the
power
of
ONE
TCF Financial Corporation
2016 Annual Report
4 STRATEGIC PILLARS
Introduced in 2015, the four strategic pillars represent the basis for TCF’s business model and strategic
decision making processes. The pillars are built on a strong enterprise risk management and credit
culture. Execution against these four pillars is critical to ensure the creation of superior and sustainable
financial performance.
DIVERSIFICATION
Focus on national vs. footprint lending increases quality
and diversification of portfolio
PROFITABLE
GROWTH
Strong origination and loan sale 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
TABLE OF CONTENTS
FORM 10-K
Letter to Our Shareholders 1
Business 1
Risk Factors 7
Selected Financial Data 20
Management’s Discussion and Analysis 21
Consolidated Financial Statements 58
Notes to Consolidated Financial Statements 63
Other Financial Data 111
CORPORATE INFORMATION
Mission, Vision and Values A-2
Offices A-3
Stockholder Information A-4
Senior Officers A-5
Board of Directors A-6
Remembering William A. Cooper A-7
THE POWER
OF ONE
TCF has focused on creating a
“One TCF” culture by bringing people
together and driving efficiencies
throughout the organization. Through
continued collaboration, we are poised
to demonstrate The Power of One.
Dear Shareholders:
Reflecting on 2016, I am pleased with our accomplishments,
our progress toward executing on our vision for the company
and the results we delivered for our shareholders. Despite
a persistently challenging banking environment in which
interest rates remained low, competition remained steady
and regulatory expectations continued to build, we were dis-
ciplined in our execution of important initiatives to drive the
company forward. We grew 2016 diluted earnings per com-
mon share by 7.5 percent from 2015, while return on average
assets of 1.05 percent increased two basis points. Our stock
price at the end of the year closed at $19.59, up 38.7 percent
compared to last year.
At TCF, we have a very unique business model that differenti-
ates us from our peers. Our management team understands
the challenges this model presents, but we also understand
the advantages it provides when executed efficiently and
consistently. We share the belief that executing our business
model creates superior and sustainable financial performance
which is demonstrated by the growth we generated in 2016.
This remains our primary focus as we go forward. We believe
we are just getting started in realizing our full potential as the
enhancements we are making to our business model, the
efficiencies we are driving throughout the organization, and
our ability to adapt to changing market conditions position
us well to meet our business goals.
A significant portion of my first year as CEO was spent on
the road, meeting with investors both to provide insight into
my views and plans for the company, as well as to gain a
Craig R. Dahl Vice Chairman, President and Chief Executive Officer
better understanding of the market’s view of TCF. I learned
a lot throughout this process. One of the most common
questions was, “how will you manage the company differ-
ently as CEO?” One of the ways I look at this question is not
so much about how I’m running the company differently, but
the significant changes that have taken place in our industry
and how we’re responding to them with the decisions we
are making today. Technology innovation and custom-
ers’ expectations about how we serve them are evolving
quickly. The pace of change is vastly accelerated and banks
are expected to deliver technology as good as or better than
other industries. We’re embracing these challenges and our
strategy enables us to position TCF to take full advantage of
emerging technology to benefit our customers, team mem-
bers and shareholders.
In addition, I restructured how our businesses and functional
teams are aligned by enhancing our leadership team to best
support this structure. By realigning roles and responsibil-
ities, we have been able to take full advantage of our deep
industry experiences while offering a fresh perspective and
innovative thinking across the organization. Next, we intro-
duced the concept of “One TCF” which has been an internal
rallying cry throughout all areas of TCF. “One TCF” represents
a cultural ideal and a mindset that we want all of our team
members to embrace. It fosters collaboration, unity, a desire
to ensure that we take into account the needs of the enter-
prise in every decision, and a commitment to improving
enterprise-wide efficiencies. We are still in the early stages,
but I am excited about the progress we have made to date.
1
In order to focus our organization and leadership team
around a common strategy, I also introduced four strategic
pillars that give us the ability to benchmark our progress
internally and provide a way for our shareholders to measure
our success. The four strategic pillars are: 1) diversification,
2) profitable growth, 3) operating leverage and 4) core fund-
ing. These pillars are executed inside of a strong enterprise
risk management and credit culture. TCF’s success in 2017
and beyond will be based on how well we are able to effi-
ciently execute against these pillars at multiple levels across
the TCF enterprise.
DIVERSIFICATION
We have a proven diversification philosophy that is derived
from a unique mix within our loan and lease portfolio and
revenue base. Our loan and lease portfolio is comprised of
five asset classes including consumer real estate, commer-
cial, leasing and equipment finance, inventory finance and
auto finance. Each of these portfolios is further diversified
by geography, rate, average loan size, estimated weighted
average life and collateral type. Having teams of experts at
lending in a wide range of asset classes allows us to pursue
thoughtful and selective growth based on market conditions.
We are not forced to grow in areas where pricing or credit
quality fail to align with our risk appetite simply because
we have no other avenues for growth. This also allows us
to adjust our focus based on macroeconomic factors and
it means we do not need all of our asset classes to perform
well at all times to deliver strong shareholder results.
With a national lending base, we are able to generate loan
and lease growth through a focus on higher credit quality
originations. If we had geographic limitations, we would be
required to originate loans and leases across the full credit
spectrum to generate growth. Instead, our diversification
strategy has been a catalyst for our strong credit quality
performance as net charge-offs of 0.26 percent declined four
basis points in 2016. While we have seen an increase in the
net charge-off rate for the auto finance portfolio, this has
been offset by a decrease in the net charge-off rate for our
consumer real estate portfolio.
For a diversified business model like ours to be successful,
leadership teams with expertise in their products are critical.
With this expertise, we have a proven track record of being
able to operate a wide variety of well-run and profitable
lending businesses.
PROFITABLE GROWTH
TCF grew loans and leases by 2.3 percent in 2016 as strong
growth in our wholesale businesses was partially offset by
the continued run-off of our consumer real estate first
2
TCF Inventory Finance — Honorees for the
2016 William A. Cooper Innovation Award
Team members with TCF Inventory Finance were
honored with the 2016 William A. Cooper Innovation
Award for their work in leveraging technology plat-
forms and improving processes that led to greater
operating efficiency for the business. This also gen-
erated incremental revenue opportunities, including
new business wins and service enhancements for
existing customers.
mortgage lien portfolio. Our focus, however, is not on the
pace of loan growth, but on our ability to generate profitable
growth. The foundation for our “profitable growth” philos-
ophy is our robust loan and lease origination capability. In
2016, we originated $16.8 billion of loans and leases across
multiple asset classes, a 10.3 percent increase from 2015.
This proven origination platform allows us to be thoughtful
in how we use these loans and leases to maximize our overall
profitability based on changing market conditions.
First, we were able to generate net interest income growth of
3.4 percent in 2016 driven by our strong net interest mar-
gin of 4.34 percent. Despite a competitive, low interest rate
environment, we achieved strong yield performance through
a combination of diversification and disciplined pricing. As
an asset sensitive bank, we are positioned to benefit further
in a rising rate environment. At December 31, 2016, 81 percent
of our average assets were variable/adjustable rate or short/
medium duration fixed rate. These assets will allow our port-
folio to re-price more quickly as interest rates rise.
Second, as a way to manage credit and concentration risk
while providing additional sources of revenue, we continued
to execute our loan sale and securitization strategy. In 2016,
we sold $3.8 billion of loans and generated $126.7 million of
revenue through gains on sales of loans and servicing fee
income. Five years ago, this revenue stream did not exist
for us. We believe our ability to leverage our loan origination
capabilities through secondary market activities sets us apart
in the industry.
In this period of low rates, we were able to recognize signifi-
cant value by leveraging our origination capabilities into the
secondary market. However, the relative profitability in the
secondary market for auto loans has declined significantly in
recent periods. Changing market conditions have resulted in
lower gain on sale spreads that challenge the effectiveness of
our originate-to-sell model in auto. If negative market condi-
tions persist in 2017, we will manage the business to a different
outcome. The diversification of our loan and lease portfolio
gives us the advantage of being flexible when determining
how capital is deployed to generate profitable growth.
As we look forward to 2017, our commercial portfolio
presents a potential opportunity for us. In recent years, we
have been very selective in this area as competition based
on pricing and terms in the commercial market was intense
and we perceived better growth opportunities in other asset
classes. Today, the commercial market is becoming more
favorable and we have capacity to grow, unlike some other
banks. In 2016, we were very active in adding new com-
mercial bankers in select markets and are optimistic about
the opportunities we are seeing. Overall, I believe we can
improve on our strong 2016 wholesale loan growth as the
economy strengthens while continuing to drive profitable
growth in 2017.
OPERATING LEVERAGE
We define operating leverage as simply growing revenue
at a higher rate than expenses. Our need to operate more
efficiently was a key topic in my conversations with investors
throughout the year. I am pleased to say that we took signifi-
cant steps toward this goal in 2016 as revenue growth of
4.1 percent outpaced expense growth of 1.7 percent. In addi-
tion, we have lowered our efficiency ratio from 70.9 percent
in 2015 to 69.2 percent in 2016. It is important to remember
that while we are looking to decrease our efficiency ratio over
time, we are not making decisions around investments solely
based on the immediate impact to our efficiency ratio.
We plan to be able to drive operating leverage going forward
by identifying efficiencies while actively reinvesting in our
businesses to meet the evolving needs of our customers.
We continued branch rationalization initiatives in 2016 that
included some supermarket branches in Illinois being replaced
by ATMs that feature advanced transaction capabilities.
This branch rationalization is continuing in 2017. We are also
making investments in our digital channels that will allow us
to improve the overall customer experience and increase our
customer base over time. This means rethinking the role of
our retail branches in our customer experience. With many
basic transactions now just a few clicks or thumbprint
away, our branches are where our customers go for deeper
conversations and help with their financial goals. Our
relationship bankers must be equipped with the tools and
technology to support our customers as we strive to ensure
we have sustainable platforms and products that enable
further business growth.
Fundamentally, we are managing our expense optimization
based on revenue growth. While there are opportunities to
manage expenses through stand-alone efficiency initiatives,
creating operating leverage requires that we also focus on our
ability to execute on the revenue strategies discussed as part
of our “profitable growth” pillar.
In my experience, approaching operating leverage challenges
by focusing on both the revenue and the expense portions of
the equation is much preferred versus approaching it solely
by cutting expenses. We are currently able to generate reve-
nue of a magnitude that you would expect to see in a bank
of a larger size than TCF. Our ongoing challenge is to find
ways to create this revenue more efficiently.
CORE FUNDING
The primary funding source of our loans and leases is our
low-cost deposit base, which totaled $17.2 billion at year-
end, a 3.1 percent increase over the prior year. This growth
was primarily driven by $318.6 million of checking account
growth. Our focus on retail deposits provides a competitive
pricing advantage in a rising rate environment. With approx-
imately 93 percent of our deposits being FDIC-insured due to
relatively lower individual account balances, our deposit base
has the potential to be more inelastic as rates climb.
We have demonstrated an expertise in being able to effec-
tively align our funding capabilities with our loan and lease
origination expectations. Through our various funding sources
across multiple markets, we have the necessary flexibility to
meet the needs of our current growth strategy.
Our ability to continue growing the checking base going
forward will be driven by the investments we are making
in our digital channels to meet the evolving needs of our cus-
tomers. TCF has long been known as a “convenience bank.”
As the definition of “convenience” continues to change in
our industry through enhancements to automated, digital,
mobile and online capabilities, we are taking significant steps
to ensure that we remain the convenience bank of choice for
the next generation.
As we work toward executing on these four strategic pillars
in 2017, it is important that we do so with a strong risk
management and credit culture. We have made significant
investments in these areas over the past several years to
ensure we are operating the organization in a thoughtful
and prudent way. These investments are paying off as they
3
have provided for additional oversight, improved processes,
more robust intelligence and more informed decision-making
across the enterprise.
HOW WE WILL WIN GOING FORWARD
I am confident that our strategic pillars provide a solid road
map for us to achieve long-term, sustained growth for our
shareholders. But achieving our full potential is also depen-
dent on our people and our commitment to attract, develop
and retain top talent. We continue to create opportunities
to bring new leaders into our organization who offer a fresh
perspective — even some from other industries. A highly
engaged workforce that’s focused on a common set of goals,
while knowing that their work can positively impact the
direction of our company, provides the engine to execute on
our strategy. I often say that we don’t want to be part of “me
too banking” — where we simply follow someone else’s lead.
We want to attract team members who have deep expe-
rience and expertise that we can leverage to create unique
business opportunities, which will ultimately become a com-
petitive advantage for us.
Our focus on people extends beyond the walls of our com-
pany. We recognize the important role we play in supporting
the lives of the people in the communities that we serve.
Strengthening communities isn’t just the right thing to do, it also
makes good business sense. Through the TCF Foundation, we
contributed more than $3 million in 2016 to over 530 chari-
table organizations that support education, human services,
community development and the arts. Our commitment
to education also extends to helping young people and
adults be financially prepared for life. Since we launched our
financial education programs in 2013, we’ve supported free,
independent financial education programs in more than
1,000 schools and reached more than 100,000 students.
Our online programs are free and available to anyone, and
are recognized as among the best in our industry. Supporting
our communities is core to our company’s values — and it
is a point of passion and pride for our team members, who
give thousands of volunteer hours in support of many worth-
while causes.
ADDITIONAL CONSIDERATIONS FOR 2017
Throughout 2016 we have been able to steadily grow capital.
We understand the importance of returning this excess
capital to our shareholders. In consultation with the Board,
we continue to have very thoughtful discussions about how
to most effectively allocate capital. There are four primary
options: 1) dividend increases, 2) stock buybacks, 3) organic
growth, and 4) corporate development. All of these options are
on the table and we will continue to work to ensure we make
decisions that are in the best interest of our shareholders.
4
In January 2017, the Consumer Financial Protection Bureau
(CFPB) filed a civil lawsuit regarding TCF’s past overdraft
opt-in practices. Unfortunately, after months of ongoing
discussions, we were unable to reach a resolution with the
CFPB. I want to make it clear that we believe our overdraft
protection opt-in program complied with the letter and
spirit of all applicable laws and regulations at all times, and
that our customers elected to participate in the overdraft
program knowingly and voluntarily. We value our customers
and have a deep understanding of their banking needs and
how they use our products and services. We disagree with
the claims made by the CFPB and we intend to defend
ourselves accordingly.
Following the recent presidential election, bank stocks,
including TCF, saw a significant boost that we have not
experienced in quite some time. This was driven by several
factors including an improved outlook for rising interest rates,
the possible reduction of the corporate tax rate, the potential
for regulatory relief and a stronger overall economy. All of
these possibilities stand to provide a positive impact on
banks, including TCF. But at this point, it is mostly specula-
tion and we will have to wait to see how the realities unfold.
As we think about the strategy we currently have in place, we
have positioned TCF for success absent any of these poten-
tial changes that could result from the new administration.
That being the case, for the first time in nearly a decade we
are optimistic about new potential tailwinds.
I want to close by acknowledging our deep sadness over the
passing of our chairman and former CEO, Bill Cooper, on
February 7, 2017. Our Board of Directors, team members and
the banking industry lost a visionary and a pioneer and we
extend our sincere condolences to his family and friends. I
invite you to read more about Bill’s extraordinary legacy at
the end of this annual report.
As we move forward, I have a lot of optimism about the future
of our company. The guidance of our Board of Directors, the
leadership of our management team and the day-to-day
efforts of our team members provide a strong foundation
for our continued success. To these groups, I extend a sincere
thank you for their hard work and commitment. But our work
is not done. Through continued collaboration, we can achieve
our goal of driving shareholder value — demonstrating
The Power of One TCF.
Craig R. Dahl
Vice Chairman, President and Chief Executive Officer
2016
FORM 10-K
TCF FINANCIAL CORPORATION
For the fiscal year ended December 31, 2016
5
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, 2016
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. [X]
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 $1,937,412,097.
As of February 16, 2017, there were 170,627,418 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 2017 Annual Meeting of Stockholders to be held on April 26, 2017 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
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7
15
16
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17
20
21
53
57
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58
63
111
112
112
113
114
115
115
116
116
116
116
117
118
120
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 "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. TCF Bank operates bank branches in Illinois, Minnesota, Michigan, Colorado, Wisconsin, Arizona and South
Dakota (TCF's primary banking markets). TCF delivers retail banking products in 45 states and commercial banking
products in 37 states. 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 $1.3 billion, $1.2 billion and $1.2 billion in the United
States in 2016, 2015 and 2014, respectively. International revenue, primarily from Canada, was $25.6 million,
$27.3 million and $27.9 million in 2016, 2015 and 2014, respectively.
TCF had total assets of $21.4 billion as of December 31, 2016 and was the 47th largest publicly traded bank holding
company in the United States based on total assets at September 30, 2016.
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, full-service supermarket branches,
access to automated teller machine ("ATM") networks and digital banking channels. 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 businesses. 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.
Effective January 1, 2016, the Company changed its reportable segments to align with the way the Company is now
managed. The revised presentation of previously reported segment data has been applied retroactively to all periods
presented in these financial statements. The new reportable segments are Consumer Banking, Wholesale Banking
and Enterprise Services. Previously, the Company's reportable segments were Lending, Funding and Support Services.
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 net income (loss), assets and revenues for
each of TCF's reportable segments.
Consumer Banking
Consumer Banking is comprised of all of the Company's consumer-facing businesses and includes retail banking,
consumer real estate and auto finance. TCF's consumer banking strategy is primarily to generate deposits to use for
funding high credit quality secured loans and leases. Loans are originated for investment and for sale. Deposits are
generated from consumers and small businesses to provide a source of low cost funds, with a focus on building and
maintaining quality customer relationships. The Consumer Banking reportable segment generates a significant portion
of the Company's net interest income and non-interest income from fees and service charges, card revenue, ATM
revenue, gains on sales of loans and servicing fee income and incurs a significant portion of the Company's provision
for credit losses and non-interest expense.
1
Retail Banking TCF offers an array of solutions for consumers and small businesses through its physical and digital
distribution channels. TCF offers a broad selection of deposit and lending products including (i) checking and savings
accounts, (ii) credit, debit and prepaid cards, (iii) check cashing and remittance services and (iv) residential, consumer
and small business lending.
Deposits 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 general interest rates, market and competitive conditions and other
economic factors. Deposits are acquired from within TCF's primary banking markets through (i) checking, savings and
money market accounts, (ii) certificates of deposit and (iii) individual retirement accounts. Such deposit accounts
provide fee income, including banking fees and service charges. Checking, savings and certain money market accounts
are a source of low interest cost funds.
At December 31, 2016, TCF had 339 branches, consisting of 191 traditional branches, 145 supermarket branches
and three campus branches. TCF operates 123 branches in Illinois, 98 in Minnesota, 52 in Michigan, 33 in Colorado,
24 in Wisconsin, seven in Arizona and two in South Dakota. TCF currently has plans to close 17 supermarket branches
in early 2017. TCF also offers 848 ATMS across TCF's primary banking markets. 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. Providing a wide range of retail banking services is an integral component of TCF's business philosophy.
Primary drivers of bank fees and service charges include the number of customers we attract, the customers' level of
engagement and the frequency with which the customer uses our solutions. TCF's business philosophy is to offer our
customers an "easy-to-bank-with" experience, with multiple solutions that benefit the customer and are consistent with
TCF's business philosophy. Customers have convenient access to their funds through their credit, debit and prepaid
cards. TCF's card programs are supported by interchange fees paid by retailers.
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 consumer real estate junior lien loans and the other that originates first mortgage
lien loans in its 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.
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
11,400 franchised and independent dealers in all 50 states. Loans are originated for investment and for sale. Gateway
One's business strategy is to maintain strong relationships with key personnel at the dealerships. These relationships
are a significant driver in generating volume and executing a high-touch underwriting approach to minimize credit
losses.
Wholesale Banking
Wholesale Banking is comprised of commercial real estate and business lending, leasing and equipment finance and
inventory finance. TCF's wholesale banking strategy is primarily to originate high credit quality secured loans and
leases for investment.
Commercial Real Estate and Business Lending With an emphasis on secured lending, essentially all of TCF's
commercial loans were secured either by properties or other business assets at December 31, 2016 and 2015.
Commercial real estate loans originated by TCF are secured by commercial real estate, including multi-family housing,
warehouse and industrial buildings, health care facilities, office buildings, retail services buildings and commercial real
estate under construction or development. The commercial real estate portfolio represented 80.2% and 82.4% of TCF's
total commercial portfolio at December 31, 2016 and 2015, respectively.
2
Commercial business loans originated by TCF 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.
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 equipment, golf cart and turf equipment, furniture and fixtures,
medical equipment, technology and data processing equipment, and manufacturing equipment. 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%.
Enterprise Services
Enterprise Services is comprised of (i) corporate treasury, which includes the Company's investment and borrowing
portfolios and management of capital, debt and market risks, (ii) corporate functions, such as information technology,
risk and credit management, bank operations, finance, investor relations, corporate development, legal and human
resources, that provide services to the operating segments, (iii) the Holding Company and (iv) eliminations. The
Company's investment portfolio accounts for the earning assets within this segment. Borrowings may be used to offset
reductions in deposits or to support lending activities. This segment also includes residual revenues and expenses
representing the difference between actual amounts incurred by Enterprise Services and amounts allocated to the
operating segments, including interest rate risk residuals, such as funds transfer pricing mismatches.
Corporate Treasury Corporate Treasury's primary responsibility is management of liquidity, capital, interest rate risk,
and investment and borrowing portfolios. Corporate Treasury has authority to invest in various types of liquid assets
including, but not limited to, U.S. 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. Corporate Treasury 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.
3
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
"Consumer Banking" and "Wholesale Banking" 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. The expanded use of the internet and the growth of
financial-technology companies partnering with financial services providers has increased competition for loan, lease
and deposit products.
Employees As of December 31, 2016, TCF had 6,427 employees, including 908 part-time employees. TCF provides
its employees with comprehensive benefits, some of which are provided on a contributory basis, including medical
and dental plans, a 401(k) savings plan with a company matching contribution, life insurance and short- and long-term
disability coverage.
Regulation
TCF Financial, as a publicly held bank holding company, and TCF Bank, which has deposits insured by the Federal
Deposit Insurance Corporation ("FDIC"), are subject to extensive regulation. Among other things, TCF Financial and
TCF Bank are subject to minimum capital requirements, lending and deposit restrictions and numerous other
requirements. TCF Financial's primary regulator is the Federal Reserve and TCF Bank's primary regulator is the Office
of the Comptroller of the Currency ("OCC"). TCF's consumer products are also regulated by the Consumer Financial
Protection Bureau ("CFPB").
Regulatory Capital Requirements TCF Financial and TCF Bank are subject to 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, 2016. 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.
4
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.
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 TCF Bank is a member of the FDIC, which maintains the Deposit Insurance Fund ("DIF").
The FDIC insures deposits up to prescribed limits for each depositor through the DIF, which is funded through
assessments on member institutions. To maintain the DIF, member institutions are assessed an insurance premium
based on an assessment base and an assessment rate.
The Dodd-Frank Act gave the FDIC much greater discretion to manage the DIF and also changed the assessment
base from domestic deposits to average total assets less tangible equity. Additionally, the Dodd-Frank Act raised the
minimum designated reserve ratio ("DRR") to 1.35% of estimated insured deposits from 1.15% and required this new
minimum be reached by September 30, 2020. On July 1, 2016 an additional surcharge of 4.5 cents for each $100 of
an institution's assessment base in excess of $10.0 billion went into effect to ensure the DRR reaches this new minimum
by the required date. The DIF ratio calculated by the FDIC using estimated insured deposits as of September 30, 2016
was 1.18%.
In 2016, insurance premiums on bank deposits insured by the FDIC for banks with at least $10.0 billion in total assets
ranged from 1.5 cents to 40 cents per $100 of the institution's assessment base. TCF's FDIC insurance expense was
$15.9 million, $20.3 million and $25.1 million in 2016, 2015 and 2014, respectively.
5
In addition to deposit insurance premium assessments from the FDIC, additional assessments may be imposed by
the Financing Corporation, a separate U.S. government agency affiliated with the FDIC to pay for the interest cost of
Financing Corporation bonds. The Financing Corporation assessment rate for 2016 was 56 cents for each $10,000
of the institution's assessment base.
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 state and local taxing jurisdictions which
impose corporate income, franchise or other taxes. TCF's various state income tax returns are generally open for the
2012 and later tax return years based on individual state statutes of limitation. The methods of filing and the methods
for calculating taxable and apportionable income vary depending upon the laws of each taxing jurisdiction.
Foreign Taxation TCF and/or its subsidiaries currently file tax returns in Canada and certain Canadian provinces
which impose corporate income taxes. TCF's various foreign income tax returns are open and subject to examination
for 2012 and later tax return years. The methods of filing and the methods for calculating taxable and apportionable
income vary depending upon the laws of each taxing jurisdiction.
See "Item 7. Management's Discussion and Analysis - Consolidated Income Statement Analysis - Income Taxes", Note
1, Basis of Presentation 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 U.S. 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
An investment in securities issued by TCF, including an investment in TCF's common and preferred stock, involves
certain risks that should be considered carefully. The most significant risks that management believes affect TCF are
described below. Any of the risks described below may have a material impact on TCF's financial condition, results of
operations or reputation. To the extent that any of the information contained in this Annual Report on Form 10-K is
forward-looking, the risk factors set forth below also are cautionary statements identifying important factors that could
cause TCF's actual results to differ materially from those expressed in any forward-looking statements.
TCF's financial results 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 and leases, the value of the collateral
securing loans and leases, 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's financial results are 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, leases 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 leases 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, leases 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, leases 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 adversely affect 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.
7
TCF Financial relies on dividends from TCF Bank for most of its liquidity.
TCF Financial is a separate and distinct legal entity from TCF Bank. 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 TCF Financial, it may not be able to pay dividends or other
obligations, which could have a material adverse effect on TCF's financial condition and results of operations.
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's financial results.
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 speculation regarding the soundness of, any financial institution, or the financial services industry generally, could
lead to losses by, or other adverse consequences to, 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 and process large amounts of information, including employee and financial
information. For example, we are currently in the process of a significant project to replace several of our key systems,
including our operations, finance and human resources systems. While we expect these systems to be a significant
improvement over our current systems, and these initiatives will be completed in phases to allow for appropriate testing
and implementation so as to minimize the chance of service interruptions, time delays and cost overruns, we may
encounter significant adverse developments in the completion and implementation of these initiatives. These may
include significant time delays, cost overruns, and other adverse developments that could result in disruptions to our
systems. Although we have plans, policies and procedures designed to prevent or limit the negative effect of these
adverse developments, there can be no assurance that these will be successful. Our failure to effectively mitigate or
promptly remediate any adverse developments could result in additional unforeseen costs, result in an inability to
perform necessary business functions, damage our reputation, result in a loss of customer business or confidence,
subject us to regulatory scrutiny, or expose us to litigation or other financial liability, any of which could materially affect
us, including our results of operations.
8
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 experienced or 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.
TCF also 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. 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.
TCF faces cyber-security and other external risks, including "denial of service," "hacking" and "identity theft," that could
adversely affect TCF's reputation and could have a material adverse effect on TCF's financial condition and results of
operations.
TCF's computer systems and network infrastructure present security risks, and could be susceptible to cyber-attacks,
such as denial of service attacks, hacking, terrorist activities or identity theft. Hacking and identity theft risks, in particular,
could cause serious financial and reputational harm. Cyber threats are rapidly evolving and TCF may not be able to
anticipate or prevent all such attacks. While TCF does not believe it has experienced a material cyber-security breach,
TCF experiences periodic threats to its data and systems, including malware and computer virus attacks, attempted
unauthorized access of accounts and attempts to disrupt its systems. TCF may incur increasing costs in an effort to
minimize these risks, could be held liable for and could suffer reputational damage as a result of, any security breach
or loss.
In addition, there have been increasingly sophisticated and large-scale efforts on the part of third parties to breach
data security with respect to financial transactions, including by intercepting account information at locations where
customers make purchases, as well as through the use of social engineering schemes such as "phishing." For example,
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 Jewel-
Osco or SUPERVALU Inc., could result in the loss of supermarket branches or could increase costs to operate the
supermarket branches. At December 31, 2016, TCF had 145 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.
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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 on loans originated by TCF or lower loan volumes originated by TCF. As a result, any increased competition in
the already highly competitive financial services industry could have a material adverse effect on TCF's financial
condition and results of operations.
The allowance for loan and lease losses maintained by TCF may not be sufficient to cover actual losses experienced
by TCF, and losses in excess of TCF's allowance could have a material adverse effect on TCF's financial condition
and results of operations.
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 customers, new information regarding existing loans and leases, identification of additional problem
loans and leases, lower than expected recoveries in the case of default 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.
10
TCF is subject to extensive government regulation and supervision, and changes in applicable laws and regulations,
or their enforcement, could have a material adverse effect on TCF's financial results.
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 January 19, 2017, the CFPB filed a civil lawsuit against TCF Bank in the United States District Court
for the District of Minnesota, captioned Consumer Financial Protection Bureau v. TCF National Bank, alleging violations
of the Consumer Financial Protection Act and Regulation E, §1005.17, in connection with TCF Bank’s practices
administering checking account overdraft program "opt-in" requirements from 2010 to early 2014. In its complaint, the
CFPB seeks, among other relief, redress for consumers, injunctive relief and unspecified penalties. TCF Bank rejects
the claims made by the CFPB in its complaint and intends to vigorously defend against the CFPB's allegations. However,
the ultimate resolution of this lawsuit and any other proceeding, action or matter arising from the same or similar facts
or practices is uncertain, and this lawsuit and any other such proceedings, actions or matters may result in costs,
losses, fines, penalties, restitution, injunctive relief, changes to our business practices and regulatory scrutiny,
enforcement or restrictions which, individually or in the aggregate, could have a material adverse effect on our reputation,
results of operations, cash flows, financial position, ability to offer certain products and business and prospects generally.
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.
11
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 leases 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 or leases. 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 or lease. 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.
Damage to TCF's reputation could have a material adverse effect on TCF’s financial results.
Reputational 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, and could be exacerbated by negative publicity.
Because TCF conducts most of its businesses under the "TCF" brand, negative public opinion about one business
could affect all of TCF's businesses.
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.
12
The Company is subject to certain risks related to originating and selling loans that could have a material adverse
effect on TCF's financial condition and results of operations.
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. 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. Selling fewer loans 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, any of which
could have a material adverse effect on TCF's financial condition and results of operations.
The structure of certain loan sales and securitizations may result in the retention of credit risk. TCF may receive interest-
only strips in connection with certain of its loan sales. The interest-only strip is recorded at fair value, 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. In addition, pursuant to rules
recently adopted as part of Dodd-Frank, sponsors of a securitization are required to retain at least a five percent
economic interest in securitized assets which they are prohibited from hedging. As a result, future securitization
transactions executed by TCF will result in retention of credit risk associated with the assets securitized.
When loans are sold or securitized, it is customary to make representations, warranties and covenants to the purchaser
or investors about the loans, including the manner in which they were originated and will be serviced. These agreements
generally require the repurchase of loans or indemnification in the event TCF breaches these representations,
warranties or covenants and such breaches are not cured. In addition, some agreements contain a requirement to
repurchase loans as a result of early payoffs by the borrower, early payment default of the borrower, or the failure to
obtain valid title. TCF has not made significant repurchases of sold loans. A material increase in the amount of loans
repurchased 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.
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. Additionally, portions of
TCF's business are relationship driven, and many of TCF's key personnel have extensive customer relationships. Loss
of 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.
13
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 that could adversely affect TCF's results of operations
and financial condition.
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 been 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.
14
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, including regulatory fines or penalties, 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'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.
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.
15
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
Consumer Banking and Wholesale Banking reportable segments. Several facilities in Minnesota are also utilized by
the Enterprise Services reportable segment. At December 31, 2016, TCF owned the buildings and land for 143 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 170 bank branch offices, all of which are functional and appropriately maintained and are utilized by
both the Consumer Banking and Wholesale Banking reportable segments. These branch offices are located in Illinois,
Minnesota, Michigan, Colorado, Wisconsin, Arizona and South Dakota. For more information on premises and
equipment, see Note 7, Premises and Equipment of Notes to Consolidated Financial Statements.
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 January 19, 2017, the CFPB filed a civil lawsuit against TCF Bank in the United States District Court for the District
of Minnesota, captioned Consumer Financial Protection Bureau v. TCF National Bank, alleging violations of the
Consumer Financial Protection Act and Regulation E, §1005.17 in connection with TCF Bank's practices administering
checking account overdraft program "opt-in" requirements from 2010 to early 2014. In its complaint, the CFPB seeks,
among other relief, redress for consumers, injunctive relief and unspecified penalties. TCF Bank rejects the claims
made by the CFPB in its complaint and intends to vigorously defend against the CFPB’s allegations. However, the
ultimate resolution of this lawsuit and any other proceeding, action or matter arising from the same or similar facts or
practices is uncertain, and this lawsuit and any other such proceedings, actions or matters may result in costs, losses,
fines, penalties, restitution, injunctive relief, changes to our business practices and regulatory scrutiny, enforcement
or restrictions which, individually or in the aggregate, could have a material adverse effect on our reputation, results
of operations, cash flows, financial position, ability to offer certain products and business and prospects generally.
Item 4. Mine Safety Disclosures
Not applicable.
16
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." As of February 16, 2017, there
were 5,751 holders of record of TCF's common stock. The high and low prices and the dividends declared for TCF's
common stock were as follows:
2016:
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
2015:
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
High
Low
Dividends
Declared
$
$
19.97
$
13.73
$
14.78
14.48
13.97
11.72
11.62
10.37
15.94
$
13.78
$
17.07
17.29
16.31
14.35
14.93
13.78
0.075
0.075
0.075
0.075
0.075
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. Dividends
for the current dividend period on all outstanding shares of preferred stock must be declared and paid or declared and
a sum sufficient for the payment thereof must be set aside before any dividend may be declared or paid on TCF's
common stock. In general, TCF Bank may not declare or pay a dividend to TCF Financial in excess of 100% of its net
retained profits for that year combined with its net retained profits for the preceding two calendar years without prior
approval of the OCC. Restrictions on the ability of TCF Bank to pay cash dividends or possible diminished earnings
of TCF may limit the ability of TCF Financial to pay dividends in the future to holders of its preferred and common
stock. In addition, the ability of TCF Financial and TCF Bank to pay dividends depends on regulatory policies and
capital requirements and may be subject to regulatory approval. See "Item 1. Business - Regulation - Regulatory
Capital Requirements", "Item 1. Business - Regulation - Restrictions on Distributions", Note 14, Regulatory Capital
Requirements and Note 23, Parent Company Financial Information of Notes to Consolidated Financial Statements.
17
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 Index and the KBW Regional Banking
Index (assuming the investment of $100 in each index on December 31, 2011 and reinvestment of all dividends).
TCF has chosen to replace the SNL U.S. Bank and Thrift Index (included in the chart in prior years) with the KBW
Regional Banking Index. TCF believes the KBW Regional Banking Index represents a more relevant group of regional
banking peers rather than the broader group of banks and thrifts included in the SNL U.S. Bank and Thrift Index. The
KBW Regional Banking Index and the SNL U.S. Bank and Thrift Index are both shown below for comparison purposes.
In addition to the required broad equity market index and industry index, TCF previously displayed an extra peer group
consisting of all publicly-traded banks and thrifts with total assets ranging from $10.0 billion to $50.0 billion, which TCF
utilized for executive compensation purposes. TCF has since discontinued the use of this peer group for this purpose
and will no longer include it in the chart below.
TCF Total Stock Return Performance Chart
l
e
u
a
V
x
e
d
n
I
275
250
225
200
175
150
125
100
75
12/31/11
12/31/12
12/31/13
12/31/14
12/31/15
12/31/16
u TCF Financial Corporation
n SNL U.S. Bank and Thrift Index (old index) p S&P 500 Index
l KBW Regional Banking Index
Index
2011
2012
2013
2014
2015
2016
TCF Financial Corporation
$
100.00
$
119.92
$
162.59
$
161.02
$
145.14
$
SNL U.S. Bank and Thrift Index (old index)
S&P 500 Index
KBW Regional Banking Index
Source: SNL Financial.
100.00
100.00
100.00
134.28
116.00
113.25
183.86
153.57
166.31
205.25
174.60
170.34
209.39
177.01
180.41
206.01
264.35
198.18
250.80
Year Ended December 31,
18
Repurchases of TCF Stock
Share repurchase activity for the quarter ended December 31, 2016 was as follows:
Period
October 1 to October 31, 2016
Share repurchase program(1)
Employee transactions(2)
November 1 to November 30, 2016
Share repurchase program(1)
Employee transactions(2)
December 1 to December 31, 2016
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
— $
—
1,412
$
14.39
— $
— $
— $
— $
— $
—
—
—
—
—
1,412
$
14.39
—
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.
19
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)
2016
2015
2014
2013
2012
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 $
192,736
Earnings (loss) per common share:
Basic
Diluted
Dividends declared
Consolidated Financial Condition:
$
$
$
1.15
1.15
0.30
$
848,106
$
820,388
$
815,629
$
802,624
$
780,019
466,481
442,295
(581)
(297)
432,240
1,027
403,094
964
388,191
102,232
1,314,006
1,262,386
1,248,896
1,206,682
1,270,442
65,874
909,887
—
338,245
116,528
9,593
212,124
19,388
52,944
894,747
—
314,695
108,872
8,700
197,123
19,388
177,735
1.07
1.07
0.225
$
$
$
$
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
(212,884)
5,606
$
$
$
$
132,603
$
(218,490)
0.82
0.82
0.20
$
$
$
(1.37)
(1.37)
0.20
$
$
$
$
Loans and leases
$ 17,843,827
$ 17,435,999
$ 16,401,646
$ 15,846,939
$15,425,724
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:
21,441,326
20,689,609
19,393,656
18,378,769
18,224,736
17,242,522
16,719,989
15,449,882
14,432,776
14,050,786
1,077,572
2,444,645
12.66
1,039,938
2,306,917
11.94
1,235,535
2,135,364
11.10
1,487,172
1,964,759
10.23
1,932,634
1,876,643
9.79
1.05%
1.03%
0.96%
0.87%
9.13
4.34
11.36
26.09
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)
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
1.02%
1.15%
1.32%
1.75%
2.46 %
1.28
0.90
0.26
1.43
0.90
0.30
1.71
1.00
0.49
2.17
1.59
0.81
3.07
1.73
1.54
(1) Net interest income on a fully tax-equivalent basis divided by average interest-earning assets.
20
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Table of Contents
Description
Overview
Results of Operations
Performance Summary
Consolidated Income Statement Analysis
Net Interest Income
Provision for Credit Losses
Non-interest Income
Non-interest Expense
Income Taxes
Reportable Segment Results
Consolidated Financial Condition Analysis
Securities Available for Sale and Securities Held to Maturity
Loans and Leases
Credit Quality
Liquidity Management
Deposits
Borrowings
Contractual Obligations and Commitments
Capital Management
Critical Accounting Estimates
Recent Accounting Developments
Legislative and Regulatory Developments
Forward-looking Information
Page
22
23
23
23
23
27
28
29
29
30
33
33
34
38
45
45
46
46
47
48
49
51
51
21
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" 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. At December 31, 2016,
TCF had 339 bank branches in Illinois, Minnesota, Michigan, Colorado, Wisconsin, Arizona and South Dakota (TCF's
primary banking markets). At December 31, 2015, TCF's primary banking markets also included Indiana.
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, full-service supermarket branches,
access to automated teller machine ("ATM") networks and digital banking channels. 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 businesses. 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.
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 64.5% of TCF's total revenue for 2016, compared with 65.0% and 65.3% for 2015 and 2014, respectively.
Net interest income can change significantly from period to period based on interest rates, customer prepayment
patterns, the volume and mix of interest-earning assets and the volume and mix of interest-bearing and non-interest
bearing deposits and interest-bearing 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.
Primary drivers of bank fees and service charges include the number of customers we attract, the customers' level of
engagement and the frequency with which the customer uses our solutions. As an effort to diversify TCF's non-interest
income sources and manage credit concentration risk, TCF sells or securitizes loans, primarily in consumer real estate
and auto finance, which result in gains on sales as well as increased servicing fee income through the growth of the
portfolio of loans sold with servicing retained by TCF. Primary drivers of gains on sales include TCF's ability to originate
loans held for sale, identify loan buyers and execute loan sales. In addition, growth in the leasing and equipment
finance lending business results in increased non-interest income from operating and sales-type leases.
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 2016, 2015 and 2014
and on information about TCF's balance sheet, loan and lease portfolio, liquidity, funding resources, capital and other
matters.
22
Results of Operations
Performance Summary TCF reported diluted earnings per common share of $1.15 for 2016, compared with $1.07
and 94 cents for 2015 and 2014, respectively. TCF reported net income of $212.1 million for 2016, compared with
$197.1 million and $174.2 million for 2015 and 2014, respectively.
Return on average assets was 1.05% for 2016, compared with 1.03% and 0.96% for 2015 and 2014, respectively.
Return on average common equity was 9.13% for 2016, compared with 9.19% and 8.71% for 2015 and 2014,
respectively.
Consolidated Income Statement Analysis
Net Interest Income Net interest income represented 64.5% of TCF's total revenue for 2016, compared with 65.0%
and 65.3% for 2015 and 2014, respectively. Net interest income was $848.1 million for 2016, compared with
$820.4 million and $815.6 million for 2015 and 2014, respectively. Net interest income increased $27.7 million, or 3.4%
in 2016 and increased $4.8 million, or 0.6% in 2015. Average loans and leases increased $581.1 million, or 3.4% in
2016 and increased $720.7 million, or 4.4% in 2015. Average securities available for sale increased $570.4 million, or
88.4% in 2016 and increased $198.1 million, or 44.3% in 2015. The average yield on interest-earning assets on a fully
tax-equivalent basis was 4.76%, 4.80% and 4.94% in 2016, 2015 and 2014, respectively. Average deposits increased
$1.2 billion, or 7.2% in 2016 and increased $1.0 billion, or 6.7% in 2015. The average rate on the deposits was 0.36%,
0.30% and 0.26% in 2016, 2015 and 2014, respectively.The increase in net interest income in 2016 was primarily due
to higher average balances of loans and leases and securities available for sale, partially offset by a lower average
yield on the interest-earning assets and higher interest expense on certificates of deposit due to growth and higher
rates paid as a result of special campaigns to fund interest-earning assets growth. The increase in 2015 was primarily
driven by higher average loan and lease balances in the auto finance, leasing and equipment finance and inventory
finance portfolios, partially offset by margin reduction resulting from the competitive, low interest rate environment.
Net interest income on a fully tax-equivalent basis 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 mix of interest-earning assets, 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.
Net interest margin was 4.34% for 2016, compared with 4.42% and 4.61% for 2015 and 2014, respectively. The
decrease in 2016 was primarily due to margin compression resulting from the competitive, low interest rate environment
and higher rates on certificates of deposit. 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.
23
TCF's average balances, interest, and yields and rates on major categories of TCF's interest-earning assets and
interest-bearing liabilities on a fully tax-equivalent basis were as follows:
Year Ended December 31,
2016
2015
Change
Average
Balance
Interest(1)
Yields
and
Rates(1)
Average
Balance
Interest(1)
Yields
and
Rates(1)
Average
Balance
Interest
Yields
and
Rates
(bps)
$
319,582
$
9,314
2.91% $
520,577
$ 12,294
2.36% $
(200,995) $ (2,980)
190,863
4,649
2.44
207,140
5,486
2.65
(16,277)
(837)
(Dollars in thousands)
Assets:
Investments and other
Securities held to maturity
Securities available for sale:(2)
Taxable
Tax-exempt(3)
Loans and leases held for sale
Loans and leases:(4)
Consumer real estate:
Fixed-rate
Variable- and adjustable-rate
Total consumer real estate
Commercial:
Fixed-rate
Variable- and adjustable-rate
Total commercial
Leasing and equipment finance
Inventory finance
Auto finance
Other
Total loans and leases
Total interest-earning assets
Other assets(5)
Total assets
Liabilities and Equity:
Non-interest bearing deposits:
Retail
Small business
Commercial and custodial
Total non-interest bearing deposits
3,248,510
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
2,452,206
4,677,517
2,488,977
4,229,247
13,847,947
17,096,457
7,051
890,846
897,897
14,745,844
17,994,354
686,360
18,680,714
2,373,176
21,525
2,394,701
Total liabilities and equity
$ 21,075,415
719,743
495,708
479,401
16,238
15,900
39,648
2,285,647
2,948,482
5,234,129
972,107
2,154,774
3,126,881
4,106,718
2,414,684
2,693,041
9,538
17,584,991
19,790,288
1,285,127
$ 21,075,415
$ 1,778,707
884,192
585,611
130,753
156,919
287,672
47,445
85,996
133,441
183,029
140,453
110,651
548
855,794
941,543
346
1,510
15,114
44,818
61,788
61,788
51
20,785
20,836
82,624
82,624
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
2.08
2.05
0.51
0.42
2.26
3.21
8.27
5.72
5.32
5.50
4.88
3.99
4.27
4.46
5.82
4.11
5.74
4.87
4.76
0.01
0.03
0.61
1.06
0.45
0.36
0.73
2.33
2.32
0.56
0.46
564,205
80,894
286,295
13,930
2,643
25,766
157,428
149,770
307,198
59,037
76,677
135,714
175,565
122,799
94,463
712
836,451
896,570
547
3,005
14,237
30,437
48,226
48,226
53
23,263
23,316
71,542
71,542
2,710,512
2,911,689
5,622,201
1,173,039
1,961,389
3,134,428
3,804,015
2,154,357
2,278,617
10,303
17,003,921
18,663,032
1,226,645
$ 19,889,677
$ 1,658,951
838,758
507,446
3,005,155
2,396,334
4,938,303
2,265,121
3,340,341
12,940,099
15,945,254
18,822
1,119,175
1,137,997
14,078,096
17,083,251
589,222
17,672,473
2,197,690
19,514
2,217,204
$ 19,889,677
55
(21)
(21)
(6)
(73)
(9)
18
4
(15)
8
(6)
(16)
12
(4)
155,538
414,814
193,106
2,308
13,257
13,882
(424,865)
(26,675)
36,793
7,149
(388,072)
(19,526)
(200,932)
(11,592)
193,385
(7,547)
302,703
260,327
414,424
9,319
(2,273)
7,464
17,654
16,188
(765)
(164)
(117)
19,343
44,973
(5)
(4)
581,070
1,127,256
58,482
$ 1,185,738
$
119,756
45,434
78,165
243,355
(1)
(3)
(2)
15
8
6
45
25
27
5
4
55,872
(201)
(260,786)
(1,495)
877
14,381
13,562
13,562
(2)
(2,478)
(2,480)
11,082
11,082
223,856
888,906
907,848
1,151,203
(11,771)
(228,329)
(240,100)
667,748
911,103
97,138
1,008,241
175,486
2,011
177,497
$ 1,185,738
Net interest income and margin
$ 858,919
4.34
$ 825,028
4.42
$ 33,891
(8)
(1)
(2)
(3)
(4)
(5)
Interest and yields are presented on a fully tax-equivalent basis.
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 $140.3 million and $104.1 million in 2016 and 2015, respectively.
24
Year Ended December 31,
2015
2014
Change
Average
Balance
Interest(1)
Yields
and
Rates(1)
Average
Balance
Interest(1)
Yields
and
Rates(1)
Average
Balance
Interest
Yields
and
Rates
(bps)
(Dollars in thousands)
Assets:
Investments and other
$
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
564,205
80,894
286,295
13,930
2,643
25,766
Securities held to maturity
Securities available for sale:(2)
Taxable
Tax-exempt(3)
Loans and leases held for sale
Loans and leases:(4)
Consumer real estate:
Fixed-rate
Variable-rate
Total consumer real estate
Commercial:
Fixed-rate
Variable- and adjustable-rate
Total commercial
Leasing and equipment finance
Inventory finance
Auto finance
Other
Total loans and leases
Total interest-earning assets
Other assets(5)
Total assets
Liabilities and Equity:
Non-interest bearing deposits:
Retail
Small business
Commercial and custodial
2,710,512
2,911,689
5,622,201
1,173,039
1,961,389
3,134,428
3,804,015
2,154,357
2,278,617
10,303
17,003,921
18,663,032
1,226,645
$19,889,677
$ 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
2,396,334
4,938,303
2,265,121
3,340,341
12,940,099
15,945,254
18,822
1,119,175
1,137,997
Total interest-bearing liabilities
14,078,096
Total deposits and borrowings
17,083,251
Other liabilities
Total liabilities
Total TCF Financial Corp. stockholders'
equity
Non-controlling interest in subsidiaries
Total equity
589,222
17,672,473
2,197,690
19,514
2,217,204
Total liabilities and equity
$19,889,677
157,428
149,770
307,198
59,037
76,677
135,714
175,565
122,799
94,463
712
836,451
896,570
547
3,005
14,237
30,437
48,226
48,226
53
23,263
23,316
71,542
71,542
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
2.08
2.05
0.51
0.42
447,016
11,994
—
—
259,186
21,128
190,973
143,431
334,404
73,752
66,450
140,202
166,974
112,603
68,595
931
823,709
877,502
921
8,343
7,032
22,089
38,385
38,385
261
19,954
20,215
58,600
58,600
3,359,670
2,788,882
6,148,552
1,469,579
1,665,788
3,135,367
3,531,256
1,888,080
1,567,904
12,071
16,283,230
17,774,178
1,123,213
$18,897,391
$ 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
1,310,163
1,393,836
13,569,394
16,336,389
502,560
16,838,949
2,041,428
17,014
2,058,442
$18,897,391
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)
10,227
(4,488)
8,591
10,196
25,868
(219)
12,742
19,068
295,601
(939)
272,759
266,277
710,713
(1,768)
720,691
888,854
103,432
$
992,286
$
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)
(190,988)
(255,839)
508,702
746,862
86,662
833,524
156,262
2,500
158,762
$
992,286
(26)
(2)
(21)
327
85
13
—
2
1
(8)
(14)
(11)
(26)
(22)
(80)
(14)
(14)
(2)
(9)
9
13
5
4
(3)
56
60
8
6
Net interest income and margin
$825,028
4.42
$818,902
4.61
$
6,126
(19)
(1)
(2)
(3)
(4)
(5)
Interest and yields are presented on a fully tax-equivalent basis.
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.
25
The components of the changes in net interest income on a fully tax-equivalent basis by volume and rate were as
follows:
Year Ended
December 31, 2016
December 31, 2015
Versus December 31, 2015
Versus December 31, 2014
(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- and adjustable-rate
Total consumer real estate
Commercial:
Fixed-rate
Variable- and adjustable-rate
Total commercial
Leasing and equipment finance
Inventory finance
Auto finance
Other
Total loans and leases
Total interest income
Interest expense:
Deposits:
Checking
Savings
Money market
Certificates of deposit
Total deposits
Borrowings:
Short-term borrowings
Long-term borrowings
Total borrowings
Total interest expense
Net interest income
Increase (Decrease) Due to
Rate(1)
Volume(1)
Total
Increase (Decrease) Due to
Rate(1)
Volume(1)
Total
$ (5,442) $
2,462
$ (2,980) $ (1,645) $ (1,451) $ (3,096)
(415)
(422)
(837)
245
(40)
205
3,588
13,306
16,026
(1,280)
(49)
(2,144)
2,308
13,257
13,882
2,952
2,643
2,325
(1,016)
—
2,313
1,936
2,643
4,638
(24,650)
(2,025)
(26,675)
(37,621)
4,076
(33,545)
1,795
(22,030)
5,354
2,504
7,149
6,317
22
6,339
(19,526)
(28,753)
1,547
(27,206)
(9,963)
(1,629)
(11,592)
(14,924)
209
(14,715)
7,496
(378)
13,635
14,769
16,747
(50)
26,962
52,032
1,823
(1,895)
(6,171)
2,885
(559)
(114)
(7,619)
(7,059)
9,319
(2,273)
7,464
17,654
16,188
11,580
(42)
12,662
15,346
29,633
(164)
(128)
(1,353)
(4,446)
(4,071)
(5,150)
(3,765)
(91)
19,343
44,973
35,838
43,114
(23,096)
(24,046)
10,227
(4,488)
8,591
10,196
25,868
(219)
12,742
19,068
12
(213)
(201)
26
(400)
(374)
(152)
(1,343)
(1,495)
(987)
(4,351)
(5,338)
1,342
8,843
3,620
(48)
(5,116)
(5,327)
3,447
(465)
5,538
9,942
46
2,638
2,847
7,635
877
14,381
13,562
(2)
(2,478)
(2,480)
11,082
5,817
4,221
2,701
(187)
(3,191)
(4,161)
2,268
1,388
4,127
7,140
(21)
6,500
7,262
7,205
8,348
9,841
(208)
3,309
3,101
10,674
12,942
$ 47,783
$ (13,892) $ 33,891
$ 40,037
$ (33,911) $
6,126
(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.
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, economic outlook and prevailing economic conditions.
The composition of TCF's provision for credit losses for the years ended December 31, 2016, 2015 and 2014 was as
follows:
(Dollars in thousands)
2016
2015
2014
2016 / 2015
2015 / 2014
Consumer real estate
$ 9,304
14.1% $ 12,697
24.0% $ 63,973
66.8 % $ (3,393)
(26.7)% $(51,276)
(80.2)%
Commercial
2,890
4.4
298
0.6
(259)
(0.3)
2,592
N.M.
557
N.M.
Year Ended December 31,
Change
Leasing and equipment
finance
Inventory finance
Auto finance
Other
Total
N.M. Not Meaningful.
7,706
4,540
39,149
2,285
11.7
6.9
59.4
3.5
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
2,295
1,504
10,206
42.4
49.5
35.3
(274)
(10.7)
2,087
538
5,201
100
62.8
21.5
21.9
4.1
$ 65,874
100.0% $ 52,944
100.0% $ 95,737
100.0 % $ 12,930
24.4
$(42,793)
(44.7)
TCF's provision for credit losses was $65.9 million for 2016, compared with $52.9 million and $95.7 million for 2015
and 2014, respectively. The provision for credit losses increased $12.9 million, or 24.4% in 2016 and decreased
$42.8 million, or 44.7% in 2015. The allowance as a percent of total loans and leases was 0.90%, 0.90% and 1.00%
as of December 31, 2016, 2015 and 2014, respectively. The decrease in the allowance as a percent of total loans and
leases from 2014 was driven primarily by reduced reserves in the consumer real estate portfolio resulting from improved
home values. The 2015 provision includes the benefit from the reduced reserves. The increase in the provision for
credit losses in 2016 was primarily due to the benefit from reduced reserves in 2015 and growth in the overall loan
and lease portfolio, partially offset by decreased net charge-offs. 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 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.
Net loan and lease charge-offs for 2016 were $45.2 million, or 0.26% of average loans and leases, compared with
$51.5 million, or 0.30% of average loans and leases for 2015 and $79.3 million, or 0.49% of average loans and leases
for 2014. The decrease in 2016 was primarily due to improved credit quality in the consumer real estate portfolio,
partially offset by increased net charge-offs in the auto finance portfolio. 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.
For additional information, see "Consolidated Financial Condition Analysis — Credit Quality" in this Management's
Discussion and Analysis and Note 6, Allowance for Loan and Lease Losses and Credit Quality Information of Notes
to Consolidated Financial Statements.
27
Non-interest Income Non-interest income is a significant source of revenue for TCF, representing 35.5% of total
revenue for 2016, compared with 35.0% and 34.7% for 2015 and 2014, respectively, and is an important factor in
TCF's results of operations. Non-interest income was $465.9 million for 2016, compared with $442.0 million and
$433.3 million for 2015 and 2014, respectively. Non-interest income increased $23.9 million, or 5.4 percent in 2016
and increased $8.7 million, or 2.0 percent in 2015.
The components of non-interest income were as follows:
(Dollars in thousands)
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
Year Ended December 31,
Change
2016
2015
2014
2016 / 2015
2015 / 2014
$
137,664
$
144,999
$
154,386
(5.1)%
(6.1)%
54,882
20,445
212,991
34,832
50,427
40,182
125,441
119,166
8,883
466,481
54,387
21,544
220,930
30,580
40,964
31,229
102,773
108,129
10,463
442,295
(581)
(297)
51,323
22,225
227,934
43,565
34,794
21,444
99,803
93,799
10,704
432,240
1,027
$
465,900
$
441,998
$
433,267
0.9
(5.1)
(3.6)
13.9
23.1
28.7
22.1
10.2
(15.1)
5.5
(95.6)
5.4
6.0
(3.1)
(3.1)
(29.8)
17.7
45.6
3.0
15.3
(2.3)
2.3
N.M.
2.0
Total non-interest income as a percentage of total revenue
35.5%
35.0%
34.7%
N.M. Not Meaningful.
Fees and Service Charges Fees and service charges totaled $137.7 million for 2016, compared with $145.0 million
and $154.4 million for 2015 and 2014, respectively. The decreases in both periods were primarily due to ongoing
consumer behavior changes, as well as higher average checking account balances per customer.
Gains on Sales of Auto Loans, Net Net gains on sales of auto loans totaled $34.8 million for 2016, compared with
$30.6 million and $43.6 million for 2015 and 2014, respectively. The increase in 2016 was primarily due to increased
volume of loans sold, partially offset by a strong competitive environment and challenging market conditions. The
decrease 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. See Note 5, Loans and Leases of Notes to Consolidated Financial Statements
for additional information.
Gains on Sales of Consumer Real Estate Loans, Net Net gains on sales of consumer real estate loans totaled
$50.4 million for 2016, compared with $41.0 million and $34.8 million for 2015 and 2014, respectively. The increase
in 2016 was primarily due to increased volume of loans sold. The increase in 2015 was primarily due to a net loss of
$4.8 million in 2014 related to the TDR loan sale. See Note 5, Loans and Leases of Notes to Consolidated Financial
Statements for additional information.
Servicing Fee Income Servicing fee income totaled $40.2 million for 2016, compared with $31.2 million and $21.4 million
for 2015 and 2014, respectively. The increases from both periods were primarily due to the cumulative effect of the
increases in the portfolios of auto and consumer real estate loans sold with servicing retained by TCF. Average loans
and leases serviced for others was $4.9 billion for 2016, compared with $3.8 billion and $2.7 billion for 2015 and 2014,
respectively.
Leasing and Equipment Finance Leasing and equipment finance income totaled $119.2 million for 2016, compared
with $108.1 million and $93.8 million for 2015 and 2014, respectively. The increase in 2016 was primarily due to higher
operating lease and sales-type lease revenue. The increase in 2015 was primarily due to higher operating lease
revenue.
28
Non-interest Expense Non-interest expense totaled $909.9 million for 2016, compared with $894.7 million and
$871.8 million for 2015 and 2014, respectively. Non-interest expense increased $15.1 million, or 1.7%, in 2016 and
increased $23.0 million, or 2.6%, in 2015.
The components of non-interest expense were as follows:
Year Ended December 31,
Change
(Dollars in thousands)
2016
2015
2014
2016 / 2015
2015 / 2014
Compensation and employee benefits
$
474,722
$
457,743
$
452,942
3.7%
1.1%
Occupancy and equipment
Other
Subtotal
Operating lease depreciation
Foreclosed real estate and repossessed assets, net
Other credit costs, net
Total non-interest expense
149,980
231,420
856,122
40,359
13,187
219
144,962
229,255
831,960
39,409
23,193
185
139,023
227,970
819,935
27,152
24,567
123
$
909,887
$
894,747
$
871,777
3.5
0.9
2.9
2.4
(43.1)
18.4
1.7
4.3
0.6
1.5
45.1
(5.6)
50.4
2.6
Compensation and Employee Benefits Compensation and employee benefits expense totaled $474.7 million for 2016,
compared with $457.7 million and $452.9 million for 2015 and 2014, respectively. The increase in 2016 was primarily
due to higher commissions and incentives, partially offset by the annual pension plan valuation adjustment. 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.
Other Non-interest Expense Other non-interest expense totaled $231.4 million for 2016, compared with $229.3 million
and $228.0 million for 2015 and 2014, respectively. The increase in 2016 was primarily due to increases in (i) branch
realignment expense related to the closure of two traditional branches and 33 supermarket branches and the pending
closures of 17 supermarket branches, (ii) loan and lease processing expense due to increases in loan and lease
originations and (iii) outside processing expense, partially offset by decreased FDIC insurance expense due to a lower
assessment rate. The increase in 2015 was primarily due to increased loan and lease processing expense due to
increases in loan originations, partially offset by decreased FDIC insurance expense due to a lower assessment rate
primarily as a result of the TDR loan sale and improved credit metrics. See Note 21, Other Expense of Notes to
Consolidated Financial Statements for additional information.
Foreclosed Real Estate and Repossessed Assets, Net Net expenses related to foreclosed real estate and repossessed
assets totaled $13.2 million for 2016, compared with $23.2 million and $24.6 million for 2015 and 2014, respectively.
The decrease in 2016 was primarily due to lower operating costs associated with maintaining fewer properties, lower
write-downs on existing foreclosed commercial and consumer properties and higher gains on sales of commercial and
consumer properties, partially offset by higher repossessed assets expense. The decrease in 2015 was primarily due
to lower operating costs associated with maintaining fewer properties and lower write-downs on existing foreclosed
commercial properties.
Income Taxes Income tax expense was 34.5% of income before income tax expense for 2016, compared with 34.6%
and 35.5% for 2015 and 2014, respectively. The lower effective income tax rates in 2016 and 2015 were primarily due
to increased investments in tax-exempt securities.
29
Reportable Segment Results
Effective January 1, 2016, the Company changed its reportable segments to align with the way the Company is now
managed. The revised presentation of previously reported segment data has been applied retroactively to all periods
presented in these financial statements. The new reportable segments are Consumer Banking, Wholesale Banking
and Enterprise Services. Previously, the Company's reportable segments were Lending, Funding and Support Services.
See Note 22, Business Segments of Notes to Consolidated Financial Statements for information regarding net income
(loss), assets and revenues for each of TCF's reportable segments.
Consumer Banking
Consumer Banking is comprised of all of the Company's consumer-facing businesses and includes retail banking,
consumer real estate and auto finance. TCF's consumer banking strategy is primarily to generate deposits to use for
funding high credit quality secured loans and leases. Loans are originated for investment and for sale. Deposits are
generated from consumers and small businesses to provide a source of low cost funds, with a focus on building and
maintaining quality customer relationships. The Consumer Banking reportable segment generates a significant portion
of the Company's net interest income and non-interest income from fees and service charges, card revenue, ATM
revenue, gains on sales of loans and servicing fee income and incurs a significant portion of the Company's provision
for credit losses and non-interest expense.
Consumer Banking generated net income available to common stockholders of $124.0 million for 2016, compared
with $105.5 million and $80.4 million for 2015 and 2014, respectively.
Consumer Banking net interest income totaled $559.9 million for 2016, compared with $536.7 million and $511.7 million
for 2015 and 2014, respectively. Net interest income increased $23.1 million, or 4.3% in 2016 and increased
$25.1 million, or 4.9% in 2015. The increase in 2016 was primarily due to higher interest income related to funds
transfer pricing driven by an increase in deposits and higher average balances of auto finance loans and loans held
for sale, partially offset by lower interest income from consumer real estate first mortgage lien loan balances due to
run-off and higher interest expense on certificates of deposit due to growth and higher rates paid as a result of special
campaigns to fund loan growth. The increase in 2015 was primarily due to higher average balances of auto finance
loans, partially offset by margin reduction resulting from the competitive, low interest rate environment and lower
interest income from consumer real estate first mortgage lien loan balances due to run-off.
Consumer Banking provision for credit losses totaled $50.8 million for 2016, compared with $44.3 million and
$89.9 million for 2015 and 2014, respectively. The provision for credit losses increased $6.5 million, or 14.6% in 2016
and decreased $45.6 million, or 50.7% in 2015. The allowance for credit losses as a percent of consumer banking
loans was 1.19% and 1.18% at December 31, 2016 and 2015, respectively.The increase in the provision for credit
losses in 2016 was primarily due to the benefit from reduced reserve requirements in 2015 for the consumer real estate
portfolio partially offset by decreased net charge-offs. The decrease in the provision for credit losses in 2015 was
primarily driven by the sale of consumer real estate TDR loans in the fourth quarter of 2014 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.
Consumer Banking non-interest income totaled $337.0 million for 2016, compared with $320.4 million and
$326.0 million for 2015 and 2014, respectively. Non-interest income increased $16.6 million, or 5.2% in 2016 and
decreased $5.6 million, or 1.7% in 2015. The increase in 2016 was primarily due to increases in net gains on sales of
consumer real estate and auto loans and an increase in servicing fee income due to the cumulative effect of the
increase in the portfolio of loans sold with servicing retained by TCF, partially offset by a decrease in fees and service
charges. The decrease in 2015 was primarily due to decreases in net gains on sales of auto loans and fees and service
charges, partially offset by increases in servicing fee income and net gains on sales of consumer real estate loans.
Fees and service charges attributable to the Consumer Banking segment totaled $130.5 million for 2016, compared
with $138.7 million and $148.6 million for 2015 and 2014, respectively. The decreases in both periods were primarily
due to ongoing consumer behavior changes, as well as higher average checking account balances per customer. Net
gains on sales of auto loans totaled $34.8 million for 2016, compared with $30.6 million and $43.6 million for 2015 and
2014, respectively. Net gains on sales of consumer real estate loans totaled $50.4 million for 2016, compared with
$41.0 million and $34.3 million for 2015 and 2014, respectively. Servicing fee income attributable to the Consumer
Banking segment totaled $38.6 million for 2016, compared with $29.0 million and $19.2 million for 2015 and 2014,
respectively. Average consumer real estate and auto finance loans serviced for others were $4.7 billion for 2016,
compared with $3.6 billion in 2015 and $2.5 billion in 2014.
30
Consumer Banking non-interest expense totaled $652.5 million for 2016, compared with $645.9 million and
$619.5 million for 2015 and 2014, respectively. Non-interest expense increased $6.5 million, or 1.0% in 2016 and
increased $26.4 million, or 4.3% in 2015. The increase in 2016 was primarily due to higher occupancy and equipment
expense and branch realignment expense of $3.9 million related to the closure of two traditional branches and 33
supermarket branches and the pending closures of 17 supermarket branches. There was no branch realignment
expense in 2015. These increases were partially offset by a decrease in net expense related to foreclosed real estate
and repossessed assets due to lower operating costs associated with maintaining fewer consumer properties, higher
gains on sales of consumer properties and lower write-downs on existing foreclosed consumer properties, as well as
a decrease in FDIC insurance expense due to a lower assessment rate. 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
an increase in net expense related to foreclosed real estate and repossessed assets due to higher write-downs on
existing foreclosed consumer properties.
Wholesale Banking
Wholesale Banking is comprised of commercial real estate and business lending, leasing and equipment finance and
inventory finance. TCF's wholesale banking strategy is primarily to originate high credit quality secured loans and
leases for investment.
Wholesale Banking generated net income available to common stockholders of $130.0 million for 2016, compared
with $127.3 million and $114.9 million for 2015 and 2014, respectively.
Wholesale Banking net interest income totaled $343.7 million for 2016, compared with $339.9 million and $326.3 million
for 2015 and 2014, respectively. Net interest income increased $3.7 million, or 1.1% in 2016 and increased $13.6 million,
or 4.2% in 2015. The increase in 2016 was primarily due to higher average loan and lease balances in the leasing and
equipment finance and inventory finance portfolios, partially offset by higher interest expense related to funds transfer
pricing driven by a combination of higher average loan and lease balances and an increase in funds transfer pricing
rates. The increase in 2015 was primarily driven by higher average loan and lease balances in the leasing and equipment
finance and inventory finance portfolios, partially offset by margin reduction resulting from the competitive, low interest
rate environment.
Wholesale Banking provision for credit losses totaled $15.1 million for 2016, compared with $8.6 million and $5.8 million
for 2015 and 2014, respectively. The provision for credit losses increased $6.4 million, or 74.7% in 2016 and increased
$2.8 million, or 47.5% in 2015. The increases from both periods were primarily due to increased reserve requirements
related to overall growth in the Wholesale Banking loan and lease portfolio.
Wholesale Banking non-interest income totaled $128.9 million for 2016, compared with $119.8 million and
$105.6 million for 2015 and 2014, respectively. Non-interest income increased $9.1 million, or 7.6% in 2016 and
increased $14.2 million, or 13.4% in 2015. The increase in 2016 was primarily due to an increase in leasing and
equipment finance income due to higher operating lease and sales-type lease revenue. The increase in 2015 was
primarily due to an increase in leasing and equipment finance income related to higher operating lease revenue.
Wholesale Banking non-interest expense totaled $247.1 million for 2016, compared with $244.9 million and
$237.2 million for 2015 and 2014, respectively. Non-interest expense increased $2.2 million, or 0.9% in 2016 and
increased $7.7 million, or 3.2% in 2015. The increase in 2016 was primarily due to an increase in allocated costs due
to the further build-out of risk management and credit, partially offset by a decrease in compensation and benefits
expense, a decrease in net expense related to foreclosed real estate and repossessed assets due to lower write-
downs on existing foreclosed commercial properties and lower operating costs associated with maintaining fewer
commercial properties and a decrease in occupancy and equipment expense. The increase in 2015 was primarily due
to increased operating lease depreciation resulting from increased leasing and equipment finance operating lease
revenue.
31
Enterprise Services
Enterprise Services is comprised of (i) corporate treasury, which includes the Company's investment and borrowing
portfolios and management of capital, debt and market risks, (ii) corporate functions, such as information technology,
risk and credit management, bank operations, finance, investor relations, corporate development, legal and human
resources, that provide services to the operating segments, (iii) the Holding Company and (iv) eliminations. The
Company's investment portfolio accounts for the earning assets within this segment. Borrowings may be used to offset
reductions in deposits or to support lending activities. This segment also includes residual revenues and expenses
representing the difference between actual amounts incurred by Enterprise Services and amounts allocated to the
operating segments, including interest rate risk residuals, such as funds transfer pricing mismatches.
Enterprise Services generated a net loss available to common stockholders of $61.3 million for 2016, compared with
$55.1 million and $40.5 million for 2015 and 2014, respectively.
Enterprise Services net interest expense totaled $55.4 million for 2016, compared with $56.3 million and $22.3 million
for 2015 and 2014, respectively. Net interest expense decreased $0.9 million, or 1.5% in 2016 and increased
$33.9 million, or 152.0% in 2015. The decrease in 2016 was primarily driven by an increase in interest income
attributable to higher average balances of securities available for sale and a decrease in borrowing expense, partially
offset by an increase in funds transfer pricing mismatches. The increase in 2015 was primarily driven by an increase
in funds transfer pricing mismatches and an increase in borrowing expense, partially offset by an increase in interest
income attributable to higher average balances of securities available for sale.
Enterprise Services non-interest income totaled $28.0 thousand for 2016, compared with $1.8 million and $1.6 million
for 2015 and 2014, respectively. Non-interest income decreased $1.8 million, or 98.5% in 2016 and increased
$0.2 million, or 14.1% in 2015. The decrease in 2016 was primarily due to a gain of $1.7 million related to appreciation
of an investment that was donated to the TCF Foundation in the first quarter of 2015.
Enterprise Services non-interest expense totaled $10.3 million for 2016, compared with $3.9 million and $15.0 million
for 2015 and 2014, respectively. Non-interest expense increased $6.4 million, or 165.3% in 2016 and decreased
$11.1 million, or 74.1% in 2015. The increase in 2016 was primarily due to an increase in compensation and benefits
expense, partially offset by an increase in recoveries of allocated expenses, a decrease in occupancy and equipment
expense and the annual pension plan valuation adjustment. The decrease in 2015 was primarily due to an increase
in recoveries of allocated expenses, partially offset by an increase in occupancy and equipment expense.
32
Consolidated Financial Condition Analysis
Securities Available for Sale and Securities Held to Maturity Total securities available for sale were $1.4 billion
at December 31, 2016, an increase of 60.1% from $0.9 billion at December 31, 2015. 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. Total securities held to maturity were
$181.3 million at December 31, 2016, a decrease of 10.2% from $201.9 million at December 31, 2015. 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 available for sale and utilize the proceeds to reduce borrowings, fund growth in loans
and leases or for other corporate purposes.
The amortized cost, fair value and fully tax-equivalent yield of securities available for sale and securities held to maturity
by final contractual maturity at December 31, 2016 and 2015 were as follows. The remaining contractual principal
maturities do not consider possible prepayments. Remaining expected maturities will differ from contractual maturities
because borrowers may have the right to prepay.
(Dollars in thousands)
Securities available for sale:
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
At December 31,
2016
2015
Amortized
Cost
Fair Value
Tax-
equivalent
Yield
Amortized
Cost
Fair Value
Tax-
equivalent
Yield
1
$
18
54,202
773,519
277,228
351,744
1
18
54,429
756,461
274,576
337,950
8.02% $
2.28
1.93
2.25
3.13
3.20
2.63
1
$
38
70,338
557,178
198,300
63,889
1
38
70,350
551,575
202,161
64,760
9.00%
2.65
1.93
2.46
3.19
3.40
2.65
Total securities available for sale
$ 1,456,712
$ 1,423,435
$
889,744
$
888,885
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
$
178,514
$
181,146
2.54% $
198,520
$
203,553
2.64%
—
1,400
1,400
—
1,400
1,400
—
2.86
3.36
2.55
100
1,900
1,400
100
1,900
1,400
$
201,920
$
206,953
2.00
2.63
3.36
2.64
Total securities held to maturity
$
181,314
$
183,946
33
Loans and Leases Information about loans and leases held in TCF's portfolio was as follows:
At December 31,
Compound Annual
Growth Rate
1-Year
5-Year
2016
2015
2014
2013
2012
2016 / 2015
2016 / 2011
(Dollars in thousands)
Consumer real estate:
First mortgage lien
$ 2,292,596
$ 2,624,956
$ 3,139,152
$ 3,766,421
$ 4,239,524
(12.7)%
(13.5)%
Junior lien
2,791,756
2,839,316
2,543,212
2,572,905
2,434,977
Total consumer real estate
5,084,352
5,464,272
5,682,364
6,339,326
6,674,501
Commercial:
Commercial real estate
2,634,191
2,593,429
2,624,255
2,743,697
3,080,942
Commercial business
652,287
552,403
533,410
404,655
324,293
Total commercial
3,286,478
3,145,832
3,157,665
3,148,352
3,405,235
Leasing and equipment finance
4,336,310
4,012,248
3,745,322
3,428,755
3,198,017
Inventory finance
2,470,175
2,146,754
1,877,090
1,664,377
1,567,214
Auto finance
Other
2,647,741
2,647,596
1,915,061
1,239,386
18,771
19,297
24,144
26,743
552,833
27,924
Total loans and leases
$ 17,843,827
$ 17,435,999
$ 16,401,646
$ 15,846,939
$ 15,425,724
N.M. Not Meaningful.
(1.7)
(7.0)
1.6
18.1
4.5
8.1
15.1
—
(2.7)
2.3
5.3
(5.9)
(3.8)
21.1
(1.0)
6.7
31.6
N.M.
(11.7)
4.7
(In thousands)
Geographic Distribution:
Minnesota
California
Illinois
Michigan
Texas
Wisconsin
Florida
Colorado
New York
Canada
Ohio
Pennsylvania
Georgia
Arizona
North Carolina
New Jersey
Indiana
Washington
Massachusetts
Tennessee
Virginia
Other
Total
Consumer
Real Estate
Commercial
Leasing and
Equipment
Finance
Inventory
Finance
Auto
Finance
Other
Total
At December 31, 2016
$ 1,247,499
$
730,183
$
108,963
$
81,739
$
51,267
$
5,723
$ 2,225,374
935,607
1,154,721
480,280
—
225,522
106,045
248,863
33,424
—
8,102
36,302
50,499
102,255
4,162
45,061
19,423
108,478
35,253
3,413
23,720
139,176
421,081
505,823
72,726
425,345
90,469
251,983
19,238
—
81,902
15,190
49,003
14,966
19,860
—
68,119
10,065
17,453
55,229
4,633
594,705
169,240
116,787
416,109
60,828
225,065
76,536
259,034
1,196
159,133
152,459
112,304
126,367
159,240
166,568
82,116
69,882
118,681
78,532
87,000
95,218
67,928
100,601
154,098
78,067
124,910
29,756
86,746
458,138
97,999
74,682
58,767
19,678
60,097
22,777
56,266
33,011
19,072
40,972
36,706
430,076
102,043
50,399
228,468
27,058
142,799
50,256
126,754
—
74,445
107,298
90,032
77,064
94,307
85,216
37,440
36,418
53,655
54,640
70,068
215,723
294,034
995,565
672,947
658,038
4
2,194,786
4,108
3,888
8
818
39
3,762
48
—
—
55
—
213
7
—
4
3
—
2
10
79
1,919,121
1,257,778
871,409
817,638
689,327
661,156
525,244
459,334
421,581
385,986
360,605
340,543
337,673
319,622
263,368
257,857
244,114
232,788
222,137
2,836,386
$ 5,084,352
$ 3,286,478
$ 4,336,310
$ 2,470,175
$ 2,647,741
$
18,771
$ 17,843,827
34
The contractual maturities of loans and leases outstanding at December 31, 2016 were as follows:
Consumer
Real Estate
Commercial
Leasing and
Equipment
Finance
Inventory
Finance
Auto
Finance
Other
Total
At December 31, 2016(1)
$
115,397
$
516,649
$ 1,438,018
$ 2,470,175
$
621,370
$
9,861
$ 5,171,470
503,863
2,323,078
2,758,773
4,465,092
446,751
139,519
—
—
1,929,904
96,467
1,808
7,102
7,517,426
5,154,931
$ 5,084,352
$ 3,286,478
$ 4,336,310
$ 2,470,175
$ 2,647,741
$
18,771
$ 17,843,827
(In thousands)
Amounts due:
Within 1 year
1 to 5 years
Over 5 years
Total
Amounts due after 1 year:
Fixed-rate loans and leases
$ 2,039,349
$
854,300
$ 2,887,119
$
— $ 2,026,371
$
8,753
$ 7,815,892
Variable- and adjustable-rate
loans and leases
2,929,606
1,915,529
11,173
—
—
157
4,856,465
Total after 1 year
$ 4,968,955
$ 2,769,829
$ 2,898,292
$
— $ 2,026,371
$
8,910
$ 12,672,357
(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.
Consumer Real Estate TCF's consumer real estate portfolio represented 28.5% and 31.3% of TCF's total loan and
lease portfolio at December 31, 2016 and 2015, respectively. The consumer real estate portfolio is secured by
mortgages on residential real estate and consisted of $2.3 billion of first mortgage lien loans with an average loan size
of $100 thousand and $2.8 billion of junior lien loans with an average loan size of $47 thousand at December 31, 2016,
compared to first mortgage lien loans of $2.6 billion and junior lien loans of $2.8 billion at December 31, 2015. The
decrease of $379.9 million in the consumer real estate portfolio was primarily due to run-off of the first mortgage lien
loans. Loans are originated for investment and for sale. TCF sold $1.6 billion and $1.3 billion of consumer real estate
loans in 2016 and 2015, respectively. Consumer real estate originations increased to $2.6 billion in 2016 compared
to $2.4 billion in 2015. At December 31, 2016 and 2015, 68.1% and 74.0%, respectively, of the consumer real estate
portfolio were in TCF's primary banking markets. At December 31, 2016 and 2015, 58.0% and 54.6%, respectively, of
the consumer real estate portfolio carried a variable or adjustable interest rate generally tied to the prime rate. At
December 31, 2016 and 2015, 47.3% and 51.0%, respectively, of TCF's consumer real estate loans consisted of
closed-end loans. TCF's closed-end consumer real estate loans require payments of principal and interest over a fixed
term.
The average Fair Isaac Corporation ("FICO®") credit score at loan origination for the consumer real estate portfolio
was 735 and 734 at December 31, 2016 and 2015, respectively. 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 portfolio
was 733 and 731 at December 31, 2016 and 2015, respectively.
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, 2016, 62.2% of the consumer real estate portfolio had
been originated since January 1, 2009 with net charge-offs of 0.01% in 2016. TCF's consumer real estate portfolio is
subject to the risk of falling home values and to the general economic environment, particularly unemployment.
The consumer real estate junior lien portfolio was comprised of $2.5 billion of home equity lines of credit ("HELOCs")
and $272.9 million of amortizing consumer real estate junior lien mortgage loans at December 31, 2016, compared
with $2.5 billion and $345.3 million at December 31, 2015, respectively. At December 31, 2016 and 2015, $2.0 billion
and $1.8 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, 2016 and 2015, $525.4 million and $664.5 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, 2016, 18.1% of these loans mature
prior to 2021. Outstanding balances on consumer real estate lines of credit were 67.1% of total lines of credit in 2016,
compared to 68.0% in 2015.
35
Commercial Real Estate and Business Lending TCF's commercial portfolio represented 18.4% and 18.0% of TCF's
total loan and lease portfolio at December 31, 2016 and 2015, respectively. The commercial portfolio consisted of
$2.6 billion of commercial real estate loans and $652.3 million of commercial business loans at December 31, 2016,
increases of 1.6% and 18.1%, respectively, from $2.6 billion and $552.4 million, respectively, at December 31, 2015.
The increase of $99.9 million in commercial business loans was primarily due to an increase in originations. Total
commercial originations were $1.9 billion in both 2016 and 2015. At December 31, 2016 and 2015, 77.8% and 84.1%,
respectively, of TCF's commercial real estate loans outstanding were secured by properties located in TCF's primary
banking markets. 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, essentially all of TCF's commercial loans were secured either by properties or other business assets at
December 31, 2016 and 2015. At December 31, 2016 and 2015, variable- and adjustable-rate loans represented 69.0%
and 67.2%, respectively, of total commercial loans outstanding.
TCF's commercial real estate loan portfolio by property and loan type was as follows:
(In thousands)
Multi-family housing
Warehouse/industrial buildings
Health care facilities
Office buildings
Retail services(1)
Self-storage
Hotels and motels
Other
Total
At December 31,
2016
Construction
and
Development
Permanent
Total
Permanent
2015
Construction
and
Development
Total
$
718,562
$
152,693
$
871,255
$
770,325
$
203,518
$
973,843
362,092
326,536
321,970
292,036
184,543
117,312
33,236
3,156
37,372
22,058
3,662
29,771
25,739
3,453
365,248
363,908
344,028
295,698
214,314
143,051
36,689
339,160
290,418
316,326
264,253
141,844
112,386
32,506
28,462
35,610
12,615
4,189
20,215
6,666
14,936
367,622
326,028
328,941
268,442
162,059
119,052
47,442
$
2,356,287
$
277,904
$
2,634,191
$
2,267,218
$
326,211
$
2,593,429
(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 24.3% and 23.0% of
TCF's total loan and lease portfolio at December 31, 2016 and 2015, respectively. The leasing and equipment finance
portfolio consisted of $2.3 billion of leases and $2.0 billion of loans at December 31, 2016, increases of 10.3% and
5.6%, respectively, from $2.1 billion of leases and $1.9 billion of loans at December 31, 2015. The increase of
$324.1 million, or 8.1%, in total loans and leases was primarily due to growth in the specialty vehicles and furniture
and fixtures product types. Leasing and equipment finance originations increased to $2.1 billion in 2016 compared to
$2.0 billion in 2015. The uninstalled backlog of approved transactions was $453.6 million and $446.3 million at
December 31, 2016 and 2015, respectively. The average loan and lease size was $77 thousand and $76 thousand
at December 31, 2016 and 2015, respectively. 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, Basis of Presentation
of Notes to Consolidated Financial Statements for information on lease accounting.
At December 31, 2016 and 2015, $140.1 million and $126.0 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, 2016, lease residuals totaled
$123.4 million, or 10.0% of original equipment value, including $7.5 million related to non-recourse sales, compared
with $118.9 million, or 9.9% of original equipment value, including $11.6 million related to non-recourse sales at
December 31, 2015.
36
TCF's leasing and equipment finance portfolio by equipment type was as follows:
(Dollars in thousands)
Specialty vehicles
Construction
Golf cart and turf
Furniture and fixtures
Medical
Technology and data processing
Manufacturing
Trucks and trailers
Agricultural
Other
Total
At December 31,
2016
2015
Balance
Percent
of Total
Balance
Percent
of Total
$
1,252,951
28.9% $
1,110,836
483,231
429,382
384,975
336,566
321,562
300,368
271,870
149,192
406,213
11.1
9.9
8.9
7.8
7.4
6.9
6.3
3.4
9.4
447,502
394,939
296,823
355,326
304,845
318,750
263,512
151,894
367,821
27.7%
11.1
9.8
7.4
8.9
7.6
7.9
6.6
3.8
9.2
$
4,336,310
100.0% $
4,012,248
100.0%
Inventory Finance TCF's inventory finance portfolio represented 13.8% and 12.3% of TCF's total loan and lease
portfolio at December 31, 2016 and 2015, respectively. The inventory finance portfolio totaled $2.5 billion and
$2.1 billion at December 31, 2016 and 2015, respectively. The increase of $323.4 million, or 15.1%, was primarily due
to strong originations and the expansion of the number of active dealers. TCF's inventory finance customers included
more than 10,800 and 10,500 active dealers at December 31, 2016 and 2015, respectively. Inventory finance
originations increased to $6.7 billion in 2016 compared to $5.8 billion in 2015. Origination levels are impacted by the
velocity of fundings and repayments with dealers.
TCF's inventory finance portfolio by marketing segment was as follows:
(Dollars in thousands)
Powersports
Lawn and garden
Other
Total
At December 31,
2016
2015
Balance
Percent
of Total
Balance
Percent
of Total
$
1,143,226
46.3% $
1,038,741
567,452
759,497
23.0
30.7
487,541
620,472
48.4%
22.7
28.9
$
2,470,175
100.0% $
2,146,754
100.0%
Auto Finance TCF's auto finance portfolio represented 14.8% and 15.2% of TCF's total loan and lease portfolio at
December 31, 2016 and 2015, respectively. The auto finance portfolio totaled $2.6 billion at both December 31, 2016
and 2015. Loans are originated for investment and for sale, including securitizations. TCF sold $2.1 billion and
$1.3 billion of auto finance loans in 2016 and 2015, respectively. Auto finance originations increased to $3.6 billion in
2016 compared to $3.2 billion in 2015. The auto finance network included dealers in all 50 states and more than 11,400
and 11,800 active dealers at December 31, 2016 and 2015, respectively. The auto finance portfolio consisted of 23.3%
new auto loans and 76.7% used auto loans at December 31, 2016, compared with 24.4% and 75.6%, respectively, at
December 31, 2015. The average original FICO score for the auto finance held for investment portfolio was 733 and
725 at December 31, 2016 and 2015, respectively.
37
Credit Quality The following summarizes TCF's loan and lease portfolio based on the credit quality factors that TCF
believes are the most important and should be considered to understand the overall condition of the portfolio. The
following items should be considered throughout this section:
•
•
•
Loans and leases 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, Basis of Presentation 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 Over 60-day delinquent loans and leases by type, excluding non-accrual loans and
leases, were as follows. 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
Portfolios acquired with deteriorated credit quality
Total
$
$
(1)
Excludes average non-accrual loans and leases by portfolio.
At December 31,
2016
2015
60 Days or More
Delinquent and
Accruing
Percentage of
Average Portfolio(1)
60 Days or More
Delinquent and
Accruing
Percentage of
Average Portfolio(1)
0.40% $
0.05
0.21
—
0.10
—
0.23
0.10
0.12
—
0.12
$
11,565
1,519
13,084
1
2,292
118
3,573
20
19,088
1
19,089
0.46%
0.05
0.25
—
0.06
0.01
0.14
0.10
0.11
0.43
0.11
8,725
1,404
10,129
—
4,523
55
6,102
20
20,829
—
20,829
38
Loan Modifications TDR loans were as follows:
(Dollars in thousands)
Consumer real estate
Commercial
Leasing and equipment finance
Inventory finance
Auto finance
Other
Total
At December 31, 2016
Accruing TDR
Loans
Non-accrual
TDR Loans
Total TDR
Loans
$
98,606
$
71,961
$
170,567
20,304
4,802
—
2,323
6
2,170
1,350
357
5,504
—
22,474
6,152
357
7,827
6
$
126,041
$
81,342
$
207,383
Over 60-day delinquent accruing TDR loans as a percentage of total accruing TDR loans
1.19%
N.A.
N.A.
(Dollars in thousands)
Consumer real estate
Commercial
Leasing and equipment finance
Inventory finance
Auto finance
Other
Total
At December 31, 2015
Accruing TDR
Loans
Non-accrual
TDR Loans
Total TDR
Loans
$
106,787
$
79,055
$
185,842
24,731
2,904
51
799
11
7,016
641
172
8,440
—
31,747
3,545
223
9,239
11
$
135,283
$
95,324
$
230,607
Over 60-day delinquent accruing TDR loans as a percentage of total accruing TDR loans
1.54%
N.A.
N.A.
N.A. Not applicable.
Total TDR loans at December 31, 2016 decreased $23.2 million, or 10.1%, from December 31, 2015. Accruing TDR
loans at December 31, 2016 decreased $9.2 million, or 6.8%, from December 31, 2015, primarily due to fewer additions
in the consumer real estate and commercial portfolios and continued strong customer payment performance in the
consumer real estate portfolio. Non-accrual TDR loans at December 31, 2016 decreased $14.0 million, or 14.7%, from
December 31, 2015 primarily due to improved credit quality trends in the consumer real estate and commercial
portfolios, as well as a decrease in auto finance non-accrual TDR loans due to fewer TDR loans being placed on non-
accrual status.
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.
TCF typically reduces a consumer real estate customer's contractual payments by 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. At December 31, 2016, 57.8% of total consumer
real estate TDR loans were accruing and TCF recognized more than 62% of the original contractual interest due on
accruing consumer real estate TDR loans in 2016, yielding 4.2%, by modifying the loans to qualified customers instead
of foreclosing on the property. At December 31, 2016, collection of principal and interest under the modified terms was
reasonably assured on all accruing consumer real estate TDR loans.
39
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, 2016,
90.3% of total commercial TDR loans were accruing and TCF recognized more than 92% of the original contractual
interest due on accruing commercial TDR loans in 2016, yielding 4.7%. At December 31, 2016, collection of principal
and interest under the modified terms was reasonably assured on all accruing commercial TDR loans.
TCF may utilize a multiple note structure as a workout alternative for certain commercial loans, which restructures a
troubled loan into two notes. The first note is established at an amount and with market terms that provide reasonable
assurance of payment and performance and is classified as a TDR loan. The second note is a separate and distinct
legal contract and is still outstanding; however it has been charged-off and may become recoverable if the borrower's
financial position improves. At December 31, 2016, one TDR loan restructured as multiple notes with a combined total
contractual balance of $9.1 million and a remaining book balance of $8.6 million was 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.
Non-performing Assets TCF's non-accrual loans and leases and other real estate owned were as follows:
(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
2016
2015
2014
2013
2012
At December 31,
$ 106,125
$ 124,156
$ 137,790
$ 180,811
$ 199,631
46,346
152,471
44,113
168,269
35,481
173,271
38,222
219,033
35,269
234,900
5,564
355
5,919
10,880
5,134
7,038
3
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
118,300
9,446
127,746
13,652
1,487
101
1,571
Total non-accrual loans and leases
181,445
200,466
216,734
277,022
379,457
Other real estate owned:
Consumer real estate
Commercial real estate
Total other real estate owned
34,070
12,727
46,797
42,912
7,070
49,982
44,932
20,718
65,650
47,637
21,237
68,874
69,599
27,379
96,978
Total non-accrual loans and leases and other real estate owned $ 228,242
$ 250,448
$ 282,384
$ 345,896
$ 476,435
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
1.02%
1.15%
1.32%
1.75%
2.46%
1.28
1.43
1.71
2.17
3.07
88.33
77.85
75.75
91.05
70.40
Non-accrual loans and leases at December 31, 2016 decreased $19.0 million, or 9.5%, from December 31, 2015,
primarily due to improved credit quality trends in the consumer real estate and commercial portfolios and lower non-
accrual TDR loans in the auto finance portfolio, partially offset by an increase in non-accrual loans in the inventory
finance portfolio. Other real estate owned at December 31, 2016 decreased $3.2 million, or 6.4%, from
December 31, 2015, primarily due to sales of other real estate owned outpacing additions. Consumer real estate loans
in process of foreclosure were $32.1 million and $44.5 million at December 31, 2016 and 2015, respectively. See Note
1, Basis of Presentation of Notes to Consolidated Financial Statements for additional information.
40
Loans and leases are generally placed on non-accrual status when the collection of interest or principal is 90 days or
more past due unless, in the case of commercial loans, they are well secured and in process of collection. 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. 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, 2016 and 2015 were as
follows:
(In thousands)
Consumer
Real Estate
Commercial
Leasing and
Equipment
Finance
Inventory
Finance
Auto
Finance
Other
Total
Balance, beginning of period
$
168,269
$
10,325
$
11,262
$
1,098
$
9,509
$
3
$
200,466
At or For the Year Ended December 31, 2016
Additions
(Charge-offs) recoveries
Transfers to other assets
Return to accrual status
Payments received
Sales
Other, net
89,484
(12,674)
(43,965)
(19,522)
(28,949)
—
(172)
5,325
(727)
—
—
(15,812)
(3,664)
10,472
20,714
12,963
(5,074)
(4,541)
(3,614)
(7,867)
—
—
(1,498)
(1,496)
(1,242)
(4,784)
—
93
5,762
(2,675)
(1,455)
—
(4,044)
—
(59)
Balance, end of period
$
152,471
$
5,919
$
10,880
$
5,134
$
7,038
$
156
(91)
—
—
(65)
—
—
3
134,404
(22,739)
(51,457)
(24,378)
(61,521)
(3,664)
10,334
$
181,445
(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
(5,483)
(2,648)
(2,352)
(7,722)
—
—
(1,271)
(1,482)
(6,278)
(4,976)
—
781
11,003
(1,667)
(953)
—
35
49
—
—
(2,550)
(81)
—
—
—
—
3
185,385
(39,028)
(64,531)
(37,438)
(61,341)
(4,083)
4,768
$
200,466
Balance, end of period
$
168,269
$
10,325
$
11,262
$
1,098
$
9,509
$
41
Loan Credit Classifications TCF assesses the risk of its loan and lease portfolio utilizing numerous risk characteristics
as outlined in the previous sections. Loan credit classifications are an additional characteristic that is closely monitored
in the overall credit risk process. Loan credit classifications are derived from standard regulatory rating definitions,
which include: non-classified (pass and special mention) and classified (substandard and doubtful). Classified loans
and leases have well-defined weaknesses, but may never result in a loss.
Loans and leases by portfolio and regulatory classification were as follows:
(In thousands)
Consumer real estate
Commercial
Leasing and equipment finance
Inventory finance
Auto finance
Other
Non-classified
Classified
At December 31, 2016
Pass
Special Mention
Substandard
Doubtful
Total
$
4,877,740
$
40,253
$
166,359
$
— $
5,084,352
3,190,241
4,285,065
2,163,764
2,631,406
18,750
61,771
23,441
139,385
244
—
34,466
27,804
167,026
16,091
21
—
—
—
—
—
3,286,478
4,336,310
2,470,175
2,647,741
18,771
Total loans and leases
$
17,166,966
$
265,094
$
411,767
$
— $
17,843,827
(In thousands)
Consumer real estate
Commercial
Leasing and equipment finance
Inventory finance
Auto finance
Other
Non-classified
Classified
At December 31, 2015
Pass
Special Mention
Substandard
Doubtful
Total
$
5,210,975
$
62,722
$
190,575
$
— $
5,464,272
3,035,320
3,969,191
1,887,505
2,632,589
19,274
65,382
19,806
138,945
—
—
45,130
23,251
120,304
15,007
23
—
—
—
—
—
3,145,832
4,012,248
2,146,754
2,647,596
19,297
Total loans and leases
$
16,754,854
$
286,855
$
394,290
$
— $
17,435,999
Total classified loans and leases were $411.8 million and $394.3 million at December 31, 2016 and 2015, respectively.
The increase of $17.5 million from December 31, 2015 was primarily due to an increase in the inventory finance
portfolio, partially offset by a decrease in the consumer real estate and commercial portfolios due to improved credit
quality trends.
42
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, economic outlook and prevailing economic conditions. The various factors used in
the methodologies are reviewed on a periodic basis.
The Company considers the allowance for loan and lease losses of $160.3 million appropriate to cover losses incurred
in the loan and lease portfolios at December 31, 2016. 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, detailed information regarding TCF's allowance for loan and lease losses was as follows:
Credit Loss Reserves
At December 31,
Credit Loss Reserves as a Percentage of
Portfolio
At December 31,
2016
2015
2014
2013
2012
2016
2015
2014
2013
2012
(Dollars in thousands)
Consumer real estate:
First mortgage lien
$ 33,828
$ 36,888
$ 55,319
$ 133,009
$ 119,957
1.48%
1.41%
1.76%
3.53%
2.83%
Junior lien
Consumer real estate
25,620
59,448
31,104
67,992
30,042
43,021
62,056
85,361
176,030
182,013
Commercial:
Commercial real estate
22,785
22,215
24,616
32,405
47,821
Commercial business
9,910
7,970
6,751
5,062
3,754
Total commercial
32,695
30,185
31,367
37,467
51,575
21,350
13,932
32,310
534
19,018
11,128
26,486
1,245
18,446
10,020
18,230
745
18,733
21,037
8,592
10,623
785
7,569
4,136
798
0.92
1.17
0.86
1.52
0.99
0.49
0.56
1.22
2.84
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
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.
160,269
156,054
164,169
252,230
267,128
0.90
0.90
1.00
1.59
1.73
1,115
1,044
943
980
2,456
N.A.
N.A.
N.A.
N.A.
N.A.
$ 161,384
$ 157,098
$ 165,112
$ 253,210
$ 269,584
0.90
0.90
1.01
1.60
1.75
43
Reconciliations of changes in the allowance for loan and lease losses were as follows:
(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,
2016
2015
2014
2013
2012
$
156,054
$
164,169
$
252,230
$
267,128
$
255,672
(10,413)
(8,211)
(18,624)
(752)
(1)
(753)
(7,738)
(2,623)
(26,994)
(7,353)
(64,085)
1,206
5,859
7,065
308
65
373
2,386
816
3,853
4,357
18,850
(45,235)
65,874
(16,424)
(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
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)
$
160,269
$
156,054
$
164,169
$
252,230
$
267,128
Net charge-offs as a percentage of average loans and
leases
0.26%
0.30%
0.49%
0.81%
1.54%
(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 2016, total net charge-offs decreased $6.3 million primarily due to a decrease in consumer real estate net
charge-offs, partially offset by an increase in auto finance net charge-offs. The decrease in net charge-offs in the
consumer real estate portfolio was primarily due to improved credit quality and increased home values. The increase
in net charge-offs in the auto finance portfolio was primarily due to the maturation of the portfolio and an industry
decline in used auto values. During 2015, total net charge-offs decreased $27.8 million primarily due to a decrease in
consumer real estate net charge-offs as a result of the improving economy, as incidents of default decreased and
home values increased and a decrease in commercial net charge-offs due to improved credit quality and continued
efforts to actively work out problem loans. These decreases were partially offset by an increase in net charge-offs in
the auto finance portfolio primarily due to growth and maturation of the portfolio.
44
Liquidity Management TCF manages its liquidity to ensure that the funding needs of depositors and borrowers are
met both promptly and in a cost-effective manner. Asset liquidity arises from the amortization, prepayment or maturity
of assets and from the ability of TCF to sell or securitize loans. 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.
TCF Bank had $256.6 million and $538.7 million of net liquidity qualifying interest-bearing deposits at the Federal
Reserve Bank at December 31, 2016 and 2015, respectively. Interest-bearing deposits held at the Federal Reserve
Bank and unencumbered U.S. Government sponsored enterprises and federal agencies mortgage-backed securities
were $1.2 billion and $1.3 billion at December 31, 2016 and 2015, respectively. In addition, TCF held unencumbered
obligations of states and political subdivisions totaling $612.5 million and $266.9 million at December 31, 2016 and
2015, 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 due from bank of $69.7 million and $69.5 million at December 31, 2016 and 2015,
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 receives 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 $1.9 billion of additional borrowing capacity at the
FHLB of Des Moines at December 31, 2016, 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. At December 31, 2016, TCFCFC had $2.2 million (USD) outstanding under the line of
credit with the counterparty and it was unused at December 31, 2015.
Deposits Deposits totaled $17.2 billion at December 31, 2016, an increase of $0.5 billion, or 3.1%, from
December 31, 2015, primarily due to an increase in checking account balances and certificates of deposit.
Non-interest bearing checking accounts represented 20.0% of total deposits at December 31, 2016, compared with
19.1% at December 31, 2015. TCF's weighted-average rate for deposits, including non-interest bearing deposits, was
0.36% at December 31, 2016, compared with 0.30% at December 31, 2015. The increase was primarily due to
increased average rates resulting from promotions for certificates of deposit.
Checking, savings and certain money market deposits are an important source of low or no interest cost funds for
TCF. The average balance of these types of deposits was $10.6 billion and $10.0 billion for 2016 and 2015, respectively.
These deposits comprised 62.1% of total average deposits for 2016, compared with 62.6% of total average deposits
for 2015.
45
Certificates of deposit totaled $4.1 billion at December 31, 2016, compared with $3.9 billion at December 31, 2015.
The maturities of certificates of deposit with denominations equal to or greater than $100,000 at December 31, 2016
were as follows:
(In thousands)
Maturity:
Three months or less
Over three through six months
Over six through 12 months
Over 12 months
Total
Denominations $100
Thousand or Greater
at December 31, 2016
$
$
388,777
331,697
1,003,841
309,419
2,033,734
Borrowings Borrowings totaled $1.1 billion and $1.0 billion at December 31, 2016 and 2015, respectively. Historically,
TCF has borrowed primarily from the FHLB of Des Moines, institutional sources under repurchase agreements and
other sources.
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.
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, 2016, 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
$
4,092,423
$
3,392,044
$
662,411
$
24,063
$
13,905
1,078,921
64,236
741,803
16,176
256,706
Annual rental commitments under non-cancelable
operating leases
Contractual interest payments(1)
Campus marketing agreement
Investments in affordable housing limited liability entities
Construction contracts and land purchase
commitments for future branch sites
191,931
149,413
28,404
12,565
28,264
55,680
2,829
9,746
55,076
39,930
5,642
2,819
3,447
3,447
—
37,853
28,678
5,643
—
—
70,738
25,125
14,290
—
—
Total
$
5,557,104
$
3,556,246
$
1,507,681
$
112,413
$
380,764
(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
$
1,425,585
$
44,511
$
115,134
$
21,986
$
1,243,954
898,809
125,648
2,450,042
127,913
125,648
298,072
490,833
254,665
—
—
25,398
—
605,967
276,651
1,269,352
Standby letters of credit and guarantees on industrial
revenue bonds
Total
8,782
7,926
281
575
—
$
2,458,824
$
305,998
$
606,248
$
277,226
$
1,269,352
46
Unrecognized tax benefits, projected benefit obligations, demand deposits with indeterminate maturities and
discretionary credit facilities that do not obligate the Company to lend have been excluded from the contractual
obligations table above.
TCF's campus marketing agreement consists of fixed and minimum obligations for exclusive marketing rights and
naming rights with one university. TCF is obligated to make annual payments for the exclusive marketing rights through
2023 with a renewal option to extend the terms through 2029. TCF is obligated to make annual payments for the
exclusive naming rights through 2023.
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 2020. Collateral held consists primarily of commercial real estate mortgages. Since the conditions under which
TCF is required to fund these commitments may not materialize, the cash requirements are expected to be less than
the total outstanding commitments.
Capital Management TCF is committed to managing capital to maintain protection for stockholders, 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 and 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, 2016 and 2015. See Note 14, Regulatory Capital Requirements
of Notes to Consolidated Financial Statements.
Preferred Stock At December 31, 2016, 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%. The Series A Preferred Stock may be redeemed at TCF's option in whole or in part on
or after June 25, 2017.
At December 31, 2016, there were 4,000,000 shares outstanding of the 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%. The Series B Preferred Stock may be redeemed at TCF's option in whole or in part on
or after December 19, 2017.
Equity Total equity at December 31, 2016 was $2.4 billion, or 11.4% of total assets, compared with $2.3 billion, or
11.2% of total assets, at December 31, 2015. Dividends to common stockholders on a per share basis totaled 7.5 cents
for each quarter of the year ended December 31, 2016 and 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. TCF's common dividend payout ratio
for the quarters ended December 31, 2016 and 2015 was 27.8% and 25.9%, respectively. TCF Financial's primary
funding sources for dividends are earnings and dividends received from TCF Bank.
At December 31, 2016, 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.
47
Common equity at December 31, 2016 was $2.2 billion, or 10.09% of total assets, compared with $2.0 billion, or 9.80%
of total assets, at December 31, 2015. Tangible common equity at December 31, 2016 was $1.9 billion, or 9.13% of
total tangible assets, compared with $1.8 billion, or 8.79% of total tangible assets, at December 31, 2015. 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.
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, were as follows:
(Dollars in thousands)
2016
2015
2014
2013
2012
At December 31,
Computation of tangible common equity to
tangible assets:
Total equity
$ 2,444,645
$ 2,306,917
$ 2,135,364
$ 1,964,759
$ 1,876,643
Less: Non-controlling interest in subsidiaries
17,162
16,001
13,715
11,791
13,270
Total TCF Financial Corporation
stockholders' equity
Less: Preferred stock
2,427,483
2,290,916
2,121,649
1,952,968
1,863,373
263,240
263,240
2,027,676
263,240
263,240
263,240
1,858,409
1,689,728
1,600,133
Total common stockholders' equity
(a)
2,164,243
Less:
Goodwill
Other intangibles(1)
Tangible common equity
Total assets
Less:
Goodwill
Other intangibles(1)
Tangible assets
Common equity to assets
Tangible common equity to tangible assets
(1)
Includes non-mortgage servicing assets.
Critical Accounting Estimates
225,640
1,738
225,640
3,126
225,640
4,641
225,640
6,326
225,640
8,674
$ 1,936,865
$ 1,798,910
$ 1,628,128
$ 1,457,762
$ 1,365,819
$ 21,441,326
$ 20,689,609
$ 19,393,656
$ 18,378,769
$ 18,224,736
225,640
1,738
225,640
3,126
225,640
4,641
225,640
6,326
225,640
8,674
$ 21,213,948
$ 20,460,843
$ 19,163,375
$ 18,146,803
$ 17,990,422
(b)
(c)
(d)
(a) / (c)
(b) / (d)
10.09%
9.13%
9.80%
8.79%
9.58%
8.50%
9.19%
8.03%
8.78%
7.59%
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, the determination of lease classification and the determination of current and deferred income
taxes. See Note 1, Basis of Presentation of Notes to Consolidated Financial Statements for further discussion of critical
accounting policies.
48
Recent Accounting Developments
In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
No. 2017-04: Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which
eliminates Step 2 from the goodwill impairment test. Under the new guidance, if a reporting unit’s carrying amount
exceeds its fair value, an entity will record an impairment charge based on that difference. The impairment charge will
be limited to the amount of goodwill allocated to that reporting unit. The standard eliminates the requirement to calculate
an implied goodwill value using Step 2 to measure impairment. The ASU does not change the guidance on completing
Step 1 of the goodwill impairment test. An entity will still be able to perform today’s optional qualitative goodwill
impairment assessment before determining whether to proceed to Step 1. The adoption of this ASU will be required
on a prospective basis for annual or any interim goodwill impairment tests performed by TCF after January 1, 2020.
Early adoption is allowed. The adoption of this ASU will not have a material impact on our consolidated financial
statements.
In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of
a Business, which clarifies the definition of a business with the objective of adding guidance to assist companies with
evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The
ASU provides a more robust framework to use in determining when a set of assets and activities is a business. 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, 2018. Management is currently evaluating the potential impact of this guidance on our
consolidated financial statements.
In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which
requires entities to show changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents
in the statement of cash flows. As a result, entities will no longer present transfers between cash and cash equivalents,
restricted cash and restricted cash equivalents in the statement of cash flows. 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, 2018.
Management is currently evaluating the potential impact of this guidance on our consolidated financial statements.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain
Cash Receipts and Cash Payments, which addresses eight specific cash flow issues with the objective of reducing
the existing diversity in practice in how certain types of cash receipts and cash payments are presented in the statement
of cash flows. 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, 2018. Early adoption is allowed. Management is currently evaluating
the potential impact of this guidance on our consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement
of Credit Losses on Financial Instruments, which changes the impairment model for most financial assets, including
trade and other receivables, held to maturity debt securities, loans and purchased financial assets with credit
deterioration. The adoption of this ASU will be required on a modified retrospective basis with a cumulative-effect
adjustment required beginning with TCF’s Quarterly Report on Form 10-Q for the quarter ending March 31, 2020. Early
adoption is allowed. Management is currently evaluating the potential impact of this guidance on our consolidated
financial statements.
In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements
to Employee Share-Based Payment Accounting, which simplifies several aspects of the accounting for share-based
payment transactions, including income tax consequences, classification of awards as either equity or liabilities and
classification on the statement of cash flows. The most significant change made will be the recognition of all excess
tax benefits and deficiencies as income tax expense or benefit in the statement of income. Certain amendments in
the ASU will be required to be applied on a prospective basis and others will be required to be applied on a retrospective
basis. This ASU is effective 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 a material impact on our consolidated financial
statements.
49
In March 2016, the FASB issued ASU No. 2016-07, Investments - Equity Method and Joint Ventures (Topic 323):
Simplifying the Transition to the Equity Method of Accounting, which eliminates the requirement to retrospectively apply
the equity method in previous periods when an investor initially obtains significant influence over the investee. 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, 2017. Early adoption is allowed. The adoption of this ASU will not have a material impact
on our consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-06, Derivatives and Hedging (Topic 815): Contingent Put and Call
Options in Debt Instruments, which clarifies the requirements for assessing whether contingent put and call options
that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts.
The adoption of this ASU will be required on a modified retrospective basis beginning with TCF’s Quarterly Report on
Form 10-Q for the quarter ending March 31, 2017. Early adoption is allowed. The adoption of this ASU will not have
a material impact on our consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-05, Derivatives and Hedging (Topic 815): Effects of Derivative Contract
Novations on Existing Hedge Accounting Relationships, which clarifies that the novation of a derivative contract in a
hedge accounting relationship does not, in and of itself, require dedesignation of that hedge accounting relationship.
The adoption of this ASU will be required on a prospective or modified retrospective basis beginning with TCF’s
Quarterly Report on Form 10-Q for the quarter ending March 31, 2017. Early adoption is allowed. The adoption of this
ASU will not have a material impact on our consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-04, Liabilities - Extinguishment of Liabilities (Subtopic 405-20):
Recognition of Breakage for Certain Prepaid Stored-Value Products, which requires issuers of prepaid stored-value
products redeemable for goods, services or cash at third-party merchants to derecognize liabilities related to those
products for breakage. 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, 2018. Early adoption is allowed.
Management is currently evaluating the potential impact of this guidance on our consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which, among other amendments, requires
lessees to recognize most leases on their balance sheet. Lessor accounting is largely unchanged. The ASU requires
both quantitative and qualitative disclosure regarding key information about leasing arrangements from both lessees
and lessors. The adoption of this ASU will be required on a modified retrospective basis beginning with TCF’s Quarterly
Report on Form 10-Q for the quarter ending March 31, 2019. Early adoption is allowed. Management is currently
evaluating the potential impact of this guidance on our consolidated financial statements.
In January 2016, the FASB issued 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. The adoption of this ASU will not have a material impact on our consolidated financial statements.
50
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. 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. In March
2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent
Considerations (Reporting Revenue Gross versus Net), which clarifies how an entity should identify the unit of
accounting for the principal versus agent evaluation, and how it should apply the control principle to certain types of
arrangements by explaining what a principal controls before the specified good or service is transferred to the customer.
In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying
Performance Obligations and Licensing, which amends the guidance for identifying performance obligations and
accounting for a license which grants the right to use intellectual property. In May 2016, the FASB issued ASU No.
2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients,
which provides narrow-scope improvements to transition, collectability, noncash consideration and the presentation
of sales and other similar taxes. In December 2016, the FASB issued ASU No. 2016-20, Technical Corrections and
Improvements to Topic 606, Revenue from Contracts with Customers, which provides guidance that affects narrow
aspects of the guidance issued in ASU No. 2014-09. The adoption of these ASUs will be required using one of two
retrospective application methods beginning with TCF’s Quarterly Report on Form 10-Q for the quarter ending March
31, 2018. Management is currently evaluating the potential impact of this guidance on our consolidated financial
statements. In evaluating this standard, management has determined that the majority of revenue earned by the
Company is from revenue streams not included in the scope of this standard and therefore management does not
expect the new revenue recognition guidance to have a material impact on our consolidated financial statements.
Legislative and Regulatory Developments
Federal and state legislation impose numerous legal and regulatory requirements on financial institutions. Future
legislative or regulatory change, or changes in enforcement practices or court rulings, may have a dramatic and
potentially adverse impact on TCF.
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.
51
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.
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; 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 programs,
including 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 either
of the primary 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 expanding existing business relationships; 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.
52
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.
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.
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- and long-term interest rates, as well as
variable interest rate indices (e.g., the prime rate or the London InterBank Offered Rate).
TCF's ALCO 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, the interest rate gap is reviewed periodically to
monitor asset and liability repricing over various time periods.
53
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 and 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.
Impact on Net Interest Income
December 31,
(Dollars in millions)
Immediate Change in Interest Rates:
+200 basis points
+100 basis points
$
2016
97.2
52.1
10.9% $
5.9
2015
93.9
50.4
11.1%
5.9
As of December 31, 2016, 59.0% of TCF's loan and lease balances are expected to reprice, amortize or prepay in the
next 12 months and 62.1% of TCF's deposit balances are low cost or no cost deposits. TCF believes that the mix of
assets repricing compared with low cost or no cost deposits positions TCF well for rising interest rates.
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 primarily 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.
54
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, 2016 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.
55
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 "Item 1.
Business - Regulation - Restrictions on Distributions", Note 14, Regulatory Capital Requirements and Note 23, Parent
Company Financial Information 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. Interest-bearing deposits held at the Federal Reserve Bank and unencumbered U.S.
Government sponsored enterprises and federal agencies mortgage-backed securities were $1.2 billion at
December 31, 2016. In addition, TCF held unencumbered obligations of states and political subdivisions totaling
$612.5 million at December 31, 2016.
Deposits are TCF's primary source of funding. TCF also maintains secured sources of funding, which primarily include
$1.9 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 may consist 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 the exchange rate of the Canadian dollar may
impact the Company's investment in TCFCFC. TCF enters 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 1, Basis of Presentation and Note 18, Derivative Instruments of Notes to Consolidated
Financial Statements for further information.
56
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, 2016 and 2015, 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, 2016. 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, 2016 and 2015, and the results of their
operations and their cash flows for each of the years in the three-year period ended December 31, 2016, 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, 2016, 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 21, 2017 expressed an unqualified opinion on
the effectiveness of the Company’s internal control over financial reporting.
Minneapolis, Minnesota
February 21, 2017
57
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,
2016
2015
$
609,603
$
74,714
181,314
1,423,435
268,832
2,292,596
2,791,756
5,084,352
3,286,478
4,336,310
2,470,175
2,647,741
18,771
17,843,827
(160,269)
17,683,558
418,372
225,640
555,858
889,337
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
529,786
$
$
21,441,326
$
20,689,609
6,009,151
$
4,719,481
2,421,467
4,092,423
17,242,522
4,391
1,073,181
1,077,572
676,587
18,996,681
5,690,559
4,717,457
2,408,180
3,903,793
16,719,989
5,381
1,034,557
1,039,938
622,765
18,382,692
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;
171,034,506 and 169,887,030 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.
1,710
862,776
1,382,901
(33,725)
(49,419)
2,427,483
17,162
2,444,645
$
21,441,326
$
1,699
851,836
1,240,347
(15,346)
(50,860)
2,290,916
16,001
2,306,917
20,689,609
58
Consolidated Statements of Income
(In thousands, except per-share data)
Interest income:
Loans and leases
Securities available for sale
Securities held to maturity
Loans held for sale 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
Other
Subtotal
Operating lease depreciation
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
Earnings per common share:
Basic
Diluted
See accompanying notes to consolidated financial statements.
Year Ended December 31,
2016
2015
2014
$
850,546
$
832,736
$
820,436
26,573
4,649
48,962
930,730
61,788
20,836
82,624
848,106
65,874
782,232
137,664
54,882
20,445
212,991
34,832
50,427
40,182
125,441
119,166
8,883
466,481
(581)
465,900
474,722
149,980
231,420
856,122
40,359
13,187
219
909,887
338,245
116,528
221,717
9,593
212,124
19,388
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
229,255
831,960
39,409
23,193
185
894,747
314,695
108,872
205,823
8,700
197,123
19,388
192,736
$
177,735
$
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
227,970
819,935
27,152
24,567
123
871,777
281,382
99,766
181,616
7,429
174,187
19,388
154,799
1.15
1.15
$
$
1.07
1.07
$
$
0.95
0.94
$
$
$
59
Consolidated Statements of Comprehensive Income
(In thousands)
2016
2015
2014
Net income attributable to TCF Financial Corporation
$
212,124
$
197,123
$
174,187
Year Ended December 31,
Other comprehensive income (loss), net of tax:
Net unrealized gains (losses) on securities available for sale
and interest-only strips
Net unrealized gains (losses) on net investment hedges
Foreign currency translation adjustment
Recognized postretirement prior service cost
Total other comprehensive income (loss), net of tax
Comprehensive income
$
See accompanying notes to consolidated financial statements.
(18,894)
(756)
1,300
(29)
(18,379)
193,745
$
(816)
4,713
(8,304)
(29)
(4,436)
192,687
$
18,092
1,945
(3,704)
(30)
16,303
190,490
60
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
Interest
Total
Equity
Total
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
TCF Financial Corporation
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
Net income
Other comprehensive income
(loss), net of tax
Net investment by (distribution
to) non-controlling interest
Dividends on preferred stock
Dividends on common stock
Common shares purchased
by TCF employee benefit
plans
Stock compensation plans,
net of tax
Change in shares held in trust
for deferred compensation
plans, at cost
—
—
—
—
—
—
—
—
—
—
—
—
—
1,452,837
885,870
—
—
—
—
—
—
—
—
—
—
—
—
—
—
15
8
—
—
—
—
—
—
23,068
7,219
7,202
174,187
—
—
(19,388)
(32,731)
—
—
—
—
16,303
—
—
—
—
—
—
Net income
Other comprehensive income
(loss), net of tax
Net investment by (distribution
to) non-controlling interest
Dividends on preferred stock
Dividends on common stock
Common shares purchased
by TCF employee benefit
plans
Stock compensation plans,
net of tax
Change in shares held in trust
for deferred compensation
plans, at cost
—
—
—
—
—
—
—
—
—
—
—
—
—
1,588,111
795,351
—
—
—
—
—
—
—
—
—
—
—
—
—
—
16
8
—
—
—
—
—
—
24,819
8,427
1,460
197,123
—
—
—
(19,388)
(37,302)
—
—
—
(4,436)
—
—
—
—
—
—
Net income
Other comprehensive income
(loss), net of tax
Net investment by (distribution
to) non-controlling interest
Dividends on preferred stock
Dividends on common stock
Common shares purchased
by TCF employee benefit
plans
Stock compensation plans,
net of tax
Change in shares held in trust
for deferred compensation
plans, at cost
—
—
—
—
—
—
—
—
—
—
—
—
—
511,420
636,056
—
—
—
—
—
—
—
—
—
—
—
—
—
—
5
6
—
—
—
—
—
5,833
6,548
—
(1,441)
212,124
—
—
—
(19,388)
(50,182)
—
—
—
(18,379)
—
—
—
—
—
—
174,187
7,429
181,616
16,303
—
16,303
—
(5,505)
(5,505)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(19,388)
(32,731)
23,083
7,227
(19,388)
(37,302)
24,835
8,435
(19,388)
(50,182)
5,838
6,554
(7,202)
—
197,123
8,700
205,823
(4,436)
—
(4,436)
—
(6,414)
(6,414)
(1,460)
—
212,124
9,593
221,717
(18,379)
—
(18,379)
—
(8,432)
(8,432)
—
—
—
—
—
(19,388)
(32,731)
23,083
7,227
—
—
—
—
—
—
(19,388)
(37,302)
24,835
8,435
—
—
—
—
—
—
(19,388)
(50,182)
5,838
6,554
—
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
1,441
—
Balance, December 31, 2016
4,006,900 171,034,506 $ 263,240 $
1,710 $
862,776 $ 1,382,901 $
(33,725) $ (49,419) $ 2,427,483 $
17,162 $ 2,444,645
See accompanying notes to consolidated financial statements.
61
Consolidated Statements of Cash Flows
(In thousands)
Cash flows from operating activities:
Year Ended December 31,
2015
2014
2016
Net income
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
$
221,717
$
205,823
$
181,616
Provision for credit losses
Depreciation and amortization
Provision for deferred income taxes
Proceeds from sales of loans and leases held for sale
Originations of loans and leases held for sale, net of repayments
Gains on sales of assets, net
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:
Proceeds from sales of securities
Proceeds from maturities of and principal collected on securities
Purchases of securities
Redemption of Federal Home Loan Bank stock
Purchases of Federal Home Loan Bank stock
Proceeds from sales of loans and leases
Loan and lease originations and purchases, net of principal collected on loans and leases
Proceeds from sales of lease equipment
Purchases of lease equipment
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.
65,874
182,226
32,966
1,044,282
(1,207,227)
(97,383)
71,495
(24,667)
289,283
—
145,782
(692,996)
156,967
(161,080)
2,830,807
(2,200,776)
11,650
(1,197,281)
65,235
(34,513)
23,002
(1,053,203)
518,468
(1,192)
5,582,983
(5,542,831)
(8,432)
(19,388)
(50,182)
(377)
5,838
(701)
484,186
(279,734)
889,337
609,603
78,930
23,064
107,768
—
$
$
52,944
157,287
20,786
970,467
(965,712)
(80,471)
31,975
(29,439)
363,660
177
94,250
(510,675)
153,005
(138,000)
1,795,602
(1,968,134)
10,041
(1,087,438)
71,709
(53,594)
16,416
(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
37,432
571,551
(626,172)
(90,736)
46,192
(32,571)
311,750
2,813
58,151
(139,080)
105,931
(97,000)
2,304,280
(2,190,753)
7,737
(920,985)
67,049
(45,469)
22,403
(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
$
$
62
Notes to Consolidated Financial Statements
Note 1. Basis of Presentation
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. TCF's 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.
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.
Effective January 1, 2016, the Company retrospectively adopted Accounting Standards Update ("ASU") No. 2015-03,
Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, which required
that debt issuance costs be presented as a direct deduction from debt. Accordingly, the Company reclassified
unamortized debt issuance costs of $2.1 million from Other assets to a reduction in Long-term borrowings on the
Consolidated Statement of Financial Condition as of December 31, 2015. The adoption of this ASU did not impact
results of operations, retained earnings or cash flows.
Effective January 1, 2016, the Company changed its reportable segments to align with the way the Company is now
managed. The revised presentation of previously reported segment data has been applied retroactively to all periods
presented in these financial statements. The new reportable segments are Consumer Banking, Wholesale Banking
and Enterprise Services. Previously, the Company's reportable segments were Lending, Funding and Support Services.
The reportable segments follow GAAP as described below, except for the accounting for intercompany interest income
and interest expense, which are eliminated in consolidation, and presenting net interest income on a fully tax-equivalent
basis. See Note 22, Business Segments for a description of the new segments.
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, the determination of lease classification and the determination
of current and deferred 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 leases and other consumer
real estate, commercial and auto finance 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.
63
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.
Impairment on auto finance loans is generally based upon the fair value of collateral less estimated 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, a
portfolio's overall risk characteristics, changes in its character or size, risk rating migration, delinquencies, collateral
values, economic outlook and prevailing economic conditions. The various factors used in the methodologies are
reviewed on a periodic basis.
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 the 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 their contractual terms. Auto finance
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.
Consumer real estate and auto finance loans in bankruptcy status may be charged down to the fair value of the
collateral, less estimated selling costs, within 60 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.
64
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 in 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.
Leases that 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 assets or
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 assets and 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
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.
65
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.
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 net of any associated allowance for
loan and lease losses.
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 that 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 fees
and service charges.
Non-accrual Loans and Leases Loans and leases are generally placed on non-accrual status when the collection
of interest or principal is 90 days or more past due unless, in the case of commercial loans, they are well secured and
in the process of collection. Delinquent consumer real estate junior lien loans are 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.
66
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 upon
transfer. 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, 2016 and 2015, was $46.8 million and $50.0 million, respectively. Repossessed and returned
assets at December 31, 2016 and 2015, were $10.0 million and $8.0 million, respectively. Other real estate owned
and repossessed and returned assets were written down $8.3 million and $12.8 million, which was included in
foreclosed real estate and repossessed assets, net expense for the years ended December 31, 2016 and 2015,
respectively.
Investments in Affordable Housing Limited Liability Entities TCF has investments in affordable housing limited
liability entities that operate qualified affordable housing projects or that invest in other limited liability entities formed
to operate affordable housing projects, which TCF generally accounts for under the proportional amortization method.
However, depending on circumstances, the effective yield, equity or cost methods may be utilized. The amount of the
investments, along with any unfunded equity contributions that 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 investments 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, 2016 and 2015 were
$30.3 million and $35.2 million, respectively.
At December 31, 2016 and 2015, four and six, 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, 2016 and 2015, the carrying amount of the VIE investments was $29.8 million and $34.7 million,
respectively. The maximum exposure to loss on the VIE investments was $29.8 million and $34.7 million at
December 31, 2016 and 2015, 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
$7.1 million, $3.9 million and $3.5 million in 2016, 2015 and 2014, respectively, are recorded in income tax expense.
At December 31, 2016, the expected payments for unfunded affordable housing commitments were $12.6 million. The
commitments are expected to be fully funded by December 31, 2018.
Interest-only Strips TCF sells fixed or variable-rate consumer real estate and auto finance loans with or without
interest-only strips to third party financial institutions. For those transactions which achieve sale treatment, the
underlying loans are removed from TCF's Consolidated Statements of Financial Condition. The Company may receive
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 in other assets with the unrealized gains or losses, net of
deferred income taxes, reported within accumulated other comprehensive income (loss), a separate component of
equity. 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. Declines in the value of interest-only
strips that are considered other than temporary are recorded in other non-interest expense.
67
Intangible Assets All assets and liabilities acquired in purchase acquisitions, including other intangibles, are initially
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.
Derivatives All derivative instruments are recognized within other assets or other liabilities at fair value within the
Consolidated Statements of Financial Condition. The Company's derivative instruments may be subject to master
netting arrangements and collateral arrangements and qualify for offset in the Consolidated Statements of Financial
Condition. A master netting arrangement with a counterparty creates a right of offset for amounts due to and from that
same counterparty that is enforceable in the event of a default or bankruptcy. The Company's policy is to recognize
amounts subject to master netting arrangements and collateral arrangements on a net basis in 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 the three-
month London InterBank Offered Rate 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 other non-interest income.
68
Net Investment Hedges Forward foreign exchange contracts, which generally settle within 34 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 34 days. Changes in the fair value of these forward foreign exchange contracts
are reflected in other 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 other
non-interest income. These contracts have original fixed maturity dates ranging from three to 10 years.
TCF enters into interest rate lock commitments in conjunction with the sale of certain consumer real estate loans.
These interest rate lock commitments are agreements to extend credit under certain specified terms and conditions
at fixed rates and have original lock expirations of up to 60 days. They are not designated as hedges and accordingly,
changes in the valuation of these commitments are reflected in gains on sales of consumer real estate loans, net.
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 other non-interest expense.
Stock-based Compensation The fair value of restricted stock, stock options and restricted stock units is determined
on the date of grant and amortized to compensation expense, with a corresponding increase to 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 or stock units, TCF estimates the
degree to which performance conditions will be met to determine the number of shares or units 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, where the fair value on vesting or exercise of the award exceeds
the grant date value less any proceeds on exercise, are recognized as an increase to additional paid-in capital. Any
income tax detriments, where the fair value on vesting or exercise of the award is less than grant date value less any
proceeds on exercise, are recognized as a reduction to additional paid-in capital to the extent of previously recognized
income tax benefits and then as income tax expense for any remaining amount.
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.
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.
69
Note 2. Cash and Due from Banks
At December 31, 2016 and 2015, TCF Bank was required by Federal Reserve regulations to maintain reserves of
$103.7 million and $101.6 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 finance loans. Cash payments received on loans serviced for third
parties are generally held in separate accounts until remitted. TCF may also retain cash balances for collateral on
certain borrowings, forward foreign exchange contracts, interest rate contracts and other contracts. TCF maintained
restricted cash totaling $51.3 million and $58.3 million at December 31, 2016 and 2015, respectively.
TCF had cash held in interest-bearing accounts of $326.5 million and $609.5 million at December 31, 2016 and 2015,
respectively.
Note 3. Investments
Investments were as follows:
(In thousands)
Federal Home Loan Bank stock, at cost
Federal Reserve Bank stock, at cost
Total investments
At December 31,
2016
2015
$
$
37,022
$
37,692
74,714
$
32,909
37,628
70,537
The investments in Federal Home Loan Bank ("FHLB") stock are required investments related to TCF's membership
in and current borrowings from the FHLB of Des Moines. TCF's investments in the 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. TCF periodically evaluates investments for other than temporary impairment.
There was no impairment of these investments in 2016, 2015 or 2014.
The yield on these investments, which have no stated contractual maturity, was 2.59% and 4.41% at December 31, 2016
and 2015, respectively.
70
Note 4. Securities Available for Sale and Securities Held to Maturity
Securities were as follows:
At December 31,
2016
2015
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
$ 827,722
$
423
$
17,254
$
810,891
$ 627,521
$
655
$
6,246
$ 621,930
(In thousands)
Securities available for sale:
Mortgage-backed securities:
U.S. Government
sponsored enterprises
and federal agencies
Other
18
—
—
18
34
—
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
Other
Other securities
Total securities held to
maturity
628,972
394
16,840
612,526
262,189
4,732
$1,456,712
$
817
$
34,094
$ 1,423,435
$ 889,744
$
5,387
$
6,246
$ 888,885
$ 178,514
$
3,072
$
440
$
181,146
$ 197,410
$
5,247
$
214
$ 202,443
—
2,800
—
—
—
—
—
2,800
1,110
3,400
—
—
—
—
1,110
3,400
$ 181,314
$
3,072
$
440
$
183,946
$ 201,920
$
5,247
$
214
$ 206,953
—
—
34
266,921
There were no sales of securities available for sale in 2016. In 2015, TCF sold $0.2 million of securities available for
sale and received cash proceeds of $0.2 million. In 2014, TCF recognized gross realized gains of $1.2 million on sales
of securities available for sale. There were no impairment charges recognized on securities available for sale in 2016,
2015 or 2014. At December 31, 2016 and 2015, mortgage-backed securities with a carrying value of $7.5 million and
$17.1 million, respectively, were pledged as collateral to secure certain deposits and borrowings. 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.
TCF recorded $0.7 million, $0.3 million and $0.1 million of impairment charges in 2016, 2015 and 2014, respectively,
on securities held to maturity.
71
Gross unrealized losses and fair value of securities available for sale and securities held to maturity aggregated by
investment category and the length of time the securities were in a continuous loss position were as follows:
At December 31, 2016
Less than 12 months
12 months or more
Total
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
(In thousands)
Securities available for sale:
Mortgage-backed securities:
U.S. Government sponsored
enterprises and federal agencies $
732,724
$
17,254
$
Obligations of states and political
subdivisions
501,620
16,840
Total securities available for sale
$
1,234,344
$
34,094
$
— $
—
— $
— $
732,724
$
17,254
—
501,620
— $
1,234,344
$
16,840
34,094
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
$
27,090
27,090
$
$
440
440
$
$
— $
— $
— $
— $
27,090
27,090
$
$
440
440
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
72
The amortized cost and fair value of securities available for sale and securities held to maturity by final contractual
maturity were as follows. 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.
1
38
272,511
616,335
888,885
100
1,900
1,400
203,553
206,953
(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
At December 31,
2016
2015
Amortized
Cost
Fair Value
Amortized
Cost
Fair Value
$
1
$
18
1
$
18
1
$
38
331,430
329,005
1,125,263
1,094,411
268,638
621,067
Total securities available for sale
$
1,456,712
$
1,423,435
$
889,744
$
Securities held to maturity:
Due in one year or less
Due in 1-5 years
Due in 5-10 years
Due after 10 years
$
— $
— $
100
$
1,400
1,400
1,400
1,400
1,900
1,400
178,514
181,146
198,520
Total securities held to maturity
$
181,314
$
183,946
$
201,920
$
Interest income attributable to securities available for sale was as follows:
(In thousands)
Taxable interest income
Tax-exempt interest income
Total interest income
Note 5. Loans and Leases
Loans and leases were as follows:
(In thousands)
Consumer real estate:
First mortgage lien
Junior lien
Total consumer real estate
Commercial:
Commercial real estate:
Permanent
Construction and development
Total commercial real estate
Commercial business
Total commercial
Leasing and equipment finance
Inventory finance
Auto finance
Other
Total loans and leases(1)
Year Ended December 31,
2016
2015
2014
$
$
16,238
$
13,930
$
11,994
10,335
1,718
—
26,573
$
15,648
$
11,994
At December 31,
2016
2015
$
2,292,596
$
2,791,756
5,084,352
2,356,287
277,904
2,634,191
652,287
3,286,478
4,336,310
2,470,175
2,647,741
18,771
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
$
17,843,827
$
17,435,999
(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 $54.1 million and
$73.7 million at December 31, 2016 and 2015, respectively.
73
The following table summarizes the recorded investment in consumer real estate and auto finance loans sold, including
accrued interest, the net sales proceeds, the securitization receivable recorded, the interest-only strips received and
the net gains. TCF executes securitizations, which qualify for sale accounting, by transferring the recorded investment
to trusts. These trusts are considered variable interest entities due to their limited capitalization and special purpose
nature. TCF has concluded it is not the primary beneficiary of the trusts and therefore, they are not consolidated. TCF
retains servicing on these sold loans. No servicing assets or liabilities related to consumer real estate or auto finance
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)
Sales proceeds, net(1)
Securitization receivable
Interest-only strips, initial value
Year Ended December 31, 2016
Consumer Real
Estate Loans
Auto Finance
Loans
Auto Finance
Securitizations
Total Auto
Finance Loans
$
1,665,507
$
688,227
$
1,447,113
$
2,135,340
—
16,925
—
5,695
18,620
—
18,620
5,695
Recorded investment in loans sold, including accrued interest
Net gains(2)
$
(1,630,113)
(669,775)
(1,453,283)
(2,123,058)
52,319
$
24,147
$
12,450
$
36,597
(In thousands)
Sales proceeds, net(1)
Interest-only strips, initial value
Recorded investment in loans sold, including accrued interest
Net gains(2)
Consumer Real
Estate Loans
Auto Finance
Loans
Auto Finance
Securitizations
Total Auto
Finance Loans
$
$
1,301,438
$
225,018
$
1,165,213
$
1,390,231
7,495
—
—
—
(1,269,108)
(218,339)
(1,139,701)
(1,358,040)
39,825
$
6,679
$
25,512
$
32,191
Year Ended December 31, 2015
(In thousands)
Sales proceeds, net(1)
Interest-only strips, initial value
Recorded investment in loans sold, including accrued interest
Net gains(2)
(1)
(2)
Includes transaction fees and other sales related assets and liabilities.
Excludes subsequent adjustments and valuation adjustments while held for sale.
Year Ended December 31, 2014
Consumer Real
Estate Loans
Auto Finance
Loans
Auto Finance
Securitizations
Total Auto
Finance Loans
$
$
1,450,244
$
1,098,635
$
265,976
$
1,364,611
10,816
17,927
—
17,927
(1,426,969)
(1,079,230)
(258,561)
(1,337,791)
34,091
$
37,332
$
7,415
$
44,747
Total interest-only strips and the contractual liabilities related to loan sales were as follows:
(In thousands)
Interest-only strips attributable to:
Consumer real estate loan sales
Auto finance loan sales
Contractual liabilities attributable to:
Consumer real estate loan sales
Auto finance loan sales
At December 31,
2016
2015
$
$
27,260
$
12,892
$
701
168
19,182
25,150
702
185
TCF recorded $0.8 million of impairment charges on the consumer real estate loan interest-only strips in 2016, compared
with none in 2015 and 2014. TCF recorded impairment charges on the auto finance loan interest-only strips of
$2.4 million, $0.9 million and $3.5 million in 2016, 2015 and 2014, respectively, primarily as a result of higher
prepayments than originally assumed.
74
TCF's agreements to sell auto and consumer real estate loans typically contain certain representations, warranties
and covenants regarding the loans sold or securitized. These representations, warranties and covenants 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 or investor, the loan's compliance with the criteria set forth in the
agreement, the manner in which the loans will be serviced, payment delinquency and compliance with applicable laws
and regulations. These agreements generally require the repurchase of loans or indemnification in the event TCF
breaches these representations, warranties or covenants and such breaches are not cured. In addition, some
agreements contain a requirement to repurchase loans as a result of early payoffs by the borrower, early payment
default of the borrower, or the failure to obtain valid title. During 2016, 2015 and 2014, losses related to repurchases
pursuant to such representations, warranties and covenants were immaterial. The majority of such repurchases were
of auto finance loans where TCF typically has contractual agreements with the automobile dealerships that originated
the loans requiring the dealers to repurchase such contracts from TCF.
The leasing and equipment finance portfolio consisted of $2.3 billion of leases and $2.0 billion of loans at
December 31, 2016, compared with $2.1 billion of leases and $1.9 billion of loans at December 31, 2015.
Future minimum lease payments receivable for direct financing, sales-type leases and operating leases as of
December 31, 2016 were as follows:
(In thousands)
2017
2018
2019
2020
2021
Thereafter
Total
$
828,687
631,715
464,743
285,663
143,654
56,584
$
2,411,046
75
Note 6. Allowance for Loan and Lease Losses and Credit Quality Information
The rollforwards of the allowance for loan and lease losses were as follows:
At or For the Year Ended December 31, 2016
(In thousands)
Consumer
Real Estate
Commercial
Leasing and
Equipment
Finance
Inventory
Finance
Auto
Finance
Other
Total
Balance, beginning of period
$
67,992
$
30,185
$
19,018
$
11,128
$
26,486
$
1,245
$
156,054
Charge-offs
Recoveries
Net (charge-offs) recoveries
Provision for credit losses
Other
(18,624)
7,065
(11,559)
9,304
(6,289)
(753)
373
(380)
2,890
—
(7,738)
2,386
(5,352)
7,706
(22)
(2,623)
(26,994)
816
(1,807)
4,540
71
3,853
(23,141)
39,149
(10,184)
(7,353)
4,357
(2,996)
2,285
—
(64,085)
18,850
(45,235)
65,874
(16,424)
Balance, end of period
$
59,448
$
32,695
$
21,350
$
13,932
$
32,310
$
534
$
160,269
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)
826
(827)
2,498
(243)
1,491
(10,365)
23,742
(5,770)
(8,359)
5,860
(2,499)
2,459
(100,967)
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.
76
The allowance for loan and lease losses and loans and leases outstanding by type of allowance methodology was as
follows:
Consumer
Real Estate
Commercial
Leasing and
Equipment
Finance
Inventory
Finance
Auto
Finance
Other
Total
At December 31, 2016
(In thousands)
Allowance for loan and lease
losses:
Collectively evaluated for
impairment
Individually evaluated for
impairment
Total
$
$
Loans and leases outstanding:
36,103
$
31,430
$
19,093
$
13,304
$
31,106
$
533
$
131,569
23,345
1,265
2,257
628
1,204
1
28,700
59,448
$
32,695
$
21,350
$
13,932
$
32,310
$
534
$
160,269
Collectively evaluated for
impairment
Individually evaluated for
impairment
Loans acquired with
deteriorated credit quality
$ 4,884,653
$ 3,242,389
$ 4,320,129
$ 2,465,041
$ 2,638,380
$
18,765
$ 17,569,357
199,699
44,089
16,165
5,134
9,360
—
—
16
—
1
6
—
274,453
17
Total
$ 5,084,352
$ 3,286,478
$ 4,336,310
$ 2,470,175
$ 2,647,741
$
18,771
$ 17,843,827
Consumer
Real Estate
Commercial
Leasing and
Equipment
Finance
Inventory
Finance
Auto
Finance
Other
Total
At December 31, 2015
(In thousands)
Allowance for loan and lease
losses:
Collectively evaluated for
impairment
Individually evaluated for
impairment
Total
$
$
Loans and leases outstanding:
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
Individually evaluated for
impairment
Loans acquired with
deteriorated credit quality
$ 5,248,829
$ 3,092,398
$ 3,997,544
$ 2,145,605
$ 2,637,269
$
19,286
$ 17,140,931
215,443
53,434
14,669
1,149
10,308
—
—
35
—
19
11
—
295,014
54
Total
$ 5,464,272
$ 3,145,832
$ 4,012,248
$ 2,146,754
$ 2,647,596
$
19,297
$ 17,435,999
77
Accruing and Non-accrual Loans and Leases TCF's key credit quality indicator is the receivable's payment
performance status, defined as accruing or non-accruing. 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. TCF's accruing and non-accrual loans and leases were as follows:
(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, 2016
$
2,177,746
$
6,581
$
2,144
$
2,186,471
$
106,125
$
2,292,596
2,744,006
4,921,752
2,628,627
651,932
3,280,559
4,320,795
2,464,986
2,634,600
18,748
17,641,440
113
1,404
7,985
—
—
—
3,478
16
3,785
14
15,278
—
—
2,144
—
—
—
1,045
39
2,317
6
2,745,410
4,931,881
2,628,627
651,932
3,280,559
4,325,318
2,465,041
2,640,702
18,768
46,346
152,471
2,791,756
5,084,352
5,564
355
5,919
10,880
5,134
7,038
3
2,634,191
652,287
3,286,478
4,336,198
2,470,175
2,647,740
18,771
5,551
17,662,269
181,445
17,843,714
—
113
—
113
Total
$
17,641,553
$
15,278
$
5,551
$ 17,662,382
$
181,445
$ 17,843,827
(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
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 were as follows:
(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,
2016
2015
2014
$
$
20,604
$
21,459
$
4,152
4,305
16,452
$
17,154
$
26,584
9,359
17,225
78
Consumer real estate loans to customers currently involved in ongoing Chapter 7 or Chapter 13 bankruptcy proceedings
which have not yet been discharged, dismissed or completed were as follows:
(In thousands)
Consumer real estate loans to customers in bankruptcy:
0-59 days delinquent and accruing
Non-accrual
Total consumer real estate loans to customers in bankruptcy
At December 31,
2016
2015
$
$
13,675
$
21,372
35,047
$
26,020
20,264
46,284
For the years ended December 31, 2016 and 2015, interest income would have been reduced by approximately
$0.1 million and $0.2 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. All loans classified as TDR loans are considered to be impaired. TDR loans consist primarily of consumer
real estate and commercial loans.
Total TDR loans at December 31, 2016 and 2015 were $207.4 million and $230.6 million, respectively, of which
$126.0 million and $135.3 million, respectively, were accruing. TCF held consumer real estate TDR loans of
$170.6 million and $185.8 million at December 31, 2016 and 2015, respectively, of which $98.6 million and
$106.8 million, respectively, were accruing. TCF also held $22.5 million and $31.7 million of commercial TDR loans
at December 31, 2016 and 2015, respectively, of which $20.3 million and $24.7 million, respectively, were accruing.
TDR loans for the remaining classes of finance receivables were not material at December 31, 2016 or 2015.
Unfunded commitments to consumer real estate and commercial loans classified as TDRs were $0.4 million at both
December 31, 2016 and 2015. At December 31, 2016 and 2015, 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; however, these loans are still considered impaired and
follow TCF's impaired loan reserve policies. In 2016 and 2015, $0.1 million and $14.0 million, respectively, of
commercial loans were removed from TDR status as they were restructured at market terms and were performing.
Unrecognized 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 2016, unrecognized interest
income for consumer real estate first mortgage lien accruing TDR loans and consumer real estate junior lien accruing
TDR loans was $2.0 million and $0.7 million, respectively. The average yield for the same period on consumer real
estate accruing TDR loans was 4.2%, which compares to the original contractual average rate of 6.7%. In 2015,
unrecognized 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, unrecognized 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%.The unrecognized interest income for the remaining classes of finance receivables
was not material for 2016, 2015 and 2014.
79
TCF considers a loan to have defaulted when under the modified terms it becomes 90 or more days delinquent, has
been transferred to non-accrual status, has been charged down or has been transferred to other real estate owned
or repossessed and returned assets. TDR loans that defaulted during 2016, 2015 and 2014, which were modified
during the respective reporting period or within one year of the beginning of the respective reporting period were as
follows:
(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,
2016
2015
2014
$
8,193
$
1,674
$
1,630
9,823
—
—
—
—
1,693
821
2,495
—
—
—
45
1,039
3,579
$
1,969
1,364
3,333
3,895
127
4,022
—
392
7,747
Defaulted TDR loans modified during the applicable period
$
11,516
$
(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 $19.3 million, or 19.6% of the
outstanding balance, at December 31, 2016, and $22.4 million, or 21.0% of the outstanding balance, at
December 31, 2015. In determining impairment for consumer real estate accruing TDR loans, TCF utilized assumed
remaining re-default rates ranging from 10% to 33% in both 2016 and 2015, depending on modification type and actual
experience. At December 31, 2016, 1.5% of accruing consumer real estate TDR loans were more than 60 days
delinquent, compared with 2.0% at December 31, 2015.
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, 2016, $47.4 million, or 65.9%,
were loans discharged in Chapter 7 bankruptcy that were not reaffirmed by the borrower, of which 82.2% were current.
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, of which 77.2% 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 $1.1 million, or 5.6% of the outstanding balance, at
December 31, 2016 and less than $0.1 million, or 0.1% of the outstanding balance, at December 31, 2015. No accruing
commercial TDR loans were 60 days or more delinquent at December 31, 2016 and 2015.
80
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.
Information on impaired loans was as follows:
(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
Unpaid
Contractual
Balance
2016
Loan
Balance
At December 31,
Related
Allowance
Recorded
Unpaid
Contractual
Balance
2015
Loan
Balance
Related
Allowance
Recorded
$
122,704
$
104,601
$
16,835
$
145,749
$
123,728
$
62,481
185,185
51,410
156,011
5,829
22,664
70,122
215,871
58,366
182,094
10,083
14
10,097
9,900
4,357
5,801
6
10,075
14
10,089
9,900
4,365
5,419
6
1,262
3
1,265
1,044
628
1,126
1
298
16
314
7,259
867
8,275
21
298
16
314
7,259
873
8,062
11
Total impaired loans with an allowance recorded
215,346
185,790
26,728
232,607
198,613
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
18,539
26,915
45,454
21,601
354
21,955
767
3,919
85
Total impaired loans without an allowance recorded
72,180
12,674
1,882
14,556
15,780
354
16,134
769
2,408
—
33,867
—
—
—
—
—
—
—
—
—
—
7,100
26,031
33,131
37,598
3,738
41,336
274
2,003
2
76,746
3,228
520
3,748
31,157
3,585
34,742
276
1,177
—
39,943
20,880
6,837
27,717
12
3
15
822
199
2,942
2
31,697
—
—
—
—
—
—
—
—
—
—
Total impaired loans
$
287,526
$
219,657
$
26,728
$
309,353
$
238,556
$
31,697
81
The average loan balance of impaired loans and interest income recognized on impaired loans were as follows:
(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,
2016
2015
2014
Average Loan
Balance
Interest
Income
Recognized
Average Loan
Balance
Interest
Income
Recognized
Average Loan
Balance
Interest
Income
Recognized
$
114,164
$
3,597
$
112,698
$
5,438
$
311,458
$
54,888
169,052
2,606
6,203
56,885
169,583
3,353
8,791
63,977
375,435
5,186
15
5,201
8,579
2,619
6,741
9
353
—
353
40
56
112
—
27,355
17
27,372
7,758
1,315
5,495
50
852
—
852
18
76
22
2
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
192,201
6,764
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
7,951
1,201
9,152
23,468
1,970
25,438
523
1,792
36,905
449
672
1,121
743
—
743
95
—
19,188
3,959
23,147
40,828
2,033
42,861
564
962
1,959
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
$
229,106
$
8,723
$
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 were as follows:
(In thousands)
Land
Office buildings
Leasehold improvements
Furniture and equipment
Subtotal
Less: Accumulated depreciation and amortization
Total
At December 31,
2016
2015
$
144,221
$
271,597
50,796
341,621
808,235
389,863
$
418,372
$
152,034
281,462
56,243
315,869
805,608
359,674
445,934
Depreciation and amortization expense related to premises and equipment was $44.9 million, $40.8 million and
$40.9 million in 2016, 2015 and 2014, respectively. TCF leases certain premises and equipment under operating
leases. Net lease expense was $35.5 million, $35.1 million and $34.0 million in 2016, 2015 and 2014, respectively.
82
At December 31, 2016, the total future minimum rental payments for operating leases of premises and equipment
were as follows:
(In thousands)
2017
2018
2019
2020
2021
Thereafter
Total
$
28,264
28,595
26,481
22,211
15,642
70,738
$
191,931
Note 8. Goodwill and Other Intangible Assets
Goodwill and other intangible assets were as follows:
(In thousands)
Amortizable intangible assets:
Deposit base intangibles
Customer base intangibles
Non-compete agreement
Tradename
Total
At December 31,
2016
2015
Gross
Amount
Accumulated
Amortization
Net
Amount
Gross
Amount
Accumulated
Amortization
Net
Amount
$
3,049
$
2,069
$
2,730
4,590
300
2,002
4,590
300
980
728
—
—
$
3,049
$
1,817
$
2,730
4,590
300
1,709
3,757
300
1,232
1,021
833
—
$
10,669
$
8,961
$
1,708
$
10,669
$
7,583
$
3,086
Unamortizable intangible assets:
Goodwill related to consumer banking segment $
214,286
Goodwill related to wholesale banking segment
11,354
Total
$
225,640
$
$
214,286
$
214,286
11,354
11,354
225,640
$
225,640
$
$
214,286
11,354
225,640
Amortization expense for intangible assets of $1.4 million, $1.6 million and $1.7 million was recognized in 2016, 2015
and 2014, respectively. Amortization expense for intangible assets is estimated to be $0.5 million for 2017, $0.4 million
for 2018, $0.3 million for 2019, $0.3 million for 2020 and $0.2 million for 2021. There was no impairment of goodwill
or the intangible assets in 2016, 2015 and 2014.
Note 9. Deposits
Deposits were as follows:
(Dollars in thousands)
Checking:
Non-interest bearing
Interest bearing
Total checking
Savings
Money market
Certificates of deposit
Total deposits
Weighted-
average
Rate
2016
Amount
At December 31,
% of
Total
Weighted-
average
Rate
2015
Amount
% of
Total
—% $ 3,454,962
20.0%
—% $ 3,187,581
19.1%
0.01
0.01
0.03
0.61
1.06
0.36
2,554,189
6,009,151
4,719,481
2,421,467
4,092,423
14.9
34.9
27.4
14.0
23.7
$ 17,242,522
100.0%
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%
83
Annual maturities for certificates of deposit at December 31, 2016 were as follows:
(In thousands)
2017
2018
2019
2020
2021
Thereafter
Total
$ 3,392,044
643,552
18,859
13,867
10,196
13,905
$ 4,092,423
The aggregate amount of certificates of deposit with balances equal to or greater than the Federal Deposit Insurance
Corporation insurance limit of $250,000 was $561.0 million and $484.2 million at December 31, 2016 and 2015,
respectively.
Note 10. Short-term Borrowings
Selected information for short-term borrowings (borrowings with an original maturity of less than one year) was as
follows:
(Dollars in thousands)
Period end balance:
2016
At December 31,
2015
2014
Amount
Rate
Amount
Rate
Amount
Rate
Securities sold under repurchase agreements
Line of Credit - TCF Commercial Finance Canada, Inc.
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.
$
$
$
$
$
2,159
2,232
4,391
—
156
5,235
1,660
7,051
—
3,391
5,907
0.10% $
5,381
0.03% $
4,425
1.75
0.94
—
—
—
$
5,381
0.03
$
4,425
0.10%
—
0.10
—% $
0.71
0.41
1.75
0.73
N.A.
N.A.
N.A.
$
$
—
225
16,431
2,166
18,822
—
62,995
5,519
—% $
74,385
0.26%
0.45
0.06
1.96
0.28
375
5,956
2,957
$
83,673
N.A.
N.A.
N.A.
$ 250,000
4,425
11,751
0.40
0.18
1.88
0.31
N.A.
N.A.
N.A.
At December 31, 2016, 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 $6.4 million.
84
Note 11. Long-term Borrowings
Long-term borrowings were as follows:
(Dollars in thousands)
Stated
Maturity
Amount
Stated Rate
Amount
Stated Rate
At December 31,
2016
2015
Federal Home Loan Bank advances
2016
$
Subtotal
Subordinated bank notes
Hedge-related basis adjustment(1)
Subtotal
Discounted lease rentals
Subtotal
Other long-term borrowings
Subtotal
2017
2018
2019
2016
2022
2025
2016
2017
2018
2019
2020
2021
2016
2017
—
—
375,000
300,000
675,000
—
108,654
148,052
(1,349)
255,357
—
57,081
42,132
24,671
11,753
4,423
140,060
—
2,764
2,764
—% $
447,000
0.54% -
1.17%
0.72% -
0.78
-
2.45
2.55
2.53
2.64
2.88
-
-
-
-
-
—
0.81
0.81
—
6.25
4.60
—
7.88
7.95
6.00
6.90
4.57
—
1.36
125,000
0.49
-
0.51
—
—
572,000
74,992
108,454
147,861
(209)
331,098
48,120
41,969
24,496
9,329
2,035
83
126,032
2,685
2,742
5,427
—
—
5.50
6.25
4.60
7.95
7.88
7.95
6.00
5.15
4.57
1.36
1.36
2.39
2.45
2.55
2.53
2.95
-
-
-
-
-
Total long-term borrowings
$
1,073,181
$
1,034,557
(1) Related to subordinated bank notes with a stated maturity of 2025 at December 31, 2016.
At December 31, 2016, TCF Bank had pledged loans secured by consumer and commercial real estate and FHLB
stock with an aggregate carrying value of $4.5 billion as collateral for FHLB advances. At December 31, 2016,
$675.0 million of FHLB advances outstanding were prepayable monthly at TCF's option.
Note 12. Income Taxes
Applicable income taxes in the Consolidated Statements of Income were as follows:
(In thousands)
Year ended December 31, 2016:
Federal
State
Foreign
Total
Year ended December 31, 2015:
Federal
State
Foreign
Total
Year ended December 31, 2014:
Federal
State
Foreign
Total
Current
Deferred
Total
$
$
$
$
$
$
66,810
$
28,629
$
11,402
5,350
4,425
(88)
95,439
15,827
5,262
83,562
$
32,966
$
116,528
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
$
81,370
13,234
5,162
99,766
85
Reconciliations to TCF's effective income tax rate from the statutory federal income tax rate of 35.00% were as follows:
Federal income tax rate
Increase (decrease) resulting from:
State income tax, net of federal income tax
Tax-exempt income
Non-controlling interest tax effect
Foreign tax effects
Other, net
Effective income tax rate
Year Ended December 31,
2016
2015
2014
35.00%
35.00%
35.00%
3.04
(2.07)
(0.99)
(0.50)
(0.03)
2.87
(0.93)
(0.97)
(0.53)
(0.84)
3.06
(0.76)
(0.92)
(0.58)
(0.34)
34.45%
34.60%
35.46%
TCF considers its undistributed foreign earnings to be reinvested indefinitely. 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, 2016 and 2015,
TCF has not provided U.S. deferred taxes on $56.3 million and $42.9 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 $3.0 million and $2.6 million as of December 31, 2016 and
2015, respectively, assuming full utilization of related foreign tax credits.
Reconciliations of the changes in unrecognized tax benefits were 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,
2016
2015
2014
$
4,249
$
4,649
$
546
627
(84)
(525)
(123)
323
—
(157)
(425)
(141)
Balance, end of period
$
4,690
$
4,249
$
4,704
468
8
(350)
—
(181)
4,649
The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $1.6 million
and $1.3 million at December 31, 2016 and 2015, respectively. TCF recognizes increases and decreases for interest
and penalties related to unrecognized tax benefits, where applicable, in income tax expense. TCF recognized
approximately $0.9 million of tax expense, $0.2 million of tax benefit and $0.1 million of tax expense in 2016, 2015
and 2014, respectively, related to interest and penalties. Interest and penalties of approximately $1.2 million and
$0.3 million were accrued at December 31, 2016 and 2015, 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 2012 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 2012 and later tax return
years. Changes in the amount of unrecognized tax benefits within the next 12 months from normal expirations of
statutes of limitation are not expected to be material.
86
TCF'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
Securities available for sale
Net operating losses
Accrued expense
Non-accrual interest
Other
Deferred tax assets
Valuation allowance
Total deferred tax assets, net of valuation allowance
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,
2016
2015
$
75,976
$
41,105
17,606
11,924
3,730
2,140
3,408
155,889
(10,377)
145,512
74,858
37,913
5,945
10,735
5,228
4,250
3,437
142,366
(7,515)
134,851
348,933
320,374
32,430
17,017
11,245
3,870
7,375
420,870
$
275,358
$
28,657
19,220
10,936
4,105
6,026
389,318
254,467
The net operating losses at December 31, 2016 consisted of state net operating losses that expire in 2017 through
2036. The valuation allowance at December 31, 2016 and 2015 principally applies to net operating losses 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.
Note 13. Equity
Restricted Retained Earnings Retained earnings at TCF Bank at December 31, 2016 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 were as follows:
(In thousands)
Treasury stock, at cost
Shares held in trust for deferred compensation plans, at cost
Total
At December 31,
2016
2015
$
$
(1,102) $
(48,317)
(49,419) $
(1,102)
(49,758)
(50,860)
Repurchases No repurchases of common stock were made in 2016, 2015 or 2014. At December 31, 2016, 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.
87
Depositary Shares Representing 7.50% Series A Non-Cumulative Perpetual Preferred Stock TCF had 6,900,000
depositary shares outstanding at December 31, 2016 and 2015, 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%. The
Series A Preferred Stock may be redeemed at TCF's option in whole or in part on or after June 25, 2017. TCF paid
cash dividends to holders of the Series A Preferred Stock of $12.9 million in 2016, 2015 and 2014.
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, 2016 and 2015. 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%. The Series B Preferred Stock may be redeemed at TCF's option in whole or in part on
or after December 19, 2017. TCF paid cash dividends to holders of the Series B Preferred Stock of $6.5 million in
2016, 2015 and 2014.
Shares Held in Trust for Deferred Compensation Plans
Executive, Senior Officer, Winthrop and Directors Deferred Compensation Plans TCF maintains the aforementioned
deferred compensation plans, which previously allowed both 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 are invested in TCF common
stock or other publicly traded stocks, bonds or mutual funds. At December 31, 2016, the fair value of the assets in
these plans totaled $14.0 million and included $10.5 million invested in TCF common stock, compared with a total fair
value of $11.7 million, including $7.5 million invested in TCF common stock at December 31, 2015.
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 $35.6 million and $29.5 million at December 31, 2016
and 2015, respectively.
TCF 401K Supplemental Plan TCF also maintains the TCF 401K 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
$1.7 million, $1.0 million and $1.5 million in 2016, 2015 and 2014, 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, 2016, the fair value of the assets in the plan totaled
$48.2 million and included $27.9 million invested in TCF common stock, compared with a total fair value of $32.8 million,
including $17.5 million invested in TCF common stock, at December 31, 2015.
The cost of TCF common stock held by TCF's deferred compensation plans and the TCF 401K Supplemental Plan 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, 2016, TCF had 3,199,988 warrants outstanding with an exercise price of $16.93 per share,
which expire on November 14, 2018. Upon the completion of the U.S. 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.
88
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 $479.8 million at
December 31, 2016, 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. In the future, these capital adequacy standards may be higher than existing minimum regulatory
capital requirements.
The Basel III capital standard was introduced in 2015 and phases in through 2019.The standard 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 and TCF Bank are subject to a capital conservation
buffer. When fully phased-in on January 1, 2019, the Basel III capital standard will require TCF and TCF Bank to
maintain a 2.5% capital conservation buffer, designed to absorb losses during periods of economic stress, composed
entirely of Common equity Tier 1 capital, on top of the minimum risk-weighted asset ratios, effectively resulting in
minimum ratios for TCF Bank of (i) a Common equity Tier 1 capital ratio of at least 7.0%, (ii) a Tier 1 risk-based capital
ratio of at least 8.5% and (iii) a Total risk-based capital ratio of at least 10.5%.
Regulatory capital information for TCF and TCF Bank was as follows:
TCF
TCF Bank
At December 31,
At December 31,
2016
2015
2016
2015
Well-capitalized
Standard
Minimum
Capital
Requirement(1)
(Dollars in thousands)
Regulatory Capital:
Common equity Tier 1 capital
$ 1,970,323
$ 1,814,442
$ 2,144,966
$ 1,992,584
Tier 1 capital
Total capital
2,248,221
2,635,925
2,092,195
2,487,060
2,162,128
2,583,512
2,008,585
2,425,682
Regulatory Capital Ratios:
Common equity Tier 1 capital ratio
10.24%
10.00%
11.14%
10.99%
6.50%
4.50%
Tier 1 risk-based capital ratio
Total risk-based capital ratio
Tier 1 leverage ratio
11.68
13.69
10.73
11.54
13.71
10.46
11.23
13.42
10.32
11.07
13.37
10.04
8.00
10.00
5.00
6.00
8.00
4.00
(1) Excludes capital conservation buffer of 0.625% as of December 31, 2016.
89
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, 2016, there were 1,650,598 and 404,000 shares reserved for issuance under the Omnibus Incentive
Plan and Incentive Stock Program, respectively.
At December 31, 2016, there were 50,000 and 1,050,000 shares of performance-based restricted stock awards
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 goals and service
conditions will result in all or a portion of the shares being forfeited. Service-based restricted stock awards under either
the Omnibus Incentive Plan or the Incentive Stock Program vest over periods from one to five years.
Information about restricted stock awards was as follows:
(Dollars in thousands)
Unrecognized stock compensation expense
Weighted-average amortization (years)
At or For the Year Ended December 31,
2016
2015
2014
$
24,925
$
25,919
$
22,532
1.6
2.1
2.6
At December 31, 2016, there were 228,867 performance-based restricted stock units granted under the Omnibus
Incentive Plan that will vest only if certain performance goals are achieved. The performance-based restricted stock
units are subject to TCF’s relative total stockholder return for a three-year measurement period, based on award date,
as measured against the peer group, which includes all publicly-traded banks and thrift institutions with assets between
$10 billion and $50 billion, excluding peers which do not remain publicly traded for the full three-year performance
period. The number of restricted stock units granted was at target and the actual restricted stock units granted will
depend on actual performance with a maximum total payout of 150% of target. Failure to achieve the performance
goals will result in all or a portion of the restricted stock units being forfeited. None of the performance-based restricted
stock units have vested. The remaining performance period of the restricted stock units was 2.0 years at
December 31, 2016.
Compensation expense for restricted stock awards and restricted stock units was as follows:
(In thousands)
Compensation expense
Tax benefit recognized for stock compensation expense
Year Ended December 31,
2016
2015
2014
$
8,715
$
5,931
$
3,103
2,127
8,690
3,424
In 2008, TCF granted stock options under the Incentive Stock Program. These options generally become exercisable
over a period of one to 10 years from the date of the grant and expire after 10 years. All outstanding options have a
fixed exercise price equal to the market price of TCF common stock on the date of grant. No stock options have
subsequently been granted under the Incentive Stock Program. TCF also has the ability to grant stock options under
the Omnibus Incentive Plan. As of December 31, 2016, no stock options had been granted under the Omnibus Incentive
Plan.
The valuation assumptions for stock options granted in 2008 under the Incentive Stock Program were as follows:
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 %
90
TCF's restricted stock award and stock option transactions since December 31, 2013 under the Omnibus Incentive
Plan and the Incentive Stock Program were as follows:
Restricted Stock Awards
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
Outstanding at
December 31, 2013
Granted
Exercised
3,355,295
$ 6.16
1,120,750
13.84
-
-
—
— -
Forfeited/canceled
(108,490)
Vested
(1,509,061)
6.80
8.35
1,626,000
$ 12.85
-
$15.75
4.36
$
13.97
—
— -
—
(47,000)
15.75
-
15.75
—
—
— -
— -
—
—
—
—
—
—
1,579,000
12.85
-
15.75
2.98
—
— -
—
2,858,494
6.16
786,933
12.86
6.80
9.65
6.16
9.48
-
-
-
-
3,273,086
899,000
—
— -
$ 15.17
$
16.02
—
15.79
14.90
16.02
16.28
—
15.96
15.96
16.28
13.24
—
15.96
15.96
-
-
-
-
-
-
-
11.09
15.61
—
13.06
11.21
12.73
14.45
13.20
13.16
13.09
12.13
—
13.59
13.10
Outstanding at
December 31, 2014
Granted
Exercised
Outstanding at
December 31, 2015
Granted
Exercised
Outstanding at
December 31, 2016
Exercisable at
December 31, 2016
N.A. Not Applicable.
—
— -
—
(200,000)
12.85
-
12.85
Forfeited/canceled
Vested
(156,332)
(216,009)
—
—
— -
— -
—
—
Forfeited/canceled
Vested
(230,486)
(405,425)
6.16
9.65
1,379,000
12.85
-
15.75
2.17
—
— -
(857,000)
(118,000)
12.85
15.75
-
-
—
— -
—
15.75
15.75
—
15.75
15.75
-
-
3,536,175
7.73
16.28
12.81
404,000
15.75
N.A.
N.A.
404,000
15.75
1.06
15.75
15.75
—
15.75
—
—
13.91
—
12.85
—
—
14.07
—
13.04
15.75
—
—
—
—
—
—
—
—
—
Note 16. Employee Benefit Plans
401K Plan The TCF 401K Plan (the "401K"), a qualified 401(k) and employee stock ownership plan, 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 $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. Employee contributions and matching contributions vest immediately.
Prior to January 1, 2016 TCF matched 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 10 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
vested immediately while the Company's matching contributions made prior to January 1, 2016 are subject to a
graduated vesting schedule based on an employee's years of service with full vesting after five years.
Employees have the opportunity to diversify and invest their account balance, including matching contributions, in
various mutual funds or TCF common stock. At December 31, 2016, the fair value of the assets in the 401K totaled
$315.5 million and included $174.4 million invested in TCF common stock. Dividends on TCF common shares held in
the 401K reduce retained earnings and the shares are considered outstanding for computing earnings per share. The
Company's matching contributions are expensed when earned. TCF's contributions to the 401K were $12.6 million,
$10.6 million and $9.6 million in 2016, 2015 and 2014, respectively.
91
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 their account balance based on the five-year Treasury rate plus 25 basis points rounded to the nearest
quarter point determined at the beginning of each year. All participant accounts are vested.
The measurement of the projected benefit obligation, prepaid pension asset, pension liability and annual pension
expense involves complex actuarial valuation methods and the use of actuarial and economic assumptions. Due to
the long-term nature of the Pension Plan obligation, actual results may differ significantly from the actuarial-based
estimates. Differences between estimates and actual experience are recorded in the year they arise. TCF closely
monitors all assumptions and updates them annually. The Company does not consolidate the assets and liabilities
associated with the Pension Plan.
Postretirement Plan TCF provides health care benefits for eligible retired employees (the "Postretirement Plan").
Effective January 1, 2000, TCF modified the Postretirement Plan for employees not yet eligible for benefits under the
Postretirement Plan by eliminating the Company subsidy. The Postretirement Plan provisions for full-time and retired
employees then eligible for these benefits were not changed. Employees retiring after December 31, 2009 are no
longer eligible to participate in the Postretirement Plan. The Postretirement Plan is not funded.
The information set forth in the following tables is based on current actuarial reports using the measurement date of
December 31 for TCF's Pension Plan and Postretirement Plan.
The funded statuses of the Pension Plan and the Postretirement Plan were as follows:
(In thousands)
Change in projected 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)
Total recognized asset (liability)
Pension Plan
Postretirement Plan
Year Ended December 31,
2016
2015
2016
2015
$
35,953
$
39,490
$
4,570
$
4,984
1,281
(625)
(3,435)
33,174
40,914
1,898
(3,435)
—
1,216
(1,436)
(3,317)
35,953
44,678
(447)
(3,317)
—
39,377
40,914
151
(211)
(346)
4,164
—
—
(346)
346
—
154
(173)
(395)
4,570
—
—
(395)
395
—
$
$
$
6,203
$
4,961
$
(4,164) $
(4,570)
6,203
$
4,961
$
(4,164) $
(4,570)
—
—
(239)
(285)
6,203
$
4,961
$
(4,403) $
(4,855)
The accumulated benefit obligation for the Pension Plan was $33.2 million and $36.0 million at December 31, 2016
and 2015, respectively.
92
TCF's Pension Plan investment policy permits investments in cash, money market mutual funds, direct fixed income
securities to include 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 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 balances of TCF's Pension Plan investments measured at fair value on a recurring basis were as follows:
(In thousands)
Level 1:
Fixed income mutual funds
Money market mutual funds
Cash
Level 2:
Mortgage-backed securities
Pension plan investments not classified in fair value hierarchy:
Collective investment fund
Total Pension Plan assets held in trust
Pension Plan
Year Ended December 31,
2016
2015
$
26,121
$
2,430
65
25,323
3,406
87
5,766
7,339
4,989
$
39,371
$
4,729
40,884
The changes recognized in accumulated other comprehensive income (loss) attributable to the Postretirement Plan
were as follows:
(In thousands)
Accumulated other comprehensive income (loss) before tax, beginning of period
Amortization of prior service credit (recognized in net periodic benefit cost)
Accumulated other comprehensive income (loss) before tax, end of period
Postretirement Plan
Year Ended December 31,
2016
2015
2014
$
$
(285) $
(331) $
46
46
(239) $
(285) $
(378)
47
(331)
The Pension Plan does not have any accumulated other comprehensive income (loss).
93
The net periodic benefit plan (income) cost included in compensation and employee benefits expense for the Pension
Plan and the Postretirement Plan was as follows:
(In thousands)
Interest cost
(Gain) 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,
2016
2015
2014
1,281
$
1,216
$
(1,898)
(625)
447
(1,436)
(1,242) $
227
$
1,587
511
1,862
3,960
Postretirement Plan
Year Ended December 31,
2016
2015
2014
151
$
154
$
(211)
(46)
(173)
(46)
(106) $
(65) $
198
(63)
(47)
88
$
$
$
$
Pension Plan actual return on plan assets, net of administrative expenses was 4.9% in 2016 and a loss of 1.0% in
2015 and 2014. The expected actuarial return on plan assets was a gain of $0.6 million, $0.6 million and $0.7 million
in 2016, 2015 and 2014, respectively. In 2016, the actual gain on plan assets of $1.9 million decreased net periodic
benefit plan costs. In 2015 and 2014, the actual losses on plan assets of $0.4 million and $0.5 million, respectively,
increased net periodic benefit plan costs.
The assumptions used to determine the estimated net benefit plan costs for the Pension Plan and Postretirement Plan
were as follows:
Discount rate
Pension Plan
Postretirement Plan
Year Ended December 31,
Year Ended December 31,
2016
2015
2014
2016
2015
2014
3.75%
3.25%
4.00%
3.50%
3.25%
4.00%
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.
Prior service credits of TCF's Postretirement Plan of $46 thousand were included within accumulated other
comprehensive income (loss) at December 31, 2016 and are expected to be recognized as components of net periodic
benefit cost during 2017.
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 1.4%, 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 assumptions used to determine the estimated benefit plan obligation for the Pension Plan and Postretirement
Plan were as follows:
Pension Plan
Postretirement Plan
Year Ended December 31,
Year Ended December 31,
2016
2015
2016
2015
3.60%
3.75%
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
3.40%
5.8
4.5
2038
3.50%
5.9
4.5
2038
Discount rate
Health care cost trend rate assumed for next year
Final health care cost trend rate
Year that final health care trend rate is reached
N.A. Not Applicable.
94
The discount rates used to determine the estimated benefit plan obligation 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 6.7 and 7.0 years.
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
$
5
$
145
(5)
(133)
For 2016, TCF was eligible to contribute up to $11.9 million to the Pension Plan until the 2016 federal income tax return
extended due date under various IRS funding methods. During 2016, TCF made no cash contributions to the Pension
Plan. TCF does not expect to be required to contribute to the Pension Plan in 2017. TCF expects to contribute $0.5 million
to the Postretirement Plan in 2017. TCF contributed $0.3 million to the Postretirement Plan in 2016. TCF currently has
no plans to pre-fund the Postretirement Plan in 2017.
The expected future benefit payments used to determine projected benefit obligations were as follows:
(In thousands)
2017
2018
2019
2020
2021
2022 - 2026
Pension Plan
Postretirement Plan
$
3,111
$
3,110
3,128
2,980
2,317
10,518
496
471
444
418
391
1,564
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 were 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,
2016
2015
$
$
1,425,585
$
1,402,088
898,809
125,648
2,450,042
8,782
639,465
128,259
2,169,812
9,178
2,458,824
$
2,178,990
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.
95
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 2020. Collateral held consists primarily
of commercial real estate mortgages. Since the conditions under which TCF is required to fund these commitments
may not materialize, the cash requirements are expected to be less than the total outstanding commitments.
Note 18. Derivative Instruments
Derivative instruments were as follows:
(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 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
At December 31, 2016
Notional
Amount
Gross Amounts
Recognized
Gross Amounts
Offset
Net Amount
Presented
$
61,760
$
1,082
$
— $
1,082
250,018
149,499
27,954
2,995
1,925
318
(1,439)
(633)
—
$
6,320
$
(2,072) $
$
150,000
$
1,320
$
(1,320) $
115,336
149,499
13,804
2,947
469
1,936
619
21
(445)
(1,332)
(619)
—
$
4,365
$
(3,716) $
1,556
1,292
318
4,248
—
24
604
—
21
649
At December 31, 2015
Notional
Amount
Gross Amounts
Recognized
Gross Amounts
Offset
Net Amount
Presented
$
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
96
The pre-tax impact of derivative activity within the Consolidated Statements of Income and the Consolidated Statements
of Comprehensive Income was as follows:
(In thousands)
Consolidated Statements of Income
Fair value hedges:
Interest rate contracts
Non-derivative hedged items
Not designated as hedges:
Income Statement Location
2016
2015
2014
Year Ended December 31,
Other non-interest income
$
(1,178) $
(142) $
Other non-interest income
1,140
209
—
—
Forward foreign exchange contracts
Other non-interest expense
(13,689)
74,292
38,752
Interest rate lock commitments
Interest rate contracts
Other contracts
Net gain (loss) recognized
Gains on sales of consumer
real estate loans, net
Other non-interest income
Other non-interest expense
Consolidated Statements of Comprehensive Income
Net investment hedges:
Forward foreign exchange contracts
Net unrealized gain (loss)
Other comprehensive income
(loss)
(419)
71
(629)
431
4
—
285
(79)
—
(14,704) $
74,794
$
38,958
(1,213) $
(1,213) $
7,613
7,613
$
$
3,126
3,126
$
$
$
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, 2016, credit risk-related contingent features existed on forward foreign exchange contracts with a
notional value of $78.1 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 $1.6 million in additional collateral. There were no
forward
liability position at
December 31, 2016.
foreign exchange contracts containing credit risk-related
in a net
features
At December 31, 2016, TCF had posted $10.1 million and $1.4 million of cash collateral related to its interest rate
contracts and other contracts, respectively, and had received $3.8 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, interest-only strips, 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, other real estate owned, repossessed and returned assets and the securitization receivable.
These non-recurring fair value adjustments typically involve application of lower of cost or fair value accounting or
write-downs of individual assets.
97
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.
The following is a discussion of the valuation methodologies used to record assets and liabilities at fair value on a
recurring or non-recurring basis and for estimating fair value of financial instruments not recorded at fair value.
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 mortgage-backed securities and other securities, categorized as Level 3, is estimated based on discounted cash
flows using consideration of credit exposure and 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.
Loans and Leases Held for Sale Loans and leases held for sale are generally carried at the lower of cost or fair
value. 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.
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.
98
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 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.
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 interest rate risk exposure resulting from such
transactions. TCF also has an interest rate swap agreement to convert its $150.0 million of fixed-rate subordinated
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 that 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.
Other Real Estate Owned and Repossessed and Returned Assets The fair value of other real estate owned,
categorized as Level 3, 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.
Securitization Receivable TCF executed an auto finance loan securitization during the second quarter of 2016 with
a related receivable representing a cash reserve account posted at the inception of the securitization. The fair value
of the securitization receivable, categorized as Level 3, is estimated based on discounted cash flows using interest
rates for borrowings of similar remaining maturities plus a spread based on management's judgment.
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 has 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.
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.
99
The balances of assets and liabilities measured at fair value on a recurring and non-recurring basis were as follows:
(In thousands)
Recurring Fair Value Measurements:
Securities available for sale:
Mortgage-backed securities:
Fair Value Measurements at December 31, 2016
Level 1
Level 2
Level 3
Total
U.S. Government sponsored enterprises and federal agencies
$
— $
810,891
$
— $
810,891
Other
Obligations of states and political subdivisions
Loans and leases held for sale
Interest-only strips
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
23,363
—
612,526
—
—
4,077
1,925
—
—
—
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
Other real estate owned:
Consumer
Commercial
Repossessed and returned assets
$
$
$
$
$
$
23,363
$ 1,429,419
— $
—
—
—
23,363
—
469
3,256
—
—
—
—
23,363
$
3,725
$
18
—
6,498
40,152
—
—
318
374
—
18
612,526
6,498
40,152
4,077
1,925
318
374
23,363
47,360
$ 1,500,142
— $
469
3,256
21
13
23,363
619
$
27,741
—
21
13
—
619
653
— $
— $
2,400
$
2,400
—
—
—
—
—
—
—
2,767
113,954
113,954
25,751
3,874
2,800
25,751
3,874
5,567
Total non-recurring fair value measurements
$
— $
2,767
$
148,779
$
151,546
(1)
As permitted under GAAP, TCF has elected to net derivative assets and derivative liabilities 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 assets and derivative liabilities are presented gross of this netting
adjustment.
100
(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
Interest-only strips
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
—
—
—
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
Other real estate owned:
Consumer
Commercial
Repossessed and returned assets
$
$
$
$
$
$
19,731
$
896,859
— $
—
—
—
19,731
—
1,192
2,317
—
—
—
—
19,731
$
3,509
$
34
—
10,568
44,332
—
—
729
284
—
34
266,921
10,568
44,332
5,915
2,093
729
284
19,731
55,947
$
972,537
— $
1,192
2,317
13
19
19,731
305
$
23,577
—
13
19
—
305
337
— $
— $
1,110
$
1,110
—
—
—
—
—
—
—
2,673
130,797
130,797
37,619
5,249
2,197
37,619
5,249
4,870
Total non-recurring fair value measurements
$
— $
2,673
$
176,972
$
179,645
(1)
As permitted under GAAP, TCF has elected to net derivative assets and derivative liabilities 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 assets and derivative liabilities are presented gross of this netting
adjustment.
Management assesses the appropriate classification of financial assets and liabilities within the fair value hierarchy
by monitoring the level of availability of observable market information. Changes in markets or economic conditions,
as well as changes to Company valuation models may require the transfer of financial instruments from one fair value
level to another. Such transfers, if any, are recorded at the fair values as of the beginning of the quarter in which the
transfer occurred. TCF had no transfers in 2016, 2015 and 2014.
101
The changes in Level 3 assets and liabilities measured at fair value on a recurring basis were as follows:
(In thousands)
Securities
Available
for Sale
Loans and
Leases
Held for Sale
Interest-only
Strips
Interest
Rate Lock
Commitments
Forward
Loan Sales
Commitments
Other
Contracts
Asset (liability) balance, December 31, 2013 $
93
$
— $
84,561
$
— $
— $
(899)
Total net gains (losses) included in:
Net income
Sales
Originations
Principal paydowns / settlements
Asset (liability) balance, December 31, 2014
Total net gains (losses) included in:
Net income
Sales
Originations
Principal paydowns / settlements
Asset (liability) balance, December 31, 2015
Total net gains (losses) included in:
Net income
Other comprehensive income (loss)
Sales
Originations
Principal paydowns / settlements
—
—
—
(38)
55
—
—
—
(21)
34
—
—
—
—
(16)
72
(39,246)
42,482
—
3,308
(68)
(289,751)
297,079
—
10,568
(48)
—
(343,949)
339,930
(3)
6,836
—
28,743
(50,351)
69,789
6,960
—
7,495
(39,912)
44,332
2,980
159
—
22,620
(29,939)
285
—
—
—
285
431
—
—
—
716
(419)
—
—
—
—
(23)
—
—
—
(23)
288
—
—
—
265
96
—
—
—
—
Asset (liability) balance, December 31, 2016 $
18
$
6,498
$
40,152
$
297
$
361
$
(47)
—
—
325
(621)
—
—
—
316
(305)
(629)
—
—
—
315
(619)
Fair Value Option
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
difference between the aggregate fair value and aggregate unpaid principal balance of these loans held for sale was
as follows:
(In thousands)
Fair value carrying amount
Aggregate unpaid principal amount
Fair value carrying amount less aggregate unpaid principal
At December 31,
2016
2015
$
$
6,498
$
6,563
(65) $
10,568
10,547
21
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, 2016 or 2015.
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 $7.6 million, $6.3 million and $0.9 million for 2016, 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.
102
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, 2016 and 2015, 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 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 were as follows. 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)
Securitization receivable(2)
Carrying
Amount
Estimated Fair Value at December 31, 2016
Level 1
Level 2
Level 3
Total
$
74,714
$
— $
74,714
$
— $
74,714
181,314
268,832
5,084,352
2,634,191
652,287
2,016,732
2,470,175
2,647,741
18,771
(160,269)
18,835
—
—
—
—
—
—
—
—
—
—
—
181,146
—
—
—
—
—
—
—
—
—
—
2,800
282,786
183,946
282,786
5,165,062
2,583,775
631,215
1,983,237
2,453,184
2,656,266
17,780
—
18,835
5,165,062
2,583,775
631,215
1,983,237
2,453,184
2,656,266
17,780
—
18,835
Total financial instrument assets
$ 15,907,675
$
— $
255,860
$ 15,794,940
$ 16,050,800
Financial instrument liabilities:
Deposits
Long-term borrowings
$ 17,242,522
$ 13,150,099
$ 4,112,685
$
— $ 17,262,784
1,073,181
—
1,073,875
2,764
1,076,639
Total financial instrument liabilities
$ 18,315,703
$ 13,150,099
$ 5,186,560
$
2,764
$ 18,339,423
Financial instruments with off-balance sheet risk:(3)
Commitments to extend credit
Standby letters of credit
Total financial instruments with off-balance sheet risk
$
$
21,681
$
— $
21,681
$
— $
21,681
(29)
—
(29)
—
(29)
21,652
$
— $
21,652
$
— $
21,652
Expected credit losses are included in the estimated fair values.
(1)
(2) Carrying amounts are included in other assets.
(3)
Positive amounts represent assets, negative amounts represent liabilities.
103
(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)
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)
—
—
—
—
—
—
—
—
—
—
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
—
5,543,273
2,556,018
531,274
1,888,664
2,132,435
2,650,429
14,699
—
Total financial instrument assets
$ 15,607,451
$
— $
272,980
$ 15,486,689
$ 15,759,669
Financial instrument liabilities:
Deposits
Long-term borrowings
$ 16,719,989
$ 12,816,196
$ 3,927,434
$
— $ 16,743,630
1,034,557
—
1,035,846
5,427
1,041,273
Total financial instrument liabilities
$ 17,754,546
$ 12,816,196
$ 4,963,280
$
5,427
$ 17,784,903
Financial instruments with off-balance sheet risk:(2)
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)
(2)
Expected credit losses are included in the estimated fair values.
Positive amounts represent assets, negative amounts represent liabilities.
Note 20. Earnings Per Common Share
The computations of basic and diluted earnings per common share were as follows:
(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,
2016
2015
2014
192,736
$
177,735
$
154,799
49
45
40
192,687
$
177,690
$
154,759
167,219,964
165,696,678
163,581,435
1.15
$
1.07
$
0.95
192,687
$
177,690
$
154,759
167,219,964
165,696,678
163,581,435
505,162
82,325
335,193
210,049
250,499
252,892
167,807,451
166,241,920
164,084,826
1.15
$
1.07
$
0.94
$
$
$
$
$
For 2016, 2015 and 2014, there were 4.7 million, 4.5 million and 4.2 million, respectively, of outstanding shares related
to non-participating restricted stock and warrants that were not included in the computation of diluted earnings per
share because they were anti-dilutive.
104
Note 21. Other Expense
Other expense was as follows:
(In thousands)
Loan and lease processing
Advertising and marketing
Professional fees
FDIC insurance
Card processing and issuance cost
Outside processing
Other
Total other expense
Note 22. Business Segments
Year Ended December 31,
2016
2015
2014
$
26,193
$
24,641
$
22,264
19,335
15,912
15,856
15,313
22,782
19,615
20,262
16,591
14,332
116,547
111,032
$
231,420
$
229,255
$
20,294
22,943
18,949
25,123
16,588
13,288
110,785
227,970
Effective January 1, 2016, the Company changed its reportable segments to align with the way the Company is now
managed. The revised presentation of previously reported segment data has been applied retroactively to all periods
presented in these financial statements. The new reportable segments are Consumer Banking, Wholesale Banking
and Enterprise Services. Consumer Banking is comprised of all of the Company's consumer-facing businesses and
includes retail banking, consumer real estate and auto finance. Wholesale Banking is comprised of commercial real
estate and business lending, leasing and equipment finance and inventory finance. Enterprise Services is comprised
of (i) corporate treasury, which includes TCF's investment and borrowing portfolios and management of capital, debt
and market risks; (ii) corporate functions, such as information technology, risk and credit management, bank operations,
finance, investor relations, corporate development, legal and human resources, that provide services to the operating
segments; (iii) the Holding Company; and (iv) eliminations.
TCF evaluates performance and allocates resources based on each reportable segment's net income or loss. The
reportable business segments follow GAAP as described in Note 1, Basis of Presentation, except for the accounting
for intercompany interest income and interest expense, which are eliminated in consolidation, and presenting net
interest income on a fully tax-equivalent basis. TCF generally accounts for inter-segment sales and transfers at cost.
105
Certain information for each of TCF's reportable segments, including reconciliations of TCF's consolidated totals, was
as follows:
Consumer
Banking
Wholesale
Banking
Enterprise
Services
Consolidated
$
559,851
$
343,653
$
(55,398) $
(In thousands)
At or For the Year Ended December 31, 2016:
Net interest income
Provision for credit losses
Non-interest income
Non-interest expense
Income tax expense (benefit)
Income (loss) after income tax expense (benefit)
Income attributable to non-controlling interest
Preferred stock dividends
Net income (loss) available to common stockholders
Total assets
Revenues from external customers:
Interest income
Non-interest income
Total
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
Net income (loss) available to common stockholders
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
Net income (loss) available to common stockholders
Total assets
Revenues from external customers:
Interest income
Non-interest income
Total
$
$
$
$
$
$
$
$
$
$
$
$
$
$
2,390,249
$
21,441,326
443,959
$
452,882
$
33,889
$
336,991
128,881
28
930,730
465,900
780,950
$
581,763
$
33,917
$
1,396,630
536,714
$
339,934
$
(56,260) $
50,819
336,991
652,460
69,523
124,040
—
—
15,055
128,881
247,115
70,805
139,559
9,593
—
124,040
8,671,126
$
$
129,966
10,379,951
$
$
44,328
320,399
645,939
61,384
105,462
—
—
8,616
119,779
244,921
70,127
136,049
8,700
—
105,462
8,954,807
$
$
127,349
9,558,406
$
$
89,895
326,048
619,526
47,906
80,384
—
—
5,842
105,624
237,221
66,475
122,377
7,429
—
80,384
8,443,343
$
$
114,948
8,969,814
$
$
—
28
10,312
(23,800)
(41,882)
—
19,388
(61,270) $
—
1,820
3,887
(22,639)
(35,688)
—
19,388
(55,076) $
—
1,595
15,030
(14,615)
(21,145)
—
19,388
(40,533) $
848,106
65,874
465,900
909,887
116,528
221,717
9,593
19,388
192,736
820,388
52,944
441,998
894,747
108,872
205,823
8,700
19,388
177,735
815,629
95,737
433,267
871,777
99,766
181,616
7,429
19,388
154,799
2,176,396
$
20,689,609
434,674
$
431,764
$
25,492
$
320,399
119,779
1,820
891,930
441,998
755,073
$
551,543
$
27,312
$
1,333,928
511,663
$
326,291
$
(22,325) $
1,980,499
$
19,393,656
433,954
$
418,064
$
22,211
$
326,048
105,624
1,595
874,229
433,267
760,002
$
523,688
$
23,806
$
1,307,496
106
Note 23. Parent Company Financial Information
TCF Financial's (parent company only) condensed statements of financial condition, income and cash flows were as
follows:
Condensed Statements of Financial Condition
(In thousands)
Assets:
Cash and due from bank
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 before income tax benefit and equity in undistributed earnings of
subsidiary
Income tax benefit
Income before equity in undistributed earnings of subsidiary
Equity in undistributed earnings of bank subsidiary
Net income
Preferred stock dividends
At December 31,
2016
2015
$
$
$
$
69,711
$
2,338,885
19,967
9,476
69,503
2,205,818
16,217
9,216
2,438,039
$
2,300,754
10,556
$
10,556
2,427,483
2,438,039
$
9,838
9,838
2,290,916
2,300,754
Year Ended December 31,
2016
2015
2014
$
155
$
306
$
365
63,000
17,657
5
80,662
17,578
370
3,545
21,493
59,324
1,010
60,334
151,790
212,124
19,388
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
154,799
Net income available to common stockholders
$
192,736
$
177,735
$
107
Condensed Statements of Cash Flows
(In thousands)
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Year Ended December 31,
2016
2015
2014
$
212,124
$
197,123
$
174,187
Equity in undistributed earnings of bank subsidiary
(151,790)
(171,959)
(156,098)
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
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 bank
Cash and due from bank at beginning of period
Cash and due from bank at end of period
—
4,731
65,065
—
(69)
22
(47)
(19,388)
(50,182)
5,838
(377)
(701)
(64,810)
208
69,503
(50)
1,308
26,422
—
(65)
92
27
(19,388)
(37,302)
24,835
558
2,570
(28,727)
(2,278)
71,781
$
69,711
$
69,503
$
(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
71,781
TCF Financial's operations are conducted through its banking subsidiary, TCF Bank. As a result, TCF's cash flow and
ability to make dividend payments to its preferred and 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, 2016, TCF Bank could pay a total
of approximately $479.8 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.
108
On January 19, 2017, the CFPB filed a civil lawsuit against TCF Bank in the United States District Court for the District
of Minnesota, captioned Consumer Financial Protection Bureau v. TCF National Bank, alleging violations of the
Consumer Financial Protection Act and Regulation E, §1005.17 in connection with TCF Bank's practices administering
checking account overdraft program "opt-in" requirements from 2010 to early 2014. In its complaint, the CFPB seeks,
among other relief, redress for consumers, injunctive relief and unspecified penalties. TCF Bank rejects the claims
made by the CFPB in its complaint and intends to vigorously defend against the CFPB’s allegations. TCF has not
accrued any amounts with respect to this matter because (i)TCF does not believe a loss is probable, (ii) believes the
Company has meritorious defenses to the claims made and (iii) the damages sought are unspecified and uncertain.
Therefore, TCF is currently unable to reasonably estimate a range of potential loss, if any, relating to this matter. There
is no assurance that the ultimate resolution of this lawsuit will not have a material adverse effect on the consolidated
financial position, operating results or cash flows of TCF.
Note 25. Accumulated Other Comprehensive Income (Loss)
The components of other comprehensive income (loss) and the related tax effects were as follows:
(In thousands)
Year Ended December 31, 2016:
Net unrealized gains (losses) on securities available for sale and interest-only
strips:
Before Tax
Tax Effect
Net of Tax
Unrealized gains (losses) arising during the period
$
(32,408) $
12,323
$
Reclassification of net (gains) losses to net income
Net unrealized gains (losses)
Net unrealized gains (losses) on net investment hedges
Foreign currency translation adjustment(1)
Recognized postretirement prior service cost:
Reclassification of net (gains) losses to net income
Total other comprehensive income (loss)
Year Ended December 31, 2015:
Net unrealized gains (losses) on securities available for sale and interest-only
strips:
Unrealized gains (losses) arising during the period
Reclassification of net (gains) losses to net income
Net unrealized gains (losses)
Net unrealized gains (losses) on net investment hedges
Foreign currency translation adjustment(1)
Recognized postretirement prior service cost:
Reclassification of net (gains) losses to net income
Total other comprehensive income (loss)
Year Ended December 31, 2014:
Net unrealized gains (losses) on securities available for sale and interest-only
strips:
Unrealized gains (losses) arising during the period
Reclassification of net (gains) losses to net income
Net unrealized gains (losses)
Net unrealized gains (losses) on net investment hedges
Foreign currency translation adjustment(1)
Recognized postretirement prior service cost:
Reclassification of net (gains) losses to net income
$
$
$
$
1,913
(30,495)
(1,213)
1,300
(46)
(722)
11,601
457
—
17
(30,454) $
12,075
$
(18,379)
(2,523) $
955
$
1,159
(1,364)
7,613
(8,304)
(46)
(407)
548
(2,900)
—
17
(2,101) $
(2,335) $
29,071
$
(10,932) $
(76)
28,995
3,126
(3,704)
(47)
29
(10,903)
(1,181)
—
17
(20,085)
1,191
(18,894)
(756)
1,300
(29)
(1,568)
752
(816)
4,713
(8,304)
(29)
(4,436)
18,139
(47)
18,092
1,945
(3,704)
(30)
16,303
Total other comprehensive income (loss)
$
28,370
$
(12,067) $
(1) Foreign investments are deemed to be permanent in nature and therefore TCF does not provide for taxes on foreign currency translation adjustments.
109
Reclassifications of net (gains) losses to net income for securities available for sale and interest-only strips were
recorded in the Consolidated Statements of Income in gains (losses) on securities, net for sales of securities, in interest
income for those securities that were previously transferred to held to maturity and in other non-interest expense for
interest-only strips. During 2014, TCF transferred $191.7 million of available for sale mortgage-backed securities to
held to maturity. At December 31, 2016 and 2015, the unrealized holding loss on the transferred securities retained in
accumulated other comprehensive income (loss) totaled $13.0 million and $14.8 million, respectively. These amounts
are amortized over the remaining lives of the transferred securities. 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.
The components of accumulated other comprehensive income (loss) were as follows:
(In thousands)
At or For the Year Ended December 31, 2016:
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, 2015:
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, 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
$
$
$
$
$
$
Securities
Available for
Sale and
Interest-only
Strips
Net
Investment
Hedges
Foreign
Currency
Translation
Recognized
Postretirement
Prior
Service Cost
Total
(9,707) $
7,249
$
(13,064) $
176
$
(20,085)
1,191
(18,894)
(756)
—
(756)
1,300
—
1,300
—
(29)
(29)
(28,601) $
6,493
$
(11,764) $
147
$
(8,891) $
2,536
$
(4,760) $
205
$
(1,568)
752
(816)
4,713
—
4,713
(8,304)
—
(8,304)
—
(29)
(29)
(9,707) $
7,249
$
(13,064) $
176
$
(26,983) $
591
$
(1,056) $
235
$
18,139
(47)
18,092
1,945
—
1,945
(3,704)
—
(3,704)
—
(30)
(30)
(8,891) $
2,536
$
(4,760) $
205
$
(15,346)
(19,541)
1,162
(18,379)
(33,725)
(10,910)
(5,159)
723
(4,436)
(15,346)
(27,213)
16,380
(77)
16,303
(10,910)
110
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,
2016
Sep. 30,
2016
Jun. 30,
2016
Mar. 31,
2016
Dec. 31,
2015
Sep. 30,
2015
Jun. 30,
2015
Mar. 31,
2015
Net interest income
$ 211,446 $ 212,018 $ 212,984 $ 211,658 $ 205,669 $ 205,270 $ 206,029 $ 203,420
Provision for credit losses
19,888
13,894
13,250
18,842
17,607
10,018
12,528
12,791
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
Net income attributable to TCF Financial
Corporation
Preferred stock dividends
Net income available to common
stockholders
Earnings per common share:
Basic
Diluted
$
$
$
191,558
198,124
199,734
192,816
188,062
195,252
193,501
190,629
115,668
119,674
117,956
112,602
115,659
112,252
113,449
100,638
225,359
228,878
227,316
228,334
222,587
222,284
223,109
226,767
81,867
29,762
52,105
88,920
30,257
58,663
90,374
29,706
60,668
77,084
26,803
50,281
81,134
26,614
54,520
85,220
30,528
54,692
83,841
28,902
54,939
64,500
22,828
41,672
2,013
2,371
2,974
2,235
2,028
2,117
2,684
1,871
50,092
4,847
56,292
57,694
4,847
4,847
48,046
4,847
52,492
4,847
52,575
4,847
52,255
4,847
39,801
4,847
45,245 $
51,445 $
52,847 $
43,199 $
47,645 $
47,728 $
47,408 $
34,954
0.27 $
0.27 $
0.31 $
0.31 $
0.32 $
0.31 $
0.26 $
0.26 $
0.29 $
0.29 $
0.29 $
0.29 $
0.29 $
0.29 $
0.21
0.21
111
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, 2016.
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, 2016,
that materially affected, or are reasonably likely to materially affect, TCF's internal control over financial reporting.
112
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, 2016. 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, 2016.
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, 2016.
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.
113
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, 2016, 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, 2016, 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, 2016 and 2015, 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, 2016, and our report dated
February 21, 2017 expressed an unqualified opinion on those consolidated financial statements.
Minneapolis, Minnesota
February 21, 2017
114
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 2017 Annual Meeting of Stockholders to be held on April 26, 2017 (the "2017 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 2017 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 2017 Proxy and is incorporated herein by reference: Election of Directors - Background of the Nominees;
Corporate Governance - Board Committees, Committee Memberships, and Meetings in 2016; 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 Karen L. Grandstrand, George G.
Johnson, Richard H. King, Vance K. Opperman, Roger J. Sit, Julie H. Sullivan and Richard A. Zona, are independent
and that Directors Johnson, Opperman, Sit, Sullivan and Zona each meet the requirements of audit committee financial
experts. Additional information regarding Ms. Grandstrand, Mr. Johnson, Mr. King, Mr. Opperman, Mr. Sit, Ms. Sullivan
and Mr. Zona and the other directors is set forth in the section Election of Directors - Background of the Nominees in
TCF's 2017 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 employees (including the PEO, PFO and PAO) and directors 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". Any changes
to either code will be posted on the website and any waivers granted to or violations by the PEO, PFO, PAO or any
director of TCF will also be posted on TCF's website. To date, there have been no waivers granted to or violations by
the PEO, PFO, PAO or any director of TCF.
115
Item 11. Executive Compensation
Information regarding compensation of directors and executive officers of TCF is set forth in the following sections of
TCF's 2017 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 equity compensation plans is set forth in the following sections of TCF's
2017 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 certain
related persons is set forth in the section entitled Corporate Governance - Director Independence and Related Person
Transactions of TCF's 2017 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 2017 Proxy
and is incorporated herein by reference.
116
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
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Financial Condition at December 31, 2016 and 2015
Consolidated Statements of Income for each of the years in the three-year period ended December 31,
2016
Consolidated Statements of Comprehensive Income for each of the years in the three-year period ended
December 31, 2016
Consolidated Statements of Equity for each of the years in the three-year period ended December 31, 2016
Consolidated Statements of Cash Flows for each of the years in the three-year period ended
December 31, 2016
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
20
57
58
59
60
61
62
63
111
113
114
120
117
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 21, 2017
118
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/ 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/ Julie H. Sullivan
Julie H. Sullivan
/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
Director, Vice Chairman and Chief Operating Officer
Director
Director
Lead Director
Director
Director
Director
Director
Director
119
Date
February 21, 2017
February 21, 2017
February 21, 2017
February 21, 2017
February 21, 2017
February 21, 2017
February 21, 2017
February 21, 2017
February 21, 2017
February 21, 2017
February 21, 2017
February 21, 2017
February 21, 2017
February 21, 2017
February 21, 2017
February 21, 2017
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*
10(a)-6*
10(b)*
10(b)-1*
10(b)-2*
10(b)-3*
10(c)
10(d)*
10(e)*
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 July 26, 2016 (No. 161784576)
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, as amended effective December 29, 2016
Form of Restricted Stock Award Agreement under the TCF Financial 2015 Omnibus Incentive Plan
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)]
Form of 2016 Management Incentive Plan - Executive, as executed by certain executives [incorporated by reference to Exhibit 10
(a)-6 to TCF Financial Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 2015 (No. 161465956)
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)]
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 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)]
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)]
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) to TCF Financial Corporation’s Current Report on Form 8-K filed January 27, 2005
(No. 05552640)]
10(e)-1*#
TCF 401K Supplemental Plan, as amended effective October 18, 2016
10(f)*
10(g)*
10(h)*
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) 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(d) to 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) to 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) to TCF
Financial Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 (No. 03830138)]
120
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#
101#
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) 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(m) to 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) to 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) to 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 to 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 to
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) to 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 to 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 to 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) to 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) to 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) to 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) to TCF Financial Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 (No. 03830138)]
Summary of Non-Employee Director Compensation [incorporated by reference to Exhibit 10(n) to TCF Financial Corporation's
Annual Report on Form 10-K for the fiscal year ended December 31, 2015 (No. 161465956)]
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, 2016, 2015, 2014, 2013 and 2012
Consolidated Ratios of Earnings to Fixed Charges and Preferred Stock Dividends for years ended December 31, 2016, 2015,
2014, 2013 and 2012
Subsidiaries of TCF Financial Corporation (as of December 31, 2016)
Consent of KPMG LLP dated February 21, 2017
Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Certification of the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Financial statements from the Annual Report on Form 10-K of the Company for the year ended December 31, 2016, formatted in
XBRL: (i) the Consolidated Statements of Financial Condition, (ii) the Consolidated Statements of Income, (iii) the Consolidated
Statements of Comprehensive Income, (iv) the Consolidated Statements of Equity, (v) the Consolidated Statements of Cash Flows
and (vi) the Notes to Consolidated Financial Statements
*Executive Contract
# Filed herein
121
2016
CORPORATE
INFORMATION
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 VALUES
Lead with integrity
Be nimble
Build relationships
Be prudent
Create opportunities
Win as a passionate team
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.
A-2
A-2
OFFICES
(As of December 31, 2016)
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 (1)
ILLINOIS/WISCONSIN
Regional Office
800 Burr Ridge Parkway
Burr Ridge, IL 60527
Traditional Branches
Chicagoland (37)
Milwaukee Area (11)
Kenosha/Racine Area (6)
Supermarket Branches
Chicagoland (86)
Milwaukee Area (7)
MICHIGAN
Regional Office
17440 College Parkway
Livonia, MI 48152
Traditional Branches
Metro Detroit Area (51)
Supermarket Branches
Metro Detroit Area (1)
COLORADO/ARIZONA
Regional Office
8085 South Chester Street
Suite 201
Centennial, CO 80112
Traditional Branches
Metro Denver Area (24)
Colorado Springs (8)
Metro Phoenix Area (7)
Supermarket Branches
Metro Denver Area (1)
WINTHROP RESOURCES
CORPORATION
Headquarters
11100 Wayzata Boulevard
Suite 800
Minnetonka, MN 55305
(952) 936-0226
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
A-3
STOCKHOLDER INFORMATION
TRADING OF COMMON STOCK
The common stock of TCF Financial Corporation is listed
on the New York Stock Exchange under the symbol TCB.
At December 31, 2016, TCF had approximately 171.0 million
shares of common stock outstanding.
MEDIA CONTACT
Mark Goldman
Senior Vice President
Corporate Communications
(952) 475-7050
ANNUAL MEETING
The Annual Meeting of Stockholders of TCF will be held
on Wednesday, April 26, 2017, 4:00 p.m. (local time) at
the Marriott Minneapolis West, 9960 Wayzata Boulevard,
St. Louis Park, Minnesota.
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:
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
reinvestment plan for TCF Financial Corporation common
stock. This stockholder-paid program provides a low-
cost alternative to traditional retail brokerage methods of
purchasing, holding and selling TCF common stock. The
Plan is sponsored and administered by our Transfer Agent,
Computershare, Inc. Information is available from:
Computershare Trust Company, N.A.
PO Box 30170
College Station, TX 77842-3170
(800) 443-6852
www.computershare.com/investor
INVESTOR/ANALYST CONTACT
Jason Korstange
Senior Vice President
Investor Relations
(952) 745-2755
Justin Horstman
Vice President
Investor Relations
(952) 745-2756
A-4
TCF Financial Corporation
Investor Relations
200 Lake Street East
Mail Code: EX0-01-C
Wayzata, MN 55391-1693
(952) 745-2760
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
Moody’s
Outlook
TCF National Bank:
Long-term Issuer
Long-term Deposits
Short-term Deposits
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
Last Review
August 2016
Stable
BBB-
A-3
BBB
A-2
BB-
BBB-
Last Review
January 2017
Stable
Baa2
A2
Prime-1
Baa2
Last Review
January 2017
Stable
BBB-
F3
BBB-
F3
B
BB+
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
Executive Vice President,
Chief Information Officer
Thomas J. Butterfield
Chief Risk Officer and
Chief Credit Officer
James M. Costa
Chief Audit Executive Officer
Andrew J. Jackson
Senior Vice President,
Chief Accounting Officer
Susan D. Bode
Senior Vice President,
General Counsel and Secretary
Joseph T. Green
Senior Vice President,
Director of Investor Relations
Jason E. Korstange
Senior Vice President, Treasurer
Jason S. Sasanfar
Senior Vice President,
Enterprise Operations Officer
Tamara K. Schuette
Senior Vice President,
Corporate Human Resources Director
Barbara E. Shaw
Executive Vice President
Director of Corporate Development
& Strategy
Bradley S. Adams
Senior Vice President,
Director of Talent Management
Gloria J. Charley
Consumer Banking
Gateway One Lending & Finance, LLC
President
Todd A. Pierson
Retail Lending
President,
National Residential Lending
Mark W. Rohde
Managing Director, Retail Portfolio
Richard J. Chenitz
Retail Banking
Managing Director,
Branch Banking
Mark L. Jeter
Wholesale Banking
TCF Equipment Finance
President and Chief Executive Officer
Gary A. Peterson
Winthrop Resources Corporation
President and Chief Executive Officer
Paul L. Gendler
TCF Inventory Finance, Inc.
President and Chief Executive Officer
Rosario A. Perrelli
Commercial Banking
Executive Vice President and
Managing Director
R. Patricia Kelly
President, TCF Capital Funding
Joseph P. Gaffigan
A-5
BOARD OF DIRECTORS
Vance K. Opperman 1,2,4,5,6,7,8
Lead Director,
TCF Financial Corporation
President and
Chief Executive Officer,
Key Investment, Inc.
Director since 2009
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
Craig R. Dahl 5,8
Chief Executive Officer and
Vice Chairman
Karen L. Grandstrand 1,2,4,5,6,7
Shareholder,
Fredrikson & Byron, P.A.
Director since 2012
Director since 2010
Thomas F. Jasper
Chief Operating Officer
and Vice Chairman
Director since 2012
George G. Johnson 2,3,6,7
CPA/Managing Director,
George Johnson & Company and
George Johnson Consultants
Director since 1998
Richard H. King 2,6,7,8
Executive Vice President
and Chief Information Officer,
Thomson Reuters
Director since 2014
James M. Ramstad 3,6,7
Former U.S. Congressman
Director since 2011
Roger J. Sit 1,2,4,6,7
Chief Executive Officer,
Global Chief Investment Officer
and Director,
Sit Investment Associates
Director since 2015
Julie H. Sullivan 2,6,7,8
President,
University of St. Thomas
Director since 2016
1 Advisory Committee – TCF Employees Stock Purchase Plan
2 Audit Committee
3 BSA and Compliance Committee
4 Compensation, Nominating and Corporate Governance Committee
Barry N. Winslow 3,6,7
Retired Vice Chairman,
TCF Financial Corporation
Director since 2008
Richard A. Zona 2,5,6,7
Retired Vice Chairman,
U.S. Bancorp
Director since 2011
5 Executive Committee
6 Finance Committee
7 Risk Committee
8 Technology Committee
A-6
REMEMBERING WILLIAM A. COOPER
On February 7, 2017, TCF lost one of its most influential leaders in the company’s 93-year history. William A. Cooper,
chairman and former chief executive officer passed away peacefully at the age of 73. As our leader for nearly
30 years, Bill left an indelible legacy that will continue to shape the future of our company. He was a visionary and
an innovator who successfully navigated TCF through two economic crises and restored the company to financial
health. He recruited a strong and diverse board of directors, and mentored many of TCF’s executive leaders.
Bill also was a giant in the banking industry. Known for his straight-forward style and wit, he earned the trust of
many shareholders and pioneered numerous industry innovations, including free checking and debit cards. He was
among the first leaders to recognize the importance of serving customers through seven day-a-week banking and
supermarket branches. As banking regulations changed, he adapted TCF’s business model and found new sources
of revenue that enhanced our profitability. His support for the creation of our leasing businesses, the creation of
TCF Inventory Finance and our national second mortgage business, and the acquisition of Gateway One were
important milestones in shaping the company we are today.
But Bill’s greatest legacy is his passion for education and supporting our communities. Both the TCF Foundation
and Friends of Education were his creations and they have provided significant support for education, human
services, wellness and the arts. The TCF Foundation has contributed tens of millions of dollars over 20 years and
Friends of Education has grown into a network of charter schools in the Minneapolis area that serves more than
9,000 students.
The Board of Directors and the entire TCF family extend their deepest condolences to Bill’s family and friends.
We are grateful for his boundless commitment to TCF and his pioneering spirit will endure for generations to come.
“ Bill leaves a remarkable legacy with TCF and the communities we serve. Over nearly 30 years as our
CEO, Bill showed tremendous leadership and courage, pioneering numerous innovations in the banking
industry and establishing a rich tradition of philanthropy and community involvement within TCF.
We will miss him greatly.” — Craig Dahl, Vice Chairman, President and Chief Executive Officer
“ Bill was truly one-of-a-kind and we will miss his leadership and voice on our board. He came from a
very modest background and never lost touch with the importance of creating opportunities for the
economically disadvantaged, whether that meant access to the banking system or support for education.
He will be deeply missed.” — Vance Opperman, TCF Lead Director
A-7
A-7
TCF Financial Corporation
200 Lake Street East
Wayzata, MN 55391-1693
tcfbank.com
TCFIR9365
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