the
future
in
focus
TCF Financial Corporation | Annual Report 2014
Over the past few years, TCF has successfully reinvented the
bank by implementing and executing on several key business
model enhancements. These have paid off as TCF has become
a much more diversified bank with a unique loan and lease
origination capacity funded by core deposits resulting in
exceptionally strong net interest margin and fee income.
With a renewed business model built for today’s banking
environment, reduced legacy credit concerns, and more
opportunities still on the horizon, the future is in focus at TCF.
table of contents
annual report on form 10-k
corporate information
1 Financial Summary
2 Select Financial Highlights
3 Letter to Our Stockholders
7
Investing in Technology
and Service
1 Business
6 Risk Factors
17 Selected Financial Data
A-1 Board of Directors
A-2 Senior Officers
A-4 Offices
18 Management’s Discussion and Analysis
A-4 Stockholder Information
52 Consolidated Financial Statements
A-7 Mission, Vision and Values
8 Financial Education
57 Notes to Consolidated Financial Statements
102 Other Financial Data
2014 Annual Report
1
Financial Summary
(Dollars in thousands, except per-share data)
2014
2013
% Change
At or For the Year Ended December 31,
Operating Results:
Net interest income
Provision for credit losses
Net interest income after provision for credit losses
Non-interest income:
Fees and other revenue
Gains on securities, net
Total non-interest income
Non-interest expense:
Non-interest expense
Branch realignment
Total non-interest expense
Income before income tax expense
Income tax expense
Income after income tax expense
Income attributable to non-controlling interest
Net income
Preferred stock dividends
$815,629
$802,624
95,737
719,892
432,240
1,027
433,267
871,777
–
871,777
281,382
99,766
181,616
7,429
174,187
19,388
118,368
684,256
403,094
964
404,058
836,400
8,869
845,269
243,045
84,345
158,700
7,032
151,668
19,065
Net income available to common stockholders
$154,799
$132,603
1.6 %
(19.1)
5.2
7.2
6.5
7.2
4.2
(100.0)
3.1
15.8
18.3
14.4
5.6
14.8
1.7
16.7
Per Common Share Information:
Basic earnings
Diluted earnings
Dividends declared
Stock price:
High
Low
Close
Book value
$ 0.95
$ 0.82
15.9 %
0.94
0.20
17.39
13.95
15.89
11.10
0.82
0.20
16.68
12.39
16.25
10.23
14.6
–
4.3
12.6
(2.2)
8.5
(10.1)
Price to book value
1.43 X
1.59 X
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 capital ratio(1)
0.96 %
0.87 %
10.3 %
8.71
4.61
0.49
10.07
8.12
4.68
0.81
9.63
7.3
(1.5)
(39.5)
4.6
(1) See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Capital Management”
(for reconciliation of GAAP to non-GAAP measures).
22
2
TCF Financial Corporation and Subsidiaries
Select Financial Highlights
Net Interest Margin
Percent
Loans & Leases
Billions of Dollars
Deposits
Billions of Dollars
4.15%
3.99%
4.65%
4.68%
4.61%
$14.8
$14.2
$15.4
$15.8
$16.4
$14.1
$14.4
$15.4
$12.2
$11.6
.53%
.38%
.31%
.26% .26%
10
11
12
13
14
10
11
12
13
14
10
11
12
13
14
Total Deposits
Average Interest Rate on Deposits
Net Charge-offs
Percent
Non-accrual Loans & Leases
and Other Real Estate Owned
Millions of Dollars
Tangible Common Equity1
Millions of Dollars
1.47%
1.45%
1.54%
$486
$476
$433
0.81%
0.49%
$1,635
$1,628
$1,366
$1,458
$1,318
$346
$282
7.20% 8.72% 7.59% 8.03% 8.50%
10
11
12
13
14
10
11
12
13
14
10
11
12
13
14
Tangible Common Equity
Tangible Common Equity/Tangible Assets
2014 Earning Assets
$17.3 Billion
2014 Interest Income2
$878 Million
2014 Non-interest Income
$433 Million
15%
Consumer
real estate
( junior liens)
5% Securities & other
2% Investments
11%
Inventory fi nance
2% Securities
11%
Auto fi nance
21%
Consumer
real estate &
other (fi rst
mortgages)
2%
Loans & leases
held for sale
13%
Inventory
fi nance
18%
Commercial
22%
Leasing &
equipment
fi nance
18%
Consumer real estate
& other (fi rst mortgages)
16%
Commercial
19%
Leasing &
equipment
fi nance
17%
Consumer
real estate
(junior liens)
8%
Auto fi nance
8%
Gains on sales
of consumer real
estate loans, net
5%
Servicing
fee income
2% Other
36%
Deposit fees
& service
charges
22%
Leasing &
equipment
fi nance
12%
Card
revenue
5%
ATM revenue
10%
Gains on sales
of auto loans, net
1 See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Capital Management” (for reconciliation of GAAP to non-GAAP measures).
2 Interest income presented on a fully tax-equivalent basis
William A. Cooper, Chairman of the Board & Chief Executive Officer
Dear Stockholders:
It is hard to believe that it has been
increased 10.1 percent to $9.72. We
Our loan origination capacity is
30 years since I first took over as
maintained an industry-leading net
significant for a number of reasons.
Chief Executive Officer at TCF. As I
interest margin in 2014 of 4.61
First, it creates revenue through
begin my final year leading the bank,
percent, over 100 basis points greater
interest income as our unique
I often look back and find myself
than our peer average. Our stock
portfolio mix allows us to put
amazed at all the exceptional things
price closed the year at $15.89 with a
high-yielding, high-quality earning
this company has accomplished. We
three-year total stockholder return of
assets on our balance sheet. Second,
were the first to launch totally free
61.02 percent.
checking, completed several
acquisitions and stock splits, acquired
new businesses, started businesses
from scratch, repositioned the
balance sheet and successfully
completed significant business model
changes while reducing balance
sheet credit risk to meet a changing
regulatory landscape. These events
laid the groundwork for the success
we had in 2014 and have helped us
bring the future of TCF into focus.
A Look at 2014
A significant factor in our success
in 2014 was our loan and lease
origination engine. We originated
$13.5 billion of loans and leases
in 2014, up 12.2 percent from 2013.
As a result, total assets now consist
of 85 percent loans and leases.
These originations have largely
been driven by our national lending
businesses, including Leasing and
Equipment Finance, Inventory
Finance, Gateway One Lending &
Finance and our national junior lien
mortgage business. We recognized
2014 was a very good year for us
several years ago that the banking
despite continued headwinds as
industry and regulatory environment
the economy showed little, if any,
in America were evolving. To
improvement until late in the year
compete, we needed to not only
and interest rates remained at
succeed in our footprint businesses,
historic lows. We earned net income
such as branch banking, retail
within our lending platforms, we
have a niche lending strategy which
allows our portfolio to be well
diversified by type of credit,
geography, industry, product and
collateral type. Finally, our core loan
sale capability allows us to reduce
risk by actively managing loan
concentrations as well as generating
gains on sales and servicing fees.
Given the growth of our national
lending platforms, investors, rating
agencies and regulators have all
expressed concern about the future
credit quality of these businesses.
We believe our experienced manage-
ment teams and effective risk
mitigation strategies within these
businesses provide for consistent
performance moving forward.
of $174.2 million, or 94 cents per
lending and commercial lending, but
We entered the inventory finance
share, up 14.8 percent and 14.6
we needed to be successful lending
business in 2008 and it is led by a
percent, respectively, from 2013.
nationally as well. As a result, we
management team that averages
Return on average tangible common
developed a unique mix of lending
over 30 years of experience specifi-
equity increased from 9.58 percent
platforms that have allowed us to
cally in this industry. Business is
to 10.08 percent during the year,
generate originations at an
generated through program
while tangible book value per share
extremely efficient level.
relationships with strong
4
4
manufacturers, primarily in the
sources of credit support, including
$74 thousand. These businesses had
powersports, lawn and garden,
the credit of the retailer, the value of
net charge-offs of only 0.10 percent
appliances and electronics, and
the collateral and the arrangements
in 2014 and are both run by very
marine industries. We finance the
with the manufacturers. In addition,
experienced management teams.
inventory shipped to the retail
credit risk is spread across more than
dealers of the manufacturers. Not
9,600 active dealers in all 50 states
only do we have the inventory as
and Canada.
Our legacy lending businesses,
commercial and retail lending, have
also added national lending
collateral, but we underwrite each
dealer’s credit and generally have
agreements with manufacturers to
reallocate repossessed inventory at
no loss to us. These loans turn very
quickly with an estimated weighted
average life of four months.
Auto financing, on the other hand, is
components in recent years. As part
a newer business which we have been
of our commercial business, we
in for three years. We acquired the
started TCF Capital Funding, an
business with a fully developed
asset-based and cash flow lending
origination and servicing platform, as
business, in 2012. Similar to our other
well as a seasoned management team
businesses, TCF Capital Funding is run
averaging 25 years of experience in
by a very experienced management
Inventory finance has been our best
auto finance. Net charge-offs in 2014
team, which we recruited as a group,
performing business in terms of
were 0.66 percent. As the portfolio is
and has seen no charge-offs since its
losses, even during the recession.
still maturing, losses may continue to
inception. Risks are mitigated by
Net charge-offs in 2014 were
slowly increase and are expected to
secured lending and diverse
0.04 percent while peak losses since
stabilize around 75 basis points. The
collateral types. While we are letting
the business began were 0.17 percent
biggest risks in the auto business are
our legacy first residential mortgage
in 2010. This is a high credit quality
a weak economy and falling auto
portfolio run off, we are originating
business because it has multiple
values. We mitigate these risks by
high-quality junior lien mortgages to
Loan & Lease Originations
Billions of Dollars
$13.5
$12.1
$10.8
$5.2
$5.5
selling our lower FICO originations
high FICO borrowers across the
and consistently underwriting with a
United States. Risks are mitigated
focus on all aspects of the transaction,
through the portfolio’s strong loan-
including credit, stability and ability
to-value and debt-to-income ratios as
to pay. The current average FICO of
well as quarterly loan sales to manage
the portfolio loans is 724.
concentration risk. This portfolio had
Our most seasoned national lending
business is Leasing and Equipment
Finance, which we have been in since
no net charge-offs in 2014, nearly no
delinquencies and a current average
FICO of 742.
10
11
12
13
14
1997 with the acquisition of Winthrop
In late 2014, we further mitigated the
Loan & Lease Portfolio
Billions of Dollars
$14.8
$14.2
$15.4
$15.8
$16.4
10
11
12
13
14
Consumer Real Estate and Other
Auto Finance
Commercial
Leasing and Equipment Finance
Inventory Finance
Resources Corporation, our high-tech
balance sheet credit risk of our legacy
leasing company. Winthrop, TCF’s
retail portfolio by selling $405.9
highest ROA business, is able to
million of consumer troubled debt
mitigate risk by financing business-
restructurings (“TDRs”) which
essential equipment through high
resulted in a $23.1 million pre-tax
credit quality borrowers. Our other
charge. We expect to recover this
leasing business, TCF Equipment
loss in less than three years through
Finance, is well diversified in select
reduced net charge-offs, lower
segments such as specialty vehicles,
expenses and increased margin
manufacturing, medical, construction
created by redeploying funds into
and technology. Together, these
higher yielding assets. We also
businesses are well diversified by
expect to see a quicker reduction
equipment type and geography
of non-performing assets moving
with an average loan size of just
forward as the TDR sale will help to
TCF Financial Corporation and Subsidiaries Net Charge-offs by Business
Percent
Consumer Real Estate
3.00%
Commerical
Leasing and Equipment Finance
Inventory Finance
Auto Finance
2.00%
1.00%
0.00%
2010
2011
2012
2013
2014
reduce inflows into non-performing
focus on strong enterprise risk
assets. Our remaining accruing
management, will carry us into
TDR consumer portfolio totaled
2015 and beyond.
5
In addition, 89 percent of our
deposits are FDIC-insured, making
them very sticky even in an economic
downturn. We have a track record
of being able to raise deposits as
needed to fund our ongoing loan and
lease originations.
For us to continue to attract high-
quality deposits, we must remain
competitive from a product and
service standpoint. We have made
several enhancements and will
continue to do so moving forward.
These have included image-enabled
ATMs, upgrades to our online and
mobile channels and participation in
Apple PayTM. We also began offering
first lien mortgages again in the
$111.9 million with reserves of
23 percent at December 31, 2014.
We created these TDRs by rewriting
mortgage loans at lower interest
rates for troubled borrowers, helping
to keep thousands of TCF customers
in their homes. This program, of
which we are very proud, was a huge
success benefiting both TCF and our
customers. This portfolio sale allows
us to diversify further away from our
legacy consumer real estate portfolio,
while providing a fresh start as we
move into 2015.
A Look Ahead
With the overhang of our legacy
branches on a correspondent basis.
consumer real estate portfolio
We are reviewing additional product
decreased due to the TDR sale,
and service opportunities, including
I am excited to begin 2015. A key
offering auto loans in the branches,
area where the TDR sale will help
credit cards, and additional online and
us in 2015 is through a reduction in
mobile upgrades. These efforts are
regulatory and operational costs.
aimed at creating new and enhanced
During the first quarter of 2014, we
touch points with customers to ensure
consolidated 46 underperforming
a long relationship with the bank.
branches to further improve
efficiencies as branch traffic has
slowed due to increased use of
online and mobile banking. Expense
efficiencies will continue to be a key
focus in 2015.
Banking regulation will continue
to be a focus in 2015. While it is
too early to predict the impact of
new rules, we have been proactive
in taking steps to align our products
with industry best practices. We
Executing on the investments we
We fund our asset growth primarily
were one of the first banks to adopt
have made in the business over the
with low-cost, core deposits. This is
deposit account disclosures based
past few years has brought the future
a key part of our strategy we expect
on the Pew Charitable Trust Model
into focus at TCF. We are no longer
to continue in 2015 and beyond.
and eliminated high-to-low sort
a bank which simply gathers
Average total deposits have
order years ago. In addition, the
deposits and makes loans in our
increased for 17 consecutive quarters
diversification of our revenue away
footprint. As we look ahead, we are
at TCF and had an average interest
from banking fees will help to
now a company that uses our
cost of just 0.26 percent in 2014. All
minimize the impact we see from
high-quality deposit base to fund
in all, the total cost for us to acquire
future regulatory changes related to
loan and lease originations not only
deposits is our fee income less
fees. With the increase in gains on
in our markets, but also through
interest and operating expenses,
loan sales and servicing revenue,
unique and diverse national lending
which was 1.71 percent in 2014, lower
banking fees made up just 53
platforms. This strategy, with a
than a five-year FHLB borrowing rate.
percent of total non-interest income
2014 Annual Report 6
“As we look ahead, we are
now a company that uses
our high-quality deposit
base to fund loan and
lease originations not only
in our markets, but also
through unique and diverse
national lending platforms.
This strategy, with a focus
on strong enterprise risk
management, will carry
us into 2015 and beyond.”
in 2014, down from 80 percent just
I also want to thank our Board of
five years ago.
Everyone is also anxiously waiting
to see what happens with interest
rates in 2015. We are well positioned
for a rising rate environment.
Approximately 80 percent of our
assets are variable/adjustable rate
Directors for their guidance over the
past year. I especially want to thank
Ray Barton who will retire from the
Board on April 22, 2015. Ray has
served on the Board since 2011 and
we appreciate the leadership he has
provided during his tenure.
or short/medium duration fixed rate.
Finally, I want to thank our employees
This means that a large portion of
for their hard work during another
our asset base will re-price as rates
challenging year. This is the group
rise. In addition, 64 percent of our
that makes our company great. I
deposits are low or no interest cost.
appreciate their dedication and
Our low-cost deposit base becomes
willingness to do whatever it takes
much more valuable in a rising rate
to put the customer first, as well as
environment. We believe we are set
their contributions in the community.
to become a more profitable bank
For example, I am proud to say that
through a higher net interest margin
TCF and its employees generously
when rates rise.
contributed over $3 million to
Finally, enterprise risk management
has been a key focus for us. This
function has grown significantly over
the past year and will continue to
grow as we move into 2015. The goal
charitable organizations in 2014. In
addition, we have been committed
to building a financially stronger
community through our financial
education program.
of enterprise risk management is to
I am very fortunate to have had the
ensure we are managing all risks of
opportunity to lead TCF for the last
the company, including credit risk, in
30 years. I have enjoyed working
a prudent and responsible manner,
closely with our Board of Directors,
especially given the ever-changing
employees, various constituents
regulatory landscape. I am very
and stockholders. I am proud of how
pleased with the enhancements
far we have come as a company,
we have made in this area.
especially through some very
In Closing
I want to thank Barry Winslow and
Earl Stratton who both announced
their retirements over the past year.
Barry joined TCF in 1987 and most
recently served as Vice Chairman of
Corporate Development. Earl joined
TCF in 1985 and most recently held
the role of Chief Operations Officer.
Both have played an extremely
influential role in TCF’s success over
challenging times. While it will be
difficult to walk away as CEO at the
end of the year, I am comforted by
the exceptionally strong manage-
ment team we have in place, the best
I’ve ever worked with. I look forward
to continuing to work with this group
as Chairman of the Board through
2017. The future is bright and in
focus for TCF.
the past 30 years. They are great
William A. Cooper
friends and will be missed.
Chairman and Chief Executive Officer
TCF Financial Corporation and Subsidiaries 2014 Annual Report
7
Investing in Technology and Service
TCF continues to make signifi cant investments to deliver even
better customer experiences in all of its lines of business.
From introducing new products and services to meet the
needs of retail banking customers to developing new
technology platforms to help our business customers manage
their inventories, TCF is focused on delivering a high quality
customer service experience. These enhancements provide
the opportunity to grow and expand customer relationships
and position us to increase the scale of our businesses.
Retail Bank Investments
In 2014, we invited customers to provide us with feedback
about their banking experience through MakeTCFBetter.com.
We received many helpful comments that identifi ed
opportunities to improve our products, services and processes
to be more convenient and transparent to our customers.
We introduced a new residential mortgage product in
TCF’s retail branches to provide a convenient and personal
approach to home fi nancing. We also improved our
technology platforms with upgrades to our mobile and
online banking applications, as well as signifi cant upgrades
to the way accounts are opened online. The new features in
all of these platforms deliver a better overall user experience
while providing the technology necessary to evolve our
online banking platforms with additional feature
enhancements in the future.
Responding to customers’ requests to provide convenient
banking whenever and wherever they want, we began
installing a fl eet of image-
enabled ATM machines that
simplify basic transaction
services on a 24/7 basis.
TCF implemented several upgrades and feature enhancements to its mobile
and online banking platforms in 2014.
TCF also renewed its commitment to quality customer
service. TCF retail banking employees participated in
new training programs focused on ensuring they have
the skills and tools they need to provide excellent service
with every interaction.
Investments in National Lending
We made a signifi cant investment in Gateway One’s loan
servicing system to expand our origination and servicing
capabilities, as well as improve scalability, functionality and
capacity. As the number of dealers served by Gateway One
continues to grow, it is critical we have the technology in
place to deliver timely information and effi ciently manage
the loan origination process.
These new ATMs feature
We also committed to harnessing technology to facilitate
envelope-free deposits for
more effi cient loan and lease processes in other areas of
both currency and checks
our business. Leveraging industry-leading technologies,
and provide a receipt image
Winthrop Resources introduced a new sales transaction
of the deposit made into a
process that simplifi ed workfl ows, improved the effi ciency
customer’s account. This
of our approval processes and established an electronic
improves the accuracy and
document management system. These enable Winthrop
convenience of conducting
to deliver a more seamless experience for customers while
basic transactions.
providing the scalability to grow with the business.
TCF is investing in new ATM technology
to improve the customer experience.
8
TCF Financial Corporation and Subsidiaries
TCF Vice Chairman Tom Jasper joined Minnesota Commissioner of Commerce Mike
Rothman and graduates of the TCF Financial Scholars Program from Eden Prairie High
School (MN) in testing their fi nancial IQ during Financial Literacy Awareness Month.
TCF Vice Chairman Tom Jasper joined Chicago Mayor Rahm Emanuel and
Cook County Board President Toni Preckwinkle in congratulating students
on their accomplishments through the One Summer Chicago Program.
Financial Education
Last year, TCF made the bold commitment to provide free
Expanding our Reach in Chicago
fi nancial education for both teens and adults through the
TCF Financial Learning Center and the TCF Financial Scholars
Program. These programs are examples of how we are
investing in our customers and employees, and improving
the quality of life in the communities we serve. In just the fi rst
In 2014, TCF was proud to extend its support for fi nancial
education in Chicago by supporting the TCF Financial
Scholars Program in the Chicago Public School system. This
greatly expands the reach of this valuable curriculum in the
2014–2015 school year to nearly 100 high schools in the city,
full year of these programs, more than 30,000 high school
encompassing more than 110,000 students.
students, customers and employees benefi ted from the
In addition, TCF was proud to bring the same curriculum
programs. Momentum continues to build for these programs
to nearly 6,500 teens participating in One Summer Chicago,
and TCF has set a long-term goal of reaching two million
a summer employment and internship opportunity provided
teens and adults.
Both the TCF Financial Scholars Program and the TCF Financial
Learning Center make use of the unique methodology
developed by EverFi, a leading education-technology
by civic organizations, nonprofi ts and corporations. In
addition to receiving critical job and life-skills training,
students in the program completed the Financial Scholars
Program as part of their summer experience.
company unaffi liated with TCF. The courses include video,
TCF Financial Learning Center for Adults
animations, gamifi cation and social networking to simplify
complex fi nancial concepts for teens and adults.
The TCF Financial Learning Center includes practical and
impartial fi nancial information that helps anyone manage
their money more effectively, make decisions that strengthen
TCF Financial Scholars Program for Students
their fi nancial future, and gain confi dence in their fi nancial
The TCF Financial Scholars Program is a teacher-led curriculum
knowledge. The eight essentials of fi nancial education are:
that includes six to eight hours of classroom instruction
• Savings and investments
combined with an interactive online learning platform
for high school students. TCF funds the Financial Scholars
• Mortgages
• Overdrafts
Program to make it available free to schools, many of which
• Payment types and credit cards
are mandated to teach fi nancial literacy but lack the funding
• Credit scores and reports
for a qualifi ed curriculum. In 2014, the TCF Financial Scholars
• Identity protection
Program was used in more than 340 local schools and school
• Insurance and taxes
districts in the communities TCF serves.
• Financing higher education
FORM 10-K
TCF Financial Corporation
For the fiscal year ended December 31, 2014
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(cid:1) Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2014
or
(cid:3) 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:
(Title of each class)
Common Stock (par value $.01 per share)
Depositary Shares, each representing a 1/1000th interest in a share of 7.50%
Series A Non-Cumulative Perpetual Preferred Stock
6.45% Series B Non-Cumulative Perpetual Preferred Stock
Warrants (expiring November 14, 2018)
(Name of each exchange on which registered)
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act.
Yes (cid:1)
No (cid:3)
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 (cid:3)
No (cid:1)
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 (cid:1)
No (cid:3)
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 (cid:1) No (cid:3)
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. (cid:3)
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 (cid:1)
Non-accelerated filer (cid:3) (Do not check if a smaller reporting company)
(cid:3)
Accelerated filer
Smaller reporting company (cid:3)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes (cid:3) No (cid:1)
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 $2,468,333,703.
As of February 17, 2015, there were 167,692,420 shares outstanding of the registrant’s common stock, par value $.01 per share,
its only outstanding class of common stock.
DOCUMENTS INCORPORATED BY REFERENCE
Specific portions of the Registrant’s definitive Proxy Statement for the 2015 Annual Meeting of Stockholders to be held on
April 22, 2015 are incorporated by reference into Part III hereof.
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.
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
Item 9.
Item 9A.
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
Item 9B.
Other Information
Part III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
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 Accountant Fees and Services
Part IV
Item 15.
Signatures
Index to Exhibits
Exhibits and Financial Statement Schedules
Page
1
6
13
13
13
13
14
17
18
48
51
51
52
57
102
103
103
104
105
106
106
107
107
107
107
108
109
110
Part I
Item 1. Business
General
TCF Financial Corporation (together with its subsidiaries, ‘‘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 Illinois, Minnesota,
Michigan, Colorado, Wisconsin, Arizona, South Dakota and Indiana (TCF’s primary banking markets). TCF delivers retail banking
products in over 40 states and commercial banking products mainly in TCF’s primary banking markets. TCF also conducts
commercial leasing and equipment finance business in all 50 states and, to a limited extent, in foreign countries; commercial
inventory finance business in all 50 states and Canada and, to a limited extent, in other foreign countries and indirect auto finance
business in all 50 states. TCF generated total revenue, defined as net interest income plus total non-interest income, of
$1.2 billion in the U.S. in each of 2014, 2013 and 2012. International revenue was $27.9 million, $25.3 million and $21.3 million in
2014, 2013 and 2012, respectively.
TCF had total assets of $19.4 billion as of December 31, 2014 and was the 45th largest publicly traded bank holding company in
the United States based on total assets at September 30, 2014. References herein to the ‘‘Holding Company’’ or ‘‘TCF Financial’’
refer to TCF Financial Corporation on an unconsolidated basis.
TCF provides convenient financial services through multiple channels in its primary banking markets. TCF has developed
products and services designed to meet the specific needs of the largest consumer segments in the market. The Company
focuses on attracting and retaining customers through service and convenience, including branches that are open seven days a
week in all markets 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 interest cost deposits. TCF’s growth strategies
include organic growth in existing businesses, development of new products and services, new customer acquisition through
electronic channels and acquisitions of portfolios or companies. New products and services are designed to build on existing
businesses and expand into complementary products and services through strategic initiatives. TCF continues to focus on asset
growth in its leasing and equipment finance, inventory finance and auto finance businesses funded through deposit generation,
as well as expanding its junior lien lending business.
TCF’s reportable segments are comprised of Lending, Funding and Support Services. Lending includes consumer real estate,
commercial real estate and business lending, leasing and equipment finance, inventory finance and auto finance. Funding
includes branch banking and treasury services, which includes the Company’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. See ‘‘Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
(‘‘Management’s Discussion and Analysis’’) – Results of Operations – Reportable Segment Results’’ and Note 22 of Notes to
Consolidated Financial Statements, Business Segments, for information regarding revenue, income and assets for each of TCF’s
reportable segments.
Lending
TCF’s lending strategy is to originate diversified portfolios of high credit quality, primarily secured, loans and leases.
Consumer Real Estate TCF makes consumer loans for personal, family or household purposes, such as home purchases, debt
consolidation and financing of home improvements. 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 very limited extent, unsecured
personal loans. Consumer loans are made on a fixed-term basis or as a revolving line of credit. Loans are originated for
investment and for sale to third party financial institutions. TCF does not have any consumer real estate subprime lending
programs. TCF continues to expand its junior lien lending business through the development of a national lending platform
focused on junior lien loans to high credit quality customers.
Commercial Real Estate and Business Lending Commercial real estate loans are loans originated by TCF that are secured by
commercial real estate, including multi-family housing, retail services, office buildings, warehouse and industrial buildings, health
care facilities and commercial real estate construction loans, mainly to borrowers based in its primary banking markets.
1
Commercial business loans are loans originated by TCF that are secured by various types of business assets including inventory,
receivables, equipment or financial instruments. In 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
continues to develop its capital funding business that began in 2012 specializing in secured, asset-backed and cash flow lending
to smaller middle-market companies in the U.S. Approximately 67% of TCF’s commercial business loans outstanding at
December 31, 2014 were to borrowers based in its primary banking markets.
Leasing and Equipment Finance TCF provides a broad range of comprehensive lease and equipment finance products
addressing the diverse financing needs of small to large companies in a growing number of select market segments including
specialty vehicles, manufacturing, construction, medical, golf cart and turf, and technology and data processing. TCF’s leasing
and equipment finance businesses, TCF Equipment Finance, a division of TCF Bank, and Winthrop Resources Corporation
(‘‘Winthrop’’), 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 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 essential business equipment such as computers, servers,
telecommunication equipment, medical equipment and other technology equipment.
Inventory Finance TCF Inventory Finance, Inc. (‘‘TCF Inventory Finance’’) originates commercial variable-rate loans which are
secured by the underlying floorplan equipment and supported by repurchase agreements from original equipment
manufacturers. The operation focuses on establishing relationships with distributors, dealer buying groups and manufacturers,
giving TCF access to thousands of independent retailers in the areas of powersports, lawn and garden, electronics and
appliances, recreational vehicles, marine and specialty vehicles. TCF Inventory Finance operates in all 50 states and Canada and,
to a limited extent, in other foreign countries. TCF Inventory Finance’s portfolio balances are impacted by seasonal shipments
and sales activities as dealers receive inventory shipments in anticipation of the upcoming selling season while carrying current
season product. 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(cid:4) and
Exmark(cid:4) brands with reliable, cost-effective sources of financing. TCF maintains a 55% ownership interest in Red Iron, with Toro
owning the other 45%.
Auto Finance On November 30, 2011, TCF entered the indirect auto lending market through 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 more than 10,500 franchised and independent dealers
in all 50 states. Loans are originated for investment and for sale. Gateway One’s business strategy is to maintain strong
relationships with key personnel at the dealerships. These relationships are a significant driver in generating volume and
executing a high-touch underwriting approach to minimize credit losses.
Funding
Branch Banking 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, 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 free checking
accounts, money market accounts, regular savings accounts, certificates of deposit and retirement savings plan accounts. TCF’s
marketing strategy emphasizes attracting deposits, primarily in checking accounts, savings accounts, money market accounts
and certificates of deposit. Such deposit accounts are a source of low cost funds and provide fee income, including banking fees
and service charges.
At December 31, 2014, TCF had 379 branches, consisting of 193 traditional branches, 178 supermarket branches and eight
campus branches. TCF operates 158 branches in Illinois, 99 in Minnesota, 53 in Michigan, 35 in Colorado, 24 in Wisconsin, seven
in Arizona, two in South Dakota and one in Indiana. Of its 178 supermarket branches, TCF had 118 branches in Jewel-Osco(cid:4)
stores at December 31, 2014. In March 2014, TCF consolidated 37 in-store branches in Illinois and nine in Minnesota as a result
of its retail banking system realignment that was announced in December 2013 to support its strategic initiatives. See
‘‘Item 1A. Risk Factors’’ for additional information regarding the risks related to TCF’s supermarket branch relationships.
Non-interest income is a significant source of revenue for TCF and an important factor in TCF’s results of operations. In recent
years, 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 branch 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 low-cost, convenient access to funds at local merchants and ATMs through its debit card programs. TCF’s debit card
2
programs are supported by interchange fees charged to retailers. Key drivers of banking fees and service charges are the number
of deposit accounts and related transaction activity.
Treasury Services Treasury Services’ primary responsibility is management of liquidity, capital, interest rate risk, and portfolio
investments and borrowings. Treasury Services has authority to invest in various types of liquid assets including, but not limited
to, 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. Treasury Services also
has the authority to enter into wholesale borrowing transactions which may be used to compensate for reductions in deposit
inflows or net deposit outflows, or to support lending, leasing and other expansion activities. These borrowings may include
Federal Home Loan Bank (‘‘FHLB’’) advances, brokered deposits, repurchase agreements, federal funds and other permitted
borrowings from creditworthy counterparties.
Information concerning TCF’s FHLB advances, repurchase agreements, federal funds and other borrowings is set forth in
‘‘Item 7. Management’s Discussion and Analysis – Consolidated Financial Condition Analysis – Borrowings’’ and in Note 10 and
Note 11 of Notes to Consolidated Financial Statements, Short-term Borrowings and Long-term Borrowings, respectively.
Support Services
Support Services consists of the Holding Company and corporate functions that provide data processing, bank operations and
other professional services to the operating segments.
Other Information
Activities of Subsidiaries of TCF 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 Bank’s
subsidiaries principally engage in leasing, inventory finance and auto finance activities. See ‘‘Lending’’ above for more
information.
Competition TCF competes with a number of depository institutions and financial service providers primarily based on price
and service and faces significant competition in attracting and retaining deposits and in lending activities. Direct competition for
deposits comes primarily from banks, savings institutions, credit unions and investment banks. Additional significant competition
for deposits comes from institutions selling money market mutual funds and corporate and government securities. TCF
competes for the origination of loans with banks, mortgage bankers, mortgage brokers, consumer and commercial finance
companies, credit unions, insurance companies and savings institutions. TCF also competes nationwide with other companies
and banks in the financing of equipment, inventory and automobiles, leasing of equipment and consumer real estate junior lien
loans. Expanded use of the internet has increased competition affecting TCF and its loan, lease and deposit products.
Employees As of December 31, 2014, TCF had 7,023 employees, including 1,622 part-time employees. TCF provides its
employees with comprehensive benefits, some of which are provided on a contributory basis, including medical and dental
plans, a 401(k) savings plan with a company matching contribution, life insurance and short- and long-term disability coverage.
Regulation
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 extensive regulation. Among other things, TCF Financial and TCF Bank are subject
to minimum capital requirements, lending and deposit restrictions and numerous other requirements. 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’’). TCF’s
consumer products are also regulated by the Consumer Financial Protection Bureau (‘‘CFPB’’).
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 as engaging in unsafe or unsound practices 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 and TCF
Bank were ‘‘well-capitalized’’ under the FDICIA capital standards as of December 31, 2014.
In July 2013, the Board of Governors of the Federal Reserve System, the OCC and FDIC approved final rules (the ‘‘Final Capital
Rules’’) implementing revised capital requirements to reflect the requirements of the Dodd-Frank Wall Street Reform and
3
Consumer Protection Act of 2010 (the ‘‘Dodd-Frank Act’’) and the Basel III international capital standards. Among other things,
the Final Capital Rules establish a new capital ratio of common equity Tier 1 capital of 4.5% and a common equity Tier 1 capital
conservation buffer of 2.5% of risk-weighted assets; increase the minimum ratio of Tier 1 capital ratio from 4% to 6% and include
a minimum leverage ratio of 4%; place an emphasis on common equity Tier 1 capital and change the risk weights assigned to
certain instruments. Failure to meet these standards would result in limitations on capital distributions as well as executive
bonuses. The Final Capital Rules became applicable to TCF on January 1, 2015 with conservation buffers phasing in over the
subsequent five years.
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 in determining 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 preferred and common stock, to pay TCF Financial’s obligations or to meet 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 requirements may be higher in the future than
existing minimum regulatory capital requirements. 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 applicable 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 undercapitalized subsidiary bank. In addition, the OCC may assess TCF Financial if
it believes the capital of TCF Bank has become impaired. If TCF Financial 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 and state law, merger and branch acquisition
transactions may be subject to certain restrictions, including 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 of January 1, 2013, the aggregate balance of a depositor’s deposit accounts are insured up to at
least the standard maximum deposit insurance amount of $250 thousand at each separately chartered FDIC-insured institution.
Under Section 331 of the Dodd-Frank Act, the FDIC insurance assessment base is defined as average total assets minus tangible
equity. 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 certain insured deposits to pay for the interest cost
of Financing Corporation bonds. The Financing Corporation assessment rate for 2014 was 62 cents for each $100 of deposits.
4
Financing Corporation assessments of $1.0 million, $1.1 million and $1.1 million were paid by TCF Bank in 2014, 2013 and 2012,
respectively.
The Dodd-Frank Act also gave the FDIC much greater discretion to manage the Deposit Insurance Fund (‘‘DIF’’). Among other
things, the Dodd-Frank Act: (1) raised the minimum designated reserve ratio (‘‘DRR’’) from 1.15% to 1.35% and removed the
upper limit on the DRR; (2) requires the DIF to reach 1.35% by September 30, 2020; (3) requires that in setting assessments the
FDIC offset the effect of the DRR reaching 1.35% by September 30, 2020, rather than 1.15% by the end of 2016, on insured
depository institutions with total consolidated assets of less than $10 billion; (4) eliminated the requirement that the FDIC pay
dividends from the fund when the DRR is between 1.35% and 1.5%; and (5) continued the FDIC’s authority to declare dividends
when the DRR at the end of a calendar year is at least 1.5%. On December 15, 2010, the FDIC set the DRR at 2.0% and it has not
changed since that time.
The Dodd-Frank Act requires that, for at least five years, the FDIC must make available to the public the reserve ratio using both
estimated insured deposits and the new assessment base. As of September 30, 2014, the DIF ratio calculated by the FDIC using
estimated insured deposits was 0.89%. The DIF reserve ratio would have been 0.41% using the new assessment base. In 2014,
for banks with at least $10 billion in total assets, the annual insurance premiums on bank deposits insured by the DIF ranged from
2.5 cents to 45 cents per $100 of deposits.
Examinations and Regulatory Sanctions TCF is subject to periodic examination by the Federal Reserve, the OCC, the CFPB
and the FDIC. 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 and lease
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. Various enforcement
remedies, including civil money penalties, may be assessed against an institution or an institution’s directors, officers,
employees, agents or independent contractors. Certain enforcement actions may not be publicly disclosed by TCF or its
regulatory authorities. Subsidiaries of TCF Bank are also 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, as amended, 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 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 authority to administer and carry out the purposes and objectives of the
federal consumer financial laws with respect to all consumer financial products and services. Among other things, the
Dodd-Frank Act: (i) directed the Federal Reserve to issue rules limiting debit-card interchange fees for larger banks, (ii) eliminated
federal preemption for subsidiaries of national banks and federal savings associations, and (iii) required larger banks to conduct
annual stress tests and report results.
Taxation
Federal Taxation TCF’s federal income tax returns are open and subject to examination for 2012 and later tax return years.
State Taxation TCF and/or its subsidiaries currently file tax returns in all states and local taxing jurisdictions which impose
corporate income, franchise or other taxes. 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.’’
Foreign Taxation TCF and/or its subsidiaries currently file tax returns in Canada and certain Canadian provinces which impose
corporate income taxes. 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 – Consolidated Income Statement Analysis – Income Taxes’’ and Note 1
and Note 12 of Notes to Consolidated Financial Statements, Summary of Significant Accounting Policies and Income Taxes,
respectively, for additional information regarding TCF’s income taxes.
Available Information
TCF’s website, www.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
5
Form 8-K, proxy statements, and amendments to those reports, as soon as reasonably practicable after electronic filing of such
material with, or furnishing it to, the SEC. TCF’s Compensation, Nominating, and Corporate Governance Committee and Audit
Committee charters, Corporate Governance Guidelines, Codes of Ethics and changes to Codes of Ethics and information on all of
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 EX0-01-G, Wayzata,
MN 55391-1693.
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 and political 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 foreign countries. 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, the ability of
TCF to sell or securitize loans, the stability of its deposit funding sources and sales revenue at the end of contractual lease terms.
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 automobiles or 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
automobile and equipment values for automobiles and equipment already in service. Adverse economic conditions may also
hinder TCF from expanding the inventory or auto finance businesses by limiting its ability to attract and retain manufacturers and
dealers as expected. Any such difficulties in TCF’s leasing and equipment, inventory and auto finance businesses could have a
material adverse effect on its 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 attract or retain 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 or prolonged
change in market interest rates could have a material adverse effect on its 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 the ability of TCF Bank and its subsidiaries to lend and its liquidity and competitive position, increase its borrowing costs,
limit its access to the capital markets 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.
TCF Financial relies on dividends from TCF Bank for most of its liquidity.
TCF Financial is a separate and distinct legal entity from its banking and other subsidiaries. TCF Financial’s liquidity comes
principally from dividends from TCF Bank. These dividends, which are limited by various federal and state regulations, are the
principal source of funds to pay dividends on its preferred and common stock and to meet its other cash needs. In the event TCF
Bank is unable to pay dividends to it, TCF Financial may not be able to pay dividends or other obligations, which would have a
material adverse effect on TCF’s financial condition and results of operations.
6
Competition for growth in deposits and evolving payment system developments 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. Industry developments involving payment
system changes could also impose additional costs. 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.
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 or a counterparty. 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 if 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 relies on its systems and counterparties, including reliance on other companies for the provision of key
components of its business infrastructure, 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. 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 inadequate or interrupted
service, could adversely affect TCF’s ability to process, record or monitor transactions, or 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. If any of TCF’s financial, accounting or other data processing systems fail or if personal information of TCF’s customers
or clients were mishandled or misused (whether by employees or counterparties), 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.
TCF faces cyber-security and other external risks, including ‘‘denial of service,’’ ‘‘hacking’’ and ‘‘identity theft,’’ that
could adversely affect TCF’s reputation and could have a material adverse effect on TCF’s financial condition and
results of operations.
TCF’s computer systems and network infrastructure present security risks, and could be susceptible to cyber-attacks, such as
denial of service attacks, hacking, terrorist activities or identity theft. Hacking and identity theft risks, in particular, could cause
serious financial and reputational harm. Cyber threats are rapidly evolving and TCF may not be able to anticipate or prevent all
such attacks. While TCF does not believe it has experienced a material cyber-security breach, TCF experiences periodic threats
to its data and systems, including malware and computer virus attacks, attempted unauthorized access of accounts, and
attempts to disrupt its systems. TCF may incur increasing costs in an effort to minimize these risks, could be held liable for, and
could suffer reputational damage as a result of, any security breach or loss.
In addition, there have been increasingly sophisticated and large-scale efforts on the part of third parties to breach data security
with respect to financial transactions, including by intercepting account information at locations where customers make
purchases, as well as through the use of social engineering schemes such as ‘‘phishing.’’ For example, large retailers such as
Target Corporation, Home Depot, SUPERVALU Inc. and Neiman Marcus Group LTD LLC reported data breaches resulting in the
loss of customer information. In the event that third parties are able to misappropriate financial information of TCF’s customers,
even if such breaches take place due to weaknesses in other parties’ internal data security procedures, TCF could suffer
reputational or financial losses which could have a material adverse effect on its financial condition and results of operations.
7
The success of TCF’s supermarket branches depends on the continued long-term success and viability of TCF’s
supermarket partners, TCF’s ability to maintain licenses or lease agreements for its supermarket locations and
customer preferences.
A significant financial decline or change in ownership involving one of TCF’s supermarket partners, including SUPERVALU Inc. or
Jewel-Osco, could result in the loss of supermarket branches or could increase costs to operate the supermarket branches. At
December 31, 2014, TCF had 178 supermarket branches. Supermarket banking continues to play an important role in TCF’s
deposit account strategy. 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,
financial or labor difficulties in the supermarket industry, or a decrease in customer utilization of traditional bank branches may
reduce activity in TCF’s supermarket branches. Any of these could have a material adverse effect on TCF’s 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.
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 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 highly depend, 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.
TCF’s remedies may not fully satisfy the obligations owed to TCF upon default by a borrower. TCF maintains an allowance for
loan and lease losses, which is a reserve established through a provision for loan and lease losses charged to expense, which
represents management’s best estimate of probable credit losses that will be incurred within the existing portfolio of loans and
leases. The level of the allowance for loan and lease losses reflects management’s continuing evaluation of industry
concentrations, specific credit risks, loan and lease loss experience, current loan and lease portfolio quality, present economic,
political and regulatory conditions and unidentified losses in the current loan and lease portfolio. The determination of the
appropriate level of the allowance for loan and lease 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 and leases, identification
of additional problem loans and leases and other factors may require an increase in the allowance for loan and lease losses. In
addition, bank regulatory agencies periodically review TCF’s allowance for loan and lease losses and may require an increase in
the provision for loan and lease losses or the recognition of additional loan and lease charge-offs, based on judgments different
than those of management. An increase in the allowance for loan and lease 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.
8
TCF is subject to extensive government regulation and supervision.
TCF Financial, 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 bank customers, depositors’ funds, federal deposit insurance
funds and the banking system as a whole, not stockholders. These regulations affect TCF’s revenues, lending practices, capital
structure, investment practices, dividend policy and growth, among other things. Congress and federal regulatory agencies
continually review banking laws, regulations and policies for possible changes. Many new banking rules are issued with limited
interpretive guidance. Changes to statutes, regulations or regulatory policies, including changes in interpretation or enforcement
of such statutes, regulations or policies, could affect TCF in substantial and unpredictable ways. In recent years there has been
an increase in the frequency of enforcement actions brought by regulatory agencies, such as the CFPB, dealing with matters
such as indirect auto lending, fair lending, account fees, loan servicing and other products and services provided to customers.
Changes in regulations, regulatory policies and enforcement activity could subject TCF to reduced revenues, additional costs,
limits on the types of financial services and products it may offer or increased competition from non-banks offering competing
financial services and products, among other things. While TCF has policies and procedures designed to prevent violations of the
extensive federal and state regulations 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’’), the Bank Secrecy Act and similar laws require financial institutions to develop programs to prevent
them 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. Several financial institutions,
including TCF, have received sanctions and some have incurred large fines for non-compliance. Violations of these regulations
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. For
example, a tightening of the money supply by the Federal Reserve could increase unemployment or 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.
Legislative and regulatory initiatives have substantially increased compliance burdens in recent years, 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, and uncertainty remains as to many aspects of its ultimate impact.
This 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.
The CFPB has examination and enforcement authority over TCF Bank and its subsidiaries, and 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 make 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. Uncertainties remain concerning
how the term ‘‘abusive’’ will be enforced.
9
It is highly likely that banks and bank holding companies will continue to be subject to significantly increased regulation and
compliance obligations that expose TCF to risk and consequences of noncompliance, which 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 legal and compliance,
operational, reputational, strategic and market risk such as credit, interest rate, liquidity and foreign currency 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.
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.
The Company may be subject to certain risks related to originating and selling loans.
When loans are sold or securitized, it is customary to make representations and warranties to the purchaser or investors about
the loans and the manner in which they were originated. These agreements generally require the repurchase or substitution of
loans in the event TCF breaches any of these representations or warranties. In addition, there may be a requirement to
repurchase loans as a result of borrower fraud or in the event of early payment default of the borrower on a loan. TCF has not
received a significant number of repurchase and indemnity demands from purchasers, and such demands have typically resulted
from borrower fraud and early payment default of the borrower on loans. A material increase in repurchase and indemnity
demands could have a material adverse effect on TCF’s financial condition and results of operations.
TCF retains interest-only strips in connection with certain of its loan sales. The interest-only strip is recorded at fair value at the
time of sale, which represents the present value of future cash flows generated by the loans to be retained by TCF. The value of
these interest-only strips may be affected by factors such as changes in the behavior patterns of customers (including defaults
and prepayments), changes in the strength of the economy and developments in the interest rate markets; therefore, actual
performance may differ from TCF’s expectations. The impact of such factors could have a material adverse effect on the value of
these interest-only strips and on TCF’s financial condition and results of operations.
In addition, TCF relies on the sale and securitization of loans to generate earnings and manage its liquidity and capital levels, as
well as geographical and product diversity in its loan portfolio. For example, TCF sold $2.7 billion of loans from its auto and
consumer real estate businesses for a pre-tax gain of $78.8 million in 2014 including its inaugural consumer auto loan
securitization of $256.3 million of loans during the third quarter of 2014 for a pre-tax gain of $7.4 million. Disruptions in the
financial markets, changes to regulations that reduce the attractiveness of such loans to purchasers of the loans, or a decrease in
the willingness of purchasers to purchase loans in general, or from TCF, could require TCF to decrease its lending activities or
retain a greater portion of the loans it originates. Although retaining, rather than selling, loans would generate additional interest
income, it would result in a decrease in the gains recognized on the sale of loans, could result in decreased liquidity, and could
result in increased credit risk as TCF’s loan portfolio increased in size from loans it originated but had otherwise planned to sell.
As a result, any of these developments 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
10
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.
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 qualified replacements. 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.
TCF’s internal controls may be ineffective.
Management regularly reviews and updates TCF’s 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.
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 employees and 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 such conduct. Because TCF conducts most of its businesses under the ‘‘TCF’’ brand, negative public opinion about
one business could affect all of TCF’s businesses.
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. Acquiring other banks, businesses or branches involves various
risks, 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 TCF or the target company; and potential
changes in banking or tax laws or regulations that may affect the target company, any of which 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 previously 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 loss of lower-cost deposits as a source of funds could
have a material adverse effect on TCF’s financial condition and results of operations.
11
Changes in accounting policies or in accounting standards could materially affect how TCF reports its financial
condition and results of operations.
TCF’s accounting policies are fundamental to the understanding of 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 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 it restating prior period financial statements in material amounts.
TCF is subject to examinations and challenges by tax authorities.
TCF is subject to federal, state, and foreign 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 taxing authorities,
regarding its tax positions. 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. These challenges 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 TCF’s financial condition and results of
operations.
Significant legal actions could subject TCF to substantial uninsured liabilities.
TCF can be subject to claims and legal actions related to its operations. These claims and legal actions, including supervisory or
enforcement actions by TCF’s regulators and other government authorities or private litigation, could result in large monetary
awards or penalties, as well as significant defense costs. While TCF maintains insurance coverage in amounts and with
deductibles that it believes are appropriate for its operations, such insurance does not cover all types of liability, and 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 TCF’s sale or servicing of its loan, lease and deposit
products. Whether or not such claims and legal action have merit, they 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.
In particular, the financial services industry has increasingly been targeted by lawsuits alleging infringement of patent rights,
often from patent holding companies seeking to monetize patents they have purchased or otherwise obtained. Regardless of the
scope or validity of such patents or other intellectual property rights, or the merits of any claims by potential or actual litigants, the
Company may have to engage in protracted and costly litigation which may be time consuming and disruptive to TCF’s
operations and management. If the Company is found to infringe one or more patents or other intellectual property rights, it may
be required to pay substantial damages or royalties to a third-party, or it may be subject to a temporary or permanent injunction
prohibiting the Company from utilizing certain technologies.
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
12
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.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Offices TCF owns its headquarters offices in Wayzata, Minnesota. Other operations facilities, located in Minnesota, Illinois,
California, and South Dakota, are either owned or leased. These facilities are utilized by the Lending segment and all but the
location in California are utilized by the Funding segment. The facility in Minnesota is also utilized by the Support Services
segment. At December 31, 2014, TCF owned the buildings and land for 147 of its bank branch offices, owned the buildings but
leased the land for 27 of its bank branch offices and leased or licensed the remaining 205 bank branch offices, all of which are
functional and appropriately maintained and are utilized by both the Lending and Funding segments. These branch offices are
located in Illinois, Minnesota, Michigan, Colorado, Wisconsin, Arizona, South Dakota and Indiana. For more information on
premises and equipment, see Note 7 of Notes to Consolidated Financial Statements, Premises and Equipment.
Item 3. Legal Proceedings
From time to time, TCF is a party to legal proceedings arising out of its lending, leasing and deposit operations, including
foreclosure proceedings and other collection actions as part of its lending and leasing collections activities. TCF may also be
subject to enforcement actions brought by federal regulators, including the SEC, the Federal Reserve, the OCC and the CFPB.
From time to time, borrowers and other customers, and employees and former employees, have also brought actions against
TCF, in some cases claiming substantial damages. TCF and other financial services companies are subject to the risk of class
action litigation. 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 failures related to regulatory compliance.
Item 4. Mine Safety Disclosures
Not applicable.
13
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 TCF
common stock on the New York Stock Exchange Composite Tape, as reported by Bloomberg.
As of February 17, 2015, there were 5,913 holders of record of TCF’s common stock.
2014:
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
2013:
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
High
Low
Dividends
Declared
$16.12
16.95
17.30
17.39
$16.46
16.68
15.32
15.04
$13.95
15.12
15.01
15.31
$14.29
13.69
13.49
12.39
$0.05
0.05
0.05
0.05
$0.05
0.05
0.05
0.05
The Board of Directors of TCF Financial and TCF Bank have each adopted a Capital Planning Policy 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 preferred 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 preferred and 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. Also,
dividends for the current dividend period on all outstanding shares of preferred stock must be declared and paid or declared and a
sum sufficient for the payment thereof must be set aside before any dividend may be declared or paid on TCF’s common stock.
In general, TCF Bank may not declare or pay a dividend to TCF Financial 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 preferred and common stock. In addition, the ability of TCF Financial and TCF Bank to pay
dividends depends on regulatory policies and capital requirements and may be subject to regulatory approval. See
‘‘Item 1. Business – Regulation – Regulatory Capital Requirements’’, ‘‘Item 1. Business – Regulation – Restrictions on
Distributions’’ and Note 14 of Notes to Consolidated Financial Statements, Regulatory Capital Requirements.
14
Total Return Performance
The following chart compares the cumulative total stockholder return on TCF common stock over the last five fiscal years with
the cumulative total return of the Standard and Poor’s (‘‘S&P’’) 500 Stock Index, the SNL U.S. Bank and Thrift Index and a
TCF-selected group of peer institutions (assuming the investment of $100 in each index on December 31, 2009 and
reinvestment of all dividends). The TCF Peer Group consists of the publicly-traded banks and thrifts with total assets ranging from
$10 billion to $50 billion as of September 30, 2013.
TCF Total Stock Return Performance Chart
TCF Financial Corporation
SNL Bank and Thrift (1)
S&P 500 Index
TCF Peer Group (2)
225
200
175
150
125
100
75
e
u
l
a
V
x
e
d
n
I
50
12/31/09
12/31/10
12/31/11
12/31/12
12/31/13
12FEB201504432999
12/31/14
Index
TCF Financial Corporation
SNL Bank and Thrift(1)
S&P 500 Index
TCF Peer Group(2)
Year Ended December 31,
2009
$100.00
100.00
100.00
100.00
2010
$110.16
111.64
115.06
111.38
2011
$ 77.91
86.81
117.49
94.98
2012
$ 93.44
116.57
136.30
108.02
2013
$126.68
159.61
180.44
151.86
2014
$125.46
178.18
205.14
155.65
(1) Includes all major exchange (NYSE, NYSE MKT, NASDAQ) banks and thrifts in SNL’s coverage universe (445 companies as of December 31,
2014).
(2) The TCF Peer Group consists of publicly-traded banks and thrifts with total assets ranging from $10 billion to $50 billion as of September 30,
2013, including: New York Community Bancorp, Inc.; First Republic Bank; Hudson City Bancorp, Inc.; First Niagara Financial Group, Inc.;
Popular, Inc.; People’s United Financial, Inc.; City National Corporation; BOK Financial Corporation; Synovus Financial Corp.; East West
Bancorp, Inc.; First Horizon National Corporation; FirstMerit Corporation; SVB Financial Group; Associated Banc-Corp; Cullen/Frost
Bankers, Inc.; Commerce Bancshares, Inc.; First Citizens BancShares, Inc.; Signature Bank; Webster Financial Corporation; Hancock Holding
Company; Susquehanna Bancshares, Inc.; Wintrust Financial Corporation; EverBank Financial Corp; Fulton Financial Corporation; UMB
Financial Corporation; Prosperity Bancshares, Inc.; Astoria Financial Corporation; First National of Nebraska, Inc.; Valley National Bancorp;
BankUnited, Inc.; PrivateBancorp, Inc.; Bank of Hawaii Corporation; Investors Bancorp, Inc.; IBERIABANK Corporation; Washington
Federal, Inc.; BancorpSouth, Inc.; F.N.B. Corporation; First BanCorp.; International Bancshares Corporation; Flagstar Bancorp, Inc.; Trustmark
Corporation; Umpqua Holdings Corporation; TFS Financial Corporation; Cathay General Bancorp; Texas Capital Bancshares, Inc.; and Central
Bancompany, Inc.
15
Repurchases of TCF Stock
The following table summarizes share repurchase activity for the quarter ended December 31, 2014.
October 1 to October 31, 2014:
Share repurchase program(1)
Employee transactions(2)
November 1 to November 30, 2014:
Share repurchase program(1)
Employee transactions(2)
December 1 to December 31, 2014:
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
–
4,603
$
–
15.43
–
–
–
–
–
–
–
–
–
4,603
$
–
15.43
Total
Maximum
Number of Shares Number of Shares
that May Yet
be Purchased
Under the Plan
Purchased as
Part of Publicly
Announced Plan
–
N.A.
–
N.A.
–
N.A.
–
N.A.
5,384,130
N.A.
5,384,130
N.A.
5,384,130
N.A.
5,384,130
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. TCF has not repurchased shares since October 2007. Future repurchases will be based upon capital levels,
growth expectations and market opportunities and may be subject to regulatory approval. The ability to repurchase shares in the future may be
adversely affected by new legislation or regulations or by changes in regulatory policies. This authorization does not have an expiration date.
(2) Represents restricted stock 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 stock. 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.
16
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. Historical data is not necessarily indicative of TCF’s future results of operations or financial
condition. See ‘‘Item 1A. Risk Factors.’’
Five Year Financial Summary
(Dollars in thousands, except per-share data)
2014
2013
2012
2011
2010
At or For the Year Ended December 31,
Consolidated Income:
Net interest income
Fees and other revenue
Gains (losses) on securities, net
Total revenue
Provision for credit losses
Non-interest expense
Loss on termination of debt
Income (loss) before income tax expense (benefit)
Income tax expense (benefit)
Income attributable to non-controlling interest
Net income (loss) attributable to TCF Financial Corporation
Preferred stock dividends
Net income (loss) available to common stockholders
Per common share:
Basic earnings (loss)
Diluted earnings (loss)
Dividends declared
Consolidated Financial Condition:
Loans and leases
Total assets
Deposits
Borrowings
Total equity
Book value per common share
Financial Ratios:
Return on average assets
Return on average common equity
Net interest margin(1)
Average total equity to average assets
Dividend payout ratio
Credit Quality Ratios:
$
815,629 $
432,240
1,027
802,624 $
403,094
964
780,019 $
388,191
102,232
699,688 $
437,171
7,263
699,202
508,862
29,123
1,248,896
95,737
871,777
–
281,382
99,766
7,429
174,187
19,388
1,206,682
118,368
845,269
–
243,045
84,345
7,032
151,668
19,065
1,270,442
247,443
811,819
550,735
(339,555)
(132,858)
6,187
(212,884)
5,606
1,144,122
200,843
764,451
–
178,828
64,441
4,993
109,394
–
1,237,187
236,437
756,335
–
244,415
90,171
3,297
150,947
–
154,799 $
132,603 $
(218,490) $
109,394 $
150,947
0.95 $
0.94 $
0.20 $
0.82 $
0.82 $
0.20 $
(1.37) $
(1.37) $
0.20 $
0.71 $
0.71 $
0.20 $
1.08
1.08
0.20
$
$
$
$
$16,401,646 $15,846,939 $15,425,724 $14,150,255 $14,788,304
18,465,025
18,225,917
11,585,115
14,050,786
4,985,611
1,933,815
1,471,663
1,876,643
10.30
9.79
19,394,611
15,449,882
1,236,490
2,135,364
11.10
18,379,840
14,432,776
1,488,243
1,964,759
10.23
18,979,388
12,202,004
4,388,080
1,878,627
11.65
0.96%
8.71
4.61
10.89
21.28
0.87%
8.12
4.68
10.46
24.30
(1.14)%
(13.33)
4.65
9.66
(14.60)
0.61%
6.32
3.99
9.24
28.10
0.85%
10.67
4.15
7.83
18.52
Non-accrual loans and leases to total loans and leases
Non-accrual loans and leases and other real estate owned to
total loans and leases and other real estate owned
Allowance for loan and lease losses to total loans and leases
Net charge-offs as a percentage of average loans and leases
1.32%
1.75%
2.46%
2.11%
2.33%
1.71
1.00
0.49
2.17
1.59
0.81
3.07
1.73
1.54
3.03
1.81
1.45
3.26
1.80
1.47
(1) Net interest income divided by average interest-earning assets.
17
Item 7. Management’s Discussion and Analysis of Financial Condition
and Results of Operations
Table of Contents
Description
Overview
Results of Operations
Performance Summary
Reportable 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 Held to Maturity and Securities Available for Sale
Loans and Leases
Credit Quality
Other Real Estate Owned and Repossessed and Returned Assets
Liquidity Management
Deposits
Borrowings
Contractual Obligations and Commitments
Capital Management
Critical Accounting Policies
Recent Accounting Developments
Legislative and Regulatory Developments
Forward-Looking Information
Page
19
19
19
20
21
21
25
26
27
28
28
28
29
32
40
40
41
41
42
42
44
44
46
46
18
Management’s discussion and analysis of the consolidated financial condition and results of operations of TCF Financial
Corporation should be read in conjunction with ‘‘Part I, Item 1A. Risk Factors,’’ ‘‘Item 6. Selected Financial Data’’ and ‘‘Item 8.
Consolidated Financial Statements.’’
Overview
TCF Financial Corporation, a Delaware corporation (‘‘we,’’ ‘‘us,’’ ‘‘our,’’ ‘‘TCF,’’ or the ‘‘Company’’), is a national bank holding
company based in Wayzata, Minnesota. Unless otherwise indicated, references herein to ‘‘TCF’’ include its direct and indirect
subsidiaries. Its principal subsidiary, TCF National Bank (‘‘TCF Bank’’), is headquartered in South Dakota. References herein to
‘‘TCF Financial’’ refer to TCF Financial Corporation on an unconsolidated basis. At December 31, 2014, TCF had 379 branches in
Illinois, Minnesota, Michigan, Colorado, Wisconsin, Arizona, South Dakota and Indiana (TCF’s primary banking markets).
TCF provides convenient financial services through multiple channels in its primary banking markets. TCF has developed
products and services designed to meet the specific needs of the largest consumer segments in the market. The Company
focuses on attracting and retaining customers through service and convenience, including branches that are open seven days a
week in all markets 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 interest cost deposits. TCF’s growth strategies
include organic growth in existing businesses, development of new products and services, new customer acquisition through
electronic channels and acquisitions of portfolios or companies. New products and services are designed to build on existing
businesses and expand into complementary products and services through strategic initiatives. TCF continues to focus on asset
growth in its leasing and equipment finance, inventory finance and auto finance businesses funded through deposit generation,
as well as expanding its junior lien lending business.
Net interest income, the difference between interest income earned on loans and leases, securities, investments and other
interest-earning assets and interest paid on deposits and borrowings, represented 65.3%, 66.5% and 61.4% of TCF’s total
revenue in 2014, 2013 and 2012, respectively. 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 a management Asset & Liability Committee and through related interest-rate risk monitoring and management policies.
See ‘‘Part I, Item 1A. Risk Factors’’ and ‘‘Part II, 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 component of TCF’s results of operations.
Increasing fee and service charge revenue has been challenging as a result of changing customer behavior and the impact of
changes in regulations. Providing a wide range of retail banking services is an integral component of TCF’s business philosophy
and a major strategy for generating non-interest income. Key drivers of bank fees and service charges are the number of deposit
accounts and related transaction activity. In addition, as an effort to diversify TCF’s non-interest income sources, the Company
continues to increase loan sales, primarily in auto finance and consumer real estate, to generate gains on sales as well as
increase servicing fee income through the growth of loans sold with servicing retained by TCF.
The following portions of this Management’s Discussion and Analysis of Financial Condition and Results of Operations
(‘‘Management’s Discussion and Analysis’’) focus in more detail on the results of operations for 2014, 2013 and 2012 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 94 cents for 2014, compared with diluted
earnings per common share of 82 cents for 2013 and diluted loss per common share of $1.37 for 2012. TCF reported net income
of $174.2 million for 2014, compared with net income of $151.7 million for 2013 and a net loss of $212.9 million for 2012. TCF’s
2012 net loss included a non-recurring after-tax charge of $295.8 million, or $1.87 per common share, related to the repositioning
of TCF’s balance sheet completed in the first quarter of 2012.
Return on average assets was 0.96% for 2014, compared with 0.87% for 2013 and a negative return of 1.14% for 2012. Return
on average common equity was 8.71% for 2014, compared with 8.12% for 2013 and a negative return of 13.33% for 2012. The
negative returns on average assets and average common equity for 2012 were due to the balance sheet repositioning discussed
above.
19
Reportable Segment Results
Lending TCF’s lending strategy is primarily to originate high credit quality secured loans and leases for investment and for sale.
The lending portfolio consists of consumer real estate, commercial real estate and business lending, leasing and equipment
finance, inventory finance and auto finance. Lending’s disciplined portfolio growth generates earning assets and, along with its
fee generating capabilities, produces a significant portion of the Company’s revenue and net income. Lending generated net
income available to common stockholders of $174.7 million for 2014, compared with $136.2 million and $30.9 million for 2013
and 2012, respectively.
Lending net interest income totaled $592.4 million for 2014, an increase of 4.2% from $568.3 million for 2013, which increased
8.4% from $524.4 million for 2012. The increase in 2014 was primarily driven by higher average loan and lease balances in the
auto finance, leasing and equipment finance and inventory finance businesses. This was partially offset by margin reduction
resulting from the competitive low interest rate environment and reduced interest income due to lower consumer real estate
loan average balances resulting from continued run-off of the first mortgage lien portfolio, as well as a shift in commercial real
estate from higher yielding fixed-rate loans to lower yielding variable rate loans due to marketplace demand.The increase in 2013
was primarily due to higher average balances driven by continued growth in the auto finance and inventory finance businesses,
partially offset by downward pressure on yields across the lending businesses due to the low-interest rate environment.
Lending provision for credit losses totaled $92.8 million for 2014, a decrease of 19.6% from $115.4 million for 2013, which
decreased 53.0% from $245.4 million for 2012. The decrease in provision expense in 2014 was primarily due to decreased net
charge-offs in the consumer real estate and commercial portfolios. This decrease was partially offset by additional provision
expense related to the sale of consumer real estate troubled debt restructuring (‘‘TDR’’) loans and an increase in provision for
credit losses in the auto finance portfolio due to growth coupled with maturation of prior years’ originations. The decrease in net
charge-offs in the consumer real estate portfolio is primarily due to the improving economy, as incidents of default decrease and
home values increase. The decrease in net charge-offs in the commercial portfolio is primarily due to improved credit quality and
continued efforts to actively work out problem loans. The decrease in 2013 was primarily due to a decrease in net charge-offs in
the consumer real estate portfolio resulting from improved home values and a reduction in incidents of default, decreased net
charge-offs in the commercial portfolio due to improved credit quality and continued efforts to actively work out problem loans
and the impact of clarifying bankruptcy-related regulatory guidance related to consumer loans adopted in 2012. See
‘‘Consolidated Income Statement Analysis – Provision for Credit Losses’’ in this Management’s Discussion and Analysis for
further discussion.
Lending non-interest income totaled $211.2 million for 2014, an increase of 25.4% from $168.4 million for 2013, which increased
21.6% from $138.5 million for 2012. The increases were primarily due to increases in gains on sales of auto loans and consumer
real estate loans, along with increased servicing fee income due to an increase in loans serviced for others. Total loans and leases
serviced for others was $3.4 billion as of December 31, 2014, compared to $2.0 billion and $1.0 billion as of December 31, 2013
and 2012, respectively. See ‘‘Consolidated Income Statement Analysis – Non-Interest Income’’ in this Management’s Discussion
and Analysis for further discussion.
Lending non-interest expense totaled $426.3 million for 2014, an increase of 6.2% from $401.3 million for 2013, which increased
9.3% from $367.2 million for 2012. The increase in 2014 was primarily due to increased staff levels to support the continued
growth of the auto finance business and expenses related to higher commissions and performance incentives based on
production results, partially offset by a decrease in foreclosed real estate and repossessed assets expense, net due to increased
gains on the sales of foreclosed properties and lower write-downs on existing foreclosed properties due to improved property
values. The increase in 2013 was primarily due to increased staff levels to support the growth of the auto finance business and
expenses related to higher commissions based on production results and performance incentives, partially offset by reduced
expenses related to fewer foreclosed consumer properties and a reduction in write-downs in balances of existing foreclosed real
estate properties as a result of improved real estate values.
Funding TCF’s funding is primarily derived from branch banking and wholesale borrowings, with a focus on building and
maintaining quality customer relationships. Deposits are generated from consumers and small businesses providing a source of
low cost funds and fee income. Borrowings may be used to offset reductions in deposits or to support lending activities. Funding
reported net income available to common stockholders of $6.1 million for 2014, compared with net income available to common
stockholders of $17.3 million and a net loss available to common stockholders of $239.3 million for 2013 and 2012, respectively.
Funding net interest income totaled $226.3 million for 2014, a decrease of 4.6% from $237.3 million for 2013, which decreased
8.1% from $258.3 million for 2012. The decrease in 2014 was primarily due to a reduction in interest income as a result of lower
balances of mortgage-backed securities, partially offset by the reduced cost of borrowings. The decrease in 2013 was primarily
due to a reduction in interest income as a result of lower balances of mortgage-backed securities.
20
Funding non-interest income totaled $220.6 million for 2014, a decrease of 6.2% from $235.2 million for 2013, which decreased
30.6% from $338.9 million for 2012. The decrease in 2014 was primarily due to a reduction in fees and service charges due to
customer behavior changes and higher average checking account balances per customer. The decrease in 2013 was primarily
due to higher gains on sales of securities during 2012 related to the balance sheet repositioning, lower transaction activity and
higher average checking account balances per customer, partially offset by a larger account base.
Funding non-interest expense totaled $434.1 million for 2014, a decrease of 1.9% from $442.6 million for 2013, which decreased
54.4% from $969.8 million for 2012. The decrease in 2014 was primarily due to the branch realignment which resulted in a
pre-tax charge of $8.9 million in the fourth quarter of 2013. The decrease in 2013 was primarily due to the loss on termination of
debt in connection with the balance sheet repositioning completed in the first quarter of 2012.
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 65.3% of
TCF’s total revenue for 2014, compared with 66.5% for 2013 and 61.4% for 2012. 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 both non-interest bearing deposits and
interest-bearing liabilities, the level of non-accrual loans and leases and other real estate owned and the impact of modified loans
and leases.
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.
Year Ended December 31,
2014
2013
Change
Average
Balance
Interest
Yields
and
Rates
Average
Balance
Yields
and
Interest Rates
Average
Balance
Interest
Yields and
Rates
(bps)
$
586,803 $ 15,390
5,281
197,943
11,994
447,016
21,128
259,186
2.62% $
2.67
2.68
8.15
768,180 $ 15,041
277
18,074
11,647
6,737
648,630
155,337
1.96% $(181,377) $
4.11
2.79
7.50
191,206
(201,614)
103,849
349
5,004
(6,080)
9,481
66
(144)
(11)
65
(Dollars in thousands)
Assets:
Investments and other
Securities held to maturity
Securities available for sale(1)
Loans and leases held for sale
Loans and leases:
Consumer real estate:
Fixed-rate
Variable-rate
3,359,670
2,788,882
190,973
143,431
Total consumer real estate
6,148,552
334,404
Commercial:
Fixed-rate
Variable- and adjustable-rate
Total commercial
Leasing and equipment finance
Inventory finance
Auto finance
Other
1,469,579
1,665,788
73,752
66,450
3,135,367
140,202
3,531,256
1,888,080
1,567,904
12,071
166,974
112,603
68,595
931
Total loans and leases(2)
16,283,230
823,709
Total interest-earning assets
17,774,178
877,502
Other assets(3)
Total assets
Liabilities and Equity:
Non-interest bearing deposits:
Retail
Small business
Commercial and custodial
1,124,226
$18,898,404
$ 1,546,453
806,649
413,893
Total non-interest bearing deposits
2,766,995
Interest-bearing deposits:
Checking
Savings
Money market
Subtotal
Certificates of deposit
2,328,402
5,693,751
1,312,483
9,334,636
2,840,922
921
8,343
7,032
16,296
22,089
Total interest-bearing deposits
12,175,558
38,385
Total deposits
14,942,553
38,385
Borrowings:
Short-term borrowings
Long-term borrowings
Total borrowings
83,673
1,311,176
261
19,954
1,394,849
20,215
Total interest-bearing liabilities
13,570,407
58,600
Total deposits and borrowings
16,337,402
58,600
Other liabilities
Total liabilities
Total TCF Financial Corp. stockholders’ equity
Non-controlling interest in subsidiaries
Total equity
502,560
16,839,962
2,041,428
17,014
2,058,442
Total liabilities and equity
$18,898,404
(14)
3
(8)
(27)
(15)
(30)
(24)
(7)
(47)
(39)
(21)
(10)
(2)
(5)
25
(1)
(8)
1
–
(29)
6
(1)
(3)
(3)
5.68
5.14
5.44
5.02
3.99
4.47
4.73
5.96
4.37
7.71
5.06
4.94
0.04
0.15
0.54
0.17
0.78
0.32
0.26
0.31
1.52
1.45
0.43
0.36
3,746,029
2,703,921
217,891
138,192
5.82
5.11
(386,359)
84,961
(26,918)
5,239
6,449,950
356,083
5.52
(301,398)
(21,679)
1,771,959
1,490,787
93,760
61,752
5.29
4.14
(302,380)
175,001
(20,008)
4,698
3,262,746
155,512
4.77
(127,379)
(15,310)
3,260,425
1,723,253
907,571
13,088
162,035
103,844
43,921
1,060
4.97
6.03
4.84
8.10
270,831
164,827
660,333
(1,017)
4,939
8,759
24,674
(129)
15,617,033
822,455
5.27
666,197
1,254
17,195,917
867,494
5.04
578,261
10,008
1,092,681
$18,288,598
$ 1,442,356
771,827
345,713
2,559,896
31,545
$ 609,806
$ 104,097
34,822
68,180
207,099
2,313,794
6,147,030
818,814
9,279,638
2,369,992
1,485
12,437
2,391
16,313
20,291
0.06
0.20
0.29
0.18
0.86
14,608
(453,279)
493,669
54,998
470,930
(564)
(4,094)
4,641
(17)
1,798
11,649,630
36,604
0.31
525,928
1,781
14,209,526
36,604
0.26
733,027
1,781
7,685
1,724,002
46
25,266
0.60
1.46
75,988
(412,826)
215
(5,312)
1,731,687
25,312
1.46
(336,838)
(5,097)
13,381,317
61,916
0.46
189,090
(3,316)
15,941,213
61,916
0.39
396,189
(3,316)
434,763
16,375,976
1,896,131
16,491
1,912,622
$18,288,598
67,797
463,986
145,297
523
145,820
$ 609,806
Net interest income and margin
$818,902
4.61
$805,578
4.68
$ 13,324
(7)
(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
Year Ended December 31,
2013
2012
Change
Average
Balance
Interest
Yields
and
Rates
Average
Balance
Yields
and
Interest Rates
Average
Balance
Interest
Yields and
Rates
(bps)
$
768,180 $ 15,041
277
18,074
11,647
6,737
648,630
155,337
1.96% $
4.11
2.79
7.50
567,907 $ 10,123
281
35,150
3,689
6,515
1,056,048
46,201
1.78% $
4.31
3.33
7.98
200,273 $
222
(407,418)
109,136
4,918
(4)
(17,076)
7,958
(Dollars in thousands)
Assets:
Investments and other
Securities held to maturity
Securities available for sale(1)
Loans and leases held for sale
Loans and leases:
Consumer real estate:
Fixed-rate
Variable-rate
3,746,029
2,703,921
217,891
138,192
Total consumer real estate
6,449,950
356,083
Commercial:
Fixed-rate
Variable- and adjustable-rate
Total commercial
Leasing and equipment finance
Inventory finance
Auto finance
Other
1,771,959
1,490,787
93,760
61,752
3,262,746
155,512
3,260,425
1,723,253
907,571
13,088
162,035
103,844
43,921
1,060
Total loans and leases(2)
15,617,033
822,455
Total interest-earning assets
17,195,917
867,494
Other assets(3)
Total assets
Liabilities and Equity:
Non-interest bearing deposits:
Retail
Small business
Commercial and custodial
1,092,681
$18,288,598
$ 1,442,356
771,827
345,713
Total non-interest bearing deposits
2,559,896
Interest-bearing deposits:
Checking
Savings
Money market
Subtotal
Certificates of deposit
2,313,794
6,147,030
818,814
9,279,638
2,369,992
1,485
12,437
2,391
16,313
20,291
Total interest-bearing deposits
11,649,630
36,604
Total deposits
14,209,526
36,604
Borrowings:
Short-term borrowings
Long-term borrowings
Total borrowings
7,685
1,724,002
46
25,266
1,731,687
25,312
Total interest-bearing liabilities
13,381,317
61,916
Total deposits and borrowings
15,941,213
61,916
Other liabilities
Total liabilities
Total TCF Financial Corp. stockholders’
equity
Non-controlling interest in subsidiaries
Total equity
434,763
16,375,976
1,896,131
16,491
1,912,622
Total liabilities and equity
$18,288,598
18
(20)
(54)
(48)
(11)
7
(8)
(26)
(55)
(41)
(45)
(17)
(122)
5
(26)
(23)
(8)
(13)
(8)
(10)
(2)
(7)
(5)
30
(112)
(86)
(31)
(27)
5.82
5.11
5.52
5.29
4.14
4.77
4.97
6.03
4.84
8.10
5.27
5.04
0.06
0.20
0.29
0.18
0.86
0.31
0.26
0.60
1.46
1.46
0.46
0.39
4,254,039
2,503,473
252,233
126,158
5.93
5.04
(508,010)
200,448
(34,342)
12,034
6,757,512
378,391
5.60
(307,562)
(22,308)
1,975,669
1,509,549
109,588
70,858
5.55
4.69
(203,710)
(18,762)
(15,828)
(9,106)
3,485,218
180,446
5.18
(222,472)
(24,934)
3,155,946
1,434,643
296,083
16,549
170,991
88,934
17,949
1,332
5.42
6.20
6.06
8.05
104,479
288,610
611,488
(3,461)
(8,956)
14,910
25,972
(272)
15,145,951
838,043
5.53
471,082
(15,588)
16,822,622
887,286
5.27
373,295
(19,792)
1,233,042
$18,055,664
$ 1,311,561
738,949
317,432
2,367,942
2,256,237
6,037,939
770,104
9,064,280
1,727,859
3,105
19,834
2,859
25,798
15,189
0.14
0.33
0.37
0.28
0.88
(140,361)
$
232,934
$
130,795
32,878
28,281
191,954
57,557
109,091
48,710
215,358
642,133
(1,620)
(7,397)
(468)
(9,485)
5,102
10,792,139
40,987
0.38
857,491
(4,383)
13,160,081
40,987
0.31
1,049,445
(4,383)
312,417
2,426,655
937
62,680
0.30
2.58
(304,732)
(702,653)
(891)
(37,414)
2,739,072
63,617
2.32
(1,007,385)
(38,305)
13,531,211
104,604
0.77
(149,894)
(42,688)
15,899,153
104,604
0.66
42,060
(42,688)
412,170
16,311,323
1,729,537
14,804
1,744,341
$18,055,664
22,593
64,653
166,594
1,687
168,281
$
232,934
Net interest income and margin
$805,578
4.68
$782,682
4.65
$ 22,896
3
(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.
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
Securities held to maturity
Securities available for sale
Loans and leases held for sale
Loans and leases:
Consumer real estate:
Fixed-rate
Variable-rate
Total consumer real estate
Commercial:
Fixed-rate
Variable- and adjustable-rate
Total commercial
Leasing and equipment finance
Inventory finance
Auto finance
Other
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, 2014
Versus Same Period in 2013
Increase (Decrease) Due to
December 31, 2013
Versus Same Period in 2012
Increase (Decrease) Due to
Volume(1)
Rate(1)
Total
Volume(1)
Rate(1)
Total
$ (4,046) $ 4,395
(130)
(649)
1,093
5,134
(5,431)
8,388
$
349
5,004
(6,080)
9,481
$ 3,854
9
(12,008)
8,227
$ 1,064
(13)
(5,068)
(269)
$ 4,918
(4)
(17,076)
7,958
(22,055)
4,365
(16,452)
(15,365)
7,045
(5,926)
13,047
9,839
29,246
(79)
34,365
28,790
10
(865)
1,946
3,779
(4,863)
874
(5,227)
(26,918)
5,239
(21,679)
(4,643)
(2,347)
(9,384)
(8,108)
(1,080)
(4,572)
(50)
(33,111)
(18,782)
(574)
(3,229)
2,695
(1,981)
(20,008)
4,698
(15,310)
4,939
8,759
24,674
(129)
1,254
10,008
(564)
(4,094)
4,641
1,798
(29,117)
10,545
(16,296)
(10,762)
(855)
(10,921)
5,527
17,703
30,367
(277)
26,280
20,023
78
354
174
5,538
(5,225)
1,489
(6,012)
(5,066)
(8,251)
(14,013)
(14,483)
(2,793)
(4,395)
5
(41,868)
(39,815)
(1,698)
(7,751)
(642)
(436)
(34,342)
12,034
(22,308)
(15,828)
(9,106)
(24,934)
(8,956)
14,910
25,972
(272)
(15,588)
(19,792)
(1,620)
(7,397)
(468)
5,102
248
(6,265)
(4,901)
861
$ 26,802
(33)
953
(196)
(4,177)
215
(5,312)
(5,097)
(3,316)
$(13,478) $ 13,324
(1,368)
(14,988)
(19,062)
(1,143)
$ 18,806
477
(22,426)
(19,243)
(41,545)
$ 4,090
(891)
(37,414)
(38,305)
(42,688)
$ 22,896
(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 of $3.3 million, was $818.9 million for 2014, an increase
of 1.7% from $805.6 million for 2013, which was up 2.9% from $782.7 million for 2012. The increase in 2014 was primarily driven
by higher average loan and lease balances in the auto finance, leasing and equipment finance and inventory finance businesses
and reduced cost of borrowings, partially offset by margin reduction resulting from the competitive low interest rate environment
and growth in the auto finance business which has a lower yield when compared to the other TCF asset classes, as well as
reduced interest income due to lower consumer real estate loan average balances resulting from continued run-off of the first
mortgage lien portfolio and ongoing loan sales, as well as a shift in commercial real estate from higher yielding fixed-rate loans to
lower yielding variable rate loans due to marketplace demand. The increase in net interest income in 2013 was primarily driven by
higher average loan and lease balances in the auto finance and inventory finance businesses as well as the balance sheet
repositioning in 2012 which resulted in a reduction to the cost of borrowings, partially offset by a reduction of interest income on
lower balances of mortgage-backed securities. The increase in 2013 was partially offset by downward pressure on yields across
the lending businesses in this low interest rate environment, lower average balances of commercial fixed-rate loans due to
run-off exceeding originations, and lower average balances of consumer real estate loans driven by run-off in the first mortgage
real estate business and ongoing loan sales of junior lien consumer mortgages.
24
Net interest margin was 4.61%, 4.68% and 4.65% for 2014, 2013 and 2012, respectively. The decrease in 2014 was primarily
due to continued margin reduction resulting from the ongoing competitive low interest rate environment and growth in the auto
finance business, which has a lower yield compared to the other TCF asset classes. The increase in 2013 was primarily due to the
balance sheet repositioning in 2012, partially offset by downward pressure on origination yields in the lending businesses due to
the low interest rate environment, and a shift in commercial real estate from higher yielding fixed-rate loans to lower yielding
variable-rate loans due to marketplace demand.
Provision for Credit Losses The provision for credit losses is calculated as part of the determination of the allowance for loan
and lease losses, which is a critical accounting estimate. TCF’s methodologies for determining and allocating the allowance for
loan and lease losses and the related provision for credit losses focus on historical trends in net charge-offs, delinquencies in the
loan and lease portfolio, value of collateral, general economic conditions and management’s assessment of credit risk in the
current loan and lease portfolio.
The following table summarizes the composition of TCF’s provision for credit losses for the years ended December 31, 2014,
2013, and 2012.
(Dollars in thousands)
Consumer real estate
Commercial
Leasing and equipment
finance
Inventory finance
Auto finance
Other
2014
Year Ended December 31,
2013
2012
2014/2013
2013/2012
Change
$63,973
(259)
66.8% $ 87,100
12,515
(0.3)
73.6% $178,496
43,498
10.6
72.1% $(23,127)
17.6
(12,774) N.M.
(26.6)% $ (91,396)
(30,983)
(51.2)%
(71.2)
3,324
2,498
23,742
2,459
3.5
2.6
24.8
2.6
1,005
1,949
13,215
2,584
0.8
1.6
11.2
2.2
10,054
6,060
6,726
2,609
4.1
2.4
2.7
1.1
2,319 N.M.
28.2
79.7
(4.8)
549
10,527
(125)
(9,049)
(4,111)
6,489
(25)
(90.0)
(67.8)
96.5
(1.0)
Total
$95,737
100.0% $118,368 100.0% $247,443 100.0% $(22,631)
(19.1)
$(129,075)
(52.2)
N.M. Not Meaningful.
TCF provided $95.7 million for credit losses for 2014, compared with $118.4 million for 2013 and $247.4 million for 2012. The
decrease in provision expense in 2014 was primarily due to a decrease in net charge-offs in the consumer real estate and
commercial portfolios. This decrease was partially offset by additional provision expense related to the sale of consumer real
estate TDR loans and an increase in provision for credit losses in the auto finance portfolio due to growth coupled with maturation
of prior years’ originations. The decrease in net charge-offs in the consumer real estate portfolio is primarily due to the improving
economy, as incidents of default decrease and home values increase. The decrease in net charge-offs in the commercial portfolio
is primarily due to improved credit quality and continued efforts to actively work out problem loans. The decrease in provision
expense in 2013 was primarily due to decreased net charge-offs in the consumer real estate portfolio due to improved home
values and a reduction in incidents of default, decreased net charge-offs in the commercial portfolio due to improved credit
quality and continued efforts to actively work out problem loans and the impact of clarifying bankruptcy-related regulatory
guidance related to consumer loans adopted in 2012.
Net loan and lease charge-offs were $79.3 million for 2014, or 0.49% of average loans and leases, compared with $126.4 million,
or 0.81% of average loans and leases, for 2013 and $233.8 million, or 1.54% of average loans and leases, for 2012. The decrease
in 2014 was primarily due to a decrease in net charge-offs in the consumer real estate and commercial portfolios. The decrease in
net charge-offs in the consumer real estate portfolio is primarily due to the improving economy, as incidents of default decrease
and home values increase. The decrease in net charge-offs in the commercial portfolio is primarily due to improved credit quality
and continued efforts to actively work out problem loans. The decrease in 2013 was primarily due to improved credit quality in the
consumer real estate portfolio as home values improved and incidents of default declined, as well as improved credit quality in
the commercial portfolio and continued efforts to actively work out problem loans, and the impact of the clarifying bankruptcy-
related regulatory guidance adopted in 2012.
For additional information, see ‘‘Consolidated Financial Condition Analysis – Credit Quality’’ in this Management’s Discussion and
Analysis.
25
Non-Interest Income Non-interest income is a significant source of revenue for TCF, representing 34.7%, 33.5% and 38.6%
of total revenue for 2014, 2013 and 2012, respectively, and is an important factor in TCF’s results of operations. Total fees and
other revenue were $432.2 million for 2014, compared with $403.1 million and $388.2 million for 2013 and 2012, respectively.
The following table summarizes the components of non-interest income.
Year Ended December 31,
(Dollars in thousands)
2014
2013
2012
2011
2010
Fees and service charges
Card revenue
ATM revenue
$154,386
51,323
22,225
$166,606
51,920
22,656
$177,953
52,638
24,181
$219,363
96,147
27,927
$273,181
111,067
29,836
Subtotal
Gains on sales of auto loans, net
Gains on sales of consumer real
estate loans, net
Servicing fee income
Subtotal
Leasing and equipment finance
Other
227,934
43,565
241,182
29,699
254,772
22,101
343,437
1,133
414,084
–
34,794
21,444
99,803
93,799
10,704
21,692
13,406
64,797
90,919
6,196
5,413
7,759
35,273
92,172
5,974
–
970
2,103
89,167
2,464
–
–
–
89,194
5,584
Fees and other revenue
Gains (losses) on securities, net
432,240
1,027
403,094
964
388,191
102,232
437,171
7,263
508,862
29,123
Total non-interest income
$433,267
$404,058
$490,423
$444,434
$537,985
Total non-interest income as a
percentage of total revenue
N.M. Not Meaningful.
34.7%
33.5%
38.6%
38.8%
43.5%
Compound Annual
Growth Rate
1-Year
2014/2013
5-Year
2014/2009
(7.3)%
(1.1)
(1.9)
(5.5)
46.7
60.4
60.0
54.0
3.2
72.8
7.2
6.5
7.2
(11.7)%
(13.3)
(6.1)
(11.6)
N.M.
N.M.
N.M.
N.M.
6.3
15.4
(2.7)
(48.9)
(3.8)
Fees and Service Charges Fees and service charges totaled $154.4 million for 2014, compared with $166.6 million and
$178.0 million for 2013 and 2012, respectively. The decrease in 2014 was primarily due to customer behavior changes and higher
average checking account balances per customer. The decrease in 2013 was primarily due to lower transaction activity and
higher average checking account balances per customer, partially offset by a larger account base.
Card Revenue Card revenue, primarily interchange fees, totaled $51.3 million for 2014, compared with $51.9 million and
$52.6 million for 2013 and 2012, respectively. The decrease in 2014 was primarily due to fewer checking accounts with debit
cards. The decrease in 2013 was primarily due to lower card transaction volume.
TCF is the 17th largest issuer of Visa(cid:4) consumer debit cards and the 13th largest issuer of Visa small business debit cards in the
United States, based on payment volume for the three months ended September 30, 2014, as provided by Visa. TCF earns
interchange revenue from customer card transactions paid primarily by merchants, not TCF’s customers. Card revenue
represented 22.5%, 21.5% and 20.7% of banking fee revenue for 2014, 2013 and 2012, respectively.
Gains on Sales of Auto Loans, Net TCF sold $1.3 billion of auto loans and recognized a gain of $44.7 million for 2014, compared
to sales of $795.3 million and $536.7 million of auto loans with recognized gains of $29.7 million and $22.1 million for 2013 and
2012, respectively. The increases in sales were primarily due to the continued growth of the auto finance business as TCF
continues to sell a percentage of its originations each quarter. Included in 2014 is $256.3 million of loans sold related to the
execution of the Company’s inaugural auto loan securitization, which took place in July 2014, and resulted in a net gain of
$7.4 million.
Gains on Sales of Consumer Real Estate Loans, Net TCF sold $1.4 billion of consumer real estate loans and recognized a gain of
$34.1 million for 2014, compared to sales of $763.1 million and $161.8 million of consumer real estate loans with recognized
gains of $21.7 million and $5.4 million for 2013 and 2012, respectively. Included in 2014 was $405.9 million related to the portfolio
sale of consumer real estate TDR loans, which resulted in a net loss of $4.8 million.
26
Servicing Fee Income Servicing fee income totaled $21.4 million for 2014, compared with $13.4 million and $7.8 million for
2013 and 2012, respectively. The increases were primarily due to an increase in the portfolio of consumer real estate and auto
loans sold with servicing retained by TCF. Total loans and leases serviced for others was $3.4 billion as of December 31, 2014,
compared to $2.0 billion and $1.0 billion as of December 31, 2013 and 2012, respectively.
Leasing and Equipment Finance Leasing and equipment finance income totaled $93.8 million for 2014, compared with
$90.9 million and $92.2 million for 2013 and 2012, respectively. The increase in 2014 and the decrease in 2013 were primarily due
to customer-driven events impacting sales-type lease revenue.
Gains (Losses) on Securities, Net Gains (losses) on securities, net totaled $1.0 million for 2014, compared with $1.0 million and
$102.2 million for 2013 and 2012, respectively. The gains in 2012 included $90.2 million related to sales of mortgage-backed
securities (including a pre-tax net gain of $77.0 million as a result of the balance sheet repositioning) and a pre-tax net gain of
$13.1 million as a result of the sale of Visa Class B stock.
Non-Interest Expense Total non-interest expense was $871.8 million for 2014, compared with $845.3 million and $1.4 billion
for 2013 and 2012, respectively. Non-interest expense increased $26.5 million, or 3.1%, in 2014 and decreased $517.3 million, or
38.0%, in 2013. The following table presents the components of non-interest expense.
Year Ended December 31,
Compound Annual
Growth Rate
2014
(Dollars in thousands)
Compensation and employee benefits $452,942 $429,188 $ 393,841 $348,792 $346,072
126,551
Occupancy and equipment
23,584
FDIC insurance
37,106
Operating lease depreciation
30,366
Advertising and marketing
146,253
Other
134,694
32,066
24,500
21,477
167,777
139,023
25,123
27,152
22,943
179,904
126,437
28,747
30,007
32,925
145,489
130,792
30,425
25,378
25,241
163,897
2011
2012
2013
Subtotal
Loss on termination of debt
Branch realignment
Foreclosed real estate and repossessed
assets, net
Other credit costs, net
847,087
–
–
809,702
–
8,869
769,574
550,735
–
712,397
–
–
709,932
–
–
24,567
123
27,950
(1,252)
41,358
887
49,238
2,816
40,385
6,018
Total non-interest expense
$871,777 $845,269 $1,362,554 $764,451 $756,335
N.M. Not Meaningful.
1-Year
2010 2014/2013
5-Year
2014/2009
5.5%
1.9
5.6
4.0
(13.7)
4.7
3.8
N.M.
N.M.
(5.1)
(60.1)
2.9
5.5%
3.2
(21.7)
10.8
6.8
7.2
4.6
–
(100.0)
(12.1)
N.M.
3.1
Compensation and Employee Benefits Compensation and employee benefits expense totaled $452.9 million for 2014,
compared with $429.2 million and $393.8 million for 2013 and 2012, respectively. The increase in 2014 was primarily due to
increased staff levels to support the growth and needs of auto finance and risk management, higher commissions based on
production results and an increase in the annual pension plan valuation adjustment. The increase in 2013 was primarily due to
increased staff levels to support the growth of auto finance and expenses related to higher commissions based on production
results and performance incentives.
FDIC Insurance FDIC premium expense totaled $25.1 million for 2014, compared with $32.1 million and $30.4 million for 2013
and 2012, respectively. The decrease in 2014 was primarily due to a lower assessment rate due to overall improving credit
metrics inclusive of the portfolio sale of consumer real estate TDR loans and a non-recurring assessment rate catch-up. The
increase in 2013 was primarily due to a higher overall assessment base.
Other Non-Interest Expense Other non-interest expense totaled $179.9 million for 2014, compared with $167.8 million and
$163.9 million for 2013 and 2012, respectively. The increase in 2014 was primarily due to increased loan and lease processing
expense due to increases in loan originations. The increase in 2013 was primarily due to an increase in regulatory compliance
costs and increased loan and lease processing expense in the consumer real estate and auto finance businesses.
Loss on Termination of Debt
of $550.7 million.
In the first quarter of 2012, TCF restructured $3.6 billion of long-term borrowings at a pre-tax loss
Branch Realignment TCF executed a realignment of its retail banking system to support its strategic initiatives which resulted
in a pre-tax charge of $8.9 million in the fourth quarter of 2013. The consolidation of 37 branches in Illinois and nine branches in
Minnesota occurred in the first quarter of 2014.
27
Foreclosed Real Estate and Repossessed Assets, Net Foreclosed real estate and repossessed assets expense, net totaled
$24.6 million for 2014, compared with $28.0 million and $41.4 million for 2013 and 2012, respectively. The decrease in 2014 was
primarily due to increased gains on the sales of foreclosed properties and lower write-downs on existing foreclosed properties as
a result of improved property values as well as fewer consumer real estate owned properties. The decrease in 2013 was
primarily due to reduced expenses related to fewer foreclosed consumer properties primarily driven by a portfolio sale of real
estate owned properties during the first quarter of 2013, a decrease in additions to foreclosed consumer properties and lower
write-downs to existing foreclosed real estate properties as a result of improved real estate property values.
Income Taxes Income tax expense represented 35.5% of income before income tax expense in 2014, compared with 34.7%
in 2013 and income tax benefit of 39.1% of loss before income tax benefit in 2012. The higher effective income tax rate for 2014
compared with 2013 was primarily due to proportionately smaller foreign tax effects. The higher effective income tax rate for
2012 was primarily due to the pre-tax loss which resulted from the 2012 balance sheet repositioning.
Consolidated Financial Condition Analysis
Securities Held to Maturity and Securities Available for Sale TCF’s securities held to maturity and securities available for
sale portfolios primarily consist of fixed-rate mortgage-backed securities issued by the Federal National Mortgage Association.
Securities held to maturity were $214.5 million, or 1.1% of total assets, at December 31, 2014, compared to $19.9 million, or
0.1% of total assets, at December 31, 2013. Securities available for sale were $463.3 million, or 2.4% of total assets, at
December 31, 2014, compared to $551.1 million, or 3.0% of total assets, at December 31, 2013. Net unrealized pre-tax gains on
securities available for sale totaled $1.7 million at December 31, 2014, compared with net unrealized pre-tax losses of
$43.0 million at December 31, 2013. TCF may, from time to time, sell securities and utilize the proceeds to reduce borrowings,
fund growth in loans and leases or for other corporate purposes. During 2014 and 2013, TCF transferred $191.7 million and
$9.3 million, respectively, in available for sale mortgage-backed securities to held to maturity, reflecting TCF’s intent to hold those
securities to maturity.
28
Loans and Leases The following tables set forth information about loans and leases held in TCF’s portfolio.
(Dollars in thousands)
Consumer real estate:
First mortgage lien
Junior lien
At December 31,
2014
2013
2012
2011
Compound Annual
Growth Rate
5-Year
1-Year
2010 2014/2013 2014/2009
$ 3,139,152 $ 3,766,421 $ 4,239,524 $ 4,742,423 $ 4,893,887
2,262,194
2,152,868
2,543,212
2,434,977
2,572,905
(16.7)%
(1.2)
(8.7)%
1.9
Total consumer real estate
5,682,364
6,339,326
6,674,501
6,895,291
7,156,081
(10.4)
Commercial:
Commercial real estate
Commercial business
Total commercial
Leasing and equipment finance
Inventory finance
Auto finance
Other
2,624,255
533,410
3,157,665
3,745,322
1,877,090
1,915,061
24,144
2,743,697
404,655
3,148,352
3,428,755
1,664,377
1,239,386
26,743
3,080,942
324,293
3,405,235
3,198,017
1,567,214
552,833
27,924
3,198,698
250,794
3,449,492
3,142,259
624,700
3,628
34,885
3,328,216
317,987
3,646,203
3,154,478
792,354
–
39,188
Total loans and leases
$16,401,646 $15,846,939 $15,425,724 $14,150,255 $14,788,304
(4.4)
31.8
0.3
9.2
12.8
54.5
(9.7)
3.5
(4.8)
(4.3)
3.5
(3.2)
4.0
32.0
N.M.
(14.0)
2.4
N.M. Not Meaningful.
(In thousands)
Geographic Distribution:
Minnesota
Illinois
California
Michigan
Wisconsin
Colorado
Texas
Canada
Florida
New York
Ohio
Pennsylvania
North Carolina
Arizona
New Jersey
Georgia
Indiana
Washington
Other
Consumer
Real Estate Commercial
Leasing and
Equipment
Finance
Inventory
Finance
Auto
Finance
Other
Total
At December 31, 2014
$1,903,494
1,429,226
651,447
556,214
315,832
399,811
3
–
16,827
7,662
5,239
15,377
70
71,064
18,020
15,563
23,520
82,800
170,195
$ 814,248
566,342
33,304
493,184
535,355
167,813
30,451
–
47,182
–
70,707
–
21,661
32,302
–
8,400
52,054
11,907
272,755
$
98,591 $
130,125
523,361
140,164
62,004
64,395
365,944
1,053
167,658
200,206
133,495
153,500
133,804
82,724
147,043
93,890
69,027
53,257
1,125,081
62,701 $
44,688
57,918
64,465
54,676
21,538
132,481
525,891
71,334
55,080
52,066
54,632
37,977
13,138
18,202
32,523
35,453
25,602
516,725
36,238 $10,060 $ 2,925,332
2,265,839
90,138
1,610,835
344,778
1,293,420
36,643
987,001
18,012
696,729
38,803
651,370
122,487
526,944
–
406,412
103,357
343,455
80,473
300,921
39,414
300,162
76,644
259,219
65,674
259,122
59,644
250,127
66,862
230,845
80,469
205,967
25,911
205,081
31,511
2,682,865
598,003
5,320
27
2,750
1,122
4,369
4
–
54
34
–
9
33
250
–
–
2
4
106
Total
$5,682,364
$3,157,665
$3,745,322 $1,877,090 $1,915,061 $24,144 $16,401,646
29
Loans and leases outstanding at December 31, 2014, 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
At December 31, 2014(1)
Consumer
Real Estate
Commercial
$ 142,862
139,970
153,822
369,490
822,424
935,776
3,118,020
$ 452,918
384,007
519,980
1,354,390
435,233
8,285
2,852
Leasing and
Equipment
Finance
$1,277,140
962,238
696,560
704,794
104,590
–
–
Inventory
Finance
Auto
Finance
Other
Total
$1,877,090
–
–
–
–
–
–
$ 376,920
392,767
394,619
625,536
125,219
–
–
$ 3,483
1,033
752
1,112
2,423
1,978
13,363
$ 4,130,413
1,880,015
1,765,733
3,055,322
1,489,889
946,039
3,134,235
Total after 1 year
5,539,502
2,704,747
2,468,182
–
1,538,141
20,661
12,271,233
Total
$5,682,364
$3,157,665
$3,745,322
$1,877,090
$1,915,061
$24,144
$16,401,646
Amounts due after 1 year on:
Fixed-rate loans and leases
Variable- and adjustable-rate
loans
$2,842,852
$1,365,948
$2,449,715
2,696,650
1,338,799
18,467
Total after 1 year
$5,539,502
$2,704,747
$2,468,182
$
$
–
–
–
$1,538,141
$20,438
$ 8,217,094
–
223
4,054,139
$1,538,141
$20,661
$12,271,233
(1) 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.
Consumer Real Estate Consumer real estate loans decreased $657.0 million, or 10.4%, from December 31, 2013 to $5.7 billion
at December 31, 2014, primarily due to the sale of $405.9 million of consumer real estate TDR loans and continued run-off of the
first mortgage lien portfolio. TCF’s consumer real estate loan portfolio represented 34.6% of its total loan and lease portfolio at
December 31, 2014, down from 40.0% at December 31, 2013. TCF’s consumer real estate portfolio is secured by mortgages on
residential real estate. At December 31, 2014, 55.2% of loan balances were secured by first mortgages and 44.8% were secured
by junior lien mortgages with an average loan size of $106 thousand secured by first mortgages and $42 thousand secured by
junior lien mortgages. At December 31, 2014, 47.7% of the consumer real estate portfolio carried a variable interest rate tied to
the prime rate, compared with 44.2% at December 31, 2013.
At December 31, 2014, 59.1% of TCF’s consumer real estate loans consisted of closed-end loans, compared with 63.7% at
December 31, 2013. TCF’s closed-end consumer real estate loans require payments of principal and interest over a fixed term. At
December 31, 2014 and 2013, 82.8% and 88.1%, respectively, of TCF’s consumer real estate loans were in TCF’s primary
banking markets. The average Fair Isaac Corporation (‘‘FICO(R)’’) credit score at loan origination for the consumer real estate
lending portfolio was 734 as of December 31, 2014 and 723 as of December 31, 2013. 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 730 at
December 31, 2014 and 717 at December 31, 2013.
At December 31, 2014, total consumer real estate lines of credit outstanding were $2.3 billion, down from $2.5 billion at
December 31, 2013. Included in these lines of credit are $2.1 billion of junior lien home equity lines of credit (‘‘HELOCs’’) as of
both December 31, 2014 and 2013, respectively. At December 31, 2014 and 2013, $1.3 billion and $1.1 billion, respectively, of
the junior lien HELOCs had a 10-year interest-only draw period and a 20-year amortization repayment period and all were within
the 10-year initial draw period and will not convert to amortizing loans until 2021 or later. At December 31, 2014 and 2013,
$816.0 million and $969.2 million, respectively, of the junior lien HELOCs were interest-only revolving draw loans with no defined
amortization period and original draw periods of 5 to 40 years. As of December 31, 2014, 14.6% of these loans will mature in the
next five years. Outstanding balances on consumer real estate lines of credit were 67.2% of total lines of credit in 2014,
compared to 66.5% in 2013.
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 also has not originated consumer real estate loans with multiple payment options or loans with
‘‘teaser’’ interest rates. At December 31, 2014, 51.2% of the consumer real estate loan balance had been originated since
January 1, 2009 with net charge-offs of less than 0.1%. TCF’s consumer real estate portfolio is subject to the risk of falling home
values and to the general economic environment, particularly unemployment.
30
Commercial Real Estate and Business Lending Commercial real estate loans decreased $119.4 million from December 31,
2013 to $2.6 billion at December 31, 2014. The decrease in commercial real estate loans was due to run-off exceeding new
originations as well as continued efforts to actively work out problem loans.Variable and adjustable-rate loans represented 53.9%
of commercial real estate loans outstanding at December 31, 2014, compared with 45.7% at December 31, 2013. At
December 31, 2014, 88.3% of TCF’s commercial real estate loans outstanding were secured by properties located in its primary
banking markets compared with 88.7% at December 31, 2013. Commercial business loans increased $128.8 million to
$533.4 million at December 31, 2014. With an emphasis on secured lending, 99.9% of TCF’s commercial real estate and
commercial business loans were secured either by properties or other business assets at December 31, 2014, compared with
99.0% at December 31, 2013.
The following table summarizes TCF’s commercial real estate loan portfolio by property and loan type.
(In thousands)
Multi-family housing
Retail services(1)
Office buildings
Warehouse/industrial buildings
Health care facilities
Hotels and motels
Residential home builders
Other
Total
At December 31,
2014
Construction and
Development
Total Permanent
2013
Construction and
Development
Total
$141,695 $ 958,626 $ 899,604
558,739
373,178
349,534
377,967
306,322
299,354
193,384
254,351
165,537
147,292
13,196
18,532
118,357
194,955
9,104
5,294
9,197
25,176
7,499
6,398
37,748
$ 48,395 $ 947,999
569,543
351,568
306,322
226,900
168,247
21,441
151,677
10,804
2,034
–
33,516
2,710
8,245
33,320
$242,111 $2,624,255 $2,604,673
$139,024 $2,743,697
Permanent
$ 816,931
364,074
372,673
290,157
229,175
139,793
12,134
157,207
$2,382,144
(1) Primarily retail strip shopping centers and malls, convenience stores, supermarkets, restaurants and automobile related businesses.
Leasing and Equipment Finance The following table summarizes TCF’s leasing and equipment finance portfolio by equipment
type.
(Dollars in thousands)
Equipment Type:
Specialty vehicles
Construction
Medical
Manufacturing
Golf cart and turf
Technology and data processing
Furniture and fixtures
Trucks and trailers
Agricultural
Other
Total
At December 31,
2014
2013
Balance
Percent
of Total
Balance
Percent
of Total
$1,007,518
429,123
387,514
365,176
344,979
262,146
252,439
218,664
127,898
349,865
26.9% $ 849,150
400,425
11.5
393,337
10.3
407,478
9.8
327,141
9.2
260,849
7.0
212,857
6.7
150,266
5.8
98,582
3.4
328,670
9.4
24.8%
11.7
11.5
11.9
9.5
7.6
6.2
4.4
2.9
9.5
$3,745,322
100.0% $3,428,755
100.0%
The leasing and equipment finance portfolio consisted of $1.9 billion of leases and $1.8 billion of loans at December 31, 2014,
increases of 3.0% and 16.9%, respectively, from $1.9 billion of leases and $1.5 billion of loans at December 31, 2013. The
uninstalled backlog of approved transactions was $418.0 million at December 31, 2014, compared with $454.4 million at
December 31, 2013. The average size of transactions originated during 2014 was $118 thousand, compared with $115 thousand
during 2013. 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, for information on
lease accounting.
31
At December 31, 2014 and 2013, $92.9 million and $68.5 million, respectively, of TCF’s lease portfolio was discounted with third-
party financial institutions on a non-recourse basis, which is recorded in long-term borrowings. The leasing and equipment
finance portfolio table above includes lease residuals, including those related to non-recourse debt. 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 to expense in the periods in which they become known. At
December 31, 2014, lease residuals totaled $109.8 million, or 10.1% of original equipment value, including $14.2 million related
to non-recourse sales, compared with $108.2 million, or 9.1% of original equipment value, including $15.2 million related to
non-recourse sales at December 31, 2013.
TCF Inventory Finance The following table summarizes TCF’s inventory finance portfolio by marketing segment.
(Dollars in thousands)
Marketing Segment:
Powersports
Lawn and garden
Electronics and appliances
Other
Total
At December 31,
2014
2013
Balance
Percent
of Total
Balance
Percent
of Total
$ 966,504
348,760
58,842
502,984
51.5% $ 929,111
298,415
18.6
57,264
3.1
379,587
26.8
55.8%
18.0
3.4
22.8
$1,877,090
100.0% $1,664,377
100.0%
Inventory finance continued to expand its core programs during 2014, with an increase in the total portfolio to $1.9 billion, or
11.4% of total loans and leases, at December 31, 2014, compared with $1.7 billion, or 10.5% of total loans and leases at
December 31, 2013. The increase was primarily due to continued growth in new dealer relationships within the other industries
segment. Inventory finance originations increased to $5.5 billion in 2014 compared to $5.1 billion in 2013.
Auto Finance TCF’s auto finance loan portfolio represented 11.7% of TCF’s total loan and lease portfolio at December 31, 2014,
compared with 7.8% at December 31, 2013. The auto finance portfolio increased significantly in 2014 to $1.9 billion from
$1.2 billion at December 31, 2013, due to continued growth as TCF expands the number of active dealers in its network by
expanding its sales force in existing territories. As of December 31, 2014, the auto finance network included more than 10,500
active dealers in 50 states, compared with about 8,500 active dealers in 45 states as of December 31, 2013. The auto finance
portfolio consisted of 25.4% new car loans and 74.6% used car loans at December 31, 2014, compared with 23.3% and 76.7%,
respectively, at December 31, 2013. The average FICO score for the auto finance portfolio was 724 at both December 31, 2014
and 2013.
Credit Quality The following sections 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. The following items should
be considered throughout this section:
(cid:127) Loans that are over 60-days delinquent have a higher potential to become non-performing and generally are a leading
indicator for future charge-off trends.
(cid:127) TDR loans are loans to financially troubled borrowers that have been modified such that TCF has granted a concession in
terms to improve the likelihood of collection of all principal and modified interest owed.
(cid:127) Non-accrual loans and leases have been charged down to the estimated fair value of the collateral less selling costs, or
reserved for expected loss upon workout.
(cid:127) Within the performing loans and leases, TCF classifies customers within regulatory classification guidelines. Loans and
leases that are ‘‘classified’’ are loans or leases 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.
32
Included in Note 6 of Notes to Consolidated Financial Statements, Allowance for Loan and Lease Losses and Credit Quality
Information, are disclosures of loans considered to be ‘‘impaired’’ for accounting purposes. Consumer real estate TDR loans are
evaluated separately in TCF’s allowance methodology. Commercial TDR loans are individually evaluated for impairment.
Impairment is based upon the present value of the expected future cash flows or for collateral dependent loans at the fair value of
collateral less selling expense; however, if payment or satisfaction of the loan is dependent on the operation, rather than the sale
of the collateral, the impairment does not include selling costs. Impaired loans comprise a portion of non-accrual loans and
accruing TDR loans. Impaired loan accounting policies prescribe specific methodologies for determining a portion of the
allowance for loan and lease losses.
Past Due Loans and Leases The following table summarizes TCF’s over 60-day delinquent loan and lease portfolio by type,
excluding non-accrual loans and leases. Delinquent balances are determined based on the contractual terms of the loan or lease.
See Note 6 of Notes to Consolidated Financial Statements, Allowance for Loan and Lease Losses and Credit Quality Information,
for additional information.
(Dollars in thousands)
Consumer real estate:
First mortgage lien
Junior lien
Total consumer real estate
Commercial:
Commercial real estate
Commercial business
Total commercial
Leasing and equipment finance
Inventory finance
Auto finance
Other
Subtotal
Delinquencies in acquired portfolios
Total
At December 31,
2014
2013
Principal
Balances
Percentage of
Portfolio
Principal
Balances
Percentage of
Portfolio
$13,370
2,091
15,461
–
–
–
2,549
75
4,263
–
22,348
88
$22,436
0.49% $20,894
3,532
0.08
0.30
24,426
–
–
–
0.07
–
0.22
–
0.14
0.03
0.14
886
544
1,430
2,401
50
1,877
10
30,194
458
$30,652
0.58%
0.14
0.40
0.03
0.14
0.05
0.07
–
0.15
0.04
0.19
1.64
0.20
Loan Modifications The following table provides a summary of accruing TDR loans.
(Dollars in thousands)
Consumer real estate
Commercial
Leasing and equipment finance
Inventory finance
Other
Total
2014
$111,933
80,375
924
527
89
At December 31,
2012
$478,262
144,508
1,050
–
38
2011
$433,078
98,448
776
–
–
2013
$506,640
120,871
1,021
4,212
93
2010
$337,401
48,838
–
–
–
$193,848
$632,837
$623,858
$532,302
$386,239
Over 60-day delinquency as a percentage of total accruing TDR
loans
1.39%
1.28%
4.34%
5.69%
4.64%
Accruing TDR loans at December 31, 2014, decreased $439.0 million, or 69.4%, from December 31, 2013, primarily due to the
portfolio sale of consumer real estate TDR loans in the fourth quarter of 2014, along with the continued efforts to actively work
out problem loans in the commercial portfolio.
TCF modifies loans through forgiveness of interest or reductions in interest rates, extension of payment dates or term
extensions with reduction of contractual payments, but generally not through reductions of principal.
Loan modifications to borrowers who have not been granted concessions are not included in the table above. Loan modifications
to troubled borrowers are not reported as TDR loans in the calendar years after modification if the loans were modified to an
interest rate equal to or greater than the yields of new loan originations with comparable risk at the time of restructuring and if the
33
loan is performing based on the restructured terms; however, these loans are still considered impaired and follow TCF’s impaired
loan reserve policies.
Under consumer real estate programs, TCF typically reduces a customer’s contractual payments by an amount appropriate for
the borrower’s financial condition. Due to clarifying bankruptcy-related regulatory guidance adopted in the third quarter of 2012,
loans discharged in Chapter 7 bankruptcy where the borrower did not reaffirm the debt are reported as non-accrual TDR loans
upon discharge as a result of the removal of the borrower’s personal liability on the loan. Due to additional clarifying regulatory
guidance adopted in the first quarter of 2014, these loans may now return to accrual status when TCF expects full repayment of
the remaining pre-discharged contractual principal and interest. Although loans classified as TDR loans are considered impaired,
TCF received more than 47% of the original contractual interest due on accruing consumer real estate TDR loans in 2014,
yielding 3.3%, by modifying the loans to qualified customers instead of foreclosing on the property.
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. Loans modified when on non-accrual
status continue to be reported as non-accrual loans until there is sustained repayment performance for a reasonable period of at
least six consecutive months. At December 31, 2014, 87.7% of total commercial TDR loans were accruing and TCF recognized
more than 93% of the original contractual interest due on accruing commercial TDR loans in 2014. At December 31, 2014,
collection of principal and interest under the modified terms was reasonably assured on all accruing commercial TDR loans.
TCF utilizes a multiple note structure as a workout alternative for certain commercial loans, which restructures a troubled loan
into two notes. When utilizing this multiple note structure, the first note is always classified as a TDR loan. Under TCF policy, the
first note is established at an amount and with market terms that provide reasonable assurance of payment and performance. If
the loan was modified at an interest rate equal to the yield of a new loan originated with comparable risk at the time of
restructuring and the loan is performing based on the terms of the restructuring agreement, this note may be removed from TDR
loan classification in the calendar year after modification. This note is reported on accrual status if the loan has been formally
restructured so as to be reasonably assured of payment and performance according to its modified terms. This evaluation
includes consideration of the customer’s payment performance for a reasonable period of at least six consecutive months, which
may include time prior to the restructuring, before the loan is returned to accrual status. The second note is charged-off. This
second note is a separate and distinct legal contract and is still outstanding. Should the borrower’s financial position improve, the
loan may become recoverable. At December 31, 2014, one TDR loan restructured as multiple notes with a combined total
contractual balance of $12.4 million and a remaining book balance of $11.4 million is included in the preceding table.
See Note 6 of Notes to Consolidated Financial Statements, Allowance for Loan and Lease Losses and Credit Quality Information,
for additional information regarding TCF’s loan modifications.
34
Non-accrual Loans and Leases and Other Real Estate Owned The following table summarizes TCF’s non-accrual loans and
leases and other real estate owned.
(Dollars in thousands)
Consumer real estate:
First mortgage lien
Junior lien
At December 31,
2014
2013
2012
2011
2010
$137,790
35,481
$180,811
38,222
$199,631
35,269
$129,114
20,257
$140,871
26,626
Total consumer real estate
173,271
219,033
234,900
149,371
167,497
Commercial:
Commercial real estate
Commercial business
Total commercial
Leasing and equipment finance
Inventory finance
Auto finance
Other
24,554
481
25,035
12,670
2,082
3,676
–
36,178
4,361
40,539
14,041
2,529
470
410
Total non-accrual loans and leases
Other real estate owned
216,734
65,650
277,022
68,874
118,300
9,446
127,746
13,652
1,487
101
1,571
379,457
96,978
104,744
22,775
127,519
20,583
823
–
15
298,311
134,898
104,305
37,943
142,248
34,407
1,055
–
50
345,257
141,065
Total non-accrual loans and leases and other
real estate owned
Non-accrual loans and leases as a percentage of total
loans and leases
Non-accrual loans and leases and other real estate
owned as a percentage of total loans and leases
and other real estate owned
Allowance for loan and lease losses as a percentage
of non-accrual loans and leases
$282,384
$345,896
$476,435
$433,209
$486,322
1.32%
1.75%
2.46%
2.11%
2.33%
1.71
2.17
3.07
3.03
3.26
75.75
91.05
70.40
85.71
76.99
The following table summarizes TCF’s non-accrual TDR loans included in the table above.
(In thousands)
Consumer real estate
Commercial
Leasing and equipment finance
Inventory finance
Auto finance
Other
Total
At December 31,
2014
$ 87,685
11,265
1,953
37
3,676
–
$104,616
2013
$134,487
26,209
2,447
–
470
1
$163,614
2012
$173,587
92,311
2,794
–
101
–
$268,793
2011
$ 46,728
83,154
979
–
–
–
$130,861
2010
$30,511
17,487
1,284
–
–
–
$49,282
Non-accrual loans and leases at December 31, 2014 decreased $60.3 million, or 21.8%, from December 31, 2013, primarily due
to the portfolio sale of consumer real estate TDR loans which included some non-accrual TDR loans, continued efforts to actively
work out commercial loans and improved credit quality in the commercial portfolio.
Consumer real estate loans are generally placed on non-accrual status once they become 90 days past due and are charged-off to
the estimated fair value of underlying collateral, less estimated selling costs, no later than 150 days past due. Commercial loans
are generally placed on non-accrual status once they become 90 days past due unless they are well secured and in the process of
collection. Auto loans are generally charged-off to the fair value of the collateral, less estimated selling costs, upon entering
non-accrual status no later than 120 days past due. 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.
35
Changes in the amount of non-accrual loans and leases for the years ended December 31, 2014 and 2013 are summarized in the
following tables.
(In thousands)
Balance, beginning of period
Additions
Charge-offs
Transfers to other assets
Return to accrual status
Payments received
Sales
Other, net
At or For the Year Ended December 31, 2014
Consumer
Real Estate Commercial
$ 40,539
29,653
(8,491)
(3,717)
–
(33,401)
(607)
1,059
$219,033
184,385
(55,107)
(62,281)
(51,269)
(20,757)
(41,458)
725
Leasing and
Equipment
Finance
$14,041
18,380
(5,040)
(3,027)
(1,683)
(9,549)
–
(452)
Inventory
Finance
$ 2,529
7,107
(515)
(306)
(2,852)
(3,398)
–
(483)
Auto
Finance Other
$ 410
92
(91)
(12)
–
(209)
(189)
(1)
$ 470
4,280
(100)
(135)
–
(839)
–
–
Total
$277,022
243,897
(69,344)
(69,478)
(55,804)
(68,153)
(42,254)
848
Balance, end of period
$173,271
$ 25,035
$12,670
$ 2,082
$3,676
$
–
$216,734
(In thousands)
Balance, beginning of period
Additions
Charge-offs
Transfers to other assets
Return to accrual status
Payments received
Sales
Other, net
At or For the Year Ended December 31, 2013
Consumer
Real Estate
$234,900
222,443
(38,283)
(66,267)
(71,229)
(19,865)
(43,434)
768
Commercial
$127,746
13,315
(27,325)
(13,885)
(9,057)
(53,985)
(309)
4,039
Leasing and
Equipment
Finance
$13,652
19,219
(5,461)
(2,252)
(1,748)
(9,267)
–
(102)
Inventory
Finance
$ 1,487
7,608
(721)
(526)
(3,321)
(2,292)
–
294
Auto
Finance
$ 101
497
(10)
(10)
–
(114)
–
6
Other
$1,571
29
(173)
(56)
–
(503)
(453)
(5)
Total
$379,457
263,111
(71,973)
(82,996)
(85,355)
(86,026)
(44,196)
5,000
Balance, end of period
$219,033
$ 40,539
$14,041
$ 2,529
$ 470
$ 410
$277,022
In 2014, additions to non-accrual loans and leases decreased $19.2 million, charge-offs of non-accrual loans and leases
decreased $2.6 million, non-accrual loans and leases that returned to accrual status decreased $29.6 million, payments received
on non-accrual loans and leases decreased $17.9 million and non-accrual loans and leases transferred to other assets decreased
$13.5 million, compared with 2013. These changes were primarily due to improved credit quality in the consumer real estate and
commercial portfolios.
Loan Credit Classifications TCF assesses the risk of its loan and lease portfolio utilizing numerous risk characteristics as
outlined in the previous sections. The loan credit classifications represent an additional characteristic that is closely monitored in
the overall credit risk process. The loan credit classifications derived from standard regulatory rating definitions include: accruing
non-classified (pass and special mention) and accruing classified (substandard and doubtful). Accruing classified loans and leases
have well-defined weaknesses, but may never become non-accrual or result in a loss.
36
The following tables summarize accruing loans and leases by portfolio and regulatory classification and non-accrual loans and
leases by portfolio.
(Dollars in thousands)
Pass Special Mention Substandard Doubtful
Accruing Non-accrual
Total
Total Total Loans
and Leases
Accruing Non-classified
Accruing Classified
At December 31, 2014
Consumer real estate
Commercial
Leasing and equipment finance
Inventory finance
Auto finance
Other
$ 5,395,103
3,033,992
3,704,565
1,661,701
1,906,740
24,136
$ 69,811
46,935
16,539
90,413
–
8
$
$ 44,179
51,703
11,548
122,894
4,645
–
Total loans and leases
$15,726,237
$223,706
$234,969
$
–
–
–
–
–
–
–
$ 5,509,093
3,132,630
3,732,652
1,875,008
1,911,385
24,144
$173,271
25,035
12,670
2,082
3,676
–
$ 5,682,364
3,157,665
3,745,322
1,877,090
1,915,061
24,144
$16,184,912
$216,734
$16,401,646
Percent of total loans and leases
95.9%
1.4%
1.4%
–%
98.7%
1.3%
100.0%
At December 31, 2013
Accruing Non-classified
Accruing Classified
(Dollars in thousands)
Pass
Special Mention
Substandard
Doubtful
Consumer real estate
Commercial
Leasing and equipment finance
Inventory finance
Auto finance
Other
$ 6,049,617
2,896,795
3,386,301
1,509,960
1,236,405
26,263
$ 21,309
54,711
15,966
87,024
–
68
$
$ 49,367
156,307
12,445
64,864
2,511
2
Total loans and leases
$15,105,341
$179,078
$285,496
$
–
–
2
–
–
–
2
Total
Accruing
Total
Non-accrual
Total Loans
and Leases
$ 6,120,293
3,107,813
3,414,714
1,661,848
1,238,916
26,333
$219,033
40,539
14,041
2,529
470
410
$ 6,339,326
3,148,352
3,428,755
1,664,377
1,239,386
26,743
$15,569,917
$277,022
$15,846,939
Percent of total loans and leases
95.3%
1.1%
1.8%
–%
98.2%
1.8%
100.0%
The combined balance of accruing classified loans and leases and non-accrual loans and leases was $451.7 million at
December 31, 2014, a decrease of $110.8 million from December 31, 2013. The decrease is primarily due to a decline of
$104.6 million of accruing classified loans in the commercial portfolio due to improved credit quality and a decrease of
$60.3 million in non-accrual loans and leases primarily due to the portfolio sale of consumer real estate TDR loans, which included
some non-accrual TDR loans, continued efforts to actively work out commercial loans and improved credit quality in the
commercial portfolio. Included in the table above in the non-accrual column are $50.0 million and $81.5 million of consumer loans
discharged in Chapter 7 bankruptcy that were not reaffirmed at December 31, 2014 and 2013, respectively.
Allowance for Loan and Lease Losses The determination of the allowance for loan and lease losses is a critical accounting
estimate. TCF’s evaluation of incurred losses is based upon historical loss rates multiplied by the respective portfolio’s loss
emergence period. Factors utilized in the determination of the amount of the allowance include historical trends in loss rates, the
portfolios’ overall risk characteristics, changes in its character or size, risk rating migration, delinquencies, collateral values and
prevailing economic conditions. The various factors used in the methodologies are reviewed on a periodic basis.
The Company considers the allowance for loan and lease losses of $164.2 million appropriate to cover losses incurred in the loan
and lease portfolios at December 31, 2014. 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.
37
In conjunction with Note 6 of Notes to Consolidated Financial Statements, Allowance for Loan and Lease Losses and Credit
Quality Information, the following table includes detailed information regarding TCF’s allowance for loan and lease losses.
(Dollars in thousands)
Consumer real estate:
First mortgage lien
Junior lien
Credit Loss Reserves
At December 31,
Allowance as a Percentage of Total Loans
and Leases Outstanding
At December 31,
2014
2013
2012
2011
2010
2014
2013
2012
2011
2010
$ 55,319
30,042
$133,009
43,021
$119,957
62,056
$115,740
67,695
$105,634
67,216
1.76% 3.53% 2.83% 2.44% 2.16%
1.18
3.14
2.55
2.97
1.67
Consumer real estate
85,361
176,030
182,013
183,435
172,850
1.50
2.78
2.73
2.66
2.42
Commercial:
Commercial real estate
Commercial business
Total commercial
Leasing and equipment
finance
Inventory finance
Auto finance
Other
Total allowance for
loan and lease
losses
Other credit loss reserves:
Reserves for unfunded
commitments
Total credit loss
reserves
N.A. Not Applicable.
24,616
6,751
31,367
18,446
10,020
18,230
745
32,405
5,062
37,467
18,733
8,592
10,623
785
47,821
3,754
51,575
21,037
7,569
4,136
798
40,446
6,508
46,954
21,173
2,996
–
1,114
50,788
11,690
0.94
1.27
1.18
1.25
1.55
1.16
1.26
2.59
1.53
3.68
62,478
0.99
1.19
1.51
1.36
1.71
26,301
2,537
–
1,653
0.49
0.53
0.95
3.09
0.55
0.52
0.86
2.94
0.66
0.48
0.75
2.86
0.67
0.48
–
3.19
0.83
0.32
–
4.22
164,169
252,230
267,128
255,672
265,819
1.00
1.59
1.73
1.81
1.80
943
980
2,456
1,829
2,353
N.A.
N.A.
N.A.
N.A.
N.A
$165,112
$253,210
$269,584
$257,501
$268,172
1.01
1.60
1.75
1.82
1.81
At December 31, 2014, the allowance as a percent of total loans and leases decreased to 1.00%, compared with 1.59% at
December 31, 2013. This decrease was primarily due to the portfolio sale of consumer real estate TDR loans during the fourth
quarter of 2014 resulting in a reduction in the overall credit risk present as of December 31, 2014.
38
The following table sets forth a reconciliation of changes in the allowance for loan and lease losses.
(Dollars in thousands)
Balance, beginning of period
Charge-offs:
Consumer real estate:
First mortgage lien
Junior lien
2014
$ 252,230
Year Ended December 31,
2013
$ 267,128
2012
$ 255,672
2011
$ 265,819
2010
$ 244,471
(43,632)
(19,494)
(60,363)
(37,145)
(101,595)
(83,190)
(94,724)
(62,130)
(78,605)
(56,125)
Total consumer real estate
(63,126)
(97,508)
(184,785)
(156,854)
(134,730)
Commercial:
Commercial real estate
Commercial business
Total commercial
Leasing and equipment finance
Inventory finance
Auto finance
Other
Total charge-offs
Recoveries:
Consumer real estate:
First mortgage lien
Junior lien
Total consumer real estate
Commercial:
Commercial real estate
Commercial business
Total commercial
Leasing and equipment finance
Inventory finance
Auto finance
Other
(8,646)
(11)
(8,657)
(7,316)
(1,653)
(11,856)
(8,359)
(28,287)
(657)
(28,944)
(7,277)
(1,141)
(5,305)
(9,115)
(34,642)
(6,194)
(40,836)
(15,248)
(1,838)
(1,164)
(10,239)
(32,890)
(9,843)
(42,733)
(16,984)
(1,044)
–
(12,680)
(45,682)
(4,045)
(49,727)
(34,745)
(1,484)
–
(16,377)
(100,967)
(149,290)
(254,110)
(230,295)
(237,063)
1,513
5,354
6,867
754
2,133
2,887
3,705
826
1,491
5,860
2,055
6,589
8,644
2,667
103
2,770
3,968
373
607
6,518
1,067
4,582
5,649
1,762
197
1,959
5,058
333
30
7,314
510
3,233
3,743
1,502
152
1,654
4,461
193
–
9,262
2,237
2,633
4,870
724
603
1,327
4,100
339
–
11,338
21,974
Total recoveries
21,636
22,880
20,343
19,313
Net charge-offs
Provision charged to operations
Other(1)
Balance, end of period
(79,331)
95,737
(104,467)
(126,410)
118,368
(6,856)
(233,767)
247,443
(2,220)
(210,982)
200,843
(8)
(215,089)
236,437
–
$ 164,169
$ 252,230
$ 267,128
$ 255,672
$ 265,819
Net charge-offs as a percentage of average loans
and leases
0.49%
0.81%
1.54%
1.45%
1.47%
(1) Included in Other in 2014 is the transfer of $95.3 million, comprised of $77.0 million of previously established allowance for
loan and lease losses and an additional $18.3 million of write-downs arising from the transfer to loans held for sale in
conjunction with the portfolio sale of consumer real estate TDR loans.
During 2014, consumer real estate net charge-offs decreased $32.6 million from 2013 and commercial net charge-offs
decreased $20.4 million from 2013. The decrease in net charge-offs in the consumer real estate portfolio is primarily due to the
improving economy, as incidents of default decrease and home values increase. The decrease in net charge-offs in the
commercial portfolio is primarily due to improved credit quality and continued efforts to work out problem loans.
39
Other Real Estate Owned and Repossessed and Returned Assets Other real estate owned and repossessed and returned
assets 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 assets
At December 31,
2014
2013
2012
2011
2010
$44,932
20,718
65,650
3,525
$47,637
21,237
68,874
3,505
$ 69,599
27,379
$ 87,792
47,106
$ 90,115
50,950
96,978
3,510
134,898
4,758
141,065
8,325
Total other real estate owned and repossessed
and returned assets
$69,175
$72,379
$100,488
$139,656
$149,390
(1) Includes properties owned and foreclosed properties subject to redemption.
Total consumer real estate properties reported in other real estate owned included 277 owned properties and 146 foreclosed
properties subject to redemption at December 31, 2014, compared with 336 owned properties and 143 foreclosed properties
subject to redemption at December 31, 2013. The decrease in owned properties from December 31, 2013 resulted from sales of
647 properties, partially offset by the addition of 588 properties. The average length of time of consumer real estate properties
sold during 2014 was approximately 5.4 months from the date the properties were listed for sale.
The changes in the amount of other real estate owned for the years ended December 31, 2014 and 2013 are summarized in the
following table.
(In thousands)
Balance, beginning of period
Transferred in, net of charge-offs
Sales
Write-downs
Other, net
Balance, end of period
(In thousands)
Balance, beginning of period
Transferred in, net of charge-offs
Sales
Write-downs
Other, net
Balance, end of period
At or For the Year Ended December 31, 2014
Total
Commercial
$ 68,874
$21,237
62,985
3,717
(59,233)
(3,824)
(14,432)
(6,562)
7,456
6,150
Consumer
$ 47,637
59,268
(55,409)
(7,870)
1,306
$ 44,932
$20,718
$ 65,650
At or For the Year Ended December 31, 2013
Total
$ 96,978
81,742
(96,973)
(15,257)
2,384
Commercial
$27,379
13,808
(8,969)
(8,247)
(2,734)
Consumer
$ 69,599
67,934
(88,004)
(7,010)
5,118
$ 47,637
$21,237
$ 68,874
Transfers into other real estate owned decreased by $18.8 million in 2014 compared with 2013. Sales of other real estate owned
decreased by $37.7 million in 2014 compared with 2013.
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 Bank’s management Asset & Liability Committee (‘‘ALCO’’) and the Finance Committee of the TCF Financial 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.
TCF Bank had $767.0 million and $550.0 million of net liquidity qualifying interest-bearing deposits at the Federal Reserve Bank at
December 31, 2014 and 2013, respectively. Interest-bearing deposits held at the Federal Reserve Bank and unencumbered
securities were $1.4 billion and $1.1 billion at December 31, 2014 and 2013, respectively.
40
ALCO and the Finance Committee of the TCF Financial Board of Directors have adopted a Holding Company Investment and
Liquidity Management Policy, which establishes the minimum amount of cash or liquid investments TCF Financial will hold. See
‘‘Item 7A. Quantitative and Qualitative Disclosures about Market Risk’’ for more information. TCF Financial had cash and liquid
investments of $71.8 million and $62.8 million at December 31, 2014 and 2013, respectively.
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, loan sales and borrowings. Lending activities, such as loan
originations and purchases and equipment purchases for lease financing, are the primary uses of TCF’s funds. 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 primarily from the FHLB of Des
Moines, institutional sources under repurchase agreements and other sources.
The primary source of funding for TCF Commercial Finance Canada, Inc. (‘‘TCFCFC’’) is a line of credit with TCF Bank. Primarily
for contingency purposes, TCFCFC maintains a $20.0 million Canadian dollar-denominated line of credit facility with a
counterparty, which is guaranteed by TCF Bank and was unused at both December 31, 2014 and 2013.
Deposits Deposits totaled $15.4 billion at December 31, 2014, an increase of $1.0 billion, or 7.0%, from December 31, 2013,
primarily due to promotions for money market accounts and certificates of deposit.
Checking, savings and money market deposits are an important source of low interest cost funds for TCF. These deposits totaled
$12.4 billion at December 31, 2014, an increase of $0.4 billion from December 31, 2013, and comprised 80.3% of total deposits
at December 31, 2014, compared with 83.2% of total deposits at December 31, 2013. The average balance of these forms of
deposits during 2014 was $12.1 billion, an increase of $0.3 billion from the $11.8 billion average balance for 2013.
Certificates of deposit totaled $3.0 billion at December 31, 2014, compared with $2.4 billion at December 31, 2013.
Non-interest bearing checking represented 18.3% of total deposits at both December 31, 2014 and 2013. TCF’s weighted-
average rate for deposits, including non-interest bearing deposits, was 0.26% at both December 31, 2014 and 2013.
Borrowings Borrowings totaled $1.2 billion and $1.5 billion at December 31, 2014 and 2013, respectively. The weighted-
average rate on long-term borrowings was 1.63% and 1.41% at December 31, 2014 and 2013, respectively. Historically, TCF has
borrowed primarily from the FHLB of Des Moines, institutional sources under repurchase agreements and other sources. At
December 31, 2014, TCF had $2.6 billion of unused, secured borrowing capacity at the FHLB of Des Moines.
On March 17, 2014, TCF Bank redeemed the aggregate principal amount of $50.0 million of subordinated notes due 2015, since
the notes no longer qualified for treatment as Tier 2 or supplementary capital prior to redemption.
See Note 11 of Notes to Consolidated Financial Statements, Long-term Borrowings, for additional information regarding TCF’s
long-term borrowings.
41
Contractual Obligations and Commitments As disclosed in Note 10, Note 11 and Note 17 of Notes to Consolidated Financial
Statements, Short-term Borrowings, Long-term Borrowings and Financial Instruments with Off-Balance Sheet Risk,
respectively, TCF has certain obligations and commitments to make future payments under contracts. At December 31, 2014,
the aggregate contractual obligations and commitments were as follows.
(In thousands)
Contractual Obligations:
Total borrowings
Time deposits
Annual rental commitments under non-cancelable
operating leases
Contractual interest payments(1)
Campus marketing agreements
Payments Due by Period
Total
Less than
1 year
1-3
years
3-5
years
More than
5 years
$1,236,490
3,049,189
$ 164,999
1,829,969
$ 950,433
1,133,486
$ 11,621
58,870
$ 109,437
26,864
193,271
101,329
36,240
26,894
38,116
3,217
57,793
29,036
5,730
41,554
16,425
5,804
67,030
17,752
21,489
Total
$4,616,519
$2,063,195
$2,176,478
$134,274
$ 242,572
(1) Includes accrued interest and future contractual interest obligations on borrowings and time deposits.
(In thousands)
Commitments:
Commitments to extend credit:
Consumer real estate and other
Commercial
Leasing and equipment finance
Amount of Commitment – Expiration by Period
Total
Less than
1 year
1-3
years
3-5
years
More than
5 years
$1,314,826
609,618
140,261
$
28,444
159,184
140,261
$
99,785
124,701
–
$138,279
229,347
–
$1,048,318
96,386
–
Total commitments to extend credit
2,064,705
327,889
224,486
367,626
1,144,704
Standby letters of credit and guarantees on
industrial revenue bonds
14,676
12,788
1,458
430
–
Total
$2,079,381
$ 340,677
$ 225,944
$368,056
$1,144,704
Unrecognized tax benefits, projected benefit obligations, demand deposits with indeterminate maturities and discretionary credit
facilities which do not obligate the Company to lend have been excluded from the contractual obligations table above.
Campus marketing agreements consist of fixed or minimum obligations for exclusive marketing and naming rights with four
campuses. TCF is obligated to make annual payments for the exclusive marketing rights at these four campuses through 2029.
TCF also has various renewal options, which may extend the terms of these agreements.
Commitments to extend credit 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. Collateral to secure any funding of these commitments predominantly consists
of residential and commercial real estate.
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 2018. Collateral
held consists primarily 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.
Capital Management TCF is committed to managing capital to maintain protection for depositors and creditors. TCF employs
a variety of capital management tools to achieve its capital goals, including, but not limited to, dividends, public offerings of
preferred and common stock, common stock repurchases and the issuance or redemption of subordinated debt and other capital
instruments. TCF maintains a Capital Planning and Dividend Policy which applies to TCF Financial and incorporates TCF Bank’s
Capital Planning and Dividend Policy. These policies ensure that capital strategy actions, including the addition of new capital, if
needed, and/or the declaration of preferred stock, common stock or bank 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 and overall financial condition. TCF’s capital levels are managed in such a manner that all regulatory capital requirements
for well-capitalized banks and bank holding companies are exceeded. At December 31, 2014 and 2013, regulatory capital for TCF
42
and TCF Bank exceeded their regulatory capital requirements. See Note 14 of Notes to Consolidated Financial Statements,
Regulatory Capital Requirements.
Preferred Stock At December 31, 2014, there were 6,900,000 depositary shares outstanding, each representing a
1/1,000th interest in a share of the Series A Non-Cumulative Perpetual Preferred Stock of TCF Financial Corporation, par value
$.01 per share, with a liquidation preference of $25,000 per share (equivalent to $25 per depositary share)(‘‘Series A Preferred
Stock’’). Dividends are payable on the Series A Preferred Stock if, as and when declared by TCF’s Board of Directors on a
non-cumulative basis on March 1, June 1, September 1 and December 1 of each year at a per annum rate of 7.5%. At
December 31, 2014, there were 4,000,000 shares outstanding of 6.45% Series B Non-Cumulative Perpetual Preferred Stock of
TCF Financial Corporation, par value $.01 per share, with a liquidation preference of $25 per share (‘‘Series B Preferred Stock’’).
Dividends are payable on the Series B Preferred Stock if, as and when declared by TCF’s Board of Directors on a non-cumulative
basis on March 1, June 1, September 1 and December 1 of each year at a per annum rate of 6.45%.
Equity Total equity at December 31, 2014 was $2.1 billion, or 11.0% of total assets, compared with $2.0 billion, or 10.7% of
total assets, at December 31, 2013. Dividends to common stockholders on a per share basis totaled 5 cents for each quarter of
the years ended December 31, 2014 and 2013. TCF’s common dividend payout ratio for the quarters ended December 31, 2014
and 2013 were 41.67% and 22.99%, respectively. TCF Financial’s primary funding sources for dividends are earnings and
dividends received from TCF Bank.
At December 31, 2014, TCF had 5.4 million shares remaining in its stock repurchase program authorized by its Board of
Directors, which has no expiration. Prior consultation with the Federal Reserve is required by regulation before TCF could
repurchase any shares of its common stock.
Tangible common equity at December 31, 2014 was $1.6 billion, or 8.50% of total tangible assets, compared with $1.5 billion, or
8.03% of total tangible assets, at December 31, 2013. Tangible common equity and the Tier 1 common capital ratio are not
financial measures recognized under generally accepted accounting principles in the United States (‘‘GAAP’’) (i.e., non-GAAP).
Tangible common equity represents total equity less preferred stock, goodwill, other intangible assets and non-controlling
interest in subsidiaries. Tangible assets represent total assets less goodwill and other intangible assets. When evaluating capital
adequacy and utilization, management considers financial measures such as tangible common equity to tangible assets and the
Tier 1 common capital ratio. These non-GAAP financial measures are viewed by management as useful indicators of capital levels
available to withstand unexpected market or economic conditions and also provide investors, regulators and other users with
information to be viewed in relation to other banking institutions.
43
The following table includes reconciliations of the non-GAAP financial measures of tangible common equity, tangible assets and
Tier 1 common capital to the GAAP measures of total equity, total assets and Tier 1 risk-based capital, respectively.
(Dollars in thousands)
Computation of tangible common equity to
tangible assets:
Total equity
Less: Non-controlling interest in
subsidiaries
Total TCF Financial Corporation
stockholders’ equity
Less:
Preferred stock
Goodwill
Other intangibles
2014
2013
2012
2011
2010
At December 31,
$ 2,135,364
$ 1,964,759
$ 1,876,643
$ 1,878,627
$ 1,480,163
13,715
11,791
13,270
10,494
8,500
2,121,649
1,952,968
1,863,373
1,868,133
1,471,663
263,240
225,640
4,641
263,240
225,640
6,326
263,240
225,640
8,674
–
225,640
7,134
–
152,599
1,232
Tangible common equity
$ 1,628,128
$ 1,457,762
$ 1,365,819
$ 1,635,359
$ 1,317,832
Total assets
Less:
Goodwill
Other intangibles
Tangible assets
$19,394,611
$18,379,840
$18,225,917
$18,979,388
$18,465,025
225,640
4,641
225,640
6,326
225,640
8,674
225,640
7,134
152,599
1,232
$19,164,330
$18,147,874
$17,991,603
$18,746,614
$18,311,194
Tangible common equity to tangible assets
8.50%
8.03%
7.59%
8.72%
7.20%
Computation of Tier 1 risk-based capital ratio:
Total Tier 1 capital
Total risk-weighted assets
$ 1,919,887
$16,321,425
$ 1,763,682
$15,455,706
$ 1,633,336
$14,733,203
$ 1,706,926
$13,475,330
$ 1,459,703
$13,936,629
Total Tier 1 risk-based capital ratio
11.76%
11.41%
11.09%
12.67%
10.47%
Computation of Tier 1 common capital ratio:
Total Tier 1 capital
Less:
Preferred stock
Qualifying non-controlling interest in
subsidiaries
Qualifying trust preferred securities
$ 1,919,887
$ 1,763,682
$ 1,633,336
$ 1,706,926
$ 1,459,703
263,240
263,240
263,240
–
–
13,715
–
11,791
–
13,270
–
10,494
115,000
8,500
115,000
Total Tier 1 common capital
$ 1,642,932
$ 1,488,651
$ 1,356,826
$ 1,581,432
$ 1,336,203
Total risk-weighted assets
Total Tier 1 common capital ratio
$16,321,425
$15,455,706
$14,733,203
$13,475,330
$13,936,629
10.07%
9.63%
9.21%
11.74%
9.59%
Critical Accounting Policies
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. See Note 1 of Notes to Consolidated Financial Statements, Summary of Significant
Accounting Policies, for further discussion of critical accounting policies.
Recent Accounting Developments
In January 2015, the FASB issued Accounting Standards Update (‘‘ASU’’) No. 2015-01, Simplifying Income Statement
Presentation by Eliminating the Concept of Extraordinary Items, which eliminates from GAAP the concept of an extraordinary
item. As a result, an entity will no longer be required to segregate extraordinary items from the results of ordinary operations, to
separately present an extraordinary item on its income statement, net of tax, after income from continuing operations or to
disclose income taxes and earnings per share data applicable to an extraordinary item. However, presentation and disclosure
guidance for items that are unusual in nature and occur infrequently will be retained. The adoption of this ASU will be required on
a prospective or retrospective basis beginning with TCF’s Quarterly Report on Form 10-Q for the quarter ending March 31, 2016.
The adoption of this ASU is not expected to have a material impact on our consolidated financial statements.
In November 2014, the FASB issued ASU No. 2014-17, Business Combinations: Pushdown Accounting, which provides an
acquired entity with an option to apply pushdown accounting in its separate financial statements upon occurrence of an event in
44
which an acquirer obtains control of the acquired entity. This ASU became effective and was adopted by TCF on November 18,
2014. The adoption of this ASU did not have an impact on our consolidated financial statements.
In November 2014, the FASB issued ASU No. 2014-16, Determining Whether the Host Contract in a Hybrid Financial Instrument
Issued in the Form of a Share Is More Akin to Debt or to Equity, which requires an entity that issues or invests in hybrid financial
instruments, issued in the form of a share, to determine the nature of the host contract by considering all stated and implied
substantive terms and features of the hybrid financial instrument, weighing each term and feature on the basis of relevant facts
and circumstances and including the embedded derivative feature that is being evaluated for separate accounting from the host
contract. The adoption of this ASU will be required on a modified retrospective basis beginning with TCF’s Quarterly Report on
Form 10-Q for the quarter ending March 31, 2016. The adoption of this ASU is not expected to have a material impact on our
consolidated financial statements.
In August 2014, the FASB issued ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going
Concern, which provides guidance regarding management’s responsibility to evaluate whether there is substantial doubt about
an entity’s ability to continue as a going concern. If substantial doubt exists and is not alleviated, or if substantial doubt exists and
is alleviated by consideration of management’s plans, footnote disclosures are required. The adoption of this ASU will be required
on a prospective basis beginning with TCF’s Annual Report on Form 10-K for the year ending December 31, 2016. The adoption
of this ASU is not expected to have a material impact on our consolidated financial statements.
In August 2014, the FASB issued ASU No. 2014-14, Classification of Certain Government-Guaranteed Mortgage Loans upon
Foreclosure, which clarified that creditors should classify certain government-guaranteed mortgage loans upon foreclosure as a
separate other receivable. The separate other receivable will be measured based on the amount of the loan balance (principal and
interest) expected to be recovered from the guarantor. The adoption of this ASU will be required on a prospective or modified
retrospective basis beginning with TCF’s Quarterly Report on Form 10-Q for the quarter ending March 31, 2015. The adoption of
this ASU is not expected to have a material impact on our consolidated financial statements.
In August 2014, the FASB issued ASU No. 2014-13, Measuring the Financial Assets and the Financial Liabilities of a Consolidated
Collateralized Financing Entity, which amends guidance on the measurement of financial assets and financial liabilities of a
consolidated collateralized financing entity. Under the ASU, a reporting entity that has consolidated a collateralized financing
entity may elect to measure the financial assets and financial liabilities using the more observable of the fair value of the financial
assets and the fair value of the financial liabilities. When this measurement alternative is not elected, this ASU clarifies that the
fair value of financial assets and financial liabilities should be measured in accordance with existing fair value guidance and any
difference in the fair value of financial assets and financial liabilities should be reflected in earnings and attributed to the reporting
entity. The adoption of this ASU will be required on a retrospective or modified retrospective basis beginning with TCF’s
Quarterly Report on Form 10-Q for the quarter ending March 31, 2016. The adoption of this ASU is not expected to have a
material impact on our consolidated financial statements.
In June 2014, the FASB issued ASU No. 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide
That a Performance Target Could Be Achieved after the Requisite Service Period, which clarifies that entities should treat
performance targets that can be met after the requisite service period of a share-based payment award as performance
conditions that affect vesting. Under the ASU, an entity would not record compensation expense related to an award for which
transfer to the employee is contingent on the entity’s satisfaction of a performance target until it becomes probable that the
performance target will be met. The adoption of this ASU will be required, either on a retrospective basis or prospective basis,
beginning with TCF’s Quarterly Report on Form 10-Q for the quarter ending March 31, 2016. The adoption of this ASU is not
expected to have a material impact on our consolidated financial statements.
In June 2014, the FASB issued ASU No. 2014-11, Transfers and Servicing (Topic 860): Repurchase-to-Maturity Transactions,
Repurchase Financings, and Disclosures, which makes limited amendments to guidance in Topic 860 on accounting for certain
repurchase agreements. The ASU requires entities to account for repurchase-to-maturity transactions as secured borrowings,
eliminates accounting guidance on linking repurchase financing transactions and expands disclosure requirements related to
certain transfers of financial assets that are accounted for as sales and certain transfers accounted for as secured borrowings.
The adoption of this ASU, as it relates to accounting changes and disclosures for certain transfers of financial assets treated as
sales will be required beginning with TCF’s Quarterly Report on Form 10-Q for the quarter ending March 31, 2015. The adoption
of this ASU, as it relates to disclosures for certain transfers of financial assets accounted for as secured borrowings, will be
required beginning with TCF’s Quarterly Report on Form 10-Q for the quarter ending June 30, 2015. Upon adoption of this ASU,
changes in accounting for transactions outstanding are required to be presented as a cumulative-effect adjustment to retained
earnings as of the beginning of the reporting period, and disclosures are not required to be presented for comparative periods.
The adoption of this ASU is not expected to have a material impact on our consolidated financial statements.
45
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which requires revenue
recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to
which the entity expects to be entitled in exchange for those goods or services. The adoption of this ASU will be required, using
one of two retrospective application methods, beginning with TCF’s Quarterly Report on Form 10-Q for the quarter ending
March 31, 2017. Management is currently evaluating the potential impact of this guidance on our consolidated financial
statements.
In April 2014, the FASB issued ASU No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and
Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, which
amends the guidance for reporting discontinued operations and requires certain disclosures about a disposal of an individually
significant component of an entity. The adoption of this ASU will be required on a prospective basis beginning with TCF’s
Quarterly Report on Form 10-Q for the quarter ending March 31, 2015. The adoption of this ASU is not expected to have a
material impact on our consolidated financial statements.
Legislative and Regulatory Developments
Federal and state legislation impose 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.
Interchange Litigation On January 20, 2015, the Supreme Court denied the request made by a group of trade associations
and merchants seeking review of a decision of the U.S. Court of Appeals, which largely upheld the Federal Reserve Board’s rules
governing debit card interchange fees.
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, 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; Competitive Conditions; Credit and Other Risks Deterioration in general
economic and banking industry conditions, including those arising from government shutdowns, defaults, anticipated defaults or
rating agency downgrades of sovereign debt (including debt of the U.S.), or increases in unemployment in TCF’s primary banking
markets; adverse economic, business and competitive developments such as shrinking interest margins, reduced demand for
financial services and loan and lease products, deposit outflows, increased deposit costs due to competition for deposit growth
and evolving payment system developments, deposit account attrition or an inability to increase the number of deposit accounts;
customers completing financial transactions without using a bank; adverse changes in credit quality and other risks posed by
TCF’s loan, lease, investment, securities held to maturity and securities available for sale portfolios, including declines in
commercial or residential real estate values, changes in the allowance for loan and lease losses dictated by new market
conditions or regulatory requirements, or the inability of home equity line borrowers to make increased payments caused by
increased interest rates or amortization of principal; deviations from estimates of prepayment rates and fluctuations in interest
rates that result in decreases in the value of assets such as interest-only strips that arise in connection with TCF’s loan sales
activity; 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
46
who satisfy our credit quality requirements; decreases in demand for the types of equipment that TCF leases or finances; the
effect of any negative publicity.
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 and their subsidiaries; the imposition of requirements that adversely impact TCF’s deposit, lending, loan
collection and other business activities such as mortgage foreclosure moratorium laws, further regulation of financial institution
campus banking programs, use by municipalities of eminent domain on property securing troubled residential mortgage loans, or
imposition of underwriting or other limitations that impact the ability to use certain variable-rate products; changes affecting
customer account charges and fee income, including changes to interchange rates; regulatory actions or changes in customer
opt-in preferences with respect to overdrafts, which may have an adverse impact on TCF’s fee revenue; 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; regulatory criticism and resulting
enforcement actions or other adverse consequences such as increased capital requirements, higher deposit insurance
assessments or monetary damages or penalties; heightened regulatory practices, requirements or expectations, including, but
not limited to, requirements related to enterprise risk management, 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 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 impact on banks of
regulatory reform, including additional capital, leverage, liquidity and risk management requirements or changes in the
composition of qualifying regulatory capital; adverse changes in securities markets directly or indirectly affecting TCF’s ability to
sell assets or to fund its operations; diminished unsecured borrowing capacity resulting from TCF credit rating downgrades and
unfavorable conditions in the credit markets that restrict or limit various funding sources; costs associated with new regulatory
requirements or interpretive guidance relating to liquidity; 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.
Branching Risk; Growth Risks Adverse developments affecting TCF’s supermarket banking relationships or any of the
supermarket chains in which TCF maintains supermarket branches; costs related to closing underperforming branches; slower
than anticipated growth in existing or acquired businesses; inability to successfully execute on TCF’s growth strategy through
acquisitions or cross-selling opportunities; failure to expand or diversify TCF’s balance sheet through programs or new
opportunities; failure to successfully attract and retain new customers, including the failure to attract and retain manufacturers
and dealers to expand the inventory finance business; failure to effectuate, and risks of claims related to, sales and
securitizations of loans; risks related to new product additions and addition of distribution channels (or entry into new markets)
for existing products.
Technological and Operational Matters Technological or operational difficulties, loss or theft of information, cyber-attacks
and other security breaches, counterparty failures and the possibility that deposit account losses (fraudulent checks, etc.) may
increase; failure to keep pace with technological change, including the failure to develop and maintain technology necessary to
satisfy customer demands.
Litigation Risks Results of litigation or government enforcement actions, including class action litigation or enforcement
actions 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 federal, state or foreign 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.
47
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 portfolios.
TCF’s Enterprise Risk Management Committee meets at least quarterly and is responsible for monitoring the loan and lease
portfolio composition and risk tolerance within the various segments of the portfolio. The Enterprise Risk Management
Committee and the Board of Directors have adopted a Concentration Policy to manage 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, inventory finance loans and equipment
finance 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, essentially all of the amortized cost of securities held in the securities available for sale portfolio are
issued and guaranteed by the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation or the
Government National Mortgage Association as of December 31, 2014.
Interest Rate Risk
ALCO and the Finance Committee of TCF Financial’s Board of Directors have adopted interest rate risk policy limits which are
incorporated into the Company’s investment policy. 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 movements in interest rates. TCF’s results of
operations depend to a large degree on its net interest income and its ability to manage interest rate risk. Although TCF manages
other risks, such as credit risk, liquidity risk, operational and other risks in the normal course of its business, the Company
considers interest rate risk to be one of its more significant market risks. 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 re-pricing 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. A mismatch between maturities, interest rate sensitivities and
prepayment characteristics of assets and liabilities results in interest-rate risk. TCF, like most financial institutions, has material
interest-rate risk exposure to changes in both short-term and long-term interest rates, as well as variable interest rate indices
(e.g., the prime rate or LIBOR).
TCF’s 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. ALCO manages TCF’s interest rate risk based on interest rate
expectations and other factors. The principal objective of TCF’s management asset and liability activities is to provide maximum
48
levels of net interest income and facilitate the funding needs of the Company,while maintaining acceptable levels of interest rate
risk and liquidity risk.
ALCO primarily uses two interest rate risk tools with policy limits to evaluate TCF’s interest rate risk: net interest income
simulation and economic value of equity (‘‘EVE’’). In addition, interest rate gap is reviewed to monitor asset and liability repricing
over various time periods.
Net Interest Income Simulation Management utilizes net interest income simulation models to estimate the near-term
effects of changing interest rates on its net interest income. Net interest income simulation involves forecasting net interest
income under a variety of scenarios, including the level of interest rates, the shape of the yield curve and the spreads between
market interest rates. Management exercises its best judgment in making assumptions regarding events that management can
influence, such as non-contractual deposit re-pricings and events outside management’s 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 subjective
and, as a result, net interest income simulation results will 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.
TCF performs various sensitivity analyses on assumptions of new loan spreads, prepayment rates, basis risk, deposit attrition
and deposit re-pricing.
The following table presents changes in TCF’s net interest income over a twelve month period if short- and long-term interest
rates were to sustain an immediate increase of 100 basis points and 200 basis points. The impact of planned growth and new
business activities is factored into the simulation model.
(Dollars in millions)
Immediate Change in Interest Rates:
+200 basis points
+100 basis points
Impact on Net Interest Income
Year Ended December 31,
2014
2013
$73.6
39.4
8.9% $64.4
36.7
4.7
7.9%
4.5
As of December 31, 2014, 50.5% of TCF’s loan and lease balances will reprice or are expected to pay down in the next 12 months
and 64.1% of TCF’s deposit balances are low cost or no cost deposits. The mix of assets repricing compared to low cost or no
cost deposits should enable TCF to increase net interest income when interest rates rise.
Economic Value of Equity Management also uses EVE to measure risk in the balance sheet that might not be taken into
account in the net interest income simulation analysis. Net interest income simulation highlights exposure over a relatively short
time period, while EVE 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 present value of liability cash flows. EVE 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, EVE 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.
Interest Rate Gap The interest rate gap is the difference between interest-earning assets and interest-bearing liabilities
re-pricing within a given period and represents the net asset or liability sensitivity at a point in time. An interest rate gap measure
could be significantly affected by external factors such as loan prepayments, early withdrawals of deposits, changes in the
correlation of various interest-bearing instruments, competition, or a rise or decline in interest rates.
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 Finance Committee of TCF Financial’s Board of Directors have adopted a Holding Company Investment and
Liquidity Management Policy, which establishes a minimum target amount of cash or liquid investments TCF Financial will hold.
TCF Financial’s primary source of cash flow is capital distributions from TCF Bank. TCF Bank may be required to receive
regulatory approval prior to making any such distributions in the future and such distributions 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. See Note 14 of Notes to Consolidated Financial Statements,
Regulatory Capital Requirements, for further information.
49
ALCO and the Finance Committee of TCF Financial’s Board of Directors have adopted a Liquidity Management Policy for TCF
Bank 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 funding
sources are reported to ALCO on a monthly basis. TCF’s Liquidity Management Policy defines liquidity stress scenarios and
establishes asset liquidity target ranges based upon those stress scenarios that are deemed appropriate for its risk profile.
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 established
agreements. At December 31, 2014, TCF had asset liquidity of $1.4 billion.
Deposits are TCF’s primary source of funding. TCF also maintains secured sources of funding, which primarily include $2.6 billion
of incremental borrowing capacity at the FHLB of Des Moines, as well as access to the Federal Reserve Discount Window.
Collateral pledged by TCF to the FHLB and the Federal Reserve consists primarily of consumer and commercial real estate loans.
The FHLB relies upon its own internal credit analysis of TCF when determining TCF’s secured borrowing capacity. In addition to
the above, TCF maintains other sources of unsecured and uncommitted borrowing capacity, including overnight federal funds
purchased lines, access to brokered deposits and access to the capital markets. 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.
Beginning in 2011, TCF entered into forward foreign exchange contracts in order to minimize the risk of changes in foreign
exchange rates on its investment in and loans to TCF Commercial Finance Canada, Inc. and on certain other foreign lease
transactions. The values 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. See Note 18 of Notes to Consolidated Financial Statements, Derivative Instruments,
for further information.
50
Item 8. Financial Statements and Supplementary Data
21JUL200414412105
Report of Independent Registered Public Accounting 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, 2014 and 2013, and the related consolidated statements of income, comprehensive income,
equity, and cash flows for each of the years in the three year period ended December 31, 2014. 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, 2014 and 2013, and the results of their operations and their
cash flows for each of the years in the three year period ended December 31, 2014, 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, 2014, based on criteria established in Internal
Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO), and our report dated February 23, 2015 expressed an unqualified opinion on the effectiveness of the Company’s internal
control over financial reporting.
8OCT201312085186
Minneapolis, Minnesota
February 23, 2015
51
Consolidated Statements of Financial Condition
(Dollars in thousands, except per-share data)
Assets:
Cash and due from banks
Investments
Securities held to maturity
Securities available for sale
Loans and leases held for sale
Loans and leases:
Consumer real estate:
First mortgage lien
Junior lien
Total consumer real estate
Commercial
Leasing and equipment finance
Inventory finance
Auto finance
Other
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 $0.01 per share, 30,000,000 shares authorized; 4,006,900
shares issued
Common stock, par value $0.01 per share, 280,000,000 shares authorized;
167,503,568 and 165,164,861 shares issued, respectively
Additional paid-in capital
Retained earnings, subject to certain restrictions
Accumulated other comprehensive loss
Treasury stock at cost, 42,566 shares, and other
Total TCF Financial Corporation stockholders’ equity
Non-controlling interest in subsidiaries
Total equity
Total liabilities and equity
See accompanying notes to consolidated financial statements.
52
At December 31,
2014
2013
$ 1,115,250
85,492
214,454
463,294
132,266
$
915,076
94,326
19,912
551,064
79,768
3,139,152
2,543,212
5,682,364
3,157,665
3,745,322
1,877,090
1,915,061
24,144
3,766,421
2,572,905
6,339,326
3,148,352
3,428,755
1,664,377
1,239,386
26,743
16,401,646
(164,169)
15,846,939
(252,230)
16,237,477
436,361
225,640
484,377
15,594,709
437,602
225,640
461,743
$19,394,611
$18,379,840
$ 5,195,243
5,212,320
1,993,130
3,049,189
$ 4,980,451
6,194,003
831,910
2,426,412
15,449,882
14,432,776
4,425
1,232,065
1,236,490
572,875
4,918
1,483,325
1,488,243
494,062
17,259,247
16,415,081
263,240
263,240
1,675
817,130
1,099,914
(10,910)
(49,400)
2,121,649
13,715
1,652
779,641
977,846
(27,213)
(42,198)
1,952,968
11,791
2,135,364
1,964,759
$19,394,611
$18,379,840
Consolidated Statements of Income
(In thousands, except per-share data)
Interest income:
Loans and leases
Securities available for sale
Securities held to maturity
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
Gains on sales of auto loans, net
Gains on sales of consumer real estate loans, net
Servicing fee income
Subtotal
Leasing and equipment finance
Other
Fees and other revenue
Gains (losses) on securities, net
Total non-interest income
Non-interest expense:
Compensation and employee benefits
Occupancy and equipment
FDIC insurance
Operating lease depreciation
Advertising and marketing
Other
Subtotal
Loss on termination of debt
Branch realignment
Foreclosed real estate and repossessed assets, net
Other credit costs, net
Total non-interest expense
Income (loss) before income tax expense (benefit)
Income tax expense (benefit)
Income (loss) after income tax expense (benefit)
Income attributable to non-controlling interest
Net income (loss) attributable to TCF Financial Corporation
Preferred stock dividends
Year Ended December 31,
2013
2014
2012
$820,436
11,994
5,281
36,518
$819,501
18,074
277
26,688
$ 835,380
35,150
281
13,812
874,229
864,540
884,623
38,385
20,215
58,600
815,629
95,737
719,892
154,386
51,323
22,225
227,934
43,565
34,794
21,444
99,803
93,799
10,704
432,240
1,027
433,267
452,942
139,023
25,123
27,152
22,943
179,904
847,087
–
–
24,567
123
871,777
281,382
99,766
181,616
7,429
174,187
19,388
36,604
25,312
61,916
802,624
118,368
684,256
166,606
51,920
22,656
241,182
29,699
21,692
13,406
64,797
90,919
6,196
403,094
964
404,058
429,188
134,694
32,066
24,500
21,477
167,777
809,702
–
8,869
27,950
(1,252)
845,269
243,045
84,345
158,700
7,032
151,668
19,065
40,987
63,617
104,604
780,019
247,443
532,576
177,953
52,638
24,181
254,772
22,101
5,413
7,759
35,273
92,172
5,974
388,191
102,232
490,423
393,841
130,792
30,425
25,378
25,241
163,897
769,574
550,735
–
41,358
887
1,362,554
(339,555)
(132,858)
(206,697)
6,187
(212,884)
5,606
Net income (loss) available to common stockholders
$154,799
$132,603
$ (218,490)
Net income (loss) per common share:
Basic
Diluted
See accompanying notes to consolidated financial statements.
$
$
0.95
0.94
$
$
0.82
0.82
$
$
(1.37)
(1.37)
53
Consolidated Statements of Comprehensive Income
(In thousands)
Net income (loss) attributable to TCF Financial Corporation
Other comprehensive income (loss):
Securities available for sale:
Year Ended December 31,
2014
$174,187
2013
$151,668
2012
$(212,884)
Unrealized gains (losses) arising during the period
Reclassification of net (gains) losses to net income (loss)
29,071
(76)
(61,177)
(860)
19,794
(89,879)
Net investment hedge:
Unrealized gains (losses) arising during the period
Foreign currency translation adjustment:
Unrealized gains (losses) arising during the period
Recognized postretirement prior service cost:
Unrealized gains (losses) arising during the period
Reclassification of net (gains) losses to net income (loss)
Income tax (expense) benefit
Total other comprehensive income (loss)
Comprehensive income (loss)
See accompanying notes to consolidated financial statements.
3,126
1,625
(3,704)
(1,979)
–
(47)
(12,067)
–
(46)
22,781
(630)
531
151
(28)
25,678
16,303
(39,656)
(44,383)
$190,490
$112,012
$(257,267)
54
Consolidated Statements of Equity
TCF Financial Corporation
(Dollars in thousands)
Preferred
Common
Number of
Shares Issued
Preferred Common
Stock
Stock
Additional
Paid-in
Capital
Accumulated
Other
Retained Comprehensive
Income (Loss)
Earnings
Treasury
Stock
and
Other
Non-
controlling
Interests
Total
Total
Equity
Balance, December 31, 2011
– 160,366,380 $
$1,604 $715,247 $1,127,823
$ 56,826 $(33,367) $1,868,133
$10,494 $1,878,627
Balance, December 31, 2012
4,006,900 163,428,763 $263,240
$1,634 $750,040 $ 877,445
$ 12,443 $(41,429) $1,863,373
$13,270 $1,876,643
Net loss attributable to TCF
Financial Corporation
Other comprehensive income
(loss)
Public offering of preferred stock
Net investment by (distribution to)
non-controlling interest
Dividends on preferred stock
Dividends on common stock
Grants of restricted stock
Common shares purchased by
TCF employee benefit plans
Cancellation of shares of restricted
stock
Cancellation of common shares
for tax withholding
Net amortization of stock
compensation
Stock compensation tax (expense)
benefit
Change in shares held in trust for
deferred compensation plans, at
cost
–
–
4,006,900
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,822,025
1,742,990
(322,908)
(179,724)
–
–
–
–
–
–
263,240
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
18
17
(3)
(2)
–
–
–
–
–
–
–
–
–
(18)
19,445
(1,198)
(1,947)
11,108
(659)
8,062
(212,884)
–
–
–
(44,383)
–
–
(5,606)
(31,904)
–
–
16
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Net income attributable to TCF
Financial Corporation
Other comprehensive income
(loss)
Net investment by (distribution to)
non-controlling interest
Dividends on preferred stock
Dividends on common stock
Grants of restricted stock
Common shares purchased by
TCF employee benefit plans
Cancellation of shares of restricted
stock
Cancellation of common shares
for tax withholding
Net amortization of stock
compensation
Stock compensation tax (expense)
benefit
Change in shares held in trust for
deferred compensation plans, at
cost
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
532,777
1,389,819
(120,313)
(66,185)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
5
–
–
–
–
–
(5)
14
20,165
–
(1)
–
–
–
(299)
(954)
10,398
(473)
769
151,668
–
–
(39,656)
–
(19,065)
(32,227)
–
–
25
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Net income attributable to TCF
Financial Corporation
Other comprehensive income
(loss)
Net investment by (distribution
to) non-controlling interest
Dividends on preferred stock
Dividends on common stock
Grants of restricted stock
Common shares purchased by
TCF employee benefit plans
Cancellation of shares of
restricted stock
Cancellation of common shares
for tax withholding
Net amortization of stock
compensation
Exercise of stock options
Stock compensation tax
(expense) benefit
Change in shares held in trust
for deferred compensation
plans, at cost
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,152,906
1,452,837
(108,490)
(205,546)
–
47,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
11
15
–
–
–
–
–
(11)
23,068
(1)
(519)
(2)
(3,332)
–
–
–
–
9,025
740
1,316
7,202
174,187
–
–
16,303
–
(19,388)
(32,731)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(8,062)
–
151,668
7,032
158,700
(39,656)
–
(39,656)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(212,884)
6,187
(206,697)
(44,383)
263,240
–
–
(44,383)
263,240
–
(5,606)
(31,904)
–
19,462
(1,185)
(1,949)
11,108
(659)
–
(19,065)
(32,227)
–
20,179
(274)
(955)
10,398
(473)
–
(19,388)
(32,731)
–
23,083
(520)
(3,334)
9,025
740
1,316
(3,411)
–
–
–
–
–
–
–
–
–
(3,411)
(5,606)
(31,904)
–
19,462
(1,185)
(1,949)
11,108
(659)
–
(8,511)
–
–
–
–
–
–
–
–
–
(8,511)
(19,065)
(32,227)
–
20,179
(274)
(955)
10,398
(473)
–
(5,505)
–
–
–
–
–
–
–
–
–
–
(5,505)
(19,388)
(32,731)
–
23,083
(520)
(3,334)
9,025
740
1,316
–
(769)
–
174,187
7,429
181,616
16,303
–
16,303
Balance, December 31, 2013
4,006,900 165,164,861 $263,240
$1,652 $779,641 $ 977,846
$(27,213) $(42,198) $1,952,968
$11,791 $1,964,759
Balance, December 31, 2014
4,006,900 167,503,568 $263,240
$1,675 $817,130 $1,099,914
$(10,910) $(49,400) $2,121,649
$13,715 $2,135,364
See accompanying notes to consolidated financial statements.
55
(7,202)
–
Consolidated Statements of Cash Flows
(In thousands)
Cash flows from operating activities:
Year Ended December 31,
2014
2013
2012
Net income (loss) attributable to TCF Financial Corporation
Adjustments to reconcile net income (loss) to net cash provided by (used in)
$
174,187
$ 151,668
$ (212,884)
operating activities:
Provision for credit losses
Depreciation and amortization
Proceeds from sales of loans and leases held for sale
Gains on sales of assets, net
Loss on termination of debt
Net income attributable to non-controlling interest
Originations of loans held for sale, net of repayments
Net change in other assets and accrued expenses and other liabilities
Other, net
Net cash provided by (used in) operating activities
Cash flows from investing activities:
Loan originations and purchases, net of principal collected on loans and
leases
Purchases of equipment for lease financing
Purchase of inventory finance portfolios
Proceeds from sales of loans
Proceeds from sales of lease receivables
Proceeds from sales of securities
Purchases of securities
Proceeds from maturities of and principal collected on securities
Purchases of Federal Home Loan Bank stock
Redemption of Federal Home Loan Bank stock
Proceeds from sales of real estate owned
Purchases of premises and equipment
Other, net
95,737
128,701
571,551
(90,736)
–
7,429
(626,172)
83,624
(32,571)
311,750
118,368
117,950
277,180
(61,265)
–
7,032
(353,982)
190,371
(36,288)
411,034
(2,190,753)
(920,985)
–
2,278,812
25,468
2,813
(139,080)
58,151
(97,000)
105,931
67,049
(45,469)
30,140
(1,196,030)
(904,383)
(9,658)
1,378,235
43,215
46,506
(53,312)
91,424
(18,789)
40,976
102,250
(37,859)
35,636
247,443
109,192
161,221
(140,665)
550,735
6,187
(171,420)
(67,985)
14,839
496,663
(1,353,981)
(938,228)
(37,527)
560,421
78,805
2,089,044
(645,880)
202,900
(157,517)
197,571
132,044
(44,082)
39,949
Net cash provided by (used in) investing activities
(824,923)
(481,789)
123,519
Cash flows from financing activities:
Net change in deposits
Net change in short-term borrowings
Proceeds from long-term borrowings
Payments on long-term borrowings
Net proceeds from public offerings of preferred stock
Redemption of subordinated debt
Redemption of trust preferred securities
Net investment by (distribution to) non-controlling interest
Dividends paid on preferred stock
Dividends paid on common stock
Stock compensation tax (expense) benefit
Common shares sold to TCF employee benefit plans
Exercise of stock options
Net cash provided by (used in) financing activities
Net change in cash and due from banks
Cash and due from banks at beginning of period
Cash and due from banks at end of period
Supplemental disclosures of cash flow information:
Cash paid (received) for:
997,661
(493)
2,808,612
(3,009,948)
–
(50,000)
–
(5,505)
(19,388)
(32,731)
1,316
23,083
740
370,356
2,299
744,348
(1,120,402)
–
(71,020)
–
(8,511)
(19,065)
(32,227)
(473)
20,179
–
1,848,782
(3,797)
1,283,466
(4,164,102)
263,240
–
(115,010)
(3,411)
(5,606)
(31,904)
(659)
19,462
–
713,347
200,174
915,076
(114,516)
(909,539)
(185,271)
1,100,347
(289,357)
1,389,704
$ 1,115,250
$ 915,076
$ 1,100,347
Interest on deposits and borrowings
Income taxes, net
Transfer of loans to other assets
Transfer of securities available for sale to securities held to maturity
$
$
$
$
55,954
113,562
91,180
191,665
See accompanying notes to consolidated financial statements
56
61,453
(28,456) $
$
$
$ 112,463
9,342
$
$ 108,524
(13,376)
$ 137,311
–
$
Notes to Consolidated Financial Statements
Note 1. Summary of Significant Accounting Policies
Basis of Presentation TCF Financial Corporation, a Delaware corporation (‘‘we,’’ ‘‘us,’’ ‘‘our,’’ ‘‘TCF’’ or the ‘‘Company’’), is a
national bank holding company based in Wayzata, Minnesota. Unless otherwise indicated, references herein to ‘‘TCF’’ include its
direct and indirect subsidiaries. Its principal subsidiary, TCF National Bank (‘‘TCF Bank’’), is headquartered in South Dakota.
References herein to ‘‘TCF Financial’’ refer to TCF Financial Corporation on an unconsolidated basis. All significant intercompany
accounts and transactions have been eliminated in consolidation.
Certain reclassifications have been made to prior period financial statements to conform to the current period presentation.
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.
Critical Accounting Policies
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.
Allowance for Loan and Lease Losses The allowance for loan and lease losses is maintained at a level 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. Loans classified as
troubled debt restructuring (‘‘TDR’’) loans are considered impaired loans. TCF individually evaluates impairment on all impaired
commercial and inventory finance loans, certain large impaired equipment finance loans and leases, large consumer real estate
TDR loans, auto finance TDR loans and all non-accrual Winthrop Resources Corporation (‘‘Winthrop’’) leases. All other loans and
leases are evaluated collectively for impairment. See Note 6, Allowance for Loan and Lease Losses and Credit Quality
Information, for a definition of impaired loans.
Loan impairment on consumer real estate TDR loans is a key component of the allowance for loan and lease losses. Impairment
is generally based upon the present value of the expected future cash flows discounted at the loan’s initial effective interest rate,
unless the loans are collateral dependent, in which case loan impairment is based upon the fair value of the collateral less selling
expenses. See Note 6, Allowance for Loan and Lease Losses and Credit Quality Information, for further information on the
determination of the allowance for losses on accruing consumer real estate TDR loans.
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, unless the loans are collateral dependent, in
which case loan impairment is based upon the fair value of collateral less estimated selling costs; however, if payment or
satisfaction of the loan is dependent on the operation, rather than the sale of the collateral, the impairment does not include
selling costs.
The impairment for all other loans and leases is evaluated collectively by various characteristics. The collective evaluation of
incurred losses in these portfolios is based upon their historical loss rates multiplied by the respective loss emergence period.
Factors utilized in the determination of the amount of the allowance include historical trends in loss rates, the portfolio’s overall
risk characteristics, changes in its character or size, risk rating migration, delinquencies, collateral values and prevailing economic
conditions.
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 in calculating the allowance for loan and lease losses. Consumer real estate loans are charged off to
the estimated fair value of underlying collateral, less estimated selling costs, no later than 150 days past due. Additional review of
the fair value, less estimated costs to sell, compared with the recorded value occurs upon foreclosure and additional charge-offs
are recorded if necessary. Auto finance loans are generally charged off to the estimated fair value of underlying collateral, less
estimated selling costs, if repossession is reasonably assured and in process. Otherwise, auto finance loans are charged off in
full no later than 120 days past due. Deposit account overdrafts, which are included within other loans, are charged off at or
57
before they are 60 days past due. Commercial loans, leasing and equipment finance loans and inventory finance loans which are
considered collateral dependent are charged off to estimated fair value, less estimated selling costs when it becomes probable,
based on current information and events, that all principal and interest amounts will not be collectible in accordance with
contractual terms. Loans which are not collateral dependent are charged off when deemed uncollectible based on specific facts
and circumstances.
The amount of the allowance for loan and lease losses significantly depends 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 future minimum lease payments and lease residual values. The determination of
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 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. Interest income on direct financing and sales-type leases is
recognized using methods which approximate a level yield over the fixed, non-cancelable term of the lease. TCF receives pro rata
rent payments for the interim period until the lease contract commences and the fixed, non-cancelable lease term begins. TCF
recognizes these interim payments in the month they are earned and records the income in interest income on direct finance
leases. Management has policies and procedures in place for the determination of lease classification and review of the related
judgments and estimates for all lease financings.
Some lease financings include a residual value 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.
TCF occasionally sells minimum lease payments as a credit risk reduction tool to third-party financial institutions at fixed rates on
a non-recourse basis with its underlying equipment as collateral. For those transactions which achieve sale treatment, the related
lease cash flow stream and the non-recourse financing are derecognized. 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 in the amount of the proceeds received. TCF 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.
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 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. 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.
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
58
and financial reporting bases of assets and liabilities (temporary differences), estimates of amounts due or owed, the timing of
reversals 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 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 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, judicial action 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. TCF periodically evaluates investments for other than temporary impairment
with losses, if any, recorded in non-interest income within gains (losses) on securities, net.
Securities Held to Maturity Securities held to maturity are carried at cost and adjusted for amortization of premiums or
accretion of discounts using a level yield method; however, transfers of securities available for sale to securities held to maturity
are made at fair value at the date of transfer. The unrealized holding gain or loss at the date of each transfer is retained in
accumulated other comprehensive income (loss) and in the carrying value of the held to maturity investment security. Such
amounts are then amortized over the remaining life of the transferred security as an adjustment of the yield on those securities.
TCF periodically evaluates securities held to maturity for other than temporary impairment. Declines in value considered other
than temporary, if any, would be recorded as non-interest income within gains (losses) on securities, net.
Securities Available for Sale Securities available for sale are carried at fair value with the unrealized gains or losses, net of
related deferred income taxes, reported within 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 evaluates securities available for sale for other than temporary impairment
on a quarterly basis. Declines in the value of securities available for sale that are considered other than temporary are recorded in
non-interest income within gains (losses) on securities, net. 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 Loans and leases designated as held for sale are carried at the lower of cost or fair value. Any
amount by which cost exceeds fair value is initially recorded as a valuation allowance and subsequently reflected in the gain or
loss on sale when sold. From time to time, management identifies and designates primarily consumer real estate and auto
finance loans held in the loan portfolios for sale. These loans are transferred to loans and leases held for sale at the lower of cost
or fair market value at the time of transfer. Any associated allowance for loan and lease losses is transferred to the valuation
allowance.
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 acquired loans, net direct fees and costs,
unearned discounts and finance charges and unearned lease income are amortized to interest income using methods which
approximate a level yield over the estimated remaining lives of the loans and leases. Net direct fees and costs on all lines of credit
are amortized on a straight line basis over the contractual life of the line of credit and adjusted for payoffs. Net deferred fees and
costs on consumer real estate lines of credit are amortized to service fee income.
Non-accrual Loans and Leases Loans and leases are generally placed on non-accrual status when the collection of interest
and principal is 90 days or more past due unless, in the case of commercial loans, they are well-secured and in the process of
collection. Auto loans are placed on non-accrual status when interest and principal is 120 days past due. Delinquent junior lien
loans are also placed on non-accrual status when there is evidence that the related third-party first lien mortgage may be 90 days
or more past due.
Loans on non-accrual status are generally reported as non-accrual loans until there is sustained repayment performance for six
consecutive months, with the exception of loans not reaffirmed upon discharge under Chapter 7 bankruptcy, which remain on
non-accrual status until TCF expects full repayment of the remaining pre-discharged contractual principal and interest. Income on
59
these loans is recognized on a cash basis when there is sustained repayment performance for six consecutive months, the loan
is not more than 60 days delinquent and a current credit evaluation has been completed.
Generally, 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 against interest income. For
non-accrual leases that have been discounted with third-party financial institutions on a non-recourse basis, 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, in which case interest income is
recognized on a cash basis.
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 and Repossessed and Returned Assets 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 of the collateral less estimated
selling costs at the time of transfer to real estate owned or repossessed and returned assets. The fair value of other real estate
owned is based on independent appraisals, real estate brokers’ price opinions or automated valuation methods, less estimated
selling costs. The fair value of repossessed and returned assets is based on available pricing guides, auction results or price
opinions, less estimated selling costs. Any carrying amount in excess of the fair value less estimated selling costs 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 shortfall is recognized in the period in which it becomes known and is included in
foreclosed real estate and repossessed assets, net expense. Operating expenses of properties and recoveries on sales of other
real estate owned are also recorded in foreclosed real estate and repossessed assets, net. Operating revenue from foreclosed
property is included in other non-interest income. Other real estate owned at December 31, 2014 and 2013, was $65.7 million
and $68.9 million, respectively. Repossessed and returned assets at both December 31, 2014 and 2013, was $3.5 million.
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.
Interest-Only Strips TCF periodically sells loans to third party financial institutions at fixed or variable rates. For those
transactions which achieve sale treatment, the underlying loan is not recognized on TCF’s Consolidated Statements of Financial
Condition. The Company sells these loans at par value and generally retains an interest in the future cash flows of borrower loan
payments, known as an interest-only strip. The interest-only strip is recorded at fair value at the time of sale. The fair value of the
interest-only strip represents the present value of future cash flows generated by the loans to be retained by TCF. After initial
recording of the interest-only strip, the accretable yield is measured as the difference between the initial investment, or 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 generally recorded.
Intangible Assets All assets and liabilities acquired in purchase acquisitions, including goodwill and other intangibles, are
recorded at fair value. Goodwill is recorded when the purchase price of an acquisition is greater than the fair value of net assets,
including identifiable intangible assets. Goodwill is not amortized, but assessed for impairment on an annual basis at the
reporting unit level. Interim impairment analysis may be required if events occur or circumstances change that would more likely
than not reduce a reporting unit’s fair value below its carrying amount. Other intangible assets are amortized on a straight-line or
effective yield basis over their estimated useful lives and are subject to impairment if events or circumstances indicate a possible
inability to realize their carrying amounts.
When testing for goodwill impairment, TCF initially performs a qualitative assessment. Based on the results of this qualitative
assessment, if TCF concludes it is more likely than not that a reporting unit’s fair value is less than its carrying amount, a
60
quantitative analysis is performed. Quantitative valuation methodologies primarily include discounted cash flow analysis in
determining fair value of reporting units. If the fair value is less than the carrying amount, additional analysis is required to
measure the amount of impairment. Impairment losses, if any, are recorded as a charge to non-interest expense and an
adjustment to the carrying value of goodwill.
Other intangible assets are reviewed for impairment whenever events or changes in circumstances indicate their carrying
amount may not be recoverable. Impairment is indicated if the sum of the undiscounted estimated future net cash flows is less
than the carrying value of the intangible asset. Impairment losses, if any, permanently reduce the carrying value of the other
intangible assets.
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 or date of employment termination. 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 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 are 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 any remaining amount. See Note 15, Stock
Compensation, for additional information concerning stock-based compensation.
Deposit Account Overdrafts Deposit account overdrafts are reported in other loans and leases. Net losses on uncollectible
overdrafts are reported as net charge-offs in the allowance for loan and lease losses within 60 days from the date of overdraft.
Uncollectible deposit fees are reversed against fees and service charges and a related reserve for uncollectible deposit fees is
maintained in other liabilities. Other deposit account losses are reported in other non-interest expense.
Note 2. Cash and Due from Banks
At December 31, 2014 and 2013, TCF Bank was required by Federal Reserve regulations to maintain reserves of $98.7 million
and $95.5 million, respectively, in cash on hand or at the Federal Reserve Bank.
TCF maintains cash balances that are restricted as to their use in accordance with certain contractual agreements primarily
related to the sale and servicing of auto loans and consumer real estate loans. Cash payments received on loans serviced for third
parties are held in separate accounts until remitted. TCF also retains cash balances for potential loss recourse on certain sold auto
loans as well as cash for collateral on certain borrowings, foreign exchange contracts and interest rate contracts. TCF maintained
restricted cash totaling $67.8 million and $46.1 million at December 31, 2014 and 2013, respectively.
TCF had cash held in interest-bearing accounts of $842.1 million and $613.3 million at December 31, 2014 and 2013,
respectively.
Note 3. Investments
Investments consisted of the following.
(In thousands)
Federal Home Loan Bank stock, at cost
Federal Reserve Bank stock, at cost
Total investments
At December 31,
2014
$47,914
37,578
2013
$56,845
37,481
$85,492
$94,326
The investments in Federal Home Loan Bank stock are required investments related to TCF’s membership in and current
borrowings from the Federal Home Loan Bank (‘‘FHLB’’) of Des Moines. All Federal Home Loan Banks (‘‘FHLBanks’’) 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 FHLBanks are jointly and severally liable for repayment of each other’s debt. Therefore,
TCF’s investments in FHLB of Des Moines could be adversely impacted by the financial operations of the FHLBanks and actions
of their regulator, the Federal Housing Finance Agency.
61
TCF Bank is required to hold Federal Reserve Bank stock equal to 6% of TCF Bank’s capital surplus, which is defined as additional
paid-in capital stock, less any deficit retained earnings, gains (losses) on available for sale securities and foreign currency
translation adjustments as of the current period end.
The yield on investments, which have no stated contractual maturity, is 4.25% and 3.93% at December 31, 2014 and 2013,
respectively.
Note 4. Securities Available for Sale and Securities Held to Maturity
Securities consisted of the following.
2014
2013
At December 31,
(Dollars in thousands)
Securities available for sale:
Mortgage-backed securities:
U.S. Government
sponsored enterprises
and federal agencies
Other
Other securities
Total securities available
for sale
Gross
Amortized Unrealized Unrealized
Losses
Gross
Gains
Cost
Gross
Fair Amortized Unrealized Unrealized
Losses
Gross
Gains
Cost
Value
Fair
Value
$461,575
55
–
$2,405
–
–
$741
–
–
$463,239
55
–
$592,283
93
1,642
$1,131
–
1,292
$45,377
–
–
$548,037
93
2,934
$461,630
$2,405
$741
$463,294
$594,018
$2,423
$45,377
$551,064
Weighted-average yield
2.62%
2.65%
Securities held to maturity:
Mortgage-backed securities:
U.S. Government
sponsored enterprises
and federal agencies
Other securities
Total securities held to
maturity
$209,538
4,916
$7,988
–
$109
–
$217,417
4,916
$ 14,610
5,302
$214,454
$7,988
$109
$222,333
$ 19,912
$
$
–
–
–
$
$
–
–
–
$ 14,610
5,302
$ 19,912
Weighted-average yield
2.64%
3.43%
Gross realized gains of $1.2 million, $1.2 million and $90.2 million were recognized on sales of securities available for sale during
2014, 2013 and 2012, respectively. At December 31, 2014 and 2013, mortgage-backed securities with a carrying value of
$8.2 million and $14.7 million, respectively, were pledged as collateral to secure certain deposits and borrowings. There were no
impairment charges recognized on securities available for sale during 2014 or 2013. During 2012, TCF recorded impairment
charges of $0.2 million on other securities as full recovery was not expected. Unrealized losses on securities available for sale are
due to changes in interest rates. TCF has the ability and intent to hold these investments until a recovery of fair value occurs.
During 2014 and 2013, TCF transferred $191.7 million and $9.3 million, respectively, of available for sale mortgage-backed
securities to held to maturity, reflecting TCF’s intent and ability to hold these securities to maturity. At December 31, 2014 and
2013, the unrealized holding loss on the transferred securities retained in accumulated other comprehensive loss totaled
$16.0 million and $0.3 million, respectively. These amounts are amortized over the remaining life of the transferred security.
Other held to maturity securities consist primarily of non-trading mortgage-backed securities and other bonds which qualify for
investment credit under the Community Reinvestment Act. During 2014, 2013 and 2012, TCF recorded an impairment charge of
$0.1 million, $0.2 million and $0.9 million, respectively, on held to maturity securities, which had a carrying value of $4.9 million,
$5.3 million and $5.7 million at December 31, 2014, 2013 and 2012, respectively.
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The following tables show the gross unrealized losses and fair value of securities available for sale at December 31, 2014 and
2013 and securities held to maturity at December 31, 2014, aggregated by investment category and the length of time the
securities were in a continuous loss position. There were no gross unrealized losses for securities held to maturity at
December 31, 2013.
At December 31, 2014
Less than
12 months
12 months or more
Total
Fair Unrealized
Losses
Value
Fair Unrealized
Losses
Value
Fair Unrealized
Losses
Value
$
$
–
–
$
$
–
–
$198,550
$198,550
$741
$198,550
$741
$198,550
$2,602
$2,602
$109
$109
$
$
–
–
$
$
–
–
$
$
2,602
2,602
$741
$741
$109
$109
At December 31, 2013
Less than
12 months
Fair
Value
Unrealized
Losses
12 months or more
Total
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
(In thousands)
Securities available for sale:
Mortgage-backed securities:
U.S. Government sponsored enterprises
and federal agencies
Total securities available for sale
Securities held to maturity:
Mortgage-backed securities:
U.S. Government sponsored enterprises
and federal agencies
Total securities held to maturity
(In thousands)
Securities available for sale:
Mortgage-backed securities:
U.S. Government sponsored
enterprises and federal agencies
$353,449
$22,678
$156,472
$22,699
$509,921
Total securities available for sale
$353,449
$22,678
$156,472
$22,699
$509,921
$45,377
$45,377
The amortized cost, fair value and yield of securities available for sale and securities held to maturity by contractual maturity at
December 31, 2014 and 2013, are shown below. The remaining contractual principal maturities do not consider possible
prepayments. Remaining expected maturities will differ from contractual maturities because borrowers may have the right to
prepay.
(Dollars in thousands)
Securities available for sale:
Due in one year or less
Due in 1-5 years
Due in 5-10 years
Due after 10 years
No stated maturity
At December 31,
2014
2013
Amortized
Cost
Fair
Value
Yield
Amortized
Cost
Fair
Value
Yield
$
4
76
86,806
374,744
–
$
4
76
87,594
375,620
–
11.63%
4.53
1.93
2.78
–
$
–
138
24,328
567,910
1,642
$
–
140
24,543
523,447
2,934
–%
5.24
2.17
2.67
–
Total securities available for sale
$461,630
$463,294
2.62
$594,018
$551,064
2.65
Securities held to maturity:
Due in one year or less
Due in 1-5 years
Due in 5-10 years
Due after 10 years
$
500
2,500
400
211,054
$
500
2,500
400
218,933
2.00%
3.08
3.00
2.64
$
–
3,000
–
16,912
$
–
3,000
–
16,912
Total securities held to maturity
$214,454
$222,333
2.64
$ 19,912
$ 19,912
–%
2.90
–
3.52
3.43
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Note 5. Loans and Leases
Loans and leases consisted of the following.
(Dollars in thousands)
Consumer real estate:
First mortgage lien
Junior lien
Total consumer real estate
Commercial:
Commercial real estate:
Permanent
Construction and development
Total commercial real estate
Commercial business
Total commercial
Leasing and equipment finance
Inventory finance
Auto finance
Other
Total loans and leases(1)
At December 31,
2014
2013
Percent
Change
$ 3,139,152
2,543,212
$ 3,766,421
2,572,905
(16.7)%
(1.2)
5,682,364
6,339,326
(10.4)
2,382,144
242,111
2,624,255
533,410
3,157,665
3,745,322
1,877,090
1,915,061
24,144
2,604,673
139,024
2,743,697
404,655
3,148,352
3,428,755
1,664,377
1,239,386
26,743
$16,401,646
$15,846,939
(8.5)
74.2
(4.4)
31.8
0.3
9.2
12.8
54.5
(9.7)
3.5
(1) Loans and leases are reported at historical cost including net direct fees and costs associated with originating and acquiring loans and leases,
lease residuals, unearned income and unamortized purchase premiums and discounts. The aggregate amount of these loan and lease
adjustments was $43.4 million and $30.3 million at December 31, 2014 and 2013, respectively.
The consumer real estate junior lien portfolio was comprised of $2.1 billion of home equity lines of credit (‘‘HELOCs’’) and
$424.4 million of amortizing junior lien mortgage loans at December 31, 2014, compared with $2.1 billion and $505.5 million at
December 31, 2013, respectively. At December 31, 2014 and 2013, $1.3 billion and $1.1 billion, respectively, of the consumer
real estate junior lien HELOCs had a 10-year interest-only draw period and a 20-year amortization repayment period and all were
within the 10-year initial draw period and will not convert to amortizing loans until 2021 or later. At December 31, 2014 and 2013,
$816.0 million and $969.2 million, respectively, of the consumer real estate junior lien HELOCs were interest-only revolving draw
loans with no defined amortization period and original draw periods of 5 to 40 years. As of December 31, 2014, 14.6% of these
loans will mature in the next five years.
In 2014 and 2013, TCF sold $1.3 billion and $0.8 billion, respectively, of consumer auto loans with servicing retained, received
cash of $1.4 billion and $0.8 billion, respectively, and recognized net gains of $44.7 million and $29.7 million, respectively. Related
to these sales, TCF retained interest-only strips of $17.9 million and $50.7 million in 2014 and 2013, respectively. Total
interest-only strips related to sales of auto loans totaled $48.6 million and $64.9 million at December 31, 2014 and 2013,
respectively. TCF recorded impairment charges on these interest-only strips of $3.5 million and $5.4 million in 2014 and 2013,
respectively, primarily as a result of higher prepayments than originally assumed. Contractual recourse liabilities related to sales
of auto loans totaled $0.7 million and $1.1 million at December 31, 2014 and 2013, respectively. No servicing assets or liabilities
related to consumer auto loans were recorded within TCF’s Consolidated Statements of Financial Condition, as the contractual
servicing fees are adequate to compensate TCF for its servicing responsibilities based on the amount demanded by the
marketplace. TCF’s managed auto loan portfolio, which includes portfolio loans, loans held for sale and loans sold and serviced
for others, totaled $3.8 billion and $2.4 billion at December 31, 2014 and 2013, respectively.
In July 2014, TCF transferred consumer auto loans totaling $256.3 million with servicing retained to a trust in the Company’s
inaugural securitization transaction, received cash proceeds of $266.7 million and recognized gains of $7.4 million, which
qualified for sale accounting and is included in the amounts above. This trust is considered a variable interest entity due to its
limited capitalization and special purpose nature, however it is not consolidated as TCF is not the primary beneficiary because the
Company does not have a variable interest in the trust.
In 2014 and 2013, TCF sold $1.4 billion and $0.8 billion, respectively, of consumer real estate loans, received cash of $1.4 billion
and $0.8 billion, respectively, and recognized net gains of $34.1 million and $21.7 million, respectively. Related to these sales,
TCF retained interest-only strips of $10.8 million and $22.2 million in 2014 and 2013, respectively. Total interest-only strips related
to sales of consumer real estate loans totaled $21.2 million and $19.6 million at December 31, 2014 and 2013, respectively. TCF
had no impairment charges on these interest-only strips in 2014 and recorded impairment charges of $0.5 million on these
64
interest-only strips in 2013. Contractual recourse liabilities related to sales of consumer real estate loans totaled $0.6 million at
both December 31, 2014 and 2013. No servicing assets or liabilities related to consumer real estate loans were recorded within
TCF’s Consolidated Statements of Financial Condition, as the contractual servicing fees are adequate to compensate TCF for its
servicing responsibilities based on the amount demanded by the marketplace. During the fourth quarter of 2014, TCF sold
consumer real estate TDR loans totaling $405.9 million, received cash proceeds of $314.0 million and recognized losses of
$4.8 million which are included in the amounts above. TCF’s managed consumer real estate loan portfolio, which includes
portfolio loans, loans held for sale and loans sold and serviced for others, totaled $7.1 billion and $7.0 billion at December 31,
2014 and 2013, respectively.
From time to time, TCF sells leasing and equipment finance loans and minimum lease payment receivables to third-party financial
institutions at fixed rates. In 2014 and 2013, TCF sold $66.9 million and $60.3 million, respectively, of loans and minimum lease
payment receivables, received cash of $68.2 million and $62.1 million, respectively, and recognized net gains of $0.4 million and
$0.5 million, respectively. Related to these sales, TCF established servicing liabilities of $0.8 million and $1.3 million in 2014 and
2013, respectively. At December 31, 2014 and 2013, TCF had total servicing liabilities related to leasing and equipment finance of
$1.5 million and $1.7 million, respectively. At December 31, 2014 and 2013, TCF had lease residuals related to non-recourse
sales of $14.2 million and $15.2 million, respectively. TCF’s managed leasing and equipment finance loan portfolio, which
includes portfolio loans and leases, loans held for sale, operating leases and loans and leases sold and serviced for others, totaled
$4.0 billion and $3.7 billion at December 31, 2014 and 2013, respectively.
There were no material sales of commercial loans in 2014. In 2013, TCF sold $86.5 million of commercial loans and recognized a
net gain of $1.6 million, with no servicing liabilities related to these sales.
TCF’s agreements to sell auto and consumer real estate loans typically contain certain representations and warranties regarding
the loans sold. These representations and warranties generally relate to, among other things, the ownership of the loan, the
validity, priority and perfection of the lien securing the loan, accuracy of information supplied to the buyer, the loan’s compliance
with the criteria set forth in the agreement, payment delinquency and compliance with applicable laws and regulations. TCF may
be required to repurchase loans in the event of an unremedied breach of these representations or warranties. In 2014, 2013 and
2012, losses related to repurchases pursuant to such representations and warranties were immaterial. The majority of such
repurchases were of consumer auto loans where TCF typically has contractual agreements with the automobile dealerships that
originated the loans requiring the dealers to repurchase such contracts from TCF.
Future minimum lease payments receivable for direct financing, sales-type leases and operating leases as of December 31, 2014
are as follows:
(In thousands)
2015
2016
2017
2018
2019
Thereafter
Total
$ 711,813
529,282
365,547
213,241
105,650
36,949
$1,962,482
65
Note 6. Allowance for Loan and Lease Losses and Credit Quality
Information
The following tables provide the allowance for loan and lease losses and other information regarding the allowance for loan and
lease losses. TCF’s key credit quality indicator is the receivable’s payment performance status, defined as accruing or
non-accruing.
At or For the Year Ended December 31, 2014
(In thousands)
Balance, beginning of period
Charge-offs
Recoveries
Net charge-offs
Provision for credit losses
Other(1)
Consumer
Real Estate Commercial
Leasing and
Equipment
Finance
$37,467
(8,657)
2,887
$18,733
(7,316)
3,705
Inventory
Finance
$ 8,592
(1,653)
826
Auto
Finance
$ 10,623
(11,856)
1,491
Other
$
785
(8,359)
5,860
Total
$ 252,230
(100,967)
21,636
(5,770)
(3,611)
(827)
(10,365)
(2,499)
(79,331)
(259)
(71)
3,324
–
2,498
(243)
23,742
(5,770)
2,459
–
95,737
(104,467)
$176,030
(63,126)
6,867
(56,259)
63,973
(98,383)
Balance, end of period
$ 85,361
$31,367
$18,446
$10,020
$ 18,230
$
745
$ 164,169
(In thousands)
Balance, beginning of period
Charge-offs
Recoveries
At or For the Year Ended December 31, 2013
Consumer
Real Estate Commercial
Leasing and
Equipment
Finance
$182,013
(97,508)
8,644
$ 51,575
(28,944)
2,770
$21,037
(7,277)
3,968
Inventory
Finance
$ 7,569
(1,141)
373
Auto
Finance
$ 4,136
(5,305)
607
Other
$ 798
(9,115)
6,518
Total
$ 267,128
(149,290)
22,880
Net charge-offs
(88,864)
(26,174)
(3,309)
(768)
(4,698)
(2,597)
(126,410)
Provision for credit losses
Other
87,100
(4,219)
12,515
(449)
1,005
–
1,949
(158)
13,215
(2,030)
2,584
–
118,368
(6,856)
Balance, end of period
$176,030
$ 37,467
$18,733
$ 8,592
$10,623
$ 785
$ 252,230
(1) Included in Other for consumer real estate is the transfer of $95.3 million, comprised of $77.0 million of previously established allowance for
loan and lease losses and an additional $18.3 million of write-downs arising from the transfer to loans held for sale in conjunction with the
portfolio sale of consumer real estate TDR loans.
66
The following tables provide information regarding the allowance for loan and lease losses and balances by type of allowance
methodology.
(In thousands)
Allowance for loan and lease losses:
Collectively evaluated for impairment
Individually evaluated for impairment
Total
Loans and leases outstanding:
Collectively evaluated for impairment
Individually evaluated for impairment
Loans acquired with deteriorated credit
Consumer
Real Estate Commercial
Leasing and
Equipment
Finance
Inventory
Finance
Auto
Finance
Other
Total
At December 31, 2014
$
$
57,167
28,194
85,361
$
$
27,594
3,773
31,367
$
$
16,310
2,136
$
$
9,627
393
17,046
1,184
$
741
4
$
128,485
35,684
18,446
$
10,020
$
18,230
$
745
$
164,169
$5,462,005
220,359
$3,038,378
119,287
$3,731,420
13,763
$1,874,481
2,609
$1,911,267
3,676
$24,055
89
$16,041,606
359,783
quality
Total
–
–
139
–
118
–
257
$5,682,364
$3,157,665
$3,745,322
$1,877,090
$1,915,061
$24,144
$16,401,646
(In thousands)
Allowance for loan and lease losses:
Collectively evaluated for impairment
Individually evaluated for impairment
Total
Loans and leases outstanding:
Collectively evaluated for impairment
Individually evaluated for impairment
Loans acquired with deteriorated credit
Consumer
Real Estate
Commercial
Leasing and
Equipment
Finance
Inventory
Finance
Auto
Finance
Other
Total
At December 31, 2013
$
54,449
121,581
$ 176,030
$
$
28,994
8,473
37,467
$
$
17,093
1,640
$
$
8,308
284
10,528
95
18,733
$
8,592
$
10,623
$
$
$
781
4
120,153
132,077
785
$
252,230
$5,673,518
665,808
$2,971,308
177,044
$3,412,769
15,139
$1,657,636
6,741
$1,238,556
470
$26,649
94
$14,980,436
865,296
quality
Total
–
–
847
–
360
–
1,207
$6,339,326
$3,148,352
$3,428,755
$1,664,377
$1,239,386
$26,743
$15,846,939
67
Accruing and Non-accrual Loans and Leases The following tables set forth information regarding TCF’s accruing and
non-accrual loans and leases. Non-accrual loans and leases are those which management believes have a higher risk of loss.
Delinquent balances are determined based on the contractual terms of the loan or lease.
(In thousands)
Consumer real estate:
First mortgage lien
Junior lien
Total consumer real
estate
Commercial:
Commercial real estate
Commercial business
Total commercial
Leasing and equipment
finance
Inventory finance
Auto finance
Other
Subtotal
Portfolios acquired with
deteriorated credit quality
Current-59 Days
Delinquent
and Accruing
60-89 Days
90 Days or
Delinquent More Delinquent
and Accruing
and Accruing
Total
Accruing
Non-accrual
Total
At December 31, 2014
$ 2,987,992
2,505,640
$13,176
2,091
$ 194
–
$ 3,001,362
2,507,731
$137,790
35,481
$ 3,139,152
2,543,212
5,493,632
15,267
194
5,509,093
173,271
5,682,364
2,599,701
532,929
3,132,630
3,728,115
1,874,933
1,907,005
24,144
–
–
–
2,242
49
2,785
–
16,160,459
20,343
–
–
–
307
26
1,478
–
2,005
2,599,701
532,929
3,132,630
3,730,664
1,875,008
1,911,268
24,144
24,554
481
25,035
12,670
2,082
3,676
–
2,624,255
533,410
3,157,665
3,743,334
1,877,090
1,914,944
24,144
16,182,807
216,734
16,399,541
2,017
83
5
2,105
–
2,105
Total
$16,162,476
$20,426
$2,010
$16,184,912
$216,734
$16,401,646
Current-59 Days
Delinquent
and Accruing
60-89 Days
90 Days or
Delinquent More Delinquent
and Accruing
and Accruing
Total
Accruing
Non-accrual
Total
At December 31, 2013
(In thousands)
Consumer real estate:
First mortgage lien
Junior lien
$ 3,564,716
2,531,151
Total consumer real estate
6,095,867
Commercial:
Commercial real estate
Commercial business
Total commercial
Leasing and equipment finance
Inventory finance
Auto finance
Other
2,706,633
399,750
3,106,383
3,404,346
1,661,798
1,236,678
26,323
$19,815
3,532
23,347
886
190
1,076
2,226
29
1,105
9
$1,079
–
$ 3,585,610
2,534,683
$180,811
38,222
$ 3,766,421
2,572,905
1,079
6,120,293
219,033
6,339,326
–
354
354
613
21
773
1
2,707,519
400,294
3,107,813
3,407,185
1,661,848
1,238,556
26,333
36,178
4,361
40,539
14,041
2,529
470
410
2,743,697
404,655
3,148,352
3,421,226
1,664,377
1,239,026
26,743
Subtotal
15,531,395
27,792
2,841
15,562,028
277,022
15,839,050
Portfolios acquired with
deteriorated credit quality
7,870
14
5
7,889
–
7,889
Total
$15,539,265
$27,806
$2,846
$15,569,917
$277,022
$15,846,939
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 non-accrual loans and leases
Foregone interest income
Year Ended December 31,
2014
$26,584
9,359
$17,225
2013
$33,046
12,149
2012
$39,232
9,401
$20,897
$29,831
68
The following table provides information regarding consumer real estate loans to customers currently involved in ongoing
Chapter 7 or Chapter 13 bankruptcy proceedings which have not yet been discharged.
(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
At December 31,
2014
2013
$47,731
247
12,284
$60,262
$65,321
682
13,475
$79,478
For the years ended December 31, 2014 and 2013, interest income would have been reduced by approximately $0.4 million and
$0.9 million, respectively, had the accrual of interest income on the above consumer loans been discontinued upon notification of
bankruptcy.
Loan Modifications for Borrowers with Financial Difficulties
Included within loans and leases in the previous tables are
certain loans that have been modified in order to maximize collection of loan balances. If, for economic or legal reasons related to
the customer’s financial difficulties, TCF grants a concession, the modified loan is classified as a TDR. TDR loans consist primarily
of consumer real estate and commercial loans.
Total TDR loans at December 31, 2014 and 2013 were $298.5 million and $796.5 million, respectively, of which $193.8 million
and $632.8 million were accruing at December 31, 2014 and 2013, respectively. TCF held consumer real estate TDR loans of
$199.6 million and $641.1 million at December 31, 2014 and 2013, respectively, of which $111.9 million and $506.6 million were
accruing at December 31, 2014 and 2013, respectively. TCF also held $91.6 million and $147.1 million of commercial TDR loans
at December 31, 2014 and 2013, respectively, of which $80.4 million and $120.9 million were accruing at December 31, 2014
and 2013, respectively. TDR loans for the remaining classes of finance receivables were not material at December 31, 2014 or
2013. TCF sold $405.9 million of consumer real estate TDR loans in a portfolio sale during December 2014.
The amount of unfunded commitments to consumer real estate and commercial loans classified as TDRs was $3.9 million and
$6.1 million at December 31, 2014 and 2013, respectively. At December 31, 2014 and 2013, no additional funds were committed
to leasing and equipment finance, inventory finance or auto finance loans classified as TDRs.
When a loan is modified as a TDR, principal balances are generally not forgiven. Loan modifications to troubled borrowers are not
reported as TDR loans in the calendar year 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 restructured agreements. All
loans classified as TDR loans are considered to be impaired. In 2014 and 2013, $12.8 million and $17.1 million, respectively, of
commercial loans were removed from TDR status as they were restructured at market terms and are performing.
The financial effects of TDR loans represent the difference between interest income recognized on accruing TDR loans and the
contractual interest that would have been recorded under the original contractual terms, or foregone interest income. For the
year ended December 31, 2014, foregone interest income for consumer real estate first mortgage lien accruing TDR loans and
consumer real estate junior lien accruing TDR loans was $16.7 million and $1.2 million, respectively. The average yield for the
same period on consumer real estate accruing TDR loans was 3.3%, which compares to the original contractual average rate of
6.8%. For the year ended December 31, 2013, foregone interest income for consumer real estate first mortgage lien accruing
TDR loans and consumer real estate junior lien accruing TDR loans was $17.6 million and $1.2 million, respectively. The average
yield for the same period on consumer real estate accruing TDR loans was 3.3%, which compares to the original contractual
average rate of 6.9%. For the year ended December 31, 2012, foregone interest income for consumer real estate first mortgage
lien accruing TDR loans and consumer real estate junior lien accruing TDR loans was $13.9 million and $0.9 million, respectively.
The average yield for the same period on consumer real estate accruing TDR loans was 3.7%, which compares to the original
contractual average rate of 6.9%. The foregone interest income for the remaining classes of finance receivables was not material
for the years ended December 31, 2014, 2013 and 2012.
69
The table below summarizes TDR loans that defaulted during the years ended December 31, 2014 and 2013, which were
modified during the respective reporting period or within one year 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 subsequent to the modification or has been transferred to other real estate owned or repossessed and
returned assets.
(Dollars in thousands)
Consumer real estate:
First mortgage lien
Junior lien
Total consumer real estate
Commercial:
Commercial real estate
Commercial business
Total commercial
Leasing and equipment finance
Auto finance
Other
Defaulted TDR loans modified during the applicable period
Total loans modified in the applicable period
Loan Balance(1)
Year Ended December 31,
2014
2013
$
1,969
1,364
3,333
3,895
127
4,022
–
392
–
$ 12,510
2,479
14,989
5,561
–
5,561
268
59
1
$
7,747
$ 20,878
$177,674
$374,761
Defaulted modified TDR loans as a percent of total loans modified in the applicable period
4.4%
5.6%
(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 TDR loans are evaluated separately in TCF’s allowance methodology. Impairment is generally based upon
the present value of the expected future cash flows or the fair value of the collateral less selling expenses for collateral
dependent loans. The allowance on accruing consumer real estate TDR loans was $20.4 million, or 18.2% of the outstanding
balance, at December 31, 2014, and $103.3 million, or 20.4% of the outstanding balance, at December 31, 2013. In determining
impairment for consumer real estate accruing TDR loans, TCF utilized assumed remaining re-default rates ranging from 4% to
22% in 2014 and 6% to 25% in 2013, depending on modification type and actual experience. At December 31, 2014, 2.4% of
accruing consumer real estate TDR loans were more than 60-days delinquent, compared with 1.4% at December 31, 2013.
Consumer real estate TDR loans generally remain on accruing status following modification if they are less than 90 days past due
and payment in full under the modified terms of the loan is expected based on a current credit evaluation and historical payment
performance. Of the non-accrual TDR balance at December 31, 2014, $50.0 million, or 57.0%, were loans discharged in
Chapter 7 bankruptcy that were not reaffirmed, of which 68.4% were current. Of the non-accrual TDR balance at December 31,
2013, $81.5 million, or 60.6%, were loans discharged in Chapter 7 bankruptcy that were not reaffirmed, of which 71.8% were
current. All eligible loans are re-aged to current delinquency status upon modification.
Commercial TDR loans are individually evaluated for impairment based upon the present value of the expected future cash flows,
or for collateral dependent loans, at the fair value of collateral less selling expense. The allowance on accruing commercial TDR
loans was $1.4 million, or 1.7% of the outstanding balance, at December 31, 2014, and $6.3 million, or 5.2% of the outstanding
balance, at December 31, 2013. No accruing commercial TDR loans were 60 days or more delinquent at December 31, 2014,
compared with one commercial TDR loan with $0.9 million outstanding at December 31, 2013.
Impaired Loans TCF considers impaired loans to include non-accrual commercial loans, non-accrual equipment finance loans
and non-accrual inventory finance loans, as well as all TDR loans. Non-accrual impaired loans, including non-accrual TDR loans,
are included in non-accrual loans and leases within the previous tables. Accruing TDR loans have been disclosed by delinquency
status within the previous tables of accruing and non-accrual loans and leases. In the following tables, 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.
70
The following table summarizes impaired loans.
At December 31,
2014
Unpaid
Contractual
Balance
Related
Unpaid
Loan Allowance Contractual
Balance
Recorded
Balance
2013
Related
Loan Allowance
Recorded
Balance
Total consumer real estate
179,939
157,073
27,567
639,045
593,796
120,830
$114,526
65,413
$101,668
55,405
$18,140
9,427
$553,736
85,309
$521,248
72,548
$107,841
12,989
(In thousands)
Impaired loans with an allowance
recorded:
Consumer real estate:
First mortgage lien
Junior lien
Commercial:
Commercial real estate
Commercial business
Total commercial
Leasing and equipment finance
Inventory finance
Auto finance
Other
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
Commercial:
Commercial real estate
Commercial business
Total commercial
Inventory finance
Auto finance
58,157
18
58,175
8,257
1,754
3,074
92
54,412
18
54,430
8,257
1,758
2,928
89
3,772
1
3,773
1,457
393
1,184
4
84,851
9,917
94,768
8,238
6,741
373
97
71,785
4,380
76,165
8,238
6,741
308
94
7,594
880
8,474
717
284
95
4
251,291
224,535
34,378
749,262
685,342
130,404
53,606
33,796
87,402
57,809
482
58,291
848
1,484
35,147
7,398
42,545
50,500
480
50,980
851
748
–
–
–
–
–
–
–
–
–
59,233
26,710
85,943
102,523
5,410
107,933
–
317
43,025
4,306
47,331
79,833
5,412
85,245
–
162
194,193
132,738
–
–
–
–
–
–
–
–
–
Total impaired loans without an
allowance recorded
148,025
95,124
Total impaired loans
$399,316
$319,659
$34,378
$943,455
$818,080
$130,404
71
The average loan balance of impaired loans and interest income recognized on impaired loans during the years ended
December 31, 2014 and 2013 are included within the table below.
(In thousands)
Impaired loans with an allowance recorded:
Consumer real estate:
First mortgage lien
Junior lien
Total consumer real estate
Commercial:
Commercial real estate
Commercial business
Total commercial
Leasing and equipment finance
Inventory finance
Auto finance
Other
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
Commercial:
Commercial real estate
Commercial business
Total commercial
Inventory finance
Auto finance
Year Ended December 31,
Average Loan
Balance
2014
Interest Income Average Loan
Balance
Recognized
2013
Interest Income
Recognized
$311,458
63,977
375,435
63,099
2,199
65,298
8,247
4,249
1,617
92
$14,715
3,492
18,207
2,349
–
2,349
58
97
–
7
$481,292
57,692
538,984
99,177
10,060
109,237
7,954
4,114
154
66
$17,263
3,762
21,025
3,193
70
3,263
174
158
2
6
454,938
20,718
660,509
24,628
39,086
5,852
44,938
65,167
2,946
68,113
426
455
2,321
1,285
3,606
2,973
94
3,067
126
–
92,268
15,236
107,504
101,921
5,674
107,595
–
132
2,305
1,682
3,987
3,165
215
3,380
–
–
Total impaired loans without an allowance
recorded
Total impaired loans
113,932
$568,870
6,799
215,231
$27,517
$875,740
7,367
$31,995
Note 7. Premises and Equipment
Premises and equipment consisted of the following.
(In thousands)
Land
Office buildings
Leasehold improvements
Furniture and equipment
Subtotal
Less: Accumulated depreciation and amortization
Total
At December 31,
2013
2014
$154,136
$152,418
277,085
276,943
54,069
53,954
294,387
312,628
795,943
359,582
779,677
342,075
$436,361
$437,602
TCF leases certain premises and equipment under operating leases. Net lease expense including utilities and other operating
expenses was $34.0 million, $35.4 million and $35.5 million in 2014, 2013 and 2012, respectively.
72
At December 31, 2014, the total future minimum rental payments for operating leases of premises and equipment are as
follows.
(In thousands)
2015
2016
2017
2018
2019
Thereafter
Total
$ 26,894
29,592
28,201
26,355
15,199
67,030
$193,271
Note 8. Goodwill and Other Intangible Assets
Goodwill and other intangible assets consisted of the following.
(In thousands)
Amortizable intangible assets:
Deposit base intangibles
Customer base intangibles
Non-compete agreement
Tradename
Total
Unamortizable intangible assets:
Goodwill related to funding segment
Goodwill related to lending segment
Total
Gross
Amount
$ 3,049
2,730
4,590
300
$ 10,669
$141,245
84,395
$225,640
At December 31,
2014
Accumulated
Amortization
Net
Amount
Gross
Amount
2013
Accumulated
Amortization
Net
Amount
$1,502
1,377
2,849
300
$ 1,547
1,353
1,741
–
$
3,049
2,730
4,590
300
$1,105
996
1,942
300
$
1,944
1,734
2,648
–
$6,028
$ 4,641
$ 10,669
$4,343
$
6,326
$141,245
84,395
$141,245
84,395
$225,640
$225,640
$141,245
84,395
$225,640
Amortization expense for intangible assets of $1.7 million, $2.3 million and $1.5 million were recognized in 2014, 2013 and 2012,
respectively. Amortization expense for intangible assets is estimated to be $1.6 million for 2015, $1.4 million for 2016,
$0.5 million for 2017, $0.4 million for 2018 and $0.3 million for 2019. There was no impairment of goodwill or the intangible
assets in 2014, 2013 or 2012.
Note 9. Deposits
Deposits consisted of the following.
(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
At December 31,
2014
2013
Weighted-
Average
Rate
Amount
% of
Total
Weighted-
Average
Rate
Amount
% of
Total
–% $ 2,832,526
2,362,717
0.04
18.3%
15.3
–% $ 2,642,600
2,337,851
0.06
18.3%
16.2
0.02
0.15
0.54
0.13
0.78
0.26
5,195,243
5,212,320
1,993,130
12,400,693
3,049,189
33.6
33.7
13.0
80.3
19.7
$15,449,882
100.0%
0.03
0.20
0.29
0.14
0.86
0.26
4,980,451
6,194,003
831,910
12,006,364
2,426,412
34.5
42.9
5.8
83.2
16.8
$14,432,776
100.0%
73
Certificates of deposit had the following remaining maturities at December 31, 2014.
(In thousands)
Maturity:
0-3 months
4-6 months
7-12 months
13-24 months
Over 24 months
Total
Denominations
$100 Thousand or
Greater
Denominations
Less Than
$100 Thousand
Total
$ 250,200
150,195
345,161
505,991
75,609
$ 348,379
244,631
491,403
587,088
50,532
$ 598,579
394,826
836,564
1,093,079
126,141
$1,327,156
$1,722,033
$3,049,189
Note 10. Short-term Borrowings
Selected information for short-term borrowings (borrowings with an original maturity of less than one year) consisted of the
following.
(Dollars in thousands)
Period end balance:
At December 31,
2014
2013
Amount
Rate
Amount
Rate
Securities sold under repurchase agreements
$ 4,425
0.10% $ 4,918
0.10%
Total
$ 4,425
0.10
$ 4,918
0.10
Average daily balances for the period ended:
Federal Home Loan Bank advances
Federal funds purchased
Securities sold under repurchase agreements
Line of Credit – TCF Commercial Finance Canada, Inc.
Total
Maximum month-end balances for the period ended:
Federal Home Loan Bank advances
Securities sold under repurchase agreements
Line of Credit – TCF Commercial Finance Canada, Inc.
N.A. Not Applicable.
$ 74,385
375
5,956
2,957
0.26% $
0.40
0.18
1.88
14
660
5,713
1,298
0.34%
0.34
0.18
2.57
$ 83,673
0.31
$ 7,685
0.60
$250,000
4,425
11,751
N.A.
N.A.
N.A.
$
–
7,071
9,587
N.A.
N.A.
N.A.
At December 31, 2014, the securities sold under short-term repurchase agreements were related to TCF Bank’s Repurchase
Investment Sweep Agreement product and were collateralized by mortgage-backed securities having a fair value of $6.8 million.
74
Note 11. Long-term Borrowings
Long-term borrowings consisted of the following.
At December 31,
2014
2013
(Dollars in thousands)
Federal Home Loan Bank advances
Subtotal
Subordinated bank notes
Subtotal
Discounted lease rentals
Subtotal
Other long-term
Subtotal
Total long-term borrowings
Stated
Maturity
2014
2015
2016
2017
2015
2016
2022
2014
2015
2016
2017
2018
2019
2020
2021
2014
2015
2016
2017
$
Amount
–
125,000
547,000
275,000
947,000
–
74,930
109,194
184,124
–
32,904
27,539
20,580
9,032
2,589
160
83
92,887
–
2,670
2,642
2,742
8,054
$1,232,065
Weighted-
Average
Rate
Amount
–% $ 398,000
200,000
497,000
75,000
1,170,000
50,000
74,868
109,113
233,981
26,275
18,866
13,319
8,281
1,689
76
–
–
68,506
2,718
2,669
2,705
2,746
10,838
$1,483,325
0.38
0.75
0.25
0.56
–
5.59
6.37
6.05
–
3.84
3.83
3.82
3.92
4.23
4.57
4.57
3.85
–
1.36
1.36
1.36
1.36
1.63
Weighted-
Average
Rate
0.37%
0.33
0.76
0.21
0.52
1.83
5.59
6.37
5.15
4.06
3.96
3.92
3.69
3.45
3.31
–
–
3.94
1.36
1.36
1.36
1.36
1.36
1.41
At December 31, 2014, TCF Bank had pledged loans secured by residential real estate, commercial real estate and FHLB stock
with an aggregate carrying value of $5.2 billion as collateral for FHLB advances. At December 31, 2014, $375.0 million of FHLB
advances outstanding were prepayable monthly at TCF’s option.
On March 17, 2014, TCF Bank redeemed at par $50.0 million of subordinated notes due 2015, since the notes no longer qualified
for treatment as Tier 2 or supplementary capital prior to redemption.
The $74.9 million of subordinated notes due 2016 have a fixed-rate coupon of 5.5% per annum until maturity. The $109.2 million
of subordinated notes due 2022 have a fixed-rate coupon of 6.25% per annum until maturity. At December 31, 2014, all of the
subordinated notes qualify as Tier 2 or supplementary capital for regulatory purposes, subject to certain regulatory limitations.
75
Note 12. Income Taxes
The following table summarizes applicable income taxes in the Consolidated Statements of Income.
(In thousands)
Year ended December 31, 2014:
Federal
State
Foreign
Total
Year ended December 31, 2013:
Federal
State
Foreign
Total
Year ended December 31, 2012:
Federal
State
Total
Current
Deferred
Total
$ 55,062
2,087
5,185
$ 26,308
11,147
(23)
$ 81,370
13,234
5,162
$ 62,334
$ 37,432
$ 99,766
$(38,206)
7,686
3,939
$ 107,630
3,941
(645)
$ 69,424
11,627
3,294
$(26,581)
$ 110,926
$ 84,345
$ 6,646
7,994
$(129,082)
(18,416)
$(122,436)
(10,422)
$ 14,640
$(147,498)
$(132,858)
TCF’s effective income tax rate differed from the statutory federal income tax rate of 35.0% as a result of the following.
Federal income tax rate
Increase (decrease) resulting from:
State income tax, net of federal income tax
Non-controlling interest tax effect
Tax exempt income
Foreign tax effects
Deferred tax adjustments
Civil money penalty
Other, net
Year Ended December 31,
2014
35.00%
2013
35.00%
2012
35.00%
3.06
(0.92)
(0.76)
(0.58)
(0.33)
–
(0.01)
3.11
(1.01)
(0.86)
(1.13)
(0.30)
–
(0.11)
1.99
0.64
0.55
–
1.40
(1.03)
0.58
Effective income tax rate
35.46%
34.70%
39.13%
Beginning in the second quarter of 2013, TCF considered its undistributed foreign earnings to be reinvested indefinitely. As a
result, TCF recorded a $1.2 million benefit in 2013 to eliminate U.S. deferred taxes on its undistributed foreign earnings. This
assertion is based on management’s determination that cash held in TCF’s foreign jurisdictions is not needed to fund its U.S.
operations and that it either has reinvested or has intentions to reinvest these earnings. While management currently intends to
indefinitely reinvest all of TCF’s foreign earnings, should circumstances or tax laws change, TCF may need to record additional
income tax expense in the period in which such determination or tax law change occurs. As of December 31, 2014 and 2013, TCF
has not provided U.S. deferred taxes on $48.1 million and $33.5 million, respectively, of its undistributed foreign earnings. If
these undistributed earnings were repatriated to the U.S. or otherwise became subject to U.S. taxation, the potential deferred
tax liability would be approximately $4.0 million and $2.7 million, as of December 31, 2014 and 2013, respectively, assuming full
utilization of related foreign tax credits.
76
A reconciliation of the changes in unrecognized tax benefits is as follows.
(In thousands)
Balance, beginning of period
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, end of period
At or For the Year Ended December 31,
2012
2013
2014
$2,377
$4,230
$4,704
449
394
468
1,781
362
8
–
(67)
(350)
(70)
(39)
–
(307)
(176)
(181)
$4,649
$4,704
$4,230
The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $1.5 million and
$1.2 million at December 31, 2014 and 2013, respectively. TCF recognizes interest and penalties related to unrecognized tax
benefits, where applicable, in income tax expense. TCF recognized approximately $71 thousand, $110 thousand and
$77 thousand in interest and penalties during 2014, 2013 and 2012, respectively. Interest and penalties of approximately
$498 thousand and $427 thousand were accrued at December 31, 2014 and 2013, respectively.
TCF’s federal income tax returns are open and subject to examination for 2012 and later tax return years. TCF’s various state
income tax returns are generally open for the 2010 and later tax return years based on individual state statutes of limitation. TCF’s
various foreign income tax returns are open and subject to examination for 2010 and later tax return years. 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 were as follows.
(In thousands)
Deferred tax assets:
Allowance for loan and lease losses
Stock compensation and deferred compensation plans
Net operating losses and credit carryforwards
Valuation allowance
Non-accrual interest
Securities available for sale
Accrued expense
Other
Total deferred tax assets
Deferred tax liabilities:
Lease financing
Premises and equipment
Loan fees and discounts
Prepaid expenses
Goodwill and other intangibles
Other
Total deferred tax liabilities
Net deferred tax liabilities
At December 31,
2014
2013
$ 63,862
34,850
11,649
(5,669)
9,333
5,397
4,892
2,721
127,035
299,621
19,114
14,921
12,479
4,139
8,106
358,380
$ 62,464
29,576
48,692
(8,745)
1,911
16,301
5,203
6,676
162,078
284,767
19,289
17,287
10,526
4,694
7,361
343,924
$231,345
$181,846
The net operating losses and credit carryforwards at December 31, 2014 consist of state net operating losses of $6.0 million that
expire in years 2015 through 2034. The valuation allowance at December 31, 2014 and 2013 principally applies to net operating
losses and tax credit carryforwards that, in the opinion of management, are more likely than not to expire un-utilized. However, to
the extent that tax benefits related to these carryforwards are realized in the future, the reduction in the valuation allowance will
reduce income tax expense.
77
Note 13. Equity
Restricted Retained Earnings Retained earnings at TCF Bank, at December 31, 2014, included 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 consisted of the following.
(In thousands)
Treasury stock, at cost
Shares held in trust for deferred compensation plans, at cost
2014
At December 31,
2013
$ (1,102) $ (1,102)
(41,096)
(48,298)
Total
$(49,400) $(42,198)
Repurchases No repurchases of common stock were made in 2014, 2013 or 2012. At December 31, 2014, TCF had 5.4 million
shares remaining in its stock repurchase programs authorized by TCF’s Board of Directors. Prior consultation with the Federal
Reserve is required by regulation before TCF could repurchase any shares of its common stock.
Depositary Shares Representing 7.50% Series A Non-Cumulative Perpetual Preferred Stock On June 25, 2012, TCF
completed the public offering of depositary shares, each representing a 1/1000th interest in a share of Series A Non-Cumulative
Perpetual Preferred Stock, par value $0.01 per share (the ‘‘Series A Preferred Stock’’). In connection with the offering, TCF
issued 6,900,000 depositary shares at a public offering price of $25 per depositary share. Dividends are payable on the Series A
Preferred Stock if, as and when declared by TCF’s Board of Directors on a non-cumulative basis on March 1, June 1, September 1
and December 1 of each year at a per annum rate of 7.5%. Net proceeds of the offering to TCF, after deducting underwriting
discounts and commissions and estimated offering expenses of $5.8 million, were $166.7 million. TCF paid $12.9 million in cash
dividends to holders of Series A Preferred Stock during 2014 and 2013, respectively.
6.45% Series B Non-Cumulative Perpetual Preferred Stock On December 19, 2012, TCF completed the public offering of
4,000,000 shares of 6.45% Series B Non-Cumulative Perpetual Preferred Stock par value $0.01 per share (the ‘‘Series B
Preferred Stock’’). Net proceeds of the offering to TCF, after deducting underwriting discounts, commissions and estimated
offering costs of $3.5 million, were $96.5 million. Dividends are payable on the Series B Preferred Stock if, as and when declared
by TCF’s Board of Directors on a non-cumulative basis on March 1, June 1, September 1 and December 1 of each year,
commencing on March 1, 2013, at a per annum rate of 6.45%. TCF paid $6.5 million and $6.1 million in cash dividends to holders
of Series B Preferred stock during 2014 and 2013, respectively.
Shares Held in Trust for Deferred Compensation Plans
Executive, Senior Officer, Winthrop and Directors Deferred Compensation Plans TCF has maintained the deferred
compensation plans listed above, which previously allowed eligible executives, senior officers, directors and certain other
employees and non-employee directors to defer a portion of certain payments, and, in some cases, grants of restricted stock. In
October 2008, TCF terminated the employee plans and only the Director plan remains active, which allows non-employee
directors to defer up to 100% of their director fees and restricted stock awards. The amounts deferred under these plans were
invested in TCF common stock, other publicly traded stocks, bonds or mutual funds. At December 31, 2014, the fair value of the
assets in these plans totaled $13.8 million and included $8.6 million invested in TCF common stock, compared with a total fair
value of $15.1 million, including $9.4 million invested in TCF common stock at December 31, 2013.
TCF Employees Deferred Stock Compensation Plan In 2011, TCF implemented the TCF Employees Deferred Stock
Compensation Plan. This plan is comprised of restricted stock awards issued to certain executives. The assets of this plan are
solely held in TCF common stock with a fair value totaling $33.2 million and $30.2 million at December 31, 2014 and 2013,
respectively.
TCF Employees Stock Purchase Plan – Supplemental Plan TCF also maintains the TCF Employees Stock Purchase Plan –
Supplemental Plan, a non-qualified plan, to which certain employees can contribute up to 50% of their salary and bonus. TCF
matching contributions to this plan totaled $1.5 million and $0.8 million in 2014 and 2013, respectively. The Company made no
other contributions to this plan, other than payment of administrative expenses. The amounts deferred under the above plan
were invested in TCF common stock or mutual funds. At December 31, 2014, the fair value of the assets in the plan totaled
78
$31.8 million and included $18.3 million invested in TCF common stock, compared with a total fair value of $27.8 million,
including $16.4 million invested in TCF common stock at December 31, 2013.
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, 2014, TCF had 3,199,988 warrants outstanding with an exercise 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 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(cid:4) and Exmark(cid:4) branded products with 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.
Note 14. Regulatory Capital Requirements
TCF and TCF Bank are 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
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, which was $83.7 million at December 31, 2014, without prior approval of the Office of the Comptroller of the
Currency (‘‘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 presents regulatory capital information for TCF and TCF Bank.
(Dollars in thousands)
At December 31, 2014:
Tier 1 leverage capital:(2)
TCF
TCF Bank
Tier 1 risk-based capital:
TCF
TCF Bank
Total risk-based capital:
TCF
TCF Bank
At December 31, 2013:
Tier 1 leverage capital:(2)
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)
Ratio
Amount
Well-Capitalized
Capital Requirement(1)
Ratio
Amount
$1,919,887
1,836,019
10.07%
9.63
$ 762,711
762,746
4.00%
4.00
N.A.
$ 953,432
N.A.
5.00%
1,919,887
1,836,019
11.76
11.25
2,209,999
2,126,131
13.54
13.03
652,857
652,785
1,305,714
1,305,569
4.00
4.00
8.00
8.00
979,286
979,177
6.00
6.00
1,632,143
1,631,961
10.00
10.00
$1,763,682
1,675,082
9.71%
9.23
$ 726,242
725,895
4.00%
4.00
N.A.
$ 907,368
N.A.
5.00%
1,763,682
1,675,082
11.41
10.84
2,107,981
2,018,959
13.64
13.07
618,228
618,033
1,236,456
1,236,066
4.00
4.00
8.00
8.00
927,342
927,049
6.00
6.00
1,545,571
1,545,082
10.00
10.00
N.A. Not Applicable.
(1) The minimum and well-capitalized requirements are determined by the Federal Reserve Board for TCF and by the OCC for TCF Bank pursuant
to the Federal Deposit Insurance Corporation Improvement Act of 1991.
(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.
79
Note 15. Stock Compensation
The TCF Financial Incentive Stock Program (the ‘‘Program’’) was adopted to enable TCF to attract and retain key personnel. At
December 31, 2014, there were 2,754,016 shares reserved for issuance under the Program.
At December 31, 2014, there were 1,080,916 shares of performance-based restricted stock outstanding that will vest only if
certain return on asset goals, loan volumes and credit quality metrics and service conditions are achieved. Failure to achieve the
performance and service conditions will result in all or a portion of the shares being forfeited. Awards of service-based restricted
stock vest over periods from one year to five years.
Information about restricted stock is summarized as follows.
(Dollars in thousands)
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,
2013
$10,467
14,482
4,034
1.6
2012
$10,934
19,530
4,259
2.1
2014
$ 8,690
22,532
3,424
2.6
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.
Valuation and related assumption information for TCF’s stock option plans related to options issued in 2008 is presented below
and no stock options were subsequently issued through December 31, 2014.
Expected volatility
Weighted-average volatility
Expected dividend yield
Expected term (years)
Risk-free interest rate
28.5%
28.5%
3.5%
6.25 - 6.75
2.58% - 2.91%
The following table reflects TCF’s restricted stock and stock option transactions under the Program since December 31, 2011.
Restricted Stock
Stock Options
Shares
Price Range
Weighted-
Average Weighted-
Average
Exercise
Price
Remaining
Contractual
Life in Years
Outstanding at December 31, 2011
Granted
Forfeited/canceled
Vested
Outstanding at December 31, 2012
Granted
Forfeited/canceled
Vested
Outstanding at December 31, 2013
Granted
Exercised
Forfeited/canceled
Vested
Shares
Price Range
Weighted-
Average
Grant Date
Fair Value
2,284,114 $ 6.16 - $28.64
7.73 - 11.56
1,769,700
7.73 - 28.02
(322,908)
7.57 - 28.64
(518,671)
$12.95
9.27
10.13
13.42
3,212,235
493,650
(120,313)
(230,277)
6.16 - 25.18
12.47 - 15.17
9.65 - 17.37
9.48 - 25.18
3,355,295
1,120,750
–
(108,490)
(1,509,061)
6.16 - 15.17
13.84 - 16.02
–
6.80 - 15.79
8.35 - 14.90
– -
11.13
13.55
12.75
16.04
11.09
15.61
–
13.06
11.21
–
2,198,744 $12.85 - $15.75
–
(121,640) 15.75 - 15.75
–
– -
– -
–
2,077,104
–
12.85 - 15.75
–
(451,104) 15.75 - 15.75
–
– -
– -
–
– -
1,626,000
–
12.85 - 15.75
–
(47,000) 15.75 - 15.75
–
–
– -
– -
–
–
Outstanding at December 31, 2014
2,858,494
6.16 - 16.02
12.73
1,579,000
12.85 - 15.75
Exercisable at December 31, 2014
N.A.
N.A.
1,579,000
12.85 - 15.75
N.A. Not Applicable.
80
5.72
–
–
–
4.22
–
–
–
4.36
–
–
–
–
2.98
$14.43
–
15.75
–
14.35
–
15.75
–
13.97
–
15.75
–
–
13.91
13.91
Note 16. Employee Benefit Plans
Employees Stock Purchase Plan The TCF Employees Stock Purchase Plan (the ‘‘ESPP’’), 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 3.0% 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 ten or more years of service up to a maximum company
contribution of 6.0% 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, 2014, the fair value of the assets in the ESPP totaled $244.0 million and included $139.6 million invested in
TCF common stock. Dividends on TCF common shares held in the ESPP reduce retained earnings and the shares are considered
outstanding for computing earnings per share. The Company’s matching contributions are expensed when made. TCF’s
contributions to the ESPP were $9.6 million in 2014, $8.9 million in 2013 and $8.0 million in 2012.
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 eligible 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 participants’ 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 arise. TCF closely monitors all assumptions and updates them
annually. The Company does not consolidate the assets and liabilities associated with the Pension Plan.
Postretirement Plan TCF provides health care benefits for eligible retired employees (the ‘‘Postretirement Plan’’). Effective
January 1, 2000, TCF modified the Postretirement Plan for employees not yet eligible for benefits under the Postretirement Plan
by eliminating the Company subsidy. The Postretirement 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.
The information set forth in the following tables is based on current actuarial reports using the measurement date of
December 31 for TCF’s Pension Plan and Postretirement Plan.
81
The following table sets forth the status of the Pension Plan and the Postretirement Plan.
(In thousands)
Change in benefit obligation:
Benefit obligation, beginning of period
Interest cost on projected benefit obligation
Actuarial (gain) loss
Benefits paid
Projected benefit obligation, end of period
Change in fair value of plan assets:
Fair value of plan assets, beginning of period
Actual gain (loss) on plan assets
Benefits paid
TCF contributions
Fair value of plan assets, end of period
Pension Plan
Postretirement Plan
Year Ended December 31,
2014
2013
2014
2013
$41,870
1,587
1,862
(5,829)
$45,037
1,292
(2,196)
(2,263)
$ 5,217
198
(63)
(368)
$ 6,675
174
(1,241)
(391)
39,490
41,870
4,984
5,217
51,018
(511)
(5,829)
–
53,617
(336)
(2,263)
–
44,678
51,018
–
–
(368)
368
–
–
–
(391)
391
–
Funded status of plans, end of period
$ 5,188
$ 9,148
$(4,984)
$(5,217)
Amounts recognized in the Consolidated Statements of Financial
Condition:
Prepaid (accrued) benefit cost, end of period
Prior service cost included in accumulated other comprehensive loss
$ 5,188
–
$ 9,148
–
$(4,984)
(331)
$(5,217)
(378)
Accumulated other comprehensive loss, before tax
–
–
(331)
(378)
Total recognized asset (liability)
$ 5,188
$ 9,148
$(5,315)
$(5,595)
The accumulated benefit obligation for the Pension Plan was $39.5 million and $41.9 million at December 31, 2014 and 2013,
respectively.
TCF’s Pension Plan investment policy states that assets may be invested in direct fixed income securities to include cash, money
market mutual funds, U.S. Treasury securities, U.S. Government-sponsored enterprises and indirect fixed income investment
securities made in fund form (mutual fund or institutional fund) where the fund invests in fixed income securities in investment
grade corporate credits, non-investment grade floating-rate bank loans and non-investment grade bonds. The fair value of Level 1
assets are based upon prices obtained from independent pricing sources for the same assets traded in active markets. The fair
value of the collective investment fund and the mortgage-backed securities categorized as Level 2 assets are based on prices
obtained from independent pricing sources that are based on observable transactions of similar instruments, but not quoted
markets. There were no assets that are valued on a recurring basis as Level 3 assets.
The following table presents the balances of TCF’s Pension Plan investments at fair value on a recurring basis.
(In thousands)
Level 1:
U.S. Treasury bills
Fixed income mutual funds
Money market mutual funds
Cash
Level 2:
Collective investment fund
Mortgage-backed securities
Total Pension Plan assets held in trust
82
Pension Plan
Year Ended
December 31,
2014
2013
$
–
22,532
16,088
71
$47,999
–
3,019
–
4,961
1,026
–
–
$44,678
$51,018
The following table sets forth the changes recognized in accumulated other comprehensive loss that are attributed to the
Postretirement Plan.
(In thousands)
Accumulated other comprehensive loss at the beginning of the year
Prior service cost
Amortization (recognized in net periodic benefit cost):
Prior service credit
Total recognized in other comprehensive income (loss)
Postretirement Plan
Year Ended December 31,
2013
2014
$(424)
$(378)
–
–
2012
$(301)
(151)
47
47
46
46
28
(123)
Accumulated other comprehensive loss at end of year, before tax
$(331)
$(378)
$(424)
The Pension Plan does not have any accumulated other comprehensive loss.
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, 2014 and 2013. The discount rates used to measure the
benefit obligation of the Pension Plan and the Postretirement Plan were 3.25% and 4.0% for the years ended December 31,
2014 and 2013, respectively.
The following tables set forth the net periodic benefit plan (income) cost included in compensation and employee benefits
expense for the Pension Plan and the Postretirement Plan.
(In thousands)
Interest cost
Loss on plan assets
Recognized actuarial (gain) loss
Net periodic benefit plan (income) cost
(In thousands)
Interest cost
Recognized actuarial (gain) loss
Amortization of prior service cost
Pension Plan
Year Ended December 31,
2013
2014
$ 1,292
$1,587
336
511
(2,196)
1,862
2012
$1,763
277
289
$3,960
$ (568)
$2,329
Postretirement Plan
Year Ended December 31,
2013
2014
174
$198
(1,241)
(63)
(46)
(47)
2012
$ 293
(721)
(28)
$
Net periodic benefit plan (income) cost
$ 88
$(1,113)
$(456)
Pension Plan actual return on plan assets, net of administrative expenses was a loss of 1.0% for the year ended December 31,
2014 and a loss of 0.6% for the year ended December 31, 2013. The expected actuarial return on plan assets was a gain of
$0.7 million and the actual loss on plan assets was $0.5 million and increased net periodic benefit cost for the year ended
December 31, 2014. The expected actuarial return on plan assets was a gain of $0.8 million and the actual loss on plan assets
was $0.3 million and increased net periodic benefit cost for the year ended December 31, 2013.
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 estimated 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,
2014
4.00%
1.50
2013
3.00%
1.50
2012
4.00%
1.50
Postretirement Plan
Year Ended December 31,
2014
4.00%
N.A.
2013
2.75%
N.A.
2012
4.00%
N.A.
Prior service credits of TCF’s Postretirement Plan totaling $46 thousand are included within accumulated other comprehensive
loss at December 31, 2014 and are expected to be recognized as components of net periodic benefit cost during 2015.
83
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 3.2%, net of administrative expenses. A 1.0%
difference in the expected return on plan assets would result in a $0.4 million change in net periodic pension expense.
The discount rate used to determine TCF’s pension and postretirement benefit obligations as of December 31, 2014 and 2013
was determined by matching estimated benefit cash flows to a yield curve derived from corporate bonds rated AA by either
Moody’s or Standard and Poor’s. Bonds containing call or put provisions were excluded. The average estimated duration of TCF’s
Pension Plan and Postretirement Plan varied between seven and eight years.
Included within the net periodic benefit cost for the Pension Plan are recognized actuarial gains and losses. The decrease in the
discount rate from 4.0% at December 31, 2013 to 3.25% at December 31, 2014 increased net periodic benefit cost by
$1.9 million during 2014. Updated mortality tables at December 31, 2014 and various plan participant census changes decreased
the 2014 net periodic benefit cost by $32 thousand.
Included within the net periodic benefit 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, 2014 reduced net periodic benefit
cost by $0.6 million. The decrease in the discount rate from 4.0% at December 31, 2013 to 3.25% at December 31, 2014
increased the net periodic benefit cost by $0.3 million. Updated mortality tables at December 31, 2014 and various plan
demographic changes increased the net periodic benefit obligation by $0.3 million.
For 2014, TCF was eligible to contribute up to $10.9 million to the Pension Plan until the 2014 federal income tax return extension
due date under various IRS funding methods. During 2014, TCF made no cash contributions to the Pension Plan. TCF does not
expect to be required to contribute to the Pension Plan in 2015. TCF expects to contribute $0.5 million to the Postretirement Plan
in 2015. TCF contributed $0.4 million to the Postretirement Plan for the year ended December 31, 2014. TCF currently has no
plans to pre-fund the Postretirement Plan in 2015.
The following are expected future benefit payments used to determine projected benefit obligations.
(In thousands)
2015
2016
2017
2018
2019
2020 - 2024
Pension
Plan
$ 4,209
3,549
2,881
3,036
3,138
12,284
Postretirement
Plan
$ 505
486
466
445
424
1,801
The following table presents assumed health care cost trend rates for the Postretirement Plan at December 31, 2014 and 2013.
Health care cost trend rate assumed for next year
Final health care cost trend rate
Year that final health care trend rate is reached
2014
2013
5.8% 6.0%
5.0% 5.0%
2023
2023
Assumed health care cost trend rates have an effect on the amounts reported for the Postretirement Plan. A 1.0% change in
assumed health care cost trend rates would have the following effect.
(In thousands)
Effect on total service and interest cost components
Effect on postretirement benefits obligations
1-Percentage-Point
Increase Decrease
$ (9)
(196)
$ 9
217
84
Note 17. Financial Instruments with Off-Balance Sheet Risk
TCF is a party to financial instruments with off-balance sheet risk, primarily to meet the financing needs of its customers. These
financial instruments, which are issued or held for purposes other than trading, involve elements of credit and interest-rate risk in
excess of the amount recognized in the Consolidated Statements of Financial Condition.
TCF’s exposure to credit loss, in the event of non-performance by the counterparty to the financial 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,
2014
2013
$1,314,826
609,618
140,261
$1,274,006
482,777
158,321
2,064,705
14,676
1,915,104
13,364
$2,079,381
$1,928,468
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 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. Collateral to secure any funding of 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 2018. Collateral held consists primarily 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. Derivative Instruments
All derivative instruments are recognized within other assets or other liabilities at fair value within the Consolidated Statements
of Financial Condition. The value of derivative instruments will vary over their contractual terms as the related underlying rates
fluctuate. The accounting for changes in the fair value of a derivative instrument 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 at inception. 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. A contract that has been, and
is expected to continue to be, effective at offsetting changes in cash flows or the net investment must be assessed and
documented at least quarterly. If it is determined that a contract is not highly effective at hedging the designated exposure,
hedge accounting is discontinued.
Upon origination of a derivative instrument, 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’’), a hedge of the volatility of an
investment in foreign operations driven by changes in foreign currency exchange rates (‘‘net investment hedge’’), or is not
designated as a hedge. 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 discontinued and any gain or loss included in other comprehensive income (loss) is reported in
earnings immediately.
85
Cash Flow Hedges TCF uses certain forward foreign exchange contracts to manage foreign exchange risk. Forward foreign
exchange contracts represent agreements to exchange a foreign currency for U.S. dollars at an agreed-upon price and
settlement date. Certain of these foreign exchange contracts were designated as cash flow hedges. TCF had no forward foreign
exchange contracts designated as cash flow hedges at December 31, 2014 or 2013.
Net Investment Hedges Foreign exchange contracts, which include certain forward contracts that settle within 30 days, are
used to manage the foreign exchange risk associated with the Company’s net investment in TCF Commercial Finance
Canada, Inc., a wholly-owned indirect Canadian subsidiary of TCF Bank.
Derivatives Not Designated as Hedges TCF executes interest rate swaps with commercial banking customers to facilitate
their respective risk management strategies. Those interest rate swaps are simultaneously hedged by offsetting interest rate
swaps that TCF executes with a third party, such that TCF minimizes its net risk exposure resulting from such transactions. As
the interest rate swaps associated with this program do not meet hedge accounting requirements, changes in the fair value of
both the customer swaps and the offsetting swaps are reflected in non-interest income. These contracts have original fixed
maturity dates ranging from three to ten years.
During the second quarter of 2012, TCF sold its Visa(cid:4) Class B stock. In conjunction with the sale, TCF and the purchaser entered
into a derivative transaction whereby TCF may receive or be required to make cash payments whenever the conversion ratio of
the Visa Class B stock into Visa Class A stock is adjusted. The fair value of this derivative has been determined using estimated
future cash flows using probability weighted scenarios for multiple estimates of Visa’s aggregate exposure to covered litigation
matters, which include consideration of amounts funded by Visa into its escrow account for the covered litigation matters.
Changes, if any, in the valuation of this swap agreement, which has no determinable maturity date, are reflected in non-interest
income.
Certain of TCF’s forward foreign exchange contracts are not designated as hedges and are generally settled within 30 days.
Changes in the fair value of these foreign exchange contracts are reflected in non-interest expense.
TCF enters into interest rate lock commitments in conjunction with certain consumer real estate loans. These interest rate lock
commitments are agreements to extend credit under certain specified terms and conditions at fixed rates and have original lock
expirations of up to 60 days. They are not designated as hedges and accordingly, changes in the valuation of these commitments
are reflected in non-interest income.
86
The following tables summarize TCF’s outstanding derivative instruments as of December 31, 2014 and 2013. See Note 19, Fair
Value Disclosures for additional information.
(In thousands)
Derivative Assets:
Net investment hedges
Forward foreign exchange contracts not designated as
hedges
Swap agreements
Interest rate lock commitments
Total derivative assets
Derivative Liabilities:
Forward foreign exchange contracts not designated as
hedges
Swap agreements
Total derivative liabilities
At December 31, 2014
Notional
Amount
Gross Amounts
Recognized
Gross Amounts
Offset
Net Amount
Presented(1)
$ 42,165
275,962
101,166
15,124
$ 189,310
114,970
$ 509
2,702
1,798
285
$5,294
$ 177
2,498
$2,675
$
–
$ 509
(1,179)
–
–
1,523
1,798
285
$(1,179)
$4,115
$
(29)
(2,498)
$(2,527)
$ 148
–
$ 148
(In thousands)
Derivative Assets:
Forward foreign exchange contracts not designated as
hedges
Swap agreements
Total derivative assets
Derivative Liabilities:
Net investment hedges
Forward foreign exchange contracts not designated as
hedges
Swap agreements
Total derivative liabilities
At December 31, 2013
Notional
Amount
Gross Amounts
Recognized
Gross Amounts
Offset
Net Amount
Presented(1)
$ 98,847
13,500
$ 32,761
363,475
41,358
$ 151
131
$ 282
$
87
834
1,031
$1,952
$ (151)
–
$ (151)
$
–
–
(1,031)
$(1,031)
$
–
131
$131
$ 87
834
–
$921
(1) All amounts were offset in the Consolidated Statements of Financial Condition.
The following table summarizes the pre-tax impact of derivative activity within the Consolidated Statements of Income and the
Consolidated Statements of Comprehensive Income, by accounting designation.
(In thousands)
Consolidated Statements of Income:
Non-interest income:
Swap agreements
Interest rate lock commitments
Non-interest expense:
Cash flow hedge
Forward foreign exchange contracts not designated as hedges
Net realized gain (loss)
Consolidated Statements of Comprehensive Income:
Other comprehensive income (loss):
Net investment hedges
Net unrealized gain (loss)
Year Ended December 31,
2012
2013
2014
$
(79)
285
$
$
–
–
–
–
–
38,752
–
25,170
(6)
(7,524)
$38,958
$25,170
$(7,530)
$ 3,126
$ 1,625
$ (630)
$ 3,126
$ 1,625
$ (630)
TCF executes all of its foreign exchange contracts in the over-the-counter market with large financial institutions pursuant to
International Swaps and Derivatives Association, Inc. 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
87
whom TCF has transacted by requiring that additional collateral be posted under certain circumstances. The amount of collateral
required depends on the contract and is determined daily based on market and currency exchange rate conditions.
At December 31, 2014, credit risk-related contingent features existed on forward foreign exchange contracts with a notional
value of $124.8 million. In the event TCF is rated less than BB- by Standard and Poor’s, the contracts could be terminated or TCF
may be required to provide approximately $2.5 million in additional collateral. There were no forward foreign exchange contracts
containing credit risk-related features in a net liability position at December 31, 2014.
At December 31, 2014, TCF had posted $5.1 million of cash collateral related to its swap agreements and had received
$1.2 million of cash collateral related to its forward foreign exchange contracts.
Note 19. Fair Value Disclosures
TCF uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value
disclosures. The Company’s fair values are based on the price that would be received upon the sale of an asset or paid to transfer
a liability in an orderly transaction between market participants at the measurement date. Securities available for sale, certain
loans and leases held for sale, forward foreign exchange contracts, swap agreements, interest rate lock commitments, forward
loan sales commitments and assets and liabilities held in trust for deferred compensation plans are recorded at fair value on a
recurring basis. From time to time we may be required to record at fair value other assets on a non-recurring basis, such as
certain securities held to maturity, loans, interest-only strips, other real estate owned and repossessed and returned assets.
These non-recurring fair value adjustments typically involve application of lower-of-cost-or-market accounting or write-downs of
individual assets.
The following is a discussion of the fair value hierarchy and the valuation methodologies used for assets and liabilities recorded at
fair value on a recurring or non-recurring basis and for estimating fair value of financial instruments not recorded at fair value.
TCF groups its assets and liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities
are traded and the degree and reliability of estimates and assumptions used to determine fair value as follows: Level 1, which
includes valuations that are based on prices obtained from independent pricing sources for the same instruments traded in active
markets; Level 2, which includes valuations that are based on prices obtained from independent pricing sources that are based
on observable transactions of similar instruments, but not quoted markets; and Level 3, for which valuations are generated from
Company model-based techniques that use significant unobservable inputs. Such unobservable inputs reflect estimates of
assumptions that market participants would use in pricing the asset or liability.
Investments The carrying value of investments in FHLB stock and Federal Reserve Bank stock, categorized as Level 2,
approximates fair value based on redemption at par value.
Securities Held to Maturity Securities held to maturity consist primarily of securities of U.S. Government sponsored
enterprises and federal agencies. The fair value of securities of U.S. Government sponsored enterprises and federal agencies,
categorized as Level 2, is estimated using prices obtained from independent asset pricing services that are based on observable
transactions, but not quoted markets. Management reviews the prices obtained from independent asset pricing services for
unusual fluctuations and comparisons to current market trading activity. The fair value of certain other securities held to maturity,
categorized as Level 3, is estimated based on discounted cash flows using current market rates and consideration of credit
exposure or other internal pricing methods. There is no observable secondary market for these securities.
Securities Available for Sale Securities available for sale consist primarily of securities of U.S. Government sponsored
enterprises and federal agencies. The fair value of securities of U.S. Government sponsored enterprises and federal agencies,
categorized as Level 2, is recorded using prices obtained from independent asset pricing services that are based on observable
transactions, but not quoted markets. Management reviews the prices obtained from independent asset pricing services for
unusual fluctuations and comparisons to current market trading activity. The fair value of other securities, categorized as Level 1,
is determined using quoted prices from the New York Stock Exchange.
Loans and Leases Held for Sale Loans and leases held for sale are generally carried at the lower of cost or fair value. The cost
of loans held for sale includes the unpaid principal balance, net of deferred loan fees and costs. Estimated fair values are based
upon recent loan sale transactions and any available price quotes on loans with similar coupons, maturities and credit quality.
Certain other loans and leases held for sale are recorded at fair value under the elected fair value option. TCF relies on internal
valuation models which utilize quoted investor prices to estimate the fair value of these loans. Loans and leases held for sale are
categorized as Level 3.
Loans The fair value of loans, categorized as Level 3, is estimated based on discounted expected cash flows and recent sales
of similar loans. The discounted cash flows include assumptions for prepayment estimates over each loan’s remaining life,
88
consideration of the current interest rate environment compared with 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. TCF also uses pricing data from recent sales of loans with similar risk characteristics as data points to
validate the assumptions used in estimating the fair value of certain loans.
Loans for which repayment is expected to be provided solely by the value of the underlying collateral, categorized as Level 3 and
recorded at fair value on a non-recurring basis, are valued based on the fair value of that collateral less estimated selling costs.
Such loans include impaired loans as well as certain delinquent non-accrual consumer real estate and auto finance loans. The fair
value of the collateral is determined based on internal estimates and assessments provided by third-party appraisers.
Forward Foreign Exchange Contracts TCF’s forward foreign exchange contracts are currency contracts executed in
over-the-counter markets and are recorded at fair value using a cash flow model that includes key inputs such as foreign
exchange rates and, in accordance with GAAP, an assessment of the risk of counterparty non-performance. The risk of
counterparty non-performance is based on external assessments of credit risk. The fair value of these contracts, categorized as
Level 2, is based on observable transactions, but not quoted markets.
Swap Agreements TCF executes interest rate swaps with commercial banking customers to facilitate the customer’s risk
management strategy. These interest rate swaps are simultaneously hedged by offsetting interest rate swaps TCF executes
with a third party, such that TCF minimizes its net risk exposure resulting from such transactions. These derivative instruments
are recorded at fair value. The fair value of these swap agreements, categorized as Level 2, is determined using a cash flow
model which considers the forward curve, the discount curve and credit valuation adjustments related to counterparty and
borrower non-performance risk. TCF also entered into a swap agreement related to the sale of TCF’s Visa Class B stock,
categorized as Level 3. The fair value of the Visa swap agreement is based upon TCF’s estimated exposure related to the Visa
covered litigation through a probability analysis of the funding and estimated settlement amounts.
Interest Rate Lock Commitments and Forward Loan Sales Commitments TCF’s interest rate lock commitments are
derivative instruments which are recorded at fair value. The related forward loan sales commitments to sell the resulting loans
held for sale are also carried at fair value under the elected fair value option. TCF relies on internal valuation models to estimate
the fair value of these instruments. The valuation models utilize estimated rates of successful loan closings and quoted investor
prices. While these models use both Level 2 and 3 inputs, TCF has determined that the majority of the inputs significant in the
valuation of these commitments fall within Level 3 and therefore they are categorized as Level 3.
Interest-Only Strips The fair value of interest-only strips, categorized as Level 3, represents the present value of future cash
flows retained by TCF on certain assets. 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 TCF believes are commensurate with
the risks associated with the cash flows and what a market participant would use. These assumptions are inherently subject to
volatility and uncertainty and, as a result, the estimated fair value of the interest-only strips may fluctuate significantly from period
to period.
Other Real Estate Owned and Repossessed and Returned Assets The fair value of other real estate owned is based on
independent appraisals, real estate brokers’ 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 assets 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 other real estate owned or repossessed and
returned assets. Other real estate owned and repossessed and returned assets were written down $14.8 million and
$15.6 million, which was included in foreclosed real estate and repossessed assets, net expense for the years ended
December 31, 2014 and 2013, respectively.
Deposits The fair value of checking, savings and money market deposits, categorized as Level 1, is deemed equal to the
amount payable on demand. The fair value of certificates of deposit, categorized as Level 2, 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.
Long-term Borrowings The fair value of TCF’s long-term borrowings, categorized as Level 2, is estimated based on
observable market prices and discounted cash flows using interest rates for borrowings of similar remaining maturities and
characteristics. The fair value of other long-term borrowings, categorized as Level 3, is based on unobservable inputs determined
at the time of origination.
89
Assets and Liabilities Held in Trust for Deferred Compensation Plans 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, categorized as Level 1, is based upon prices obtained from independent asset
pricing services based on active markets. The fair value of the liabilities equals the fair value of the assets.
Financial Instruments with Off-Balance Sheet Risk The fair value of TCF’s commitments to extend credit and standby
letters of credit, categorized as Level 2, is 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 interest rates and do not expose TCF to interest rate risk; therefore fair value is
approximately equal to carrying value.
The following tables present the balances of assets and liabilities measured at fair value on a recurring and non-recurring basis.
(In thousands)
Recurring Fair Value Measurements:
Securities available for sale:
Mortgage-backed securities:
U.S. Government sponsored enterprises and federal
agencies
Other
Loans and leases held for sale
Forward foreign exchange contracts(1)
Swap agreements(1)
Interest rate lock commitments(1)
Forward loan sales commitments
Assets held in trust for deferred compensation plans
Total assets
Forward foreign exchange contracts(1)
Swap agreements(1)
Forward loan sales commitments
Liabilities held in trust for deferred compensation plans
Fair Value Measurements at December 31, 2014
Total
Level 3
Level 1
Level 2
$
$
$
$
–
–
–
–
–
–
–
18,703
$463,239
–
–
3,211
1,798
–
–
–
$18,703
$468,248
$
–
–
–
18,703
$
177
1,877
–
–
–
55
3,308
–
–
285
19
–
$463,239
55
3,308
3,211
1,798
285
19
18,703
3,667
$490,618
–
621
42
–
663
$
177
2,498
42
18,703
$ 21,420
Total liabilities
$18,703
$
2,054
$
Non-recurring Fair Value Measurements:
Securities held to maturity
Loans
Interest-only strips
Other real estate owned:
Consumer
Commercial
Repossessed and returned assets
Total non-recurring fair value measurements
$
$
–
–
–
–
–
–
–
$
–
–
–
$
1,516
164,897
41,204
$
1,516
164,897
41,204
–
4,839
1,563
40,502
8,866
1,425
40,502
13,705
2,988
$
6,402
$258,410
$264,812
(1) As permitted under GAAP, TCF has elected to net derivative receivables and derivative payables with the related cash collateral received and
paid when a legally enforceable master netting agreement exists. For purposes of this table, the derivative receivable and derivative payable
balances are presented gross of this netting adjustment.
90
(In thousands)
Recurring Fair Value Measurements:
Securities available for sale:
Mortgage-backed securities:
U.S. Government sponsored enterprises and federal
agencies
Other
Other securities
Forward foreign exchange contracts(1)
Swap agreements(1)
Assets held in trust for deferred compensation plans
Total assets
Forward foreign exchange contracts(1)
Swap agreements(1)
Liabilities held in trust for deferred compensation plans
Total liabilities
Non-recurring Fair Value Measurements:
Securities held to maturity
Loans
Interest-only strips
Other real estate owned:
Consumer
Commercial
Repossessed and returned assets
Total non-recurring fair value measurements
Fair Value Measurements at December 31, 2013
Level 1
Level 2
Level 3
Total
$
–
–
2,934
–
–
16,724
$548,037
–
–
151
131
–
$19,658
$548,319
$
$
–
–
16,724
921
132
–
$16,724
$
1,053
$
$
$
$
–
93
–
–
–
–
93
–
899
–
899
$548,037
93
2,934
151
131
16,724
$568,070
$
921
1,031
16,724
$ 18,676
$
$
–
–
–
–
–
–
–
$
–
–
–
$
1,902
214,183
33,098
$
1,902
214,183
33,098
–
–
1,537
40,355
14,088
730
40,355
14,088
2,267
$
1,537
$304,356
$305,893
(1) As permitted under GAAP, TCF has elected to net derivative receivables and derivative payables with the related cash collateral received and
paid when a legally enforceable master netting agreement exists. For purposes of this table, the derivative receivable and derivative payable
balances are presented gross of this netting adjustment.
Management assesses the appropriate classification of financial assets and liabilities within the fair value hierarchy by monitoring
the level of availability of observable market information. Changes in markets or economic conditions, as well as changes to
Company valuation models may require the transfer of financial instruments from one fair value level to another. Such transfers,
if any, are recorded at the fair values as of the beginning of the quarter in which the transfer occurred. TCF had no transfers in the
years ended December 31, 2014 and 2013, and transferred $1.1 million of securities available for sale from Level 3 to Level 1 in
the year ended December 31, 2012.
91
The following table presents changes in Level 3 assets and liabilities measured at fair value on a recurring basis.
(In thousands)
Asset (liability) balance, December 31, 2011
Transfers out of Level 3
Total net losses included in:
Net loss
Other comprehensive loss
Purchases
Principal paydowns / settlements
Asset (liability) balance, December 31, 2012
Principal paydowns / settlements
Asset (liability) balance, December 31, 2013
Total net gains (losses) included in:
Net income
Sales
Purchases / originations
Principal paydowns / settlements
Securities
Loans and
Available Leases Held
for Sale
$ 1,450
(1,098)
Swap
for Sale Commitments Commitments Agreements
–
$
–
$ –
–
–
–
–
–
$
$
Forward
Loan Sales
Interest
Rate Lock
–
(100)
–
(125)
127
(34)
93
–
–
–
(38)
–
–
–
–
–
–
–
72
(39,246)
42,482
–
–
–
–
–
–
–
–
285
–
–
–
–
–
–
–
–
–
–
(23)
–
–
–
(150)
–
(1,434)
357
(1,227)
328
(899)
(47)
–
–
325
Asset (liability) balance, December 31, 2014
$
55
$ 3,308
$285
$(23)
$ (621)
Fair Value Option
In the third quarter of 2014, TCF initiated a correspondent lending program in which TCF Bank originates consumer mortgage
loans and sells them to a wholesale partner. TCF elected the fair value option for these loans. This election facilitates the
offsetting of changes in fair values of the loans held for sale and the derivative financial instruments used to economically hedge
them. The following table presents the difference between the aggregate fair value and aggregate unpaid principal balance of
these loans held for sale as of December 31, 2014. There were no loans held for sale reported under the fair value option as of
December 31, 2013.
(In thousands)
Fair value carrying amount
Aggregate unpaid principal amount
Fair value carrying amount less aggregate unpaid principal
At December 31, 2014
$3,308
3,205
$ 103
Differences between the fair value carrying amount and the aggregate unpaid principal balance include changes in fair value
recorded at and subsequent to funding and gains and losses on the related loan commitment prior to funding. No loans recorded
under the fair value option were delinquent or on nonaccrual status at December 31, 2014. The net gain from initial measurement
of the above loans and subsequent changes in fair value for loans outstanding was $0.9 million for the year ended December 31,
2014, and is included in gains on sales of consumer real estate loans, net. This amount excludes the impact from offsetting
hedging arrangements which are also included in gains on sales of consumer real estate loans, net.
Disclosures About Fair Value of Financial Instruments
Management discloses 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, 2014 and 2013, 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 the Company’s financial instruments, the estimates of fair values are subjective in nature, involve
uncertainties and include matters of significant judgment. Changes in assumptions could significantly affect the estimated
values.
92
The following tables present the carrying amounts and estimated fair values of the Company’s financial instruments, excluding
short-term financial assets and liabilities as their carrying amounts approximate fair value and excluding financial instruments
recorded at fair value on a recurring basis. 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 intangible value of TCF’s branches and core
deposits, leasing operations, goodwill, premises and equipment 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.
Carrying
Amount
Estimated Fair Value at December 31, 2014
Level 1
Level 2
Level 3
Total
(In thousands)
Financial instrument assets:
Investments
Securities held to maturity
Loans and leases held for sale
Loans:
Consumer real estate
Commercial real estate
Commercial business
Equipment finance
Inventory finance
Auto finance
Other
Allowance for loan losses(1)
Interest-only strips(2)
$
$
85,492
214,454
132,266
5,682,364
2,624,255
533,410
1,806,808
1,877,090
1,915,061
24,144
(164,169)
69,789
Total financial instrument assets
$14,800,964
$
Financial instrument liabilities:
Deposits
Long-term borrowings
$15,449,882
1,232,065
$12,400,693
–
$3,063,850
1,246,221
Total financial instrument liabilities
$16,681,947
$12,400,693
$4,310,071
–
–
–
–
–
–
–
–
–
–
–
–
–
$
$
85,492
217,418
–
$
–
4,916
139,370
85,492
222,334
139,370
–
–
–
–
–
–
–
–
–
5,836,770
2,575,625
512,083
1,787,271
1,864,786
1,927,384
18,724
–
73,058
5,836,770
2,575,625
512,083
1,787,271
1,864,786
1,927,384
18,724
–
73,058
$ 302,910
$14,739,987
$15,042,897
$
$
$
–
8,054
$15,464,543
1,254,275
8,054
$16,718,818
–
–
–
$
$
25,885
(47)
25,838
$
25,885
(47)
$
25,838
$
Financial instruments with off-balance
sheet risk:(3)
Commitments to extend credit
Standby letters of credit
Total financial instruments with
off-balance sheet risk
$
$
25,885
(47)
$
25,838
$
–
–
–
(1) Expected credit losses are included in the estimated fair values.
(2) Carrying amounts are included in other assets.
(3) Positive amounts represent assets, negative amounts represent liabilities.
93
Carrying
Amount
Estimated Fair Value at December 31, 2013
Level 1
Level 2
Level 3
Total
(In thousands)
Financial instrument assets:
Investments
Securities held to maturity
Loans and leases held for sale
Loans:
Consumer real estate
Commercial real estate
Commercial business
Equipment finance
Inventory finance
Auto finance
Other
Allowance for loan losses(1)
Interest-only strips(2)
$
$
94,326
19,912
79,768
6,339,326
2,743,697
404,655
1,546,134
1,664,377
1,239,386
26,743
(252,230)
84,561
–
–
–
–
–
–
–
–
–
–
–
–
–
$
$
94,326
14,610
–
$
–
5,302
84,341
94,326
19,912
84,341
–
–
–
–
–
–
–
–
–
6,279,328
2,673,825
392,947
1,534,905
1,653,345
1,256,357
25,216
–
85,265
6,279,328
2,673,825
392,947
1,534,905
1,653,345
1,256,357
25,216
–
85,265
$ 108,936
$13,990,831
$14,099,767
Total financial instrument
assets
$13,990,655
$
Financial instrument liabilities:
Deposits
Long-term borrowings
$14,432,776
1,483,325
$12,006,364
–
$2,434,946
1,496,017
Total financial instrument liabilities
$15,916,101
$12,006,364
$3,930,963
Financial instruments with
off-balance sheet risk:(3)
Commitments to extend credit
Standby letters of credit
Total financial instruments with
off-balance sheet risk
$
$
29,057
(52)
29,005
$
$
–
–
–
$
29,057
(52)
$
29,005
$
$
$
$
–
10,838
$14,441,310
1,506,855
10,838
$15,948,165
–
–
–
$
$
29,057
(52)
29,005
(1) Expected credit losses are included in the estimated fair values.
(2) Carrying amounts are included in other assets.
(3) Positive amounts represent assets, negative amounts represent liabilities.
94
Note 20. 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 (Loss) Per Common Share:
At or For the Year Ended December 31,
2014
2013
2012
Net income (loss) attributable to TCF Financial Corporation
Preferred stock dividends
$
174,187
(19,388)
$
151,668
(19,065)
$
Net income (loss) available to common stockholders
Earnings allocated to participating securities
154,799
40
132,603
71
(212,884)
(5,606)
(218,490)
50
Earnings (loss) allocated to common stock
$
154,759
$
132,532
$
(218,540)
Weighted-average shares outstanding
Restricted stock
166,542,848
(2,961,413)
164,229,421
(3,213,417)
162,288,902
(3,020,094)
Weighted-average common shares outstanding for basic earnings
(loss) per common share
Basic earnings (loss) per common share
Diluted Earnings (Loss) Per Common Share:
Earnings (loss) allocated to common stock
163,581,435
161,016,004
159,268,808
$
$
0.95
154,759
$
$
0.82
132,532
$
$
(1.37)
(218,540)
Weighted-average common shares outstanding used in basic
earnings (loss) per common share calculation
163,581,435
161,016,004
159,268,808
Net dilutive effect of:
Non-participating restricted stock
Stock options
250,499
252,892
719,459
191,092
–
–
Weighted-average common shares outstanding for diluted
earnings (loss) per common share
164,084,826
161,926,555
159,268,808
Diluted earnings (loss) per common share
$
0.94
$
0.82
$
(1.37)
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 2014, 2013 and 2012, there were 4.2 million, 3.8 million and 5.1 million, respectively, of outstanding shares related to
non-participating restricted stock, stock options, and warrants that were not included in the computation of diluted earnings per
share because they were anti-dilutive.
Note 21. Other Expense
Other expense consisted of the following.
(In thousands)
Loan and lease processing
Professional fees
Card processing and issuance cost
Outside processing
Telecommunications
Travel
Other
Total other expense
$
Year Ended December 31,
2013
2014
$ 13,787
$ 20,294
18,642
18,949
15,868
16,588
13,767
13,288
11,720
11,911
12,810
11,481
81,183
87,393
2012
9,567
13,608
15,586
12,919
11,735
11,740
88,742
$179,904
$167,777
$163,897
95
Note 22. Business Segments
Lending, Funding and Support Services have been identified as reportable segments. Lending includes consumer real estate,
commercial real estate and business lending, leasing and equipment finance, inventory finance and auto finance. Funding
includes branch banking and treasury services. 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 or loss. The business segments follow
GAAP as described in Note 1, Summary of Significant Accounting Policies. TCF generally accounts for inter-segment sales and
transfers at cost.
The following tables set forth certain information for each of TCF’s reportable segments, including a reconciliation of TCF’s
consolidated totals.
(In thousands)
At or For the Year Ended December 31, 2014:
Net interest income
Provision for credit losses
Non-interest income
Non-interest expense
Income tax expense (benefit)
Income (loss) after income tax expense
(benefit)
Income attributable to non-controlling
interest
Preferred stock dividends
Net income (loss) available to common
stockholders
Lending
Funding
Support
Services
Eliminations
and Other(1) Consolidated
$
592,409
92,800
211,166
426,290
102,398
$ 226,327
2,937
220,568
434,141
3,722
$
166
–
140,779
147,549
(1,932)
$
(3,273)
–
(139,246)
(136,203)
(4,422)
$
815,629
95,737
433,267
871,777
99,766
182,087
6,095
(4,672)
(1,894)
181,616
7,429
–
–
–
–
19,388
–
–
7,429
19,388
$
174,658
$
6,095
$ (24,060) $
(1,894)
$
154,799
Total assets
$16,871,154
$6,488,853
$239,425
$(4,204,821)
$19,394,611
Revenues from external customers:
Interest income
Non-interest income
Total
At or For the Year Ended December 31, 2013:
Net interest income
Provision for credit losses
Non-interest income
Non-interest expense
Income tax expense (benefit)
Income (loss) after income tax expense (benefit)
Income attributable to non-controlling interest
Preferred stock dividends
Net income (loss) available to common
stockholders
$
852,019
211,166
$
22,210
220,506
$
–
1,595
$ 1,063,185
$ 242,716
$
1,595
$
568,286
115,408
168,387
401,326
76,663
143,276
7,032
–
$ 237,289
2,960
235,238
442,557
9,750
$
3
–
136,584
139,864
8
17,260
–
–
(3,285)
–
19,065
$
$
$
–
–
–
$
874,229
433,267
$ 1,307,496
$
(2,954)
–
(136,151)
(138,478)
(2,076)
1,449
–
–
802,624
118,368
404,058
845,269
84,345
158,700
7,032
19,065
$
136,244
$
17,260
$ (22,350) $
1,449
$
132,603
Total assets
$16,197,449
$7,862,779
$228,863
$(5,909,251)
$18,379,840
Revenues from external customers:
Interest income
Non-interest income
Total
$
840,250
168,387
$
24,290
235,185
$ 1,008,637
$ 259,475
$
$
–
486
486
$
$
–
–
–
$
864,540
404,058
$ 1,268,598
(1) Other includes the unallocated portion of pension and other postretirement benefits (expenses) attributable to the annual determination of
actuarial gains and losses.
96
(In thousands)
At or For the Year Ended December 31, 2012:
Net interest income
Provision for credit losses
Non-interest income
Non-interest expense
Income tax expense (benefit)
Income (loss) after income tax expense (benefit)
Income attributable to non-controlling interest
Preferred stock dividends
Net income (loss) available to common
stockholders
Lending
Funding
Support
Services
Eliminations
and Other(1) Consolidated
$
524,358
245,355
138,514
367,172
13,272
37,073
6,187
–
$ 258,283
2,088
338,895
969,805
(135,432)
$
41
–
140,784
152,677
(7,790)
$
(2,663)
–
(127,770)
(127,100)
(2,908)
$
(239,283)
–
–
(4,062)
–
5,606
(425)
–
–
780,019
247,443
490,423
1,362,554
(132,858)
(206,697)
6,187
5,606
$
30,886
$ (239,283) $ (9,668) $
(425)
$
(218,490)
Total assets
$15,694,693
$7,249,958
$148,513
$(4,867,247)
$18,225,917
Revenues from external customers:
Interest income
Non-interest income
Total
$
$
842,718
138,514
$
41,905
338,848
$
–
13,061
981,232
$ 380,753
$ 13,061
$
$
–
–
–
$
884,623
490,423
$ 1,375,046
(1) Other includes the unallocated portion of pension and other postretirement benefits (expenses) attributable to the annual determination of
actuarial gains and losses.
Note 23. Parent Company Financial Information
TCF Financial’s (parent company only) condensed statements of financial condition as of December 31, 2014 and 2013 and the
condensed statements of income and cash flows for the years ended December 31, 2014, 2013 and 2012 are as follows.
Condensed Statements of Financial Condition
(In thousands)
Assets:
Cash and cash equivalents
Investment in bank subsidiary
Accounts receivable from bank subsidiary
Other assets
Total assets
Liabilities and Equity:
Other liabilities
Total liabilities
Equity
Total liabilities and equity
At December 31,
2014
2013
$
71,781
2,037,781
13,862
12,628
$
62,775
1,863,563
21,706
19,498
$2,136,052
$1,967,542
$
14,403
$
14,574
14,403
14,574
2,121,649
1,952,968
$2,136,052
$1,967,542
97
Condensed Statements of Income
(In thousands)
Interest income
Interest expense
Net interest income (expense)
Non-interest income:
Dividends from TCF Bank
Affiliate service fees
Other
Total 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 (deficit) in undistributed earnings of bank subsidiary
Net income (loss)
Preferred stock dividends
Year Ended December 31,
2013
2014
419
365
–
–
2012
355
7,952
$
$
$
365
419
(7,597)
19,000
22,461
1,178
42,639
21,193
338
3,436
24,967
18,037
52
18,089
156,098
174,187
19,388
–
23,338
407
23,745
22,108
322
3,352
25,782
(1,618)
309
(1,309)
152,977
151,668
19,065
18,000
17,089
12,936
48,025
14,703
298
15,731
30,732
9,696
2,766
12,462
(225,346)
(212,884)
5,606
Net income (loss) available to common stockholders
$154,799
$132,603
$(218,490)
98
Condensed Statements of Cash Flows
(In thousands)
Cash flows from operating activities:
Year Ended December 31,
2014
2013
2012
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by (used in)
$ 174,187
$ 151,668
$(212,884)
operating activities:
(Equity) deficit in undistributed earnings of bank subsidiary
(Gains) on sales of assets, net
Other, net
Net cash provided by (used in) operating activities
Cash flows from investing activities:
Capital contributions to bank subsidiary
Proceeds from sales of securities available for sale
Proceeds from sales of other securities
Purchases of premises and equipment
Proceeds from sales of premises and equipment
Other, net
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Net proceeds from public offerings of preferred stock
Dividends paid on preferred stock
Dividends paid on common stock
Redemption of trust preferred securities
Interest paid on trust preferred securities
Shares sold to TCF employee benefit plans
Stock compensation tax (expense) benefit
Exercise of stock options
Net cash provided by (used in) financing activities
Net change in cash and due from banks
Cash and due from banks at beginning of period
Cash and due from banks at end of period
(156,098)
(1,177)
16,430
(152,977)
(350)
9,962
225,346
(13,116)
9,561
33,342
8,303
8,907
–
2,813
–
(260)
91
–
2,644
–
(19,388)
(32,731)
–
–
23,083
1,316
740
–
–
–
(148)
–
869
(192,000)
–
14,550
(6)
–
–
721
(177,456)
–
(19,065)
(32,227)
–
–
20,179
(473)
–
263,240
(5,606)
(31,904)
(115,010)
(8,757)
19,462
(659)
–
(26,980)
(31,586)
120,766
9,006
62,775
(22,562)
85,337
(47,783)
133,120
$ 71,781
$ 62,775
$ 85,337
TCF Financial’s (parent company only) operations are conducted through its banking subsidiary, TCF Bank. As a result, TCF’s cash
flow and ability to make dividend payments to its common stockholders depend on the earnings of TCF Bank. The ability of TCF
Bank to pay dividends or make other payments to TCF Financial is limited by its obligation to maintain sufficient capital and by
other regulatory restrictions on dividends. At December 31, 2014, TCF Bank could pay a total of approximately $83.7 million in
dividends to TCF without prior regulatory approval.
Note 24. Litigation Contingencies
From time to time, TCF is a party to legal proceedings arising out of its lending, leasing and deposit operations, including
foreclosure proceedings and other collection actions as part of its lending and leasing collections activities. TCF may also be
subject to enforcement actions brought by federal regulators, including the Securities and Exchange Commission (‘‘SEC’’), the
Federal Reserve, the OCC and the Consumer Financial Protection Bureau. From time to time, borrowers and other customers,
and employees and former employees, have also brought actions against TCF, in some cases claiming substantial damages. TCF
and other financial services companies are subject to the risk of class action litigation. 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 TCF’s 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 failures related to regulatory compliance.
99
Note 25. Accumulated Other Comprehensive Income (Loss)
The components of other comprehensive income (loss) and the related tax effects are presented in the tables below.
(In thousands)
Year Ended December 31, 2014:
Securities available for sale:
Unrealized gains (losses) arising during the period
Reclassification of net (gains) losses to net income
Net unrealized gains (losses)
Net investment hedges:
Unrealized gains (losses) arising during the period
Foreign currency translation adjustment:(1)
Unrealized gains (losses) arising during the period
Recognized postretirement prior service cost:
Reclassification of net (gains) losses to net income
Before Tax
Tax Effect Net of Tax
$ 29,071
(76)
$(10,932)
29
$ 18,139
(47)
28,995
(10,903)
18,092
3,126
(1,181)
1,945
(3,704)
(47)
–
17
(3,704)
(30)
Total other comprehensive income (loss)
$ 28,370
$(12,067)
$ 16,303
Year Ended December 31, 2013:
Securities available for sale:
Unrealized gains (losses) arising during the period
Reclassification of net (gains) losses to net income
Net unrealized gains (losses)
Net investment hedges:
Unrealized gains (losses) arising during the period
Foreign currency translation adjustment:(1)
Unrealized gains (losses) arising during the period
Recognized postretirement prior service cost:
Reclassification of net (gains) losses to net income
Total other comprehensive income (loss)
Year Ended December 31, 2012:
Securities available for sale:
Unrealized gains (losses) arising during the period
Reclassification of net (gains) losses to net income
Net unrealized gains (losses)
Net investment hedges:
Unrealized gains (losses) arising during the period
Foreign currency translation adjustment:(1)
Unrealized gains (losses) arising during the period
Recognized postretirement prior service cost:
Unrealized gains (losses) arising during the period
Reclassification of net (gains) losses to net income
$(61,177)
(860)
$ 23,053
324
$(38,124)
(536)
(62,037)
23,377
(38,660)
1,625
(614)
1,011
(1,979)
(46)
–
18
(1,979)
(28)
$(62,437)
$ 22,781
$(39,656)
$ 19,794
(89,879)
$ (7,252)
32,745
$ 12,542
(57,134)
(70,085)
25,493
(44,592)
(630)
239
(391)
531
151
(28)
–
(66)
12
531
85
(16)
Total other comprehensive income (loss)
$(70,061)
$ 25,678
$(44,383)
(1) Foreign investments are deemed to be permanent in nature and therefore TCF does not provide for taxes on foreign currency translation
adjustments.
Reclassifications of net gains and net losses to net income related to securities available for sale were recorded in gains (losses)
on securities, net in the Consolidated Statements of Income. The tax effect of these reclassifications was recorded in income tax
expense (benefit) in the Consolidated Statements of Income. See Note 16, Employee Benefit Plans, for additional information
regarding TCF’s recognized postretirement prior service cost.
100
Accumulated other comprehensive income (loss) balances are presented in the tables below.
Securities
Available
for Sale
Net
Investment
Hedges
Foreign
Currency
Translation
Adjustment
Recognized
Postretirement Prior
Service Cost
Total
(In thousands)
At or For the Year Ended December 31, 2014:
Balance, beginning of period
Other comprehensive income (loss)
Amounts reclassified from accumulated
other comprehensive income (loss)
$(26,983)
18,139
(47)
Net other comprehensive income (loss)
18,092
Balance, end of period
At or For the Year Ended December 31, 2013:
Balance, beginning of period
Other comprehensive income (loss)
Amounts reclassified from accumulated other
comprehensive income (loss)
Net other comprehensive income (loss)
Balance, end of period
At or For the Year Ended December 31, 2012:
Balance, beginning of period
Other comprehensive income (loss)
Amounts reclassified from accumulated other
comprehensive income (loss)
Net other comprehensive income (loss)
$ (8,891)
$ 11,677
(38,124)
(536)
(38,660)
$(26,983)
$ 56,269
12,542
(57,134)
(44,592)
$ 591
1,945
–
1,945
$2,536
$ (420)
1,011
–
1,011
$ 591
$
(29)
(391)
–
(391)
$(1,056)
(3,704)
–
(3,704)
$(4,760)
$
923
(1,979)
–
(1,979)
$(1,056)
$
392
531
–
531
$235
–
$(27,213)
16,380
(30)
(30)
(77)
16,303
$205
$(10,910)
$263
–
$ 12,443
(39,092)
(28)
(28)
(564)
(39,656)
$235
$(27,213)
$194
85
$ 56,826
12,767
(16)
(57,150)
69
(44,383)
Balance, end of period
$ 11,677
$ (420)
$
923
$263
$ 12,443
101
Other Financial Data
The selected quarterly financial data presented below should be read in conjunction with the Consolidated Financial Statements
and related notes.
SELECTED QUARTERLY FINANCIAL DATA (Unaudited)
Three Months Ended
(In thousands, except per-share data)
Net interest income
Provision for credit losses
Dec. 31, Sep. 30,
2014
2014
Jun. 30, Mar. 31, Dec. 31, Sep. 30,
2013
2014
2014
2013
Jun. 30, Mar. 31,
2013
2013
$204,074 $204,180 $206,101 $201,274 $201,862 $199,627 $202,044 $199,091
38,383
22,792
14,492
55,597
15,739
32,591
24,602
9,909
Net interest income after provision for credit
losses
Non-interest income
Non-interest expense
148,477
109,768
221,758
188,441
116,076
219,688
196,192
104,016
213,195
186,782
103,407
217,136
179,070
105,412
220,469
175,025
106,160
212,232
169,453
99,783
208,516
160,708
92,703
204,052
Income before income tax expense
Income tax expense
Income after income tax expense
Income attributable to non-controlling interest
Preferred stock dividends
36,487
11,011
25,476
1,488
4,847
84,829
30,791
54,038
1,721
4,847
87,013
31,385
55,628
2,503
4,847
73,053
26,579
46,474
1,717
4,847
64,013
22,791
41,222
1,227
4,847
68,953
24,551
44,402
1,607
4,847
60,720
19,444
41,276
2,372
4,847
49,359
17,559
31,800
1,826
4,524
Net income available to common stockholders
$ 19,141 $ 47,470 $ 48,278 $ 39,910 $ 35,148 $ 37,948 $ 34,057 $ 25,450
Per common share:
Basic earnings
Diluted earnings
$
$
0.12 $
0.12 $
0.29 $
0.29 $
0.30 $
0.29 $
0.25 $
0.24 $
0.22 $
0.22 $
0.24 $
0.23 $
0.21 $
0.21 $
0.16
0.16
102
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), Chief Financial
Officer (Principal Financial Officer) and Chief Accounting Officer (Principal Accounting Officer), of the effectiveness of the design
and operation of the Company’s disclosure controls and procedures pursuant to Rules 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 were effective as of December 31, 2014.
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), Chief
Financial Officer (Principal Financial Officer) and Chief Accounting Officer (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 control over financial
reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the quarter ended December 31, 2014, that materially
affected, or are reasonably likely to materially affect, TCF’s internal control over financial reporting.
103
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) and Chief Financial Officer
(Principal Financial Officer), completed an assessment of TCF’s internal control over financial reporting as of December 31, 2014.
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 in May 2013. Based
on this assessment, management concluded that TCF’s internal control over financial reporting was effective as of
December 31, 2014.
KPMG LLP, the Company’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, 2014.
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.
104
21JUL200414412105
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
TCF Financial Corporation:
We have audited TCF Financial Corporation’s (the Company) internal control over financial reporting as of December 31, 2014,
based on criteria established in Internal Control – Integrated Framework (2013) 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’s Report on Internal Control Over Financial Reporting. Our responsibility is
to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal
control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures
as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, TCF Financial Corporation maintained, in all material respects, effective internal control over financial reporting as
of December 31, 2014, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission.
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, 2014 and 2013,
and the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the years in the
three year period ended December 31, 2014, and our report dated February 23, 2015 expressed an unqualified opinion on those
consolidated financial statements.
8OCT201312085186
Minneapolis, Minnesota
February 23, 2015
105
Item 9B. Other Information
On February 20, 2015, TCF and William A. Cooper, entered into an amendment (the ‘‘Employment Amendment’’) to the
Amended and Restated Employment Agreement (the ‘‘Employment Agreement’’) and an amendment (the ‘‘Award
Amendment’’) to the Performance Based and Employment Vested Restricted Stock Award Agreement (the ‘‘Award
Agreement’’), each entered into with Mr. Cooper on March 10, 2014. Pursuant to the Employment Amendment, Section 4(b) of
the Employment Agreement was modified such that in the event Mr. Cooper terminates his employment with TCF for Good
Reason based on the failure of the Board to elect him Chairman, Mr. Cooper will not receive any lump sum payment of salary
other than accrued and unpaid salary and bonus, if any.
Pursuant to the Award Amendment, Section 3(b) of the Award Agreement was modified such that in the event Mr. Cooper
terminates his employment for Good Reason (as defined in the Award Agreement), vesting will not be accelerated, but continued
employment will no longer be a requirement for vesting. As a result, vesting or forfeiture will be solely based on the achievement
of the performance criteria set forth in the Award Agreement.
The foregoing descriptions of the Employment Amendment and Award Amendment are qualified in their entirety by reference to
their full text, copies of which are attached hereto and are incorporated by reference herein.
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 2015 Annual Meeting of Stockholders to be held on April 22, 2015 (the ‘‘2015 Proxy’’), and is incorporated
herein by reference: 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 following sections of TCF’s 2015 Proxy and is
incorporated herein by reference: Corporate Governance – Director Nominations; and Additional Information.
Audit Committee and Financial Expert
Information regarding TCF’s Audit Committee, its members and financial experts is set forth in the following sections of TCF’s
2015 Proxy and is incorporated herein by reference: Election of Directors – Background of the Nominees; Corporate
Governance – Board Committees, Committee Memberships, and Meetings in 2014; and Corporate Governance – Audit
Committee.
TCF’s Board of Directors is required to determine whether it has at least one Audit Committee Financial Expert and that the
expert is independent. An Audit Committee Financial Expert is a committee member who has an understanding of generally
accepted accounting principles and financial statements and has the ability to assess the general application of these principles in
connection with the accounting for estimates, accruals and reserves. Additionally, this individual should have experience
preparing, auditing, analyzing or evaluating financial statements that present the breadth and level of complexity of accounting
issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by
TCF’s financial statements, or experience actively supervising one or more persons engaged in such activities. The member
should also have an understanding of internal control over financial reporting as well as an understanding of audit committee
functions.
The Board has determined that Raymond L. Barton, Thomas A. Cusick, George G. Johnson, Vance K. Opperman and Richard A.
Zona meet the requirements of audit committee financial experts. The Board has also determined that Mr. Barton, Mr. Cusick,
Ms. Grandstrand, Mr. Johnson, Mr. King, Mr. Opperman and Mr. Zona are independent. Additional information regarding
Mr. Barton, Mr. Cusick, Ms. Grandstrand, Mr. Johnson, Mr. King, Mr. Opperman and Mr. Zona, and the other directors is set forth
in the section Election of Directors – Background of the Nominees in TCF’s 2015 Proxy and is incorporated herein by reference.
Code of Ethics for Senior Financial Management
TCF has adopted a Code of Ethics applicable to the Principal Executive Officer (‘‘PEO’’), Principal Financial Officer (‘‘PFO’’) and
Principal Accounting Officer (‘‘PAO’’) (the ‘‘Senior Financial Management Code of Ethics’’) as well as a code of ethics generally
applicable to all officers (including the PEO, PFO and PAO), directors and employees of TCF (the ‘‘Code of Ethics’’). The Code of
Ethics and Senior Financial Management Code of Ethics are both available for review at TCF’s website at www.tcfbank.com by
clicking on ‘‘About TCF’’ and then ‘‘About TCF Corporate Governance’’ and then ‘‘Code of Ethics for Senior Financial
106
Management.’’ 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 following sections of TCF’s 2015
Proxy and is incorporated herein by reference: Director Compensation; Compensation Discussion and Analysis; Compensation
Committee Report; Executive Compensation; and Corporate Governance – Compensation, Nominating, and Corporate
Governance Committee – Compensation Committee Interlocks and Insider Participation.
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 following sections of TCF’s 2015 Proxy and is incorporated herein by
reference: Ownership of TCF Stock; Equity Compensation Plans Approved by Stockholders; and Proposal 2: Approval of TCF
Financial 2015 Equity Incentive Plan.
Item 13. Certain Relationships and Related Transactions, and Director
Independence
Information regarding director independence and certain relationships and transactions between TCF and management is set
forth in the section entitled Corporate Governance – Director Independence and Related Person Transactions of TCF’s 2015
Proxy and is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services
Information regarding principal accountant fees and services and the Audit Committee’s pre-approval policies and procedures
relating to audit and non-audit services provided by the Company’s independent registered public accounting firm is set forth in
the section entitled Independent Registered Public Accountants in TCF’s 2015 Proxy and is incorporated herein by reference.
107
Part IV
Item 15. Exhibits and Financial Statement Schedules
(a) Financial Statements, Financial Statement Schedules and Exhibits
1. Financial 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, 2014 and 2013
Consolidated Statements of Income for each of the years in the three-year period ended December 31, 2014
Consolidated Statements of Comprehensive Income for each of the years in the three-year period ended
December 31, 2014
Consolidated Statements of Equity for each of the years in the three-year period ended December 31, 2014
Consolidated Statements of Cash Flows for each of the years in the three-year period ended December 31, 2014
Notes to Consolidated Financial Statements
Other Financial Data
Management’s Report on Internal Control Over Financial Reporting
Report of Independent Registered Public Accounting Firm
2. Financial 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. Exhibits
Index to Exhibits
Page
17
52
53
54
55
56
57
102
104
105
110
108
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 23, 2015
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.
Name
Title
Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer)
Director
Director
Director
Director
Director
Date
February 23, 2015
February 23, 2015
February 23, 2015
February 23, 2015
February 23, 2015
February 23, 2015
February 23, 2015
February 23, 2015
/s/ WILLIAM A. COOPER
William A. Cooper
/s/ MICHAEL S. JONES
Michael S. Jones
/s/ SUSAN D. BODE
Susan D. Bode
/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
Director, Vice Chairman and Executive Vice President
February 23, 2015
/s/ KAREN L. GRANDSTRAND
Director
February 23, 2015
Karen L. Grandstrand
/s/ THOMAS F. JASPER
Thomas F. Jasper
/s/ GEORGE G. JOHNSON
George G. Johnson
/s/ RICHARD H. KING
Richard H. King
/s/ VANCE K. OPPERMAN
Vance K. Opperman
/s/ JAMES M. RAMSTAD
James M. Ramstad
/s/ ROGER J. SIT
Roger J. Sit
/s/ BARRY N. WINSLOW
Barry N. Winslow
/s/ RICHARD A. ZONA
Richard A. Zona
Director, Vice Chairman and Executive Vice President
February 23, 2015
Director
Director
Director
Director
Director
Director
Director
109
February 23, 2015
February 23, 2015
February 23, 2015
February 23, 2015
February 23, 2015
February 23, 2015
February 23, 2015
Index to Exhibits
Exhibit
Number
3(a)
3(b)
4(a)
4(b)
4(c)
4(d)
4(e)
4(f)
4(g)
4(h)
10(a)*
10(a)-1*
10(a)-2*
10(a)-3*
10(a)-4*
10(a)-5*
10(a)-6*
Description
Amended and Restated Certificate of Incorporation of TCF Financial Corporation [incorporated by reference to
Exhibit 3(a) to TCF Financial Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31,
2012 (No. 13633841)]
Amended and Restated Bylaws of TCF Financial Corporation [incorporated by reference to Exhibit 3.1 to TCF
Financial Corporation’s Current Report on Form 8-K filed October 25, 2013 (No. 131169769)]
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 (No. 091243195)]
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 (No. 0912431945)]
Specimen Common Stock Certificate of TCF Financial Corporation [incorporated by reference to Exhibit 4.3 to TCF
Financial Corporation’s Registration Statement on Form S-3ASR filed May 29, 2012 (No. 12874917)]
Form of Certificate for Series A Non-Cumulative Perpetual Preferred Stock [incorporated by reference to
Exhibit 4.1 to TCF Financial Corporation’s Current Report on Form 8-K filed June 22, 2012 (No. 12922780)]
Deposit Agreement dated June 25, 2012 by and among TCF Financial Corporation, Computershare Trust
Company, N.A. and Computershare Inc. and the holders from time to time of the Depositary Receipts described
therein [incorporated by reference to Exhibit 4.1 to TCF Financial Corporation’s Current Report on Form 8-K filed
June 25, 2012 (No. 12923856)]
Form of Depositary Receipt (included as part of Exhibit 4(e)) [incorporated by reference to Exhibit 4.1 to TCF
Financial Corporation’s Current Report on Form 8-K filed June 25, 2012 (No. 12923856)]
Form of Certificate for 6.45% Series B Non-Cumulative Perpetual Preferred Stock [incorporated by reference to
Exhibit 4.1 to TCF Financial Corporation’s Current Report on Form 8-K filed December 18, 2012 (No. 121271334)]
Copies of instruments with respect to long-term debt will be furnished to the Securities and Exchange
Commission upon request.
TCF Financial Incentive Stock Program, as amended and restated April 24, 2013 [incorporated by reference to
Exhibit 10.1 to TCF Financial Corporation’s Current Report on Form 8-K filed April 30, 2013 (No. 13797581)]
Form of the Nonqualified Stock Option Award Agreement as executed by certain executives [incorporated by
reference to Exhibit 10(b)-10 to TCF Financial Corporation’s Current Report on Form 8-K filed January 25, 2008
(No. 08551203)]
Nonqualified Stock Option Award Agreement as executed by William A. 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 (No. 08995870)]
Form of Restricted Stock Award Agreement as executed by certain executives [incorporated by reference to
Exhibit 10(b)-14 to TCF Financial Corporation’s Current Report on Form 8-K filed January 23, 2009 (No. 09543236)]
Form of Deferred Restricted Stock Award Agreement as executed by certain executives [incorporated by
reference to Exhibit 10(b)-16 to TCF Financial Corporation’s Current Report on Form 8-K filed February 18, 2011
(No. 11625311)]
Nonqualified Stock Option Award 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 (No. 11782127)]
Form of Performance-Based Restricted Stock Award 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 (No. 12537269)]
110
10(a)-7*
10(a)-8*
Form of Performance-Based Restricted Stock Award Agreement as executed by certain executives [incorporated
by reference to Exhibit 10.3 to TCF Financial Corporation’s Current Report on Form 8-K filed January 20, 2012
(No. 12537269)]
Performance-Based Restricted Stock Award Agreement between TCF Financial Corporation and William A.
Cooper dated March 10, 2014 [incorporated by reference to Exhibit 10.2 to TCF Financial Corporation’s Current
Report on Form 8-K filed March 13, 2014 (No. 14688801)]
10(a)-9*#
Amendment No. 1 dated February 20, 2015 to the Performance-Based Restricted Stock Award Agreement
between TCF Financial Corporation and William A. Cooper dated March 10, 2014
10(b)*
10(c)*
TCF Performance-Based Compensation Policy for Covered Executive Officers, as approved effective January 1,
2013 [incorporated by reference to Exhibit 10.2 to TCF Financial Corporation’s Current Report on Form 8-K filed
April 30, 2013 (No. 13797581)]
Form of 2014 Management Incentive Plan – Executive, as executed by certain executives [incorporated by
reference to Exhibit 10(c)-1 of TCF Financial Corporation Annual Report on Form 10-K for the fiscal year ended
December 31, 2013 (No. 1469798)]
10(c)-1*#
Form of 2015 Management Incentive Plan – Executive, as executed by certain executives
10(d)*
10(d)-1*
10(d)-2*
Amended and Restated Employment Agreement with William A. Cooper effective as of March 10, 2014
[incorporated by reference to Exhibit 10.1 to TCF Financial Corporation’s Current Report on Form 8-K filed
March 13, 2014 (No. 14688801)]
Employment Agreement with Craig R. Dahl effective as of January 1, 2013 [incorporated by reference to
Exhibit 10.2 to TCF Financial Corporation’s Current Report on Form 8-K filed February 25, 2013 (No. 13639745)]
Employment Agreement with Thomas F. Jasper effective as of January 1, 2013 [incorporated by reference to
Exhibit 10.3 to TCF Financial Corporation’s Current Report on Form 8-K filed February 25, 2013 (No. 13639745)]
10(d)-3*#
Amendment No. 1 dated February 20, 2015 to the Amended and Restated Employment Agreement with
William A. Cooper
10(e)*
10(e)-1*
10(f)*
10(g)*
10(h)*
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 (No. 05552640)]
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 3,
2011 (No. 11802298)]
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 (No. 09618185)]
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 (No. 05552640)]
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 (No. 1584625)]; 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 (No. 1706058)]; 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 (No. 02730799)]; 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 (No. 03830138)]
10(i)*
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 (No. 05552640)]
111
10(j)*
10(k)*
10(k)-1*
10(k)-2*
10(k)-3*
10(l)*
10(l)-1*
10(m)*
10(n)*
10(o)*
10(p)*
12(a)#
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 (No. 1584625)];
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 (No. 1706058)]; 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 (No. 03830138)]
Directors Stock Grant Program, as amended and restated April 25, 2012 [incorporated by reference to Exhibit 10(j)
of TCF Financial Corporation’s Quarterly Report on Form 10-Q filed for the quarter ended June 30, 2012
(No. 12986667)]
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
(No. 09543236)]
Form of Director’s Restricted Stock Agreement dated January 24, 2012 [incorporated by reference to
Exhibit 10(j)-1 of TCF Financial Corporation’s Quarterly Report on Form 10-Q filed for the quarter ended June 30,
2012 (No. 12986667)]
Form of Deferred Director’s Restricted Stock Agreement dated January 24, 2012 [incorporated by reference to
Exhibit 10(j)-2 of TCF Financial Corporation’s Quarterly Report on Form 10-Q filed for the quarter ended June 30,
2012 (No. 12986667)]
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 (No. 05552640)]
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 (No. 05552640)]; and as amended by
Amendment of Directors 2005 Deferred Compensation Plan effective July 19, 2010 [incorporated by reference to
Exhibit 10(r)-1 of TCF Financial Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30,
2010 (No. 101147679)]
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 (No. 1584625)];
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 (No. 1706058)]; 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 (No. 02568362)]; 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 (No. 02730799)]; 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 (No. 03830138)]
Summary of Non-Employee Director Compensation [incorporated by reference to Exhibit 10.1 to TCF Financial
Corporation’s Current Report on Form 8-K filed July 23, 2014 (No. 14988540)]
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 (No. 11625311)]
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
(No. 11625311)]
Consolidated Ratios of Earnings to Fixed Charges for years ended December 31, 2014, 2013, 2012, 2011, and
2010
112
12(b)#
21#
23#
31.1#
31.2#
32.1#
32.2#
101#
Consolidated Ratios of Earnings to Fixed Charges and Preferred Stock Dividends for years ended December 31,
2014, 2013, 2012, 2011, and 2010
Subsidiaries of TCF Financial Corporation (as of December 31, 2014)
Consent of KPMG LLP dated February 23, 2015
Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Certification of the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Financial statements from the Annual Report on Form 10-K of the Company for the year ended December 31,
2014, formatted in XBRL: (i) the Consolidated Statements of Financial Condition, (ii) the Consolidated Statements
of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of
Equity, (v) the Consolidated Statements of Cash Flows and (vi) the Notes to Consolidated Financial Statements
*
#
Executive Contract
Filed herein
113
Corporate Information
2014 Annual Report
A-1
A-1
Board of Directors
William A. Cooper 5
Chairman of the Board
and Chief Executive Offi cer
Raymond L. Barton 2,5,6,7
Chairman,
Great Clips, Inc.
Chairman since 1987
Director since 2011
Peter Bell 3,4,6,7
Former Chair,
Metropolitan Council
Director since 2009
William F. Bieber 1,3,4,5,6,7
Chairman,
ATEK Companies, Inc.
Director since 1997
Theodore J. Bigos 1,4,6,7
Owner,
Bigos Management, Inc.
Thomas A. Cusick 2,5,6,7,8
Retired Vice Chairman,
TCF Financial Corporation
Craig R. Dahl 8
Vice Chairman and
Executive Vice President
Karen L. Grandstrand 1,2,4,5,6,7
Partner,
Fredrikson & Byron P.A.
Director since 2008
Director since 1988
Director since 2012
Director since 2010
Thomas F. Jasper
Vice Chairman and
Executive Vice President
Director since 2012
George G. Johnson 2,3,6,7
CPA/Managing Director,
George Johnson & Company
and George Johnson
Consultants
Richard H. King 2,6,7,8
Vice President and
Chief Operating Offi cer,
Technology,
Thomson Reuters
Director since 1998
Director since 2014
Vance K. Opperman 1,2,4,5,6,7,8,9
President and
Chief Executive Offi cer,
Key Investment, Inc.
Director since 2009
James M. Ramstad 3,6,7
Former United States
Congressman
Director since 2011
Roger J. Sit 2,6,7
Chief Executive Offi cer and
Global Chief Investment
Offi cer, Sit Investment
Associates
Director since 2015
Barry N. Winslow 6
Retired Vice Chairman,
TCF Financial Corporation
Richard A. Zona 1,2,4,5,6,7
Retired Vice Chairman,
U.S. Bancorp
Director since 2008
Director since 2011
1 Advisory Committee —
TCF Employees Stock Purchase Plan
2 Audit Committee
3 BSA and Compliance Committee
4 Compensation, Nominating and
Corporate Governance Committee
5 Executive Committee
6 Finance Committee
7 Risk Committee
8 Technology Committee
9 Lead Director
A-2
TCF Financial Corporation and Subsidiaries
Senior Offi cers
TCF Financial Corporation
Chairman of the Board
and Chief Executive Offi cer
William A. Cooper
Vice Chairman
and Executive Vice President
Craig R. Dahl
Vice Chairman
and Executive Vice President
Thomas F. Jasper
Executive Vice President
and Chief Financial Offi cer
Michael S. Jones
Chief Risk Offi cer
James M. Costa
Chief Credit Offi cer
Mark A. Bagley
Chief Audit Executive Offi cer
Andrew J. Jackson
Senior Vice Presidents
Susan D. Bode
Joseph T. Green
Jason E. Korstange
Brian W. Maass
Tamara K. Schuette
Barbara E. Shaw
TCF National Bank
Lending
Vice Chairman
and Executive Vice President
Craig R. Dahl
Vice Chairman
and Executive Vice President
Thomas F. Jasper
Senior Vice President
and Director of Talent Management
Gloria J. Charley
Retail Lending
Managing Director
Mark W. Rohde
Executive Vice Presidents
Robert J. Brueggeman
Kevin Collier
Joseph W. Doyle
Claire M. Graupmann
Scott L. Lane
Matthew R. Wiley
Senior Vice Presidents
Bradley C. Barthels
Patricia A. Buss
Todd D. Crisman
Rose M. Dickey
Michael A. Dill
Calvin E. Fuoss
Daniel B. Hoffman
Monica R. Husnik
Matthew D. Krueger
Sydney S. Libsack
Vicki L. Makowka
Jeffery D. Memeti
Bjorn J. Peterson
Carol B. Schirmers
Thomas K. Torossian
Katrina Williams
Commercial Lending
Managing Director
James J. Urbanek
President, TCF Capital Funding
Joseph P. Gaffi gan
Executive Vice Presidents
Thomas R. Bobak
William R. Patterson
Guy J. Rau
Senior Vice Presidents
Jeffrey T. Doering
Michael B. Hagen
Thomas G. Karle
James J. Kuncl
David R. Larsen
Mark I. Manbeck
Russell P. McMinn
Douglas A. Ortyn
Mark R. Pietrowiak
Janelle J. Rietz-Kamenar
Michael Roidt
Elisabeth A. Rojas
Edward J. Ryczek
Lisa M. Salazar
Patrick P. Skiles
TCF Equipment Finance
President and
Chief Executive Offi cer
William S. Henak
Executive Vice Presidents
Lee A. Anderson
Richard J. Chenitz
Bradley C. Gunstad
Gary A. Peterson
Judy I. VanOsdel
Senior Vice Presidents
Gary W. Anderson
Curtis D. Billmeyer
Peter C. Darin
James J. Filiatrault
Thomas A. Greco
James A. Groenewold
Kyin Ong Lok
Richard V. Pawlewicz
Robert J. Stark
Mark H. Valentine
Jeffrey S. Wertz
Winthrop Resources Corporation
President
Paul L. Gendler
Senior Vice Presidents
Gary W. Anderson
Timothy A. Haugen
Barbara E. King
David F. Larson
Abigail R. Nesbitt
Jeffrey L. Ripperton
Dean J. Stinchfi eld
Bradley R. Swenson
TCF Inventory Finance, Inc.
President
and Chief Executive Offi cer
Rosario A. Perrelli
Executive Vice Presidents
Kevin L. Harrington
Vincent E. Hillery
Peter D. Kelley
Christopher Meals
Mark J. Wrend
Senior Vice Presidents
Thomas E. Evans
Kevin O’Hara
James S. Raymond
Thomas L. Sorrentino
Larry M. Tagli
Dornett Y. Wright
TCF Commercial Finance Canada, Inc.
President
Peter D. Kelley
Gateway One Lending & Finance, LLC
Chief Executive Offi cer
G. Brian MacInnis
President
David G. MacInnis
Chief Operating Offi cer
Todd A. Pierson
Chief Financial Offi cer
Gerald A. Wilkins
Chief Information Offi cer
Martin F. Crowley
Chief Credit Offi cer
Charles Tocker
Executive Vice President
Andrew B. Sturm
Senior Vice President
Sydney B. Libsack
Credit Administration
Chief Credit Offi cer
Mark A. Bagley
Executive Vice President
and Chief Lending Offi cer
Mark D. Nyquist
Senior Vice Presidents
Barbara L. Buss
Larry M. Czekaj
Philip M. Gulan
Robert A. Henry
Trisha L. Karki
Christine M. Van Wassenhove
David J. Veurink
Funding &
Information Technology
Vice Chairman
and Executive Vice President
Craig R. Dahl
Vice Chairman
and Executive Vice President
Thomas F. Jasper
Executive Vice Presidents
Robert C. Borgstrom
Luis J. Campos
Timothy G. Doyle
Mark W. Gault
Michael J. Olson
Senior Vice Presidents
Beverly L. Burman
Delia M. Conrad
Kent J. Engler
Brent L. Farka
Christopher N. Germann
Mark A. Goldman
Traci R. Mikesell
Jennifer K. Rohling
Gregory A. Waltz
Cathleen L. Wilkins
Information Technology
Executive Vice President
Gregg R. Goudy
Senior Vice Presidents
Scott D. Dressler
Richard J. Nelson
Rodger R. Read
Finance, Corporate
Development &
Administration
Executive Vice President
and Chief Financial Offi cer
Michael S. Jones
Executive Vice President,
Corporate Controller
Tamara K. Schuette
Executive Vice President
and Chief Accounting Offi cer
Susan D. Bode
Senior Vice President
and Director of Talent Management
Gloria J. Charley
Executive Vice President
and Treasurer
Brian W. Maass
Branch Banking
Managing Director of Branch Banking
Mark L. Jeter
Managing Director of Customer
Segments and Alternative Channels
Geoffrey C. Thomas
Executive Vice President,
Corporate Operations Director
James C. LaPlante
Senior Vice Presidents
Rion F. Cornell
Brian P. Engels
Thomas J. Gottwalt
Anton J. Negrini
Christy A. Powers
Jason S. Sasanfar
2014 Annual Report
A-3
Legal
Executive Vice President,
General Counsel and Secretary
Joseph T. Green
Executive Vice Presidents
Bradley C. Gunstad
Brian J. Hurd
Senior Vice Presidents
Sheri A. Ahl
Gary L. Fineman
Shelley A. Fitzmaurice
Charles P. Hoffman, Jr.
Kirk D. Johnson
Gloria J. Karsky
Jacqueline A. Layton
Janella Jane Miller
R. Elizabeth Topoluk
Human Resources
Executive Vice President and
Corporate Human Resources Director
Barbara E. Shaw
Senior Vice Presidents
Edward J. Gallagher
Viane R. Hoefs
Roger T. Sorensen
Enterprise Risk Management
Chief Risk Offi cer
James M. Costa
Executive Vice Presidents
Douglass B. Hiatt
Beatrice E. Lingen
David M. Stautz
Senior Vice Presidents
Rita L. Carroll
James C. Cummans
James M. Dunne
Phil B. Fandek
Mark C. Grondahl
Donald J. Hawkins
Stephen A. Mancini
Richard G. McNutt
LaDonna C. Resch
Timothy H. Rote
Laura Santos
William A. Sarvela
Joseph R. Schneider
Risk Control Services
Chief Audit Executive Offi cer
Andrew J. Jackson
A-4
TCF Financial Corporation and Subsidiaries
Offi ces (as of December 31, 2014)
Stockholder Information
Executive Offi ces
Michigan
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
Traditional Branches
Minneapolis/St. Paul Area (43)
Greater Minnesota (2)
South Dakota (2)
Supermarket Branches
Minneapolis/St. Paul Area (48)
Greater Minnesota (2)
Campus Branches
Minneapolis/St. Paul Area (2)
Greater Minnesota (2)
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 (1)
Winthrop Resources
Corporation
Headquarters
11100 Wayzata Boulevard
Suite 800
Minnetonka, MN 55305
(952) 936-0226
Illinois/Wisconsin/Indiana
TCF Inventory Finance, Inc.
Traditional Branches
Chicagoland (37)
Milwaukee Area (11)
Kenosha/Racine Area (6)
Supermarket Branches
Chicagoland (118)
Milwaukee Area (7)
Indiana (1)
Campus Branches
Chicagoland (2)
Greater Illinois (1)
Headquarters
1475 East Woodfi eld Road
Suite 1100
Schaumburg, IL 60173
(877) 872-8234
Gateway One Lending
and Finance, LLC
Headquarters
160 North Riverview Drive,
Suite 100
Anaheim, CA 92808
(888) 810-8860
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, 2014, TCF had
approximately 167.5 million shares
of common stock outstanding.
Transfer Agent and Registrar
Computershare Trust Company, N.A.
P.O. Box 30170
College Station, TX 77842-3170
(800) 443-6852
www.computershare.com/investor
Direct Stock Purchase and
Dividend Reinvestment Plan
TCF Financial Corporation 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 Trust Company, N.A.
P.O. Box 30170
College Station, TX 77842-3170
(800) 443-6852
www.computershare.com/investor
Stockholder Information
2014 Annual Report
A-5
Stock Data
Year
2014
Close
High
Low
Dividends
Paid
Per Share
Fourth Quarter
$15.89
$16.12
$13.95
$0.05
Third Quarter
Second Quarter
First Quarter
2013
15.53
16.37
16.66
16.95
17.30
17.39
15.12
15.01
15.31
0.05
0.05
0.05
Fourth Quarter
$16.25
$16.46
$14.29
$0.05
Third Quarter
Second Quarter
First Quarter
2012
14.28
14.18
14.96
16.68
15.32
15.04
13.69
13.49
12.39
0.05
0.05
0.05
Fourth Quarter
$12.15
$12.49
$10.45
$0.05
Third Quarter
Second Quarter
First Quarter
2011
11.94
11.48
11.89
12.43
12.53
12.58
9.59
10.43
10.04
0.05
0.05
0.05
Fourth Quarter
$10.32
$11.68
$ 8.61
$0.05
Third Quarter
Second Quarter
First Quarter
2010
9.16
13.80
15.86
14.37
16.04
17.37
8.66
13.37
14.60
0.05
0.05
0.05
Reconciliation of GAAP to Non-GAAP Financial Measures
Return on Average Tangible Common Equity1
(Dollars in thousands)
At or For the Year Ended
December 31,
2013
2014
Net income available to common stockholders
$ 154,799 $ 132,603
Other intangibles amortization, net of tax
Adjusted net income available to
common stockholders
1,062
1,479
$ 155,861
134,082
Average balances:
Total equity
Less: Non-controlling interest in subsidiaries
Total TCF Financial Corporation
stockholders’ equity
Less:
Preferred stock
Goodwill
Other intangibles
$2,058,442 $1,912,622
17,014
16,491
2,041,428
1,896,131
263,240
263,240
225,640
225,640
5,498
7,418
Tangible average common equity
$ 1,547,050 $1,399,833
Return on average tangible common equity
10.08%
9.58%
Tangible Book Value Per Common Share1
(Dollars in thousands, except per-share data)
2014
2013
At December 31,
Fourth Quarter
$14.81
$16.63
$12.90
$0.05
Total equity
Third Quarter
Second Quarter
First Quarter
16.19
16.61
15.94
17.66
18.89
16.83
13.87
14.95
13.40
0.05
0.05
0.05
For more historical information on TCF’s stock price and
dividend, visit http://ir.tcfbank.com.
Less: Non-controlling interest in subsidiaries
Total TCF Financial Corporation
stockholders’ equity
Less:
Preferred stock
Goodwill
Other intangibles
$2,135,364 $1,964,759
13,715
11,791
2,121,649
1,952,968
263,240
263,240
225,640
225,640
4,641
6,326
Annual Meeting
The Annual Meeting of Stockholders of TCF will be
held on Wednesday, April 22, 2015, 4:00 p.m. CDT at
the Marriott Minneapolis West, 9960 Wayzata Boulevard,
St. Louis Park, Minnesota.
Tangible common equity
$1,628,128 $ 1,457,762
Common shares outstanding
167,461
165,122
Tangible book value per common share
$ 9.72 $ 8.83
1 When evaluating capital adequacy and utilization, management considers
fi nancial measures such as Return on Average Tangible Common Equity
and Tangible Book Value Per Common Share. These measures are non-
GAAP fi nancial measures and are viewed by management as useful
indicators of capital levels available to withstand unexpected market or
economic conditions, and also provide investors, regulators, and other
users with information to be viewed in relation to other banking institutions.
A-6
TCF Financial Corporation and Subsidiaries
Investor/Analyst Contacts
Credit Ratings
Jason Korstange
Senior Vice President
Investor Relations
(952) 745-2755
Justin Horstman
Assistant Vice President
Investor Relations
(952) 745-2756
Media Contact
Mark Goldman
Senior Vice President
Corporate Communications
(952) 475-7050
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 fi lings. 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
Stock Price Performance (In Dollars)
Standard & Poor’s
Last Review October 2014
Outlook
TCF Financial Corporation:
Long-term Counterparty
Short-term Counterparty
TCF National Bank:
Long-term Counterparty
Short-term Counterparty
Preferred Stock
Subordinated Debt
Stable
BBB-
A-3
BBB
A-2
BB-
BBB-
Fitch Ratings
Last Review January 2015
Outlook
TCF Financial Corporation:
Long-term IDR
Short-term IDR
TCF National Bank:
Long-term IDR
Short-term IDR
Preferred Stock
Subordinated Debt
Stable
BBB-
F3
BBB-
F3
B
BB+
Moody’s
Last Review November 2014
Outlook
TCF National Bank:
Long-term Issuer
Long-term Deposits
Short-term Deposits
Bank Financial Strength
Subordinated Debt
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
$35
30
25
20
15
10
5
Year
Ending
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
12-12
12-14
*Stock split adjusted
For more historical information on TCF’s stock price and dividend, visit http://ir.tcfbank.com.
Stable
Baa1
Baa1
Prime-2
C-
Baa2
$1.50
1.25
1.00
0.75
0.50
0.25
0.00
2014 Annual Report
A-7
Mission
TCF strives to consistently deliver superior performance
by providing the essential means to enhance the rhythm
of customers’ lives and help them achieve their goals.
Unified by the passion to act as an ally of our customers,
we lend prudently in diverse, niche segments and fund
these assets through core deposits, both generated through
a great customer experience within our communities.
Vision
We will be a sound, well-capitalized, principled bank that
gathers core deposits and lends under the fundamental
concept of diversification that enables us to consistently
achieve superior returns for our employees, customers
and stockholders.
Values
Lead with INTEGRITY
Be NIMBLE
Build RELATIONSHIPS
Be PRUDENT
Create OPPORTUNITIES
Win as a PASSIONATE team
TCF Financial Corporation 200 Lake Street East, Wayzata, MN 55391-1693 tcfbank.com
TCFIR9359