In rhythm
as one
TCF Financial Corporation
2015 Annual Report
TCF AT A GLANCE
(As of December 31, 2015)
$20.7
BILLION
in total assets
375
BRANCHES
in Illinois, Minnesota,
Michigan, Colorado, Wisconsin, Arizona,
South Dakota and Indiana
21
CONSECUTIVE
QUARTERS
of average
deposit growth
84%
84% of total assets are
loans and leases
90%
Over 90% of total deposits
insured by the FDIC
<25%
No single asset class greater than 25%
of total loan and lease portfolio
TABLE OF CONTENTS
Letter to Our Shareholders 1
Financial Summary 6
Select Financial Highlights 7
The New TCF Brand 8
Community 10
FORM 10-K
Business 1
Risk Factors 7
Selected Financial Data 19
Management’s Discussion and Analysis 20
Consolidated Financial Statements 55
Notes to Consolidated Financial Statements 60
Other Financial Data 108
CORPORATE INFORMATION
Offices A-2
Stockholder Information A-3
Senior Officers A-6
Board of Directors A-8
Mission, Vision and Values A-9
IN RHYTHM
AS ONE
Craig R. Dahl
Vice Chairman, President and
Chief Executive Officer
William A. Cooper
Chairman of the Board
Our new brand platform speaks as one voice to all of our stakeholders. It gives us the flexibility
to be relevant wherever they live, whatever they need and whenever they connect with TCF.
Our team is working hard as ‘One TCF’ to be in rhythm with our customers’ goals and developing
lasting relationships that create value for them, for our company and for our shareholders.
Dear Shareholders,
2016 marks a new era for our company. This is the culmina-
tion of our multi-year focus to transform TCF into a strong,
well-capitalized company that is capable of superior financial
performance. Coming out of the financial crisis that began
in 2008, we executed a strategy that successfully reposi-
tioned the bank, established new businesses with expansion
opportunities that diversified our portfolio, enhanced our
risk management capabilities to respond to the changing
regulatory environment and built a strong and experienced
management team to lead our next phase of growth through
our unique business model. Through all of this change, one
of the constants was Craig Dahl. He played a significant role
in the success of all of these initiatives and, particularly with
our lending businesses, it was his foresight and leadership
that drove their creation and success.
Now, Craig steps forward to lead all of TCF as our chief
executive officer. With Craig, our shareholders have a proven
leader with deep experience and understanding of the
banking industry who has demonstrated he can execute
sound strategies and deliver consistent revenue growth.
A LOOK AT 2015
2015 was a good year for us, even as we faced uncertain
macroeconomic conditions, adapted to regulatory changes
and navigated a persistently low interest rate environment
that has extended longer than we had anticipated. We grew
net income 13.2 percent versus the prior year, representing a
13 cent per diluted share increase, return on average tangible
common equity increased from 10.08 percent to 10.48 percent
during the year, and tangible book value per share increased
9.0 percent to $10.59. Our ability to earn high yields on our
loans and leases, while effectively managing our risk profile
and paying low rates on our deposits, allowed us to generate a
net interest margin that was more than 100 basis points higher
than our peer average.
Our success in growing our business made it possible to
reward our shareholders with a 50 percent quarterly div-
idend increase in late 2015, the first increase since 2008.
Fundamentally, we are committed to returning capital to our
shareholders while balancing our need to continue investing
in high-return growth businesses.
Driving our success is an unwavering commitment to our
straightforward business model: We gather deposits through
a strong retail bank franchise and put this money to work
by funding a diverse portfolio of loans and leases. Our retail
bank has grown average deposits for 21 consecutive quarters,
a streak we were proud to continue throughout 2015. Our
focus on providing banking services whenever and wherever
our customers need them is a key driver of this deposit
growth. We have always provided convenient banking options,
but as customers demand faster and more connected ways
to manage their money, we are making investments in tech-
nology, channels, products and services to be in rhythm with
1
their needs. During the year, we expanded our fleet of ATMs
by 28 percent through the addition of more than 200 ATMs
in Target® retail stores in Minnesota, Chicago and Michigan.
We introduced an entirely new website experience that
provides fingertip access to the information our customers
need the most. In addition, we introduced the latest mobile
payment solutions — Apple PayTM, Samsung PayTM and
Android PayTM — providing new and more secure ways to
pay for purchases. We also focused on enhancing our prod-
uct lineup to broaden our ability to support the financial
needs of our customers. We introduced a credit card and
made significant progress in supporting the introduction
of a suite of services to serve the needs of millennials and
those preferring nontraditional banking products. Our
customers have embraced these new product offerings and
the feedback we have received gives us confidence going
forward that we can gain a greater share of their wallet and
continue to grow our deposit funding base.
Our lending businesses had another strong year, with
originations of $15.3 billion, up 13.1 percent from 2014. This
marks our fourth consecutive year of double-digit loan
origination growth. Our diverse portfolio of loans and leases
finished the year at $17.4 billion, up 6.3 percent from 2014,
led by 38.3 percent growth in auto finance and 14.4 percent
growth in inventory finance. Our unique combination of
lending businesses gives us the ability to shift originations
in response to market conditions. We do not need to make
concessions on price or credit quality to obtain the growth
we want.
As our strong loan-origination engine delivered consistent
growth, we also continued to strengthen our ability to
generate incremental revenues through core loan sales and
securitizations. In 2015, we sold $2.7 billion of loans, primarily
composed of consumer auto loans and consumer real estate
loans, for a gain of $72.1 million. This included three auto
loan securitizations. Equally important, we continued to
service the loans we sold, which resulted in $31.2 million of
servicing fee income.
Anchored by a stable foundation of high quality loans in
diverse industries, our credit quality continued to stabilize in
2015. Following the sale of $405.9 million of consumer real
estate troubled debt restructuring loans in late 2014, non-
performing assets declined 11.3 percent in 2015. In addition,
net charge-offs as a percentage of average loans and leases
declined 19 basis points to 0.30 percent, a more normalized
level as we begin 2016. We have been vigilant in executing
our diversification strategy since the last recession. With new
economic concerns, such as China and the energy markets,
we believe we are now much better positioned for a potential
economic downturn.
2
The diversification of our revenue sources through loan
servicing and sales has made it possible to decrease our
reliance on banking fees to fuel our profitability. Banking fees
made up just 50 percent of non-interest income in 2015,
down from 77 percent in 2010. This change in revenue mix
has helped to reduce our exposure to increased regulatory
scrutiny of these fees through enforcement of Regulation E
and the Durbin Amendment as well as potential future
action by the Consumer Financial Protection Bureau on
industry-wide overdraft fee practices.
In December 2015, the Federal Reserve raised interest rates
for the first time since 2006. This was welcome news and
positions us well to increase shareholder value due to the ac-
tions we have taken over the past several years to make our
balance sheet more asset sensitive. We are more profitable
in a rising rate environment because 81 percent of our assets
are variable/adjustable rate or short/medium duration fixed
rate. As an asset-sensitive bank, we expect to benefit from
a rising rate environment; however, there are other factors
that can affect the margin, such as competition and portfolio
mix changes. As a result, we may see the benefit of a higher
interest rate environment in the form of higher net interest
income as opposed to a lift in the margin.
LOOKING AHEAD: CRAIG DAHL OUTLINES A
STRATEGIC VISION FOR 2016 AND BEYOND
Let me begin by saying that I’m honored and grateful to be
TCF’s new chief executive officer. I appreciate the support of
our chairman, Bill Cooper, and the entire board of directors
as we look to accelerate the momentum we have achieved
over the past several years. I am deeply committed to
continuing our focus on driving shareholder value. I believe
that we have significant opportunities to further scale our
businesses and create operating leverage that will achieve
consistent earnings growth. We believe we will be successful
by adhering to our conservative banking philosophy that has
made our company strong and focusing our organization
on a clear strategy. I am also fortunate to be surrounded by
a very talented team of senior executives who bring diverse
perspective, industry knowledge and a fundamental under-
standing of the unique cultural aspects of our company. Our
management team is poised to execute our strategy and
take full advantage of the marketplace opportunities that are
in front of us. I am optimistic about the journey ahead of us.
Nowhere is the future of our company more strongly on
display than in our new brand that was introduced last June.
I believe that presenting one message and image to the mar-
ket that connects all of the best elements of our businesses
together will strengthen our opportunities. For much of our
history, our individual businesses have operated with a sharp
focus on their specific customers and market segments.
They were strong individually. But as we look ahead, it is
clear that we are stronger together when we leverage the
best practices and ideas throughout all of our businesses to
benefit all of our stakeholders. This thinking is behind the
internal rallying cry we have adopted across the organization:
“Strong Individually. Stronger Together. One TCF.” Anchoring
this focus are our new mission, vision and values that were
introduced in 2015. Our team members come to work every
day with a passion to serve our customers and help them
achieve their personal and business goals. Now, as we move
forward as “One TCF,” we have all of the right pieces in place
to maximize efficiency and profitability without sacrificing
our focus on quality service.
To fully realize our vision for “One TCF,” we require strong
leadership from the top. This is why I made it my first priority
to realign our senior leadership team to set a strong example
of collaboration, accountability and culture. We are fortunate
to have many long-tenured executives who understand
our unique business model and have creative ideas to
capture additional opportunities. But our new structure also
challenges our team to think broadly across the organization
and find new ways to generate operating efficiencies and
maximize our investments. There is no other team that I
would rather be leading in my new role and I expect them to
make an immediate and lasting impact on TCF.
When we met with shareholders at our Investor Day last
August, I introduced a strategic vision to help us achieve
TCF’s full potential. It included four strategic pillars:
(1) diversification, (2) profitable growth, (3) operating leverage
and (4) core funding. We will execute on these pillars under a
strong enterprise risk management and credit culture. I want
to briefly highlight how we will manage the business with this
strategy as our compass.
Diversification
We believe creating a well-diversified loan and lease portfolio
is an effective way to manage risk in today’s banking envi-
ronment. Our current business mix within our portfolio is
54 percent wholesale and 46 percent retail. In fact, no single
asset class makes up greater than 25 percent of our portfolio.
Our ability to successfully execute our niche lending strat-
egy allows us to diversify our portfolio in a variety of ways,
whether by type of credit, geography, industry, product, loan
size or type of collateral.
Since 2011, the consumer real estate concentration within
our portfolio has decreased from 49 percent to 31 percent
while our newer national lending platforms, auto finance
and inventory finance, have increased from five percent to
28 percent. While we continue to lend within our retail banking
4 STRATEGIC PILLARS
DIVERSIFICATION
Focus on national vs. footprint lending increases
quality and diversification of portfolio
PROFITABLE GROWTH
Strong origination, loan sale and securitization
capabilities drive loan growth and revenue diversification
with a continued high net interest margin
OPERATING LEVERAGE
Focus on improving operating leverage following
recent build-out of key functions
CORE FUNDING
Maintain sufficient funding sources to support
loan and lease growth
footprint, the buildout of our national lending platforms has
driven revenue increases while spreading our risk more widely
across our portfolio. Our national lending capability is unique
for a midsize regional bank. It gives us the ability to grow high
credit quality loans and leases through originations across all
geographies. Limiting ourselves to lending within our footprint
would require us to concede on credit or pricing to achieve
the growth we want.
Profitable Growth
While we are looking to generate top-line balance sheet
growth, our primary focus is increasing returns to our
shareholders. This occurs in two ways. First, we must fully
utilize the expertise we have accumulated in the various
niche industries we serve. By providing differentiated service
and partnership in our lending businesses, we are able to
scale these businesses and move into adjacent markets.
Second, we have opportunities to further leverage our cost
structure to support all of our businesses. We are making
substantial progress on these priorities.
3
LEADERSHIP CONTINUITY
From left: Thomas J. Butterfield, chief information officer; Thomas F. Jasper, chief operating officer; Gloria J. Charley, director of talent management;
Michael S. Jones, executive vice president of consumer banking; Craig R. Dahl, chief executive officer; William S. Henak, executive vice president of wholesale
banking; Barbara E. Shaw, director of corporate human resources; Mark A Bagley, chief credit officer; Brian W. Maass, chief financial officer;
James M. Costa, chief risk officer and Tamara K. Schuette, corporate controller.
Our strong origination, loan sale and securitization capabilities
also give us flexibility to control our balance sheet growth to
respond to changing economic conditions. In 2015, loan and
lease balances would have grown by 23 percent had we de-
cided to keep all originations on the balance sheet. Clearly, this
level of growth is not desirable, but it highlights the fact that
we can manage our growth through our own actions.
Growing profitably also requires us to be mindful of risks
in the marketplace. With many banks recently announcing
plans to reduce growth in auto finance, we continue to
use our expertise in the market, make investments in
infrastructure and maintain consistent underwriting to
drive responsible and profitable growth. On the other hand,
despite many opportunities, we have made the conscious
decision to avoid more volatile markets such as energy-
related lending.
Operating Leverage
One of the key priorities for 2016, and a critical driver to
our long term success, is increasing our operating leverage.
We have built a unique business model that generates
strong revenue and provides an expanded and diversified
origination capability. This strategy results in higher expenses
because 84 percent of our total assets are comprised of
loans and leases while our business model focuses on small
transaction sizes. We also see added expenses as a result of
our large servicing and operating lease portfolios. However,
these expenses are more than offset by the revenue they
4
generate. As a result, the nature of our business will continue
to lead to elevated expenses compared to our peers.
I believe there are many areas across the organization where
we can optimize our spending to increase operating leverage.
It begins with consistent and stable revenue growth across
all of our businesses. I am proud of our track record in this
area. Second, we need to grow the asset base while reducing
the rate at which expenses are increasing. Efficient expense
management starts with looking at our spending holistically
across the company to identify redundancy and streamline
our processes by adopting best practices.
One of the tenets of our “One TCF” rallying cry is to promote
shared ownership in driving efficiency and common practices.
In early 2015, we took an important step forward with the
addition of an enterprise chief information officer who is
charged with aligning our information technology resources
across the company. As our businesses have matured and
the opportunities for synergies in areas such as technology
have strengthened, we have a laser focus on driving efficiency
across the business. I am optimistic we will quickly see the
benefits of these initiatives.
Our individual business units have also shown their commit-
ment to improving effeciencies within the organization. In early
2016, we announced plans to close 33 in-store branches in
the Chicago market and replace them with ATMs that feature
advanced transaction capabilities. These changes are expected
to be completed in May 2016.
Finally, I expect the investments we have made in our
enterprise risk management function over the past few years
to be a driver of positive operating leverage moving forward.
We have worked hard to build a best-in-class program that
will reduce balance sheet risk, minimize future losses and
ultimately benefit the bottom line.
helped them provide a consistently good customer experi-
ence. This combination of investments ultimately improves
our standing in attracting new customers while strengthen-
ing our relationships with existing customers. New product
offerings such as credit cards and mortgages give us addi-
tional opportunities to capture greater wallet share.
Core Funding
If the engine of our growth is strong loan and lease
originations, then we need to ensure we have a stable and
consistent source of funding to keep it running. Core funding
growth enables us to meet the growing demand for our
loan and lease products. Our funding strategy is primarily
anchored by a low-cost deposit base, of which more than
90 percent are insured by the FDIC. Sustaining this strategy
requires us to continue increasing the quality of our deposit
accounts while reducing attrition. We have been successful
in doing this but, as competition for customers increases,
we need the right combination of technology, products and
services to capture additional market share.
We are committed to making smart and strategic invest-
ments to deliver a differentiated customer experience that
is in rhythm with the needs of our customers. This means
delivering the right solutions, in the right way whenever and
wherever our customers need them. Throughout 2015, we
introduced new technologies, enhanced existing service
channels and delivered resources to our team members that
Cooper Innovation Award
We established the William A. Cooper Innovation Award
in 2015 in recognition of his 30 years with TCF. It is given
annually to team members who embody Mr. Cooper’s
pioneering spirit of innovation, leadership and service.
The first William A. Cooper Innovation Award was given
to President of National Residential Lending Mark Rohde,
and members of his team. The business has demon-
strated consistent growth and also great success from a
customer experience standpoint in servicing the portfolio.
M&A opportunities may also provide a way for us to
supplement our funding capabilities. A potential deposit
acquisition that makes sense for us will be prudently
evaluated. Nonetheless, we continue to invest in our retail
franchise to effectively fund our strong loan and lease
growth into the future.
Our responsibility to shareholders is to generate growth
prudently while managing risk and our credit profile. This
is why we consistently emphasize the importance of a
strong enterprise risk management and credit culture. The
investments we have made in these areas are helping us
make better decisions, more effectively manage our risks
and ensure we have the processes and accountabilities in
place to meet and exceed today’s regulatory requirements.
MOVING AHEAD IN RHYTHM AS ONE
We would be remiss if we did not acknowledge the one
critical component that makes all of our success possible: our
team members. Their passion, hard work and commitment
to living by our mission, vision and values is what makes
TCF a great company. We are also fortunate to have a strong
board with the diverse skills and expertise necessary to
lead our bank in today’s environment. We appreciate their
support and guidance.
With the chairman and CEO roles now split, you have our
commitment that we are aligned on our strategy for the
future and the pathway we will follow to achieve strong
results in 2016 and beyond. We appreciate and respect the
trust you have placed in us and the expectations you have of
us as an investor in our company. We are In Rhythm As One.
We are “One TCF.”
Craig R. Dahl
Vice Chairman, President and Chief Executive Officer
William A. Cooper
Chairman of the Board
5
FINANCIAL SUMMARY
Dollars in thousands, except per-share data.
At or For the Year Ended December 31,
2015
2014
% Change
Operating Results
Net interest income
Provision for credit losses
Net interest income after provision for credit losses
Non-interest income
Non-interest expense
Income before income tax expense
Income tax expense
Income after income tax expense
Income attributable to non-controlling interest
Net income attributable to TCF Financial Corporation
Preferred stock dividends
$820,388
$815,629
52,944
767,444
441,998
894,747
314,695
108,872
205,823
8,700
197,123
19,388
95,737
719,892
433,267
871,777
281,382
99,766
181,616
7,429
174,187
19,388
0.6 %
(44.7)
6.6
2.0
2.6
1 1.8
9.1
13.3
17.1
13.2
—
14.8
Net income available to common stockholders
$ 177,735
$154,799
Per Common Share Information
2015
2014
% Change
Basic earnings
Diluted earnings
Dividends declared
Stock price:
High
Low
Close
Book value
Price to book value
Financial Ratios
Return on average assets
Return on average common equity
Net interest margin
Net charge-offs as a percentage of average loans and leases
Common equity Tier 1 capital ratio
Total risk-based capital ratio
N.A. Not applicable
6
$
1.07
$
0.95
1.07
0.225
17.29
13.78
14.12
11.94
1.18 X
2015
1.03 %
9.19
4.42
0.30
10.00
13.71
0.94
0.20
17.39
13.95
15.89
11.10
1.43 X
2014
0.96%
8.71
4.61
0.49
N.A.
13.54
12.6 %
13.8
12.5
(0.6)
(1.2)
(1 1.1)
7.6
(17.5)
% Change
7.3 %
5.5
(4.1)
(38.8)
N.A.
17 bps
SELECT FINANCIAL HIGHLIGHTS
Net Interest Margin
(Percent)
Loans & Leases
(Billions of dollars)
Deposits
(Billions of dollars)
4.65% 4.68% 4.61% 4.42%
3.99%
$15.4
$15.8
$14.2
$17.4
$16.4
$16.7
$15.4
$14.1
$14.4
$12.2
5.83% 5.53% 5.27% 5.06% 4.92%
0.38% 0.31% 0.26% 0.26% 0.30%
2011
2012
2013
2014
2015
2011
2012
2013
2014
2015
2011
2012
2013
2014
2015
Total Loans & Leases
Average Yield on Loans & Leases
Total Deposits
Average Interest Rate on Deposits
Net Charge-offs
(Percent)
Non-accrual Loans & Leases and
Other Real Estate Owned
(Millions of dollars)
1.54%
1.45%
$476
$433
0.81%
0.49%
0.30%
$346
$282
$250
Tangible Common Equity1
(Millions of dollars)
$1,635
8.72%
$1,458
$1,366
7.59%
8.03%
$1,799
$1,628
8.50% 8.79%
2011
2012
2013
2014
2015
2011
2012
2013
2014
2015
2011
2012
2013
2014
2015
Tangible Common Equity
Tangible Common Equity/Tangible Assets
2015 Earning Assets
$18.8 billion
2015 Interest Income2
$897 million
2015 Non-interest Income
$442 million
(cid:31) 21% Leasing & equipment finance
(cid:31) 17% Commercial
(cid:31) 15% Consumer real estate (junior liens)
(cid:31) 14% Auto finance
(cid:31) 14% Consumer real estate & other
(first mortgages)
(cid:31) 12% Inventory finance
(cid:31) 7% Securities & other
(cid:31) 20% Leasing & equipment finance
(cid:31) 17% Consumer real estate & other
(first mortgages)
(cid:31) 17% Consumer real estate (junior liens)
(cid:31) 15% Commercial
(cid:31) 14% Inventory finance
(cid:31) 11% Auto finance
(cid:31) 3% Loans & leases held for sale
(cid:31) 2% Securities
(cid:31) 1%
Investments and other
(cid:31) 33% Fees & service charges
(cid:31) 25% Leasing & equipment finance
(cid:31) 12% Card revenue
(cid:31) 9% Gains on sales of consumer real
estate loans, net
(cid:31) 7% Gains on sales of auto loans, net
(cid:31) 7% Servicing fee income
(cid:31) 5% ATM revenue
(cid:31) 2% Other
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
7
ONE BRAND. ONE TCF.
In 2015, we introduced a bold new look for TCF. For the first time, all of our businesses are unified by
a common look that speaks in one voice to our stakeholders. Our new icon represents movement,
propelling teams forward toward customers’ goals in always-changing environments. This brand
platform gives us the flexibility to be relevant to all of our customers. From television and digital to
modern products and local experiential events, our brand strategy comes to life at every touch
point to enhance the rhythm of customers’ everyday lives.
Our rebranding is more than a cosmetic change. It is a reflec-
tion of our dedication and focus to deliver a service experience
that not only provides products and services that are in rhythm
with customers’ needs, but also the desire to form lasting
relationships with them. No matter if our customer is a college
student, small business owner, manufacturer or auto dealer-
ship, we want them to feel that we are their ally and prepared
to respond to their evolving needs.
Supporting our new brand is a commitment to wisely invest in
new products, services and channel enhancements to deliver
on our promise to customers. In 2015, we launched a new web-
site platform that improved access to information, delivered
fundamental improvements in the way customer information
was displayed in our online and mobile banking applications,
improved customers’ ability to open accounts online and
unveiled a real-time customer feedback mechanism to track
and measure their service experience. In addition, we enhanced
access through a 28 percent expansion in our ATM network
across our retail banking footprint. Our lending businesses also
introduced new platforms to streamline how our customers
connect with us and deployed new technologies to make it
easier for them to manage their loans. Cumulatively, these
enhancements and our brand provide a compelling reason for
our customers to choose us as their financial services partner.
One brand. One TCF. We created a new identity that
unifies all of our businesses under a common look.
Presenting one message to the marketplace strengthens
our ability to deepen the connections we have with our
customers, no matter what their needs.
8
Anywhere. Anytime. Any device. Our new website and
enhancements to our mobile platform make it easier for
customers to connect with us on any platform, at any
time. In 2015, we were among the first banks to deploy
all three new mobile payment solutions — Apple PayTM,
Samsung PayTM and Android PayTM.
Life’s twists and turns. Set to memorable music. Our new broadcast advertising helps to convey our brand promise to consumers. The campaign
features everyday life moments — complete with unexpected twists and turns — and shows how our products and services can help them through
their day. Using iconic music as a soundtrack, the ads are relatable, memorable and convey the evolution of our service experience.
Relevance. Flexibility. “In Rhythm.”
Our new brand platform is relevant
to all audiences, whether we are
communicating to businesses or
individuals. Our first campaign under
the new brand emphasizes how TCF
is “in rhythm” with our customers’
needs and provides a clear connec-
tion to the products and services that
we can provide for them.
9
CREATING OPPORTUNITIES IN OUR COMMUNITIES
Our mission statement expresses the passion we have to improve the quality of life of those
who live in the communities we serve. We believe in accomplishing this through both financial
support for philanthropic causes and through the volunteer efforts of our team members. We share
in the responsibility to strengthen programs that improve education, provide human services,
foster strong arts and culture and promote community development.
An important component of our
community involvement is the time and
dedication that our team members put
into supporting community events.
In 2015, TCF received the Innovation in
Financial Education Award by NASDAQ
and EverFi. The award recognizes leader-
ship in improving the financial capability
of young Americans through the use
of technology and new media to teach
financial skills.
Friends of Education supports programs
that emphasize content and critical
thinking with demonstrated evidence
of increasing student achievement and
post-secondary readiness.
NEARLY $3 MILLION
FINANCIAL EDUCATION
FRIENDS OF EDUCATION
In 2015, the TCF Foundation granted
more than $1.5 million to philanthropic
organizations in our communities. In
many cases, our team members are
directly involved in these organiza-
tions either in leadership positions
or through extensive volunteerism.
Our team members and customers
donated an additional $1.3 million
through fundraising activities and
matching gifts. Our Change Makes
Change® employee-led fund raising
program provides a unique opportu-
nity to support a variety of important
causes such as animal welfare, veter-
an services and disease research. In
addition, our team members provided
tens of thousands of hours volunteer-
ing for many outstanding community
organizations who share our belief in
strengthening communities.
10
We made an ambitious commitment
to help improve the financial capa-
bility of adults and young people
throughout our communities. Since
2013, we have offered unbiased,
online financial education in partner-
ship with EverFi, one of the leading
education technology companies.
Our program for adults, the Financial
Learning Center, and our program for
high school students, the Financial
Scholars program, reached nearly
40,000 people in 2015. Our program
is offered in more than 350 schools
in the communities we serve, a nearly
70 percent increase from 2014. We
believe these programs are having a
positive impact. Based on assess-
ment testing conducted before and
after the programs, students who
participated increased their scores by
an average of 77 percent.
TCF is proud to provide support for
Friends of Education, a Minnesota-
based organization focused on
improving education of children.
Established in 1999 under the leader-
ship of TCF Chairman William A.
Cooper, Friends of Education has
grown to serve nearly 9,000 students
in 16 charter schools throughout
Minnesota. In 2015, one of these
schools, Yinghua Academy in
Minneapolis, was named as a
National Blue Ribbon School by the
U.S. Department of Education. In ad-
dition, the Minnesota Department of
Education has designated Friends of
Education its “exemplary” rating,
the highest distinction for charter
school providers. Friends of Education
is currently the only organization to
earn the state’s highest rating for char-
ter school management.
FORM 10-K
TCF FINANCIAL CORPORATION
For the fiscal year ended December 31, 2015
2015 UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2015
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from to
Commission File No. 001-10253
TCF Financial Corporation
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
Delaware
41-1591444
200 Lake Street East
Wayzata, Minnesota 55391-1693
(Address and Zip Code of principal executive offices)
(952) 745-2760
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
(Title of each class)
(Name of each exchange on which registered)
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)
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 [X] No [ ]
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 [ ] No [X]
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or
for such shorter period that the registrant was required to submit and post such files).
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting
company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [X]
Accelerated filer [ ]
Non-accelerated filer [ ] (Do not check if smaller reporting company)
Smaller reporting company [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
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 $2,546,966,152.
As of February 22, 2016, there were 170,618,639 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 2016 Annual Meeting of Stockholders to be held on April 27, 2016 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.
Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure
Item 9A.
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.
Part IV
Item 15.
Signatures
Index to Exhibits
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
Exhibits and Financial Statement Schedules
Page
1
7
14
14
15
15
16
19
20
51
54
54
55
60
108
109
109
110
111
112
112
113
113
113
113
114
115
117
Part I
Item 1. Business
General
TCF Financial Corporation (together with its direct and indirect subsidiaries, "we," "us," "our," "TCF" or the "Company"),
a Delaware corporation incorporated on April 28, 1987, is a national bank holding company based in Wayzata,
Minnesota. References herein to the "Holding Company" or "TCF Financial" refer to TCF Financial Corporation on an
unconsolidated basis. Its principal subsidiary, TCF National Bank ("TCF Bank"), 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 44 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 2015, 2014 and 2013. International revenue, primarily from Canada, was $27.3 million,
$27.9 million and $25.3 million in 2015, 2014 and 2013, respectively.
TCF had total assets of $20.7 billion as of December 31, 2015 and was the 45th largest publicly traded bank holding
company in the United States based on total assets at September 30, 2015.
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 select
locations open seven days a week with extended hours 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 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. Funded generally through retail deposit generation, TCF continues to focus
on profitable asset growth in its leasing and equipment finance, inventory finance, auto finance and consumer real
estate junior lien lending businesses.
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, Business Segments of Notes to Consolidated Financial Statements 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. TCF has two consumer real estate loan sale programs;
one that sells nationally originated junior lien loans and the other that originates first mortgage lien loans in our primary
banking markets and sells the loans through a correspondent relationship. TCF does not have any consumer real
estate subprime lending programs. TCF continues to expand its junior lien lending business through a national lending
platform focused on junior lien loans to high credit quality customers.
1
Commercial Real Estate and Business Lending With an emphasis on secured lending, 99.9% of TCF's total
commercial loans were secured either by properties or other business assets at both December 31, 2015 and 2014.
Commercial real estate loans are loans originated by TCF that are secured by commercial real estate, including multi-
family housing, warehouse and industrial buildings, office buildings, health care facilities, retail services and commercial
real estate construction loans, mainly to borrowers based in its primary banking markets. The commercial real estate
portfolio represented 82.4% and 83.1% of TCF's total commercial portfolio at December 31, 2015 and 2014,
respectively.
Commercial business loans are loans originated by TCF that are secured by various types of business assets including
inventory, receivables, equipment or financial instruments. 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 55% of TCF's commercial business loans outstanding at
December 31, 2015 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, construction, golf cart and turf, medical, manufacturing, 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 primarily in the areas of powersports and
lawn and garden. 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® and Exmark® 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 Gateway One Lending & Finance, LLC ("Gateway One"), headquartered in Anaheim, California,
originates and services loans on new and used autos to customers through relationships established with more than
11,800 franchised and independent dealers in all 50 states. Loans are originated for investment and for sale, including
securitizations. 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, 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. TCF provides an online and
mobile banking platform to further enhance the customer banking experience.
2
At December 31, 2015, TCF had 375 branches, consisting of 192 traditional branches, 177 supermarket branches
and six campus branches. TCF operates 155 branches in Illinois, 99 in Minnesota, 53 in Michigan, 34 in Colorado,
24 in Wisconsin, seven in Arizona, two in South Dakota and one in Indiana. Of its 177 supermarket branches, TCF
had 117 branches in Jewel-Osco® stores at December 31, 2015. TCF will be closing 33 branches located in Jewel-
Osco stores in 2016 and in their place installing ATMs that feature advanced transaction capabilities. 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 component of TCF's results of
operations. Increasing fee and service charge revenue has been challenging as a result of changing consumer 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. 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 programs are supported by interchange fees charged to retailers.
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 obligations and securities of various federal
agencies and U.S. Government sponsored enterprises, obligations of states and political subdivisions, 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, Short-term Borrowings and Note 11, Long-term Borrowings of Notes to Consolidated Financial Statements.
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, 2015, TCF had 6,755 employees, including 1,233 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.
3
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 various regulatory capital requirements
administered by the federal banking agencies 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.
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 Consumer Protection Act of 2010 (the "Dodd-Frank Act") and the Basel III international capital
standards. The Final Capital Rules became applicable to TCF on January 1, 2015 with conservation buffers phasing
in over the subsequent five years. Among other things, the Final Capital Rules established 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; increased the minimum Tier 1 capital ratio from 4.0% to 6.0% and included a minimum leverage ratio of 4.0%;
placed an emphasis on common equity Tier 1 capital and changed the risk weights assigned to certain instruments.
Failure to meet these standards would result in limitations on capital distributions as well as executive bonuses. TCF
and TCF Bank exceeded the Basel III capital standards as of December 31, 2015. See Note 14, Regulatory Capital
Requirements of Notes to Consolidated Financial Statements for additional information.
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 earnings
for the current year combined with its net retained earnings for the preceding two calendar years without prior approval
of the OCC. 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. 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.
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. Annual dividend distributions in excess of earnings 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.
4
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 would be required to 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 Under current law, 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 2015 was
60 cents for each $100 of deposits. Financing Corporation assessments of $1.0 million, $1.0 million and $1.1 million
were paid by TCF Bank in 2015, 2014 and 2013, 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: (i) raised the minimum designated reserve ratio ("DRR") from 1.15% to 1.35%
and removed the upper limit on the DRR; (ii) requires the DIF to reach 1.35% by September 30, 2020; (iii) 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 $10.0 billion;
(iv) eliminated the requirement that the FDIC pay dividends from the fund when the DRR is between 1.35% and 1.5%;
and (v) 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, 2015, the DIF ratio
calculated by the FDIC using estimated insured deposits was 1.09%. The DIF reserve ratio would have been 0.51%
using the new assessment base. In 2015, for banks with at least $10.0 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. TCF's FDIC
insurance expense was $20.3 million, $25.1 million and $32.1 million in 2015, 2014 and 2013, respectively.
5
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. See "Item 1A. Risk Factors."
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.
Taxation
Federal Taxation TCF's federal income tax returns are open and subject to examination for 2013 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.
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 7. Management's Discussion and Analysis - Consolidated Income Statement Analysis - Income Taxes" and
Note 1, Summary of Significant Accounting Policies and Note 12, Income Taxes of Notes to Consolidated Financial
Statements 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 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
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.
6
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 both business and economic conditions generally, as well as those
in the local markets in which TCF operates. 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 the values of 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 TCF Financial uses 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.
7
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 and it is expected that competition for deposits will continue to increase. If TCF's competitors
raise the rates they pay on deposits, TCF may experience 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.
Losses of deposits may require TCF to address its liquidity needs in ways that increase its funding 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 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.
8
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,
many retailers have 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 damage or financial
losses which could have a material adverse effect on its financial condition and results of operations.
The success of TCF's supermarket branches depends on the continued long-term success and viability of TCF's
supermarket partners, 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, 2015, TCF had 177 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, or that we may not be able to renew branch leases with our supermarket partners on favorable
terms, or at all.
Also, 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. Although utilization of these
branches may decrease, the nature of these leases with our supermarket partners generally do not allow us to terminate
significant numbers of individual branches. Because these leases are generally all renewed together, in the event of
a decrease in customer utilization there may be limited opportunities to terminate unprofitable branch leases. Any of
the above risks 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. Further, decreased underwriting standards of competitors may result in lower interest
rates or loan volumes. 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.
9
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 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.
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.
Future changes in regulations, regulatory policies, interpretation and enforcement of statutes, regulations or policies
could result in reduced revenues, increased compliance burdens, additional costs, limits on the types of financial
services and products we may offer or increased competition from non-banks offering competing financial services
and products, among other things. 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, 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. 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.
For example, on October 29, 2015, TCF received a Notice and Opportunity to Respond and Advise letter ("NORA
Letter") from the CFPB notifying TCF that the CFPB’s Office of Enforcement is considering recommending that the
CFPB take legal action against TCF related to compliance with laws relating to unfair, deceptive and abusive acts and
practices and Regulation E, §1005.17, in connection with TCF’s practices in administering checking account overdraft
program "opt-in" requirements. The purpose of a NORA Letter is to ensure that potential subjects of enforcement
actions have the opportunity to present their positions to the CFPB before an enforcement action is recommended or
commenced and TCF has provided the CFPB with a written statement setting forth the reasons of law and policy why
it believes that the CFPB should not take action. TCF is in discussions with the CFPB and is seeking to reach an
appropriate resolution of the matter. We are currently unable to predict the ultimate timing or outcome of this matter.
There can be no assurance that the CFPB will not utilize its enforcement authority through settlement, administrative
proceedings or litigation and seek remediation, disgorgement, penalties, other monetary relief, injunctive relief or
changes to TCF’s business practices or operations, which could have a material adverse effect on TCF.
10
While TCF has policies and procedures designed to prevent violations of laws, regulations and regulatory policies,
and to ensure compliance with new or changed laws, regulations and regulatory policies, there can be no assurance
that violations will not occur, and failure to comply could result in reputational damage, remediation, disgorgement,
penalties, other monetary relief, injunctive relief or changes to TCF's business practices or operations, any of which
could have a material adverse effect on its 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.
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 interest rate, credit, 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 may receive 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 expected to be received 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.
11
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, in 2015, TCF recognized net
gains of $72.0 million on the recorded investment of $2.6 billion in consumer real estate and auto loans sold, including
accrued interest. This included total consumer auto loan securitization transaction net gains of $25.5 million on $1.1
billion of the recorded investment, including accrued interest.
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 from TCF, or in general, 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, would decrease TCF's capital ratios as a result of the increase of risk weighted assets, 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 did not 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 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.
Management transition and the 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 key personnel, including its ability to attract and retain such 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. On January 1, 2016,
several management changes became effective, including Craig R. Dahl assuming the role of Chief Executive Officer,
Brian W. Maass assuming the role of Chief Financial Officer, and Thomas F. Jasper assuming the role of Chief Operating
Officer. Although each of these positions was filled internally, and there were no executive departures as a result of
these changes, any significant leadership change or executive management transition involves inherent risk, and any
failure to ensure the effective transfer of knowledge and a smooth transition could hinder our strategic planning,
execution and future performance. 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.
12
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.
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 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.
13
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 on 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 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 office in Wayzata, Minnesota. Other operations facilities, located in Minnesota,
Illinois, California and South Dakota, are either owned or leased. These facilities are predominantly utilized by the
Lending and Funding segments. Several facilities in Minnesota are also utilized by the Support Services segment. At
December 31, 2015, TCF owned the buildings and land for 147 of its bank branch offices, owned the buildings but
leased the land for 26 of its bank branch offices and leased or licensed the remaining 202 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, Premises and Equipment of Notes to Consolidated
Financial Statements.
14
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 regulatory examinations and enforcement actions brought by federal regulators, including the SEC,
the Federal Reserve, the OCC and the CFPB, and TCF's regulatory authorities may impose sanctions on TCF for
failures related to regulatory compliance. 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. Except as discussed below, 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.
On October 29, 2015, TCF received a NORA Letter from the CFPB notifying TCF that the CFPB’s Office of Enforcement
is considering recommending that the CFPB take legal action against TCF related to compliance with laws relating to
unfair, deceptive and abusive acts and practices and Regulation E, §1005.17, in connection with TCF’s practices in
administering checking account overdraft program "opt-in" requirements. The purpose of a NORA Letter is to ensure
that potential subjects of enforcement actions have the opportunity to present their positions to the CFPB before an
enforcement action is recommended or commenced and TCF has provided the CFPB with a written statement setting
forth the reasons of law and policy why it believes that the CFPB should not take action. TCF is in discussions with
the CFPB and is seeking to reach an appropriate resolution of the matter. We are currently unable to predict the ultimate
timing or outcome of this matter. There can be no assurance that the CFPB will not utilize its enforcement authority
through settlement, administrative proceedings or litigation and seek remediation, disgorgement, penalties, other
monetary relief, injunctive relief or changes to TCF’s business practices or operations, which could have a material
adverse effect on TCF.
Item 4. Mine Safety Disclosures
Not applicable.
15
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 the dividends declared for TCF's common stock.
As of February 22, 2016, there were 5,945 holders of record of TCF's common stock.
2015:
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
2014:
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
High
Low
Dividends
Declared
$
$
15.94
$
13.78
$
17.07
17.29
16.31
14.35
14.93
13.78
16.12
$
13.95
$
16.95
17.30
17.39
15.12
15.01
15.31
0.075
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 Office of the Comptroller of the Currency. 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, Regulatory Capital Requirements of Notes to Consolidated Financial Statements.
16
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, 2010 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, 2014.
TCF Total Stock Return Performance Chart
TCF Financial Corporation
SNL Bank and Thrift(1)
S&P 500 Index
TCF Peer Group(2)
Year Ended December 31,
Index
TCF Financial Corporation
SNL Bank and Thrift(1)
S&P 500 Index
TCF Peer Group(2)
2010
2011
2012
2013
2014
2015
$
100.00
$
70.73
$
84.82
$
115.01
$
113.89
$
100.00
100.00
100.00
77.76
102.11
86.26
104.42
118.45
97.43
142.97
156.82
138.54
159.60
178.28
143.09
102.66
162.83
180.75
152.75
Includes all major exchange (NYSE, NYSE MKT, NASDAQ) banks and thrifts in SNL's coverage universe (428 companies as of December 31, 2015).
(1)
(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, 2014, including: New
York Community Bancorp, Inc.; First Republic Bank; First Niagara Financial Group, Inc.; Hudson City Bancorp, Inc.; SVB Financial Group; People's United Financial,
Inc.; Popular, Inc.; City National Corporation; BOK Financial Corporation; East West Bancorp, Inc.; Cullen/Frost Bankers, Inc.; Synovus Financial Corp.; Signature
Bank; Associated Banc-Corp; FirstMerit Corporation; First Horizon National Corporation; Commerce Bancshares, Inc.; Umpqua Holdings Corporation; First Citizens
BancShares, Inc.; Webster Financial Corporation; Prosperity Bancshares, Inc.; EverBank Financial Corp; Hancock Holding Company; Wintrust Financial
Corporation; Susquehanna Bancshares, Inc.; Investors Bancorp, Inc.; BankUnited, Inc.; Fulton Financial Corporation; First National of Nebraska, Inc.; Valley
National Bancorp; UMB Financial Corporation; PacWest Bancorp; F.N.B. Corporation; IBERIABANK Corporation; Astoria Financial Corporation; PrivateBancorp,
Inc.; Washington Federal, Inc.; Bank of Hawaii Corporation; MB Financial, Inc.; Texas Capital Bancshares, Inc.; BancorpSouth, Inc.; First BanCorp.; Trustmark
Corporation; United Bankshares, Inc.; International Bancshares Corporation; TFS Financial Corporation; Cathay General Bancorp; Old National Bancorp; Central
Bancompany, Inc.; and Western Alliance Bancorporation.
17
Repurchases of TCF Stock
The following table summarizes share repurchase activity for the quarter ended December 31, 2015.
Period
October 1 to October 31, 2015
Share repurchase program(1)
Employee transactions(2)
November 1 to November 30, 2015
Share repurchase program(1)
Employee transactions(2)
December 1 to December 31, 2015
Share repurchase program(1)
Employee transactions(2)
Total
Share repurchase program(1)
Employee transactions(2)
Total Number
of Shares
Purchased
Average
Price Paid
Per Share
Total Number of Shares
Purchased as Part of
Publicly Announced Plan
Maximum Number of
Shares that May Yet be
Purchased Under the Plan
— $
—
4,761
$
15.12
— $
— $
— $
— $
— $
—
—
—
—
—
4,761
$
15.12
—
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 granted on or prior to April 22, 2015 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.
18
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)
2015
2014
2013
2012
2011
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 $
177,735
Net income (loss) per common share:
Basic
Diluted
Dividends declared
Consolidated Financial Condition:
$
$
$
1.07
1.07
0.225
$
820,388
$
815,629
$
802,624
$
780,019
$
699,688
442,295
(297)
432,240
1,027
403,094
964
388,191
102,232
437,171
7,263
1,262,386
1,248,896
1,206,682
1,270,442
1,144,122
52,944
894,747
—
314,695
108,872
8,700
197,123
19,388
95,737
871,777
—
281,382
99,766
7,429
174,187
19,388
154,799
0.95
0.94
0.20
$
$
$
$
118,368
845,269
—
243,045
84,345
7,032
151,668
19,065
247,443
811,819
550,735
(339,555)
(132,858)
6,187
200,843
764,451
—
178,828
64,441
4,993
(212,884)
109,394
5,606
$
$
$
$
132,603
$
(218,490)
0.82
0.82
0.20
$
$
$
(1.37)
(1.37)
0.20
—
109,394
0.71
0.71
0.20
$
$
$
$
Loans and leases
$ 17,435,999
$ 16,401,646
$ 15,846,939
$15,425,724
$ 14,150,255
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:
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 total loans and leases
Net charge-offs as a percentage of average loans and
leases
(1) Net interest income divided by average interest-earning assets.
20,691,704
19,394,611
18,379,840
18,225,917
16,719,989
15,449,882
14,432,776
14,050,786
1,042,033
2,306,917
11.94
1,236,490
2,135,364
11.10
1,488,243
1,964,759
10.23
1,933,815
1,876,643
9.79
18,979,388
12,202,004
4,388,080
1,878,627
11.65
1.03%
0.96%
0.87%
9.19
4.42
11.15
21.03
8.71
4.61
10.89
21.28
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
1.15%
1.32%
1.75%
2.46 %
2.11%
1.71
1.00
0.49
2.17
1.59
0.81
3.07
1.73
1.54
3.03
1.81
1.45
1.43
0.90
0.30
19
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 Available for Sale and Securities Held to Maturity
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
21
22
22
22
23
23
27
28
29
30
30
30
31
36
43
43
44
44
45
46
47
47
49
49
20
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 (together with its direct and indirect subsidiaries, "we," "us," "our," "TCF" or the "Company"),
a Delaware corporation, is a national bank holding company based in Wayzata, Minnesota. References herein to "TCF
Financial" refer to TCF Financial Corporation on an unconsolidated basis. Its principal subsidiary, TCF National Bank
("TCF Bank"), is headquartered in Sioux Falls, South Dakota. At December 31, 2015, TCF had 375 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 select
locations open seven days a week with extended hours 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 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. Funded generally through retail deposit generation, TCF continues to focus
on profitable asset growth in its leasing and equipment finance, inventory finance, auto finance and consumer real
estate junior lien lending businesses.
Net interest income, the difference between interest income earned on loans and leases, securities, investments and
other interest-earning assets (interest income) and interest paid on deposits and borrowings (interest expense),
represented 65.0% of TCF's total revenue for 2015, compared with 65.3% and 66.5% for 2014 and 2013, 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. 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 and manage credit concentration risk, the Company continues to sell or securitize loans, primarily in auto
finance and consumer real estate, which result in gains on sales as well as increased 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 2015, 2014, and 2013
and on information about TCF's balance sheet, loan and lease portfolio, liquidity, funding resources, capital and other
matters.
21
Results of Operations
Performance Summary TCF reported diluted earnings per common share of $1.07 for 2015, compared with 94 cents
and 82 cents for 2014 and 2013, respectively. TCF reported net income of $197.1 million for 2015, compared with
$174.2 million and $151.7 million for 2014 and 2013, respectively.
Return on average assets was 1.03% for 2015, compared with 0.96% and 0.87% for 2014 and 2013, respectively.
Return on average common equity was 9.19% for 2015, compared with 8.71% and 8.12% for 2014 and 2013,
respectively.
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 $207.5 million for 2015, compared
with $173.9 million and $136.2 million for 2014 and 2013, respectively.
Lending net interest income totaled $620.0 million for 2015, an increase of 4.7% from $592.4 million for 2014, which
increased 4.2% from $568.3 million for 2013. The increases in both periods were primarily driven by higher average
loan and lease balances in the auto finance, leasing and equipment finance and inventory finance businesses. These
increases were partially offset by margin reduction resulting from the competitive, low interest rate environment.
Lending provision for credit losses totaled $50.5 million for 2015, a decrease of 45.5% from $92.8 million for 2014,
which decreased 19.6% from $115.4 million for 2013. The decrease in 2015 was primarily driven by the sale of consumer
real estate troubled debt restructuring ("TDR") loans in the fourth quarter of 2014 ("the TDR loan sale") and improved
credit quality in the consumer real estate portfolio, partially offset by an increase in provision for credit losses in the
auto finance portfolio due to growth and maturation of the portfolio. The decrease in 2014 was primarily due to a
decrease in net charge-offs in the consumer real estate and commercial portfolios, partially offset by additional provision
expense related to the TDR loan sale and an increase in provision for credit losses in the auto finance portfolio due
to growth and maturation of the portfolio. See "Consolidated Income Statement Analysis - Provision for Credit Losses"
in this Management's Discussion and Analysis for further discussion.
Lending non-interest income totaled $227.0 million for 2015, an increase of 7.5% from $211.2 million for 2014, which
increased 25.4% from $168.4 million for 2013. The increase in 2015 was primarily due to (i) an increase in leasing
and equipment finance income related to higher operating lease revenue, (ii) an increase in servicing fee income due
to the cumulative effect of an increase in the portfolio of consumer real estate and auto loans sold with servicing
retained by TCF and (iii) an increase in net gains on sales of consumer real estate loans, partially offset by a decrease
in net gains on sales of auto loans. The increase in 2014 was primarily due to increases in net gains on sales of auto
loans and consumer real estate loans, along with increased servicing fee income. Average loans and leases serviced
for others was $3.9 billion in 2015, compared with $2.9 billion and $1.7 billion in 2014 and 2013, respectively. See
"Consolidated Income Statement Analysis - Non-interest Income" in this Management's Discussion and Analysis for
further discussion.
Lending non-interest expense totaled $462.8 million for 2015, an increase of 8.3% from $427.5 million for 2014, which
increased 6.5% from $401.4 million for 2013. The increase in 2015 was primarily due to increased staff levels to support
the growth of auto finance and further build out of the risk management function and increased operating lease
depreciation resulting from increased leasing and equipment finance income. 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.
22
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 loss available to common stockholders of $13.2 million for 2015,
compared with net income available to common stockholders of $5.4 million and $17.3 million for 2014 and 2013,
respectively.
Funding net interest income totaled $204.9 million for 2015, a decrease of 9.5% from $226.3 million for 2014, which
decreased 4.6% from $237.3 million for 2013. The decrease in 2015 was primarily due to higher interest rates paid
on certificates of deposit and money market accounts as a result of special campaigns to fund loan and lease growth.
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.
Funding non-interest income totaled $213.3 million for 2015, a decrease of 3.3% from $220.6 million for 2014, which
decreased 6.2% from $235.2 million for 2013. The decrease in 2015 was primarily due to a reduction in fees and
service charges due to consumer behavior changes, including customers maintaining higher average checking account
balances, partially offset by increased card revenue due to increased transaction volume. The decrease in 2014 was
primarily due to a reduction in fees and service charges due to consumer behavior changes, including customers
maintaining higher average checking account balances.
Funding non-interest expense totaled $436.2 million for 2015, which remained consistent with $435.2 million for 2014,
which decreased 1.6% from $442.5 million for 2013. 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.
Consolidated Income Statement Analysis
Net Interest Income Net interest income represented 65.0% of TCF's total revenue for 2015, compared with 65.3%
and 66.5% for 2014 and 2013, respectively. 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
(i) changes in prevailing short- and long-term interest rates, (ii) loan and deposit pricing strategies and competitive
conditions, (iii) the volume and the mix of interest-earning assets and both non-interest bearing deposits and interest-
bearing liabilities, (iv) the level of non-accrual loans and leases and other real estate owned and (v) the impact of
modified loans and leases.
23
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,
2015
2014
Change
Average
Balance
Interest
Yields
and
Rates
Average
Balance
Interest
Yields
and
Rates
Average
Balance
Interest
Yields
and
Rates
(bps)
$
520,577
$ 12,294
2.36% $
586,803
$ 15,390
2.62% $
(66,226) $ (3,096)
207,140
5,486
2.65
197,943
5,281
2.67
9,197
205
(Dollars in thousands)
Assets:
Investments and other
Securities held to maturity
Securities available for sale:(1)
Taxable
Tax-exempt(2)
Loans and leases held for sale
Loans and leases:(3)
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
564,205
80,894
286,295
13,930
2,643
25,766
2,710,512
157,428
2,911,689
149,770
5,622,201
307,198
1,173,039
1,961,389
59,037
76,677
3,134,428
135,714
3,804,015
175,565
2,154,357
122,799
2,278,617
94,463
10,303
712
Total loans and leases
17,003,921
836,451
Total interest-earning assets
18,663,032
896,570
Other assets(4)
Total assets
Liabilities and Equity:
Non-interest bearing deposits:
Retail
Small business
Commercial and custodial
1,228,651
$ 19,891,683
$ 1,658,951
838,758
507,446
Total non-interest bearing deposits
3,005,155
Interest-bearing deposits:
Checking
Savings
Money market
Certificates of deposit
Total interest-bearing deposits
Total deposits
Borrowings:
Short-term borrowings
Long-term borrowings
Total borrowings
Total interest-bearing liabilities
Total deposits and borrowings
Other liabilities
Total liabilities
Total TCF Financial Corp. stockholders'
equity
Non-controlling interest in subsidiaries
Total equity
547
3,005
14,237
30,437
48,226
48,226
53
23,263
23,316
71,542
71,542
2,396,334
4,938,303
2,265,121
3,340,341
12,940,099
15,945,254
18,822
1,121,181
1,140,003
14,080,102
17,085,257
589,222
17,674,479
2,197,690
19,514
2,217,204
Total liabilities and equity
$ 19,891,683
(26)
(2)
(21)
327
85
13
—
2
1
(8)
(14)
(11)
(26)
(22)
(80)
(14)
(14)
(2)
(9)
9
13
5
4
(3)
55
60
8
6
2.47
3.27
9.00
5.81
5.14
5.46
5.03
3.91
4.33
4.62
5.70
4.15
6.91
4.92
4.80
0.02
0.06
0.63
0.91
0.37
0.30
0.28
2.07
2.05
0.51
0.42
447,016
11,994
—
—
259,186
21,128
3,359,670
190,973
2,788,882
143,431
6,148,552
334,404
1,469,579
1,665,788
73,752
66,450
3,135,367
140,202
3,531,256
166,974
1,888,080
112,603
1,567,904
68,595
12,071
931
16,283,230
823,709
17,774,178
877,502
1,124,226
$18,898,404
$ 1,546,453
806,649
413,893
2,766,995
2,328,402
5,693,751
1,312,483
2,840,922
12,175,558
14,942,553
83,673
1,311,176
1,394,849
13,570,407
16,337,402
502,560
16,839,962
2,041,428
17,014
2,058,442
$18,898,404
921
8,343
7,032
22,089
38,385
38,385
261
19,954
20,215
58,600
58,600
2.68
—
8.15
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
0.78
0.32
0.26
0.31
1.52
1.45
0.43
0.36
117,189
80,894
27,109
1,936
2,643
4,638
(649,158)
(33,545)
122,807
6,339
(526,351)
(27,206)
(296,540)
(14,715)
295,601
10,227
(939)
(4,488)
272,759
266,277
710,713
8,591
10,196
25,868
(1,768)
(219)
12,742
19,068
720,691
888,854
104,425
$
993,279
$
112,498
32,109
93,553
238,160
67,932
(374)
(755,448)
(5,338)
7,205
8,348
9,841
9,841
(208)
3,309
3,101
12,942
12,942
952,638
499,419
764,541
1,002,701
(64,851)
(189,995)
(254,846)
509,695
747,855
86,662
834,517
156,262
2,500
158,762
$
993,279
Net interest income and margin
$825,028
4.42
$818,902
4.61
$
6,126
(19)
(1)
(2)
(3)
(4)
Average balances and yields of securities available for sale are based upon historical amortized cost and exclude equity securities.
The yield on tax-exempt securities available for sale is computed on a tax-equivalent basis using a statutory federal income tax rate of 35% for all periods presented.
Average balances of loans and leases include non-accrual loans and leases and are presented net of unearned income.
Includes leased equipment and related initial direct costs under operating leases of $104.1 million and $84.9 million in 2015 and 2014, respectively.
24
Year Ended December 31,
2014
2013
Change
Average
Balance
Interest
Yields
and
Rates
Average
Balance
Interest
Yields
and
Rates
Average
Balance
Interest
Yields
and
Rates
(bps)
(Dollars in thousands)
Assets:
Investments and other
$
586,803
$ 15,390
2.62% $
768,180
$ 15,041
1.96% $
(181,377) $
349
197,943
5,281
2.67
6,737
277
4.11
191,206
5,004
Securities held to maturity
Securities available for sale:(1)
Taxable
Loans and leases held for sale
Loans and leases:(2)
Consumer real estate:
Fixed-rate
Variable-rate
Total consumer real estate
Commercial:
Fixed-rate
Variable- and adjustable-rate
Total commercial
447,016
259,186
11,994
21,128
3,359,670
190,973
2,788,882
143,431
6,148,552
334,404
1,469,579
1,665,788
73,752
66,450
3,135,367
140,202
Leasing and equipment finance
3,531,256
166,974
Inventory finance
Auto finance
Other
1,888,080
112,603
1,567,904
68,595
12,071
931
Total loans and leases
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
Certificates of deposit
Total interest-bearing deposits
Total deposits
Borrowings:
Short-term borrowings
Long-term borrowings
Total borrowings
2,328,402
5,693,751
1,312,483
2,840,922
12,175,558
14,942,553
83,673
1,311,176
1,394,849
Total interest-bearing liabilities
13,570,407
Total deposits and borrowings
16,337,402
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
921
8,343
7,032
22,089
38,385
38,385
261
19,954
20,215
58,600
58,600
2.68
8.15
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
0.78
0.32
0.26
0.31
1.52
1.45
0.43
0.36
648,630
155,337
18,074
11,647
3,746,029
217,891
2,703,921
138,192
6,449,950
356,083
1,771,959
1,490,787
93,760
61,752
3,262,746
155,512
3,260,425
162,035
1,723,253
103,844
907,571
13,088
43,921
1,060
15,617,033
822,455
17,195,917
867,494
1,092,681
$18,288,598
$ 1,442,356
771,827
345,713
2,559,896
2,313,794
6,147,030
818,814
2,369,992
11,649,630
14,209,526
7,685
1,724,002
1,731,687
13,381,317
15,941,213
434,763
16,375,976
1,896,131
16,491
1,912,622
$18,288,598
1,485
12,437
2,391
20,291
36,604
36,604
46
25,266
25,312
61,916
61,916
2.79
7.50
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
0.86
0.31
0.26
0.60
1.46
1.46
0.46
0.39
(201,614)
(6,080)
103,849
9,481
(386,359)
(26,918)
84,961
5,239
(301,398)
(21,679)
(302,380)
(20,008)
175,001
4,698
(127,379)
(15,310)
270,831
164,827
660,333
4,939
8,759
24,674
(1,017)
(129)
1,254
10,008
666,197
578,261
31,545
$
609,806
$
104,097
34,822
68,180
207,099
14,608
(564)
(453,279)
(4,094)
4,641
1,798
1,781
1,781
215
(5,312)
(5,097)
(3,316)
(3,316)
493,669
470,930
525,928
733,027
75,988
(412,826)
(336,838)
189,090
396,189
67,797
463,986
145,297
523
145,820
$
609,806
66
(144)
(11)
65
(14)
3
(8)
(27)
(15)
(30)
(24)
(7)
(47)
(39)
(21)
(10)
(2)
(5)
25
(8)
1
—
(29)
6
(1)
(3)
(3)
Net interest income and margin
$818,902
4.61
$805,578
4.68
$ 13,324
(7)
(1)
(2)
(3)
Average balances and yields of securities available for sale are based upon historical amortized cost and exclude equity securities.
Average balances of loans and leases include non-accrual loans and leases and are presented net of unearned income.
Includes lease equipment and related initial direct costs under operating leases of $84.9 million and $74.5 million in 2014 and 2013, respectively.
25
The following table presents the components of the changes in net interest income by volume and rate.
Year Ended
December 31, 2015
December 31, 2014
Versus Same Period in 2014
Versus Same Period in 2013
(In thousands)
Interest income:
Investments and other
Securities held to maturity
Securities available for sale:
Taxable
Tax-exempt
Loans and leases held for sale
Loans and leases:
Consumer real estate:
Fixed-rate
Variable-rate
Increase (Decrease) Due to
Rate(1)
Volume(1)
Total
Increase (Decrease) Due to
Rate(1)
Volume(1)
Total
$ (1,645) $ (1,451) $ (3,096) $ (4,046) $
4,395
$
349
245
(40)
205
5,134
(130)
5,004
2,952
2,643
2,325
(1,016)
—
2,313
1,936
2,643
4,638
(5,431)
(649)
(6,080)
—
8,388
—
1,093
—
9,481
(37,621)
4,076
(33,545)
(22,055)
(4,863)
(26,918)
6,317
22
6,339
4,365
874
5,239
Total consumer real estate
(28,753)
1,547
(27,206)
(16,452)
(5,227)
(21,679)
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
(14,924)
11,580
(42)
12,662
15,346
29,633
(128)
35,838
43,114
209
(14,715)
(15,365)
(1,353)
(4,446)
(4,071)
(5,150)
(3,765)
(91)
10,227
7,045
(4,488)
(5,926)
8,591
10,196
25,868
13,047
9,839
29,246
(219)
(79)
(4,643)
(2,347)
(9,384)
(8,108)
(1,080)
(4,572)
(50)
(23,096)
(24,046)
12,742
19,068
34,365
28,790
(33,111)
(18,782)
(20,008)
4,698
(15,310)
4,939
8,759
24,674
(129)
1,254
10,008
26
(400)
(374)
10
(574)
(564)
(987)
(4,351)
(5,338)
(865)
(3,229)
(4,094)
5,817
4,221
(187)
(3,191)
(4,161)
2,268
1,388
4,127
(21)
6,500
7,262
7,205
8,348
(208)
3,309
3,101
1,946
3,779
2,695
(1,981)
4,641
1,798
248
(6,265)
(4,901)
(33)
953
(196)
215
(5,312)
(5,097)
(3,316)
10,674
12,942
861
(4,177)
$ 40,037
$ (33,911) $
6,126
$ 26,802
$ (13,478) $ 13,324
(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 $4.6 million, was $825.0 million for 2015,
an increase of 0.7% from $818.9 million for 2014, which increased 1.7% from $805.6 million for 2013. The increases
in both periods were primarily driven by higher average loan and lease balances in the auto finance, leasing and
equipment finance and inventory finance businesses. These increases were partially offset by margin reduction resulting
from the competitive, low interest rate environment. The increase in 2014 was also due to the reduced cost of borrowings.
Net interest margin was 4.42% for 2015, compared with 4.61% and 4.68% for 2014 and 2013, respectively. The
decrease in 2015 was primarily due to margin compression resulting from the competitive, low interest rate environment
and higher rates on certificates of deposit and money market accounts, as well as a change in the asset portfolio mix
due to growth in the auto finance business. The decrease in 2014 was primarily due to continued margin reduction
resulting from the ongoing competitive low interest rate environment and change in the asset portfolio mix due to
growth in the auto finance business.
26
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 evaluation of incurred losses is based upon
historical loss rates multiplied by the respective portfolio's loss emergence period. Factors utilized in the determination
and allocation of the allowance for loan and lease losses and the related provision for credit losses include historical
trends in loss rates, a portfolio's overall risk characteristics, changes in its character or size, risk rating migration,
delinquencies, collateral values and prevailing economic conditions.
The following table summarizes the composition of TCF's provision for credit losses for the years ended December
31, 2015, 2014, and 2013.
(Dollars in thousands)
2015
2014
2013
2015 / 2014
2014 / 2013
Consumer real estate
$ 12,697
24.0% $ 63,973
66.8% $ 87,100
73.6 % $(51,276)
(80.2)% $(23,127)
(26.6)%
Commercial
298
0.6
(259)
(0.3)
12,515
10.6
557
N.M.
(12,774)
N.M.
Year Ended December 31,
Change
Leasing and equipment
finance
Inventory finance
Auto finance
Other
Total
N.M. Not Meaningful.
5,411
3,036
28,943
2,559
10.2
5.7
54.7
4.8
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
2,087
538
5,201
100
62.8
21.5
21.9
4.1
2,319
549
10,527
(125)
N.M.
28.2
79.7
(4.8)
$ 52,944
100.0% $ 95,737
100.0% $ 118,368
100.0 % $(42,793)
(44.7)
$(22,631)
(19.1)
TCF provided $52.9 million for credit losses for 2015, compared with $95.7 million and $118.4 million for 2014 and
2013, respectively. The decrease in 2015 was primarily driven by the TDR loan sale and improved credit quality in the
consumer real estate portfolio, partially offset by an increase in provision for credit losses in the auto finance portfolio
due to growth and maturation of the portfolio. The decrease in 2014 was primarily due to decreases in net charge-offs
in the consumer real estate and commercial portfolios, partially offset by additional provision expense related to the
TDR loan sale and an increase in provision for credit losses in the auto finance portfolio due to growth and maturation
of the portfolio.
Net loan and lease charge-offs for 2015 were $51.5 million, or 0.30% of average loans and leases, compared with
$79.3 million, or 0.49% of average loans and leases for 2014 and $126.4 million, or 0.81% of average loans and leases
for 2013. The decrease in 2015 was primarily due to lower incidents of default and improved home values in the
consumer real estate portfolio due to the improving economy. The decrease in 2014 was primarily due to decreases
in net charge-offs in the consumer real estate and commercial portfolios. The decrease in net charge-offs in the
consumer real estate portfolio was primarily due to the improving economy, as incidents of default decreased and
home values increased. The decrease in net charge-offs in the commercial portfolio was primarily due to improved
credit quality and continued efforts to actively work out problem loans.
For additional information, see "Consolidated Financial Condition Analysis — Credit Quality" in this Management's
Discussion and Analysis.
27
Non-interest Income Non-interest income is a significant source of revenue for TCF, representing 35.0% of total
revenue for 2015, compared with 34.7% and 33.5% for 2014 and 2013, respectively, and is an important factor in
TCF's results of operations. Total fees and other revenue were $442.3 million for 2015, compared with $432.2 million
and $403.1 million for 2014 and 2013, respectively.
Year Ended December 31,
Compound Annual
Growth Rate
1-Year
5-Year
(Dollars in thousands)
2015
2014
2013
2012
2011
2015/2014
2015/2010
Fees and service charges
$ 144,999
$ 154,386
$ 166,606
$ 177,953
$ 219,363
(6.1)%
(11.9)%
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
54,387
21,544
220,930
30,580
40,964
31,229
102,773
108,129
10,463
442,295
51,323
22,225
227,934
43,565
34,794
21,444
99,803
93,799
10,704
51,920
22,656
241,182
29,699
21,692
13,406
64,797
90,919
6,196
432,240
403,094
Gains (losses) on securities, net
(297)
1,027
964
52,638
24,181
254,772
22,101
5,413
7,759
35,273
92,172
5,974
388,191
102,232
96,147
27,927
343,437
1,133
—
970
2,103
89,167
2,464
437,171
7,263
Total non-interest income
$ 441,998
$ 433,267
$ 404,058
$ 490,423
$ 444,434
6.0
(3.1)
(3.1)
(29.8)
17.7
45.6
3.0
15.3
(2.3)
2.3
N.M.
2.0
(13.3)
(6.3)
(11.8)
N.M.
N.M.
N.M.
N.M.
3.9
13.4
(2.8)
N.M.
(3.9)
Total non-interest income as a
percentage of total revenue
N.M. Not Meaningful.
35.0%
34.7%
33.5%
38.6%
38.8%
Fees and Service Charges Fees and service charges totaled $145.0 million for 2015, compared with $154.4 million
and $166.6 million for 2014 and 2013, respectively. Fees and service charges represented 65.6% of banking fee
revenue for 2015, compared with 67.7% and 69.1% for 2014 and 2013, respectively. The decreases in both periods
were primarily due to consumer behavior changes, including customers maintaining higher average checking account
balances.
Card Revenue Card revenue, primarily interchange fees charged to retailers, totaled $54.4 million for 2015, compared
with $51.3 million and $51.9 million for 2014 and 2013, respectively. Card revenue represented 24.6% of banking fee
revenue for 2015, compared with 22.5% and 21.5% for 2014 and 2013, respectively. The increase in 2015 was primarily
due to increased transaction volume. The decrease in 2014 was primarily due to fewer checking accounts with debit
cards. TCF is the 17th largest issuer of Visa® consumer debit cards and the 17th largest issuer of Visa small business
debit cards in the United States, based on payment volume for the three months ended September 30, 2015, as
provided by Visa.
Gains on Sales of Auto Loans, Net In 2015, TCF recognized net gains of $32.2 million, excluding subsequent
adjustments, on the recorded investment of $1.4 billion in auto loans sold, including accrued interest. In 2014, TCF
recognized net gains of $44.7 million, excluding subsequent adjustments, on the recorded investment of $1.3 billion
in auto loans sold, including accrued interest. In 2013, TCF recognized net gains of $29.7 million on the recorded
investment of $798.3 million in auto loans sold, including accrued interest. The decrease in net gains in 2015 was
primarily due to a stronger competitive environment and an increase in transaction costs, partially offset by an increase
in auto loans sold 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 the net gains on sales of auto loans are amounts related to the
execution of securitizations. During 2015 and 2014, TCF transferred the recorded investments of $1.1 billion and
$258.6 million, respectively, in consumer auto loans, including accrued interest, with servicing retained, to trusts in
securitization transactions, and recognized gains of $25.5 million and $7.4 million, respectively, excluding subsequent
adjustments. There were no securitization transactions in 2013. See Note 5, Loans and Leases of Notes to Consolidated
Financial Statements for additional information.
28
Gains on Sales of Consumer Real Estate Loans, Net In 2015, TCF recognized net gains of $39.8 million, excluding
subsequent adjustments and valuation adjustments while held for sale, on the recorded investment of $1.3 billion in
consumer real estate loans sold, including accrued interest. In 2014, TCF recognized net gains of $34.1 million,
excluding subsequent adjustments and valuation adjustments while held for sale, on the recorded investment of
$1.4 billion in consumer real estate loans sold, including accrued interest. In 2013, TCF recognized net gains of
$21.7 million on the recorded investment of $766.3 million in consumer real estate loans sold, including accrued
interest. Included in 2014 were loan balances of $405.9 million related to the TDR loan sale, which resulted in a net
loss of $4.8 million. TCF has two consumer real estate loan sale programs; one that sells nationally originated consumer
real estate junior lien loans and the other that originates first mortgage lien loans in our primary banking markets and
sells the loans through a correspondent relationship. Included in the consumer real estate recognized net gains was
$6.4 million and $0.9 million, excluding subsequent adjustments and valuation adjustments while held for sale, on the
recorded investments of $289.8 million and $39.2 million in first mortgage lien loans sold related to the correspondent
lending program, including accrued interest, for 2015 and 2014, respectively. There were no sales of correspondent
lending loans in 2013. See Note 5, Loans and Leases of Notes to Consolidated Financial Statements for additional
information.
Servicing Fee Income Servicing fee income totaled $31.2 million for 2015, compared with $21.4 million and $13.4 million
for 2014 and 2013, respectively. The increases from both periods were primarily due to the cumulative effect of an
increase in the portfolio of auto and consumer real estate loans sold with servicing retained by TCF. Average loans
and leases serviced for others was $3.9 billion for 2015, compared with $2.9 billion and $1.7 billion for 2014 and 2013,
respectively.
Leasing and Equipment Finance Leasing and equipment finance income totaled $108.1 million for 2015, compared
with $93.8 million and $90.9 million for 2014 and 2013, respectively. The increases in both periods were primarily due
to higher operating lease revenue.
Non-interest Expense Non-interest expense totaled $894.7 million for 2015, compared with $871.8 million and
$845.3 million for 2014 and 2013, respectively. Non-interest expense increased $23.0 million, or 2.6%, in 2015 and
increased $26.5 million, or 3.1%, in 2014. The following table presents the components of non-interest expense.
Year Ended December 31,
Compound Annual
Growth Rate
1-Year
5-Year
(Dollars in thousands)
2015
2014
2013
2012
2011
2015/2014
2015/2010
Compensation and employee benefits
$ 457,743
$ 452,942
$ 429,188
$ 393,841
$ 348,792
Occupancy and equipment
144,962
139,023
134,694
130,792
126,437
FDIC insurance
Advertising and marketing
Other
Subtotal
Operating lease depreciation
Loss on termination of debt
Branch realignment
Foreclosed real estate and
repossessed assets, net
Other credit costs, net
20,262
22,782
186,211
831,960
39,409
—
—
25,123
22,943
179,904
819,935
27,152
—
—
32,066
21,477
167,777
785,202
24,500
30,425
25,241
163,897
744,196
25,378
—
550,735
8,869
—
28,747
32,925
145,489
682,390
30,007
—
—
23,193
24,567
185
123
27,950
(1,252)
41,358
887
49,238
2,816
Total non-interest expense
$ 894,747
$ 871,777
$ 845,269
$1,362,554
$ 764,451
1.1%
4.3
(19.3)
(0.7)
3.5
1.5
45.1
—
—
(5.6)
50.4
2.6
5.8%
2.8
(3.0)
(5.6)
4.9
4.3
1.2
—
—
(10.5)
(50.2)
3.4
Compensation and Employee Benefits Compensation and employee benefits expense totaled $457.7 million for 2015,
compared with $452.9 million and $429.2 million for 2014 and 2013, respectively. The increase in 2015 was primarily
due to the increased staff levels to support the growth of auto finance and further build-out of the risk management
function, partially offset by non-recurring items, including the annual pension plan valuation adjustment resulting from
an increase to the discount rate. 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.
29
FDIC Insurance Federal Deposit Insurance Corporation ("FDIC") insurance expense totaled $20.3 million for 2015,
compared with $25.1 million and $32.1 million for 2014 and 2013, respectively. The decrease in 2015 was due to a
lower assessment rate primarily as a result of the TDR loan sale and improved credit metrics. The decrease in 2014
was primarily due to a lower assessment rate due to overall improving credit metrics inclusive of the TDR loan sale
and a non-recurring assessment rate catch-up.
Other Non-interest Expense Other non-interest expense totaled $186.2 million for 2015, compared with $179.9 million
and $167.8 million for 2014 and 2013, respectively. The increases in both periods were primarily due to increased loan
and lease processing expense due to increases in loan originations. See Note 21, Other Expense of Notes to
Consolidated Financial Statements for additional information.
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.
Foreclosed Real Estate and Repossessed Assets, Net Foreclosed real estate and repossessed assets expense, net
totaled $23.2 million for 2015, compared with $24.6 million and $28.0 million for 2014 and 2013, respectively. The
decrease in 2015 was primarily due to lower write-downs on existing foreclosed commercial properties. 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.
Income Taxes Income tax expense was 34.6% of income before income tax expense for 2015, compared with 35.5%
and 34.7% for 2014 and 2013, respectively. The lower effective income tax rate for 2015 compared with 2014 was
primarily due to increased investments in tax exempt securities. The higher effective income tax rate for 2014 compared
with 2013 was primarily due to proportionately smaller foreign tax effects.
Consolidated Financial Condition Analysis
Securities Available for Sale and Securities Held to Maturity TCF's securities available for sale portfolio consists
primarily of fixed-rate mortgage-backed securities issued by the Federal National Mortgage Association ("Fannie Mae")
and obligations of states and political subdivisions. TCF's securities held to maturity portfolio consists primarily of fixed-
rate mortgage-backed securities issued by Fannie Mae. 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.
30
The amortized cost, fair value and yield of securities available for sale and securities held to maturity by final contractual
maturity at December 31, 2015 and 2014 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. Yields on securities are presented on a fully tax-equivalent basis.
At December 31,
2015
2014
(Dollars in thousands)
Amortized Cost
Fair Value
Securities available for sale:
Mortgage-backed securities:
Due in one year or less
$
Due in 1-5 years
Due in 5-10 years
Due after 10 years
Obligations of states and political
subdivisions:
Due in 5-10 years
Due after 10 years
1
$
38
70,338
557,178
198,300
63,889
Total securities available for sale $
889,744
$
1
38
70,350
551,575
202,161
64,760
888,885
Tax-
equivalent
Yield
Amortized Cost
Fair Value
Tax-
equivalent
Yield
9.00% $
2.65
1.93
2.46
3.19
3.40
2.65
4
$
76
86,806
374,744
4
76
87,594
375,620
—
—
—
—
$
461,630
$
463,294
11.63%
4.53
1.93
2.78
—
—
2.62
Securities held to maturity:
Mortgage-backed securities:
Due after 10 years
Other securities:
Due in one year or less
Due in 1-5 years
Due in 5-10 years
$
198,520
$
203,553
2.64% $
211,054
$
218,933
2.64%
Total securities held to maturity
$
201,920
$
206,953
100
1,900
1,400
100
1,900
1,400
2.00
2.63
3.36
2.64
500
2,500
400
500
2,500
400
$
214,454
$
222,333
2.00
3.08
3.00
2.64
Loans and Leases The following tables set forth information about loans and leases held in TCF's portfolio.
At December 31,
Compound Annual
Growth Rate
1-Year
5-Year
2015
2014
2013
2012
2011
2015/2014
2015/2010
(Dollars in thousands)
Consumer real estate:
First mortgage lien
$ 2,624,956
$ 3,139,152
$ 3,766,421
$ 4,239,524
$ 4,742,423
(16.4)%
(11.7)%
Junior lien
2,839,316
2,543,212
2,572,905
2,434,977
2,152,868
Total consumer real estate
5,464,272
5,682,364
6,339,326
6,674,501
6,895,291
Commercial:
Commercial real estate
2,593,429
2,624,255
2,743,697
3,080,942
3,198,698
Commercial business
Total commercial
552,403
533,410
404,655
324,293
250,794
3,145,832
3,157,665
3,148,352
3,405,235
3,449,492
Leasing and equipment finance
4,012,248
3,745,322
3,428,755
3,198,017
3,142,259
Inventory finance
Auto finance
Other
2,146,754
1,877,090
1,664,377
1,567,214
624,700
2,647,596
1,915,061
1,239,386
19,297
24,144
26,743
552,833
27,924
3,628
34,885
Total loans and leases
$ 17,435,999
$ 16,401,646
$ 15,846,939
$ 15,425,724
$ 14,150,255
N.M. Not Meaningful.
11.6
(3.8)
(1.2)
3.6
(0.4)
7.1
14.4
38.3
(20.1)
6.3
4.6
(5.3)
(4.9)
11.7
(2.9)
4.9
22.1
N.M.
(13.2)
3.3
31
(In thousands)
Geographic Distribution:
Minnesota
Illinois
California
Michigan
Wisconsin
Texas
Colorado
Florida
Canada
New York
Pennsylvania
Ohio
Georgia
New Jersey
Arizona
North Carolina
Washington
Massachusetts
Virginia
Indiana
Tennessee
Other
Total
Consumer
Real Estate
Commercial
Leasing and
Equipment
Finance
Inventory
Finance
Auto
Finance
Other
Total
At December 31, 2015
$ 1,555,919
$
797,109
$
107,454
$
73,817
$
53,856
$
6,668
$
2,594,823
1,271,024
885,462
489,480
271,682
—
337,167
50,498
—
23,915
27,259
6,031
36,301
41,862
86,858
1,485
107,845
40,305
31,600
22,003
1,830
479,220
47,647
472,204
467,451
41,573
189,664
60,499
—
15,069
497
66,326
45,514
4,535
20,662
17,231
10,333
18,538
2,688
49,166
46,564
161,988
554,991
126,051
61,088
359,011
66,499
197,571
1,073
245,194
156,445
156,533
99,573
150,203
105,748
135,382
56,200
114,595
86,994
77,228
67,797
48,829
63,826
85,980
74,144
149,060
21,632
85,919
517,032
67,349
63,012
61,891
44,818
22,597
16,639
49,222
25,251
17,238
32,918
39,523
41,190
107,531
448,292
51,344
26,195
215,814
49,998
142,517
—
114,927
113,480
64,654
94,935
89,479
72,852
83,508
40,253
44,620
71,727
36,670
54,979
4,335
27
2,951
877
5
3,984
48
—
51
57
—
—
—
183
39
4
1
1
2
2
2,072,927
2,000,245
1,228,010
901,437
765,463
668,944
537,052
518,105
466,505
360,750
355,435
321,141
308,676
302,942
286,867
239,886
235,297
225,928
224,592
212,362
175,746
293,342
924,630
544,867
669,965
62
2,608,612
$ 5,464,272
$
3,145,832
$ 4,012,248
$ 2,146,754
$ 2,647,596
$
19,297
$ 17,435,999
Loans and leases outstanding at December 31, 2015, are shown by contractual maturity in the following table.
(In thousands)
Amounts due:
Within 1 year
1 to 5 years
Over 5 years
Total after 1 year
Total
Amounts due after 1 year:
Consumer
Real Estate
Commercial
Leasing and
Equipment
Finance
Inventory
Finance
Auto
Finance
Other
Total
At December 31, 2015(1)
$
123,528
$
509,696
$ 1,348,225
$ 2,146,754
$ 557,100
$ 10,146
$ 4,695,449
584,204
2,161,789
2,551,239
4,756,540
474,347
112,784
5,340,744
2,636,136
2,664,023
—
—
—
1,951,089
139,407
2,090,496
1,551
7,600
9,151
7,249,872
5,490,678
12,740,550
$ 5,464,272
$ 3,145,832
$ 4,012,248
$ 2,146,754
$ 2,647,596
$ 19,297
$ 17,435,999
Fixed-rate loans and leases
$ 2,369,377
$ 1,090,063
$ 2,648,797
$
— $ 2,090,496
$ 9,038
$ 8,207,771
Variable- and adjustable-rate loans
2,971,367
1,546,073
15,226
—
—
113
4,532,779
Total after 1 year
$ 5,340,744
$ 2,636,136
$ 2,664,023
$
— $ 2,090,496
$ 9,151
$ 12,740,550
(1) 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.
32
Consumer Real Estate TCF's consumer real estate portfolio represented 31.3% of TCF's total loan and lease portfolio
at December 31, 2015, compared with 34.6% at December 31, 2014. TCF's first mortgage lien loans represented
15.0% and 19.1% of TCF's total loan and lease portfolio at December 31, 2015 and 2014, respectively. TCF's consumer
real estate junior lien loans represented 16.3% and 15.5% of TCF's total loan and lease portfolio at December 31, 2015
and 2014, respectively. The consumer real estate portfolio consisted of $2.6 billion of first mortgage lien loans and
$2.8 billion of consumer real estate junior lien loans at December 31, 2015, a decrease of 16.4% and an increase of
11.6%, respectively, from $3.1 billion and $2.5 billion, respectively, at December 31, 2014. The decrease in first
mortgage lien loans was primarily due to run-off and the increase in consumer real estate junior lien loans was primarily
due to an increase in loan originations. TCF's consumer real estate portfolio is secured by mortgages on residential
real estate. At December 31, 2015, 48.0% of loan balances were secured by first mortgages with an average loan size
of $102 thousand and 52.0% were secured by consumer real estate junior lien mortgages with an average loan size
of $45 thousand. At December 31, 2015, 54.6% of the consumer real estate portfolio carried a variable interest rate
tied to the prime rate, compared with 47.7% at December 31, 2014.
At December 31, 2015, 51.0% of TCF's consumer real estate loans consisted of closed-end loans, compared with
59.1% at December 31, 2014. TCF's closed-end consumer real estate loans require payments of principal and interest
over a fixed term. At December 31, 2015 and 2014, 74.0% and 82.8%, respectively, of TCF's consumer real estate
loans were in TCF's primary banking markets. The average Fair Isaac Corporation ("FICO®") credit score at loan
origination for the consumer real estate lending portfolio was 734 at both December 31, 2015 and 2014. As part of
TCF's credit risk monitoring, TCF obtains updated FICO score information quarterly. The average updated FICO score
for the consumer real estate lending portfolio was 731 at December 31, 2015 and 730 at December 31, 2014.
At December 31, 2015, outstanding balances on home equity lines of credit were $2.7 billion, up from $2.3 billion at
December 31, 2014. Included in these lines of credit are $2.5 billion and $2.1 billion of consumer real estate junior lien
home equity lines of credit ("HELOCs") as of December 31, 2015 and 2014, respectively. At December 31, 2015 and
2014, $1.8 billion and $1.3 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 interest-only draw period
and will not convert to amortizing loans until 2021 or later. At December 31, 2015 and 2014, $664.5 million and
$816.0 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, 2015, 18.2% of
these loans will mature prior to 2021. Outstanding balances on consumer real estate lines of credit were 68.0% of total
lines of credit in 2015, compared to 67.2% in 2014.
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 at origination. TCF also has not originated consumer real estate loans with multiple payment
options or loans with "teaser" interest rates. At December 31, 2015, 57.6% of the consumer real estate loan balance
had been originated since January 1, 2009 with net charge-offs of 0.04% in 2015. TCF's consumer real estate portfolio
is subject to the risk of falling home values and to the general economic environment, particularly unemployment.
Commercial Real Estate and Business Lending TCF's commercial portfolio represented 18.0% of TCF's total loan
and lease portfolio at December 31, 2015, compared with 19.3% at December 31, 2014. The commercial real estate
and business lending portfolio consisted of $2.6 billion of commercial real estate loans and $552.4 million of commercial
business loans at December 31, 2015, a decrease of 1.2% and an increase of 3.6%, respectively, from $2.6 billion
and $533.4 million, respectively, at December 31, 2014. The increase in commercial business loans was primarily due
to an increase in loan originations. At December 31, 2015, 84.1% of TCF's commercial real estate loans outstanding
were secured by properties located in its primary banking markets, compared with 88.3% at December 31, 2014. While
commercial real estate collateral is generally located in TCF's primary banking markets, commercial real estate lending
follows its strong, proven sponsors into other markets. With an emphasis on secured lending, 99.9% of TCF's total
commercial loans were secured either by properties or other business assets at both December 31, 2015 and 2014.
Variable and adjustable-rate loans represented 67.2% of total commercial loans outstanding at December 31, 2015,
compared with 58.3% at December 31, 2014. The increase in variable and adjustable-rate loans as a percentage of
total commercial loans was primarily due to customers shifting from higher yielding fixed-rate loans to lower yielding
variable-rate loans.
33
Total
958,626
299,354
377,967
254,351
373,178
140,712
147,292
72,775
The following table summarizes TCF's commercial real estate loan portfolio by property and loan type.
(In thousands)
Permanent
2015
Construction
and
Development
At December 31,
Total
Permanent
2014
Construction
and
Development
Multi-family housing
$
770,325
$
203,518
$
973,843
$
816,931
$
141,695
$
Warehouse/industrial buildings
Office buildings
Health care facilities
Retail services(1)
Self-storage
Hotels and motels
Other
Total
339,160
316,326
290,418
264,253
141,844
112,386
32,506
28,462
12,615
35,610
4,189
20,215
6,666
14,936
367,622
328,941
326,028
268,442
162,059
119,052
47,442
290,157
372,673
229,175
364,074
125,704
139,793
43,637
9,197
5,294
25,176
9,104
15,008
7,499
29,138
$
2,267,218
$
326,211
$
2,593,429
$
2,382,144
$
242,111
$
2,624,255
(1) Primarily retail strip shopping centers and malls, convenience stores, supermarkets, restaurants and automobile related businesses.
Leasing and Equipment Finance TCF's leasing and equipment finance portfolio represented 23.0% of TCF's total loan
and lease portfolio at December 31, 2015, compared with 22.8% at December 31, 2014. The leasing and equipment
finance portfolio consisted of $2.1 billion of leases and $1.9 billion of loans at December 31, 2015, increases of 8.5%
and 5.7%, respectively, from $1.9 billion of leases and $1.8 billion of loans at December 31, 2014. The uninstalled
backlog of approved transactions was $446.3 million at December 31, 2015, compared with $418.0 million at
December 31, 2014. The average loan and lease size was $76 thousand at December 31, 2015, compared with
$74 thousand at December 31, 2014. 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, Summary of Significant
Accounting Policies of Notes to Consolidated Financial Statements, for information on lease accounting.
At December 31, 2015 and 2014, $126.0 million and $92.9 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 below 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, 2015, lease residuals totaled $118.9 million,
or 9.9% of original equipment value, including $11.6 million related to non-recourse sales, compared with $109.8 million,
or 10.1% of original equipment value, including $14.2 million related to non-recourse sales at December 31, 2014.
34
The following table summarizes TCF's leasing and equipment finance portfolio by equipment type.
(Dollars in thousands)
Equipment Type:
Specialty vehicles
Construction
Golf cart and turf
Medical
Manufacturing
Technology and data processing
Furniture and fixtures
Trucks and trailers
Agricultural
Other
Total
At December 31,
2015
2014
Balance
Percent
of Total
Balance
Percent
of Total
$
1,110,836
27.7 % $
1,007,518
26.9 %
447,502
394,939
355,326
318,750
304,845
296,823
263,512
151,894
367,821
11.1
9.8
8.9
7.9
7.6
7.4
6.6
3.8
9.2
429,123
344,979
387,514
365,176
262,146
252,439
218,664
127,898
349,865
11.5
9.2
10.3
9.8
7.0
6.7
5.8
3.4
9.4
$
4,012,248
100.0 % $
3,745,322
100.0 %
Inventory Finance The inventory finance loan portfolio represented 12.3% of TCF's total loan and lease portfolio at
December 31, 2015, compared with 11.4% at December 31, 2014. Inventory finance loans totaled $2.1 billion at
December 31, 2015, an increase of 14.4% from $1.9 billion at December 31, 2014. The increase was primarily due to
an increase within lawn and garden, combined with growth in the powersports segment as our customers continue to
experience growth in their businesses. The inventory finance network included more than 10,500 active dealers at
December 31, 2015, compared with more than 9,600 active dealers at December 31, 2014. Inventory finance
originations increased to $5.8 billion in 2015 compared to $5.5 billion in 2014.
The following table summarizes TCF's inventory finance portfolio by marketing segment.
(Dollars in thousands)
Marketing Segment:
Powersports
Lawn and garden
Other
Total
At December 31,
2015
2014
Balance
Percent
of Total
Balance
Percent
of Total
$
1,038,741
48.4% $
966,504
487,541
620,472
22.7
28.9
348,760
561,826
51.5%
18.6
29.9
$
2,146,754
100.0% $
1,877,090
100.0%
Auto Finance TCF's auto finance loan portfolio represented 15.2% of TCF's total loan and lease portfolio at
December 31, 2015, compared with 11.7% at December 31, 2014. Auto finance loans totaled $2.6 billion at
December 31, 2015, an increase of 38.3% from $1.9 billion at December 31, 2014. The increase was due to continued
growth as TCF expands the number of active dealers in its network. The auto finance network included dealers in all
50 states and more than 11,800 active dealers at December 31, 2015, compared with more than 10,500 active dealers
at December 31, 2014. The auto finance portfolio consisted of 24.4% new car loans and 75.6% used car loans at
December 31, 2015, compared with 25.4% and 74.6%, respectively, at December 31, 2014. The average original FICO
score for the held for investment auto finance portfolio was 725 and 724 at December 31, 2015 and 2014, respectively.
35
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:
•
Loans that are over 60-days delinquent have a higher potential to become non-accrual and generally are a
leading indicator for future charge-off trends.
• 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.
• 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.
• 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-accrual or
result in a loss.
Included in Note 1, Summary of Significant Accounting Policies and in Note 6, Allowance for Loan and Lease Losses
and Credit Quality Information of Notes to Consolidated Financial Statements are disclosures of loans considered to
be "impaired" for accounting purposes. Impairment is generally based upon the present value of the expected future
cash flows discounted at the loan's initial effective interest rate 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 include non-accrual
commercial loans, non-accrual equipment finance loans, non-accrual inventory finance loans, as well as all 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, Allowance for Loan and Lease Losses and Credit Quality Information of Notes to
Consolidated Financial Statements for additional information.
(Dollars in thousands)
Consumer real estate:
First mortgage lien
Junior lien
Total consumer real estate
Commercial
Leasing and equipment finance
Inventory finance
Auto finance
Other
Subtotal
Delinquencies in acquired portfolios
Total
$
$
At December 31,
2015
2014
60 Days or More
Delinquent and
Accruing
Percentage of
Portfolio
60 Days or More
Delinquent and
Accruing
Percentage of
Portfolio
0.46% $
0.05
0.23
—
0.06
0.01
0.14
0.13
0.11
0.41
0.11
$
13,370
2,091
15,461
—
2,549
75
4,263
—
22,348
88
22,436
0.49%
0.08
0.30
—
0.07
—
0.22
—
0.14
0.03
0.14
10,248
1,519
11,767
1
2,292
118
3,573
20
17,771
1,318
19,089
36
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
Auto finance
Other
Total
At December 31,
2015
2014
2013
2012
2011
$ 106,787
$ 111,933
$ 506,640
$ 478,262
$ 433,078
24,731
2,904
51
799
11
80,375
120,871
144,508
924
527
—
89
1,021
4,212
—
93
1,050
—
—
38
98,448
776
—
—
—
$ 135,283
$ 193,848
$ 632,837
$ 623,858
$ 532,302
Over 60-day delinquency as a percentage of total accruing TDR loans
1.54%
1.39%
1.28%
4.34%
5.69%
Accruing TDR loans at December 31, 2015 decreased $58.6 million, or 30.2%, from December 31, 2014, primarily
due to the improved credit quality and continued strong customer payment performance in the commercial portfolio.
TCF modifies loans through reductions in interest rates, extension of payment dates, term extensions or term extensions
with a 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 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 through reducing
the interest rate by an amount appropriate for the borrower's financial condition. 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. These loans may 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 60.0% of the original contractual interest due on
accruing consumer real estate TDR loans in 2015, yielding 4.1%, by modifying the loans to qualified customers instead
of foreclosing on the property.
Commercial 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, 2015,
77.9% of total commercial TDR loans were accruing and TCF recognized more than 88.0% of the original contractual
interest due on accruing commercial TDR loans in 2015. At December 31, 2015, collection of principal and interest
under the modified terms was reasonably assured on all accruing commercial TDR loans.
TCF previously utilized a multiple note structure as a workout alternative for certain commercial loans, which restructured
a troubled loan into two notes. When utilizing this multiple note structure, the first note was always classified as a TDR
loan. Under TCF policy, the first note was 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, 2015, two TDR loans restructured as multiple notes with a combined total
contractual balance of $11.3 million and a remaining book balance of $10.7 million are included in the preceding table.
See Note 6, Allowance for Loan and Lease Losses and Credit Quality Information of Notes to Consolidated Financial
Statements for additional information regarding TCF's loan modifications.
37
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
Total consumer real estate
Commercial:
Commercial real estate
Commercial business
Total commercial
Leasing and equipment finance
Inventory finance
Auto finance
Other
Total non-accrual loans and leases
Other real estate owned
2015
2014
2013
2012
2011
At December 31,
$ 124,156
$ 137,790
$ 180,811
$ 199,631
$ 129,114
44,113
168,269
35,481
173,271
38,222
219,033
35,269
234,900
20,257
149,371
6,737
3,588
10,325
11,262
1,098
9,509
3
24,554
481
25,035
12,670
2,082
3,676
—
36,178
4,361
40,539
14,041
2,529
470
410
200,466
49,982
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
Total non-accrual loans and leases and other real estate owned $ 250,448
$ 282,384
$ 345,896
$ 476,435
$ 433,209
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
1.15%
1.32%
1.75%
2.46%
2.11%
1.43
1.71
2.17
3.07
3.03
77.85
75.75
91.05
70.40
85.71
Non-accrual loans and leases at December 31, 2015 decreased $16.3 million, or 7.5%, from December 31, 2014,
primarily due to improved credit quality trends and continued efforts to actively work out problem loans in the commercial
portfolio. See Note 1, Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements for
additional information.
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,
2015
2014
2013
2012
2011
$
79,055
$
87,685
$ 134,487
$
173,587
$
46,728
7,016
641
172
8,440
—
11,265
1,953
37
3,676
—
26,209
2,447
—
470
1
92,311
2,794
—
101
—
83,154
979
—
—
—
$
95,324
$ 104,616
$ 163,614
$
268,793
$
130,861
38
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. Delinquent consumer real estate 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, or foreclosure, charge-off
or collection action has been initiated. 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. Regardless of whether contractual
principal and interest payments are well secured, equipment finance loans that are 90 or more days past due are
placed on non-accrual status. Auto loans will be charged-off in full no later than 120 days past due, unless repossession
is reasonably assured and in process, in which case the loan would be charged-off to the fair value of the collateral,
less estimated selling costs. Auto loans in bankruptcy status may be placed on non-accrual status or partially charged-
off to the fair value of the collateral prior to 120 days past due based on specific criterion. TDR loans are placed on
non-accrual status prior to the past due thresholds outlined above if repayment under the modified terms is not likely
after performing a well-documented credit analysis. 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.
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 a well-documented credit analysis indicates full repayment of the remaining
pre-discharged contractual principal and interest is likely. 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.
Changes in the amount of non-accrual loans and leases for the years ended December 31, 2015 and 2014 are
summarized in the following tables. The decrease in non-accrual loans and leases was primarily due to improved credit
quality in the commercial and consumer real estate portfolios.
(In thousands)
Consumer
Real Estate
Commercial
Leasing and
Equipment
Finance
Inventory
Finance
Auto
Finance
Other
Total
Balance, beginning of period
$
173,271
$
25,035
$
12,670
$
2,082
$
3,676
$
— $
216,734
At or For the Year Ended December 31, 2015
Additions
(Charge-offs) recoveries
Transfers to other assets
Return to accrual status
Payments received
Sales
Other, net
131,585
(25,409)
(59,203)
(25,981)
(26,368)
—
374
13,723
(5,247)
(245)
(2,827)
(19,644)
(4,083)
3,613
16,797
12,242
11,003
(5,483)
(2,648)
(2,352)
(7,722)
—
—
(1,271)
(1,482)
(6,278)
(4,976)
—
781
(1,667)
(953)
—
—
—
(2,550)
(81)
Balance, end of period
$
168,269
$
10,325
$
11,262
$
1,098
$
9,509
$
35
49
—
—
—
—
3
185,385
(39,028)
(64,531)
(37,438)
(61,341)
(4,083)
4,768
$
200,466
(In thousands)
Consumer
Real Estate
Commercial
Leasing and
Equipment
Finance
Inventory
Finance
Auto
Finance
Other
Total
Balance, beginning of period
$
219,033
$
40,539
$
14,041
$
2,529
$
470
$
410
$
277,022
At or For the Year Ended December 31, 2014
Additions
(Charge-offs) recoveries
Transfers to other assets
Return to accrual status
Payments received
Sales
Other, net
184,385
(55,107)
(62,281)
(51,269)
(20,757)
(41,458)
725
29,653
(8,491)
(3,717)
—
(33,401)
(607)
1,059
18,380
(5,040)
(3,027)
(1,683)
(9,549)
—
(452)
7,107
4,280
(515)
(306)
(2,852)
(3,398)
—
(483)
(100)
(135)
—
(839)
—
—
92
(91)
(12)
—
(209)
(189)
(1)
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
39
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.
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-classified
Accruing Classified
At December 31, 2015
Total
Accruing
Total Non-
accrual
Total Loans
and Leases
Consumer real estate
$ 5,210,975
$
62,722
$
22,306
$
— $ 5,296,003
$ 168,269
$ 5,464,272
Commercial
3,035,320
65,382
34,805
Leasing and equipment
finance
Inventory finance
Auto finance
Other
3,969,191
1,887,505
2,632,589
19,274
19,806
138,945
—
—
11,989
119,206
5,498
20
—
—
—
—
—
3,135,507
10,325
3,145,832
4,000,986
2,145,656
2,638,087
19,294
11,262
4,012,248
1,098
9,509
3
2,146,754
2,647,596
19,297
Total loans and leases
$16,754,854
$
286,855
$
193,824
$
— $17,235,533
$ 200,466
$17,435,999
Percent of total loans and
leases
96.1%
1.7%
1.1%
—%
98.9%
1.1%
100.0%
(Dollars in thousands)
Pass
Special Mention
Substandard
Doubtful
Total Accruing
Accruing Non-classified
Accruing Classified
At December 31, 2014
Total Non-
accrual
Total Loans
and Leases
Consumer real estate
$ 5,395,103
$
69,811
$
44,179
$
— $ 5,509,093
$ 173,271
$ 5,682,364
Commercial
3,033,992
46,935
51,703
Leasing and equipment
finance
Inventory finance
Auto finance
Other
3,704,565
1,661,701
1,906,740
24,136
16,539
90,413
—
8
11,548
122,894
4,645
—
—
—
—
—
—
3,132,630
25,035
3,157,665
3,732,652
1,875,008
1,911,385
24,144
12,670
2,082
3,676
—
3,745,322
1,877,090
1,915,061
24,144
Total loans and leases
$15,726,237
$
223,706
$
234,969
$
— $ 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%
The combined balance of accruing classified loans and leases and non-accrual loans and leases was $394.3 million
at December 31, 2015, a decrease of $57.4 million from December 31, 2014, primarily due to a decrease of
substandard and non-accrual loans in the commercial and consumer real estate portfolios due to improved credit
quality trends and continued efforts to actively work out problem loans in the commercial portfolio.
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, a portfolio's 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.
40
The Company considers the allowance for loan and lease losses of $156.1 million appropriate to cover losses incurred
in the loan and lease portfolios at December 31, 2015. 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 will not require
significant changes in the balance of the allowance for loan and lease losses due to subsequent evaluations of the
loan and lease portfolios, in light of factors then prevailing, including economic conditions, information obtained during
TCF's ongoing credit review process or regulatory requirements. Among other factors, an economic slowdown,
increasing levels of unemployment and/or a decline in collateral values may have an adverse impact on the current
adequacy of the allowance for loan and lease losses by increasing credit risk and the risk of potential loss.
The total allowance for loan and lease losses is generally available to absorb losses from any segment of the portfolio.
The allocation of TCF's allowance for loan and lease losses disclosed in the following table is subject to change based
on changes in the criteria used to evaluate the allowance and is not necessarily indicative of the trend of future losses
in any particular portfolio.
In conjunction with Note 6, Allowance for Loan and Lease Losses and Credit Quality Information of Notes to Consolidated
Financial Statements, the following table includes detailed information regarding TCF's allowance for loan and lease
losses.
Credit Loss Reserves
At December 31,
Credit Loss Reserves as a Percentage of
Portfolio
At December 31,
2015
2014
2013
2012
2011
2015
2014
2013
2012
2011
(Dollars in thousands)
Consumer real estate:
First mortgage lien
$ 36,888
$ 55,319
$ 133,009
$ 119,957
$ 115,740
1.41%
1.76%
3.53%
2.83%
2.44%
Junior lien
Consumer real estate
31,104
67,992
30,042
43,021
62,056
67,695
85,361
176,030
182,013
183,435
Commercial:
Commercial real estate
22,215
24,616
32,405
47,821
40,446
Commercial business
7,970
6,751
5,062
3,754
6,508
Total commercial
30,185
31,367
37,467
51,575
46,954
19,018
11,128
26,486
1,245
18,446
10,020
18,230
745
18,733
21,037
21,173
8,592
10,623
785
7,569
4,136
798
2,996
—
1,114
1.10
1.24
0.86
1.44
0.96
0.47
0.52
1.00
6.45
1.18
1.50
0.94
1.27
0.99
0.49
0.53
0.95
3.09
1.67
2.78
1.18
1.25
1.19
0.55
0.52
0.86
2.94
2.55
2.73
1.55
1.16
1.51
0.66
0.48
0.75
2.86
3.14
2.66
1.26
2.59
1.36
0.67
0.48
—
3.19
156,054
164,169
252,230
267,128
255,672
0.90
1.00
1.59
1.73
1.81
1,044
943
980
2,456
1,829
N.A.
N.A.
N.A.
N.A.
N.A.
$ 157,098
$ 165,112
$ 253,210
$ 269,584
$ 257,501
0.90
1.01
1.60
1.75
1.82
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.
At December 31, 2015, the allowance as a percent of total loans and leases decreased to 0.90%, compared with
1.00% at December 31, 2014. The decrease was driven primarily by reduced reserves in the consumer real estate
portfolio resulting from improved home values.
41
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
Total consumer real estate
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
Total recoveries
Net charge-offs
Provision for credit losses
Other(1)
Balance, end of period
Year Ended December 31,
2015
2014
2013
2012
2011
$
164,169
$
252,230
$
267,128
$
255,672
$
265,819
(19,448)
(14,239)
(33,687)
(5,225)
(24)
(5,249)
(7,631)
(2,501)
(18,386)
(7,093)
(74,547)
1,578
5,850
7,428
2,032
1,737
3,769
2,792
1,019
2,971
5,034
(43,632)
(19,494)
(63,126)
(8,646)
(11)
(8,657)
(7,316)
(1,653)
(11,856)
(8,359)
(60,363)
(37,145)
(97,508)
(28,287)
(657)
(28,944)
(7,277)
(1,141)
(5,305)
(9,115)
(100,967)
(149,290)
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
(101,595)
(83,190)
(184,785)
(34,642)
(6,194)
(40,836)
(15,248)
(1,838)
(1,164)
(10,239)
(254,110)
1,067
4,582
5,649
1,762
197
1,959
5,058
333
30
(94,724)
(62,130)
(156,854)
(32,890)
(9,843)
(42,733)
(16,984)
(1,044)
—
(12,680)
(230,295)
510
3,233
3,743
1,502
152
1,654
4,461
193
—
23,013
(51,534)
52,944
(9,525)
21,636
(79,331)
95,737
(104,467)
6,518
22,880
(126,410)
118,368
(6,856)
7,314
20,343
(233,767)
247,443
(2,220)
9,262
19,313
(210,982)
200,843
(8)
$
156,054
$
164,169
$
252,230
$
267,128
$
255,672
Net charge-offs as a percentage of average loans and
leases
0.30%
0.49%
0.81%
1.54%
1.45%
(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 2015, total net charge-offs decreased $27.8 million primarily due to a $30.0 million decrease in consumer real
estate net charge-offs and a $4.3 million decrease in commercial net charge-offs, partially offset by a $5.1 million
increase in auto finance net charge-offs. The decrease in net charge-offs in the consumer real estate portfolio was
primarily due to the improving economy, as incidents of default decreased and home values increased. The decrease
in net charge-offs in the commercial portfolio was primarily due to improved credit quality and continued efforts to
actively work out problem loans. The increase in net charge-offs in the auto finance portfolio was primarily due to
growth and maturation of the portfolio.
42
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
2015
2014
2013
2012
2011
At December 31,
$
42,912
$
44,932
$
47,637
$
69,599
$
7,070
49,982
7,969
20,718
65,650
3,525
21,237
68,874
3,505
27,379
96,978
3,510
87,792
47,106
134,898
4,758
Total other real estate owned and repossessed
and returned assets
$
57,951
$
69,175
$
72,379
$
100,488
$
139,656
(1)
Includes properties owned and foreclosed properties subject to redemption.
Total consumer real estate properties reported in other real estate owned included 297 owned properties and 113
foreclosed properties subject to redemption at December 31, 2015, compared with 277 owned properties and 146
foreclosed properties subject to redemption at December 31, 2014. The increase in owned properties from
December 31, 2014 resulted from the addition of 598 properties, partially offset by sales of 578 properties. The average
length of time of consumer real estate properties sold during 2015 and 2014 was approximately 5.7 months and 5.4
months, respectively, from the date the properties were listed for sale. Consumer real estate loans in process of
foreclosure were $44.5 million and $59.3 million at December 31, 2015 and 2014, respectively.
The changes in the amount of other real estate owned for the years ended December 31, 2015 and 2014 are
summarized in the following tables. The decrease in other real estate owned was primarily due to the decrease in
commercial properties as sales increased and transfers in decreased. Total sales of other real estate owned increased
by $5.9 million in 2015 compared with 2014. Total transfers into other real estate owned decreased by $4.4 million in
2015 compared with 2014.
(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, 2015
Consumer
Commercial
Total
44,932
$
20,718
$
58,339
(54,534)
(8,937)
3,112
246
(10,645)
(3,488)
239
42,912
$
7,070
$
At or For the Year Ended December 31, 2014
Consumer
Commercial
Total
47,637
$
21,237
$
59,268
(55,409)
(7,870)
1,306
3,717
(3,824)
(6,562)
6,150
44,932
$
20,718
$
65,650
58,585
(65,179)
(12,425)
3,351
49,982
68,874
62,985
(59,233)
(14,432)
7,456
65,650
$
$
$
$
Liquidity Management TCF manages its liquidity position to ensure that the funding needs of depositors and borrowers
are met promptly and in a cost-effective manner. Asset liquidity arises from the ability to convert assets to cash as well
as from the maturity of assets. Liability liquidity results from the ability of TCF to maintain a diverse set of funding
sources to promptly meet funding requirements.
TCF's Asset & Liability Committee ("ALCO") and the 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. See "Item
7A. Quantitative and Qualitative Disclosures about Market Risk" for more information.
43
TCF Bank had $538.7 million and $767.0 million of net liquidity qualifying interest-bearing deposits at the Federal
Reserve Bank at December 31, 2015 and 2014, respectively. Interest-bearing deposits held at the Federal Reserve
Bank and unencumbered securities were $1.3 billion and $1.4 billion at December 31, 2015 and 2014, respectively.
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. See "Item 7A. Quantitative and Qualitative Disclosures about Market Risk" for more information.
TCF Financial had cash and liquid investments of $69.5 million and $71.8 million at December 31, 2015 and 2014,
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 securitizations, 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 Federal Home Loan Bank ("FHLB") of Des Moines, institutional
sources under repurchase agreements and other sources. TCF had $2.4 billion of additional borrowing capacity at the
FHLB of Des Moines at December 31, 2015, as well as access to the Federal Reserve Discount Window. In addition,
TCF maintains a diversified set of unsecured and uncommitted funding sources, including access to overnight federal
funds purchased lines, brokered deposits and capital markets.
The primary source of funding for TCF Commercial Finance Canada, Inc. ("TCFCFC") is a line of credit with TCF Bank.
TCFCFC also 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, 2015 and 2014.
Deposits Deposits totaled $16.7 billion at December 31, 2015, an increase of $1.3 billion, or 8.2%, from
December 31, 2014, primarily due to special campaigns for certificates of deposit and money market accounts.
Checking, savings and certain money market deposits are an important source of low interest cost funds for TCF. The
average balance of these types of deposits was $10.0 billion for both 2015 and 2014. These deposits comprised 62.6%
of total average deposits for 2015, compared with 67.0% of total average deposits for 2014.
Certificates of deposit totaled $3.9 billion at December 31, 2015, compared with $3.0 billion at December 31, 2014.
Non-interest bearing checking accounts represented 19.1% of total deposits at December 31, 2015, compared with
18.3% at December 31, 2014. TCF's weighted-average rate for deposits, including non-interest bearing deposits, was
0.30% at December 31, 2015, compared with 0.26% at December 31, 2014. The increase was primarily due to
increased average rates resulting from promotions for certificates of deposit.
Borrowings Borrowings totaled $1.0 billion and $1.2 billion at December 31, 2015 and 2014, respectively. Historically,
TCF has borrowed primarily from the FHLB of Des Moines, institutional sources under repurchase agreements and
other sources.
On February 27, 2015, TCF Bank issued $150.0 million of subordinated notes due February 27, 2025 with a fixed-
rate coupon of 4.60% per annum. Simultaneously, TCF Bank entered into an interest rate swap agreement designated
as a fair value hedge. The effect of the interest rate swap is to effectively convert the fixed-rate on the subordinated
notes to a floating interest rate based on the three-month London InterBank Offered Rate ("LIBOR") plus a fixed number
of basis points on the notional amount.
See Note 10, Short-term Borrowings and Note 11, Long-term Borrowings of Notes to Consolidated Financial Statements
for additional information regarding TCF's borrowings.
44
Contractual Obligations and Commitments As discussed further in Note 7, Premises and Equipment; Note 9,
Deposits; Note 10, Short-term Borrowings; Note 11, Long-term Borrowings; and Note 17, Financial Instruments with
Off-Balance Sheet Risk of Notes to Consolidated Financial Statements, TCF has certain obligations and commitments
to make future payments under contracts. At December 31, 2015, the aggregate contractual obligations and
commitments were as follows.
(In thousands)
Contractual Obligations:
Certificates of deposit
Total borrowings
Payments Due by Period
Total
Less than
1 year
1-3
years
3-5
years
More than
5 years
$ 3,903,793
$ 2,770,362
$ 1,089,405
$
23,321
$
20,705
1,042,242
578,180
194,207
11,364
258,491
Annual rental commitments under non-cancelable operating
leases
Contractual interest payments(1)
Campus marketing agreements
Investment in low income housing affordable tax credits
Construction contracts and land purchase
commitments for future branch sites
184,238
164,553
32,628
22,311
29,885
55,914
2,946
9,746
60,146
40,571
5,656
12,565
5,267
5,267
—
31,598
28,902
5,748
—
—
62,609
39,166
18,278
—
—
Total
$ 5,355,032
$ 3,452,300
$ 1,402,550
$
100,933
$
399,249
(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
Total commitments to extend credit
Amount of Commitment - Expiration by Period
Total
Less than
1 year
1-3
years
3-5
years
More than
5 years
$ 1,402,088
$
23,900
$
122,927
$
81,658
$ 1,173,603
639,465
128,259
2,169,812
168,077
128,259
320,236
302,304
153,521
—
—
15,563
—
425,231
235,179
1,189,166
Standby letters of credit and guarantees on industrial
revenue bonds
Total
9,178
7,829
919
430
—
$ 2,178,990
$
328,065
$
426,150
$
235,609
$ 1,189,166
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 rights, which may also
include naming rights, with three campuses. TCF is obligated to make annual payments for the exclusive marketing
rights at these three 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 2019. 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.
45
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, common stock repurchases, 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 and TCF Bank manage their capital levels to exceed all regulatory capital requirements, which
were exceeded at December 31, 2015 and 2014. See Note 14, Regulatory Capital Requirements of Notes to
Consolidated Financial Statements.
Preferred Stock At December 31, 2015, 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)
(the "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, 2015, 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 (the "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, 2015 was $2.3 billion, or 11.1% of total assets, compared with $2.1 billion, or
11.0% of total assets, at December 31, 2014. Dividends to common stockholders on a per share basis totaled 7.5
cents for the quarter ended December 31, 2015, an increase of 50% from a per share basis of 5 cents for each of the
first three quarters of 2015 and each quarter of 2014. TCF's common dividend payout ratio for the quarters ended
December 31, 2015 and 2014 was 25.9% and 41.7%, respectively. TCF Financial's primary funding sources for
dividends are earnings and dividends received from TCF Bank.
At December 31, 2015, 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 before TCF could
repurchase any shares of its common stock.
Tangible common equity at December 31, 2015 was $1.8 billion, or 8.79% of total tangible assets, compared with
$1.6 billion, or 8.50% of total tangible assets, at December 31, 2014. Tangible common equity is not a financial measure
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. This non-GAAP financial measure is viewed by management as a useful indicator 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.
46
The following table includes reconciliations of the non-GAAP financial measures of tangible common equity and tangible
assets to the GAAP measures of total equity and total assets, respectively.
(Dollars in thousands)
2015
2014
2013
2012
2011
At December 31,
Computation of tangible common equity to
tangible assets:
Total equity
$
2,306,917
$
2,135,364
$
1,964,759
$
1,876,643
$
1,878,627
Less: Non-controlling interest in subsidiaries
16,001
13,715
11,791
13,270
10,494
Total TCF Financial Corporation stockholders'
equity
Less:
Preferred stock
Goodwill
Other intangibles(1)
2,290,916
2,121,649
1,952,968
1,863,373
1,868,133
263,240
225,640
3,126
263,240
225,640
4,641
263,240
225,640
6,326
263,240
225,640
8,674
—
225,640
7,134
Tangible common equity
$
1,798,910
$
1,628,128
$
1,457,762
$
1,365,819
$
1,635,359
Total assets
Less:
Goodwill
Other intangibles(1)
Tangible assets
$ 20,691,704
$ 19,394,611
$ 18,379,840
$ 18,225,917
$ 18,979,388
225,640
3,126
225,640
4,641
225,640
6,326
225,640
8,674
225,640
7,134
$ 20,462,938
$ 19,164,330
$ 18,147,874
$ 17,991,603
$ 18,746,614
Tangible common equity to tangible assets
8.79%
8.50%
8.03%
7.59%
8.72%
(1)
Includes non-mortgage servicing assets.
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 financing and income taxes. See Note 1, Summary of Significant Accounting Policies of
Notes to Consolidated Financial Statements for further discussion of critical accounting policies.
Recent Accounting Developments
In January 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU")
No. 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and
Financial Liabilities, which amends the classification and measurement of investments in equity securities, simplifies
the impairment analysis of equity investments without readily determinable fair values, requires separate presentation
of certain fair value changes for financial liabilities measured at fair value and eliminates certain disclosure requirements
associated with the fair value of financial instruments. The adoption of this ASU will be required on a prospective basis
with a cumulative-effect adjustment required beginning with TCF’s Quarterly Report on Form 10-Q for the quarter
ending March 31, 2018. With limited exceptions, early adoption is prohibited. Management is currently evaluating the
potential impact of this guidance on our consolidated financial statements.
In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of
Deferred Taxes, which requires deferred tax assets and deferred tax liabilities to be presented as noncurrent in a
classified balance sheet and eliminates the requirement to allocate a valuation allowance on a pro-rata basis between
gross current and noncurrent deferred tax assets. 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, 2017. Early
adoption is allowed. The adoption of this ASU will not have an impact on our consolidated financial statements.
In September 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805): Simplifying the Accounting
for Measurement-Period Adjustments, which amends the rules related to provisional amounts recognized at the
acquisition date of a business combination. 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, 2016. Early adoption is allowed. The
adoption of this ASU will not have a material impact on our consolidated financial statements.
47
In August 2015, the FASB issued ASU No. 2015-15, Interest-Imputation of Interest (Subtopic 835-30): Presentation
and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements, which amends
certain Securities and Exchange Commission content concerning the presentation and subsequent measurement of
debt issuance costs related to line-of-credit arrangements. This ASU became effective upon issuance and was adopted
in the third quarter of 2015. The adoption of this ASU did not have an impact on our consolidated financial statements.
In July 2015, the FASB issued ASU No. 2015-12, Plan Accounting: Defined Benefit Pension Plans (Topic 960), Defined
Contribution Pension Plans (Topic 962), Health and Welfare Benefit Plans (Topic 965): (Part I) Fully Benefit-Responsive
Investment Contracts, (Part II) Plan Investment Disclosures, (Part III) Measurement Date Practical Expedient
(consensuses of the FASB Emerging Issues Task Force), which simplifies the measurement, presentation and related
disclosures for fully benefit-responsive investment contracts and disclosures about plan investments and allows a plan
with a fiscal year end that does not coincide with the end of a calendar month to make an accounting policy election
to measure its investments and investment-related accounts using the month end closest to its fiscal year end. The
adoption of this ASU will be required on a retrospective basis for Part I and II and a prospective basis for Part III
beginning with the plan’s financial statements for the year ending December 31, 2016. Early adoption is allowed. The
adoption of this ASU will not have a material impact on our consolidated financial statements.
In May 2015, the FASB issued ASU No. 2015-07, Fair Value Measurement (Topic 820): Disclosures for Investments
in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent), which eliminates the requirement to
categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value
per share practical expedient pursuant to Accounting Standards Codification 820, Fair Value Measurement. The
adoption of this ASU will be required on a retrospective basis beginning with TCF's Quarterly Report on Form 10-Q
for the quarter ending March 31, 2016. Early adoption is allowed. The adoption of this ASU will not have a material
impact on our consolidated financial statements.
In April 2015, the FASB issued ASU No. 2015-05, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic
350-40); Customer's Accounting for Fees Paid in a Cloud Computing Arrangement, which updates guidance about
whether a cloud computing arrangement includes a software license and how to account for those software licenses.
The ASU was adopted by TCF on September 1, 2015. The adoption of this ASU did not have an impact on our
consolidated financial statements.
In April 2015, the FASB issued ASU No. 2015-04, Compensation-Retirement Benefits (Topic 715): Practical Expedient
for the Measurement Date of an Employer's Defined Benefit Obligation and Plan Assets, which allows employers with
fiscal year ends that do not coincide with a calendar month end to make an accounting policy election to measure
defined benefit plan assets and obligations as of the end of the month closest to their fiscal year ends. 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, 2016. Early adoption is allowed. The adoption of this ASU will not have a material impact on our
consolidated financial statements.
In April 2015, the FASB issued ASU No. 2015-03, Interest-Imputation of Interest (Subtopic 835-30): Simplifying the
Presentation of Debt Issuance Costs, which requires that debt issuance costs related to a recognized debt liability be
presented in the balance sheet as a direct deduction from that debt liability, consistent with the presentation of a debt
discount. The adoption of this ASU will be required on a retrospective basis beginning with TCF's Quarterly Report on
Form 10-Q for the quarter ending March 31, 2016. Early adoption is allowed. The adoption of this ASU will not have
a material impact on our consolidated financial statements.
In February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 820): Amendments to the Consolidation
Analysis, which changes the analysis that a reporting entity must perform to determine whether it should consolidate
certain types of legal entities. 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 will not have a material impact on our consolidated financial statements.
48
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. In August, 2015, the FASB issued ASU No.
2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which delays the effective
date of the new revenue recognition requirements in ASU No. 2014-09 by one year. The adoption of this ASU is now
required beginning with TCF’s Quarterly Report on Form 10-Q for the quarter ending March 31, 2018. Management
is currently evaluating the potential impact of this guidance 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.
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
Annual Report on Form 10-K 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; 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 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.
49
Legislative and Regulatory Requirements. New consumer protection and supervisory requirements and regulations,
including those resulting from action by the Consumer Financial Protection Bureau 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 offer 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 or 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; inability to timely close underperforming branches due to long-term lease obligations; 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 new or expanded
programs or 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; ability to attract and retain employees given competitive conditions
and the impact of consolidating facilities.
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 opening/origination, servicing
practices, fees or charges, employment practices, or checking account overdraft program "opt in" requirements; and
possible increases in indemnification obligations for certain litigation against Visa U.S.A.
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.
50
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
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 in the normal course of business, such as credit risk, liquidity risk, foreign
currency risk and operational risk, the Company considers interest rate risk to be one of its more significant market
risks.
Interest Rate Risk
TCF's 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. Since TCF does not hold a trading portfolio, the Company is not exposed to market risk from trading
activities. As such, the major sources of the Company's interest rate risk are timing differences in the maturity and
repricing characteristics of assets and liabilities, changes in the shape of the yield curve, changes in consumer 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 consumer 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 in managing its assets and liabilities is
to provide maximum 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") analysis. In addition, interest rate gap is reviewed to monitor asset
and liability repricing over various time periods.
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 repricings and events outside management's control, such as consumer
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, consumer 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 repricing.
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
$
2015
93.9
50.4
11.1% $
5.9
2014
73.6
39.4
8.9%
4.7
Impact on Net Interest Income
December 31,
51
As of December 31, 2015, 55.8% of TCF's loan and lease balances are expected to reprice, amortize or prepay in the
next 12 months and 62.6% of TCF's deposit balances are low cost or no cost deposits. The mix of assets repricing
compared with low cost or no cost deposits should enable TCF to increase net interest income as interest rates rise.
Management also uses EVE and interest rate gap analyses 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 is the difference between interest-earning assets and interest-bearing liabilities repricing 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.
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.
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 Risk Appetite Statement to manage the Company's
credit risk by setting (i) a desired balance between asset classes, (ii) concentration limits based on loan type, business
line and geographic region and (iii) maximum tolerances for credit performance. 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 also has credit risk in its securities portfolio related to obligations of states and political subdivisions.
The Company maintains a restrictive set of underwriting criteria and regularly monitors credit performance under the
direction and supervision of the TCF Bank Credit Committee to manage this risk. Credit risk in the remainder of the
securities portfolio is minimal. The remainder of the securities available for sale and securities held to maturity portfolios
as of December 31, 2015 consist primarily of fixed-rate mortgage-backed securities issued and guaranteed by Fannie
Mae. All investment related counterparties and transaction limits are reviewed and approved annually by both ALCO
and the TCF Bank Credit Committee.
52
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,
Regulatory Capital Requirements of Notes to Consolidated Financial Statements for further information.
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 Bank or
other highly liquid marketable securities that are not pledged and can be sold or pledged to various counterparties
under established agreements. At December 31, 2015, TCF had asset liquidity of $1.3 billion.
Deposits are TCF's primary source of funding. TCF also maintains secured sources of funding, which primarily include
$2.4 billion of additional 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 Bank consists primarily of consumer
and commercial real estate loans and mortgage-backed securities. 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 a diversified set
of unsecured and uncommitted funding sources, including access to overnight federal funds purchased lines, brokered
deposits and 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 TCFCFC 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 TCFCFC. 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,
Derivative Instruments of Notes to Consolidated Financial Statements for further information.
53
Item 8. Financial Statements and Supplementary Data
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, 2015 and 2014, 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, 2015. 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, 2015 and 2014, and the results
of their operations and their cash flows for each of the years in the three-year period ended December 31, 2015, 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, 2015, 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 29, 2016 expressed an unqualified opinion on
the effectiveness of the Company’s internal control over financial reporting.
Minneapolis, Minnesota
February 29, 2016
54
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:
At December 31,
2015
2014
$
889,337
$
1,115,250
70,537
201,920
888,885
157,625
2,624,956
2,839,316
5,464,272
3,145,832
4,012,248
2,146,754
2,647,596
19,297
17,435,999
(156,054)
17,279,945
445,934
225,640
531,881
85,492
214,454
463,294
132,266
3,139,152
2,543,212
5,682,364
3,157,665
3,745,322
1,877,090
1,915,061
24,144
16,401,646
(164,169)
16,237,477
436,361
225,640
484,377
$
$
20,691,704
$
19,394,611
5,690,559
$
4,717,457
2,408,180
3,903,793
16,719,989
5,381
1,036,652
1,042,033
622,765
18,384,787
5,195,243
5,212,320
1,993,130
3,049,189
15,449,882
4,425
1,232,065
1,236,490
572,875
17,259,247
Preferred stock, par value $0.01 per share, 30,000,000 shares authorized;
4,006,900 shares issued
263,240
263,240
Common stock, par value $0.01 per share, 280,000,000 shares authorized;
169,887,030 and 167,503,568 shares issued, respectively
Additional paid-in capital
Retained earnings, subject to certain restrictions
Accumulated other comprehensive income (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.
1,699
851,836
1,240,347
(15,346)
(50,860)
2,290,916
16,001
2,306,917
$
20,691,704
$
1,675
817,130
1,099,914
(10,910)
(49,400)
2,121,649
13,715
2,135,364
19,394,611
55
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
Advertising and marketing
Other
Subtotal
Operating lease depreciation
Branch realignment
Foreclosed real estate and repossessed assets, net
Other credit costs, net
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 attributable to TCF Financial Corporation
Preferred stock dividends
Net income available to common stockholders
Net income per common share:
Basic
Diluted
See accompanying notes to consolidated financial statements.
56
Year Ended December 31,
2015
2014
2013
$
$
$
$
832,736
15,648
5,486
38,060
891,930
48,226
23,316
71,542
820,388
52,944
767,444
144,999
54,387
21,544
220,930
30,580
40,964
31,229
102,773
108,129
10,463
442,295
(297)
441,998
457,743
144,962
20,262
22,782
186,211
831,960
39,409
—
23,193
185
894,747
314,695
108,872
205,823
8,700
197,123
19,388
177,735
1.07
1.07
$
820,436
$
11,994
5,281
36,518
874,229
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
22,943
179,904
819,935
27,152
—
24,567
123
871,777
281,382
99,766
181,616
7,429
174,187
19,388
154,799
0.95
0.94
$
$
$
$
$
$
819,501
18,074
277
26,688
864,540
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
21,477
167,777
785,202
24,500
8,869
27,950
(1,252)
845,269
243,045
84,345
158,700
7,032
151,668
19,065
132,603
0.82
0.82
Consolidated Statements of Comprehensive Income
(In thousands)
Year Ended December 31,
2015
2014
2013
Net income attributable to TCF Financial Corporation
$
197,123
$
174,187
$
151,668
Other comprehensive income (loss):
Securities available for sale:
Unrealized gains (losses) arising during the period
Reclassification of net (gains) losses to net income
Net investment hedges:
Unrealized gains (losses) arising during the period
Foreign currency translation adjustment:
Unrealized gains (losses) arising during the period
Recognized postretirement prior service cost:
Reclassification of net (gains) losses to net income
Income tax (expense) benefit
Total other comprehensive income (loss)
(2,523)
1,159
7,613
(8,304)
(46)
(2,335)
(4,436)
29,071
(76)
3,126
(3,704)
(47)
(12,067)
16,303
Comprehensive income
$
192,687
$
190,490
$
See accompanying notes to consolidated financial statements.
(61,177)
(860)
1,625
(1,979)
(46)
22,781
(39,656)
112,012
57
Consolidated Statements of Equity
(Dollars in thousands)
Preferred
Common
Number of
Shares Issued
Preferred
Stock
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Treasury
Stock
and Other
Non-
controlling
Interests
Total
Equity
Total
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
TCF Financial Corporation
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
151,668
7,032
158,700
(39,656)
—
(39,656)
—
(8,511)
(8,511)
(769)
—
174,187
7,429
181,616
16,303
—
16,303
—
(5,505)
(5,505)
Net income
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
14
—
—
—
—
—
—
(5)
20,165
(299)
(1)
(954)
—
—
—
10,398
(473)
769
151,668
—
—
—
(19,065)
(32,227)
—
—
25
—
—
—
—
(39,656)
—
—
—
—
—
—
—
—
—
—
Net income
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
(1)
(2)
—
—
—
—
—
—
—
—
—
(11)
23,068
(519)
(3,332)
9,025
740
1,316
7,202
174,187
—
—
(19,388)
(32,731)
—
—
—
—
—
—
—
—
—
16,303
—
—
—
—
—
—
—
—
—
—
—
Net income
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
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
828,304
1,588,111
(159,522)
(73,431)
—
200,000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
8
—
—
—
—
—
(8)
16
24,819
(2)
(685)
—
—
2
—
—
(1,166)
7,160
2,568
558
1,460
197,123
—
—
—
(19,388)
(37,302)
—
—
—
—
—
—
—
—
(4,436)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(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
(19,388)
(37,302)
—
24,835
(687)
(1,166)
7,160
2,570
558
—
—
—
—
—
—
—
—
—
(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
—
—
—
—
—
—
—
—
—
—
—
(19,388)
(37,302)
—
24,835
(687)
(1,166)
7,160
2,570
558
—
(7,202)
—
197,123
8,700
205,823
(4,436)
—
(4,436)
—
(6,414)
(6,414)
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
Balance, December 31, 2015
4,006,900 169,887,030 $ 263,240 $
1,699 $ 851,836 $ 1,240,347 $
(15,346) $
(50,860) $ 2,290,916 $
16,001 $ 2,306,917
See accompanying notes to consolidated financial statements.
58
(1,460)
—
Consolidated Statements of Cash Flows
(In thousands)
Cash flows from operating activities:
Year Ended December 31,
2014
2013
2015
Net income attributable to TCF Financial Corporation
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
$
197,123
$
174,187
$
151,668
Provision for credit losses
Depreciation and amortization
Proceeds from sales of loans and leases held for sale
Gains on sales of assets, net
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
Net cash provided by (used in) investing activities
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 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:
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
See accompanying notes to consolidated financial statements.
52,944
157,287
970,467
(80,471)
8,700
(965,712)
52,761
(29,439)
363,660
(1,968,134)
(1,087,438)
—
1,767,785
27,817
177
(510,675)
94,250
(138,000)
153,005
71,709
(53,594)
26,457
(1,616,641)
1,256,646
1,072
4,471,086
(4,666,595)
(6,414)
(19,388)
(37,302)
558
24,835
2,570
1,027,068
(225,913)
1,115,250
889,337
95,737
128,701
571,551
(90,736)
7,429
(626,172)
83,624
(32,571)
311,750
(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
(824,923)
997,661
(493)
2,808,612
(3,059,948)
(5,505)
(19,388)
(32,731)
1,316
23,083
740
713,347
200,174
915,076
$ 1,115,250
$
64,855
79,687
107,403
—
55,954
113,562
91,180
191,665
118,368
117,950
277,180
(61,265)
7,032
(353,982)
190,371
(36,288)
411,034
(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
(481,789)
370,356
2,299
744,348
(1,191,422)
(8,511)
(19,065)
(32,227)
(473)
20,179
—
(114,516)
(185,271)
1,100,347
915,076
61,453
(28,456)
112,463
9,342
$
$
$
$
59
Notes to Consolidated Financial Statements
Note 1. Summary of Significant Accounting Policies
Basis of Presentation TCF Financial Corporation (together with its direct and indirect subsidiaries, "we," "us," "our,"
"TCF" or the "Company"), a Delaware corporation, is a national bank holding company based in Wayzata, Minnesota.
References herein to "TCF Financial" or the "Holding Company" refer to TCF Financial Corporation on an
unconsolidated basis. Its principal subsidiary, TCF National Bank ("TCF Bank"), is headquartered in Sioux Falls, South
Dakota. 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,
along with non-accrual commercial loans, non-accrual equipment finance loans and non-accrual inventory finance
loans. TCF individually evaluates impairment on all impaired loans and all non-accrual leasing and equipment finance
leases and other consumer real estate, commercial and auto loans specifically identified for evaluation. All other loans
and leases are evaluated collectively for impairment.
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.
Impairment on commercial and inventory finance loans and on leasing and equipment finance loans and leases is
generally based upon the present value of the expected future cash flows discounted at the initial effective interest
rate of the loan or lease, unless the loan or lease is collateral dependent, in which case impairment is based upon
the fair value of collateral less estimated selling costs; however, if payment or satisfaction of the loan or lease 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.
60
Loans and leases are charged off to the extent they are deemed to be uncollectible. Charge-offs related to 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. Commercial loans, leasing and equipment
finance loans and leases 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. Auto loans will be
charged-off in full no later than 120 days past due, unless repossession is reasonably assured and in process, in
which case the loan would be charged-off to the fair value of the collateral, less estimated selling costs. Auto loans
in bankruptcy status may be partially charged-off to the fair value of the collateral prior to 120 days past due based
on specific criteria. Deposit account overdrafts are reported in other loans. Net losses on uncollectible overdrafts are
reported as net charge-offs in the allowance for loan and lease losses within 60 days from the date of overdraft. 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 may sell minimum lease payments primarily 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.
61
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 recorded in income tax expense in the Consolidated Statements of 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 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 in 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, or to the call date for securities with call features.
62
Loans and Leases Held for Sale Loans and leases designated as held for sale are generally 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. Certain other loans and leases held for sale are recorded
at fair value under the elected fair value option. 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 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 are 120 days
past due. Delinquent consumer real estate 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, or foreclosure, charge-off
or collection action has been initiated. TDR loans are placed on non-accrual status prior to the past due thresholds
outlined above if repayment under the modified terms is not likely after performing a well-documented credit analysis.
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 a well-documented credit analysis indicates full repayment of
the remaining pre-discharged contractual principal and interest is likely. Income on these loans is recognized on a
cash basis when there is sustained repayment performance for six or 12 consecutive months based on the credit
evaluation and the loan is not more than 60 days delinquent.
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.
63
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 non-interest expense within foreclosed real estate and repossessed assets, net
expense. Operating revenue from foreclosed property is included in other non-interest income. Other real estate
owned at December 31, 2015 and 2014, was $50.0 million and $65.7 million, respectively. Repossessed and returned
assets at December 31, 2015 and 2014, was $8.0 million and $3.5 million, respectively. Other real estate owned and
repossessed and returned assets were written down $12.8 million and $14.8 million, which was included in foreclosed
real estate and repossessed assets, net expense for the years ended December 31, 2015 and 2014, respectively.
Investments in Affordable Housing Limited Liability Entities Investments in affordable housing consist of
investments in limited liability entities that operate qualified affordable housing projects or that invest in other limited
liability entities formed to operate affordable housing projects. For investments entered into prior to January 1, 2015,
TCF generally utilized the effective yield method with the tax credits and amortization of the investment reflected in
the Consolidated Statements of Income as a reduction of income tax expense. For investments entered into subsequent
to January 1, 2015, TCF generally utilizes the proportional amortization method. 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. The tax credits and amortization of the investment are reflected in
the Consolidated Statements of Income as a reduction of income tax expense. TCF's investments in affordable housing
limited liability entities at December 31, 2015 and 2014 was $35.2 million and $7.0 million, respectively.
At December 31, 2015 and 2014, six and five, respectively, of these investments in affordable housing limited liability
entities were considered variable interest entities ("VIE"). These limited liability entities are not consolidated with TCF.
At December 31, 2015 and 2014, the carrying amount of the VIE investments was $34.7 million and $6.5 million,
respectively. The maximum exposure to loss on the VIE investments was $34.7 million and $6.5 million at
December 31, 2015 and 2014, respectively, however the limited liability entity provides various guarantees to TCF
including guaranteed minimum returns. These guarantees are backed by an investment grade credit-rated company,
which further reduces the risk of loss. In addition to the guarantees, the investments are supported by the performance
of the underlying real estate properties which also mitigates the risk of loss. Tax credits and other tax benefits of $3.9
million, $3.5 million and $5.1 million in 2015, 2014 and 2013, respectively, are recorded in income tax expense. At
December 31, 2015, the expected payments for unfunded affordable housing commitments was $22.3 million. The
commitments are expected to be fully funded by December 31, 2018.
Interest-only Strips TCF may sell fixed or variable-rate consumer real estate and consumer auto loans with or
without interest-only strips to third party financial institutions. For those transactions which achieve sale treatment,
the underlying loans are not recognized on TCF's Consolidated Statements of Financial Condition. The Company
sells these loans at par value and generally receives as part of the sale consideration 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 expected to
be received 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.
64
Intangible Assets All assets and liabilities acquired in purchase acquisitions, including 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 at least 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 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.
Deposit Account Overdrafts Deposit account overdrafts are reported in other loans. Net losses on uncollectible
overdrafts are reported as net charge-offs in the allowance for loan and lease losses within 60 days from the date of
overdraft. Uncollectible deposit fees are reversed against fees and service charges and a related reserve for
uncollectible deposit fees is maintained in other liabilities. Other deposit account losses are reported in other non-
interest expense.
Note 2. Cash and Due from Banks
At December 31, 2015 and 2014, TCF Bank was required by Federal Reserve regulations to maintain reserves of
$101.6 million and $98.7 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. Cash payments received on loans serviced for third parties
are generally held in separate accounts until remitted. TCF also retains cash balances for collateral on certain
borrowings, forward foreign exchange contracts, interest rate contracts and other contracts. TCF maintained restricted
cash totaling $58.3 million and $67.8 million at December 31, 2015 and 2014, respectively.
TCF had cash held in interest-bearing accounts of $609.5 million and $842.1 million at December 31, 2015 and 2014,
respectively.
65
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,
2015
2014
$
$
32,909
$
37,628
70,537
$
47,914
37,578
85,492
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. TCF's investments in FHLB of Des
Moines could be adversely impacted by the financial operations of the Federal Home Loan Banks and actions of their
regulator, the Federal Housing Finance Agency. The amount of Federal Reserve Bank stock that TCF Bank is required
to hold is based on TCF Bank's capital structure.
The yield on investments which have no stated contractual maturity was 4.41% and 4.25% at December 31, 2015 and
2014, respectively.
Note 4. Securities Available for Sale and Securities Held to Maturity
Securities consisted of the following.
At December 31,
2015
2014
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
$ 627,521
$
655
$
6,246
$ 621,930
$ 461,575
$
2,405
$
741
$ 463,239
(In thousands)
Securities available for sale:
Mortgage-backed securities:
U.S. Government sponsored
enterprises and federal
agencies
Other
34
—
262,189
4,732
—
—
34
266,921
55
—
—
—
—
—
55
—
Obligations of states and
political subdivisions
Total securities available for
sale
Securities held to maturity:
Mortgage-backed securities:
U.S. Government sponsored
enterprises and federal
agencies
$ 889,744
$
5,387
$
6,246
$ 888,885
$ 461,630
$
2,405
$
741
$ 463,294
$ 197,410
$
5,247
$
214
$ 202,443
$ 209,538
$
7,988
$
109
$ 217,417
Other
Other securities
1,110
3,400
—
—
—
—
1,110
3,400
1,516
3,400
—
—
—
—
1,516
3,400
Total securities held to maturity $ 201,920
$
5,247
$
214
$ 206,953
$ 214,454
$
7,988
$
109
$ 222,333
During 2015, TCF sold $0.2 million of securities available for sale and received cash proceeds of $0.2 million. Gross
realized gains of $1.2 million were recognized on sales of securities available for sale in both 2014 and 2013. At
December 31, 2015 and 2014, mortgage-backed securities with a carrying value of $17.1 million and $8.2 million,
respectively, were pledged as collateral to secure certain deposits and borrowings. There were no impairment charges
recognized on securities available for sale in 2015, 2014, or 2013. 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.
66
There were no transfers from securities available for sale to securities held to maturity in 2015. During 2014, TCF
transferred $191.7 million 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, 2015 and 2014, the unrealized holding loss on the
transferred securities retained in accumulated other comprehensive income (loss) totaled $14.8 million and
$16.0 million, respectively. These amounts are amortized over the remaining lives of the transferred securities. Other
held to maturity securities consist of bonds which qualify for investment credit under the Community Reinvestment
Act. In 2015, 2014, and 2013, TCF recorded an impairment charge of $0.3 million, $0.1 million, and $0.2 million,
respectively, on held to maturity securities, which had a carrying value of $1.1 million, $1.5 million and $1.9 million at
December 31, 2015, 2014, and 2013, respectively.
The following tables show the gross unrealized losses and fair value of securities available for sale and securities held
to maturity at December 31, 2015 and 2014, aggregated by investment category and the length of time the securities
were in a continuous loss position.
(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
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
$
$
$
$
$
$
$
$
At December 31, 2015
Less than 12 months
12 months or more
Total
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
552,127
552,127
$
$
6,246
6,246
$
$
— $
— $
— $
— $
552,127
552,127
$
$
6,246
6,246
12,333
12,333
$
$
100
100
$
$
1,732
1,732
$
$
114
114
$
$
14,065
14,065
$
$
214
214
At December 31, 2014
Less than 12 months
12 months or more
Total
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
— $
— $
— $
— $
198,550
198,550
$
$
741
741
$
$
198,550
198,550
$
$
741
741
2,602
2,602
$
$
109
109
$
$
— $
— $
— $
— $
2,602
2,602
$
$
109
109
67
The amortized cost and fair value of securities available for sale and securities held to maturity by final contractual
maturity at December 31, 2015 and 2014 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.
(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
Total securities available for sale
Securities held to maturity:
Due in one year or less
Due in 1-5 years
Due in 5-10 years
Due after 10 years
Total securities held to maturity
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
At December 31,
2015
2014
Amortized Cost
Fair Value
Amortized Cost
Fair Value
$
$
$
$
1
$
38
1
$
38
4
$
76
268,638
621,067
272,511
616,335
86,806
374,744
889,744
$
888,885
$
461,630
$
100
$
100
$
500
$
1,900
1,400
1,900
1,400
2,500
400
198,520
203,553
211,054
201,920
$
206,953
$
214,454
$
4
76
87,594
375,620
463,294
500
2,500
400
218,933
222,333
At December 31,
2015
2014
Percent Change
$
2,624,956
$
2,839,316
5,464,272
2,267,218
326,211
2,593,429
552,403
3,145,832
4,012,248
2,146,754
2,647,596
19,297
3,139,152
2,543,212
5,682,364
2,382,144
242,111
2,624,255
533,410
3,157,665
3,745,322
1,877,090
1,915,061
24,144
(16.4)%
11.6
(3.8)
(4.8)
34.7
(1.2)
3.6
(0.4)
7.1
14.4
38.3
(20.1)
6.3
Total loans and leases(1)
$
17,435,999
$
16,401,646
(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 $56.1 million and
$43.4 million at December 31, 2015 and 2014, respectively.
68
The consumer real estate junior lien portfolio was comprised of $2.5 billion of home equity lines of credit ("HELOCs")
and $345.3 million of amortizing consumer real estate junior lien mortgage loans at December 31, 2015, compared
with $2.1 billion and $424.4 million at December 31, 2014, respectively. At December 31, 2015 and 2014, $1.8 billion
and $1.3 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 interest-only draw period and will not
convert to amortizing loans until 2021 or later. At December 31, 2015 and 2014, $664.5 million and $816.0 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, 2015, 18.2% of these loans mature
prior to 2021.
The following table summarizes the carrying value of consumer real estate loans and consumer auto loans sold with
servicing retained, the cash received, interest-only strips received and the recognized net gains for the years ended
December 31, 2015, 2014 and 2013. No servicing assets or liabilities related to consumer real estate or 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.
(In thousands)
2015
2014
2013
For the Year Ended December 31,
Sales proceeds, net(1)
Recorded investment in loans sold,
including accrued interest
Interest-only strips, initial value
Net gains(2)
Consumer
Real Estate
Loans
Consumer
Auto Loans
Consumer
Real Estate
Loans
Consumer
Auto Loans
Consumer
Real Estate
Loans
Consumer
Auto Loans
$
1,301,438 $
1,390,231 $
1,450,244 $
1,364,611 $
765,849 $
777,300
(1,269,108)
(1,358,040)
(1,426,969)
(1,337,791)
(766,307)
(798,281)
7,495
—
10,816
17,927
22,150
$
39,825 $
32,191 $
34,091 $
44,747 $
21,692 $
50,680
29,699
Includes transaction fees and other sales related costs.
(1)
(2) Excludes subsequent adjustments and valuation adjustments while held for sale.
TCF has two consumer real estate loan sale programs; one that sells nationally originated consumer real estate junior
lien loans and the other that originates first mortgage lien loans in our primary banking markets and sells the loans
through a correspondent relationship. Included in the consumer real estate recognized net gains was $6.4 million and
$0.9 million on the recorded investments of $289.8 million and $39.2 million in first mortgage lien loans sold related
to the correspondent lending program, including accrued interest, for 2015 and 2014, respectively. There were no
sales of correspondent lending loans in 2013. Included in the consumer real estate loans sold in the table above for
2014 are amounts related to the sale of consumer real estate TDR loans. During the fourth quarter of 2014, TCF sold
$405.9 million of consumer real estate TDR loan balances ("the TDR loan sale"), received cash proceeds of $314.0
million and recognized losses of $4.8 million.
Included in the consumer auto loans sold in the table above are amounts related to the execution of securitizations.
During 2015 and 2014, TCF transferred the recorded investments of $1.1 billion and $258.6 million, respectively, in
consumer auto loans, including accrued interest, with servicing retained, to trusts in securitization transactions, received
net sales proceeds of $1.2 billion and $266.0 million, respectively, and recognized gains of $25.5 million and $7.4 million,
respectively, which qualified for sale accounting. These trusts are considered VIEs due to their limited capitalization
and special purpose nature, however TCF does not have a variable interest in the trusts. Therefore, TCF is not the
primary beneficiary of the trusts and they are not consolidated. There were no securitization transactions in 2013.
Total interest-only strips and the contractual liabilities related to loan sales are shown below.
(In thousands)
Interest-only strips attributable to:
Consumer real estate loan sales
Consumer auto loan sales
Contractual liabilities attributable to:
Consumer real estate loan sales
Consumer auto loan sales
At December 31,
2015
2014
19,182 $
25,150
702 $
185
21,198
48,591
563
699
$
$
69
TCF had no impairment charges on consumer real estate loan interest-only strips in 2015 and 2014 and recorded
impairment charges of $0.5 million in 2013. TCF recorded impairment charges on the consumer auto loan interest-
only strips of $0.9 million, $3.5 million and $5.4 million in 2015, 2014 and 2013, respectively, primarily as a result of
higher prepayments than originally assumed.
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. During 2015, 2014 and 2013, 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, 2015 are as follows:
(In thousands)
2016
2017
2018
2019
2020
Thereafter
Total
$
710,872
535,135
381,465
243,472
124,318
54,658
$
2,049,920
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 related information. 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, 2015
(In thousands)
Consumer
Real Estate
Commercial
Leasing and
Equipment
Finance
Inventory
Finance
Auto
Finance
Other
Total
Balance, beginning of period
$
85,361
$
31,367
$
18,446
$
10,020
$
18,230
$
745
$
164,169
Charge-offs
Recoveries
Net (charge-offs) recoveries
Provision for credit losses
Other
(33,687)
7,428
(26,259)
12,697
(3,807)
(5,249)
3,769
(1,480)
298
—
(7,631)
2,792
(4,839)
5,411
—
(2,501)
1,019
(1,482)
3,036
(446)
(18,386)
2,971
(15,415)
28,943
(5,272)
(7,093)
5,034
(2,059)
2,559
—
(74,547)
23,013
(51,534)
52,944
(9,525)
Balance, end of period
$
67,992
$
30,185
$
19,018
$
11,128
$
26,486
$
1,245
$
156,054
At or For the Year Ended December 31, 2014
(In thousands)
Consumer
Real Estate
Commercial
Leasing and
Equipment
Finance
Inventory
Finance
Auto
Finance
Other
Total
Balance, beginning of period
$
176,030
$
37,467
$
18,733
$
8,592
$
10,623
$
785
$
252,230
Charge-offs
Recoveries
Net (charge-offs) recoveries
Provision for credit losses
Other(1)
(63,126)
6,867
(56,259)
63,973
(98,383)
(8,657)
2,887
(5,770)
(259)
(71)
(7,316)
3,705
(3,611)
3,324
—
(1,653)
(11,856)
(8,359)
(100,967)
826
(827)
2,498
(243)
1,491
(10,365)
23,742
(5,770)
5,860
(2,499)
2,459
21,636
(79,331)
95,737
—
(104,467)
Balance, end of period
$
85,361
$
31,367
$
18,446
$
10,020
$
18,230
$
745
$
164,169
(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 TDR loan sale.
70
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:
Consumer
Real Estate Commercial
Leasing and
Equipment
Finance
Inventory
Finance
Auto
Finance
Other
Total
At December 31, 2015
$
$
38,819
$
30,170
$
16,994
$
10,929
$
23,471
$
1,243
$
121,626
29,173
15
2,024
199
3,015
2
34,428
67,992
$
30,185
$
19,018
$
11,128
$
26,486
$
1,245
$
156,054
Collectively evaluated for impairment
$ 5,248,829
$ 3,092,398
$
3,997,544
$ 2,145,605
$ 2,637,269
$ 19,286
$17,140,931
Individually evaluated for impairment
215,443
53,434
14,669
1,149
10,308
Collectively evaluated for impairment
$ 5,462,005
$ 3,038,378
$
3,731,420
$ 1,874,481
$ 1,911,267
$ 24,055
$16,041,606
Individually evaluated for impairment
220,359
119,287
13,763
2,609
3,676
Loans acquired with deteriorated
credit quality
Total
(In thousands)
Allowance for loan and lease losses:
Collectively evaluated for impairment
Individually evaluated for impairment
Total
Loans and leases outstanding:
Loans acquired with deteriorated
credit quality
Total
11
—
295,014
54
—
—
35
—
19
$ 5,464,272
$ 3,145,832
$
4,012,248
$ 2,146,754
$ 2,647,596
$ 19,297
$17,435,999
Consumer
Real Estate Commercial
Leasing and
Equipment
Finance
Inventory
Finance
Auto
Finance
Other
Total
At December 31, 2014
$
$
57,167
$
27,594
$
16,310
$
9,627
$
17,046
$
741
$
128,485
28,194
3,773
2,136
393
1,184
4
35,684
85,361
$
31,367
$
18,446
$
10,020
$
18,230
$
745
$
164,169
89
—
359,783
257
—
—
139
—
118
$ 5,682,364
$ 3,157,665
$
3,745,322
$ 1,877,090
$ 1,915,061
$ 24,144
$16,401,646
71
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
Delinquent
and Accruing
90 Days or More
Delinquent and
Accruing
Total
Accruing
Non-accrual
Total
At December 31, 2015
$
2,489,235
$
8,649
$
2,916
$
2,500,800
$
124,156
$
2,624,956
2,793,684
5,282,919
2,586,692
548,814
3,135,506
3,998,469
2,145,538
2,634,496
19,274
17,216,202
242
1,481
10,130
—
1
1
1,728
87
2,343
13
14,302
1
38
2,954
—
—
—
564
31
1,230
7
2,795,203
5,296,003
2,586,692
548,815
3,135,507
4,000,761
2,145,656
2,638,069
19,294
44,113
168,269
2,839,316
5,464,272
6,737
3,588
10,325
11,262
1,098
9,509
3
2,593,429
552,403
3,145,832
4,012,023
2,146,754
2,647,578
19,297
4,786
17,235,290
200,466
17,435,756
—
243
—
243
Total
$
17,216,444
$
14,303
$
4,786
$ 17,235,533
$
200,466
$ 17,435,999
(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
Delinquent
and Accruing
90 Days or More
Delinquent and
Accruing
Total
Accruing
Non-accrual
Total
At December 31, 2014
$
2,987,992
$
13,176
$
194
$
3,001,362
$
137,790
$
3,139,152
2,505,640
5,493,632
2,599,701
532,929
3,132,630
3,728,115
1,874,933
1,907,005
24,144
16,160,459
2,017
2,091
15,267
—
—
—
2,242
49
2,785
—
20,343
83
—
194
—
—
—
307
26
1,478
—
2,507,731
5,509,093
2,599,701
532,929
3,132,630
3,730,664
1,875,008
1,911,268
24,144
35,481
173,271
2,543,212
5,682,364
24,554
2,624,255
481
25,035
12,670
2,082
3,676
—
533,410
3,157,665
3,743,334
1,877,090
1,914,944
24,144
2,005
16,182,807
216,734
16,399,541
5
2,105
—
2,105
Total
$
16,162,476
$
20,426
$
2,010
$ 16,184,912
$
216,734
$ 16,401,646
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
Unrecognized interest income
Year Ended December 31,
2015
2014
2013
$
$
21,459
$
26,584
$
4,305
9,359
17,154
$
17,225
$
33,046
12,149
20,897
72
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 or completed.
(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,
2015
2014
$
$
26,020
$
—
20,264
46,284
$
47,731
247
12,284
60,262
For the years ended December 31, 2015 and 2014, interest income would have been reduced by approximately
$0.2 million and $0.4 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 loan. TDR loans consist primarily of consumer real estate and commercial loans.
Total TDR loans at December 31, 2015 and 2014 were $230.6 million and $298.5 million, respectively, of which
$135.3 million and $193.8 million, respectively, were accruing. TCF held consumer real estate TDR loans of
$185.8 million and $199.6 million at December 31, 2015 and 2014, respectively, of which $106.8 million and
$111.9 million, respectively, were accruing. TCF also held $31.7 million and $91.6 million of commercial TDR loans at
December 31, 2015 and 2014, respectively, of which $24.7 million and $80.4 million, respectively, were accruing. TDR
loans for the remaining classes of finance receivables were not material at December 31, 2015 or 2014.
Unfunded commitments to commercial and consumer real estate loans classified as TDRs were $0.4 million and $3.9
million at December 31, 2015 and 2014, respectively. At December 31, 2015 and 2014, 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 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 loan is performing based on the restructured terms. All loans classified as TDR loans are considered to be
impaired. In 2015 and 2014, $14.0 million and $12.8 million, respectively, of commercial loans were removed from
TDR status as they were restructured at market terms and were performing.
Foregone interest represents the difference between interest income recognized on accruing TDR loans and the
contractual interest that would have been recorded under the original contractual terms. In 2015, foregone interest
income for consumer real estate first mortgage lien accruing TDR loans and consumer real estate junior lien accruing
TDR loans was $2.2 million and $0.8 million, respectively. The average yield for the same period on consumer real
estate accruing TDR loans was 4.1%, which compares to the original contractual average rate of 6.7%. In 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%. In 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%.The foregone interest income for the remaining classes of finance receivables was not material
for 2015, 2014 and 2013.
73
The table below summarizes TDR loans that defaulted during 2015 and 2014, 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)
Loan balance:(1)
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
Year Ended December 31,
2015
2014
$
1,674
$
821
2,495
—
—
—
45
1,039
1,969
1,364
3,333
3,895
127
4,022
—
392
Defaulted TDR loans modified during the applicable period
Total TDR loans modified in the applicable period
$
$
3,579
85,326
$
$
7,747
177,674
Defaulted modified TDR loans as a percent of total TDR loans modified in the
applicable period
4.2%
4.4%
(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 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. The allowance on accruing consumer real estate TDR loans was $22.4 million, or 21.0% of the
outstanding balance, at December 31, 2015, and $20.4 million, or 18.2% of the outstanding balance, at
December 31, 2014. In determining impairment for consumer real estate accruing TDR loans, TCF utilized assumed
remaining re-default rates ranging from 10% to 33% in 2015 and 4% to 22% in 2014, depending on modification type
and actual experience. At December 31, 2015, 2.0% of accruing consumer real estate TDR loans were more than 60
days delinquent, compared with 2.4% at December 31, 2014.
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, 2015, $51.5 million, or 65.1%,
were loans discharged in Chapter 7 bankruptcy that were not reaffirmed by the borrower, of which 77.2% were current.
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. 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 discounted at the loan's initial effective interest rate, unless the loans are collateral dependent, in which
case 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 allowance on accruing commercial TDR loans was less than $0.1 million, or 0.1% of the outstanding balance,
at December 31, 2015, and $1.4 million, or 1.7% of the outstanding balance, at December 31, 2014. No accruing
commercial TDR loans were 60 days or more delinquent at December 31, 2015 and 2014.
74
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.
The following table summarizes impaired loans.
(In thousands)
Impaired loans with an allowance recorded:
Consumer real estate:
First mortgage lien
Junior lien
Total consumer real estate
Commercial:
Commercial real estate
Commercial business
Total commercial
Leasing and equipment finance
Inventory finance
Auto finance
Other
At December 31,
Unpaid
Contractual
Balance
2015
Loan
Balance
Related
Allowance
Recorded
Unpaid
Contractual
Balance
2014
Loan
Balance
Related
Allowance
Recorded
$
145,749
$
123,728
$
20,880
$
114,526
$
101,668
$
18,140
70,122
215,871
58,366
182,094
6,837
27,717
65,413
179,939
55,405
157,073
9,427
27,567
298
16
314
7,259
867
8,275
21
298
16
314
7,259
873
8,062
11
12
3
15
822
199
2,942
2
58,157
54,412
18
18
58,175
54,430
8,257
1,754
3,074
92
8,257
1,758
2,928
89
3,772
1
3,773
1,457
393
1,184
4
Total impaired loans with an allowance recorded
232,607
198,613
31,697
251,291
224,535
34,378
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
Other
7,100
26,031
33,131
37,598
3,738
41,336
274
2,003
2
3,228
520
3,748
31,157
3,585
34,742
276
1,177
—
Total impaired loans without an allowance recorded
76,746
39,943
—
—
—
—
—
—
—
—
—
—
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
—
148,025
95,124
—
—
—
—
—
—
—
—
—
—
Total impaired loans
$
309,353
$
238,556
$
31,697
$
399,316
$
319,659
$
34,378
75
The average loan balance of impaired loans and interest income recognized on impaired loans during 2015 and 2014
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
Year Ended December 31,
2015
2014
Average Loan
Balance
Interest Income
Recognized
Average Loan
Balance
Interest Income
Recognized
$
112,698
$
5,438
$
311,458
$
56,885
169,583
27,355
17
27,372
7,758
1,315
5,495
50
3,353
8,791
852
—
852
18
76
22
2
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
Total impaired loans with an allowance recorded
211,573
9,761
454,938
20,718
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
Total impaired loans without an allowance recorded
19,188
3,959
23,147
40,828
2,033
42,861
564
962
67,534
1,045
1,817
2,862
1,957
5
1,962
114
—
4,938
39,086
5,852
44,938
65,167
2,946
68,113
426
455
113,932
Total impaired loans
$
279,107
$
14,699
$
568,870
$
2,321
1,285
3,606
2,973
94
3,067
126
—
6,799
27,517
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,
2015
2014
$
152,034
$
281,462
56,243
315,869
805,608
359,674
$
445,934
$
152,418
276,943
53,954
312,628
795,943
359,582
436,361
TCF leases certain premises and equipment under operating leases. Net lease expense was $35.1 million, $34.0
million and $35.4 million in 2015, 2014 and 2013, respectively.
76
At December 31, 2015, the total future minimum rental payments for operating leases of premises and equipment are
as follows.
(In thousands)
2016
2017
2018
2019
2020
Thereafter
Total
$
29,885
31,211
28,935
17,853
13,745
62,609
$
184,238
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
At December 31,
2015
2014
Gross
Amount
Accumulated
Amortization
Net
Amount
Gross
Amount
Accumulated
Amortization
Net
Amount
$
3,049
$
1,817
$
1,232
$
3,049
$
1,502
$
2,730
4,590
300
1,709
3,757
300
1,021
833
—
2,730
4,590
300
1,377
2,849
300
1,547
1,353
1,741
—
$
$
$
10,669
$
7,583
$
3,086
$
10,669
$
6,028
$
4,641
141,245
84,395
225,640
$
$
141,245
$
141,245
84,395
84,395
225,640
$
225,640
$
$
141,245
84,395
225,640
Amortization expense for intangible assets of $1.6 million, $1.7 million and $2.3 million were recognized in 2015, 2014
and 2013, respectively. Amortization expense for intangible assets is estimated to be $1.4 million for 2016, $0.5 million
for 2017, $0.4 million for 2018, $0.3 million for 2019 and $0.3 million for 2020. There was no impairment of goodwill
or the intangible assets in 2015, 2014 and 2013.
Note 9. Deposits
Deposits consisted of the following.
(Dollars in thousands)
Checking:
Non-interest bearing
Interest bearing
Total checking
Savings
Money market
Certificates of deposit
Total deposits
Weighted-
Average
Rate
2015
Amount
At December 31,
% of
Total
Weighted-
Average
Rate
2014
Amount
% of
Total
—% $
3,187,581
19.1%
—% $
2,832,526
18.3%
0.02
0.01
0.06
0.63
0.91
0.30
2,502,978
5,690,559
4,717,457
2,408,180
3,903,793
14.9
34.0
28.2
14.5
23.3
$ 16,719,989
100.0%
0.04
0.02
0.15
0.54
0.78
0.26
2,362,717
5,195,243
5,212,320
1,993,130
3,049,189
15.3
33.6
33.7
13.0
19.7
$ 15,449,882
100.0%
77
Certificates of deposit had the following remaining maturities at December 31, 2015.
(In thousands)
Maturity:
0-3 months
4-6 months
7-12 months
Over 12 months
Total
Denominations
$100 Thousand or
Greater
Denominations
Less Than
$100 Thousand
Total
$
$
309,076
$
384,143
$
302,176
719,329
585,969
347,450
708,188
547,462
1,916,550
$
1,987,243
$
693,219
649,626
1,427,517
1,133,431
3,903,793
The aggregate amount of certificates of deposit with balances equal to or greater than the Federal Deposit Insurance
Corporation insurance limit of $250,000 were $484.2 million and $302.8 million at December 31, 2015 and 2014,
respectively.
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:
Securities sold under repurchase agreements
Total
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.
At December 31,
2015
2014
Amount
Rate
Amount
Rate
$
$
$
$
$
5,381
5,381
—
225
16,431
2,166
18,822
—
62,995
5,519
0.03% $
0.03
$
4,425
4,425
0.10%
0.10
—% $
74,385
0.26%
0.45
0.06
1.96
0.28
N.A.
N.A.
N.A.
$
$
375
5,956
2,957
83,673
250,000
4,425
11,751
0.40
0.18
1.88
0.31
N.A.
N.A.
N.A.
At December 31, 2015, 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
period end fair value of $15.5 million.
78
Note 11. Long-term Borrowings
Long-term borrowings consisted of the following.
(Dollars in thousands)
Stated
Maturity
Amount
Stated Rate
Amount
Stated Rate
At December 31,
2015
2014
Federal Home Loan Bank advances
2015
$
Subtotal
Subordinated bank notes
Hedge-related basis adjustment(1)
Subtotal
Discounted lease rentals
Subtotal
Other long-term borrowings
Subtotal
2016
2017
2016
2022
2025
2015
2016
2017
2018
2019
2020
2021
2015
2016
2017
—
447,000
125,000
572,000
74,994
109,282
149,126
(209)
333,193
—
48,120
41,969
24,496
9,329
2,035
83
126,032
—
2,685
2,742
5,427
0.54% -
0.49
-
2.39
2.45
2.55
2.53
2.95
-
-
-
-
-
—% $
1.17
0.51
5.50
6.25
4.60
—
7.95
7.88
7.95
6.00
5.15
4.57
—
1.36
1.36
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
0.37% -
0.38%
0.25
-
2.39
2.39
2.45
2.63
2.63
-
-
-
-
-
1.17
0.25
5.50
6.25
—
7.95
7.95
7.95
7.95
5.05
4.57
4.57
1.36
1.36
1.36
Total long-term borrowings
$
1,036,652
$
1,232,065
(1) Related to subordinated bank notes with a stated maturity of 2025 at December 31, 2015.
At December 31, 2015, TCF Bank had pledged loans secured by residential and commercial real estate and FHLB
stock with an aggregate carrying value of $4.6 billion as collateral for FHLB advances. At December 31, 2015,
$125.0 million of FHLB advances outstanding were prepayable monthly at TCF's option.
On February 27, 2015, TCF Bank issued $150.0 million of subordinated notes due February 27, 2025 with a fixed-
rate coupon of 4.60% per annum (the "2025 Notes"), at a price to investors of 99.375% of the principal amount. In
addition, TCF Bank incurred issuance costs of $1.4 million. Both the discount to the principal amount and issuance
costs are amortized as interest expense over the full term of the notes using the effective interest method. Interest is
payable semi-annually, in arrears, on February 27 and August 27, and commenced on August 27, 2015. Simultaneously,
TCF Bank entered into an interest rate swap agreement with a total notional amount of $150.0 million designated as
a fair value hedge of the 2025 Notes. The effect of the interest rate swap is to effectively convert the fixed-rate on the
2025 Notes to a floating interest rate based on the three-month London InterBank Offered Rate ("LIBOR") plus a fixed
number of basis points on the notional amount. See Note 18, Derivative Instruments, for additional information regarding
the interest rate swap.
79
Note 12. Income Taxes
The following table summarizes applicable income taxes in the Consolidated Statements of Income.
(In thousands)
Year ended December 31, 2015:
Federal
State
Foreign
Total
Year ended December 31, 2014:
Federal
State
Foreign
Total
Year ended December 31, 2013:
Federal
State
Foreign
Total
Current
Deferred
Total
$
$
$
$
$
$
73,579
$
16,141
$
9,255
5,252
4,637
8
89,720
13,892
5,260
88,086
$
20,786
$
108,872
55,062
$
26,308
$
2,087
5,185
11,147
(23)
62,334
$
37,432
$
(38,206) $
107,630
$
7,686
3,939
3,941
(645)
(26,581) $
110,926
$
81,370
13,234
5,162
99,766
69,424
11,627
3,294
84,345
TCF's effective income tax rate differed from the statutory federal income tax rate of 35.00% 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
Other, net
Effective income tax rate
Year Ended December 31,
2015
2014
2013
35.00%
35.00%
35.00%
2.87
(0.97)
(0.93)
(0.53)
(0.84)
3.06
(0.92)
(0.76)
(0.58)
(0.34)
3.11
(1.01)
(0.86)
(1.13)
(0.41)
34.60%
35.46%
34.70%
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 position 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, 2015 and 2014, TCF has not provided U.S. deferred taxes on $42.9 million and
$48.1 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 $2.6 million
and $4.0 million, as of December 31, 2015 and 2014, respectively, assuming full utilization of related foreign tax credits.
80
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
At or For the Year Ended December 31,
2015
2014
2013
$
4,649
$
4,704
$
4,230
323
—
(157)
(425)
(141)
468
8
(350)
—
(181)
394
362
(67)
(39)
(176)
4,704
Balance, end of period
$
4,249
$
4,649
$
The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $1.3 million
and $1.5 million at December 31, 2015 and 2014, respectively. TCF recognizes increases and decreases for interest
and penalties related to unrecognized tax benefits, where applicable, in income tax expense. TCF recognized
approximately $195 thousand of tax benefit in 2015 and $71 thousand and $110 thousand of tax expense in 2014 and
2013, respectively, related to interest and penalties. Interest and penalties of approximately $303 thousand and $498
thousand were accrued at December 31, 2015 and 2014, respectively.
TCF's federal income tax returns are open and subject to examination for 2013 and later tax return years. TCF's various
state income tax returns are generally open for the 2011 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 2011 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 tax credit carryforwards
Valuation allowance
Securities available for sale
Accrued expense
Non-accrual interest
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,
2015
2014
$
74,858
$
37,913
10,735
(7,515)
5,945
5,228
4,250
3,437
63,862
34,850
11,649
(5,669)
5,397
4,892
9,333
2,721
134,851
127,035
320,374
299,621
28,657
19,220
10,936
4,105
6,026
389,318
$
254,467
$
19,114
14,921
12,479
4,139
8,106
358,380
231,345
The net operating losses and tax credit carryforwards at December 31, 2015 consist of state net operating losses of
$3.2 million that expire in 2016 through 2035 and federal credit carryforwards of $463 thousand that expire in 2019.
The valuation allowance at December 31, 2015 and 2014 principally applies to net operating losses and tax credit
carryforwards that, in the opinion of management, are more likely than not to expire unutilized. 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.
81
Note 13. Equity
Restricted Retained Earnings Retained earnings at TCF Bank at December 31, 2015 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 create 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
Total
At December 31,
2015
2014
$
$
(1,102) $
(49,758)
(50,860) $
(1,102)
(48,298)
(49,400)
Repurchases No repurchases of common stock were made in 2015, 2014 or 2013. At December 31, 2015, TCF had
5.4 million shares remaining in its stock repurchase program 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 TCF had 6,900,000
depositary shares outstanding at December 31, 2015 and 2014, each representing a 1/1000th interest in a share of
the Series A Non-Cumulative Perpetual Preferred Stock, par value $0.01 per share (the "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%. TCF
paid cash dividends to holders of Series A Preferred Stock of $12.9 million in 2015, 2014 and 2013.
6.45% Series B Non-Cumulative Perpetual Preferred Stock TCF had 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") outstanding at
December 31, 2015 and 2014. 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%. TCF paid cash dividends to holders of Series B Preferred Stock of $6.5 million, $6.5
million and $6.1 million in 2015, 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, which previously allowed eligible 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, 2015, the fair value of the assets in these
plans totaled $11.7 million and included $7.5 million invested in TCF common stock, compared with a total fair value
of $13.8 million, including $8.6 million invested in TCF common stock at December 31, 2014.
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 of $29.5 million and $33.2 million at December 31, 2015
and 2014, respectively.
82
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 $1.0 million, $1.5 million and $0.8 million in 2015, 2014
and 2013, respectively. The Company made no other contributions to this plan, other than payment of administrative
expenses. The amounts deferred under this plan are invested in TCF common stock or mutual funds. At
December 31, 2015, the fair value of the assets in the plan totaled $32.8 million and included $17.5 million invested
in TCF common stock, compared with a total fair value of $31.8 million, including $18.3 million invested in TCF common
stock at December 31, 2014.
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, 2015, 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 United States Department of the Treasury ("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 obligation to the Federal Government in connection with the CPP.
Joint Venture TCF has a joint venture with The Toro Company ("Toro") called Red Iron Acceptance, LLC ("Red Iron").
Red Iron provides U.S. distributors and dealers and select Canadian distributors of the Toro® and Exmark® branded
products with 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 earnings for the current year
combined with its net retained earnings for the preceding two calendar years, which was $481.0 million at
December 31, 2015, without prior approval of the Office of the Comptroller of the Currency ("OCC"). 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. 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.
83
The following table presents regulatory capital information for TCF and TCF Bank. Information presented for 2015
reflects the transition to the Basel III capital standard from previous regulatory capital adequacy guidelines under the
Basel I framework. The Basel III capital standard phases in through 2019 and revised the definition of capital, increased
minimum capital ratios, introduced regulatory capital buffers above those minimums, introduced a common equity Tier
1 capital ratio and revised the rules for calculating risk-weighted assets. Banks that are not advanced approaches
institutions may make a one-time election to opt out of the requirement to include components of accumulated other
comprehensive income (loss) in common equity Tier 1 capital. TCF has elected to opt-out of the accumulated other
comprehensive income (loss) requirement.
TCF
TCF Bank
At December 31,
At December 31,
2015
2014
2015
2014
Well-capitalized
Standard(1)
Minimum
Capital
Requirement(1)
(Dollars in thousands)
Regulatory Capital:
Common equity Tier 1 capital
$ 1,814,442
N.A.
$ 1,992,584
N.A.
Tier 1 capital
Total capital
2,092,195
$ 1,919,887
2,008,585
$ 1,836,019
2,487,060
2,209,999
2,425,682
2,126,131
Regulatory Capital Ratios:
Common equity Tier 1 capital ratio
10.00%
Tier 1 risk-based capital ratio
Total risk-based capital ratio
Tier 1 leverage ratio
11.54
13.71
10.46
N.A.
11.76%
13.54
10.07
10.99%
11.07
13.37
10.04
N.A.
11.25%
13.03
9.63
6.50%
8.00
10.00
5.00
4.50%
6.00
8.00
4.00
N.A. Not Applicable.
(1) The well-capitalized standard and the minimum capital requirement reflect the Basel III capital standards that became effective January 1, 2015 and are
applicable to TCF Bank.
Note 15. Stock Compensation
The TCF Financial 2015 Omnibus Incentive Plan ("Omnibus Incentive Plan") and the TCF Financial Incentive Stock
Program ("Incentive Stock Program") were adopted to enable TCF to attract and retain key personnel. In April 2015,
TCF stockholders approved the Omnibus Incentive Plan, which replaced the Incentive Stock Program. At
December 31, 2015, there were 2,544,415 and 1,379,000 shares reserved for issuance under the Omnibus Incentive
Plan and Incentive Stock Program, respectively.
At December 31, 2015, there were 50,000 and 1,050,000 shares of performance-based restricted stock outstanding
under the Omnibus Incentive Plan and Incentive Stock Program, respectively, that will vest only if certain performance
goals 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 under either the Omnibus Incentive
Plan or the Incentive Stock Program vest over periods from one 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,
2015
2014
2013
$
5,931
$
8,690
$
25,919
2,127
2.1
22,532
3,424
2.6
10,467
14,482
4,034
1.6
84
The Omnibus Incentive Plan authorized new performance-based restricted stock units to certain executives that were
approved by the Compensation Committee of the TCF Board of Directors at its January 2015 meeting. The performance-
based restricted stock units are subject to TCF’s relative total stockholder return for the period beginning January 1,
2015 through December 31, 2017, as measured against the peer group, which includes all publicly-traded banks and
thrift institutions with assets between $10 billion and $50 billion as of September 30, 2014, excluding peers which do
not remain publicly traded for the full three-year performance period. The number of restricted stock units granted was
72,858 at target and the actual restricted stock units granted will depend on actual performance with a maximum total
payout of 150% of target.
TCF has also issued stock options under the Incentive Stock Program that generally become exercisable over a period
of one to ten years from the date of the grant and expire after ten years. All outstanding options have a fixed exercise
price equal to the market price of TCF common stock on the date of grant.
The following table presents the valuation and related assumption information for TCF's stock option plans related to
options issued in 2008 and no stock options have been subsequently issued under the Incentive Stock Program. As
of December 31, 2015, no stock options were issued under the Omnibus Incentive Plan.
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 Incentive Stock Program
and Omnibus Incentive Plan since December 31, 2012.
Restricted Stock
Stock Options
Shares
Price Range
Weighted-
Average
Grant Date
Fair Value
Shares
Price Range
Weighted-
Average
Remaining
Contractual
Life in Years
Weighted-
Average
Exercise
Price
2,077,104
$ 12.85
-
$15.75
4.22
$
14.35
Outstanding at
December 31, 2012
Granted
Forfeited/canceled
Vested
Outstanding at
December 31, 2013
Granted
Exercised
3,212,235
$ 6.16
493,650
12.47
(120,313)
(230,277)
9.65
9.48
3,355,295
6.16
1,120,750
13.84
-
-
-
-
-
-
—
— -
Forfeited/canceled
(108,490)
Vested
(1,509,061)
6.80
8.35
Outstanding at
December 31, 2014
Granted
Exercised
2,858,494
6.16
786,933
12.86
—
— -
Forfeited/canceled
Vested
(156,332)
(216,009)
6.80
9.65
$ 25.18
$
15.17
17.37
25.18
15.17
16.02
—
15.79
14.90
16.02
16.28
—
15.96
15.96
11.13
13.55
12.75
16.04
11.09
15.61
—
13.06
11.21
12.73
14.45
-
-
-
-
-
-
-
—
— -
—
(451,104)
15.75
-
15.75
—
— -
—
—
—
—
1,626,000
12.85
-
15.75
4.36
—
— -
—
(47,000)
15.75
-
15.75
—
—
— -
— -
—
—
—
—
—
—
1,579,000
12.85
-
15.75
2.98
—
— -
—
—
(200,000)
12.85
-
12.85
13.20
13.16
—
—
— -
— -
—
—
—
—
—
—
—
15.75
—
13.97
—
15.75
—
—
13.91
—
12.85
—
—
-
-
15.75
15.75
2.17
14.07
14.07
Outstanding at
December 31, 2015
Exercisable at
December 31, 2015
N.A. Not Applicable.
3,273,086
6.16
16.28
13.09
1,379,000
12.85
N.A.
N.A.
1,379,000
12.85
85
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. Effective January 1, 2016, TCF will match the
contributions of all participants with TCF common stock at the rate of $1 per dollar for employees with one or more
years of service up to a maximum company contribution of 5.0% of the employee's covered compensation subject to
the annual covered compensation limitation imposed by the IRS. Matching contributions made after January 1, 2016
will vest immediately. 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, 2015, the fair value of the assets in
the ESPP totaled $238.0 million and included $124.7 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
$10.6 million in 2015, $9.6 million in 2014 and $8.9 million in 2013.
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.
86
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.
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
Funded status of plans, end of period
Amounts recognized in the Consolidated Statements of Financial Condition:
Prepaid (accrued) benefit cost, end of period
Prior service cost included in accumulated other comprehensive income (loss)
Accumulated other comprehensive income (loss), before tax
Pension Plan
Postretirement Plan
Year Ended December 31,
2015
2014
2015
2014
$
39,490
$
41,870
$
4,984
$
5,217
1,216
(1,436)
(3,317)
35,953
44,678
(447)
(3,317)
—
1,587
1,862
(5,829)
39,490
51,018
(511)
(5,829)
—
40,914
44,678
154
(173)
(395)
198
(63)
(368)
4,570
4,984
—
—
(395)
395
—
—
—
(368)
368
—
$
$
4,961
$
5,188
$
(4,570) $
(4,984)
4,961
$
5,188
$
(4,570) $
(4,984)
—
—
—
—
(285)
(285)
(331)
(331)
Total recognized asset (liability)
$
4,961
$
5,188
$
(4,855) $
(5,315)
The accumulated benefit obligation for the Pension Plan was $36.0 million and $39.5 million at December 31, 2015
and 2014, 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:
Fixed income mutual funds
Money market mutual funds
Cash
Level 2:
Collective investment fund
Mortgage-backed securities
Total Pension Plan assets held in trust
87
Pension Plan
Year Ended December 31,
2015
2014
$
25,323
$
3,406
87
4,729
7,339
$
40,884
$
22,532
16,088
71
4,961
1,026
44,678
The following table sets forth the changes recognized in accumulated other comprehensive income (loss) that are
attributed to the Postretirement Plan.
(In thousands)
Accumulated other comprehensive income (loss) before tax, beginning of period
Amortization (recognized in net periodic benefit cost):
Prior service credit
Total recognized in other comprehensive income (loss)
Accumulated other comprehensive income (loss) before tax, end of period
$
$
Postretirement Plan
Year Ended December 31,
2015
2014
2013
(331) $
(378) $
(424)
46
46
47
47
46
46
(285) $
(331) $
(378)
The Pension Plan does not have any accumulated other comprehensive income (loss).
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
Net periodic benefit plan (income) cost
Pension Plan
Year Ended December 31,
2015
2014
2013
1,216
$
1,587
$
447
(1,436)
511
1,862
227
$
3,960
$
Postretirement Plan
Year Ended December 31,
2015
2014
2013
154
$
(173)
(46)
(65) $
198
$
(63)
(47)
88
$
1,292
336
(2,196)
(568)
174
(1,241)
(46)
(1,113)
$
$
$
$
Pension Plan actual return on plan assets, net of administrative expenses was a loss of 1.0% in 2015 and 2014 and
a loss of 0.6% in 2013. The expected actuarial return on plan assets was a gain of $0.6 million, $0.7 million and $0.8
million in 2015, 2014 and 2013, respectively, and the actual loss on plan assets was $0.4 million, $0.5 million and $0.3
million in 2015, 2014 and 2013, respectively, increasing net periodic benefit plan costs in all periods.
The discount rate and expected long-term rate of return on plan assets used to determine the estimated net benefit
plan costs were as follows.
Assumptions used to determine estimated net benefit plan cost
2015
2014
2013
2015
2014
2013
Discount rate
3.25%
4.00%
3.00%
3.25%
4.00%
2.75%
Expected long-term rate of return on plan assets
1.50
1.50
1.50
N.A.
N.A.
N.A.
N.A. Not Applicable.
Pension Plan
Postretirement Plan
Year Ended December 31,
Year Ended December 31,
88
Prior service credits of TCF's Postretirement Plan totaling $46 thousand are included within accumulated other
comprehensive income (loss) at December 31, 2015 and are expected to be recognized as components of net periodic
benefit cost during 2016.
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
expected average return of the index consistent with the Pension Plan's current investment strategy was 2.5%, 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 measure the benefit obligation of the Pension Plan was 3.75% for 2015 and 3.25% for 2014.
The discount rate used to measure the benefit obligation of the Postretirement Plan was 3.5% for 2015 and 3.25% for
2014. The discount rates used were 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 benefit cash flows for TCF's Pension Plan and Postretirement Plan varied
between 7 and 7.2 years.
Included within the net periodic benefit cost for the Pension Plan are recognized actuarial gains and losses. The
discount rate used to determine benefit obligations increased from 3.25% at December 31, 2014 to 3.75% at
December 31, 2015 decreasing net periodic benefit cost by $1.2 million during 2015. Changes to the interest crediting
rate assumption, which start at 1.75% in 2016 and phase to 3.5% beginning in 2019, decreased net periodic benefit
cost by $0.6 million. Updated mortality tables at December 31, 2015 and various plan participant census changes
increased the 2015 net periodic benefit cost by $0.4 million.
Included within the net periodic benefit cost for the Postretirement Plan are recognized actuarial gains and losses.
The discount rate used to determine benefit obligations increased from 3.25% at December 31, 2014 to 3.5% at
December 31, 2015, decreasing net periodic benefit cost by $0.1 million for 2015. Updated mortality tables at
December 31, 2015 and various plan demographic changes decreased the net periodic benefit cost by $0.1 million.
For 2015, TCF was eligible to contribute up to $11.2 million to the Pension Plan until the 2015 federal income tax return
extended due date under various IRS funding methods. During 2015, TCF made no cash contributions to the Pension
Plan. TCF does not expect to be required to contribute to the Pension Plan in 2016. TCF expects to contribute $0.5
million to the Postretirement Plan in 2016. TCF contributed $0.4 million to the Postretirement Plan in 2015. TCF currently
has no plans to pre-fund the Postretirement Plan in 2016.
The following are expected future benefit payments used to determine projected benefit obligations.
(In thousands)
2016
2017
2018
2019
2020
2021 - 2025
Pension Plan
Postretirement Plan
$
3,592
$
3,017
3,100
3,144
3,051
11,165
514
491
467
442
417
1,713
The following table presents assumed and final health care cost trend rates for the Postretirement Plan at
December 31, 2015 and 2014.
Health care cost trend rate assumed for next year
Final health care cost trend rate
Year that final health care trend rate is reached
2015
2014
5.9%
4.5%
2038
5.8%
5.0%
2023
89
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 benefit obligations
1-Percentage-Point
Increase
Decrease
7
$
151
(6)
(137)
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 amounts 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,
2015
2014
$
$
1,402,088
$
1,314,826
639,465
128,259
2,169,812
9,178
2,178,990
$
609,618
140,261
2,064,705
14,676
2,079,381
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 a certain amount 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 2019. 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.
90
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 fair values 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 the exposure to changes
in the fair value of an asset or liability due to changes in market risk ("fair value 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.
Fair Value Hedges During the first quarter of 2015, TCF Bank entered into an interest rate swap agreement related
to its contemporaneously issued subordinated debt, which settles through a central clearing house. The swap was
designated as a fair value hedge and effectively converts the fixed interest rate to a floating rate based on three-month
LIBOR plus a fixed number of basis points on the $150.0 million notional amount through February 27, 2025, the
maturity date of the subordinated debt. In exchange, TCF Bank will receive 4.60% fixed-rate interest on the $150.0
million notional amount from the swap counterparty.
The interest rate swap substantially offsets the change in fair value of the hedged underlying debt that is attributable
to the changes in market risk. The gains and losses related to changes in the fair value of the interest rate swap as
well as the offsetting changes in fair value of the hedged debt are reflected in non-interest income.
Net Investment Hedges Forward foreign exchange contracts, that generally settle within 35 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. 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.
Derivatives Not Designated as Hedges Certain of TCF's forward foreign exchange contracts are not designated as
hedges and are generally settled within 35 days. Changes in the fair value of these forward foreign exchange contracts
are reflected in non-interest expense.
TCF executes interest rate swap agreements with commercial banking customers to facilitate their respective risk
management strategies. Those interest rate swaps are simultaneously hedged with offsetting interest rate swaps that
TCF executes with a third party and settles through a central clearing house, minimizing TCF's 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 seven years.
TCF enters into interest rate lock commitments in conjunction with consumer real estate loans included in the
correspondent lending program. 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.
91
During the second quarter of 2012, TCF sold its Visa® 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.
The following tables summarize TCF's outstanding derivative instruments as of December 31, 2015 and 2014. See
Note 19, Fair Value Disclosures, for additional information.
(In thousands)
Derivative Assets:
Derivatives designated as hedges:
Forward foreign exchange contracts
Derivatives not designated as hedges:
Forward foreign exchange contracts
Interest rate contracts
Interest rate lock commitments
Total derivative assets
Derivative Liabilities:
Derivatives designated as hedges:
Interest rate contracts
Derivatives not designated as hedges:
Forward foreign exchange contracts
Interest rate contracts
Other contracts
Interest rate lock commitments
Total derivative liabilities
(In thousands)
Derivative Assets:
Derivatives designated as hedges:
Forward foreign exchange contracts
Derivatives not designated as hedges:
Forward foreign exchange contracts
Interest rate contracts
Interest rate lock commitments
Total derivative assets
Derivative Liabilities:
Derivatives not designated as hedges:
Forward foreign exchange contracts
Interest rate contracts
Other contracts
Total derivative liabilities
At December 31, 2015
Notional
Amount
Gross Amounts
Recognized
Gross Amounts
Offset
Net Amount
Presented(1)
$
47,409
$
858
$
— $
858
260,678
111,347
50,667
5,057
2,093
729
(2,081)
—
—
$
8,737
$
(2,081) $
$
150,000
$
142
$
(142) $
187,902
111,347
13,804
3,218
1,192
2,175
305
13
(1,081)
(2,175)
(305)
—
$
3,827
$
(3,703) $
2,976
2,093
729
6,656
—
111
—
—
13
124
At December 31, 2014
Notional
Amount
Gross Amounts
Recognized
Gross Amounts
Offset
Net Amount
Presented(1)
$
42,165
$
509
$
— $
509
275,962
101,166
15,124
2,702
1,798
285
(1,179)
—
—
$
5,294
$
(1,179) $
$
189,310
$
177
$
(29) $
101,166
13,804
1,877
621
(1,877)
(621)
$
2,675
$
(2,527) $
1,523
1,798
285
4,115
148
—
—
148
(1)
All amounts were offset in the Consolidated Statements of Financial Condition.
92
The following table summarizes the pre-tax impact of derivative activity within the Consolidated Statements of Income
and the Consolidated Statements of Comprehensive Income.
(In thousands)
Consolidated Statements of Income
Fair value hedges:
Interest rate contracts
Non-derivative hedged items
Not designated as hedges:
Income Statement Location
2015
2014
2013
Year Ended December 31,
Non-interest income
$
(142) $
Non-interest income
209
— $
—
—
—
Forward foreign exchange contracts
Non-interest expense
74,292
38,752
25,170
Interest rate lock commitments
Interest rate contracts
Net gain (loss) recognized
Consolidated Statements of Comprehensive Income
Net investment hedges:
Forward foreign exchange contracts
Net unrealized gain (loss)
Non-interest income
Non-interest income
Other comprehensive
income (loss)
$
$
$
431
4
285
(79)
—
—
74,794
$
38,958
$
25,170
7,613
7,613
$
$
3,126
3,126
$
$
1,625
1,625
TCF executes all of its forward 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 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, 2015, credit risk-related contingent features existed on forward foreign exchange contracts with a
notional value of $144.5 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 $2.9 million in additional collateral. There were no
forward
liability position at
December 31, 2015.
foreign exchange contracts containing credit risk-related
in a net
features
At December 31, 2015, TCF had posted $10.8 million and $1.4 million of cash collateral related to its interest rate
contracts and other contracts, respectively, and had received $1.0 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, interest
rate contracts, interest rate lock commitments, forward loan sales commitments, assets and liabilities held in trust for
deferred compensation plans and other contracts 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.
93
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
other securities and other mortgage-backed securities, 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, and obligations of states and political subdivisions. The fair value of these securities,
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. Other mortgage-backed
securities, for which there is little or no market activity, are categorized as Level 3 assets and the fair value of these
assets is determined by using internal pricing methods.
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, 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 non-accrual 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.
94
Interest Rate Contracts TCF executes interest rate swap agreements 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, minimizing TCF's net risk exposure resulting from such transactions. TCF
also entered into an interest rate swap agreement to convert its fixed-rate 2025 Notes to floating rate debt. 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/or borrower non-performance risk.
Interest Rate Lock Commitments and Forward Loan Sales Commitments TCF's interest rate lock commitments
are derivative instruments which are carried at fair value. The related forward loan sales commitments to sell the
resulting loans held for sale are also recorded 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 expected to be received 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.
Assets and Liabilities Held in Trust for Deferred Compensation Plans Assets held in trust for deferred
compensation plans include investments in publicly traded securities, 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.
Other Contracts TCF 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 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.
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.
95
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. 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:
Fair Value Measurements at December 31, 2015
Level 1
Level 2
Level 3
Total
U.S. Government sponsored enterprises and federal agencies
$
— $
621,930
$
— $
621,930
Other
Obligations of states and political subdivisions
Loans and leases held for sale
Forward foreign exchange contracts(1)
Interest rate contracts(1)
Interest rate lock commitments(1)
Forward loan sales commitments
—
—
—
—
—
—
—
Assets held in trust for deferred compensation plans
19,731
—
266,921
—
5,915
2,093
—
—
—
34
—
10,568
—
—
729
284
—
34
266,921
10,568
5,915
2,093
729
284
19,731
11,615
$
928,205
— $
1,192
2,317
13
19
19,731
305
$
23,577
—
13
19
—
305
337
$
$
19,731
$
896,859
— $
—
—
—
19,731
—
1,192
2,317
—
—
—
—
19,731
$
3,509
$
— $
— $
1,110
$
1,110
—
—
—
—
—
—
—
—
—
2,673
130,797
7,122
130,797
7,122
37,619
5,249
2,197
37,619
5,249
4,870
Total assets
Forward foreign exchange contracts(1)
Interest rate contracts(1)
Interest rate lock commitments(1)
Forward loan sales commitments
Liabilities held in trust for deferred compensation plans
Other contracts(1)
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
$
— $
2,673
$
184,094
$
186,767
(1) As permitted under GAAP, TCF has elected to net derivative receivables and derivative payables when a legally enforceable master netting agreement exists as
well as the related cash collateral received and paid. For purposes of this table, the derivative receivable and derivative payable balances are presented gross of
this netting adjustment.
96
(In thousands)
Recurring Fair Value Measurements:
Securities available for sale:
Mortgage-backed securities:
Fair Value Measurements at December 31, 2014
Level 1
Level 2
Level 3
Total
U.S. Government sponsored enterprises and federal agencies
$
— $
463,239
$
— $
463,239
Other
Loans and leases held for sale
Forward foreign exchange contracts(1)
Interest rate contracts(1)
Interest rate lock commitments(1)
Forward loan sales commitments
—
—
—
—
—
—
Assets held in trust for deferred compensation plans
18,703
—
—
3,211
1,798
—
—
—
Total assets
Forward foreign exchange contracts(1)
Interest rate contracts(1)
Forward loan sales commitments
Liabilities held in trust for deferred compensation plans
Other contracts(1)
Total liabilities
Non-recurring Fair Value Measurements:
Securities held to maturity
Loans
Interest-only strips
Other real estate owned:
Consumer
Commercial
$
$
$
$
$
$
18,703
$
468,248
— $
—
—
18,703
—
177
1,877
—
—
—
18,703
$
2,054
$
55
3,308
—
—
285
19
—
55
3,308
3,211
1,798
285
19
18,703
3,667
$
490,618
— $
177
1,877
42
18,703
621
$
21,420
—
42
—
621
663
— $
— $
1,516
$
1,516
—
—
—
—
—
—
—
4,839
164,897
41,204
40,502
8,866
164,897
41,204
40,502
13,705
Repossessed and returned assets
Total non-recurring fair value measurements
2,988
264,812
(1) As permitted under GAAP, TCF has elected to net derivative receivables and derivative payables when a legally enforceable master netting agreement exists as
well as the related cash collateral received and paid. For purposes of this table, the derivative receivable and derivative payable balances are presented gross of
this netting adjustment.
258,410
— $
1,563
1,425
6,402
—
$
$
$
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 2015, 2014 and 2013.
97
The following table presents changes in Level 3 assets and liabilities measured at fair value on a recurring basis.
(In thousands)
Securities
Available
for Sale
Loans and
Leases
Held for Sale
Interest
Rate Lock
Commitments
Forward
Loan Sales
Commitments
Other
Contracts
Asset (liability) balance, December 31, 2012
$
127
$
— $
— $
— $
(1,227)
Principal paydowns / settlements
Asset (liability) balance, December 31, 2013
Total net gains (losses) included in:
Net income
Sales
Purchases / originations
Principal paydowns / settlements
Asset (liability) balance, December 31, 2014
Total net gains (losses) included in:
Net income
Sales
Originations
Principal paydowns / settlements
(34)
93
—
—
—
(38)
55
—
—
—
(21)
—
—
72
(39,246)
42,482
—
3,308
(68)
(289,751)
297,079
—
—
—
285
—
—
—
285
431
—
—
—
—
—
(23)
—
—
—
(23)
288
—
—
—
Asset (liability) balance, December 31, 2015
$
34
$
10,568
$
716
$
265
$
328
(899)
(47)
—
—
325
(621)
—
—
—
316
(305)
Fair Value Option
In the third quarter of 2014, TCF initiated a correspondent lending program in which TCF Bank originates first mortgage
lien loans in its primary banking markets and sells the loans through a correspondent relationship. 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.
(In thousands)
Fair value carrying amount
Aggregate unpaid principal amount
Fair value carrying amount less aggregate unpaid principal
At December 31,
2015
2014
$
$
10,568
$
10,547
21
$
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 non-accrual status at December 31, 2015 and
2014. The net gain from initial measurement of the correspondent lending loans held for sale, any subsequent changes
in fair value while the loans are outstanding and any actual adjustment to the gains realized upon sales of the loans
totaled $6.3 million and $0.9 million for 2015 and 2014, respectively, and is included in gains on sales of consumer
real estate loans, net. This amount excludes the impact from the interest rate lock commitments and forward loan
sales commitments which are also included in gains on sales of consumer real estate loans, net.
98
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, 2015 and 2014, 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.
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.
(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)
Carrying
Amount
Estimated Fair Value at December 31, 2015
Level 1
Level 2
Level 3
Total
$
70,537
$
— $
70,537
$
— $
70,537
201,920
157,625
5,464,272
2,593,429
552,403
1,909,672
2,146,754
2,647,596
19,297
(156,054)
44,332
—
—
—
—
—
—
—
—
—
—
—
202,443
—
—
—
—
—
—
—
—
—
—
4,510
165,387
206,953
165,387
5,543,273
2,556,018
531,274
1,888,664
2,132,435
2,650,429
14,699
—
48,817
5,543,273
2,556,018
531,274
1,888,664
2,132,435
2,650,429
14,699
—
48,817
Total financial instrument assets
$ 15,651,783
$
— $
272,980
$ 15,535,506
$ 15,808,486
Financial instrument liabilities:
Deposits
Long-term borrowings
$ 16,719,989
$ 12,816,196
$ 3,927,434
$
— $ 16,743,630
1,036,652
—
1,035,846
5,427
1,041,273
Total financial instrument liabilities
$ 17,756,641
$ 12,816,196
$ 4,963,280
$
5,427
$ 17,784,903
Financial instruments with off-balance sheet risk:(3)
Commitments to extend credit
Standby letters of credit
Total financial instruments with off-balance sheet risk
$
$
23,937
$
— $
23,937
$
— $
23,937
(35)
—
(35)
—
(35)
23,902
$
— $
23,902
$
— $
23,902
(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.
99
(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)
Carrying
Amount
Estimated Fair Value at December 31, 2014
Level 1
Level 2
Level 3
Total
$
85,492
$
— $
85,492
$
— $
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
—
—
—
—
—
—
—
—
—
—
—
217,418
—
—
—
—
—
—
—
—
—
—
4,916
139,370
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
Total financial instrument assets
$ 14,800,964
$
— $
302,910
$ 14,739,987
$ 15,042,897
Financial instrument liabilities:
Deposits
Long-term borrowings
$ 15,449,882
$ 12,400,693
$ 3,063,850
$
— $ 15,464,543
1,232,065
—
1,246,221
8,054
1,254,275
Total financial instrument liabilities
$ 16,681,947
$ 12,400,693
$ 4,310,071
$
8,054
$ 16,718,818
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
$
— $
25,885
$
— $
25,885
(47)
—
(47)
—
(47)
25,838
$
— $
25,838
$
— $
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.
100
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 Per Common Share:
Net income available to common stockholders
Earnings allocated to participating securities
Earnings allocated to common stock
Weighted-average common shares outstanding for basic
earnings per common share
Basic earnings per common share
Diluted Earnings Per Common Share:
Earnings allocated to common stock
Weighted-average common shares outstanding used in basic
earnings per common share calculation
Net dilutive effect of:
Non-participating restricted stock
Stock options
Weighted-average common shares outstanding for diluted
earnings per common share
Diluted earnings per common share
$
$
$
$
$
Year Ended December 31,
2015
2014
2013
177,735
$
154,799
$
45
40
177,690
$
154,759
$
132,603
71
132,532
165,696,678
163,581,435
161,016,004
1.07
$
0.95
$
0.82
177,690
$
154,759
$
132,532
165,696,678
163,581,435
161,016,004
335,193
210,049
250,499
252,892
719,459
191,092
166,241,920
164,084,826
161,926,555
1.07
$
0.94
$
0.82
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 and restricted stock units 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 2015, 2014, and 2013, there were 4.5 million, 4.2 million and 3.8 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.
101
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
Note 22. Business Segments
Year Ended December 31,
2015
2014
2013
$
24,641
$
20,294
$
19,615
16,591
14,332
11,957
11,609
87,466
18,949
16,588
13,288
11,911
11,481
87,393
13,787
18,642
15,868
13,767
11,720
12,810
81,183
$
186,211
$
179,904
$
167,777
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 retail 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.
102
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, 2015:
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
Lending
Funding
Support
Services
Eliminations
and Other(1)
Consolidated
$
619,960
$
204,853
$
215
$
(4,640) $
820,388
50,547
227,000
462,842
117,323
216,248
8,700
—
2,397
213,297
436,174
(7,230)
(13,191)
—
—
—
112,354
106,907
3,232
2,430
—
19,388
—
(110,653)
(111,176)
(4,453)
336
—
—
52,944
441,998
894,747
108,872
205,823
8,700
19,388
Net income (loss) available to common stockholders
$
207,548
$ 17,963,060
$
$
(13,191) $
(16,958) $
336
$
177,735
7,469,377
$
260,527
$ (5,001,260) $ 20,691,704
Net income (loss) available to common stockholders
$
173,923
Total assets
Revenues from external customers:
Interest income
Non-interest income
Total
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
Total assets
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
Total assets
Revenues from external customers:
Interest income
Non-interest income
Total
$
865,513
$
26,417
$
— $
— $
891,930
227,000
213,245
1,753
—
441,998
$
1,092,513
$
239,662
$
1,753
$
— $
1,333,928
$
592,409
$
226,327
$
166
$
(3,273) $
815,629
92,800
211,166
427,451
101,972
181,352
7,429
—
2,937
220,568
435,248
3,316
5,394
—
—
—
135,491
139,993
(1,100)
(3,236)
—
19,388
—
(133,958)
(130,915)
(4,422)
(1,894)
—
—
95,737
433,267
871,777
99,766
181,616
7,429
19,388
$ 16,871,479
$
$
5,394
6,488,869
$
$
(22,624) $
(1,894) $
154,799
239,084
$ (4,204,821) $ 19,394,611
$
852,019
$
22,210
$
— $
— $
874,229
211,166
220,506
1,595
—
433,267
$
1,063,185
$
242,716
$
1,595
$
— $
1,307,496
$
568,286
$
237,289
$
115,408
168,387
401,386
76,641
143,238
7,032
—
2,960
235,238
442,531
9,759
17,277
—
—
3
—
130,329
133,575
21
(3,264)
—
19,065
$
(2,954) $
802,624
—
(129,896)
(132,223)
(2,076)
1,449
—
—
118,368
404,058
845,269
84,345
158,700
7,032
19,065
$ 16,197,766
$
$
17,277
7,862,797
$
$
(22,329) $
1,449
$
132,603
228,528
$ (5,909,251) $ 18,379,840
$
840,250
$
24,290
$
168,387
235,185
$
1,008,637
$
259,475
$
— $
486
486
$
— $
864,540
—
404,058
— $
1,268,598
Net income (loss) available to common stockholders
$
136,206
(1) Other includes the unallocated portion of pension and other postretirement benefits (expenses) attributable to the annual determination of actuarial gains and
losses.
103
Note 23. Parent Company Financial Information
TCF Financial's (parent company only) condensed statements of financial condition as of December 31, 2015 and
2014 and the condensed statements of income and cash flows for the years ended December 31, 2015, 2014 and
2013 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
Condensed Statements of Income
(In thousands)
Interest income
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 subsidiary
Income tax benefit
Income (loss) before equity in undistributed earnings of subsidiary
Equity in undistributed earnings of bank subsidiary
Net income
Preferred stock dividends
At December 31,
2015
2014
$
$
$
$
69,503
$
2,205,818
16,217
9,216
71,781
2,037,781
13,862
12,628
2,300,754
$
2,136,052
9,838
$
9,838
2,290,916
2,300,754
$
14,403
14,403
2,121,649
2,136,052
Year Ended December 31,
2015
2014
2013
$
306
$
365
$
419
25,000
17,281
1,733
44,014
13,905
342
5,344
19,591
24,729
435
25,164
171,959
197,123
19,388
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
Net income available to common stockholders
$
177,735
$
154,799
$
132,603
104
Condensed Statements of Cash Flows
(In thousands)
Cash flows from operating activities:
Net income
Year Ended December 31,
2015
2014
2013
$
197,123
$
174,187
$
151,668
Adjustments to reconcile net income to net cash provided by (used in) operating
activities:
Equity in undistributed earnings of bank subsidiary
(171,959)
(156,098)
(152,977)
Gains on sales of assets, net
Other, net
Net cash provided by (used in) operating activities
Cash flows from investing activities:
Proceeds from sales of securities available for sale
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:
Dividends paid on preferred stock
Dividends paid on common stock
Common 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
(50)
1,308
26,422
—
(65)
92
—
27
(19,388)
(37,302)
24,835
558
2,570
(28,727)
(2,278)
71,781
(1,177)
16,430
33,342
2,813
(260)
91
—
2,644
(19,388)
(32,731)
23,083
1,316
740
(26,980)
9,006
62,775
$
69,503
$
71,781
$
(350)
9,962
8,303
—
(148)
—
869
721
(19,065)
(32,227)
20,179
(473)
—
(31,586)
(22,562)
85,337
62,775
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, 2015, TCF Bank could
pay a total of approximately $481.0 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 regulatory examinations and enforcement actions brought by federal regulators, including the
Securities and Exchange Commission, the Federal Reserve, the OCC and the Consumer Financial Protection Bureau
("CFPB"), and TCF's regulatory authorities may impose sanctions on TCF for failures related to regulatory compliance.
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. Except as discussed below, 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.
105
On October 29, 2015, TCF received a Notice and Opportunity to Respond and Advise letter ("NORA Letter") from the
CFPB notifying TCF that the CFPB’s Office of Enforcement is considering recommending that the CFPB take legal
action against TCF related to compliance with laws relating to unfair, deceptive and abusive acts and practices and
Regulation E, §1005.17, in connection with TCF’s practices in administering checking account overdraft program "opt-
in" requirements. The purpose of a NORA Letter is to ensure that potential subjects of enforcement actions have the
opportunity to present their positions to the CFPB before an enforcement action is recommended or commenced and
TCF has provided the CFPB with a written statement setting forth the reasons of law and policy why it believes that
the CFPB should not take action. TCF is in discussions with the CFPB and is seeking to reach an appropriate resolution
of the matter. We are currently unable to predict the ultimate timing or outcome of this matter. There can be no assurance
that the CFPB will not utilize its enforcement authority through settlement, administrative proceedings or litigation and
seek remediation, disgorgement, penalties, other monetary relief, injunctive relief or changes to TCF’s business
practices or operations, which could have a material adverse effect on TCF.
Note 25. Accumulated Other Comprehensive Income (Loss)
The components of other comprehensive income (loss) and the related tax effects are presented in the table below.
(In thousands)
Year Ended December 31, 2015:
Securities available for sale:
Before Tax
Tax Effect
Net of Tax
Unrealized gains (losses) arising during the period
$
(2,523) $
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, 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
Total other comprehensive income (loss)
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
$
$
$
$
1,159
(1,364)
7,613
(8,304)
(46)
(2,101) $
955
$
(407)
548
(2,900)
—
17
(2,335) $
29,071
$
(10,932) $
(76)
28,995
3,126
(3,704)
(47)
29
(10,903)
(1,181)
—
17
28,370
$
(12,067) $
(61,177) $
23,053
$
(860)
(62,037)
1,625
(1,979)
(46)
324
23,377
(614)
—
18
(1,568)
752
(816)
4,713
(8,304)
(29)
(4,436)
18,139
(47)
18,092
1,945
(3,704)
(30)
16,303
(38,124)
(536)
(38,660)
1,011
(1,979)
(28)
(39,656)
Total other comprehensive income (loss)
$
(62,437) $
22,781
$
(1) Foreign investments are deemed to be permanent in nature and therefore TCF does not provide for taxes on foreign currency translation adjustments.
106
Reclassifications of net (gains) losses to net income for securities available for sale were recorded in the Consolidated
Statements of Income in gains (losses) on securities, net for sales of securities and in interest income for those securities
that were previously transferred to held to maturity. See Note 4, Securities Available for Sale and Securities Held to
Maturity, for additional information regarding the transfer. The tax effect of these reclassifications was recorded in
income tax expense in the Consolidated Statements of Income. See Note 16, Employee Benefit Plans, for additional
information regarding TCF's recognized postretirement prior service cost.
Accumulated other comprehensive income (loss) balances are presented in the table below.
(In thousands)
At or For the Year Ended December 31, 2015:
Securities
Available
for Sale
Net
Investment
Hedges
Foreign
Currency
Translation
Adjustment
Recognized
Postretirement
Prior
Service Cost
Total
Balance, beginning of period
$
(8,891) $
2,536
$
(4,760) $
205
$
(10,910)
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, 2014:
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, 2013:
Balance, beginning of period
Other comprehensive income (loss)
Amounts reclassified from accumulated other
comprehensive income (loss)
Net other comprehensive income (loss)
(1,568)
752
(816)
4,713
—
4,713
(8,304)
—
(8,304)
—
(29)
(29)
(5,159)
723
(4,436)
(9,707) $
7,249
$
(13,064) $
176
$
(15,346)
(26,983) $
591
$
(1,056) $
235
$
(27,213)
18,139
(47)
18,092
1,945
—
1,945
(3,704)
—
(3,704)
—
(30)
(30)
16,380
(77)
16,303
(8,891) $
2,536
$
(4,760) $
205
$
(10,910)
11,677
$
(420) $
923
$
263
$
12,443
$
$
$
$
(38,124)
(536)
(38,660)
1,011
—
1,011
(1,979)
—
(1,979)
—
(28)
(28)
(39,092)
(564)
(39,656)
(27,213)
Balance, end of period
$
(26,983) $
591
$
(1,056) $
235
$
107
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)
(In thousands, except per-share data)
Dec. 31,
2015
Sep. 30,
2015
Jun. 30,
2015
Mar. 31,
2015
Dec. 31,
2014
Sep. 30,
2014
Jun. 30,
2014
Mar. 31,
2014
Net interest income
$ 205,669 $ 205,270 $ 206,029 $ 203,420 $ 204,074 $ 204,180 $ 206,101 $ 201,274
Provision for credit losses
17,607
10,018
12,528
12,791
55,597
15,739
9,909
14,492
Three Months Ended
Net interest income after provision for
credit losses
Non-interest income
Non-interest expense
Income before income tax expense
Income tax expense
Income after income tax expense
Income attributable to non-controlling
interest
Preferred stock dividends
Net income available to common
stockholders
Net income per common share:
Basic
Diluted
$
$
$
188,062
195,252
193,501
190,629
148,477
188,441
196,192
186,782
115,659
112,252
113,449
100,638
109,768
116,076
104,016
103,407
222,587
222,284
223,109
226,767
221,758
219,688
213,195
217,136
81,134
26,614
54,520
2,028
4,847
85,220
30,528
54,692
2,117
4,847
83,841
28,902
54,939
2,684
4,847
64,500
22,828
41,672
1,871
4,847
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
47,645 $
47,728 $
47,408 $
34,954 $
19,141 $
47,470 $
48,278 $
39,910
0.29 $
0.29 $
0.29 $
0.29 $
0.29 $
0.29 $
0.21 $
0.21 $
0.12 $
0.12 $
0.29 $
0.29 $
0.30 $
0.29 $
0.25
0.24
108
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, 2015.
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 Securities and Exchange Commission'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, 2015,
that materially affected, or are reasonably likely to materially affect, TCF's internal control over financial reporting.
109
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, 2015. 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, 2015.
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, 2015.
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.
110
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, 2015, 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, 2015, based on criteria established in Internal Control - Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the consolidated statements of financial condition of TCF Financial Corporation and subsidiaries as of
December 31, 2015 and 2014, 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, 2015, and our report dated
February 29, 2016 expressed an unqualified opinion on those consolidated financial statements.
Minneapolis, Minnesota
February 29, 2016
111
Item 9B. Other Information
None.
Part III
Item 10. Directors, Executive Officers and Corporate Governance
Information regarding directors and executive officers of TCF is set forth in the following sections of TCF's definitive
Proxy Statement for the 2016 Annual Meeting of Stockholders to be held on April 27, 2016 (the "2016 Proxy") and is
incorporated herein by reference: Election of Directors; Background of Executive Officers Who Are Not Directors; and
Section 16(a) Beneficial Ownership Reporting Compliance.
Information regarding procedures for nominations of Directors is set forth in the following sections of TCF's 2016 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 2016 Proxy and is incorporated herein by reference: Election of Directors - Background of the Nominees;
Corporate Governance - Board Committees, Committee Memberships, and Meetings in 2015; 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 all members of the Audit Committee, including Thomas A. Cusick, Karen L. Grandstrand,
George G. Johnson, Richard H. King, Vance K. Opperman, Roger J. Sit and Richard A. Zona, are independent and
that Messrs. Cusick, Johnson, Opperman and Zona each meets the requirements of audit committee financial experts.
Additional information regarding Ms. Grandstrand, Mr. Johnson, Mr. King, Mr. Opperman, Mr. Sit and Mr. Zona and
the other directors is set forth in the section Election of Directors - Background of the Nominees in TCF's 2016 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 "Learn More" under the heading
"Corporate Governance" and then either "Code of Ethics Policy" or "Code of Ethics for Senior Financial Management,"
respectively. Any changes to the Code of Ethics or the 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.
112
Item 11. Executive Compensation
Information regarding compensation of directors and executive officers of TCF is set forth in the following sections of
TCF's 2016 Proxy and is incorporated herein by reference: Corporate Governance - Compensation, Nominating, and
Corporate Governance Committee - Compensation Committee Interlocks and Insider Participation; Director
Compensation; Compensation Discussion and Analysis; Compensation Committee Report; and Executive
Compensation.
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 2016 Proxy and is
incorporated herein by reference: Equity Compensation Plans Approved by Stockholders; and Ownership of TCF
Stock.
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 2016 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 2016 Proxy
and is incorporated herein by reference.
113
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, 2015 and 2014
Consolidated Statements of Income for each of the years in the three-year period ended December 31,
2015
Consolidated Statements of Comprehensive Income for each of the years in the three-year period ended
December 31, 2015
Consolidated Statements of Equity for each of the years in the three-year period ended December 31, 2015
Consolidated Statements of Cash Flows for each of the years in the three-year period ended
December 31, 2015
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
19
55
56
57
58
59
60
108
110
111
117
114
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.
SIGNATURES
TCF FINANCIAL CORPORATION
/s/ Craig R. Dahl
Craig R. Dahl,
Vice Chairman, President and Chief Executive Officer
(Principal Executive Officer)
Dated: February 29, 2016
115
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
indicated.
following persons on behalf of
the capacities and on
the registrant and
the dates
in
Name
Title
/s/ Craig R. Dahl
Craig R. Dahl
/s/ Brian W. Maass
Brian W. Maass
/s/ Susan D. Bode
Susan D. Bode
/s/ Peter Bell
Peter Bell
/s/ William F. Bieber
William F. Bieber
/s/ Theodore J. Bigos
Theodore J. Bigos
/s/ William A. Cooper
William A. Cooper
/s/ Thomas A. Cusick
Thomas A. Cusick
/s/ Karen L. Grandstrand
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, President 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 and Chairman
Director
Director
Director, Vice Chairman and Chief Operating Officer
Director
Director
Director
Director
Director
Director
Director
116
Date
February 29, 2016
February 29, 2016
February 29, 2016
February 29, 2016
February 29, 2016
February 29, 2016
February 29, 2016
February 29, 2016
February 29, 2016
February 29, 2016
February 29, 2016
February 29, 2016
February 29, 2016
February 29, 2016
February 29, 2016
February 29, 2016
February 29, 2016
INDEX TO EXHIBITS
Exhibit
Number
Description
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*
Amended and Restated Certificate of Incorporation of TCF Financial Corporation [incorporated by reference to Exhibit 3.1 to
TCF Financial Corporation’s Current Report on Form 8-K filed April 28, 2015 (No. 15798862)]
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 20, 2015 (No.151166907)]
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 2015 Omnibus Incentive Plan [incorporated by reference to Exhibit 10.1 to TCF Financial Corporation’s Current
Report on Form 8-K filed April 28, 2015 (No. 15798862)]
Form of Restricted Stock Award Agreement under the TCF Financial 2015 Omnibus Incentive Plan [incorporated by reference
to Exhibit 10.2 to TCF Financial Corporation’s Current Report on Form 8-K filed April 28, 2015 (No. 15798862)]
Form of Performance-Based Restricted Stock Award Agreement under the TCF Financial 2015 Omnibus Incentive Plan
[incorporated by reference to Exhibit 10.3 to TCF Financial Corporation’s Current Report on Form 8-K filed April 28, 2015
(No. 15798862)]
Form of Restricted Stock Unit Agreement under the TCF Financial 2015 Omnibus Incentive Plan [incorporated by reference
to Exhibit 10.4 to TCF Financial Corporation’s Current Report on Form 8-K filed April 28, 2015 (No. 15798862)]
Form of Performance-Based Restricted Stock Unit Agreement under the TCF Financial 2015 Omnibus Incentive Plan
[incorporated by reference to Exhibit 10.5 to TCF Financial Corporation’s Current Report on Form 8-K filed April 28, 2015
(No. 15798862)]
2015 Performance-Based Restricted Stock Unit Agreement under the TCF Financial 2015 Omnibus Incentive Plan entered
into by certain executives [incorporated by reference to Exhibit 10.6 to TCF Financial Corporation’s Current Report on Form
8-K filed April 28, 2015 (No. 15798862)]
10(a)-6*#
Form of 2016 Management Incentive Plan - Executive, as executed by certain executives
10(b)*
10(b)-1*
10(b)-2*
10(b)-3*
10(b)-4*
10(b)-5*
10(b)-6*
10(b)-7*
10(c)
10(c)-1*
10(d)*
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 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)]
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)]
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)]
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 2015 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, 2014 (No. 15639563)]
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)]
117
10(d)-1*
10(e)*
Employment Agreement with Craig R. Dahl effective as of January 1, 2016 [incorporated by reference to Exhibit 10.1 to TCF
Financial Corporation’s Current Report on Form 8-K filed October 30, 2015 (No. 151184773)]
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)]
10(e)-1*#
TCF Employees Stock Purchase Plan - Supplemental Plan, as amended and restated effective January 1, 2016
10(f)*
10(g)*
10(h)*
10(i)*
10(j)*
10(k)*
10(k)-1*
10(k)-2*
10(l)*
10(l)-1*
10(m)*
10(n)*#
10(o)*
10(p)*
12(a)#
12(b)#
21#
23#
31.1#
31.2#
32.1#
32.2#
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)]
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)]
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 for the quarter ended June 30, 2012 (No. 12986667)]
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 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 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
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, 2015, 2014, 2013, 2012 and 2011
Consolidated Ratios of Earnings to Fixed Charges and Preferred Stock Dividends for years ended December 31, 2015, 2014,
2013, 2012 and 2011
Subsidiaries of TCF Financial Corporation (as of December 31, 2015)
Consent of KPMG LLP dated February 29, 2016
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
118
Financial statements from the Annual Report on Form 10-K of the Company for the year ended December 31, 2015, 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
101#
*Executive Contract
# Filed herein
119
CORPORATE
INFORMATION
WINTHROP RESOURCES
CORPORATION
Headquarters
11100 Wayzata Boulevard
Suite 800
Minnetonka, MN 55305
(952) 936-0226
TCF INVENTORY FINANCE, INC.
Headquarters
1475 East Woodfield Road
Suite 1100
Schaumburg, IL 60173
(877) 872-8234
GATEWAY ONE LENDING &
FINANCE, LLC
Headquarters
160 North Riverview Drive
Suite 100
Anaheim, CA 92808
(888) 810-8860
EXECUTIVE OFFICES
TCF Financial Corporation
200 Lake Street East
Wayzata, MN 55391-1693
(952) 745-2760
TCF NATIONAL BANK
Headquarters
2508 South Louise Avenue
Sioux Falls, SD 57106
MINNESOTA/SOUTH DAKOTA
Regional Office
Plymouth Corporate Center
1405 Xenium Lane
Plymouth, MN 55441
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)
OFFICES
(As of December 31, 2015)
ILLINOIS/WISCONSIN/INDIANA
Regional Office
800 Burr Ridge Parkway
Burr Ridge, IL 60527
Traditional Branches
Chicagoland (37)
Milwaukee Area (11)
Kenosha/Racine Area (6)
Supermarket Branches
Chicagoland (117)
Milwaukee Area (7)
Indiana (1)
Campus Branches
Chicagoland (1)
MICHIGAN
Regional Office
17440 College Parkway
Livonia, MI 48152
Traditional Branches
Metro Detroit Area (51)
Supermarket Branches
Metro Detroit Area (1)
Campus Branches
Metro Detroit Area (1)
COLORADO/ARIZONA
Regional Office
8085 South Chester Street
Suite 201
Centennial, CO 80112
Traditional Branches
Metro Denver Area (25)
Colorado Springs (8)
Metro Phoenix Area (7)
Supermarket Branches
Metro Denver Area (1)
A-2
STOCKHOLDER INFORMATION
TRADING OF COMMON STOCK
The common stock of TCF Financial Corporation is listed
INVESTOR/ANALYST CONTACT
Jason Korstange
on the New York Stock Exchange under the symbol TCB.
Senior Vice President
At December 31, 2015, TCF had approximately 169.8 million
Investor Relations
shares of common stock outstanding.
(952) 745-2755
ANNUAL MEETING
The Annual Meeting of Stockholders of TCF will be held
on Wednesday, April 27, 2016, 4:00 p.m. (local time) at
the Marriott Minneapolis West, 9960 Wayzata Boulevard,
St. Louis Park, Minnesota.
TRANSFER AGENT AND REGISTRAR
Computershare Trust Company, N.A.
PO Box 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
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 filings. Information may also be obtained, free of
charge, from:
reinvestment plan for TCF Financial Corporation common
TCF Financial Corporation
stock. This stockholder-paid program provides a low-
cost alternative to traditional retail brokerage methods of
purchasing, holding and selling TCF common stock. The
Investor Relations
200 Lake Street East
Mail Code: EX0-01-C
Plan is sponsored and administered by our Transfer Agent,
Wayzata, MN 55391-1693
Computershare, Inc. Information is available from:
(952) 745-2760
Computershare Trust Company, N.A.
PO Box 30170
College Station, TX 77842-3170
(800) 443-6852
www.computershare.com/investor
A-3
CREDIT RATINGS
Standard & Poor’s
Outlook
TCF Financial Corporation:
Long-term Counterparty
Short-term Counterparty
TCF National Bank:
Long-term Counterparty
Short-term Counterparty
Preferred Stock
Subordinated Debt
Fitch Ratings
Outlook
TCF Financial Corporation:
Long-term IDR
Short-term IDR
TCF National Bank:
Long-term IDR
Short-term IDR
Preferred Stock
Subordinated Debt
Moody’s
Outlook
TCF National Bank:
Long-term Issuer
Long-term Deposits
Short-term Deposits
Subordinated Debt
A-4
Last Review
September 2015
Stable
BBB-
A-3
BBB
A-2
BB-
BBB-
Last Review
January 2016
Stable
BBB-
F3
BBB-
F3
B
BB+
Last Review
October 2015
Stable
Baa2
A2
Prime-1
Baa2
RECONCILIATION OF GAAP TO NON-GAAP
FINANCIAL MEASURES1
(Dollars in thousands)
Computation of tangible book value
per common share:
At December 31,
2015
2014
Total equity
$2,306,917 $ 2,135,364
Less: Non-controlling interest
in subsidiaries
16,001
13,715
Total TCF Financial Corporation
stockholders’ equity
2,290,916
2,121,649
Less:
Preferred stock
Goodwill
Other intangibles
263,240
263,240
225,640
225,640
3,126
4,641
Tangible common equity
$ 1,798,910 $ 1,628,128
Common stock shares outstanding
169,844,464
167,461,002
Tangible book value per
common share
(Dollars in thousands)
Computation of return on average
tangible common equity:
Net income available to
common stockholders
Other intangibles amortization,
net of tax
Adjusted net income available to
common stockholders
Average balances:
Total equity
Less: Non-controlling interest
in subsidiaries
Total TCF Financial Corporation
stockholders’ equity
Less:
Preferred stock
Goodwill
Other intangibles
$ 10.59 $ 9.72
Year Ended December 31,
2015
2014
$ 177,735 $ 154,799
1,000
1,062
$ 178,735 $ 155,861
$2,217,204 $2,058,442
19,514
17,014
2,197,690
2,041,428
263,240
263,240
225,640
225,640
3,913
5,498
Average tangible common equity
$1,704,897 $ 1,547,050
Return on average tangible
common equity
10.48%
10.08%
1 When evaluating capital adequacy and utilization, management considers
financial measures such as tangible book value per common share and return
on average tangible common equity. These measures are non-GAAP financial
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.
STOCK DATA
Year
2015
Close
High
Low
Dividends
Paid
Per Share
Year
2012
Close
High
Low
Dividends
Paid
Per Share
Fourth Quarter
$14.12
$15.94
$13.78
$0.075
Fourth Quarter
$12.15
$12.49
$10.45
$0.05
Third Quarter
Second Quarter
First Quarter
15.16
16.61
15.72
17.07
17.29
16.31
14.35
14.93
13.78
0.05
0.05
0.05
Third Quarter
Second Quarter
First Quarter
11.94
11.48
11.89
12.43
12.53
12.58
2014
2011
Fourth Quarter
$15.89
$16.12
$13.95
$0.05
Fourth Quarter
$10.32
$11.68
Third Quarter
Second Quarter
First Quarter
15.53
16.37
16.66
16.95
17.30
17.39
15.12
15.01
15.31
0.05
0.05
0.05
Third Quarter
Second Quarter
First Quarter
9.16
13.80
15.86
14.37
16.04
17.37
9.59
10.43
10.04
$8.61
8.66
13.37
14.60
0.05
0.05
0.05
$0.05
0.05
0.05
0.05
2013
Fourth Quarter
$16.25
$16.46
$14.29
$0.05
Third Quarter
Second Quarter
First Quarter
14.28
14.18
14.96
16.68
15.32
15.04
13.69
13.49
12.39
0.05
0.05
0.05
STOCK PRICE PERFORMANCE (Dollars)
Stock Price*
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
6-86
12-87
12-89
12-91
12-93
12-95
12-97
12-99
12-01
12-03
12-05
12-07
12-09
12-11
12-13
12-15
*Stock split adjusted
For more historical information on TCF’s stock price and dividend, visit http://ir.tcfbank.com.
$1.50
1.25
1.00
0.75
0.50
0.25
A-5
SENIOR OFFICERS
TCF FINANCIAL CORPORATION
TCF NATIONAL BANK
Vice Chairman, President
and Chief Executive Officer
Craig R. Dahl
Vice Chairman and
Chief Operating Officer
Thomas F. Jasper
Executive Vice President,
Chief Financial Officer
Brian W. Maass
Executive Vice President,
Consumer Banking
Michael S. Jones
Executive Vice President,
Wholesale Banking
William S. Henak
Chief Credit Officer
Mark A. Bagley
Executive Vice President,
Chief Information Officer
Thomas J. Butterfield
Chief Risk Officer
James M. Costa
Chief Audit Executive Officer
Andrew J. Jackson
Senior Vice Presidents
Susan D. Bode
Joseph T. Green
Jason E. Korstange
Jason S. Sasanfar
Tamara K. Schuette
Barbara E. Shaw
A-6
Consumer Banking
Executive Vice President,
Consumer Banking
Michael S. Jones
Gateway One Lending & Finance, LLC
Executive Vice President,
National Consumer Lending
G. Brian MacInnis
President
David G. MacInnis
Chief Operating Officer
Todd A. Pierson
Executive Vice Presidents
Jennifer Ishiguro
Andrew B. Sturm
Gerald A. Wilkins
Senior Vice Presidents
Paul Y. Choi
Sydney B. Libsack
Retail Lending
Executive Vice President,
National Consumer Lending
G. Brian MacInnis
President,
National Residential Lending
Mark W. Rohde
Managing Director,
Retail Portfolio
Richard J. Chenitz
Executive Vice Presidents
Robert J. Brueggeman
Kevin Collier
Joseph W. Doyle
Claire M. Graupmann
Scott L. Lane
Senior Vice Presidents
Bradley C. Barthels
Patrica A. Buss
Rose M. Dickey
Michael A. Dill
Calvin E. Fuoss
Daniel B. Hoffman
Monica R. Husnik
Matthew D. Krueger
Sydney B. Libsack
Jeffery D. Memeti
Bjorn J. Peterson
Carol B. Schirmers
Thomas K. Torossian
Katrina Williams
Retail Banking
Managing Director,
Branch Banking
Mark L. Jeter
Managing Director,
Customer Segments
and Alternative Channels
Geoffrey C. Thomas
Executive Vice Presidents
Robert C. Borgstrom
Luis J. Campos
Kent J. Engler
Mark W. Gault
Michael J. Olson
Senior Vice Presidents
Beverly L. Burman
Delia M. Conrad
Brent L. Farka
Christopher N. Germann
Mark A. Goldman
Traci R. Mikesell
James A. Phelan
Jennifer K. Rohling
Camilla M. Stensen
Gregory A. Waltz
Cathleen L. Wilkins
Scott A. Winkel
Wholesale Banking
Executive Vice President,
Wholesale Banking
William S. Henak
Executive Vice President,
Chief Lending Officer
Mark D. Nyquist
TCF Equipment Finance
President
and Chief Executive Officer
Gary A. Peterson
Executive Vice Presidents
Bradley C. Gunstad
Judy I. VanOsdel
Senior Vice Presidents
Gary W. Anderson
Curtis D. Billmeyer
Peter C. Darin
James J. Filiatrault
Thomas A. Greco
James A. Groenewold
Paul M. Healey
Kyin Ong Lok
Richard V. Pawlewicz
Robert J. Stark
Mark H. Valentine
Jeffrey S. Wertz
Winthrop Resources Corporation
President and
Chief Executive Officer
Paul L. Gendler
Senior Vice Presidents
Gary W. Anderson
Jay R. Deverell
Timothy A. Haugen
Abigail R. Nesbitt
Jeffrey L. Ripperton
Dean J. Stinchfield
Bradley R. Swenson
TCF Inventory Finance, Inc.
President
and Chief Executive Officer
Rosario A. Perrelli
Executive Vice Presidents
Kevin L. Harrington
Mark J. Wrend
Senior Vice Presidents
Thomas E. Evans
Eileen M. Meyer
Thomas L. Sorrentino
Commercial Banking
Managing Director
R. Patricia Kelly
President,
TCF Capital Funding
Joseph P. Gaffigan
Executive Vice Presidents
Thomas R. Bobak
William R. Patterson
Guy J. Rau
Senior Vice Presidents
Peter F.C. Armstrong
Kurt C. Beuker
Andrew T. Claar
Jeffrey T. Doering
Thomas G. Karle
David R. Larsen
Mark I. Manbeck
Russell P. McMinn
Kevin C. Nowak
Douglas A. Ortyn
Mark R. Pietrowiak
Janelle J. Rietz-Kamenar
Michael Roidt
Elisabeth A. Rojas
Edward J. Ryczek
Lisa M. Salazar
Patrick P. Skiles
Operations, Finance, Corporate
Development & Administration
Vice Chairman and
Chief Operating Officer
Thomas F. Jasper
Finance & Operations
Chief Financial Officer
Brian W. Maass
Executive Vice President,
Treasurer
Jason S. Sasanfar
Executive Vice President,
Corporate Controller
Tamara K. Schuette
Executive Vice Presidents
Susan D. Bode
Sharon K. Krumm
James C. LaPlante
Nicole C. Malinis
Senior Vice Presidents
Rion F. Cornell
Kathleen M. Cousins
Brian P. Engels
Thomas J. Gottwalt
Marcia L. O’Brien
Christy A. Powers
Legal
Executive Vice President,
General Counsel and Secretary
Joseph T. Green
Executive Vice Presidents
Kurt Bjorklund
Bradley C. Gunstad
Brian J. Hurd
Senior Vice Presidents
Sheri A. Ahl
Shelley A. Fitzmaurice
Kirk D. Johnson
Kristen E. Larson
Jacqueline A. Layton
Janella Jane Miller
R. Elizabeth Topoluk
Human Resources
Executive Vice President,
Corporate Human Resources Director
Barbara E. Shaw
Senior Vice Presidents
Edward J. Gallagher
Viane R. Hoefs
Roger T. Sorensen
Talent Management
Senior Vice President,
Director of Talent Management
Gloria J. Charley
Investor Relations
Senior Vice President,
Director of Investor Relations
Jason E. Korstange
Information Technology
Chief Information Officer
Thomas J. Butterfield
Executive Vice Presidents
Brett Brunick
Christopher Chapman
Martin F. Crowley
Gregg R. Goudy
Richard J. Nelson
Enterprise Risk Management
Chief Risk Officer
James M. Costa
Executive Vice Presidents
Douglass B. Hiatt
Beatrice E. Lingen
David M. Stautz
Senior Vice Presidents
Rita L. Carroll
Marcela Contreras
James C. Cummans
Duane R. Dunham
James M. Dunne
Phil B. Fandek
Zafar Farooq
Mark C. Grondahl
Roger W. Howe
Adam Leishman
Stephen A. Mancini
Sean P. McGuire
Richard G. McNutt
LaDonna C. Resch
Timothy H. Rote
Laura R. Santos
William A. Sarvela
Joseph R. Schneider
David Stafford
Credit Administration
Chief Credit Officer
Mark A. Bagley
Executive Vice Presidents
Lee A. Anderson
Christopher Meals
Senior Vice Presidents
Barbara L. Buss
Larry M. Czekaj
Robert A. Henry
Darci L. Juniper
Trisha L. Karki
Barbara E. King
Cynthia J. Rundorff
Charles Tocker
Christine M. Van Wassenhove
Risk Control Services
Chief Audit Executive Officer
Andrew J. Jackson
A-7
BOARD OF DIRECTORS
William A. Cooper 5
Chairman of the Board
Chairman since 1987
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.
Director since 2008
Thomas A. Cusick 2,5,6,7,8
Retired Vice Chairman,
TCF Financial Corporation
Craig R. Dahl 5,8
Vice Chairman, President
and Chief Executive Officer
Karen L. Grandstrand 1,2,4,5,6,7
Shareholder,
Fredrikson & Byron, P.A.
Director since 1988
Director since 2012
Director since 2010
Thomas F. Jasper
Vice Chairman and
Chief Operating Officer
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
Executive Vice President
and Chief Information Officer,
Thomson Reuters
Vance K. Opperman 1,2,4,5,6,7,8
President and
Chief Executive Officer,
Key Investment, Inc.
Director since 1998
Director since 2014
Director since 2009
James M. Ramstad 3,6,7
Former U.S. Congressman
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
Roger J. Sit 1,2,4,6,7
Chief Executive Officer,
Global Chief Investment Officer
and Director,
Sit Investment Associates
Director since 2015
A-8
Barry N. Winslow 3,6,7
Retired Vice Chairman,
TCF Financial Corporation
Richard A. Zona 2,5,6,7
Retired Vice Chairman,
U.S. Bancorp
Director since 2008
Director since 2011
OUR 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.
OUR 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 shareholders.
OUR VALUES
Lead with integrity
Be nimble
Build relationships
Be prudent
Create opportunities
Win as a passionate team
A-9
TCF Financial Corporation
200 Lake Street East
Wayzata, MN 55391-1693
tcfbank.com
TCFIR9362
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