF Financial Corporation and Subsidiaries
necessary. Valuation adjustments on residential properties
made within 90 days after foreclosure are recorded as
charge-offs. Subsequent valuation adjustments are
recorded as real estate owned expense. Deposit account
overdrafts, which are included within consumer other, 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 probable, 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
commercial 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 typically 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
component, 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 adjustments, if necessary, are charged
to non-interest expense in the periods in which they
become known.
From time to time, TCF sells minimum lease payments
to third-party financial institutions, at fixed rates,
on a non-recourse basis with its underlying equipment
as collateral as a credit risk reduction tool. For those
transactions which achieve sale treatment, the related
lease cash flow stream and the non-recourse financing
are not recognized on TCF’s Consolidated Statements of
Financial Condition. For those transactions which do not
achieve sale treatment, the underlying lease remains on
TCF’s Consolidated Statements of Financial Condition and
non-recourse debt is recorded equal to the amount of the
proceeds received. TCF typically retains servicing of these
leases and bills, collects and remits 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 Consolidated Statements of
Financial Condition. In these non-recourse financings, the
other financial institution has no further recourse against TCF.
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
2011 Form 10-K
61
Consolidated Statements of Financial Condition 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 allowance for lease losses is not
provided on operating leases.
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 interpretations 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
Statements of Income, 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 unrecognized
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 Held for Sale Consumer auto loans
and equipment finance leases designated as held
for sale are carried at the lower of cost or fair value. Any
cost amount exceeding an individual loan or lease’s fair
value is recorded as a valuation allowance and recognized
within the Consolidated Statements of Income as a
reduction of gains on loans and leases held for sale.
loans and leases Loans and leases are reported
at historical cost including net direct fees and costs
associated 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
62 TCF Financial Corporation and Subsidiaries
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 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 non-accrual status
at 90 days past due or when four payments are owed, or
after a partial charge-off, which management feels is
appropriate based on the experience of TCF’s customer
activity and loan type. There is no industry-wide practice
for placing a consumer real estate loan on non-accrual
status and therefore TCF’s non-accrual information is
not always comparable to other banks. Consumer loans,
other than consumer real estate, are charged-off at 120
days or more past due or when five payments are owed.
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 principal 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 principal 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 or
property evaluations. 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. Other real estate owned at December 31,
2011 and 2010 was $134.9 million and $141.1 million,
respectively. Repossessed and returned equipment at
December 31, 2011 and 2010 was $4.8 million and $8.3
million, respectively.
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 and 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, 2011, TCF’s investments in affordable housing
limited partnerships were $22.7 million, compared with
$30.2 million at December 31, 2010.
Five of these investments in affordable housing limited
partnerships are considered variable interest entities.
These partnerships are not consolidated with TCF. As
2011 Form 10-K
63
of December 31, 2011 and 2010, the carrying amount
of these five investments was $22.1 million and $29.4
million, respectively. The maximum exposure to loss on
these five investments was $22.1 million at December 31,
2011; 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.
Interest Only Strips TCF periodically sells auto loans
to third party financial institutions, at fixed rates, on
a limited-recourse basis. For those transactions which
achieve sales treatment, the underlying loan is not
recognized on TCF’s Consolidated Statements of Financial
Condition. TCF sells these loans at par value and retains a
participation in the expected future cash flows of borrower
loan payments which represents the deferral of a portion
of the purchase price known as an interest only strip. The
interest only strip is recorded at fair value at the time of
sale in other assets within the Consolidated Statements
of Financial Condition. The fair value of the interest only
strip represents the present value of future cash flows to
be generated by the loans, in excess of the interest paid to
investors, and costs of servicing the loans and completing
the sale. After initial recording of the interest only strip,
the accretable yield is measured as the difference between
the fair value and the cash flows expected to be collected.
The accretable yield is amortized into interest income over
the life of the interest only strip using the effective yield
method. The expected cash flows are evaluated quarterly to
determine if they have changed from previous projections.
If the present value of the original cash flows expected to
be collected is less than the present value of the current
estimate of cash flows to be collected, the change is
adjusted prospectively over the remaining life of the
interest only strip. If the present value of the original cash
flows expected to be collected is greater than the present
value of the current estimate, an other than temporary
impairment is recorded.
Intangible Assets Goodwill is tested for impairment
annually. Other intangibles are amortized over their
estimated 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.
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
corresponding 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 compensation 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 exercise 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 16, Stock Compensation for additional
information concerning stock-based compensation.
Employee Benefits Plans During the fourth quarter of 2011,
TCF retrospectively changed its method of accounting for
pension and other postretirement benefits. TCF’s prior
policy was to report net actuarial gains and losses as a
component of stockholders’ equity in the Consolidated
Statements of Financial Condition on an annual basis.
TCF’s policy for actuarial gains and losses is now to
immediately recognize them in its operating results in the
year in which the gains and losses occur. Additionally,
for purposes of calculating the expected return on plan
assets, TCF will no longer use an averaging technique for
the market-related value of plan assets, but will instead
use the actual fair value of plan assets. While both the
prior and new policies are permitted under U.S. GAAP,
TCF believes that the new policies are preferable as the
economic results of the Pension and Postretirement Plans
will be recognized in earnings in the year they occur.
Financial data for all periods presented has been adjusted
to reflect the effect of these accounting changes. See
Note 28 for additional information.
64 TCF Financial Corporation and Subsidiaries
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.
the following pro forma financial information. The pro
forma financial information does not necessarily reflect
the results of operations that would have occurred had
TCF and Gateway One constituted a single entity during
such periods. Growth opportunities are expected to be
achieved in various amounts at various times during the
years subsequent to the acquisition and not ratably over,
or at the beginning or end of such periods. No adjustments
have been reflected in the following pro forma financial
information for anticipated growth opportunities.
Note 2. Business Combinations
(In thousands, except per-share data)
On November 30, 2011, TCF Bank acquired 100% of the
outstanding common shares of Gateway One Lending &
Finance, LLC (“Gateway One”), a privately held lending
company that indirectly originates loans on new and
used autos to consumers through established dealer
relationships. The acquisition of Gateway One further
diversifies the Company’s lending business and provides
growth opportunities within the U.S. auto lending
marketplace. As a result of the acquisition, Gateway
One became a wholly-owned subsidiary of TCF Bank and,
accordingly, its results of operations since November 30,
2011 have been included within TCF’s consolidated
financial statements. TCF’s Consolidated Statement of
Income for the year ended December 31, 2011 included
net interest income, non-interest income and net income
of Gateway One totaling $282 thousand, $1.9 million and
$89 thousand, respectively. During the fourth quarter of
2011, TCF recognized $2 million of acquisition costs. These
expenses are reported in other non-interest expense within
the Consolidated Statement of Income for the year ended
December 31, 2011.
The following unaudited pro forma financial information
presents the combined results of operations of TCF and
Gateway One as if the acquisition had been effective
January 1, 2010. These results include the impact of
amortizing certain purchase accounting adjustments such
as intangible assets, compensation expenses and the
impact of the acquisition on income tax expense. There
were no material nonrecurring pro forma adjustments
directly attributable to the acquisition included within
Interest income
Net interest income
Non-interest income
Net income
Basic earnings per common share
Diluted earnings per common share
Year Ended December 31,
2010
2011
(Unaudited)
$943,776
704,693
458,998
107,597
$ .70
$ .69
$978,623
706,556
547,940
150,613
$ 1.08
$ 1.08
The following table summarizes the consideration paid for
Gateway One and the amounts of the assets acquired and
liabilities assumed recognized at the acquisition date.
At November 30, 2011
$115,218
(In thousands)
Cash Consideration
Recognized amounts of identifiable assets
acquired and liabilities assumed:
Cash and cash equivalents
Restricted cash
Loans held for sale
Loans held for investment
Intangible assets
Interest only strip
Deferred tax asset
Deferred stock compensation
Other assets
Accounts payable
Loan sale liability
Debt assumed
Servicing funds to be remitted
Other liabilities
Total identifiable net assets
Goodwill
Total net assets acquired
$ 2,210
18,685
13,711
3,779
6,170
21,210
11,286
2,600
1,588
(1,043)
(5,972)
(9,988)
(17,901)
(4,158)
$ 42,177
73,041
$115,218
2011 Form 10-K
65
All of Gateway One’s loans held for investment had
evidence of deteriorated credit quality. The goodwill of
$73 million arising from the acquisition consists largely of
expected incremental balance sheet and fee growth and
cross selling opportunities. The goodwill was assigned to TCF’s
Wholesale Banking segment. None of the goodwill recognized
is expected to be deductible for income tax purposes.
Pursuant to the terms of the acquisition, three key
members of Gateway One’s management team acquired
shares of TCF common stock in the aggregate value of
$2.6 million with proceeds received by them from the
acquisition. These shares of TCF common stock will be
retained by a trustee for three years pursuant to the terms
of custodial agreements entered into between the trustee,
TCF and each individual. Ownership of these shares will
be forfeited to TCF if during the three year period the
individual terminates his employment with TCF without
cause, or TCF terminates their employment for cause, and
has been accounted for separately from the acquisition.
The value of these shares has been recorded within other
assets and will be recognized as compensation expense
ratably throughout the duration of the three-year period.
In addition, TCF provided Gateway One $10 million in interim
funding prior to the acquisition to facilitate its closing in a
timely manner. This loan was executed at prevailing market
pricing and terms.
Note 3. Cash and Due from Banks
At December 31, 2011, TCF was required by Federal
Reserve regulations to maintain reserves of $42.1 million
in cash on hand or at the Federal Reserve.
TCF maintains cash balances that are restricted as
to their use in accordance with certain contractual
agreements related to the sale and servicing of auto loans.
Cash proceeds from loans serviced for third parties are
held in restricted accounts until remitted. TCF also retains
restricted cash balances for potential loss recourse on
certain sold auto loans. Restricted cash totaling $17.5
million was included within cash and due from banks at
December 31, 2011.
Note 4. Investments
The carrying values of investments consist of the following.
(In thousands)
Federal Home Loan Bank stock, at cost
Federal Reserve Bank stock, at cost
Other
Total investments
At December 31,
2010
2011
$141,516
$119,086
30,684
31,711
7,568
6,983
$179,768
$157,780
The investments in Federal Home Loan Bank (“FHLB”)
stock are required investments related to TCF’s current
borrowings from the FHLB Des Moines. 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. 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 2011, TCF recorded an impairment charge of
$16 thousand on other investments, which had a carrying
value of $7 million at December 31, 2011, as full recovery
is not expected. 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.
The carrying values and yields on investments at
December 31, 2011, 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
$ –
700
2,000
4,283
150,797
$157,780
Yield
–%
2.71
3.25
5.01
2.84
2.90%
66 TCF Financial Corporation and Subsidiaries
Note 5. Securities Available for Sale
Securities available for sale consist of the following.
2011
2010
At December 31,
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
losses
Fair
Value
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
$2,233,307
152
–
1,742
$2,235,201
3.79%
$89,029
–
–
–
$89,029
$ –
–
–
192
$192
$2,322,336
152
–
1,550
$2,324,038
$1,929,098
222
24,999
2,610
$1,956,929
$16,579
–
1
–
$16,580
$42,141 $1,903,536
222
25,000
2,416
$42,335 $1,931,174
–
–
194
3.87%
(Dollars in thousands)
Mortgage-backed securities:
U.S. Government sponsored
enterprises and federal
agencies
Other
U.S. Treasury securities
Other securities
Total
Weighted-average yield
Gross gains of $8 million, $31.5 million and $31.8 million were recognized on sales of securities during 2011, 2010 and 2009,
respectively. Mortgage-backed securities of $1.8 billion were pledged as collateral to secure certain deposits and borrowings
at December 31, 2011. Mortgage-backed securities and U.S. treasury securities of $1.9 billion were pledged as collateral to
secure deposits and borrowings at December 31, 2010. See Notes 11 and 12 for additional information. During 2011 and 2010,
TCF recorded impairment charges of $768 thousand and $2.1 million, respectively, on other securities as full recovery is not
expected. The other securities had a fair value of $1.6 million and $2.4 million at December 31, 2011 and 2010, respectively.
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)
Other securities
Total
(In thousands)
Mortgage-backed securities:
U.S. Government sponsored enterprises
and federal agencies
Other securities
Total
less than 12 months
Fair Value
$ 1,450
$ 1,450
Unrealized
losses
$ 192
$ 192
At December 31, 2011
12 months or more
Total
Fair Value
$ –
$ –
Unrealized
losses
$ –
$ –
Fair Value
$ 1,450
$ 1,450
Unrealized
losses
$ 192
$ 192
Less than 12 months
At December 31, 2010
12 months or more
Total
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
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
The amortized cost and fair value of securities available for sale at December 31, 2011, by contractual maturity, are shown
below. The remaining contractual principal maturities do not consider prepayments. Remaining expected maturities will differ
from contractual maturities because borrowers may have the right to prepay.
(In thousands)
Due in one year or less
Due in 1-5 years
Due in 5-10 years
Due in after 10 years
No stated maturity
Total
2011 Form 10-K
At December 31, 2011
Amortized Cost
$ 100
99
168
2,233,192
1,642
$2,235,201
Fair Value
$ 100
105
169
2,322,214
1,450
$2,324,038
67
Note 6. 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,
2011
2010
Percentage
Change
$ 4,742,423
2,152,868
6,895,291
38,513
6,933,804
$ 4,893,887
2,262,194
7,156,081
39,188
7,195,269
3,039,488
159,210
3,198,698
250,794
3,449,492
3,125,837
202,379
3,328,216
317,987
3,646,203
(3.1)%
(4.8)
(3.6)
(1.7)
(3.6)
(2.8)
(21.3)
(3.9)
(21.1)
(5.4)
1,110,803
939,474
18.2
2,039,096
29,219
129,100
(165,959)
2,031,456
3,142,259
624,700
$14,150,255
2,277,753
29,728
109,555
(202,032)
2,215,004
3,154,478
792,354
$14,788,304
(10.5)
(1.7)
17.8
(17.9)
(8.3)
(.4)
(21.2)
(4.3)%
(1) Operating leases of $69.6 million and $77.4 million at December 31, 2011 and December 31, 2010, respectively, are included in other assets in the Consolidated Statements
of Financial Condition.
From time to time, TCF sells minimum lease payments
to third-party financial institutions at fixed rates. For
those transactions which achieve sale treatment, the
related lease cash flow stream is not recognized on TCF’s
Consolidated Statements of Financial Condition. During
the year ended December 31, 2011, TCF sold $119.2 million
of minimum lease payment receivables, received cash
of $125.1 million and recognized a gain of $5.9 million.
During the year ended December 31, 2010, TCF sold
$10.7 million of minimum lease payment receivables,
received cash of $10.7 million and recognized a loss of
$25 thousand. At December 31, 2011 and 2010, TCF’s
lease residuals reported within the table above included
$9.1 million and $183 thousand, respectively, related to all
historical sales of minimum lease payment receivables.
68 TCF Financial Corporation and Subsidiaries
Subsequent to the acquisition of Gateway One in
2011, TCF sold $37.4 million of consumer auto loans with
servicing retained and received cash of $37.4 million,
resulting in gains of $1.1 million. Related to these sales,
TCF retained an interest-only strip of $2.2 million and
assumed contractual recourse liabilities of $321 thousand.
At December 31, 2011, interest only strips and contractual
recourse liabilities totaled $22.4 million and $6 million,
respectively. No servicing assets or liabilities were
recorded within TCF’s Consolidated Statements of Financial
Condition, as the contractual servicing fees are adequate
to compensate TCF for its servicing responsibilities. The
unpaid principal balance of auto loans serviced for third
parties was $425.1 million at December 31, 2011.
Future minimum lease payments receivable for direct
financing, sales-type leases and operating leases as of
December 31, 2011 are as follows.
(In thousands)
2012
2013
2014
2015
2016
Thereafter
Total
Total
$ 838,237
574,518
354,925
187,331
77,801
23,499
$2,056,311
The aggregate amount of loans to non-management
directors of TCF and their related interests was $21.3
million and $7.4 million at December 31, 2011 and 2010,
respectively. During 2011, $19.5 million in new loans were
made and $5.5 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, 2011
and 2010. 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.
Acquired loans and leases During the year ended
2011, TCF paid $67.1 million to acquire leasing and equipment
finance loans and leases having remaining contractual
principal cash flows including residuals on leases of $69.9
million and paid $5.9 million to acquire inventory finance
loans having a portfolio balance of $6 million. See Note 2
for information regarding loans acquired with Gateway One.
During the year ended 2010, TCF paid $186.8 million and
$168.6 million to acquire leasing and equipment finance and
inventory finance loans and leases, respectively, with portfolio
balances of $186.8 million and $168.4 million, respectively.
Within TCF’s $371.9 million acquired loan and lease
portfolios at December 31, 2011, there are certain loans
which had experienced credit quality deterioration at the
time of acquisition. These loans had outstanding principal
balances of $10.8 million and $13.7 million at December 31,
2011 and December 31, 2010, respectively.
The excess of expected cash flows to be collected 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 or lease. These loans
and leases are classified as accruing and interest income
continues to be recognized unless expected credit losses
exceed the non-accretable discount. These acquired
loans and leases do not have an allowance for loan and
lease losses recorded against them as the non-accretable
discount is adequate to absorb expected remaining credit
losses. In the future, if TCF is unable to collect the expected
cash flows or reduces its expectations for cash flows below
the current level, an allowance for credit losses will be
established on these acquired portfolios.
The non-accretable discount on loans acquired with
deteriorated credit quality was $946 thousand and $769
thousand at December 31, 2011 and December 31, 2010,
respectively. The accretable discount to be recognized in
income for these loans was $754 thousand at December 31,
2011 and $207 thousand at December 31, 2010. Accretion
of $157 thousand and $169 thousand was recorded for the
years ended December 31, 2011 and 2010, respectively.
2011 Form 10-K
69
Note 7. Allowance for Loan and Lease Losses and Credit Quality Information
The following tables provide the allowance for loan and lease losses, other credit loss reserves and other information
regarding the allowance for loan and lease 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
Other
Balance, at end of year
Allowance for loan and lease losses:
Collectively evaluated for loss potential
Individually evaluated for loss potential
Total
Loans and leases outstanding:
Collectively evaluated for loss potential
Individually evaluated for loss potential
Loans acquired with deteriorated credit quality
Total
(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
Allowance for loan and lease losses:
Collectively evaluated for loss potential
Individually evaluated for loss potential
Total
Loans and leases outstanding:
Collectively evaluated for loss potential
Individually evaluated for loss potential
Loans acquired with deteriorated credit quality
Total
Consumer Real
Estate and
Other
At December 31, 2011
leasing and
Equipment
Finance
Commercial
$ 174,503
(169,534)
13,005
(156,529)
166,575
–
$ 184,549
$ 62,478
(42,733)
1,654
(41,079)
25,555
–
$ 46,954
$ 26,301
(16,984)
4,461
(12,523)
7,395
–
$ 21,173
Inventory
Finance
$ 2,537
(1,044)
193
(851)
1,318
(8)
$ 2,996
Total
$ 265,819
(230,295)
19,313
(210,982)
200,843
(8)
$ 255,672
$ 183,429
1,120
$ 184,549
$ 24,842
22,112
$ 46,954
$ 17,339
3,834
$ 21,173
$ 2,583
413
$ 2,996
$ 228,193
27,479
$ 255,672
$6,922,512
7,664
3,628
$6,933,804
$2,811,046
638,446
–
$3,449,492
$3,112,864
22,200
7,195
$3,142,259
$616,496
8,204
–
$624,700
$13,462,918
676,514
10,823
$14,150,255
Consumer Real
Estate and
Other
At December 31, 2010
Leasing and
Equipment
Finance
Commercial
$ 167,442
(151,107)
16,208
(134,899)
141,960
$ 174,503
$ 43,504
(49,727)
1,327
(48,400)
67,374
$ 62,478
$ 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
$ 173,726
777
$ 174,503
$ 26,928
35,550
$ 62,478
$ 17,478
8,823
$ 26,301
$ 2,097
440
$ 2,537
$ 220,229
45,590
$ 265,819
$ 7,182,753
12,516
–
$ 7,195,269
$ 2,933,466
712,737
–
$ 3,646,203
$3,102,581
38,243
13,654
$3,154,478
$785,231
7,123
–
$792,354
$14,004,031
770,619
13,654
$ 14,788,304
70 TCF Financial Corporation and Subsidiaries
Performing and Non-accrual loans and leases The following tables set 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.
(In thousands)
Consumer real estate and other:
First mortgage lien
Junior lien
Other
Total consumer real estate
and other
Commercial real estate
Commercial business
Total commercial
Leasing and equipment finance:
Middle market
Small ticket
Winthrop
Other
Total leasing and equipment
finance
Inventory finance
Subtotal
Portfolios acquired with
deteriorated credit quality
Total
(In thousands)
Consumer real estate and other:
First mortgage lien
Junior lien
Other
Total consumer real estate
and other
Commercial real estate
Commercial business
Total commercial
Leasing and equipment finance:
Middle market
Small ticket
Winthrop
Other
Total leasing and equipment
finance
Inventory finance
Subtotal
Portfolios acquired with
deteriorated credit quality
Total
At December 31, 2011
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
$ 4,525,951
2,110,334
34,829
$32,571
7,813
20
6,671,114
3,092,855
227,970
3,320,825
1,627,369
792,566
447,334
185,563
3,052,832
623,717
13,668,488
40,404
98
49
147
1,260
2,368
235
198
4,061
153
44,765
$54,787
14,464
21
69,272
1,001
–
1,001
84
613
–
–
$ 87,358
22,277
41
$ 4,613,309
2,132,611
34,870
$129,114
20,257
15
$ 4,742,423
2,152,868
34,885
109,676
1,099
49
1,148
1,344
2,981
235
198
6,780,790
3,093,954
228,019
3,321,973
1,628,713
795,547
447,569
185,761
149,386
104,744
22,775
127,519
13,185
5,535
1,253
610
6,930,176
3,198,698
250,794
3,449,492
1,641,898
801,082
448,822
186,371
697
7
70,977
4,758
160
115,742
3,057,590
623,877
13,784,230
20,583
823
298,311
3,078,173
624,700
14,082,541
65,820
$13,734,308
766
$45,531
1,128
$72,105
1,894
$117,636
67,714
$13,851,944
–
67,714
$298,311 $14,150,255
At December 31, 2010
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
$ 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
6,933,072
3,215,055
279,879
3,494,934
1,606,125
695,491
529,467
158,431
2,989,514
790,955
14,208,475
38,338
8,856
165
9,021
3,221
3,172
462
–
6,855
189
54,403
56,312
–
–
–
330
727
–
–
94,650
8,856
165
9,021
3,551
3,899
462
–
7,027,722
3,223,911
280,044
3,503,955
1,609,676
699,390
529,929
158,431
167,547
104,305
37,943
142,248
23,153
11,018
134
102
7,195,269
3,328,216
317,987
3,646,203
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
2011 Form 10-K
71
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
Unrecognized interest income
For the Year Ended December 31,
2011
$37,645
7,371
$30,274
2010
$40,016
6,773
$33,243
2009
$31,368
3,010
$28,358
The following table summarizes consumer real estate loans to customers in bankruptcy.
(In thousands)
Consumer real estate loans to customers in bankruptcy:
0-59 days delinquent and accruing
60+ days delinquent and accruing
Non-accrual
Total consumer real estate loans to customers in bankruptcy
For the years ended December 31, 2011 and 2010,
interest income would have been reduced by approximately
$70 thousand and $79 thousand, respectively, had the
accrual of interest income been discontinued upon
notification of bankruptcy.
loan Modifications for Borrowers with Financial
Difficulties Included within loans and leases are certain
loans that have been modified in order to maximize
collection of loan balances. If, for economic or legal
reasons related to a customer’s financial difficulties, TCF
grants a concession from the original terms and conditions
on the loan, the modified loan is classified as a TDR.
During the third quarter of 2011, TCF adopted
Accounting Standards Update (“ASU”) 2011-02,
A Creditor’s Determination of Whether a Restructuring is a
Troubled Debt Restructuring (Topic 310), which modified
guidance for identifying modifications of receivables that
constitute a TDR. As a result of adopting the provisions of
ASU 2011-02, TCF reassessed all loan modifications that
occurred after December 31, 2010 for identification as
TDRs. TCF adopted the provisions of the ASU that require
impaired loan accounting and reporting for newly identified
TDRs as of July 1, 2011. The total of newly identified TDRs
was $46.3 million, of which $20.7 million were accruing
consumer real estate loans and $23.7 million were accruing
commercial loans. Due to the increase in accruing TDRs,
At December 31,
2011
2010
$74,347
1,112
17,531
$92,990
$66,166
1,849
22,782
$90,797
the consumer real estate provision for credit losses on
impaired loans increased $2.2 million in the third quarter
of 2011. There was no increase in commercial provision as a
result of the newly identified TDRs.
TCF held consumer real estate loan TDRs of $479.8
million and $367.9 million at December 31, 2011 and
December 31, 2010, respectively, of which $433.1 million
and $337.4 million were accruing at December 31, 2011
and December 31, 2010, respectively. TCF also held $181.6
million and $66.3 million of commercial loan TDRs at
December 31, 2011 and December 31, 2010, respectively,
of which $98.4 million and $48.8 million were accruing at
December 31, 2011 and December 31, 2010, respectively.
The amount of additional funds committed to commercial
borrowers in TDR status was $8.5 million and $2.2 million
at December 31, 2011 and December 31, 2010, respectively.
When a loan is modified as a TDR, there is not a direct,
material impact on the loans within the Consolidated
Statements of Financial Condition, as principal balances
are generally not forgiven. Loan modifications are not
reported in calendar years after modification if the loans
were modified at an interest rate equal to the yields of
new loan originations with comparable risk and the loans
are performing based on the terms of the restructuring
agreements. All loans classified as TDRs are considered
to be impaired.
72 TCF Financial Corporation and Subsidiaries
The financial effects of TDRs are presented in the following tables and represent the difference between interest income
recognized on accruing TDRs and the contractual interest that would have been recorded under the original contractual terms.
(In thousands)
Consumer real estate:
First mortgage lien
Junior lien
Total consumer real estate
Commercial real estate
Commercial business
Total commercial
Leasing and equipment finance:
Middle market
Total leasing and equipment finance
Total
(In thousands)
Consumer real estate:
First mortgage lien
Junior lien
Total consumer real estate
Commercial real estate
Commercial business
Total commercial
Total
(In thousands)
Consumer real estate:
First mortgage lien
Junior lien
Total consumer real estate
Total
For the Year Ended December 31, 2011
Contractual
Interest Due on TDRs
Interest Income
Recognized on TDRs
Unrecognized
Interest Income
$23,815
1,712
25,527
3,249
306
3,555
78
78
$29,160
$12,225
955
13,180
3,066
306
3,372
79
79
$16,631
$11,590
757
12,347
183
–
183
(1)
(1)
$12,529
For the Year Ended December 31, 2010
Contractual
Interest Due on TDRs
Interest Income
Recognized on TDRs
Unrecognized
Interest Income
$19,649
1,450
21,099
200
–
200
$21,299
$10,416
719
11,135
182
–
182
$11,317
$ 9,233
731
9,964
18
–
18
$ 9,982
For the Year Ended December 31, 2009
Contractual
Interest Due on TDRs
Interest Income
Recognized on TDRs
Unrecognized
Interest Income
$ 6,056
252
6,308
$ 6,308
$ 3,086
129
3,215
$ 3,215
$ 2,970
123
3,093
$ 3,093
2011 Form 10-K
73
The table below summarizes TDRs that defaulted during the years ended December 31, 2011 and 2010, and whose modification
date was within 12 months of the beginning of the respective reporting period. TCF considers a loan to have defaulted when
it becomes 90 or more days delinquent under the modified terms, has been transferred to non-accrual status or has been
transferred to other real estate owned.
(Dollars in thousands)
Consumer real estate:
First mortgage lien
Junior lien
Total consumer real estate
Commercial real estate
Total defaulted modified loans
Loans modified in the applicable period
Defaulted modified loans as a percent of loans
modified in the applicable period
For the Year Ended December 31,
2011
2010
Number of loans
loan Balance(1)
Number of Loans
Loan Balance(1)
147
42
189
5
194
2,017
$ 26,693
4,934
31,627
32,161
$63,788
$482,197
203
35
238
–
238
2,022
$ 40,241
2,355
42,596
–
$ 42,596
$419,331
9.6%
13.2%
11.8%
10.2%
(1) The loan balances presented are not materially different than the pre-modification loan balances as TCF’s loan modifications generally do not forgive principal amounts.
Consumer real estate TDRs are evaluated separately
in TCF’s allowance methodology based on the present
value of expected cash flows for loans in this status as
the repayments of such loans is not expected from the
foreclosure and liquidation of the collateral at the time
of the modification. The allowance on accruing consumer
real estate loan TDRs was $58.3 million, or 13.5% of the
outstanding balance at December 31, 2011, and $36.8
million, or 10.9% of the outstanding balance at December 31,
2010. The reserve percentage increased for December 31,
2011 compared with December 31, 2010 primarily due
to more modifications being extended, longer expected
modification periods and lower expected realizable values
on re-defaulted loans due to declines in property values.
For consumer real estate TDRs, TCF utilized re-default rates
ranging from 10% to 25%, depending on modification type,
in determining impairment, which is consistent with actual
experience. The allowance on accruing commercial loan
TDRs was $1.4 million, or 1.4% of the outstanding balance,
at December 31, 2011 and $695 thousand, or 1.4% 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 modification
remain on accrual status if payment in full under the
modified loan is expected. Certain borrowers are also
required to demonstrate performance with a reduced
payment amount prior to the actual legal modification.
Otherwise, the loans are placed on non-accrual status
and reported as non-accrual until there is sustained
repayment performance for six consecutive payments.
All eligible loans are re-aged to current delinquency
status upon modification.
Impaired loan TCF considers impaired loans to include
non-accrual commercial loans, non-accrual equipment
finance loans and non-accrual inventory finance loans,
as well as consumer TDR loans, commercial TDR loans and
leasing and equipment finance TDR loans. Non-accrual
impaired loans are included in the previous tables within
the amounts disclosed as non-accrual and the accruing
consumer real estate TDRs and accruing commercial TDRs
have been previously disclosed as performing within the
tables of performing and non-accrual loans and leases.
In the following table, 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.
74 TCF Financial Corporation and Subsidiaries
The following table summarizes 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
Commercial business
Total commercial
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
Commercial business
Total commercial
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
At December 31, 2011
Unpaid
Contractual
Balance
loan Balance
Related
Allowance
Recorded
Year-to-Date
Average loan
Balance
Year-to-Date
Interest Income
Recognized
$396,754
33,796
430,550
224,682
36,043
260,725
9,501
532
610
10,643
823
702,741
67,954
3,810
71,764
$774,505
$395,513
33,404
428,917
196,784
29,183
225,967
9,501
532
610
10,643
823
666,350
49,099
1,790
50,889
$717,239
$55,642
5,397
61,039
13,819
4,019
17,838
1,130
114
127
1,371
44
80,292
–
–
–
$80,292
$355,183
27,561
382,744
174,964
33,563
208,527
11,341
528
356
12,225
939
604,435
39,394
1,723
41,117
$645,552
$12,040
930
12,970
3,078
307
3,385
123
9
–
132
71
16,558
1,194
79
1,273
$17,831
At December 31, 2010
Unpaid
Contractual
Balance
Loan Balance
Related
Allowance
Recorded
Year-to-Date
Average Loan
Balance
Year-to-Date
Interest Income
Recognized
$315,289
21,679
336,968
192,426
41,168
233,594
13,181
524
102
13,807
1,055
585,424
37,822
2,972
40,794
$626,218
$314,852
21,717
336,569
153,143
37,943
191,086
13,181
524
102
13,807
1,055
542,517
29,688
1,655
31,343
$573,860
$35,340
3,006
38,346
20,214
8,558
28,772
2,745
155
2
2,902
185
70,205
–
–
–
$70,205
$279,167
18,248
297,415
115,385
33,256
148,641
13,147
599
260
14,006
913
460,975
19,232
1,300
20,532
$481,507
$10,311
687
10,998
115
4
119
80
1
8
89
48
11,254
664
65
729
$11,983
2011 Form 10-K
75
TCF leases certain premises and equipment under
operating leases. Net lease expense including utilities and
other operating expenses was $34.4 million, $34.7 million
and $35.3 million in 2011, 2010 and 2009, respectively.
At December 31, 2011, the total minimum rental
payments for operating leases were as follows.
(In thousands)
2012
2013
2014
2015
2016
Thereafter
Total
$ 26,193
26,885
25,474
23,996
20,968
90,615
$214,131
The increase in the loan balance of impaired loans
from December 31, 2010 was primarily due to an increase
of $95.7 million in accruing consumer loan TDRs and an
increase of $49.6 million in accruing commercial TDRs.
Included in impaired loans were $413.7 million and
$326.1 million of accruing consumer real estate loan TDRs
less than 90 days past due as of December 31, 2011 and
December 31, 2010, respectively.
Note 8. 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,
2010
2011
$145,304
$145,583
272,155
272,036
62,433
63,612
323,745
319,679
803,637
800,910
364,629
$436,281
359,869
$443,768
76 TCF Financial Corporation and Subsidiaries
Note 9. Goodwill and Other Intangible Assets
Goodwill and intangible assets are summarized as follows.
At December 31,
2011
2010
Weighted-
average
Amortization
Period
(In Years)
Gross
Amount
Accumulated
Amortization
Net
Amount
Weighted-
average
Amortization
Period
(In Years)
Gross
Amount
Accumulated
Amortization
Net
Amount
11
5
2
7
$ 2,730
4,590
300
$ 7,620
$360
113
13
$486
$ 2,370
4,477
287
$ 7,134
9
3
–
9
$ 1,400
50
–
$ 1,450
$197 $ 1,203
29
–
$ 1,232
21
–
$218
$141,245
84,395
$225,640
$141,245
84,395
$225,640
$141,245
11,354
$152,599
$141,245
11,354
$152,599
(Dollars in thousands)
Amortizable intangible assets:
Customer base intangibles
Non-compete agreements
Tradename
Total
Unamortizable intangible assets:
Goodwill related to Retail
Banking segment
Goodwill related to Wholesale
Banking segment
Total
As a result of the acquisition of Gateway One in 2011, TCF recorded goodwill and other intangibles of $73 million and
$6.2 million, respectively. Amortization expense for intangible assets is estimated to be $1.3 million for 2012, $1.5 million
for 2013, $1.3 million for 2014, $1.2 million for 2015 and $1.1 million for 2016. There was no impairment of goodwill or
intangible assets for the years ended December 31, 2011, 2010, or 2009.
Note 10. 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
2011
2010
Rate at
Year-end
Amount
% of Total
Rate at
Year-end
Amount
% of Total
– %
.16
.07
.37
.36
.25
.75
.29
$ 2,442,522
2,187,227
4,629,749
5,855,263
651,377
11,136,389
1,065,615
$12,202,004
20.0%
18.0
38.0
48.0
5.3
91.3
8.7
100.0%
– %
.26
.12
.55
.54
.37
.84
.41
$ 2,429,061
2,101,003
4,530,064
5,390,802
635,922
10,556,788
1,028,327
$11,585,115
21.0%
18.1
39.1
46.5
5.5
91.1
8.9
100.0%
Certificates of deposit had the following remaining maturities at December 31, 2011.
(In thousands)
Maturity
0-3 months
4-6 months
7-12 months
13-24 months
Over 24 months
Total
2011 Form 10-K
$100,000+
$213,611
67,993
89,169
35,175
3,225
$409,173
Other
$146,035
155,394
246,880
93,481
14,652
$656,442
Total
$ 359,646
223,387
336,049
128,656
17,877
$1,065,615
77
Note 11. 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, 2011.
(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 – TCF Commercial Finance Canada, Inc.
Total
Year ended December 31, average daily balance
Federal Home Loan Bank advances
Federal funds purchased
Securities sold under repurchase agreements
U.S. Treasury, tax and loan borrowings
Line of Credit – TCF Commercial Finance Canada, Inc.
Total
Maximum month-end balance
Federal Home Loan Bank advances
Federal funds purchased
Securities sold under repurchase agreements
U.S. Treasury, tax and loan borrowings
Line of Credit – TCF Commercial Finance Canada, Inc.
N.A. Not Applicable.
2011
Amount
Rate
2010
Amount
Rate
2009
Amount
Rate
$ –
–
6,416
–
–
$ 6,416
$23,483
15,784
7,677
2,105
393
$49,442
$ –
20,000
12,024
2,675
5,794
–
–
.10
–
–
.10
.24%
.20
.10
–
19.08
.35
–
N.A.
N.A.
N.A.
N.A.
$100,000
15,000
7,534
3,054
1,202
$126,790
$ 63,548
43,151
12,211
3,139
2,842
$124,891
$200,000
205,000
19,913
5,029
10,202
.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
$200,000
228,000
24,994
3,119
–
.22%
.11
.20
–
–
.20
.22%
.14
.61
.20
–
.27
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 identical securities upon the maturities of the agreements. At December 31, 2011, 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 $15.1 million.
78 TCF Financial Corporation and Subsidiaries
Note 12. 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
Year of
Maturity
2011
2013
2015
2016
2017
2018
2014
2015
2016
2068
2012
2011
2012
2013
2014
2015
2016
2017
At December 31,
2011
2010
Amount
$ –
400,000
900,000
1,100,000
1,250,000
300,000
3,950,000
71,020
50,000
74,661
195,681
114,236
–
–
57,622
36,009
16,641
5,662
4,026
1,787
121,747
$4,381,664
Weighted-
average
Rate
– %
.97
4.18
4.49
4.60
3.51
4.02
2.21
2.14
5.63
3.49
12.83
–
–
5.32
5.28
5.12
5.04
4.98
4.98
5.25
4.26%
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%
At December 31, 2011, TCF has pledged loans secured by
The next call year and stated maturity year for the
residential real estate, commercial real estate loans and
FHLB stock with an aggregate carrying value of $6.9 billion
as collateral for FHLB advances. Included in FHLB advances
and repurchase agreements at December 31, 2011 are
$300 million of fixed-rate FHLB advances and repurchase
agreements, which are callable quarterly by counterparties
at par until maturity.
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
funding 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.
callable FHLB advances and repurchase agreements
outstanding at December 31, 2011 were as follows.
(Dollars in thousands)
Year
2012
2015
2017
2018
2019
Total
Weighted-
Stated
average
Rate
Maturity
4.04% $ –
200,000
100,000
–
–
$300,000
–
–
–
–
4.04
Next Call
$300,000
–
–
–
–
$300,000
Weighted-
average
Rate
–%
3.88
4.37
–
–
4.04
During the first quarter of 2011, TCF repaid its $90
million senior unsecured variable-rate term note. TCF was
not in default with respect to any of its covenants under the
variable-rate term note agreement prior to or at the time
of repayment.
2011 Form 10-K
79
The $71 million of subordinated notes due 2014 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 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
supplementary 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.
TCF will have to seek approval from the Federal Reserve
to redeem the trust preferred securities. While TCF believes
it will be granted such approval based on the approval it
has previously received, TCF cannot be assured that the
Federal Reserve will be willing to approve the redemption.
Note 13. Income Taxes
(In thousands)
Year ended December 31, 2011:
Federal
State
Total
Year ended December 31, 2010:
Federal
State
Total
Year ended December 31, 2009:
Federal
State
Total
Current
Deferred
Total
$(2,737)
16,740
$14,003
$49,462
11,695
$61,157
$ 4,311
6,285
$10,596
$56,144
(5,706)
$50,438
$27,100
1,914
$29,014
$37,636
1,579
$39,215
$53,407
11,034
$64,441
$76,562
13,609
$90,171
$41,947
7,864
$49,811
The effective income tax rate differs from the federal income tax rate of 35% as a result of the following.
Year Ended December 31,
2011
35.00%
4.01
(.69)
(.34)
.05
.22
(1.01)
(.82)
(.38)
36.04%
2010
35.00%
2009
35.00%
3.62
(.76)
(.25)
(.14)
.17
(.48)
(.41)
.14
36.89%
3.56
(1.31)
(.78)
(3.16)
.69
.10
(.22)
.79
34.67%
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
Non-controlling interest tax effect
Tax exempt income
Other, net
Effective income tax rate
80 TCF Financial Corporation and Subsidiaries
A reconciliation of the change in the gross amount,
before related tax effects, of unrecognized tax benefits
from January 1, 2011 to December 31, 2011 is as follows.
(In thousands)
Balance at January 1, 2011
Increases for tax positions
related to the current year
Increases for tax positions
related to prior years
Decreases for tax positions
related to prior years
Settlements with taxing authorities
Decreases related to lapses of applicable
statutes of limitation
Balance at December 31, 2011
$2,464
273
605
(261)
(84)
(620)
$2,377
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 $240 thousand at December
31, 2011. TCF recorded an increase in accrued interest of
$22 thousand for 2011 and a reduction in accrued interest
of $154 thousand during 2010.
TCF’s federal income tax returns are open and subject
to examination for the 2008 and later tax return years.
TCF’s various state income tax returns are generally open
for the 2007 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 expense
Other
Total deferred tax assets
Deferred tax liabilities:
Lease financing
Securities available for sale
Loan fees and discounts
Premises and equipment
Prepaid expenses
Goodwill and other intangibles
Investments in FHLB stock
Other
Total deferred tax liabilities
Net deferred tax liabilities
At December 31,
2011
2010
$ 92,031
$ 93,159
23,464
–
16,316
(5,094)
3,469
6,462
136,648
18,910
9,442
8,988
(4,159)
3,200
8,655
138,195
304,996
32,568
21,938
20,505
9,092
5,532
2,509
6,385
403,525
$266,877
252,951
–
23,124
16,434
9,431
2,780
3,183
4,471
312,374
$174,179
The net operating losses at December 31, 2011 consist
of federal net operating losses of $3.4 million that expire in
years 2027 through 2031 and state net operating losses of
$12.9 million that expire in years 2012 through 2031.
2011 Form 10-K
81
Note 14. Equity
Restricted Retained Earnings Retained earnings at
TCF Bank at December 31, 2011 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 stockholders. 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
2011
$ (1,102)
2010
$ (1,325)
(32,265)
$(33,367)
(21,790)
$(23,115)
No repurchases of common stock were made in 2011, 2010
or 2009. At December 31, 2011, TCF had 5.4 million shares
remaining in its stock repurchase programs authorized by
the Board. Prior consultation with the Federal Reserve is
required by regulation before TCF could begin to repurchase
its common stock.
Public Offering of Common Stock In March of 2011
and February of 2010, TCF completed public offerings of
common stock which raised net proceeds of $219.7 million
and $164.6 million, respectively, through the issuance of
15,081,968 and 12,322,250 common shares, respectively.
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 $474 thousand and $807 thousand in 2011
and 2010, respectively. TCF made no other contributions
to these plans, other than payment of administrative
expenses. The amounts deferred were invested in TCF stock
or other publicly traded stocks, bonds or mutual funds.
At December 31, 2011, the fair value of the assets in the
plans totaled $34.2 million and included $24.4 million
invested in TCF common stock compared with a total fair
value of $31.4 million, including $22.3 million invested in
TCF common stock at December 31, 2010. 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.
Warrants At December 31, 2011, 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
“TCBWS”. As a result, TCF has no further obligations to the
Federal Government in connection with the CPP.
Joint Venture TCF has 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®
branded products 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.
82 TCF Financial Corporation and Subsidiaries
Note 15. 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
$329.4 million at December 31, 2011, without prior approval
of the Office of the Comptroller of the Currency (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.
The following table sets forth TCF’s and TCF 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, 2011:
Tier 1 leverage capital (2)
TCF
TCF Bank
Tier 1 risk-based capital
TCF
TCF Bank
Total risk-based capital
TCF
TCF Bank
As of December 31, 2010:
Tier 1 leverage capital
TCF
TCF Bank
Tier 1 risk-based capital
TCF
TCF Bank
Total risk-based capital
TCF
TCF Bank
Actual
Amount
Ratio
Minimum
Capital Requirement(1)
Amount
Ratio
Well-Capitalized
Capital Requirement(1)
Ratio
Amount
$1,706,926
1,553,381
9.15%
8.33
$ 745,887
745,940
4.00%
4.00
N.A.
$ 932,426
N.A.
5.00%
1,706,926
1,553,381
1,994,875
1,841,273
12.67
11.53
14.80
13.67
539,013
538,829
1,078,026
1,077,658
4.00
4.00
8.00
8.00
808,520
808,243
1,347,533
1,347,072
6.00
6.00
10.00
10.00
$1,459,703
1,503,379
7.91%
8.15
$ 738,105
737,702
4.00%
4.00
N.A.
$ 922,128
N.A.
5.00%
1,459,703
1,503,379
1,792,683
1,836,233
10.47
10.80
12.86
13.19
557,465
557,057
1,114,930
1,114,114
4.00
4.00
8.00
8.00
836,198
835,585
1,393,663
1,392,642
6.00
6.00
10.00
10.00
N.A. Not Applicable.
(1) The minimum and well-capitalized requirements are determined by the Federal Reserve for TCF and by the OCC for TCF Bank pursuant to the FDIC Improvement Act of 1991.
At December 31, 2011, TCF and TCF Bank exceeded their regulatory capital requirements and are considered “well-capitalized.”
(2) The minimum Tier 1 leverage ratio for bank holding companies and banks is 3.0 or 4.0 percent depending on factors specified in regulations issued by federal banking
agencies.
2011 Form 10-K
83
Note 16. Stock Compensation
The TCF Financial Incentive Stock Program (the “Program”) was adopted to enable TCF to attract and retain key personnel.
At December 31, 2011, there were 3,633,405 shares reserved for issuance under the Program.
At December 31, 2011, there were 126,809 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 portion of the shares being forfeited. Other restricted stock grants vest over periods from one
year to seven years. Information about restricted stock is summarized as follows.
(Dollars in thousands, except per-share data)
Weighted-average grant date fair value of restricted stock per share
Compensation expense for restricted stock
Unrecognized stock compensation expense for restricted stock awards and options
Tax benefit recognized for stock compensation expense
Weighted average amortization (years)
At or For the Year Ended December 31,
2011
$ 12.36
$10,273
15,723
$ 3,984
1.0
2010
$ 13.36
$ 9,121
12,377
$ 3,513
.9
2009
$ 10.33
$ 7,852
17,346
$ 3,034
1.6
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.
The following table reflects TCF’s stock option and restricted stock transactions under the Program since December 31, 2008.
Restricted Stock
Stock Options
Outstanding at December 31, 2008
Granted
Exercised
Forfeited
Vested
Outstanding at December 31, 2009
Granted
Forfeited
Vested
Outstanding at December 31, 2010
Granted
Forfeited
Vested
Outstanding at December 31, 2011
Exercisable at December 31, 2011
N.A. Not Applicable.
Shares
1,887,517
718,761
–
(481,000)
(254,433)
1,870,845
307,433
(20,000)
(387,653)
1,770,625
1,247,500
(120,886)
(613,125)
2,284,114
N.A.
Price Range
$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
6.16 - 14.89
7.57 - 28.02
7.57 - 30.13
6.16 - 28.64
N.A.
Shares
2,373,419
–
(108,800)
(56,000)
–
2,208,619
–
–
–
2,208,619
–
(9,875)
–
2,198,744
1,109,640
Price Range
$11.78 -15.75
–
11.78 -14.52
11.78 -15.75
–
12.85 -15.75
–
–
–
12.85 -15.75
–
15.75 -15.75
–
12.85 -15.75
12.85 -15.75
Weighted-
Average
Remaining
Contractual
Life in Years
9.26
8.26
7.26
5.72
Weighted-
Average
Exercise
Price
$14.44
–
14.14
14.95
–
14.44
–
–
14.44
–
15.75
–
14.43
14.44
84 TCF Financial Corporation and Subsidiaries
Note 17. 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 employee’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, 2011, the fair value of
the assets in the plan totaled $138.9 million and included
$84 million invested in TCF common stock. The Company’s
matching contributions are expensed when made. TCF’s
contributions to the plan were $7.6 million in 2011 and
$6.9 million in both 2010 and 2009.
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 recorded in the year they occur. TCF closely
monitors all assumptions and updates them annually. TCF
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.
2011 Form 10-K
85
The following table sets forth the status of the Pension Plan and the Postretirement Plan at the dates indicated. Amounts
have been restated for the effects of a change in accounting principle. See Note 28 for additional information.
(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
Plan amendment
Actuarial (gain) 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
Prior service cost
Accumulated other comprehensive (income) loss, before tax
Total recognized asset (liability)
N.A. Not Applicable.
Pension Plan
Postretirement Plan
Year Ended December 31,
2011
2010
$47,449
(1,229)
$46,220
$46,220
$48,916
–
2,223
–
(1,718)
(3,201)
46,220
56,355
3,975
(3,201)
–
57,129
$10,909
$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
2011
N.A.
N.A.
N.A.
N.A.
$ 9,555
2
431
(304)
(1,426)
(526)
7,732
–
–
(526)
526
–
$(7,732)
2010
N.A.
N.A.
N.A.
N.A.
$ 9,166
1
455
–
461
(528)
9,555
–
–
(528)
528
–
$(9,555)
$10,909
$ 7,439
$(7,732)
$(9,555)
–
–
–
$10,909
–
–
–
$ 7,439
–
(301)
(301)
$(8,033)
7
–
7
$(9,548)
TCF’s Pension Plan investment policy states that assets may be invested in direct obligations of the U.S. government, U.S.
treasury bills, notes or bonds, with maturity dates not exceeding ten years. At December 31, 2011, assets held in trust for the
Pension Plan included U.S. treasury notes. 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 Financial Accounting Standards
Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures and are
measured on a recurring basis.
86 TCF Financial Corporation and Subsidiaries
The following table sets forth the changes recognized in accumulated other comprehensive (income) loss at the dates indicated.
(In thousands)
Accumulated other comprehensive loss at the beginning of the year
Prior service cost
Adjustment to transition obligation
Amortizations (recognized in net periodic benefit plan cost):
Transition obligation
Total recognized in other comprehensive (income)
Accumulated other comprehensive (income) loss at end of year, before tax
Postretirement Plan
Year Ended December 31,
2011
$ 7
(301)
(3)
(4)
(308)
$(301)
2010
$11
–
–
(4)
(4)
$ 7
2009
$15
–
–
(4)
(4)
$11
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, 2011 and December 31, 2010. The discount
rate used to measure the benefit obligations of the Pension Plan and the Postretirement Plan was 4% for the year ended
December 31, 2011 and 4.75% for the year ended December 31, 2010.
Net periodic benefit plan (income) cost included in compensation and employee benefits expense consists of the following.
(In thousands)
Interest cost
Return on plan assets
Service cost
Recognized actuarial (gain) loss
Amortization of transition obligation
Net periodic benefit plan (income) cost
Pension Plan
Year Ended December 31,
2011
$ 2,223
(3,975)
–
(1,718)
–
$(3,470)
2010
$ 2,554
(9,938)
–
1,726
–
$(5,658)
2009
$ 2,918
(13,560)
–
936
–
$ (9,706)
Postretirement Plan
Year Ended December 31,
2011
$ 431
–
2
(1,426)
4
$ (989)
2010
$455
–
1
461
4
$921
2009
$ 495
–
7
891
4
$1,397
Pension Plan actual return on plan assets, net of administrative expenses was 7% for the year ended December 31, 2011 and
21.1% for the year ended December 31, 2010. The actual gain on plan assets for the year ended December 31, 2011 totaled
$4 million and reduced net periodic benefit cost during 2011.
The discount rate and expected long-term rate of return on plan assets used to determine the estimated net benefit plan cost
were as follows.
Assumptions used to
determine net benefit plan cost
Discount rate
Expected long-term rate
of return on plan assets
N.A. Not Applicable.
Pension Plan
Year Ended December 31,
Postretirement Plan
Year Ended December 31,
2011
4.75%
5.00
2010
5.50%
8.50
2009
6.25%
8.50
2011
4.75%
N.A.
2010
5.25%
N.A.
2009
6.25%
N.A.
2011 Form 10-K
87
Prior service credits of the Postretirement Plan totaling
$29 thousand are included within accumulated other
comprehensive income at December 31, 2011 and are
expected to be recognized as components of net periodic
benefit cost during 2012.
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 average return of the index consistent with the
Pension Plan’s current investment strategy was 3.9%, 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 1.5%, 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 $550 thousand change in net
periodic benefit cost.
The discount rate used to determine TCF’s Pension
Plan and Postretirement Plan benefit obligations as of
December 31, 2011 and December 31, 2010, 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.
Included within the net periodic benefit plan cost for the
Pension Plan are recognized actuarial gains and losses.
The decrease in the discount rate from 4.75% at December
31, 2010 to 4% at December 31, 2011 increased net periodic
pension cost by $2.4 million during 2011. The reduction of
the interest crediting rate from 4.5% at December 31, 2010
to 3.5% at December 31, 2011 and other interest crediting
assumption changes reduced net periodic pension cost
for 2011 by $3.7 million. Various plan participant census
changes decreased the 2011 net periodic pension cost by
$400 thousand.
Included in the net periodic benefit plan cost for the
Postretirement Plan are recognized actuarial gains and
losses. The Postretirement Plan change in actuarially
estimated cost per participant as of December 31, 2011
reduced net periodic benefit cost by $1.3 million. Actual
claims paid during 2011 totaled $453 thousand less than
expected, reducing net periodic benefit cost. The decrease
in the discount rate from 4.75% at December 31, 2010 to
4% at December 31, 2011 increased net periodic benefit
cost by $410 thousand. Various plan demographic changes
decreased the net periodic pension cost by $72 thousand.
For 2011, TCF is eligible to contribute up to $18 million
to the Pension Plan until the 2011 federal income tax return
extension due date under various IRS funding methods.
During 2011, TCF made no cash contributions to the Pension
Plan. TCF does not expect to be required to contribute
to the Pension Plan in 2012. TCF expects to contribute
$823 thousand to the Postretirement Plan in 2012. TCF
contributed $526 thousand and $528 thousand to the
Postretirement Plan for the years ended December 31, 2011
and 2010, respectively. TCF currently has no plans to pre-
fund the Postretirement Plan in 2012.
The following are expected future benefit payments
used to determine projected benefit obligations.
(In thousands)
2012
2013
2014
2015
2016
2017-2021
Pension
Plan
$ 4,288
3,646
4,097
3,182
3,201
14,773
Postretirement
Plan
$ 823
799
770
738
705
2,984
The following table presents assumed health care cost
trend rates for the Postretirement Plan at December 31,
2011 and 2010.
Health care cost trend rate assumed for next year
Final health care cost trend rate
Year that final health care trend rate is reached
2011
6.75%
5%
2023
2010
7.50%
5%
2023
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 service and
interest cost components
Effect on postretirement
benefits obligations
1-Percentage-Point
Increase
Decrease
$ 19
354
$ (18)
(321)
88 TCF Financial Corporation and Subsidiaries
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
generally 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
commitments expire in various years through 2016.
Collateral held primarily consists of commercial real estate
mortgages. 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. 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
instrument, 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:
Consumer real estate and other
Commercial
Leasing and equipment finance
Total commitments to extend credit
Standby letters of credit and
guarantees on industrial revenue bonds
Total
At December 31,
2010
2011
$1,349,779 $1,444,619
277,427
148,597
1,870,643
279,076
177,534
1,806,389
26,964
31,062
$1,833,353 $1,901,705
2011 Form 10-K
89
Note 19. 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 Consolidated Statements of Financial Condition.
These contracts 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
Value Measurement for additional information.
(In thousands)
Forward foreign exchange contracts
Netting adjustments (1)
Net receivable / payable
Notional
Amount
$176,979
Designated
as Hedges
$ –
–
$ –
(In thousands)
Forward foreign exchange contracts
Netting adjustments (1)
Net receivable / payable
Notional
Amount
$185,540
Designated
as Hedges
$ 12
(12)
$ –
Receivables
Not
Designated
as Hedges
$ 396
(396)
$ –
Receivables
Not
Designated
as Hedges
$ 3
(3)
$ –
December 31, 2011
Total
$ 396
(396)
$ –
Designated
as Hedges
$ 3
(3)
$ –
December 31, 2010
Total
$ 15
(15)
$ –
Designated
as Hedges
$198
(12)
$186
Payables
Not
Designated
as Hedges
$ 662
(378)
$ 284
Payables
Not
Designated
as Hedges
$1,659
(3)
$1,656
Total
$ 665
(381)
$ 284
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. Includes $150 thousand of cash collateral received and $135 thousand of cash collateral posted at December 31, 2011.
The value of forward foreign exchange contracts will vary
over their contractual term 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 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.
90 TCF Financial Corporation and Subsidiaries
Amounts recorded within other comprehensive income
(loss) are subsequently reclassified to non-interest expense
upon completion of the related transaction. 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, were used to manage the
foreign exchange risk associated with certain minimum
lease payment streams. TCF had less than $1 thousand of
unrealized gains and $2 thousand of unrealized losses, at
December 31, 2011 and 2010, respectively, classified as
cash flow hedges and recorded in other comprehensive
income (loss). During 2011, TCF recorded gains on foreign
exchange contracts totaling $289 thousand within other
comprehensive income, which were also reclassified into
earnings. For the year ended December 31, 2011, losses of
$24 thousand were excluded from the assessment of hedge
effectiveness of TCF’s cash flow hedges, while the amount
excluded in 2010 was less than $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 gross amount of related gains or
losses included in the cumulative translation adjustment
within other comprehensive income (loss) for the year
ended December 31, 2011 was a gain of $259 thousand. For
the year ending December 31, 2010, a loss of $195 thousand
was included in the cumulative translation adjustment
within other comprehensive income (loss).
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)
Consolidated Statements of Income:
Foreign exchange (losses) gains
Forward foreign exchange contract losses:
Cash flow hedge
Not designated as hedges
Total forward foreign exchange
contract gains (losses)
Net realized losses
Accumulated other comprehensive income
(loss):
Foreign currency translation adjustment
Net investment hedge
Cash flow hedge
Net unrealized (loss) gain
For the Year Ended
December 31,
2011
2010
$(4,751)
$ 1,720
$ 265
3,062
$ –
(1,976)
3,327
(1,424)
(1,976)
(256)
(433)
259
2
$ (172)
575
(195)
(1)
$ 379
TCF executes all of its foreign exchange contracts in
the over-the-counter market with large, international
financial institutions pursuant to International Swaps and
Derivatives Association, Inc. (“ISDA”) master agreements.
These agreements include credit risk-related features
that enhance the creditworthiness of these instruments
as compared with other obligations of the respective
counterparty with whom TCF has transacted by requiring
that additional collateral be posted under certain
circumstances. At December 31, 2010, TCF had posted
$854 thousand of U.S. Treasury securities as collateral
under such agreements in the normal course of business.
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
terminate transactions with certain counterparties in the
event that, among other things, TCF Bank’s long-term debt
is rated less than BBB- by Standard and Poor’s or Baa3
by Moody’s. At December 31, 2011, credit risk-related
contingent features existed on forward foreign exchange
contracts with a notional value of $76.4 million. In the
event TCF was rated less than BB- by Standard and Poor’s,
the contract could be terminated or TCF may be required to
provide approximately $1.5 million of additional collateral.
There were $344 thousand of forward foreign exchange
contracts containing credit risk related features in a net
liability position at December 31, 2011 with cash collateral
posted by TCF of $135 thousand to offset these contracts.
2011 Form 10-K
91
Note 20. 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 descrip tion of valuation methodologies used for
assets recorded at fair value on a recurring basis at
December 31, 2011.
Securities Available for Sale Securities available
for sale consist primarily of U.S. Government sponsored
enterprise securities and federal agencies and U.S. Treasury
securities. 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 and notes 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. Other securities, for which there are active markets
and routine trading volume, are categorized as Level 1 assets.
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
agreement exists between TCF and the counterparty.
Assets Held in Trust for Deferred Compensation
Assets held in trust for deferred compensation plans
include investments in publicly traded stocks, excluding
TCF common stock reported in treasury and other equity,
and U.S. Treasury notes. The fair value of these assets is
based upon prices obtained from independent asset pricing
services based on active markets.
92 TCF Financial Corporation and Subsidiaries
The following table presents the balances of assets and liabilities measured at fair value on a recurring basis.
(In thousands)
At December 31, 2011:
Securities available for sale:
Mortgage-backed securities:
U.S. Government sponsored enterprises and federal agencies
Other
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, 2010:
Securities available for sale:
Mortgage-backed securities:
U.S. Government sponsored enterprises and federal agencies
Other
U.S. Treasury securities
Other securities
Forward foreign currency contracts
Assets held in trust for deferred compensation plans (4)
Total assets
Forward foreign currency contracts
Total liabilities
Readily
Available
Market Prices(1)
Observable
Market Prices(2)
Company
Determined
Market Prices(3)
Total at
Fair Value
$ –
–
252
–
9,833
$10,085
$ –
$ –
$ –
–
25,000
–
–
9,178
$34,178
$ –
$ –
$2,322,336
–
–
396
–
$2,322,732
$ 665
$ 665
$ 1,903,536
–
–
–
15
–
$ 1,903,551
$ 1,857
$ 1,857
$ –
152
1,298
–
–
$1,450
$ –
$ –
$ –
222
–
2,416
–
–
$2,638
$ –
$ –
$2,322,336
152
1,550
396
9,833
$2,334,267
$ 665
$ 665
$ 1,903,536
222
25,000
2,416
15
9,178
$ 1,940,367
$ 1,857
$ 1,857
(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 are 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.
2011 Form 10-K
93
The change in total assets carried at fair value using
Company Determined Market Prices, from December 31,
2010 to December 31, 2011, was the result of decreases
in fair values of $672 thousand recorded within non-
interest expense, decreases in fair value of $82 thousand
recorded through other comprehensive income, sales of
$100 thousand and reductions due to principal paydowns
of $70 thousand. Transfers to securities measured at fair
value using Readily Available Market Prices from securities
measured using Company Determined Market Prices were
$264 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 estimated fair value of such collateral.
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 acquired through foreclosure, repossession or
returned to TCF 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. Real estate owned
and repossessed and returned equipment were written down
$26.4 million, which is included in foreclosed real estate
and repossessed assets, net expense, during the year ended
December 31, 2011.
The table below presents the balances of assets which were measured at fair value on a non-recurring basis.
(In thousands)
At December 31, 2011:
loans (4)
Real estate owned (5)
Repossessed and returned equipment (5)
Investments (6)
Total
At December 31, 2010:
Loans (4)
Real estate owned (5)
Repossessed and returned equipment (5)
Investments (6)
Total
Readily
Available
Market Prices(1)
Observable
Market Prices(2)
Company
Determined
Market Prices(3)
$ –
–
–
–
$ –
$ –
–
–
–
$ –
$ –
–
3,889
–
$3,889
$ –
–
5,731
–
$5,731
$ 29,003
122,263
270
4,244
$155,780
$ 42,683
127,295
1,180
4,296
$ 175,454
Total at
Fair Value
$ 29,003
122,263
4,159
4,244
$159,669
$ 42,683
127,295
6,911
4,296
$181,185
(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 are 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 impairment reserves are determined based on the appraisal value of the collateral.
(5) Amounts do not include assets held at cost at December 31, 2011 or 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.
94 TCF Financial Corporation and Subsidiaries
Note 21. 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, 2011 and December 31, 2010 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 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 estimated fair values of
TCF’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,
2011
2010
Carrying
Amount
Estimated
Fair Value
Carrying
Amount
Estimated
Fair Value
$ 1,389,704
157,780
2,324,038
14,321
22,436
$ 1,389,704
157,780
2,324,038
14,524
22,436
$ 663,901
179,768
1,931,174
–
–
6,933,804
3,198,698
250,794
1,110,803
624,700
(255,672)
$15,771,406
6,583,570
3,154,724
242,331
1,118,271
623,651
–
$15,631,029
$11,136,389
1,065,615
6,416
4,381,664
284
$16,590,368
$11,136,389
1,068,793
6,416
4,913,637
284
$17,125,519
7,195,269
3,328,216
317,987
939,474
792,354
(265,819)
$15,082,324
$10,556,788
1,028,327
126,790
4,858,821
1,842
$16,572,568
$ 663,901
179,768
1,931,174
–
–
6,907,960
3,222,201
303,172
942,167
792,940
–
$14,943,283
$10,556,788
1,031,090
126,790
5,280,615
1,842
$16,997,125
$ 31,210
(71)
$ 31,139
$ 31,210
(71)
$ 31,139
$ 33,909
(92)
$ 33,817
$ 33,909
(92)
$ 33,817
(In thousands)
Financial instrument assets:
Cash and due from banks
Investments
Securities available for sale
Loans and leases held for sale
Interest only strips
Loans:
Consumer real estate and other
Commercial real estate
Commercial business
Equipment finance loans
Inventory finance loans
Allowance for loan 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.
2011 Form 10-K
95
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, forward
foreign exchange contracts and assets held in trust for
deferred compensation plans are carried at fair value (see
Note 20). Certain financial instruments, 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 discounted cash flows using current market rates and
consideration of credit exposure.
loans and leases Held for Sale Auto loans and
equipment finance leases held for sale are carried at the
lower of cost or fair value. The cost of auto loans held for
sale includes the unpaid principal balance, net of deferred
loan fees and cost and dealer participation premiums.
Estimated fair values are based upon recent loan sale
transactions and any available price quotes on loans with
similar coupons, maturities and credit quality.
Interest Only Strips The fair value of the interest only
strip represents the present value of future cash flows to
be generated by the loans, in excess of the interest paid to
investors and servicing revenue received on the loans, and
is included in other assets in the Consolidated Statements
of Financial Condition. This excess interest represents
future proceeds and is generated as the contractual loan
rate less the fixed rate that will be paid to the investor as
specified in the loan sale agreements. TCF uses available
market data, along with its own empirical data and
discounted cash flow models, to arrive at the estimated
fair value of its interest only strips. The present value of
the estimated expected future cash flows to be received is
determined by using discount, loss and prepayment rates
that the Company believes are commensurate with the
risks associated with the cash flows. These assumptions
are inherently subject to volatility and uncertainty, and as
a result, the estimated fair value of the interest only strip
will potentially fluctuate from period to period and such
fluctuations could be significant.
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.
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 values 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.
96 TCF Financial Corporation and Subsidiaries
Note 22. 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.
(Dollars 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 share 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 share 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
2011
2009
$ 109,394
–
–
109,394
292
$ 109,102
155,938,871
(1,716,565)
$ 150,947
–
–
150,947
752
$ 150,195
139,681,722
(1,065,206)
$ 94,269
6,378
12,025
75,866
257
$ 75,609
127,592,824
(999,580)
154,222,306
$ .71
138,616,516
$ 1.08
126,593,244
$ .60
$ 109,102
$ 150,195
$ 75,609
154,222,306
138,616,516
126,593,244
204,354
82,560
–
56,844
139,155
–
229
167
–
154,509,220
$ .71
138,812,515
$ 1.08
126,593,640
$ .60
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, 2011, 2010 and
2009, 5 million, 4.1 million and 6.5 million shares,
respectively, related to non-participating restricted stock,
stock options, and warrants were not included in the
computation of diluted earnings per share because they
were anti-dilutive.
2011 Form 10-K
97
Note 23. Comprehensive Income
Comprehensive income is the total of net income and other comprehensive income (loss). The following table summarizes the
components of comprehensive income.
(In thousands)
Net income
Other comprehensive income (loss):
Unrealized holding gains (losses) arising during the year on securities
available for sale
Recognized postretirement prior service cost and transition obligation
Reclassification adjustment for securities gains included in net income
Foreign currency translation adjustment
Foreign currency hedge
Income tax (expense) benefit
Total other comprehensive income (loss)
Comprehensive income
Note 24. Other Expense
Other expense consists of the following.
(In thousands)
Card processing and issuance
Professional fees
Telecommunications
Outside processing
Postage and courier
Deposit account losses
Office supplies
ATM processing
Other
Total other expense
Year Ended December 31,
2011
$109,394
2010
$150,947
2009
$ 94,269
122,638
308
(8,045)
(433)
261
(42,211)
72,518
$181,912
3,342
4
(31,484)
575
(196)
10,407
(17,352)
$133,595
(3,253)
4
(31,828)
251
–
12,801
(22,025)
$ 72,244
Year Ended December 31,
2011
$ 18,593
15,466
12,420
11,910
10,241
8,435
6,684
4,902
56,838
$145,489
2010
$ 19,167
17,742
11,915
11,487
11,926
12,590
8,342
5,820
47,264
$146,253
2009
$ 19,792
8,504
11,726
10,821
13,816
14,076
9,281
6,615
48,186
$142,817
Note 25. 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,
inventory finance and auto 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 each segment’s net income. The business
segments follow U.S. GAAP as described in Note 1, Summary
of Significant Accounting Policies. TCF generally accounts
for inter-segment sales and transfers at cost.
98 TCF Financial Corporation and Subsidiaries
The following tables set forth certain information of each of TCF’s reportable segments, including a reconciliation of TCF’s
consolidated totals.
(In thousands)
At or For the Year Ended December 31, 2011:
Revenues from external customers:
Interest income
Non-interest income (expense)
Total
Net interest income (expense)
Provision for credit losses
Non-interest income
Non-interest expense
Income tax expense (benefit)
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, 2010:
Revenues from external customers:
Interest income
Non-interest income (expense)
Total
Net interest income (expense)
Provision for credit losses
Non-interest income
Non-interest expense
Income tax expense (benefit)
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 (expense)
Total
Net interest income (expense)
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
Retail
Banking
Wholesale
Banking
Treasury
Services
Support
Services
Eliminations
and Other(1) Consolidated
$ 388,903
337,725
$ 726,628
$ 448,144
162,164
337,725
545,323
28,810
49,572
–
$ 49,572
$7,284,842
$ 442,632
98,687
$ 541,319
$ 274,696
36,132
98,687
208,690
47,087
81,474
4,993
$ 76,481
$7,541,242
$ 106,416
8,558
$ 114,974
$ (21,023)
2,547
25,417
28,216
(9,361)
(17,008)
–
$ (17,008)
$7,249,289
$ –
(536)
$ –
–
$ (536) $ –
$ (2,145)
$ 16
–
–
(156,471)
139,076
(164,153)
146,375
597
(2,692)
4,940
(4,591)
–
–
$ (4,591) $ 4,940
$(3,222,752)
$126,767
$ 937,951
444,434
$ 1,382,385
$ 699,688
200,843
444,434
764,451
64,441
114,387
4,993
$ 109,394
$18,979,388
$ 412,038
409,601
$ 821,639
$ 442,984
140,616
409,601
562,799
56,124
93,046
–
$ 93,046
$ 7,590,148
$ 454,154
98,714
$ 552,868
$ 253,122
94,040
98,714
191,320
23,631
42,845
3,297
$ 39,548
$ 7,823,331
$ 103,685
31,584
$ 135,269
$ 5,725
1,781
33,188
9,767
11,138
16,227
–
$ 16,227
$ 6,200,121
$ –
(1,914)
$ –
–
$ (1,914) $ –
$ (1,167) $ (1,462)
–
(141,887)
(148,676)
944
4,383
–
$ (2,257) $ 4,383
$ (3,365,444)
$ 216,869
–
138,369
141,125
(1,666)
(2,257)
–
$ 969,877
537,985
$ 1,507,862
$ 699,202
236,437
537,985
756,335
90,171
154,244
3,297
$ 150,947
$ 18,465,025
$ 433,296
418,046
$ 851,342
$ 403,179
178,030
418,046
599,044
17,525
26,626
–
$ 26,626
$7,582,747
$ 408,875
77,238
$ 486,113
$ 206,933
78,693
77,238
156,262
18,065
31,151
(410)
$ 31,561
$ 7,544,365
$ 116,010
32,292
$ 148,302
$ 22,988
1,813
32,292
8,256
17,790
27,421
–
$ 27,421
$ 5,549,107
$ –
(1,721)
$ –
–
$ (1,721) $ –
$ (655)
$ 561
–
–
(125,508)
123,787
(136,636)
129,729
3,302
(6,871)
7,171
1,490
–
–
$ 7,171
$ 1,490
$(2,988,724)
$197,680
$ 958,181
525,855
$ 1,484,036
$ 633,006
258,536
525,855
756,655
49,811
93,859
(410)
$ 94,269
$ 17,885,175
(1) Includes the portion of pension and other postretirement benefits (expenses) attributable to the annual determination of actuarial gains and losses.
2011 Form 10-K
99
Note 26. Parent Company Financial Information
TCF Financial Corporation’s (parent company only) condensed statements of financial condition as of December 31, 2011
and 2010, and the condensed statements of income and cash flows for the years ended December 31, 2011, 2010 and 2009
are as follows.
Condensed Statements of Financial Condition
(In thousands)
Assets:
Cash and cash equivalents
Investment in bank subsidiaries
Accounts receivable from bank subsidiary
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 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
Income (loss) before income tax benefit and equity in undistributed
earnings of subsidiaries
Income tax benefit
Income (loss) before equity in undistributed earnings of subsidiaries
Equity in undistributed earnings of bank subsidiaries
Net income
Preferred stock dividend
Non-cash deemed preferred stock dividend
Net income available to common stockholders
100 TCF Financial Corporation and Subsidiaries
Year Ended December 31,
2011
2010
$ 133,120
1,829,588
16,897
15,313
$1,994,918
$114,236
–
12,549
126,785
1,868,133
$1,994,918
Year Ended December 31,
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)
159,632
150,947
–
–
$150,947
$ 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
2009
$ 44
12,369
(12,325)
32,000
9,127
(1,984)
7,143
9,844
365
1,487
11,696
15,122
5,170
20,292
73,977
94,269
6,378
12,025
$ 75,866
2011
$ 432
16,227
(15,795)
29,500
14,736
(1,006)
13,730
14,367
318
4,020
18,705
8,730
7,118
15,848
93,546
109,394
–
–
$109,394
Condensed 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:
Equity in undistributed earnings of bank subsidiaries
Other, net
Year Ended December 31
2010
2009
2011
$109,394
$ 150,947
$ 94,269
(93,546)
28,320
(65,226)
44,168
(33,000)
(133)
21
(33,112)
(30,772)
–
219,666
–
–
(12,364)
17,971
280
(90,489)
–
104,292
115,348
17,772
$133,120
(159,632)
16,743
(142,889)
8,058
(255,000)
(142)
–
(255,142)
(27,617)
–
164,748
–
–
(12,364)
18,089
298
89,640
–
232,794
(14,290)
32,062
$ 17,772
(73,977)
29,794
(44,183)
50,086
(50)
(40)
–
(90)
(50,828)
(7,925)
–
361,172
(361,172)
(12,364)
19,147
(1,058)
–
1,537
(51,491)
(1,495)
33,557
$ 32,062
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.
Note 27. 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
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
Total adjustments
Net cash provided by operating activities
Cash flows from investing activities:
Capital infusions to bank subsidiary
Purchase of premises and equipment, net
Other, net
Net cash used by investing activities
Cash Flows from financing activities:
Dividends paid on common stock
Dividends paid on preferred stock
Issuance of common stock
Recission of capital contribution to bank subsidiary
Redemption of preferred securities
Interest paid on trust preferred securities
Shares sold to Employees Stock Purchase Plans
Stock Compensation tax benefits (expense)
(Repayments of) proceeds from senior unsecured term note
Other, net
Net cash provided (used) by financing activities
Net increase (decrease) in cash
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
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, 2011, TCF’s banking subsidiary
could pay a total of approximately $329.4 million in
dividends to TCF without prior regulatory approval.
Additionally, retained earnings at TCF’s bank subsidiary,
at December 31, 2011 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 stockholders. Future payments
2011 Form 10-K
101
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 and therefore the ultimate resolution
of a matter and the possible range of loss associated
with certain potential outcomes cannot be established.
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. TCF is also
subject to regulatory examinations and TCF’s regulatory
authorities may impose sanctions on TCF for a failure to
maintain regulatory compliance. TCF is currently subject to
a Consent Order with the OCC relating to its Bank Secrecy Act
(“BSA”) compliance. Although the Consent Order does not
call for the payment of a civil money penalty, TCF believes
the OCC will be issuing written notice to TCF related to TCF’s
BSA compliance deficiencies. Under this notice, TCF will be
provided the opportunity to respond to the OCC and its
findings outlined in this notice. After the OCC’s review
of TCF’s response to the notice, the OCC may impose a
penalty related to these findings. TCF is currently not
able to estimate a reasonable range of losses relating
to that possibility.
Note 28. Change in Accounting Principle
As discussed in Note 1, Summary of Significant Accounting
Policies, the financial data for all periods presented has
been adjusted to reflect the effect of these accounting
changes. The cumulative effect of the change on
retained earnings as of January 1, 2009 was a decrease
of $27.4 million, with the corresponding adjustment
to accumulated other comprehensive income (loss).
The significant effects of the change in accounting for
pension and other postretirement benefits on TCF’s
Consolidated Statements of Income and Consolidated
Statements of Financial Condition for the periods
presented are included below.
(Dollars in thousands, except per-share data)
Consolidated Statements of Income:
Prior accounting:
Compensation and employee benefits
Income tax expense
Net income available to common stockholders
Net income per common share
Basic
Diluted
Accounting under new polices:
Compensation and employee benefits
Income tax expense
Net income available to common stockholders
Net income per common share
Basic
Diluted
(In thousands)
Consolidated Statements of Financial Condition:
Prior accounting:
Retained earnings, subject to certain restrictions
Accumulated other comprehensive income (loss)
Accounting under new policies:
Retained earnings, subject to certain restrictions
Accumulated other comprehensive income (loss)
102 TCF Financial Corporation and Subsidiaries
Year Ended December 31,
2010
2009
$ 352,861
87,765
146,564
$ 1.05
$ 1.05
$ 346,072
90,171
150,947
$ 1.08
$ 1.08
$ 356,996
45,854
68,694
$ .54
$ .54
$ 345,868
49,811
75,866
$ .60
$ .60
At December 31, 2010
$1,064,978
(31,514)
$1,049,156
(15,692)
Other Financial Data
The selected quarterly financial data presented below should be read in conjunction with the Consolidated Financial
Statements and related notes. Prior period financial data has been revised, as applicable, for a retrospective change
in accounting principle. See Note 28 of Notes to Consolidated Financial Statements for additional information.
Select ed Quarterly Financial Data (Unaud ited)
(Dollars in thousands, except per-share data)
Selected Financial Condition Data:
Total loans and leases
Securities available for sale
Goodwill
Total assets
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
Gains on auto loans held for sale
Total non-interest income
Non-interest expense
Income before income tax expense
Income tax expense
Income after income tax expense
Income attributable to non-controlling
interest
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,
2011
Sept. 30,
2011
June 30,
2011
At
March 31,
2011
Dec. 31,
2010
Sept. 30,
2010
June 30,
2010
March 31,
2010
$14,150,255 $14,339,715 $14,631,945 $14,796,541 $14,788,304 $14,896,601 $14,639,893 $14,706,423
1,899,825
152,599
18,187,102
11,882,373
17,590
4,496,574
1,393,405
2,324,038
225,640
18,979,388
12,202,004
6,416
4,381,664
1,878,627
1,940,331
152,599
18,029,622
11,523,043
14,805
4,600,820
1,474,113
1,931,174
152,599
18,465,025
11,585,115
126,790
4,858,821
1,480,163
2,463,367
152,599
18,834,416
11,939,476
9,514
4,415,362
1,769,619
2,172,017
152,599
18,712,136
12,043,684
12,898
4,533,176
1,724,471
1,947,462
152,599
18,312,978
11,461,519
344,681
4,581,511
1,505,327
2,600,806
152,599
19,092,027
12,320,502
7,204
4,397,750
1,872,044
Dec. 31,
2011
Sept. 30,
2011
June 30,
2011
Three Months Ended
March 31,
2011
Dec. 31,
2010
Sept. 30,
2010
June 30,
2010
March 31,
2010
$ 173,434 $ 176,064 $ 176,150 $ 174,040 $ 174,286 $ 173,755 $ 176,499 $ 174,662
50,491
52,315
59,287
77,646
45,274
44,005
49,013
59,249
114,185
123,749
132,145
128,766
96,640
114,468
127,486
124,171
91,315
5,842
1,133
98,290
187,533
24,942
7,424
17,518
116,108
1,648
–
117,756
188,848
52,657
19,159
33,498
114,369
(227)
–
114,142
195,091
51,196
19,086
32,110
114,246
–
–
114,246
192,979
50,033
18,772
31,261
120,309
21,185
–
141,494
185,972
52,162
17,391
34,771
129,437
8,505
–
137,942
190,908
61,502
23,226
38,276
136,043
(137)
–
135,906
188,361
75,031
28,438
46,593
123,073
(430)
–
122,643
191,094
55,720
21,116
34,604
1,075
1,243
1,686
989
898
912
1,186
301
$ 16,443 $ 32,255 $ 30,424 $ 30,272 $ 33,873 $ 37,364 $ 45,407 $ 34,303
$ .10 $ .20 $ .19 $ .21 $ .24 $ .26 $ .32 $ .26
$ .10 $ .20 $ .19 $ .21 $ .24 $ .26 $ .32 $ .26
$ .05 $ .05 $ .05 $ .05 $ .05 $ .05 $ .05 $ .05
.37
3.55
3.92
1.63
9.81
.71
7.12
3.96
1.48
9.58
.68
7.00
4.02
1.19
9.32
.68
8.00
4.06
1.51
8.24
.75
9.09
4.05
1.75
8.05
.85
10.08
4.14
1.58
8.28
1.03
12.82
4.19
1.30
7.88
.77
10.80
4.21
1.22
7.10
2011 Form 10-K
103
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 Managing Director
of Corporate Development (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, management concluded that
the Company’s disclosure controls and procedures are
effective, as of December 31, 2011.
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 Managing Director of Corporate
Development (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
financial reporting (as defined in Rule 13a-15(f) of the
Exchange Act) during the quarter ended December 31,
2011 that materially affected, or are reasonably likely
to materially affect, TCF’s internal control over financial
reporting. During the fourth quarter of 2011, TCF completed
the acquisition of Gateway One Lending & Finance, LLC
(“Gateway One”), which adopted key controls within TCF’s
internal controls over financial reporting upon acquisition.
104 TCF Financial Corporation and Subsidiaries
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 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 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, with the participation of the Chief
Executive Officer (Principal Executive Officer), Chief
Financial Officer (Principal Financial Officer) and the
Controller and Managing Director of Corporate Development
(Principal Accounting Officer), completed an assessment
of TCF’s internal control over financial reporting as of
December 31, 2011. This assessment was based on criteria
for evaluating internal control over financial reporting
established in Internal Control — Integrated Framework
issued by the Committee of Sponsoring Organizations of
the Treadway Commission. The scope of the assessment
excluded Gateway One, which was acquired on November
30, 2011. Consolidated revenues for the Company were
$1.1 billion during 2011, of which Gateway One represented
$2.2 million, or .2%. The consolidated total assets of the
Company as of December 31, 2011 were $19 billion, of which
Gateway One represented $69.9 million, or .4%. Based on
this assessment, management concluded that TCF’s
internal control over financial reporting was effective
as of December 31, 2011.
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, 2011.
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
Michael S. Jones
Executive Vice President and Chief Financial Officer
David M. Stautz
Senior Vice President, Controller and Managing Director
of Corporate Development
February 21, 2012
2011 Form 10-K
105
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, 2011, 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
106 TCF Financial Corporation and Subsidiaries
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, 2011, based on
criteria established in Internal Control — Integrated
Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
TCF Financial Corporation acquired Gateway One Lending
and Finance, LLC (“Gateway One”) on November 30, 2011,
and management excluded Gateway One’s internal
control over financial reporting from its assessment of
the effectiveness of TCF Financial Corporation’s internal
control over financial reporting as of December 31, 2011.
Consolidated revenues for TCF Financial Corporation were
$1.1 billion during 2011, of which Gateway One represented
$2.2 million, or .2%. The consolidated total assets of TCF
Financial Corporation as of December 31, 2011 were
$19 billion, of which Gateway One represented $69.9 million,
or .4%. Our audit of internal control over financial reporting
of TCF Financial Corporation also excluded an evaluation of
the internal control over financial reporting of Gateway One.
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, 2011 and 2010, and the related
consolidated statements of operations, equity and cash
flows for each of the years in the three-year period ended
December 31, 2011, and our report dated February 21, 2012
expressed an unqualified opinion on those consolidated
financial statements.
Minneapolis, Minnesota
February 21, 2012
Item 9B. Other Information
None.
Part III
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 2012 Annual Meeting of Stockholders to
be held on April 25, 2012 (the “2012 Proxy Statement”) and
incorporated herein by reference: “Proposal 1: Election of
Directors”; “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 sections entitled “Proposal 1:
Election of Directors: Corporate Governance – Director
Nominations” and Additional Information in TCF’s 2012
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 2012 Proxy Statement under “Proposal 1:
Election of Directors: Background of the Nominees” and
“Corporate Governance: Board Committees, Committee
Memberships, and Meetings in 2011” 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 Audit Committee Financial 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, Thomas A. Cusick,
George G. Johnson, Vance K. Opperman and Richard A. Zona,
meet the requirements of Audit Committee Financial Expert.
The Board has also determined that Messrs. Schwalbach,
Cusick, Johnson, Opperman and Zona are independent.
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,” then “Corporate Governance”
and then “Code of Ethics” and “Code of Ethics for Senior
Financial Management,” respectively. 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.
Item 11. Executive Compensation
Information regarding compensation of directors and
executive officers of TCF is set forth in the 2012 Proxy
Statement under “Proposal 1: Election of Directors: Board
Committees, Committee Memberships and Meetings in
2011: Compensation Committee Interlocks and Insider
Participation”; “Proposal 1: Compensation of Directors”;
“Compensation Discussion and Analysis”; “Compensation
Committee Report”; “Summary Compensation Table”;
“Grants of Plan-Based Awards in 2011”; “Outstanding
Equity Awards at December 31, 2011”; “Option Exercises
and Stock Vested in 2011”; “Pension Benefits in 2011”;
“Nonqualified Deferred Compensation in 2011” and
“Potential Payments Upon Termination or Change in
Control” and is incorporated herein by reference.
2011 Form 10-K
107
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
stockholders and shares authorized under plans is set forth
in the 2012 Proxy Statement under “Proposal 1: Election of
Directors: TCF Stock Ownership of Directors, Officers and
5% Owners” and “Equity Compensation Plans Approved by
Stockholders” and is incorporated herein by reference.
Item 13. Certain Relationships
and Related Transactions, and
Director Independence
Information regarding certain director independence
and relationships and transactions between TCF and
management is set forth in the 2012 Proxy Statement
under “Corporate Governance: Director Independence
and Related Party Transactions” 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 2012 Proxy Statement
under “Independent Registered Public Accountants” and
is incorporated herein by reference.
108 TCF Financial Corporation and Subsidiaries
Part IV
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, 2011 and 2010
Consolidated Statements of Income
for each of the years in the three-year period ended December 31, 2011
Consolidated Statements of Equity
for each of the years in the three-year period ended December 31, 2011
Consolidated Statements of Cash Flows
for each of the years in the three-year period ended December 31, 2011
Notes to Consolidated Financial Statements
Other Financial Data
Management’s Report on Internal Control Over Financial Reporting
Reports of Independent Registered Public Accounting Firm
P ag e
18
56
57
58
59
60
103
105
55, 106
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 111 of this report.
2011 Form 10-K
109
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 21, 2012
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.
Na me
Title
Da te
/s/ William A. Cooper
William A. Cooper
/s/ Michael S. Jones
Michael S. Jones
/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/ Craig R. Dahl
Craig R. Dahl
/s/ Luella G. Goldberg
Luella G. Goldberg
/s/ Karen L. Grandstrand
Karen L. Grandstrand
/s/ Thomas F. Jasper
Thomas F. Jasper
/s/ George G. Johnson
George G. Johnson
/s/ Vance K. Opperman
Vance K. Opperman
/s/ James M. Ramstad
James M. Ramstad
/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
110 TCF Financial Corporation and Subsidiaries
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 Managing Director
of Corporate Development (Principal Accounting Officer)
Director
Director
Director
Director
Director
Director and Vice Chairman
Director
Director
Director and Vice Chairman
Director
Director
Director
Director
Director
Director and Vice Chairman
Director
February 21, 2012
February 21, 2012
February 21, 2012
February 21, 2012
February 21, 2012
February 21, 2012
February 21, 2012
February 21, 2012
February 21, 2012
February 21, 2012
February 21, 2012
February 21, 2012
February 21, 2012
February 21, 2012
February 21, 2012
February 21, 2012
February 21, 2012
February 21, 2012
February 21, 2012
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)
10(a)*
Description
Amended and Restated Certificate of Incorporation of TCF Financial Corporation, as amended through April
27, 2011 [incorporated by reference to Exhibit 3(a) of TCF Financial Corporation’s Quarterly Report on Form
10-Q for the quarter ended June 30, 2011]
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]
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
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
2011 Form 10-K
111
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 January 1, 2011
[incorporated by reference to Exhibit 10(b) to TCF Financial Corporation’s Current Report on Form 8-K filed
May 2, 2011]
Form of 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 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]
Form of 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]
Form of 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]
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]
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*
10(b)-9*
10(b)-10*
10(b)-11*
112 TCF Financial Corporation and Subsidiaries
10(b)-12*
10(b)-13*
10(b)-14*
10(b)-15*
10(b)-16*
10(b)-17*
10(b)-18*
10(b)-19*
10(b)-20*
10(b)-21*
10(c)*
10(d)*
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]
Form of Restricted Stock Agreement and Non-Solicitation/Confidentiality Agreement as executed by
certain executives, effective February 16, 2011 [incorporated by reference to Exhibit 10(b)-16 to TCF
Financial Corporation’s Current Report on Form 8-K filed February 18, 2011]
Nonqualified Stock Option Agreement as executed by Barry N. Winslow, effective July 31, 2008
[incorporated by reference to Exhibit 10(b)-17 of TCF Financial Corporation’s Quarterly Report on Form
10-Q filed for the quarter ended March 31, 2011]
Restricted Stock Agreement as executed by Barry N. Winslow, effective December 14, 2009 [incorporated by
reference to Exhibit 10(b)-18 of TCF Financial Corporation’s Quarterly Report on Form 10-Q for the quarter
ended March 31, 2011]
Restricted Stock Agreement and Non-Solicitation/Confidentiality Agreement as executed by James J. Urbanek,
effective January 25, 2010 [incorporated by reference to Exhibit 10(b)-19 of TCF Financial Corporation’s
Quarterly Report on Form 10-Q for the quarter ended March 31, 2011]
Form of Restricted Stock Agreement as executed by William A. Cooper, effective January 17, 2012
[incorporated by reference to Exhibit 10.2 to TCF Financial Corporation’s Current Report on Form 8-K filed
January 20, 2012]
Form of Restricted Stock Agreement as executed by certain executives, effective January 17, 2012
[incorporated by reference to Exhibit 10.3 to TCF Financial Corporation’s Current Report on Form 8-K filed
January 20, 2012]
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]
2011 Form 10-K
113
10(e)*
10(f)*
10(f)-1*
10(g)*
10(h)*
10(i)*
10(j)*
10(j)-1*
10(k)*
10(k)-1*
10(l)*
10(m)*
10(m)-1*
Amended and Restated Agreement (2012) with William A. Cooper between William A. Cooper and TCF
Financial Corporation effective as of January 25, 2012 [incorporated by reference to Exhibit 10.1 to TCF
Financial Corporation’s Current Report on Form 8-K filed January 30, 2012]
TCF Financial Corporation Supplemental Employee Retirement Plan — ESPP Plan 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 Employees Stock Purchase Plan - Supplemental Plan, as amended and restated effective January 1,
2011 [incorporated by reference to Exhibit 10(j)-1 to TCF Financial Corporation’s Current Report on Form
8-K filed May 2, 2011]
Trust Agreement for TCF Employees Stock Purchase Plan 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 2011 Management Incentive Plan – Executive as executed by certain executives of TCF, effective
January 1, 2011 [incorporated by reference to Exhibit 10(o) of TCF Financial Corporation’s Current Report
on Form 8-K filed January 24, 2011]
Form of 2012 Management Incentive Plan – Executive as executed by certain executives of TCF, effective
January 1, 2012 [incorporated by reference to Exhibit 10.1 of TCF Financial Corporation’s Current Report on
Form 8-K filed January 20, 2012]
TCF Performance-Based Compensation Policy for Covered Executive Officers, as approved effective January
1, 2011 [incorporated by reference to Exhibit 10(p) to TCF Financial Corporation’s Current Report on Form
8-K filed May 2, 2011]
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
114 TCF Financial Corporation and Subsidiaries
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]
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]
Amended and Restated TCF Director Retirement Plan effective as of October 17, 2011 [incorporated by
reference to Exhibit 10(t) of TCF Financial Corporation’s Quarterly Report on Form 10-Q filed for the quarter
ended September 30, 2011]
TCF Employees Deferred Stock Compensation Plan, effective January 1, 2011 [incorporated by reference to
Exhibit 10(u) to TCF Financial Corporation’s Current Report on Form 8-K filed February 18, 2011]
Form of Rabbi Trust Agreement for the TCF Employees Deferred Stock Compensation Plan [incorporated by
reference to Exhibit 10(v) to TCF Financial Corporation’s Current Report on Form 8-K filed February 18, 2011]
10(n)*
10(o)*
10(p)*
10(q)*
10(r)*#
Summary on Non-Employee Director Compensation
12#
18#
21#
23#
31#
32#
99.1*
99.2*
101#
Computation of Ratios of Earnings to Fixed Charges for periods ended December 31, 2011, 2010, 2009, 2008
and 2007
Letter on Change in Accounting Principles
Subsidiaries of TCF Financial Corporation (as of December 31, 2011)
Consent of KPMG LLP dated February 21, 2012
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)
Form of Consent Order, dated July 20, 2010, issued by the Comptroller of the Currency in the matter of TCF
National Bank. [incorporated by reference to Exhibit 99.1 to TCF Financial Corporation’s Quarterly Report
on Form 10-Q for the quarterly period ended June 30, 2010]
Form of Stipulation and Consent to the Issuance of a Consent Order dated July 20, 2010, issued by the
Comptroller of the Currency in the matter of TCF National Bank [incorporated by reference to Exhibit 99.2 to
TCF Financial Corporation’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2010]
Financial Statements of the Company for the period ended December 31, 2011, 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
* Indicates management contracts, compensatory plans or arrangements required to be filed pursuant to Item 601(b)(10)(iii)(A) of Regulation S-K
# Filed herein
2011 Form 10-K
115
Board of Directors
Senior Officers
TCF Financial Corporation
TCF lending
Chairman of the Board
and Chief Executive Officer
William A. Cooper
Vice Chairman and Executive
Vice President, Lending
Craig R. Dahl
Vice Chairman,
Corporate Development
Barry N. Winslow
Chief Risk Officer
Neil W. Brown
Vice Chairman and Executive
Vice President, Lending
Craig R. Dahl
Vice Chairman and Executive
Vice President, Funding,
Operations and Finance
Thomas F. Jasper
Executive Vice President
and Chief Financial Officer
Michael S. Jones
Executive Vice President
and Chief Operations Officer
Earl D. Stratton
Senior Vice Presidents
James S. Broucek
Steven D. Christensen
Joseph T. Green
Jason E. Korstange
Barbara E. Shaw
David M. Stautz
TCF Retail Lending
Managing Director
Mark W. Rohde
Executive Vice Presidents
Robert J. Brueggeman
Joseph W. Doyle
Claire M. Graupmann
Matthew R. Wiley
Senior Vice Presidents
Bradley C. Barthels
Rose M. Dickey
Michael A. Dill
Calvin E. Fuoss
Donald J. Hawkins
Daniel B. Hoffman
Vicki L. Makowka
Carol B. Schirmers
Thomas K. Torossian
Jason R. Voronyak
Katrina Williams
TCF Commercial Lending
Managing Director
James J. Urbanek
Executive Vice Presidents
Douglas W. Benner
Thomas R. Bobak
J. Thomas Finnegan
Michael R. Klemz
Senior Vice Presidents
John E. Boyle
Michael Y. Chin
Jeffrey T. Doering
Mark W. Lucke
Russell P. McMinn
Douglas A. Ortyn
William R. Patterson
Guy J. Rau
Janelle Rietz-Kamenar
Michael Roidt
Elisabeth A. Rojas
Lisa M. Salazar
Patrick P. Skiles
William A. Cooper 5
Chairman of the Board and Chief Executive Officer
Raymond L. Barton 1,3,4,5,6
Chairman, Great Clips, Inc.
Peter Bell 3,6
Former Chair, Metropolitan Council
William F. Bieber 1,3,4,6
Chairman and Owner, ATEK Companies, Inc.
Theodore J. Bigos 1,3,4,6
Owner, Bigos Management, Inc.
Thomas A. Cusick 2,3,6,7
Retired Vice Chairman, TCF Financial Corporation
Craig R. Dahl
Vice Chairman and Executive Vice President, Lending
Luella G. Goldberg 1,2,3,4,5,6,7
Past Chair, University of Minnesota Foundation,
Former Acting President, Wellesley College
Karen L. Grandstrand 2,3,6,7
Partner, Fredrikson & Byron, P.A.
Thomas F. Jasper
Vice Chairman and Executive Vice President, Funding,
Operations and Finance
George G. Johnson 2,3,6,7
CPA/Managing Director, George Johnson & Company
Vance K. Opperman 1,2,3,4,5,6,7
President and Chief Executive Officer, Key Investment, Inc.
James M. Ramstad 3,6
Former U.S. Congressman
Gerald A. Schwalbach 1,2,3,4,5,6,7
Chairman, Spensa Development Group, LLC
Ralph Strangis 3,5,6
Senior Partner, Kaplan, Strangis and Kaplan, P.A.
Barry N. Winslow
Vice Chairman, Corporate Development
Richard A. Zona 2,3,5,6,7
Retired Vice Chairman, U.S. Bancorp
1 Advisory Committee –
TCF Employees Stock Purchase Plan
2 Audit Committee
3 BSA Compliance Committee
4 Compensation/Nominating/
Corporate Governance Committee
5 Executive Committee
6 Finance Committee
7 Risk Committee
116 TCF Financial Corporation and Subsidiaries
TCF Equipment Finance, Inc.
President and
Chief Operating Officer
William S. Henak
Executive Vice President
Bradley C. Gunstad
Senior Vice Presidents
Gary W. Anderson
Gloria J. Charley
Richard J. Chenitz
Peter C. Darin
Walter E. Dzielsky
Michael A. Kloos
Brick W. Moore
Jodie L. Palmer
Gary A. Peterson
Charles A. Sell, Jr.
Robert J. Stark
Mark H. Valentine
Frederick M. Van Etten
Judy I. VanOsdel
Winthrop Resources
Corporation
Co-Presidents
Paul L. Gendler
Richard J. Pieper
Senior Vice Presidents
Gary W. Anderson
Abigail R. Nesbitt
Dean J. Stinchfield
Bradley R. Swenson
TCF Inventory Finance, Inc.
President and
Chief Executive Officer
Rosario A. Perrelli
Executive Vice Presidents
Vincent E. Hillery
Peter D. Kelley
Christopher Meals
Senior Vice Presidents
Peter J. Baranowski
Thomas E. Evans
Kevin L. Harrington
James S. Raymond
Larry M. Tagli
Mark J. Wrend
Dornett Wright
TCF Commercial Finance
Canada, Inc.
President
Peter D. Kelley
Gateway One Lending
and Finance, LLC
Chief Executive Officer
G. Brian MacInnis
President
David G. MacInnis
Executive Vice President
Todd A. Pierson
Senior Vice Presidents
Scott R. Fjellman
Andrew B. Sturm
TCF Funding
Vice Chairman and Executive
Vice President, Funding,
Operations and Finance
Thomas F. Jasper
TCF Branch Banking
Executive Vice President
and Chief Operations Officer
Earl D. Stratton
Managing Director
Mark L. Jeter
Executive Vice Presidents
Robert C. Borgstrom
Luis J. Campos
Timothy G. Doyle
James L. Koon
Timothy B. Meyer
Michael J. Olson
Senior Vice Presidents
Delia M. Conrad
Peter R. Daugherty
Mark W. Gault
Jennifer K. Rohling
TCF Finance / Treasury
Executive Vice President and
Chief Financial Officer
Michael S. Jones
Executive Vice President and
Treasurer, TCF National Bank
James S. Broucek
Senior Vice Presidents
Barbara L. Buss
Scott D. Campbell
Andrew D. Clark
Larry M. Czekaj
Martin J. Krogman
Kathleen M. Wacker
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
TCF Internal Audit
Senior Vice President
and Chief Audit Executive
Steven D. Christensen
TCF Legal / Compliance
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
Neysa M. Alecu
Gary L. Fineman
Linda J. Firth-Hawkins
Shelley A. Fitzmaurice
Douglass B. Hiatt
Charles P. Hoffman, Jr.
Kirk D. Johnson
Gloria J. Karsky
Janella Jane Miller
R. Elizabeth Topoluk
Executive Vice President,
Controller and Managing
Director of Corporate
Development, TCF National Bank
David M. Stautz
Senior Vice Presidents
Susan D. Bode
James M. Dunne
Brian P. Engels
Christy A. Powers
TCF Operations
Executive Vice President and
Chief Operations 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
Carol Jean F. Felth
Christopher N. Germann
Beatrice Lingen
James M. Matheis
Anton J. Negrini
Richard J. Nelson
Leonard D. Steele
William N. Welch
Cathleen L. Wilkins
TCF Enterprise
Risk Management
Chief Risk Officer
Neil W. Brown
Managing Director of Enterprise
Risk Management
Paul B. Brawner
TCF Credit Quality
Executive Vice President
and Chief Credit Officer
Mark D. Nyquist
Executive Vice Presidents
Robert A. Henry
David J. Veurink
2011 Annual Report
117
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
1475 East Woodfield Road
Suite 1100
Schaumburg, IL 60173
(877) 872-8234
TCF Commercial Finance Canada, Inc.
Headquarters
700 Dorval Drive
Suite 705
Oakville, Ontario L6K 3V3
Canada
(877) 800-4430
Gateway One lending & Finance, llC
Headquarters
160 North Riverview Drive
Suite 100
Anaheim, CA 92808
(888) 810-8740
Traditional Branches
Minneapolis/St. Paul Area (45)
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 (39)
Milwaukee Area (10)
Kenosha/Racine Area (6)
Supermarket Branches
Chicagoland (154)
Milwaukee Area (8)
Kenosha/Racine Area (2)
Indiana (5)
Campus Branches
Chicagoland (2)
Greater Illinois (1)
Michigan
Traditional Branches
Metro Detroit Area (51)
Supermarket Branches
Metro Detroit Area (1)
Campus Branches
Metro Detroit Area (1)
Colorado/Arizona
Traditional Branches
Metro Denver Area (26)
Colorado Springs (8)
Metro Phoenix Area (7)
Supermarket Branches
Metro Denver Area (2)
118 TCF Financial Corporation and Subsidiaries
Stockholder Information
Stock Data
Year
2011
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
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
Close
High
Dividends
Paid
Low Per Share
$10.32
9.16
16.04
15.86
$14.81
16.19
16.61
15.94
$13.62
13.04
13.37
11.76
$13.66
18.00
12.03
17.92
$17.93
26.18
27.80
26.36
$11.68
17.37
13.80
17.37
$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
$8.61
8.66
13.37
14.60
$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
$ .05
.05
.05
.05
$ .05
.05
.05
.05
$ .05
.05
.05
.25
$ .25
.25
.25
.25
$.2425
.2425
.2425
.2425
For more historical information on TCF’s stock price and
dividend, visit http://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, 2011, TCF had approximately 160.3 million
shares of common stock outstanding.
2012 Common Stock Dividend Dates
Expected Record:
January 27
April 27
July 27
October 26
Expected Payment:
February 29
May 31
August 31
November 30
Annual Meeting
The Annual Meeting of Stockholders of TCF will be held
on Wednesday, April 25, 2012, 3:00 p.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 stockholder-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.
2011 Annual Report
119
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 http://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
Mail Code: 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
January 2012
Negative
Fitch Ratings
Outlook
TCF Financial Corporation:
Last Review
September 2011
Negative
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 2012
Stable
A2
A2
Prime-1
C+
Baa2
Stock Price Performance (In Dollars)
$35
30
25
20
15
10
5
Year
Ending
Stock Price*
Dividends*
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
4
0
/
3
/
9
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 12-11
*Stock split adjusted
For more historical information on TCF’s stock price and dividend, visit http://ir.tcfbank.com.
120 TCF Financial Corporation and Subsidiaries
Corporate Philosophy
Functionally Organized TCF’s new functionally organized
management structure, which emphasizes four key initiatives:
1) Enterprise Risk Management, 2) Lending, 3) Funding and
4) Corporate Development is supported by focused profit center
reporting. This functionally organized management structure
creates a highly responsive and performance driven culture.
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.
Stockholder Value TCF focuses on increasing long-term
stockholder value by making sound business decisions, taking
advantage of marketplace opportunities, and preparing for vari-
ous economic conditions through balance sheet diversification.
Our goal is to make TCF stock a strong, long-term investment.
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, includ-
ing 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 extend credit to
high-quality customers and invest only in programs that add
value to the organization and yield solid returns.
Expansion TCF grows both through de novo expansion and acqui-
sition. We are growing by starting and acquiring new businesses,
opening new branches and offering new products and services.
The Customer First TCF strives to place The Customer First.
We believe providing great service helps to retain existing custom-
ers, 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 com-
mitted 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.
Bank Regulators Bank regulators play an essential role in the
banking industry. TCF is committed to maintaining strong, positive
and professional working relationships with its regulators. Open
and effective communication with regulators throughout the
organization is essential to ensuring effective, efficient and
productive bank supervision.
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.
Interest-rate Risk TCF believes interest-rate risk should
be minimized. Interest-rate speculation does not generate
consistent profits and is high risk.
Community Participation TCF believes in community
participation, both financially and through volunteerism.
We feel a responsibility to help those less fortunate.
TCF Financial Corporation
200 Lake Street East
Wayzata, MN 55391-1693
www.tcfbank.com
TCFIR9350