Our Strategies in Motion
TCF Financial Corporation
2017 annual report
OUR STRATEGIES IN MOTION
Introduced in 2015, TCF’s four strategic pillars represent the basis for its 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 moving forward.
DIVERSIFICATION
Focus on national and footprint lending
increases quality and diversification of portfolio
PROFITABLE GROWTH
Strong loan and lease origination capabilities
and high net interest margin drive balance
sheet growth with an emphasis on profitability
Diversification
philosophy
driving stable
credit quality
2017 loans and
leases up 7.1%
2017 total
revenue up 4.5%
OPERATING LEVERAGE
Focus on improving organizational efficiencies
to drive positive operating leverage
CORE FUNDING
Maintain sufficient funding sources
to support loan and lease growth
2018 efficiency
ratio target
of 66% to 68% 1
Successful
launch of new
digital banking
platform
1 Compared to previous 5-year approximate average of 70%
TABLE OF CONTENTS
FORM 10-K
Letter to Our Shareholders 1
Business 1
Risk Factors 8
Selected Financial Data 21
Management’s Discussion and Analysis 22
Consolidated Financial Statements 63
Notes to Consolidated Financial Statements 68
Other Financial Data 121
CORPORATE INFORMATION
Stockholder Information A-2
Executive Management Team A-4
Board of Directors A-5
Offices A-6
Mission, Vision and Values A-7
Building
momentum
as One TCF
Craig R. Dahl, Chairman and Chief Executive Officer
Throughout 2017, TCF continued to build on its “One TCF” culture that encourages collaboration
and efficiencies across the organization. With the execution of several key initiatives in 2017 and
strategies in motion for the future, TCF is building momentum as One TCF.
Dear Shareholders:
Throughout my first two years as CEO, I have spoken
extensively about focusing on our “One TCF” culture to
improve the returns to our shareholders. During these
two years, our team has worked very hard to deliver on
this goal. As a result, TCF continued to generate positive
momentum throughout 2017 that positions us to be
successful in 2018. I believe we will look back at 2017
as an inflection point for our organization that will result
in the superior and sustainable long-term results we are
focused on achieving.
In 2017, we continued to execute on our four strategic
pillars: 1) diversification, 2) profitable growth, 3) operating
leverage and 4) core funding. I remain committed to
these pillars as they are the foundation for all that
we do. The business philosophies we have in place,
coupled with several key actions throughout the year,
resulted in improved core earnings trends. We have also
continued to invest in talent and technology, both of
which are playing a key role in moving the organization
forward. I sense a more positive sentiment around the
organization, both internally and externally, which has
me excited about what lies ahead.
Building momentum in 2017
TCF had a transformational year in 2017, with the most
significant action being the discontinuation of our auto
finance loan originations effective December 1, 2017.
While it had been a contributor to loan and lease growth
over the past several years, we determined that the
financial outlook of the auto finance business was less
favorable compared to alternative uses of capital. We
believe we can earn a higher return by investing in other
initiatives such as organic loan and lease growth, dividend
increases, stock repurchases, corporate development
and investments in our business. We recognized the auto
finance business was a key headwind for the stock and
believe the additional capital flexibility will be a benefit for
our shareholders moving forward.
We also received an estimated net tax benefit of $130.7
million from the Tax Cuts and Jobs Act (“Tax Reform”)
enacted in late 2017, resulting from the re-measurement
of our estimated net deferred tax liability, primarily
generated from accelerated tax depreciation on our leasing
portfolio. In addition, we expect Tax Reform to result in
a significantly lower effective tax rate of approximately
1
23 percent to 25 percent beginning in 2018. As a result of
these benefits, we were pleased to provide approximately
$4.6 million in one-time bonuses to eligible team
members. In addition, we donated $5.0 million to the TCF
Foundation that will increase the grants we provide to
nonprofit organizations in the communities we serve.
Optimizing our capital remains a key opportunity for us
to deliver value to our shareholders. We began doing
this through several actions in 2017. First, we completed
various portfolio purchases and acquired two businesses
that have supported our focus on profitable growth.
Second, we proactively refinanced our 7.50% Series A non-
cumulative perpetual preferred stock with 5.70% Series C
non-cumulative perpetual preferred stock, resulting in
annual savings of approximately $3.0 million beginning in
2018. Finally, as part of our discontinuation of auto finance
loan originations, we launched a new share repurchase
program of $150.0 million and began repurchasing
common stock in the fourth quarter.
We also took steps in 2017 to further reduce the risk
profile of our balance sheet as non-accrual loans and
leases decreased by 34.6 percent and other real estate
owned decreased by 61.1 percent from December 31, 2016.
The run-off of our auto finance portfolio will also have a
positive impact on our overall risk profile over time.
A key win for TCF in 2017 was the successful launch of
our new digital banking platform. We invested heavily in
this initiative to ensure our customers have the tools and
resources that meet their evolving financial needs. The
new digital platform includes mobile deposit, fingerprint
identification, enhanced planning tools and much more. In
addition, the new platform will allow us to more efficiently
add on new features in the future. Our ability to offer a
competitive digital product to our customers is critical for
the future of the organization.
As we executed on these initiatives, as well as our core
business strategies, we did so under the lens of our
four strategic pillars. This means we understand the
significance of a well-diversified balance sheet funded by a
low-cost, core deposit base. It also means we understand
the importance of growing the balance sheet in a way
that can optimize the profitability of the organization as a
whole. Finally, it means improving efficiencies within the
organization is a guiding factor in the decisions we make.
Diversification
Maintaining a well-diversified loan and lease portfolio
is one of our core business philosophies. Not only do
we have multiple asset classes within our loan and
lease portfolio, each asset class is further diversified by
geography, rate, average loan and lease size, estimated
weighted average life and collateral type. Importantly, we
are able to compete as experts within each segment in
which we participate.
Our strong diversification provides the flexibility to be
selective in where and how we grow based on changing
appetites or market factors. For example, we discontinued
auto finance loan originations as we felt there were better
places to invest our capital to improve our overall returns.
We were able to do this because of our diversified portfolio
and our opportunities for growth in other areas, including
our investment portfolio. From an earnings asset growth
standpoint, we can be thoughtful when considering how
to redeploy the run-off of the auto finance portfolio to
optimize our return on capital.
The value of our loan and lease diversification has also
been demonstrated through our stable credit quality in
2017 compared to 2016, with steady delinquencies and
net charge-offs and lower non-performing assets. While
we saw an increase in auto finance net charge-offs in
2017, this was more than offset by an improvement in
consumer real estate.
Profitable growth
TCF grew loans and leases by 7.1 percent in 2017 driven by
strong growth in our wholesale businesses. While we were
pleased with this level of growth, our focus remains on
optimizing the level of profitability. We are not interested
in growth just for the sake of growth. In addition, we
took steps in 2017 to improve our earnings predictability
by reducing our reliance on gains on sales of loans and
increasing our net interest income.
A key factor in our profitability was our net interest
income which increased 9.1 percent in 2017. We continue
to have one of the highest net interest margins in the
industry, which has further benefited from the recent
interest rate hikes. Loan and lease yields in 2017
increased 33 basis points primarily due to increases in
short-term rates, our strategy of competing as experts in
niche segments and our pricing discipline, while deposit
costs remained well-managed with an increase of just
two basis points.
2
2017 WILLIAM A. COOPER
INNOVATION AWARD
A team of business and IT leaders was
recognized with the 2017 William A. Cooper
Innovation Award for their work in creating and
successfully launching a new digital banking
platform. This award recognizes significant
advancement of products, processes, services,
technologies, or ideas that enable TCF to
enhance its ability to serve its customers.
In 2017, we completed a strategic leasing company
acquisition, a $445.5 million leasing and equipment finance
portfolio purchase and an acquisition of a residential
mortgage lending business, all of which support our pillar
of profitable growth. The leasing company acquisition
resulted in increased leasing and equipment finance non-
interest income while the portfolio purchase resulted in
loan and lease growth with strong yields. The mortgage
lending business acquisition provides a first mortgage
loan origination platform that will create incremental
gains on sales revenue and the potential for future loan
growth if we choose to hold the loans on our balance
sheet. Going forward, we expect to focus on organic growth
opportunities, but we will continue to pursue acquisition
opportunities that fit our risk-reward profile.
Our decision to discontinue auto finance originations further
demonstrates our commitment to profitable growth. By
making this decision, we chose profitability over growth.
Even with the potential for reduced loan and lease growth,
we expect to be more profitable in 2018 by putting funds
from the auto finance run-off to work in other capacities.
We are committed to generating profitable growth that
leads to higher returns on our capital.
Operating leverage
I have made it a priority during my first two years as CEO
to focus on improving the efficiency of our organization by
increasing revenues more than expenses. We recognize a
bank’s efficiency ratio has a high correlation to valuation.
In 2017, our efficiency ratio was significantly impacted by
the strategic changes made to our auto finance business.
In addition, we continued making key investments in
technology across the organization. As a result of our
actions in 2017, I believe we are now in a position where we
can show meaningful improvement in our efficiency ratio.
At TCF, we have a business model that generates revenue
well in excess of our similarly sized peers. Our challenge is
to do this more efficiently. We expect to execute on this in
2018 as a result of various efficiency initiatives, including
the discontinuation of auto finance loan originations.
I believe improving the efficiency with which we operate
is a significant opportunity for us to improve the returns
to our shareholders. We have instilled a culture in our
organization that the decisions we make should be made
with an eye toward the long-term impact they will have
on our operating leverage. While balancing this culture
with continued investments in our businesses, we feel we
are in a good position to take meaningful steps toward
becoming a more efficient organization in 2018.
Core funding
The primary funding source of our loans and leases is
our low-cost deposit base, which totaled $18.3 billion at
December 31, 2017, a 6.3 percent increase from December 31,
2016. This granular deposit base is a very valuable part
of our franchise. As short-term rates have increased, the
relative value of the deposit base has been evident in our
well-managed deposit costs. Deposit costs in 2017 were
0.38 percent, an increase of just two basis points compared
to 2016, despite the steady increase in interest rates and
growth in the deposit base.
Our ability to continue to grow core checking balances is
directly tied to the convenience we provide to our retail
customers. The definition of “convenience” has evolved
and now places more emphasis on 24/7 banking through
digital channels as opposed to the number of branches and
branch hours. Since the launch of our new digital banking
platform in 2017, we have been pleased with the significant
increases in usage by our customers. This tells us the
solutions we are providing are meeting their needs.
3
Although we continue to be subject to the Consumer
Financial Protection Bureau’s (CFPB) lawsuit regarding our
overdraft opt-in practices, we received a favorable ruling
from the court in September 2017 related to our motion
to dismiss. We remain confident that the way we provided
our overdraft program to our customers complied with
all applicable laws and regulations and we treated our
customers fairly. We believe the facts and the law will
support our legal position.
Another key driver of our success moving forward will be
our people. Our people are our most important resource.
We are investing heavily in the development and retention
of our team members. We are also focused on attracting
team members who demonstrate leadership and
expertise in areas that are important to our future success.
The hard work of all our team members, including our
board of directors and executive management team, has
been vital to our success over the past year. I thank them
all for their efforts.
I am very excited about the positive momentum we
have generated in 2017 and what it can mean for our
organization in 2018 and beyond. This momentum gives
us the opportunity to focus on making investments in our
future and improving returns for shareholders through
various channels. This is important to our shareholders
and it is important to the board of directors and executive
management team at TCF. We have strategies in motion
to generate the returns our shareholders expect. By
working together as “One TCF”, we can continue to build
momentum and deliver the results needed to achieve
our goals. We made many tough decisions in 2017 that
have set the stage for what is to come. The work is not
done, but I believe we have an organization that is built
for the future and a focus that aligns with the goals of
our shareholders.
Craig R. Dahl
Chairman and Chief Executive Officer
We believe the new platform will help retain existing
customers and attract new customers to TCF.
Looking ahead, we expect to continue to generate core
deposit growth while retaining our access to wholesale
funding sources, which can be used as needed based on
anticipated loan and lease growth. We also believe our
deposit composition will allow us to effectively manage
deposit costs moving forward, especially given the
additional funding generated by the run-off of our auto
finance portfolio. I view our deposit base as the strength
of our franchise.
Positioned for success in 2018
As you can see, we demonstrated real momentum in 2017
that we believe has positioned us to be successful in 2018.
We have an auto finance run-off headwind we expect to
not only eliminate, but turn into a tailwind as we improve
our risk profile and redeploy the capital into higher return
initiatives. We are continuing to see opportunities for
growth in our wholesale loan and lease portfolios. As a
bank with an asset sensitive balance sheet, we expect to
continue to benefit from anticipated additional interest
rate hikes in 2018, both from disciplined loan and lease
pricing and a preferred deposit composition. In addition,
there are opportunities for us to start making meaningful
progress in lowering our efficiency ratio.
Perhaps what I am most encouraged by is our opportunity
to be more proactive in deploying excess capital that
has been generated by earnings accumulation and tax
reform. In fact, this has already begun. In early 2018
we announced a quarterly common stock dividend of
15 cents per share, an increase of 100 percent compared
to our previous quarterly cash dividend. In addition,
we announced we will be redeeming the Series B non-
cumulative perpetual preferred stock on March 1, 2018.
We expect this to result in an annual after-tax expense
savings of $6.5 million beginning in the second quarter of
2018. For the past two years, I have indicated that we have
been reviewing four potential uses of capital including
organic loan and lease growth, dividend increases, stock
repurchases, and corporate development. As of early
2018, we have now deployed capital into all of these
areas. Going forward, we will continue to evaluate these
channels, as well as investments in our business, for
additional deployment of excess capital. We understand
that deploying capital is important to our shareholders and
I believe we have positioned ourselves to do so effectively.
4
FORM 10-K
For the fiscal year ended December 31, 2017
3
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2017
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)
6.45% Series B Non-Cumulative Perpetual Preferred Stock
Depositary shares, each representing a 1/1000th interest in a share of 5.70% Series C 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 þ 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 þ
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 þ 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 þ 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. þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and
"emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ
Accelerated filer
¨
Non-accelerated filer ¨ (Do not check if smaller reporting company) Smaller reporting company ¨ Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with
any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨ No þ
The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the average bid and
asked price of such common equity, as of the last business day of the registrant's most recently completed second fiscal quarter as reported by
the New York Stock Exchange, was $2,502,765,920.
As of February 20, 2018, there were 170,962,451 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 2018 Annual Meeting of Stockholders to be held on April 25, 2018 are
incorporated by reference into Part III hereof.
TABLE OF CONTENTS
Description
Part I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Part II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Selected Financial Data
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm
Consolidated Financial Statements
Notes to Consolidated Financial Statements
Other Financial Data
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure
Item 9A.
Controls and Procedures
Management's Report on Internal Control Over Financial Reporting
Report of Independent Registered Public Accounting Firm
Item 9B.
Other Information
Part III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Part IV
Item 15.
Signatures
Index to Exhibits
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Exhibits and Financial Statement Schedules
Page
1
8
16
16
17
17
18
21
22
59
62
62
63
68
121
122
122
123
124
125
125
126
126
126
126
127
128
130
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. TCF's 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 consumer banking services in 46 states and commercial
banking services in 34 states. TCF also conducts commercial leasing and equipment finance business in all 50 states
and, to a limited extent, in foreign countries and commercial inventory finance business in all 50 states and Canada
and, to a limited extent, in other foreign countries. Effective April 1, 2017, the Company executed its strategic shift
from an originate-to-sell and originate-to-hold model to an entirely originate-to-hold model for its auto finance business
and effective December 1, 2017, the Company discontinued auto finance loan originations. The determination was
based on management's review of strategic alternatives and the financial outlook of the auto finance loan origination
business compared with alternative uses of capital. TCF's subsidiary, Gateway One Lending & Finance, LLC ("Gateway
One"), will continue to service existing auto loans on its balance sheet and those serviced for others. The decision to
discontinue auto finance loan originations resulted in a goodwill impairment charge of $73.0 million, an other intangible
assets impairment charge of $0.4 million and approximately $14.8 million of expenses related to severance, other
asset impairments and lease termination expenses in 2017.
TCF generated total revenue, defined as net interest income plus total non-interest income, of $1.4 billion, $1.3 billion
and $1.2 billion in the United States in 2017, 2016 and 2015, respectively. International revenue, primarily from Canada,
was $22.6 million, $25.6 million and $27.3 million in 2017, 2016 and 2015, respectively. TCF had total assets of
$23.0 billion as of December 31, 2017 and was the 46th largest publicly traded bank holding company in the United
States based on total assets at September 30, 2017.
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.
The Company's reportable segments are Consumer Banking, Wholesale Banking and Enterprise 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 24. Business Segments
of Notes to Consolidated Financial Statements for information regarding net income (loss), assets and revenues for
each of TCF's reportable segments.
1
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 originate high credit quality
secured consumer real estate loans for investment and for sale and to generate deposits. Effective April 1, 2017, the
Company executed its strategic shift from an originate-to-sell and originate-to-hold model to an entirely originate-to-
hold model for its auto finance business and effective December 1, 2017, the Company discontinued auto finance loan
originations. 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.
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 services 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 cost or no cost funds.
At December 31, 2017, TCF had 320 branches, consisting of 189 traditional branches, 128 supermarket branches
and three campus branches. TCF operates 123 branches in Illinois, 88 in Minnesota, 50 in Michigan, 33 in Colorado,
17 in Wisconsin, seven in Arizona and two in South Dakota. TCF currently plans to close five supermarket branches
in early 2018, of which three are in Illinois and two are in Minnesota. TCF also offers 836 ATMs across TCF's primary
banking markets. See "Item 1A. Risk Factors" for further 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, as well as by utilizing TCF's enhanced digital channels. TCF's card programs are supported by interchange
fees paid by retailers.
Consumer Real Estate TCF originates 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 originated for investment and for sale, either
on a fixed-term basis or as a revolving line of credit. 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 correspondent relationships. 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, headquartered in Anaheim, California, services loans on new and used autos. Effective
April 1, 2017, the Company executed its strategic shift for auto finance from an originate-to-sell and originate-to-hold
model to an entirely originate-to-hold model and effective December 1, 2017, the Company discontinued auto finance
loan originations. Prior to April 1, 2017, loans were originated for investment and for sale. Gateway One will continue
to service existing auto loans on its balance sheet and those serviced for others.
2
Wholesale Banking
Wholesale Banking is comprised of commercial 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 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, 2017 and 2016.
Commercial real estate loans originated by TCF are secured by commercial real estate, including multi-family housing,
office buildings, warehouse and industrial buildings, health care facilities, self-storage buildings, retail services buildings
and hotel and motel buildings. The commercial real estate portfolio represented 77.3% and 80.2% of TCF's total
commercial portfolio at December 31, 2017 and 2016, respectively.
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, manufacturing equipment, golf cart and turf equipment,
trucks and trailers, medical equipment, furniture and fixtures, technology and data processing equipment, and
agricultural 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, primarily 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
capital management, 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.
3
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 12. Short-term Borrowings and Note 13. Long-term Borrowings of Notes to Consolidated Financial Statements.
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 further 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
(through December 1, 2017), leasing of equipment and origination of 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, 2017, TCF had 6,116 employees, including 778 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").
4
Regulatory Capital Requirements TCF Financial and TCF Bank are subject to various minimum regulatory capital
requirements administered by the Federal Reserve and the OCC. These requirements include quantitative measures
that assign risk weightings to assets and off-balance sheet items, as well as define and set minimum regulatory capital
requirements. Failure to meet minimum capital requirements can initiate certain mandatory, and possible additional
discretionary, actions by the federal banking regulators that, if undertaken, could have a material adverse effect on
TCF's financial condition and results of operations. These federal banking regulators 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
requirements. In addition to other potential actions, failure to meet these requirements would result in limitations on
capital distributions as well as executive bonuses. The Basel III capital standard phases in through 2019. Institutions
not subject to the advanced approaches requirements were allowed to opt out of including components of accumulated
other comprehensive income (loss) in common equity Tier 1 capital. TCF and TCF Bank made the one-time permanent
election to not include accumulated other comprehensive income (loss) in regulatory capital. 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%. TCF and
TCF Bank exceeded the fully phased-in Basel III capital standard as of December 31, 2017. See Note 16. Regulatory
Capital Requirements of Notes to Consolidated Financial Statements for further 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. Restricted retained earnings 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. See Note 15. Equity of Notes to Consolidated Financial Statements for further
information on restricted retained earnings.
Dividends or other capital distributions from TCF Bank to TCF Financial are an important source of funds to enable
TCF Financial to pay dividends on its preferred and common stock, to pay TCF Financial's obligations or to meet other
cash needs. The ability of TCF Financial and TCF Bank to pay dividends depends on regulatory policies and regulatory
capital requirements and may be subject to regulatory approval.
In general, TCF Bank may not declare or pay a dividend to TCF Financial in excess of 100% of its net retained earnings
for the current year combined with its net retained earnings for the preceding two calendar years without prior approval
of the OCC. The OCC also has the authority to prohibit the payment of dividends by a national bank when it determines
such payments would constitute an unsafe and unsound banking practice. TCF Bank's ability to make capital
distributions in the future may require regulatory approval and may be restricted by its federal banking regulators. 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. See Note 16. Regulatory Capital Requirements of Notes to
Consolidated Financial Statements for further information.
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 banking regulator to maintain the capital of a subsidiary bank would be assumed
by the bankruptcy trustee and may be entitled to priority over other creditors.
5
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 Wall Street Reform and Consumer Protection Act of 2010 (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, 2017 was 1.28%.
In 2017, 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
$16.0 million, $15.9 million and $20.3 million in 2017, 2016 and 2015, respectively.
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. As of December 31, 2017, the Financing Corporation assessment rate was 46 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. Federal banking regulators 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 federal banking regulators. 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.
6
Taxation
Federal Taxation TCF's federal income tax returns are open and subject to examination for 2014 and later tax return
years. The Tax Cuts and Jobs Act ("Tax Reform") was enacted on December 22, 2017, which resulted in the re-
measurement of deferred tax assets and deferred tax liabilities to account for the future impact of lower corporate tax
rates on these deferred amounts. As a result of Tax Reform, TCF recorded a reasonable estimate of a net tax benefit
of $130.7 million in 2017, primarily resulting from the re-measurement of the Company's estimated net deferred tax
liability.
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 2013
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 on 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 2013 and later tax return years. The methods of filing and the methods for calculating taxable and apportionable
income vary depending on the laws of each taxing jurisdiction.
See "Item 7. Management's Discussion and Analysis - Consolidated Income Statement Analysis - Income Taxes", Note
2. Summary of Significant Accounting Policies and Note 14. Income Taxes of Notes to Consolidated Financial
Statements for further 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.
7
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 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 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 collateral already in service. Adverse economic conditions may also hinder TCF from expanding the inventory
finance business by limiting its ability to attract and retain manufacturers and dealers as expected. Any such difficulties
in TCF's leasing and equipment and inventory 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.
8
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, through systems and counterparties, 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. Any disruptions to these systems may result in significant
costs and other adverse developments. Although we have plans, policies and procedures designed to prevent or limit
the negative effect of these disruptions, there can be no assurance that these will be successful. Our failure to effectively
mitigate or promptly remediate any disruptions could 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.
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.
9
TCF faces cyber-security and other external risks, including "denial of service," "hacking," "ransomware" 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 or withdraw money, 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 and
many financial institutions have experienced losses as account information has been stolen through the use of skimmers
placed on ATMs and point of sale terminals. 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' security protections, 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, 2017, TCF had 128 supermarket branches. Supermarket banking continues
to play an important role in TCF's deposit account strategy. TCF is subject to the risk, among others, that its license
or lease for a location or locations will terminate upon the sale or closure of that location or locations by the supermarket
partner or that we may not be able to renew branch leases with our supermarket partners on favorable terms, or at
all.
Also, difficult economic conditions, financial or labor difficulties in the supermarket industry, or a decrease in customer
utilization of traditional bank branches may reduce activity in TCF's supermarket branches. Although utilization of these
branches may decrease, the nature of these leases with our supermarket partners generally do not allow us to terminate
significant numbers of individual branches. Because these leases are generally all renewed together, in the event of
a decrease in customer utilization there may be limited opportunities to terminate unprofitable branch leases. Any of
the above risks could have a material adverse effect on TCF's financial condition and results of operations.
New lines of business or new products and services may subject TCF to additional risk.
From time to time, TCF may implement new lines of business or offer new products and services within existing lines
of business. There are substantial risks and uncertainties associated with these efforts, particularly in instances where
the markets are not fully developed. In developing and marketing new lines of business and new products or services,
TCF may invest significant time and resources. Initial timetables for the introduction and development of new lines of
business and new products or services may not be achieved and price and profitability targets may not prove feasible.
External factors, such as compliance with regulations, competitive alternatives and shifting market preferences may
also impact the successful implementation of a new line of business or a new product or service. Furthermore, any
new line of business or new product or service could have a significant impact on the effectiveness of TCF's system
of internal controls. Failure to successfully manage these risks in the development and implementation of new lines
of business and new products or services could have a material adverse effect on TCF's financial condition and results
of operations.
10
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, such as providing loans through peer-to-peer lending. 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, federal banking regulators periodically review TCF's allowance
for loan and lease losses and may require an increase in the provision for loan and lease losses or the recognition of
additional loan and lease charge-offs, based on judgments different than those of management. An increase in the
allowance for loan and lease losses would result in a decrease in net income, and possibly risk-based capital, and
could have a material adverse effect on TCF's financial condition and results of operations.
TCF is subject to extensive government regulation and supervision, 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 regulators continually review banking laws, regulations and policies for possible changes. Many
new banking rules are issued with limited interpretive guidance.
11
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 federal banking regulators, 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 (the "Court"), captioned Consumer Financial Protection Bureau v. TCF National Bank,
alleging violations of the Consumer Financial Protection Act ("CFPA") 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. On September 8, 2017, the Court issued a ruling on the motion made by TCF Bank to dismiss the complaint
of the CFPB. In its ruling, the Court granted TCF Bank's motion to dismiss the CFPB's Regulation E claims and also
dismissed the CFPB's unfair, deceptive and abusive conduct claims under the CFPA for periods prior to July 21, 2011.
The Court did not grant TCF Bank's motion to dismiss CFPA claims for periods on or after July 21, 2011. TCF Bank
rejects the claims made by the CFPB in its complaint and intends to continue 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.
TCF's earnings are significantly affected by the fiscal and monetary policies of the federal government and its agencies,
as well as other legal changes affecting businesses and consumers.
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.
In addition, legal changes affecting consumers and businesses, including the deductibility or other tax attributes
associated with certain products, may significantly decrease the demand for certain products that we offer. For example,
Tax Reform limits the tax deductibility of interest paid on home equity loans to those loans used to purchase or
substantially improve qualified residences, which may decrease consumer demand for such loan products.
12
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.
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 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, decrease in demand for loans which we
sell, changes to laws or 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 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.
13
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.
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 traditional bank deposits in brokerage accounts, online bank accounts, mutual funds or general-purpose
reloadable prepaid cards. Consumers can also complete transactions such as paying bills, transferring funds and
obtaining loans 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.
14
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, including those resulting from the enactment of Tax Reform, 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.
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 deposit products and sale or servicing
of its loan and lease 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.
15
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 and risks related to natural disasters that are 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.
In addition, severe weather, earthquakes, other natural disasters, pandemics, acts of war or terrorism and other adverse
external events could have a significant impact on our lending business. Such events could impair the ability of borrowers
to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage and/or
cause us to incur additional expenses. Because our lending businesses are geographically diverse, those businesses
are likely to be impacted more often by natural disasters, including hurricanes, flooding, fires and earthquakes, which
have caused extensive damage in various parts of the United States in which they conduct business. The occurrence
of any such events could have a material adverse effect on our financial condition and results of operations.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Offices TCF owns its headquarters office in Wayzata, Minnesota. Other operations facilities, located in Minnesota,
Illinois, California and South Dakota, are either owned or leased. These facilities are predominantly utilized by the
Consumer Banking and Wholesale Banking reportable segments. Several facilities in Minnesota are also utilized by
the Enterprise Services reportable segment. At December 31, 2017, TCF owned the buildings and land for 144 of its
bank branch offices, owned the buildings and leased the land for 26 of its bank branch offices and leased or licensed
the remaining 150 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 further information on premises and
equipment, see Note 8. Premises and Equipment, Net of Notes to Consolidated Financial Statements.
16
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 federal regulators 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 (the "Court"), captioned Consumer Financial Protection Bureau v. TCF National Bank, alleging violations
of the Consumer Financial Protection Act ("CFPA") 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. On September 8,
2017, the Court issued a ruling on the motion made by TCF Bank to dismiss the complaint of the CFPB. In its ruling,
the Court granted TCF Bank's motion to dismiss the CFPB's Regulation E claims and also dismissed the CFPB's unfair,
deceptive and abusive conduct claims under the CFPA for periods prior to July 21, 2011. The Court did not grant TCF
Bank's motion to dismiss CFPA claims for periods on or after July 21, 2011. TCF Bank rejects the claims made by the
CFPB in its complaint and intends to continue 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.
17
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 "TCF." As of February 20, 2018, there
were 5,438 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:
2017:
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
2016:
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
High
Low
Dividends
Declared
$
$
21.29
$
16.71
$
17.20
17.47
20.03
14.58
14.89
15.33
19.97
$
13.73
$
14.78
14.48
13.97
11.72
11.62
10.37
0.075
0.075
0.075
0.075
0.075
0.075
0.075
0.075
The Board of Directors of TCF Financial and TCF Bank have each adopted a Capital Adequacy 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 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 earnings for the current year combined with its net retained earnings 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 16. Regulatory Capital
Requirements and Note 25. Parent Company Financial Information of Notes to Consolidated Financial Statements.
18
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 NASDAQ Regional
Banking Index (assuming the investment of $100 in each index on December 31, 2012 and reinvestment of all
dividends).
TCF Total Stock Return Performance Chart
l
e
u
a
V
x
e
d
n
I
250
200
150
100
50
12/31/2012
12/31/2013
12/31/2014
12/31/2015
12/31/2016
12/31/2017
u TCF Financial Corporation p S&P 500 Index l KBW NASDAQ Regional Banking Index
Index
2012
2013
2014
2015
2016
2017
TCF Financial Corporation
$
100.00
$
135.58
$
134.27
$
121.03
$
171.78
$
S&P 500 Index
KBW NASDAQ Regional Banking Index
Source: S&P Global Market Intelligence.
100.00
100.00
132.39
146.85
150.51
150.41
152.59
159.31
170.84
221.46
183.13
208.14
225.34
Year Ended December 31,
19
Repurchases of TCF Stock
Share repurchase activity for the quarter ended December 31, 2017 was as follows:
Period
October 1 to October 31, 2017
Share repurchase program(1)
Employee transactions(2)
November 1 to November 30, 2017
Share repurchase program(3)
Employee transactions(2)
December 1 to December 31, 2017
Share repurchase program(3)
Employee transactions(2)
Total
Share repurchase program(3)
Employee transactions(2)
Total Number
of Shares
Purchased
Average
Price Paid
Per Share
Total Number of Shares
Purchased as Part of
Publicly Announced Plan
Approximate Dollar Value (or
Maximum Number) of
Shares that May Yet Be
Purchased Under the Plan
— $
—
1,405
$
17.08
— $
— $
—
—
446,464
$
20.51
— $
—
446,464
1,405
$
$
20.51
17.08
—
N.A.
— $
N.A.
446,464
$
N.A.
446,464
$
N.A.
5,384,130
N.A.
150,000,000
N.A.
140,843,494
N.A.
140,843,494
N.A.
N.A. Not Applicable
(1)
Prior to November 27, 2017, the share repurchase authorization was approved by the Board of Directors on April 14, 2007 and was announced in a press release
dated April 16, 2007. The authorization was for a repurchase of up to an additional 5% of TCF's common stock outstanding at the time of the authorization, or 6.5
million shares. This plan has been replaced by the current share repurchase authorization approved and announced on November 27, 2017.
(2) Represents restricted stock withheld pursuant to the terms of awards granted under either the TCF Financial Incentive Stock Program or the TCF Financial 2015
Omnibus Incentive Plan to offset tax withholding obligations that occur upon vesting and release of restricted stock. Both plans provide 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.
The current share repurchase authorization was approved by the Board of Directors and announced in a press release on November 27, 2017. The authorization
was for a repurchase of up to $150.0 million in aggregate value of shares of TCF's common stock. Future repurchases will be based on market conditions, the
trading price of TCF shares and other factors. 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 may be commenced or suspended at any time or from time to time.
(3)
20
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)
2017
2016
2015
2014
2013
At or For the Year Ended December 31,
Consolidated Income:
Net interest income
Non-interest income
Total revenue
Provision for credit losses
Non-interest expense
Income before income tax expense (benefit)
Income tax expense (benefit)
Income attributable to non-controlling interest
Net income attributable to TCF Financial
Corporation
Preferred stock dividends
Impact of preferred stock redemption
Net income available to common stockholders
Earnings per common share:
Basic
Diluted
Dividends declared
Consolidated Financial Condition:
$
925,238
$
848,106
$
820,388
$
815,629
$
802,624
448,299
465,900
441,998
433,267
404,058
1,373,537
1,314,006
1,262,386
1,248,896
1,206,682
68,443
1,059,934
245,160
(33,624)
10,147
268,637
19,904
5,779
242,954
1.44
1.44
0.30
$
$
$
$
$
$
$
$
65,874
909,887
338,245
116,528
9,593
212,124
19,388
—
192,736
1.15
1.15
0.30
$
$
$
$
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
—
132,603
0.82
0.82
0.20
Loans and leases
$ 19,104,460
$ 17,843,827
$ 17,435,999
$ 16,401,646
$ 15,846,939
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:
23,002,159
21,441,326
20,689,609
19,393,656
18,378,769
18,335,002
17,242,522
16,719,989
15,449,882
14,432,776
1,249,449
2,680,584
13.96
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
1.26%
1.05%
1.03%
0.96%
0.87%
10.80
4.54
11.50
20.83
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
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
0.62%
1.02%
1.15%
1.32%
1.75%
0.72
0.90
0.24
1.28
0.90
0.26
1.43
0.90
0.30
1.71
1.00
0.49
2.17
1.59
0.81
(1) Net interest income on a fully tax-equivalent basis divided by average interest-earning assets.
21
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
Forward-looking Information
Page
23
24
24
25
25
29
30
31
32
33
36
36
38
42
49
49
50
50
51
53
54
57
22
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, 2017,
TCF had 320 bank branches in Illinois, Minnesota, Michigan, Colorado, Wisconsin, Arizona and South Dakota (TCF's
primary banking markets).
TCF provides convenient financial services through multiple channels in its primary banking markets. TCF has
developed products and services designed to meet the specific needs of the largest consumer segments in the market.
The Company focuses on attracting and retaining customers through service and convenience, including select
locations open seven days a week with extended hours and on most holidays, 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 67.4% of TCF's total revenue for 2017, compared with 64.5% and 65.0% for 2016 and 2015, 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. The significant components of non-interest income are from leasing and equipment finance and fees and
service charges. The leasing and equipment finance business generates non-interest income primarily from operating
leases and sales-type leases. Providing a wide range of consumer 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 loans,
primarily in consumer real estate, which result in gains on sales, as well as servicing fee income. Primary drivers of
gains on sales include TCF's ability to originate loans held for sale, identify loan buyers and execute loan sales. TCF
implemented changes to its auto finance business strategy in 2017, transitioning from a partial reliance on gains on
sales of loans to an entirely originate-to-hold model effective April 1, 2017 and discontinued auto finance loan
originations effective December 1, 2017. Over time, this shift may decrease capital and operational risk and will impact
net interest income, provision for credit losses, gains on sales of auto loans and servicing fee income.
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 2017, 2016 and 2015
and on information about TCF's financial condition, loan and lease portfolio, liquidity, funding resources, capital and
other matters.
23
Results of Operations
Performance Summary TCF reported diluted earnings per common share of $1.44 for 2017, compared with $1.15
and $1.07 for 2016 and 2015, respectively. TCF reported net income of $268.6 million for 2017, compared with
$212.1 million and $197.1 million for 2016 and 2015, respectively. Net income increased $56.5 million, or 26.6%, in
2017 and increased $15.0 million, or 7.6%, in 2016. The increase in net income in 2017 was primarily due to the
enactment of the Tax Cuts and Jobs Act ("Tax Reform") on December 22, 2017, partially offset by charges related to
the changes implemented to auto finance's business strategy in 2017. As a result of the enactment of Tax Reform, an
estimated net tax benefit of $130.7 million, or 77 cents per common share, was recorded for 2017 resulting primarily
from the re-measurement of the Company's estimated net deferred tax liability. Effective April 1, 2017, the Company
executed its strategic shift from an originate-to-sell and originate-to-hold model to an entirely originate-to-hold model
for its auto finance business and effective December 1, 2017, the Company discontinued auto finance loan originations.
The determination was based on management's review of strategic alternatives and the financial outlook of the auto
finance loan origination business compared with alternative uses of capital. TCF's subsidiary, Gateway One Lending
& Finance, LLC, will continue to service existing auto loans on its balance sheet and those serviced for others. The
decision to discontinue auto finance loan originations resulted in a goodwill impairment charge of $73.0 million, an
other intangible assets impairment charge of $0.4 million and approximately $14.8 million of expenses related to
severance, other asset impairments and lease termination expenses in 2017. These auto finance items reduced diluted
earnings per common share by 49 cents for 2017. The increase in net income in 2016 was primarily due to revenue
growth outpacing expenses.
Return on average assets on a fully tax-equivalent basis was 1.26% for 2017, compared with 1.05% and 1.03% for
2016 and 2015, respectively. The return on average assets on a fully tax-equivalent basis increased in 2017 and 2016
primarily due to increases in net income. Total average assets were $22.1 billion for 2017, compared with $21.1 billion
and $19.9 billion for 2016 and 2015, respectively. Total average assets increased $976.6 million, or 4.6%, in 2017 and
increased $1.2 billion, or 6.0%, in 2016. Return on average common equity was 10.80% for 2017, compared with
9.13% and 9.19% for 2016 and 2015, respectively. The return on average common equity ratio increased in 2017
primarily due to an increase in net income available to common stockholders. The return on average common equity
ratio decreased in 2016 primarily due to higher average total common equity. Total average common equity was
$2.2 billion for 2017, compared with $2.1 billion and $1.9 billion for 2016 and 2015, respectively. Total average common
equity increased $139.0 million, or 6.6%, in 2017 and increased $175.5 million, or 9.1%, in 2016.
24
Consolidated Income Statement Analysis
Net Interest Income Net interest income represented 67.4% of TCF's total revenue for 2017, compared with 64.5%
and 65.0% for 2016 and 2015, respectively. Net interest income was $925.2 million for 2017, compared with
$848.1 million and $820.4 million for 2016 and 2015, respectively. Net interest income increased $77.1 million, or
9.1%, in 2017 and $27.7 million, or 3.4%, in 2016. The average yield on interest-earning assets on a fully tax-equivalent
basis was 5.00%, 4.76% and 4.80% for 2017, 2016 and 2015, respectively. Average interest-earning assets increased
$898.2 million, or 4.5%, in 2017 and $1.1 billion, or 6.0%, in 2016. The average rate on interest-bearing liabilities was
0.61%, 0.56% and 0.51% for 2017, 2016 and 2015, respectively. Average interest-bearing liabilities increased
$564.2 million, or 3.8%, in 2017 and $667.7 million, or 4.7%, in 2016.
The increase in net interest income in 2017 was primarily due to an increase in interest income on loans and leases,
partially offset by a decrease in interest income on loans held for sale and an increase in total interest expense. Total
interest income was $1.0 billion for 2017, compared with $930.7 million for 2016. Total interest income increased
$88.3 million, or 9.5%, in 2017 primarily due to higher average balances and increased average yields on commercial
loans, increased average yields on auto finance loans, higher average balances and increased average yields on
inventory finance loans and higher average balances of leasing and equipment finance loans and leases. These
increases were partially offset by lower average balances of consumer real estate loans. Total interest expense was
$93.8 million for 2017, compared with $82.6 million for 2016. Total interest expense increased $11.2 million, or 13.5%,
in 2017 primarily due to higher average balances of long-term borrowings and increased average rates and higher
average balances of certificates of deposit, partially offset by lower average rates on money market accounts.
The increase in net interest income in 2016 was primarily due to an increase in interest income on loans and leases,
securities available for sale and loans held for sale, partially offset by an increase in interest expense on deposits.
Total interest income was $930.7 million for 2016, compared with $891.9 million for 2015. Total interest income
increased $38.8 million, or 4.4%, in 2016 primarily due to higher average balances of loans and leases and securities
available for sale, partially offset by a lower average yield on interest-earning assets. Total interest expense was
$82.6 million for 2016, compared with $71.5 million for 2015. Total interest expense increased $11.1 million, or 15.5%,
in 2016 primarily due to higher interest expense on certificates of deposit due to growth and higher rates paid as a
result of special campaigns to fund interest-earning asset growth.
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 4.54% for 2017, compared with 4.34% and 4.42% for 2016 and 2015, respectively. Net interest
margin increased 20 basis points in 2017 and decreased 8 basis points in 2016. The increase in 2017 was primarily
due to overall margin expansion on loans and leases, primarily impacted by interest rate increases, partially offset by
higher average rates on higher average balances of certificates of deposit. 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.
25
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,
2017
2016
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
$
282,507
$
10,491
3.71% $
319,582
$
170,006
4,436
2.61
190,863
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
823,526
712,530
208,678
18,382
22,916
16,606
1,934,395
2,961,449
4,895,844
977,698
2,455,578
3,433,276
4,399,138
2,646,500
3,105,326
11,149
109,185
171,671
280,856
47,587
111,886
159,473
202,508
164,386
152,974
571
Total loans and leases
18,491,233
960,768
Total interest-earning assets
20,688,480
1,033,599
Other assets(5)
Total assets
Liabilities and Equity:
Non-interest bearing deposits:
Retail
Small business
Commercial and custodial
1,363,487
$ 22,051,967
$ 1,931,856
925,890
634,487
Total non-interest bearing deposits
3,492,233
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
2,541,407
4,888,280
2,140,553
4,495,062
14,065,302
17,557,535
5,267
1,239,433
1,244,700
Total interest-bearing liabilities
15,310,002
Total deposits and borrowings
18,802,235
Accrued expenses and other liabilities
713,794
Total liabilities
19,516,029
Total TCF Financial Corp. stockholders'
equity
Non-controlling interest in subsidiaries
Total equity
2,513,424
22,514
2,535,938
Total liabilities and equity
$ 22,051,967
379
4,255
10,139
51,239
66,012
66,012
58
27,749
27,807
93,819
93,819
2.23
3.22
7.96
5.64
5.80
5.74
4.87
4.56
4.64
4.60
6.21
4.93
5.11
5.20
5.00
0.01
0.09
0.47
1.14
0.47
0.38
1.10
2.24
2.23
0.61
0.50
719,743
495,708
479,401
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
3,248,510
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
$ 21,075,415
80
17
(3)
1
(31)
(8)
48
24
(1)
57
37
14
39
82
(63)
33
24
—
6
(14)
8
2
2
37
(9)
(9)
5
4
9,314
4,649
16,238
15,900
39,648
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
2.91% $
(37,075) $
1,177
2.44
(20,857)
(213)
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
103,783
216,822
2,144
7,016
(270,723)
(23,042)
(351,252)
(21,568)
12,967
(338,285)
14,752
(6,816)
142
25,890
26,032
19,479
23,933
42,323
23
104,974
92,056
33
2,745
(4,975)
6,421
4,224
4,224
7
6,964
6,971
11,195
11,195
5,591
300,804
306,395
292,420
231,816
412,285
1,611
906,242
898,192
78,360
$
976,552
$
153,149
41,698
48,876
243,723
89,201
210,763
(348,424)
265,815
217,355
461,078
(1,784)
348,587
346,803
564,158
807,881
27,434
835,315
140,248
989
141,237
$
976,552
Net interest income and margin
$ 939,780
4.54
$ 858,919
4.34
$ 80,861
20
(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 on 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 $224.7 million and $140.3 million for 2017 and 2016, respectively.
26
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)
(Dollars in thousands)
Assets:
Investments and other
$
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)
719,743
495,708
479,401
16,238
15,900
39,648
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
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
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
2,452,206
4,677,517
2,488,977
4,229,247
13,847,947
17,096,457
7,051
890,846
897,897
Total interest-bearing liabilities
14,745,844
Total deposits and borrowings
17,994,354
Accrued expenses and other liabilities
Total liabilities
Total TCF Financial Corp. stockholders'
equity
Non-controlling interest in subsidiaries
Total equity
686,360
18,680,714
2,373,176
21,525
2,394,701
Total liabilities and equity
$21,075,415
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 on 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 for 2016 and 2015, respectively.
27
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, 2017
December 31, 2016
Versus December 31, 2016
Versus December 31, 2015
(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
$ (1,166) $
2,343
$
1,177
$ (5,442) $
2,462
$ (2,980)
(530)
317
(213)
(415)
(422)
(837)
2,318
6,974
(174)
42
2,144
7,016
(21,553)
(1,489)
(23,042)
3,588
13,306
16,026
(1,280)
(49)
(2,144)
2,308
13,257
13,882
(19,589)
(1,979)
(21,568)
(24,650)
(2,025)
(26,675)
715
(18,630)
14,037
11,814
14,752
1,795
(6,816)
(22,030)
5,354
2,504
7,149
(19,526)
360
13,001
13,913
13,326
14,284
18,588
88
46,284
44,754
(218)
142
(9,963)
(1,629)
(11,592)
12,889
12,119
6,153
9,649
23,735
(65)
58,690
47,302
25,890
26,032
19,479
23,933
42,323
23
104,974
92,056
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
(164)
19,343
44,973
14
72
19
2,673
33
2,745
12
(213)
(201)
(152)
(1,343)
(1,495)
(1,924)
(3,051)
(4,975)
2,979
1,768
(15)
7,862
7,801
3,310
3,442
2,456
22
(898)
(830)
6,421
4,224
7
6,964
6,971
7,885
11,195
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
$ 40,815
$ 40,046
$ 80,861
$ 47,783
$ (13,892) $ 33,891
(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.
28
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 was as follows:
(Dollars in thousands)
2017
2016
2015
2017 / 2016
2016 / 2015
Consumer real estate
$(12,318)
(18.0)% $ 9,304
14.1% $ 12,697
24.0% $(21,622)
N.M.
$ (3,393)
(26.7)%
Commercial
9,098
13.3
2,890
4.4
298
0.6
6,208
N.M.
2,592
N.M.
Year Ended December 31,
Change
Leasing and equipment
finance
Inventory finance
Auto finance
Other
Total
N.M. Not Meaningful.
10,067
1,367
56,712
3,517
14.7
2.0
82.9
5.1
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
2,361
30.6%
(3,173)
(69.9)
17,563
1,232
44.9
53.9
2,295
1,504
10,206
42.4
49.5
35.3
(274)
(10.7)
$ 68,443
100.0 % $ 65,874
100.0% $ 52,944
100.0% $ 2,569
3.9
$ 12,930
24.4
TCF's provision for credit losses was $68.4 million for 2017, compared with $65.9 million and $52.9 million for 2016
and 2015, respectively. The provision for credit losses increased $2.6 million, or 3.9%, in 2017 and $12.9 million, or
24.4%, in 2016. The increase in the provision for credit losses in 2017 was primarily due to increased provision for
credit losses related to the auto finance, commercial and leasing and equipment finance portfolios, partially offset by
a decrease in provision for credit losses related to the consumer real estate portfolio. The increase in the provision for
credit losses related to the auto finance portfolio was primarily due to increased net charge-offs and growth as a result
of the reclassification of loans from held for sale to held for investment. The increase in the provision for credit losses
related to the commercial and leasing and equipment finance portfolios was primarily due to increased net charge-
offs. The decrease in the provision for credit losses related to the consumer real estate portfolio was primarily due to
the recovery of $13.3 million on previous charge-offs related to the non-accrual loans that were sold in the first and
third quarters of 2017 and improving credit quality. The increase in the provision for credit losses in 2016 was primarily
due to the benefit from reduced reserves in 2015 (the allowance as a percent of total loans and leases was 0.90%
and 1.00% at December 31, 2015 and 2014, respectively) and growth in the overall loan and lease portfolio, partially
offset by decreased net charge-offs.
For further information, see "Consolidated Financial Condition Analysis — Credit Quality" in this Management's
Discussion and Analysis and Note 7. Allowance for Loan and Lease Losses and Credit Quality Information of Notes
to Consolidated Financial Statements.
29
Non-interest Income Non-interest income is a significant source of revenue for TCF, representing 32.6% of total
revenue for 2017, compared with 35.5% and 35.0% for 2016 and 2015, respectively, and is an important factor in
TCF's results of operations. Non-interest income was $448.3 million for 2017, compared with $465.9 million and
$442.0 million for 2016 and 2015, respectively. Non-interest income decreased $17.6 million, or 3.8%, in 2017 and
increased $23.9 million, or 5.4%, in 2016. The decrease in 2017 was primarily due to decreases in net gains on sales
of auto loans, net gains on sales of consumer real estate loans and fees and service charges, partially offset by an
increase in leasing and equipment finance non-interest income. The increase in 2016 was primarily due to increases
in leasing and equipment finance non-interest income, net gains on sales of consumer real estate loans, servicing fee
income and net gains on sales of auto loans, partially offset by a decrease in fees and service charges.
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
2017
2016
2015
2017 / 2016
2016 / 2015
$
131,887
$
137,664
$
144,999
(4.2)%
(5.1)%
55,732
19,624
207,243
5,460
37,327
41,347
84,134
145,039
11,646
448,062
237
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)
$
448,299
$
465,900
$
441,998
1.5
(4.0)
(2.7)
(84.3)
(26.0)
2.9
(32.9)
21.7
31.1
(3.9)
N.M.
(3.8)
0.9
(5.1)
(3.6)
13.9
23.1
28.7
22.1
10.2
(15.1)
5.5
(95.6)
5.4
Total non-interest income as a percentage of total revenue
32.6%
35.5%
35.0%
N.M. Not Meaningful.
Fees and Service Charges Fees and service charges totaled $131.9 million for 2017, compared with $137.7 million
and $145.0 million for 2016 and 2015, respectively. Fees and service charges decreased $5.8 million, or 4.2%, in 2017
and $7.3 million, or 5.1%, in 2016 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 $5.5 million for 2017, compared with
$34.8 million and $30.6 million for 2016 and 2015, respectively. Net gains on sales of auto loans decreased
$29.4 million, or 84.3%, in 2017 and increased $4.3 million, or 13.9%, in 2016. The decrease in 2017 was primarily
due to the strategic shift in auto finance. The increase in 2016 was primarily due to increased volume of loans sold,
partially offset by a strong competitive environment and challenging market conditions. TCF sold $424.7 million,
$2.1 billion and $1.3 billion of auto loans in 2017, 2016 and 2015, respectively. See Note 6. Loans and Leases of Notes
to Consolidated Financial Statements for further information.
Gains on Sales of Consumer Real Estate Loans, Net Net gains on sales of consumer real estate loans totaled
$37.3 million for 2017, compared with $50.4 million and $41.0 million for 2016 and 2015, respectively. Net gains on
sales of consumer real estate loans decreased $13.1 million, or 26.0%, in 2017 and increased $9.5 million, or 23.1%,
in 2016. The decrease in 2017 was primarily due to decreased volume of loans sold. The increase in 2016 was primarily
due to increased volume of loans sold. TCF sold $1.3 billion, $1.6 billion and $1.3 billion of consumer real estate loans
in 2017, 2016 and 2015, respectively. See Note 6. Loans and Leases of Notes to Consolidated Financial Statements
for further information.
30
Servicing Fee Income Servicing fee income totaled $41.3 million for 2017, compared with $40.2 million and $31.2 million
for 2016 and 2015, respectively. Of this amount, $33.6 million relates to auto finance loans serviced for others for 2017,
compared with $33.1 million and $24.1 million for 2016 and 2015, respectively, and $6.4 million relates to consumer
real estate loans serviced for others for 2017, compared with $5.4 million and $5.0 million for 2016 and 2015,
respectively. Servicing fee income increased $9.0 million, or 28.7%, in 2016 primarily due to the cumulative effect of
the increases in the portfolios of auto finance and consumer real estate loans sold with servicing retained by TCF.
Average auto finance loans serviced for others were $2.5 billion for 2017, compared with $2.6 billion and $2.0 billion
for 2016 and 2015, respectively. Average consumer real estate loans serviced for others were $2.4 billion for 2017,
compared with $2.0 billion and $1.6 billion for 2016 and 2015, respectively.
Leasing and Equipment Finance Leasing and equipment finance non-interest income totaled $145.0 million for 2017,
compared with $119.2 million and $108.1 million for 2016 and 2015, respectively. Leasing and equipment finance non-
interest income increased $25.9 million, or 21.7%, in 2017 and $11.0 million, or 10.2%, in 2016. The increase in 2017
was primarily due to an increase in operating lease revenue, mainly driven by the acquisition of Equipment Financing
& Leasing Corporation ("EFLC") in the second quarter of 2017 and portfolio growth. The increase in 2016 was primarily
due to higher operating lease and sales-type lease revenue.
Non-interest Expense Non-interest expense totaled $1.1 billion for 2017, compared with $909.9 million and
$894.7 million for 2016 and 2015, respectively. Non-interest expense increased $150.0 million, or 16.5%, in 2017 and
$15.1 million, or 1.7%, in 2016. The increase in 2017 was primarily due to increases in other non-interest expense,
operating lease depreciation, compensation and employee benefits expense, occupancy and equipment expense and
net foreclosed real estate and repossessed assets expense. The increase in 2016 was primarily due to increases in
compensation and employee benefits expense, occupancy and equipment expense and other non-interest expense,
partially offset by a decrease in net foreclosed real estate and repossessed assets expense.
The components of non-interest expense were as follows:
(Dollars in thousands)
2017
2016
2015
2017 / 2016
2016 / 2015
Compensation and employee benefits
$
483,235
$
474,722
$
457,743
1.8%
3.7%
Year Ended December 31,
Change
Occupancy and equipment
Other
Subtotal
Operating lease depreciation
Foreclosed real estate and repossessed assets, net
Other credit costs, net
Total non-interest expense
N.M. Not Meaningful.
156,909
345,456
985,600
55,901
17,756
677
149,980
231,420
856,122
40,359
13,187
219
144,962
229,255
831,960
39,409
23,193
185
$ 1,059,934
$
909,887
$
894,747
4.6
49.3
15.1
38.5
34.6
N.M.
16.5
3.5
0.9
2.9
2.4
(43.1)
18.4
1.7
Compensation and Employee Benefits Compensation and employee benefits expense totaled $483.2 million for 2017,
compared with $474.7 million and $457.7 million for 2016 and 2015, respectively. Compensation and employee benefits
expense increased $8.5 million, or 1.8%, in 2017 and $17.0 million, or 3.7%, in 2016. The increase in 2017 was primarily
due to higher enterprise services contract labor utilization, higher incentive compensation and one-time employee
bonuses, partially offset by reduced headcount in auto finance resulting in lower salaries and commissions. The increase
in 2016 was primarily due to higher commissions and incentives, partially offset by the annual pension plan valuation
adjustment.
Occupancy and Equipment Occupancy and equipment expense totaled $156.9 million for 2017, compared with
$150.0 million and $145.0 million for 2016 and 2015, respectively. Occupancy and equipment expense increased
$6.9 million, or 4.6%, in 2017 and $5.0 million, or 3.5%, in 2016. The increase in 2017 was primarily due to increased
software maintenance expense and ATM expenses, partially offset by lower repairs and maintenance. The increase
in 2016 was primarily due to increased depreciation and amortization expense and higher software maintenance
expense. Depreciation and amortization expense related to premises and equipment was $45.9 million, $44.9 million
and $40.8 million in 2017, 2016 and 2015, respectively.
31
Other Non-interest Expense Other non-interest expense totaled $345.5 million for 2017, compared with $231.4 million
and $229.3 million for 2016 and 2015, respectively. Other non-interest expense increased $114.0 million, or 49.3%,
in 2017 and $2.2 million, or 0.9%, in 2016. The increase in 2017 was primarily due to charges related to the
discontinuation of auto finance loan originations, including goodwill and other intangible assets impairment charges
of $73.4 million and severance, asset impairment and lease termination expenses of $14.8 million, increased
professional fees of $13.7 million driven by strategic investments in technology capabilities, a $6.3 million increase in
charitable contributions related to the additional donation to TCF Foundation of $5.0 million, a $5.2 million increase in
outside processing expense, a $4.7 million increase in advertising and marketing expense and a $2.5 million increase
in card processing expense, partially offset by a $4.0 million decrease in loan and lease processing expense and a
$3.0 million decrease in branch realignment expense. The increase in 2016 was primarily due to $3.9 million of branch
realignment expense related to the closure of two traditional branches and 50 supermarket branches, a $1.6 million
increase in loan and lease processing expense due to increases in loan and lease originations and a $1.0 million
increase in outside processing expense, partially offset by a $4.4 million decrease in Federal Deposit Insurance
Corporation ("FDIC") insurance expense due to a lower assessment rate. See Note 23. Other Non-interest Expense
of Notes to Consolidated Financial Statements for further information.
Operating Lease Depreciation Operating lease depreciation totaled $55.9 million for 2017, compared with $40.4 million
and $39.4 million for 2016 and 2015, respectively. Operating lease depreciation increased $15.5 million, or 38.5%, in
2017 primarily due to more transactions resulting in part from the acquisition of EFLC.
Foreclosed Real Estate and Repossessed Assets, Net Net foreclosed real estate and repossessed assets expense
totaled $17.8 million for 2017, compared with $13.2 million and $23.2 million for 2016 and 2015, respectively. Net
foreclosed real estate and repossessed assets expense increased $4.6 million, or 34.6%, in 2017 and decreased
$10.0 million, or 43.1%, in 2016. The increase in 2017 was due to higher repossessed assets expense primarily
attributable to auto finance and lower gains on sales of commercial properties, partially offset by lower operating costs
associated with maintaining fewer consumer properties. 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.
Income Taxes Income tax benefit was $33.6 million for 2017, compared with income tax expense of $116.5 million
and $108.9 million for 2016 and 2015, respectively. The income tax benefit for 2017 was impacted by an estimated
net tax benefit of $130.7 million primarily resulting from the re-measurement of the Company's estimated net deferred
tax liability as a result of the enactment of Tax Reform. See Note 2. Summary of Significant Accounting Policies and
Note 14. Income Taxes of Notes to Consolidated Financial Statements for further information.
32
Reportable Segment Results
The Company's reportable segments are Consumer Banking, Wholesale Banking and Enterprise Services. See Note
24. Business Segments of Notes to Consolidated Financial Statements for further 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 originate high credit quality
secured consumer real estate loans for investment and for sale and to generate deposits. Effective April 1, 2017, the
Company executed its strategic shift from an originate-to-sell and originate-to-hold model to an entirely originate-to-
hold model for its auto finance business and effective December 1, 2017, the Company discontinued auto finance loan
originations. TCF will continue to service existing auto loans on its balance sheet and those serviced for others. 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 $23.1 million for 2017, compared with
$124.0 million and $105.5 million for 2016 and 2015, respectively. Consumer Banking net income available to common
stockholders decreased $100.9 million, or 81.3%, in 2017 and increased $18.6 million, or 17.6%, in 2016.
Consumer Banking net interest income totaled $574.6 million for 2017, compared with $559.9 million and $536.7 million
for 2016 and 2015, respectively. Net interest income increased $14.8 million, or 2.6%, in 2017 and $23.1 million, or
4.3%, in 2016. The increase in 2017 was primarily due to an increase in interest income on loans and an increase in
funds transfer pricing credits, partially offset by a decrease in interest income on loans held for sale and an increase
in total interest expense. The increase in 2016 was primarily due to an increase in interest income related to funds
transfer pricing credits and an increase in interest income on loans held for sale, partially offset by an increase in total
interest expense.
Total interest income attributable to the Consumer Banking segment was $823.5 million for 2017, compared with
$796.1 million and $755.3 million for 2016 and 2015, respectively. Total interest income increased $27.4 million, or
3.4%, in 2017 and $40.7 million, or 5.4%, in 2016. The increase in total interest income in 2017 was primarily due to
higher average yields on auto finance loans and an increase in funds transfer pricing credits driven by deposits, partially
offset by lower average balances of consumer real estate loans. The increase in total interest income in 2016 was
primarily due to an increase in funds transfer pricing credits driven by an increase in deposits and higher average
balances of auto finance loans, partially offset by a decrease in interest income from consumer real estate first mortgage
lien loan balances due to run-off.
Total interest expense attributable to the Consumer Banking segment was $248.9 million for 2017, compared with
$236.2 million and $218.6 million for 2016 and 2015, respectively. Total interest expense increased $12.7 million, or
5.4%, in 2017 and $17.6 million, or 8.1%, in 2016. The increase in total interest expense in 2017 was primarily due to
an increase in interest expense on inter-company borrowings and an increase in funds transfer pricing charges.The
increase in total interest expense in 2016 was primarily due to higher interest expense on certificates of deposits due
to growth and higher rates paid as a result of special campaigns to fund loan growth.
Consumer Banking provision for credit losses totaled $48.2 million for 2017, compared with $50.8 million and
$44.3 million for 2016 and 2015, respectively. The provision for credit losses decreased $2.6 million, or 5.1%, in 2017
and increased $6.5 million, or 14.6%, in 2016. The decrease in the provision for credit losses in 2017 was primarily
due to a decreased provision for credit losses related to the consumer real estate portfolio, partially offset by an
increased provision for credit losses related to the auto finance portfolio. The decrease in the provision for credit losses
related to the consumer real estate portfolio was primarily due to the recovery of $13.3 million on previous charge-offs
related to the non-accrual loans that were sold in the first and third quarters of 2017 and improving credit quality. The
increase in the provision for credit losses related to the auto finance portfolio was primarily due to increased net charge-
offs and growth as a result of the reclassification of loans from held for sale to held for investment. 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 (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), partially offset by decreased net charge-offs.
33
Consumer Banking non-interest income totaled $290.0 million for 2017, compared with $337.0 million and
$320.4 million for 2016 and 2015, respectively. Non-interest income decreased $47.0 million, or 13.9%, in 2017 and
increased $16.6 million, or 5.2%, in 2016. The decrease in 2017 was primarily due to decreases in net gains on sales
of auto loans, net gains on sales of consumer real estate loans and fees and service charges. The increase in 2016
was primarily due to increases in net gains on sales of consumer real estate loans, net gains on sales of auto loans
and servicing fee income, partially offset by a decrease in fees and service charges.
Fees and service charges attributable to the Consumer Banking segment totaled $121.7 million for 2017, compared
with $130.5 million and $138.7 million for 2016 and 2015, respectively. Fees and service charges decreased $8.8 million,
or 6.8%, in 2017 and $8.1 million, or 5.9%, in 2016, 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 $5.5 million for 2017, compared with $34.8 million and $30.6 million for 2016
and 2015, respectively. Net gains on sales of auto loans decreased $29.4 million, or 84.3%, in 2017 and increased
$4.3 million, or 13.9%, in 2016. The decrease in 2017 was due to the strategic shift in auto finance. The increase in
2016 was primarily due to increased volume of loans sold, partially offset by a strong competitive environment and
challenging market conditions.
Net gains on sales of consumer real estate loans totaled $37.3 million for 2017, compared with $50.4 million and
$41.0 million for 2016 and 2015, respectively. Net gains on sales of consumer real estate loans decreased $13.0 million,
or 25.9%, in 2017 and increased $9.4 million, or 23.0%, in 2016. The decrease in 2017 was primarily due to decreased
volume of loans sold. The increase in 2016 was primarily due to increased volume of loans sold.
Servicing fee income attributable to the Consumer Banking segment totaled $40.0 million for 2017, compared with
$38.6 million and $29.0 million for 2016 and 2015, respectively. Of this amount, $33.6 million relates to auto finance
loans serviced for others for 2017, compared with $33.1 million and $24.1 million for 2016 and 2015, respectively, and
$6.4 million relates to consumer real estate loans serviced for others for 2017, compared with $5.4 million and
$5.0 million for 2016 and 2015, respectively. Servicing fee income increased $9.5 million, or 32.9%, in 2016 due to
the cumulative effect of the increases in the portfolios of auto finance and consumer real estate loans sold with servicing
retained by TCF. Average auto finance loans serviced for others were $2.5 billion for 2017, compared with $2.6 billion
and $2.0 billion for 2016 and 2015, respectively. Average consumer real estate loans serviced for others were $2.4 billion
for 2017, compared with $2.0 billion and $1.6 billion for 2016 and 2015, respectively.
Consumer Banking non-interest expense totaled $743.7 million for 2017, compared with $652.5 million and
$645.9 million for 2016 and 2015, respectively. Non-interest expense increased $91.3 million, or 14.0%, in 2017 and
$6.5 million, or 1.0%, in 2016. The increase in 2017 was primarily due to charges related to the discontinuation of auto
finance loan originations, including goodwill and other intangible asset impairment charges and severance, asset
impairment and lease termination expenses, as well as increases in occupancy and equipment expense, allocation
expense from Enterprise Services, advertising and marketing expense, net foreclosed real estate and repossessed
assets expense and card processing expense. These increases were partially offset by a decrease in compensation
and employee benefits expense attributable to reduced headcount in auto finance resulting in lower salaries and
commissions, a decrease in branch realignment expense and a decrease in loan processing expense. 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 50 supermarket branches. These increases were partially offset
by a decrease in net foreclosed real estate and repossessed assets expense 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.
34
Wholesale Banking
Wholesale Banking is comprised of commercial 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 $278.4 million for 2017, compared
with $130.0 million and $127.3 million for 2016 and 2015, respectively. Wholesale Banking net income available to
common stockholders increased $148.4 million, or 114.2%, in 2017 and $2.6 million, or 2.1%, in 2016.
Wholesale Banking net interest income totaled $359.3 million for 2017, compared with $343.7 million and $339.9 million
for 2016 and 2015, respectively. Net interest income increased $15.6 million, or 4.5%, in 2017 and $3.7 million, or
1.1%, in 2016. The increases in both periods were primarily due to increases in interest income on loans and leases,
partially offset by increases in total interest expense.
Total interest income attributable to the Wholesale Banking segment was $552.8 million for 2017, compared with
$479.6 million and $452.8 million for 2016 and 2015, respectively. Total interest income increased $73.2 million, or
15.3%, in 2017 and $26.8 million, or 5.9%, in 2016. The increase in total interest income in 2017 was primarily due to
higher average balances and increased average yields on commercial and inventory finance loans and higher average
balances of leasing and equipment finance loans and leases. The increase in total interest income in 2016 was primarily
due to higher average loan and lease balances in the leasing and equipment finance and inventory finance portfolios.
Total interest expense attributable to the Wholesale Banking segment was $193.5 million for 2017, compared with
$135.9 million and $112.9 million for 2016 and 2015, respectively. Total interest expense increased $57.6 million, or
42.4%, in 2017 and $23.1 million, or 20.4%, in 2016. The increase in total interest expense in 2017 was primarily due
to higher funds transfer pricing charges driven by an increase in loans and leases and an increase in interest expense
on inter-company borrowings. The increase in total interest expense in 2016 was primarily due to higher funds transfer
pricing charges driven by a combination of higher average loan and lease balances and an increase in funds transfer
pricing rates.
Wholesale Banking provision for credit losses totaled $20.2 million for 2017, compared with $15.1 million and
$8.6 million for 2016 and 2015, respectively. The provision for credit losses increased $5.2 million, or 34.3%, in 2017
and $6.4 million, or 74.7%, in 2016. The increase in 2017 was primarily due to increased net charge-offs in the
commercial and leasing and equipment finance portfolios, partially offset by lower reserve requirements in the inventory
finance portfolio. The increase in 2016 was primarily due to increased reserve requirements related to overall growth
in the Wholesale Banking loan and lease portfolio.
Wholesale Banking non-interest income totaled $158.0 million for 2017, compared with $128.9 million and
$119.8 million for 2016 and 2015, respectively. Non-interest income increased $29.1 million, or 22.6%, in 2017 and
$9.1 million, or 7.6%, in 2016. The increase in 2017 was primarily due to an increase in leasing and equipment finance
non-interest income due to an increase in operating lease revenue, mainly driven by the acquisition of EFLC in the
second quarter of 2017 and portfolio growth. The increase in 2016 was primarily due to an increase in leasing and
equipment finance non-interest income due to higher operating lease and sales-type lease revenue.
Wholesale Banking non-interest expense totaled $277.4 million for 2017, compared with $247.1 million and
$244.9 million for 2016 and 2015, respectively. Non-interest expense increased $30.3 million, or 12.3%, in 2017 and
$2.2 million, or 0.9%, in 2016. The increase in 2017 was primarily due to an increase in operating lease depreciation
primarily attributable to more transactions resulting in part from the acquisition of EFLC and an increase in occupancy
and equipment expense. 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 foreclosed real estate and repossessed assets expense 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.
35
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
capital management, 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 $58.5 million for 2017, compared with
$61.3 million and $55.1 million for 2016 and 2015, respectively. Enterprise Services net loss available to common
stockholders decreased $2.7 million, or 4.5%, in 2017 and increased $6.2 million, or 11.2%, in 2016.
Enterprise Services net interest expense totaled $8.7 million for 2017, compared with $55.4 million and $56.3 million
for 2016 and 2015, respectively. Net interest expense decreased $46.7 million, or 84.4%, in 2017 and $0.9 million, or
1.5%, in 2016. The decrease in 2017 was primarily driven by a decrease in funds transfer pricing mismatches as a
result of rising interest rates and an increase in interest income attributable to higher average balances of securities
available for sale, partially offset by an increase in interest expense primarily due to higher average balances of long-
term borrowings and higher interest expense on deposits. 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.
Enterprise Services non-interest income totaled $0.3 million for 2017, compared with $28.0 thousand and $1.8 million
for 2016 and 2015, respectively. Non-interest income decreased $1.8 million, or 98.5%, in 2016 primarily due to a gain
of $1.7 million related to appreciation of an investment that was donated to TCF Foundation in the first quarter of 2015.
Enterprise Services non-interest expense totaled $38.8 million for 2017, compared with $10.3 million and $3.9 million
for 2016 and 2015, respectively. Non-interest expense increased $28.5 million, or 276.0%, in 2017 and $6.4 million,
or 165.3%, in 2016. The increase in 2017 was primarily due to higher compensation and employee benefits expense
due to higher contract labor utilization, higher incentive compensation and one-time employee bonuses, as well as
higher professional fees related to strategic investments in technology capabilities and higher contribution expense
related to the additional donation to TCF Foundation of $5.0 million. These increases were partially offset by a decrease
in occupancy and equipment expense. 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.
Consolidated Financial Condition Analysis
Securities Available for Sale and Securities Held to Maturity Total securities available for sale were $1.7 billion
at December 31, 2017, an increase of $285.6 million, or 20.1%, from $1.4 billion at December 31, 2016. 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. The increase in securities
available for sale was primarily due to purchases of obligations of states and political subdivisions and fixed-rate
mortgage-backed securities, partially offset by proceeds from maturities and principal collected on fixed-rate mortgage-
backed securities. 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. There were no sales of securities available
for sale during 2017 or 2016. In 2015, TCF sold $0.2 million of securities available for sale.
Total securities held to maturity were $161.6 million at December 31, 2017, a decrease of $19.7 million, or 10.9%,
from $181.3 million at December 31, 2016. TCF's securities held to maturity portfolio consists primarily of fixed-rate
mortgage-backed securities issued by Fannie Mae. The decrease in securities held to maturity was primarily due to
proceeds from maturities and principal collected on fixed-rate mortgage-backed securities.
36
The amortized cost, fair value and fully tax-equivalent yield 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.
2017
At December 31,
2016
2015
Amortized
Cost
Fair Value
Tax-
equivalent
Yield
Amortized
Cost
Fair Value
Tax-
equivalent
Yield
Amortized
Cost
Fair Value
Tax-
equivalent
Yield
(Dollars in thousands)
Securities available
for sale:
Mortgage-backed
securities:
Due in one year
or less
$
Due in 1-5 years
$
6
—
6
—
Due in 5-10 years
82,842
82,046
Due after 10
years
Obligations of
states and political
subdivisions:
825,347
812,639
Due in 1-5 years
15,178
15,312
Due in 5-10 years
431,494
435,821
363,487
363,194
—
2.04
2.32
2.97
3.14
3.29
1.98% $
1
$
8.02% $
1
$
18
1
18
38
1
38
54,202
54,429
70,338
70,350
2.28
1.93
773,519
756,461
2.25
557,178
551,575
—
—
277,228
274,576
351,744
337,950
—
3.13
3.20
—
—
198,300
202,161
63,889
64,760
9.00%
2.65
1.93
2.46
—
3.19
3.40
Due after 10
years
Total securities
available for
sale
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
Total securities
held to
maturity
$1,718,354
$1,709,018
2.72
$1,456,712
$1,423,435
2.63
$ 889,744
$ 888,885
2.65
$ 158,776
$ 162,826
2.55% $ 178,514
$ 181,146
2.54% $ 198,520
$ 203,553
2.64%
1,000
1,400
400
1,000
1,400
400
3.00
3.21
3.00
—
1,400
1,400
—
1,400
1,400
—
2.86
3.36
100
1,900
1,400
100
1,900
1,400
2.00
2.63
3.36
$ 161,576
$ 165,626
2.56
$ 181,314
$ 183,946
2.55
$ 201,920
$ 206,953
2.64
See Note 5. Securities Available for Sale and Securities Held to Maturity of Notes to Consolidated Financial Statements
for further information regarding TCF's securities available for sale and securities held to maturity.
37
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
2017
2016
2015
2014
2013
2017 / 2016
2017 / 2012
(Dollars in thousands)
Consumer real estate:
First mortgage lien
$ 1,959,387
$ 2,292,596
$ 2,624,956
$ 3,139,152
$ 3,766,421
(14.5)%
(14.3)%
Junior lien
2,860,309
2,791,756
2,839,316
2,543,212
2,572,905
Total consumer real estate
4,819,696
5,084,352
5,464,272
5,682,364
6,339,326
Commercial:
Commercial real estate
2,751,285
2,634,191
2,593,429
2,624,255
2,743,697
Commercial business
809,908
652,287
552,403
533,410
404,655
Total commercial
3,561,193
3,286,478
3,145,832
3,157,665
3,148,352
Leasing and equipment finance
4,761,661
4,336,310
4,012,248
3,745,322
3,428,755
Inventory finance
2,739,754
2,470,175
2,146,754
1,877,090
1,664,377
Auto finance
Other
3,199,639
2,647,741
2,647,596
1,915,061
1,239,386
22,517
18,771
19,297
24,144
26,743
Total loans and leases
$ 19,104,460
$ 17,843,827
$ 17,435,999
$ 16,401,646
$ 15,846,939
2.5
(5.2)
4.4
24.2
8.4
9.8
10.9
20.8
20.0
7.1
3.3
(6.3)
(2.2)
20.1
0.9
8.3
11.8
42.1
(4.2)
4.4
(In thousands)
Geographic Distribution:
California
Minnesota
Illinois
Michigan
Texas
Florida
Wisconsin
New York
Colorado
Georgia
Ohio
Canada
Pennsylvania
Arizona
North Carolina
New Jersey
Washington
Massachusetts
Indiana
Oregon
Virginia
Missouri
Tennessee
Other
Total
Consumer
Real Estate
Commercial
Leasing and
Equipment
Finance
Inventory
Finance
Auto
Finance
Other
Total
At December 31, 2017
$ 1,027,903
$
192,526
$
647,979
$
107,390
$
517,942
$
11
$ 2,493,751
977,861
1,061,955
405,219
—
171,210
196,433
39,188
219,665
46,427
8,058
—
40,710
99,854
8,514
52,304
118,695
41,336
17,177
86,528
22,673
7,427
3,458
814,106
479,728
548,340
95,858
162,622
375,955
34,174
207,784
82,174
63,397
—
23,709
34,556
21,157
14,106
16,736
28,543
56,698
47,996
2,258
68,141
16,017
111,025
199,038
157,767
442,212
245,290
68,515
266,155
85,513
134,510
170,093
1,256
166,981
141,965
159,858
164,719
90,319
119,480
96,042
56,510
96,180
67,572
87,652
98,586
64,778
111,062
165,785
147,762
93,329
87,339
37,288
75,845
100,003
438,603
87,410
34,244
77,729
28,644
39,779
18,974
61,879
43,051
38,571
57,857
55,209
46,848
117,631
51,657
296,243
196,250
24,655
179,782
49,852
111,349
99,023
—
111,508
94,163
118,039
101,964
31,023
70,649
40,458
22,679
86,302
36,785
67,913
4,936
6,519
5,659
10
38
1,019
43
3,655
1
—
—
68
379
1
2
4
1
11
—
—
—
—
2,053,362
1,929,649
1,279,704
1,000,108
923,172
759,906
606,681
603,757
450,306
440,574
439,859
430,386
405,161
385,298
361,739
296,556
278,983
272,265
256,764
245,984
237,782
230,249
167,101
174,612
985,030
668,637
726,924
160
2,722,464
$ 4,819,696
$ 3,561,193
$ 4,761,661
$ 2,739,754
$ 3,199,639
$
22,517
$ 19,104,460
38
The contractual maturities of loans and leases outstanding were as follows:
Consumer
Real Estate
Commercial
Leasing and
Equipment
Finance
Inventory
Finance
Auto
Finance
Other
Total
At December 31, 2017(1)
$
108,468
$
645,608
$ 1,591,494
$ 2,739,754
$
770,968
$
10,681
$ 5,866,973
424,792
2,427,694
3,050,354
4,286,436
487,891
119,813
—
—
2,336,493
92,178
5,213
6,623
8,244,546
4,992,941
$ 4,819,696
$ 3,561,193
$ 4,761,661
$ 2,739,754
$ 3,199,639
$
22,517
$ 19,104,460
(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
$ 1,738,321
$
731,804
$ 3,160,076
$
— $ 2,428,671
$
11,683
$ 8,070,555
Variable- and adjustable-rate
loans and leases
2,972,907
2,183,781
10,091
—
—
153
5,166,932
Total after 1 year
$ 4,711,228
$ 2,915,585
$ 3,170,167
$
— $ 2,428,671
$
11,836
$ 13,237,487
(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 25.2% and 28.5% of TCF's total loan and
lease portfolio at December 31, 2017 and 2016, respectively. The consumer real estate portfolio is secured by
mortgages on residential real estate and consisted of $2.0 billion of first mortgage lien loans and $2.9 billion of junior
lien loans, with a decrease of $333.2 million, or 14.5%, in the first mortgage lien portfolio and an increase of $68.6 million,
or 2.5%, in the junior lien portfolio, from $2.3 billion and $2.8 billion at December 31, 2016, respectively. The decrease
in the consumer real estate first mortgage lien portfolio was primarily due to run-off and the non-accrual loan sales of
$71.2 million during the first and third quarters of 2017. The increase in the junior lien portfolio was primarily due to
the purchase of a loan portfolio of $175.4 million on September 27, 2017. The average loan size was $99 thousand
for first mortgage lien loans and $48 thousand for junior lien loans at December 31, 2017, compared with $100 thousand
and $47 thousand at December 31, 2016, respectively. Loans are originated for investment and for sale. Total consumer
real estate originations were $2.3 billion in 2017, a decrease of $299.0 million, or 11.6%, from $2.6 billion in 2016. TCF
sold $1.3 billion and $1.6 billion of consumer real estate loans in 2017 and 2016, respectively. At December 31, 2017
and 2016, 61.5% and 68.1%, respectively, of the consumer real estate portfolio were in TCF's primary banking markets.
At December 31, 2017 and 2016, 62.2% and 58.0%, respectively, of the consumer real estate portfolio carried a variable
or adjustable rate generally tied to the prime rate. At December 31, 2017 and 2016, 42.2% and 47.3%, 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 738 and 735 at December 31, 2017 and 2016, 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 736 and 733 at December 31, 2017 and 2016, 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, 2017, 68.3% of the consumer real estate portfolio had
been originated since January 1, 2009 with net recoveries of 0.01% in 2017. 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 $2.7 billion of home equity lines of credit ("HELOCs")
and $206.2 million of amortizing consumer real estate junior lien mortgage loans at December 31, 2017, compared
with $2.5 billion and $272.9 million at December 31, 2016, respectively. At December 31, 2017 and 2016, $2.3 billion
and $2.0 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, 2017 and 2016, $400.4 million and $525.4 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 five to 40 years. As of December 31, 2017, 16.2% of these loans
mature prior to 2021. Outstanding balances on consumer real estate lines of credit were 66.9% of total lines of credit
at December 31, 2017, compared with 67.1% at December 31, 2016.
39
Commercial TCF's commercial portfolio represented 18.6% and 18.4% of TCF's total loan and lease portfolio at
December 31, 2017 and 2016, respectively. The commercial portfolio consisted of $2.8 billion of commercial real estate
loans and $809.9 million of commercial business loans at December 31, 2017, with increases of $117.1 million, or
from $2.6 billion and $652.3 million, respectively, at
4.4%, and $157.6 million, or 24.2%, respectively,
December 31, 2016. The increase in the commercial portfolio was primarily due to originations outpacing lower
prepayments and pay-offs. Total commercial originations were $2.1 billion in 2017, an increase of $183.2 million, or
9.7%, from $1.9 billion in 2016. At December 31, 2017 and 2016, 74.7% and 77.8%, 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, 2017 and 2016. At
December 31, 2017 and 2016, variable- and adjustable-rate loans represented 73.5% and 69.0%, 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
Office buildings
Warehouse/industrial buildings
Health care facilities
Self-storage
Retail services(1)
Hotels and motels
Other
Total
At December 31,
2017
Construction
and
Development
Permanent
Total
Permanent
2016
Construction
and
Development
Total
$
791,201
$
178,517
$
969,718
$
718,562
$
152,693
$
871,255
305,853
309,804
262,889
246,369
251,903
199,336
18,397
56,177
4,795
34,632
44,676
5,052
41,176
508
362,030
314,599
297,521
291,045
256,955
240,512
18,905
321,970
362,092
326,536
184,543
292,036
117,312
33,236
22,058
3,156
37,372
29,771
3,662
25,739
3,453
344,028
365,248
363,908
214,314
295,698
143,051
36,689
$
2,385,752
$
365,533
$
2,751,285
$
2,356,287
$
277,904
$
2,634,191
(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 24.9% and 24.3% of
TCF's total loan and lease portfolio at December 31, 2017 and 2016, respectively. The leasing and equipment finance
portfolio consisted of $2.5 billion of leases and $2.3 billion of loans at December 31, 2017, with increases of
$141.6 million, or 6.1%, and $283.8 million, or 14.1%, respectively, from $2.3 billion of leases and $2.0 billion of loans
at December 31, 2016. The increase in the leasing and equipment finance portfolio was primarily due to a loan and
lease portfolio purchase of $445.5 million on September 29, 2017. Leasing and equipment finance originations
(excluding loan and lease purchases) were $2.0 billion in 2017, a decrease of $177.8 million, or 8.3%, from $2.1 billion
in 2016. Leasing and equipment finance originations include operating lease originations. The uninstalled backlog of
approved transactions was $506.4 million and $453.6 million at December 31, 2017 and 2016, respectively. The
average loan and lease size was $77 thousand at both December 31, 2017 and 2016. See Note 2. Summary of
Significant Accounting Policies of Notes to Consolidated Financial Statements for further information on lease
accounting.
At December 31, 2017 and 2016, $119.5 million and $140.1 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, 2017, lease residuals totaled
$139.9 million, or 9.7% of original equipment value, including $6.2 million related to non-recourse sales, compared
with $123.4 million, or 10.0% of original equipment value, including $7.5 million related to non-recourse sales at
December 31, 2016.
40
TCF's leasing and equipment finance portfolio by equipment type was as follows:
(Dollars in thousands)
Specialty vehicles
Construction equipment
Manufacturing equipment
Golf cart and turf equipment
Trucks and trailers
Medical equipment
Furniture and fixtures
Technology and data processing equipment
Agricultural equipment
Other
Total
At December 31,
2017
2016
Balance
Percent
of Total
Balance
Percent
of Total
$
1,403,142
29.5% $
1,252,951
548,575
472,902
431,888
367,206
335,636
334,732
290,999
148,269
428,312
11.5
9.9
9.1
7.7
7.1
7.0
6.1
3.1
9.0
483,231
300,368
429,382
271,870
336,566
384,975
321,562
149,192
406,213
28.9%
11.1
6.9
9.9
6.3
7.8
8.9
7.4
3.4
9.4
$
4,761,661
100.0% $
4,336,310
100.0%
Inventory Finance TCF's inventory finance portfolio represented 14.3% and 13.8% of TCF's total loan and lease
portfolio at December 31, 2017 and 2016, respectively. The inventory finance portfolio totaled $2.7 billion at
December 31, 2017, an increase of $269.6 million, or 10.9%, from $2.5 billion at December 31, 2016. The increase
was primarily due to strong originations and the expansion in the number of active dealers. Inventory finance originations
were $7.4 billion in 2017, an increase of $721.2 million, or 10.8%, from $6.7 billion in 2016. Origination levels are
impacted by the velocity of fundings and repayments with dealers. TCF's inventory finance customers included more
than 10,900 and 10,800 active dealers at December 31, 2017 and 2016, respectively.
TCF's inventory finance portfolio by marketing segment was as follows:
(Dollars in thousands)
Powersports
Lawn and garden
Other
Total
At December 31,
2017
2016
Balance
Percent
of Total
Balance
Percent
of Total
$
1,187,049
43.3% $
1,143,226
606,173
946,532
22.1
34.6
567,452
759,497
46.3%
23.0
30.7
$
2,739,754
100.0% $
2,470,175
100.0%
Auto Finance TCF's auto finance portfolio represented 16.7% and 14.8% of TCF's total loan and lease portfolio at
December 31, 2017 and 2016, respectively. The auto finance portfolio totaled $3.2 billion at December 31, 2017, an
increase of $551.9 million, or 20.8%, from $2.6 billion at December 31, 2016. The increase was primarily due to the
strategic shift from an originate-to-sell and originate-to-hold model to an entirely originate-to-hold model effective April
1, 2017 resulting in the reclassification of approximately $345 million of loans from held for sale to held for investment
during the second quarter of 2017. Prior to April 1, 2017, loans were originated for investment and for sale. Total auto
finance originations were $2.2 billion in 2017, a decrease of $1.4 billion, or 38.3%, from $3.6 billion in 2016 primarily
due to the strategic shift in auto finance and the discontinuation of auto finance loan originations effective December
1, 2017. TCF sold $424.7 million and $2.1 billion of auto finance loans in 2017 and 2016, respectively. The auto finance
portfolio consisted of 19.9% new auto loans and 80.1% used auto loans at December 31, 2017, compared with 23.3%
and 76.7%, respectively, at December 31, 2016. The average original FICO score for the auto finance held for
investment portfolio was 715 and 733 at December 31, 2017 and 2016, respectively. The decrease in the average
original FICO score was primarily due to the implementation of the strategic shift.
41
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.
Troubled debt restructuring ("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 estimated
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 2. Summary of Significant Accounting Policies and in Note 7. 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 on 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 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 estimated selling costs. Impaired loans include
non-accrual commercial, equipment finance and 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 7. Allowance for Loan and Lease Losses and Credit Quality Information of Notes to Consolidated Financial
Statements for further information.
(Dollars in thousands)
Consumer real estate:
60 Days or More Delinquent and Accruing
Percentage of Period-end Loans and Leases(1)
At December 31,
At December 31,
2017
2016
2015
2014
2013
2017
2016
2015
2014
2013
First mortgage lien
$ 4,666
$ 8,725
$ 11,565
$ 13,370
$ 20,894
0.25% 0.40% 0.46% 0.49% 0.58%
Junior lien
Total consumer real estate
Commercial
Leasing and equipment finance
Inventory finance
Auto finance
Other
Subtotal
Portfolios acquired with
deteriorated credit quality
1,268
5,934
1
6,389
208
9,077
9
1,404
1,519
2,091
3,532
10,129
13,084
15,461
24,426
—
4,523
55
6,102
20
1
2,292
118
3,573
20
—
2,549
75
1,430
2,401
50
4,263
1,877
—
10
21,618
20,829
19,088
22,348
30,194
0.04
0.13
—
0.14
0.01
0.28
0.04
0.11
1,561
—
1
88
458
13.18
Total
$ 23,179
$ 20,829
$ 19,089
$ 22,436
$ 30,652
0.12
0.05
0.21
—
0.10
—
0.23
0.10
0.12
—
0.12
0.05
0.25
—
0.06
0.01
0.14
0.10
0.11
0.43
0.11
0.08
0.30
—
0.07
—
0.22
—
0.14
0.03
0.14
0.14
0.40
0.05
0.07
—
0.15
0.04
0.19
1.64
0.20
(1)
Excludes non-accrual loans and leases.
42
Loan Modifications TDR loans were as follows:
(Dollars in thousands)
Accruing TDR Loans:
Consumer real estate
Commercial
Leasing and equipment finance
Inventory finance
Auto finance
Other
Total
Non-accrual TDR Loans:
Consumer real estate
Commercial
Leasing and equipment finance
Inventory finance
Auto finance
Other
Total
Total TDR loans:
Consumer real estate
Commercial
Leasing and equipment finance
Inventory finance
Auto finance
Other
Total
2017
2016
2015
2014
2013
At December 31,
$
88,092
$
98,606
$ 106,787
$ 111,933
$ 506,640
12,249
10,263
—
3,464
3
20,304
4,802
—
2,323
6
24,731
2,904
51
799
11
80,375
120,871
924
527
—
89
1,021
4,212
—
93
$ 114,071
$ 126,041
$ 135,283
$ 193,848
$ 632,837
$
34,282
$
71,961
$
79,055
$
87,685
$ 134,487
83
1,413
476
5,351
1
2,170
1,350
357
5,504
—
7,016
641
172
8,440
—
11,265
1,953
37
3,676
—
26,209
2,447
—
470
1
$
41,606
$
81,342
$
95,324
$ 104,616
$ 163,614
$ 122,374
$ 170,567
$ 185,842
$ 199,618
$ 641,127
12,332
11,676
476
8,815
4
22,474
31,747
91,640
147,080
6,152
357
7,827
6
3,545
223
9,239
11
2,877
564
3,676
89
3,468
4,212
470
94
$ 155,677
$ 207,383
$ 230,607
$ 298,464
$ 796,451
Over 60-day delinquent accruing TDR loans as a percentage of total
accruing TDR loans
0.36%
1.19%
1.54%
1.39%
1.28%
Total TDR loans were $155.7 million at December 31, 2017, a decrease of $51.7 million, or 24.9%, from $207.4 million
at December 31, 2016. Accruing TDR loans were $114.1 million at December 31, 2017, a decrease of $12.0 million,
or 9.5%, from $126.0 million at December 31, 2016. The decrease in accruing TDR loans was primarily due to a
$10.5 million decrease in consumer real estate accruing TDR loans driven by payoffs and the transfer of loans to non-
accrual status and an $8.1 million decrease in commercial accruing TDR loans driven by the transfer of loans to non-
accrual status and payoffs. These decreases were partially offset by a $5.5 million increase in leasing and equipment
finance accruing TDR loans. Non-accrual TDR loans were $41.6 million at December 31, 2017, a decrease of
$39.7 million, or 48.9%, from $81.3 million at December 31, 2016. The decrease was primarily due to a $37.7 million
decrease in consumer real estate non-accrual TDR loans driven by the non-accrual loan sales in the first and third
quarters of 2017.
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.
43
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, 2017, 72.0% 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 2017, yielding 4.2%, by modifying the loans to qualified customers instead
of foreclosing on the property. At December 31, 2017, collection of principal and interest under the modified terms was
reasonably assured on all accruing consumer real estate TDR loans. TDR loans for the remaining classes of financing
receivables were not material at December 31, 2017.
See Note 7. Allowance for Loan and Lease Losses and Credit Quality Information of Notes to Consolidated Financial
Statements for further 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
2017
2016
2015
2014
2013
At December 31,
$ 61,950
$ 106,125
$ 124,156
$ 137,790
$ 180,811
21,274
83,224
6,785
—
6,785
17,089
4,116
7,366
2
46,346
152,471
44,113
168,269
35,481
173,271
38,222
219,033
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
Total non-accrual loans and leases
118,582
181,445
200,466
216,734
277,022
Other real estate owned:
Consumer real estate
Commercial real estate
Total other real estate owned
17,907
318
18,225
34,070
12,727
46,797
42,912
7,070
49,982
44,932
20,718
65,650
47,637
21,237
68,874
Total non-accrual loans and leases and other real estate owned $ 136,807
$ 228,242
$ 250,448
$ 282,384
$ 345,896
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
0.62%
1.02%
1.15%
1.32%
1.75%
0.72
1.28
1.43
1.71
2.17
144.24
88.33
77.85
75.75
91.05
Non-accrual loans and leases were $118.6 million at December 31, 2017, a decrease of $62.9 million, or 34.6%, from
$181.4 million at December 31, 2016. The decrease was primarily due to the consumer real estate non-accrual loan
sales of $71.2 million in the first and third quarters of 2017, partially offset by an increase in leasing and equipment
finance non-accrual loans and leases. Other real estate owned was $18.2 million at December 31, 2017, a decrease
of $28.6 million, or 61.1%, from $46.8 million at December 31, 2016. The decrease was primarily due to the sales of
consumer real estate properties outpacing additions and sales of commercial real estate properties. See Note 2.
Summary of Significant Accounting Policies and Note 7. Allowance for Loan and Lease Losses and Credit Quality
Information of Notes to Consolidated Financial Statements for further information.
44
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. For purposes of this disclosure, purchased credit impaired loans have been excluded.
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 were as follows:
(In thousands)
Consumer
Real Estate
Commercial
Leasing and
Equipment
Finance
Inventory
Finance
Auto
Finance
Other
Total
Balance, beginning of period
$
152,471
$
5,919
$
10,880
$
5,134
$
7,038
$
3
$
181,445
At or For the Year Ended December 31, 2017
Additions
(Charge-offs) recoveries
Transfers to other assets
Return to accrual status
Payments received
Sales
Other, net
64,540
(7,313)
(26,830)
(8,111)
(20,576)
(72,448)
1,491
16,726
(5,428)
(100)
—
(6,088)
(4,284)
40
28,779
(8,175)
(5,951)
(292)
(8,152)
—
—
9,950
(1,588)
(1,858)
(3,011)
(4,539)
—
28
9,730
(2,281)
(1,776)
—
81
2
—
—
(5,345)
(84)
—
—
—
—
2
129,806
(24,783)
(36,515)
(11,414)
(44,784)
(76,732)
1,559
$
118,582
Balance, end of period
$
83,224
$
6,785
$
17,089
$
4,116
$
7,366
$
(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
Loan and Lease Credit Classifications TCF assesses the risk of its loan and lease portfolio utilizing numerous risk
characteristics as outlined in the previous sections. Loan and lease credit classifications are an additional characteristic
monitored in the overall credit risk process. Loan and lease 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.
45
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, 2017
Pass
Special Mention
Substandard
Doubtful
Total
$
4,706,493
$
22,075
$
91,128
$
— $
4,819,696
3,452,837
4,681,488
2,553,028
3,180,807
22,507
42,729
40,252
116,312
551
—
65,627
39,921
70,414
18,281
10
—
—
—
—
—
3,561,193
4,761,661
2,739,754
3,199,639
22,517
Total loans and leases
$
18,597,160
$
221,919
$
285,381
$
— $
19,104,460
(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
Total classified loans and leases were $285.4 million and $411.8 million at December 31, 2017 and 2016, respectively.
The decrease of $126.4 million, or 30.7%, from December 31, 2016 was primarily due to decreases in classified
inventory finance and consumer real estate loans, partially offset by increases in classified commercial loans and
classified leasing and equipment finance loans and leases. The decrease in classified inventory finance loans was
due to enhancements made to the model used to determine the classifications of loans in the first quarter of 2017 that
better align with the inherent risk in this portfolio. The decrease in classified consumer real estate loans was a result
of the non-accrual loan sales in the first and third quarters of 2017.
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 on 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 $171.0 million appropriate to cover losses incurred
in the loan and lease portfolios at December 31, 2017. 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, a decline in collateral values and/or rising interest rates 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.
46
In conjunction with Note 7. 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,
2017
2016
2015
2014
2013
2017
2016
2015
2014
2013
(Dollars in thousands)
Consumer real estate:
First mortgage lien
$ 26,698
$ 33,828
$ 36,888
$ 55,319
$ 133,009
1.36%
1.48%
1.41%
1.76%
3.53%
Junior lien
Consumer real estate
Commercial:
Commercial real estate
Commercial business
Total commercial
Leasing and equipment
finance
Inventory finance
Auto finance
Other
Total allowance for loan
and lease losses
Other credit loss reserves:
Reserves for unfunded
commitments
Total credit loss
reserves
N.A. Not Applicable.
20,470
47,168
25,620
59,448
31,104
67,992
30,042
43,021
85,361
176,030
24,842
12,353
37,195
22,528
13,233
50,225
692
22,785
22,215
24,616
32,405
9,910
7,970
6,751
5,062
32,695
30,185
31,367
37,467
21,350
13,932
32,310
534
19,018
11,128
26,486
1,245
18,446
10,020
18,230
745
18,733
8,592
10,623
785
0.72
0.98
0.90
1.53
1.04
0.47
0.48
1.57
3.07
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
171,041
160,269
156,054
164,169
252,230
0.90
0.90
0.90
1.00
1.59
1,479
1,115
1,044
943
980
N.A.
N.A.
N.A.
N.A.
N.A.
$ 172,520
$ 161,384
$ 157,098
$ 165,112
$ 253,210
0.90
0.90
0.90
1.01
1.60
47
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,
2017
2016
2015
2014
2013
$
160,269
$
156,054
$
164,169
$
252,230
$
267,128
(6,077)
(5,784)
(11,861)
(3,608)
(1,823)
(5,431)
(10,816)
(3,014)
(41,101)
(6,869)
(79,092)
6,231
14,550
20,781
776
57
833
2,065
838
6,625
3,510
34,652
(44,440)
68,443
(13,231)
(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
6,518
22,880
(126,410)
118,368
(6,856)
23,013
(51,534)
52,944
(9,525)
21,636
(79,331)
95,737
(104,467)
$
171,041
$
160,269
$
156,054
$
164,169
$
252,230
Net charge-offs as a percentage of average loans and
leases
0.24%
0.26%
0.30%
0.49%
0.81%
(1)
Primarily includes the transfer of the allowance for loan and lease losses to held for sale.
Net charge-offs for 2017 were $44.4 million, or 0.24% of average loans and leases, compared with $45.2 million, or
0.26% of average loans and leases for 2016 and $51.5 million, or 0.30% of average loans and leases for 2015. Net
charge-offs decreased $0.8 million in 2017 primarily due to the recovery of $13.3 million on previous charge-offs related
to the consumer real estate non-accrual loans that were sold in the first and third quarters of 2017, partially offset by
increased net charge-offs in the auto finance, commercial and leasing and equipment finance portfolios. The increase
in auto finance charge-offs was primarily due to the strategic shift from an originate-to-sell and originate-to-hold model
to an entirely originate-to-hold model, maturation of the portfolio and lower recoveries. The increase in commercial
charge-offs was primarily due to the charge-off of two loans during 2017. The increase in leasing and equipment finance
charge-offs was primarily due to the charge-off of one loan in the fourth quarter of 2017. Net charge-offs decreased
$6.3 million in 2016 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.
48
Liquidity Management TCF manages its liquidity to ensure that its funding needs are met both promptly and in a
cost-effective manner. Asset liquidity arises from liquid assets that can be sold or pledged as collateral, amortization,
prepayment or maturity of assets and from the ability of TCF to sell 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 further information.
TCF Bank had $242.6 million and $256.6 million of net liquidity qualifying interest-bearing deposits at the Federal
Reserve Bank at December 31, 2017 and 2016, 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 at both December 31, 2017 and 2016. In addition, TCF held unencumbered obligations of states and
political subdivisions totaling $814.3 million and $612.5 million at December 31, 2017 and 2016, 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 further information.
TCF Financial had cash and due from banks of $80.5 million and $69.7 million at December 31, 2017 and 2016,
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 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 $1.6 billion of additional borrowing capacity at the FHLB of Des
Moines at December 31, 2017, 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. TCFCFC had no outstanding borrowings at December 31, 2017 and $2.2 million (USD)
outstanding under the line of credit with the counterparty at December 31, 2016.
Deposits Deposits totaled $18.3 billion at December 31, 2017, an increase of $1.1 billion, or 6.3%, from $17.2 billion
at December 31, 2016. The increase was primarily due to growth in certificates of deposit, savings and checking
balances, partially offset by a decrease in money market balances.
Non-interest bearing checking accounts represented 20.0% of total deposits at both December 31, 2017 and 2016.
TCF's weighted-average interest rate for deposits, including non-interest bearing deposits, was 0.38% and 0.36% at
December 31, 2017 and 2016, respectively. The increase was primarily due to increased average interest rates resulting
from promotions for certificates of deposit and savings accounts, partially offset by decreased average interest rates
on money market balances.
Checking, savings and certain money market deposits are an important source of low cost or no cost funds for TCF.
The average balance of these types of deposits was $10.8 billion and $10.6 billion for 2017 and 2016, respectively.
These deposits comprised approximately 61% and 62% of total average deposits for 2017 and 2016, respectively.
49
Certificates of deposit totaled $5.0 billion and $4.1 billion at December 31, 2017 and 2016, respectively. The maturities
of certificates of deposit with denominations equal to or greater than $100,000 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, 2017
$
$
216,861
320,214
957,052
949,329
2,443,456
Borrowings Borrowings totaled $1.2 billion and $1.1 billion at December 31, 2017 and 2016, respectively. Historically,
TCF has borrowed primarily from the FHLB of Des Moines, institutional sources under repurchase agreements and
other sources.
See Note 12. Short-term Borrowings and Note 13. Long-term Borrowings of Notes to Consolidated Financial Statements
for further information regarding TCF's borrowings.
Contractual Obligations and Commitments As discussed further in Note 8. Premises and Equipment, Net; Note
10. Investments in Affordable Housing Limited Liability Entities; Note 11. Deposits; Note 13. Long-term Borrowings
and Note 19. 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, 2017, the aggregate contractual obligations and commitments were as follows:
(In thousands)
Contractual Obligations:
Certificates of deposit
Long-term borrowings
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
Liabilities related to acquisition and portfolio purchase
Payments Due by Period
Total
Less than
1 year
1-3
years
3-5
years
More than
5 years
$
4,982,271
$
3,251,222
$
1,700,057
$
17,225
$
13,767
1,251,606
52,347
929,714
121,293
148,252
158,639
187,237
26,065
51,398
21,568
7,683
29,892
88,204
2,745
10,792
21,568
500
55,228
59,469
5,490
22,202
—
6,012
29,090
24,415
5,490
18,404
—
1,171
44,429
15,149
12,340
—
—
—
Total
$
6,686,467
$
3,457,270
$
2,778,172
$
217,088
$
233,937
(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
$
1,484,065
$
47,601
$
65,531
$
13,018
$
1,357,915
1,033,973
126,249
2,644,287
159,509
126,249
333,359
631,636
220,540
—
—
22,288
—
697,167
233,558
1,380,203
Standby letters of credit and guarantees on industrial
revenue bonds
Total
12,992
11,859
539
594
—
$
2,657,279
$
345,218
$
697,706
$
234,152
$
1,380,203
50
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 2030 and TCF has the option to extend the terms through 2040 upon making a renewal
option payment.
Liabilities related to acquisition and portfolio purchase consist of a liability of $5.9 million to be paid within three years
related to TCF's acquisition of EFLC, as well as liabilities related to the leasing and equipment finance loan and lease
portfolio purchase. See Note 9. Goodwill and Other Intangible Assets for further information.
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 2021. 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, redemption of preferred stock
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, redemption of preferred stock 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 achieved at December 31, 2017
and 2016. See Note 16. Regulatory Capital Requirements of Notes to Consolidated Financial Statements for further
information.
Equity Total equity at December 31, 2017 was $2.7 billion, or 11.7% of total assets, compared with $2.4 billion, or
11.4% of total assets, at December 31, 2016.
Preferred Stock Preferred stock was $265.8 million at December 31, 2017, an increase of $2.6 million, or 1.0%, from
$263.2 million at December 31, 2016. The increase was primarily due to the issuance of the Series C non-cumulative
perpetual preferred stock, partially offset by the redemption of the Series A non-cumulative perpetual preferred stock.
At December 31, 2017 and 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 $0.01 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 at any time. On January 30, 2018, TCF's Board of Directors approved the redemption of all outstanding
shares of the Series B Preferred Stock on March 1, 2018.
51
At December 31, 2017, there were 7,000,000 depositary shares outstanding, each representing a 1/1000th ownership
interest in a share of the 5.70% Series C non-cumulative perpetual preferred stock of TCF Financial Corporation, par
value $0.01 per share, with a liquidation preference of $25,000 per share (equivalent to $25 per depositary share) (the
"Series C Preferred Stock"). Dividends are payable on the Series C 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 5.70%. The Series C Preferred Stock may be redeemed at TCF's option in whole or in part on
December 1, 2022 or on any dividend payment date thereafter.
The Series C Preferred Stock was issued on September 14, 2017 for an aggregate public offering price of $175.0 million.
Net proceeds of the offering to TCF, after deducting deferred stock issuance costs of $5.7 million, were $169.3 million.
On October 16, 2017, TCF redeemed the 6,900,000 depositary shares, each representing a 1/1000th ownership interest
in a share of the 7.50% Series A non-cumulative perpetual preferred stock of TCF Financial Corporation, par value
$0.01 per share, with a liquidation preference of $25,000 per share (equivalent to $25 per depositary share) (the "Series
A Preferred Stock") for $172.5 million using the net proceeds from the offering of its Series C depositary shares and
additional cash on hand. Dividends were 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 7.50%.
Common Stock TCF repurchased 446,464 shares of its common stock during the fourth quarter of 2017 at an average
cost of $20.51 per share under its share repurchase program. At December 31, 2017, TCF had the ability to purchase
up to $140.8 million in aggregate value of shares of TCF's common stock in its stock repurchase program authorized
by its Board of Directors on November 27, 2017. Future repurchases will be based on market conditions, the trading
price of TCF shares and other factors. 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 may be commenced or suspended
at any time or from time to time.
Dividends to common stockholders on a per share basis totaled 7.5 cents for each quarter of the years ended
December 31, 2017 and 2016, respectively. TCF's common dividend payout ratio for the quarters ended
December 31, 2017 and 2016 was 13.2% and 27.8%, respectively. On January 30, 2018, TCF's Board of Directors
declared a regular quarterly cash dividend of 15.0 cents per common share, an increase of 100.0 percent, payable
on March 1, 2018 to stockholders of record at the close of business on February 15, 2018. TCF Financial's primary
funding sources for dividends are earnings and dividends received from TCF Bank.
Total common stockholders' equity at December 31, 2017 was $2.4 billion, or 10.42% of total assets, compared with
$2.2 billion, or 10.09% of total assets, at December 31, 2016. Tangible common equity at December 31, 2017 was
$2.2 billion, or 9.72% of total tangible assets, compared with $1.9 billion, or 9.13% of total tangible assets, at
December 31, 2016. Tangible common equity and tangible assets are not financial measures recognized under
generally accepted accounting principles in the United States ("GAAP") (i.e., non-GAAP). Tangible common equity
represents total equity less non-controlling interest in subsidiaries, preferred stock, goodwill and other intangible assets.
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.
52
Reconciliations of the non-GAAP financial measures of tangible common equity and tangible assets to the GAAP
measures of total equity and total assets were as follows:
(Dollars in thousands)
2017
2016
2015
2014
2013
At December 31,
Computation of tangible common equity to
tangible assets:
Total equity
$ 2,680,584
$ 2,444,645
$ 2,306,917
$ 2,135,364
$ 1,964,759
Less: Non-controlling interest in subsidiaries
17,827
17,162
16,001
13,715
11,791
Total TCF Financial Corporation
stockholders' equity
Less: Preferred stock
2,662,757
2,427,483
2,290,916
2,121,649
1,952,968
265,821
263,240
2,164,243
263,240
263,240
263,240
2,027,676
1,858,409
1,689,728
Total common stockholders' equity
(a)
2,396,936
Less:
Goodwill, net
Other intangibles, net(1)
Tangible common equity
Total assets
Less:
Goodwill, net
Other intangibles, net(1)
Tangible assets
Common equity to assets
Tangible common equity to tangible assets
(1)
Includes non-mortgage servicing assets.
Critical Accounting Estimates
154,757
23,687
225,640
1,738
225,640
3,126
225,640
4,641
225,640
6,326
$ 2,218,492
$ 1,936,865
$ 1,798,910
$ 1,628,128
$ 1,457,762
$ 23,002,159
$ 21,441,326
$ 20,689,609
$ 19,393,656
$ 18,378,769
(b)
(c)
154,757
23,687
225,640
1,738
225,640
3,126
225,640
4,641
225,640
6,326
(d)
$ 22,823,715
$ 21,213,948
$ 20,460,843
$ 19,163,375
$ 18,146,803
(a) / (c)
(b) / (d)
10.42%
9.72%
10.09%
9.13%
9.80%
8.79%
9.58%
8.50%
9.19%
8.03%
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 and the determination of current and deferred income taxes. See Note 2. Summary of Significant
Accounting Policies of Notes to Consolidated Financial Statements for further discussion of critical accounting
estimates.
53
Recent Accounting Developments
In August 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU")
No. 2017-12: Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, which
expands hedge accounting for nonfinancial and financial risk components and amends measurement methodologies
to more closely align hedge accounting with a company's risk management activities. The ASU decreases the complexity
of preparing and understanding hedge results through measurement and reporting of hedge ineffectiveness. In addition,
disclosures will be enhanced and the presentation of hedged results changed to align the effects of the hedging
instrument and the hedged item. 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; however early adoption is allowed.
TCF adopted this ASU effective January 1, 2018. The adoption of this guidance will not have a material impact on our
consolidated financial statements.
In May 2017, the FASB issued ASU No. 2017-09: Compensation - Stock Compensation (Topic 718): Scope of
Modification Accounting, which provides guidance about which changes to the terms and conditions of a share-based
payment award requires an entity to apply modification accounting in Topic 718. The adoption of this ASU will be
required on a prospective basis to an award modified beginning with TCF's Quarterly Report on Form 10-Q for the
quarter ending March 31, 2018. Early adoption is allowed. The adoption of this guidance will not have a material impact
on our consolidated financial statements.
In March 2017, the FASB issued ASU No. 2017-07: Compensation - Retirement Benefits (Topic 715): Improving the
Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which will change how
employers that sponsor defined benefit pension and/or other postretirement benefit plans present the net periodic
benefit cost in the income statement. Under the new guidance, employers will present the service cost component of
the net periodic benefit cost in the same income statement line item as other employee compensation costs arising
from services rendered during the period. Only the service cost component will be eligible for capitalization in assets.
The other components of net periodic benefit cost will be presented separately from the line item that includes service
cost and outside of any subtotal of operating income. In addition, disclosure of the line items used to present the other
components of net periodic benefit cost is required if the components are not presented separately in the income
statement. The adoption of this ASU will be required on either a full 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. The adoption
of this guidance will not have a material impact on our consolidated financial statements.
In February 2017, the FASB issued ASU No. 2017-05: Other Income - Gains and Losses from the Derecognition of
Nonfinancial Assets (Subtopic 610-20), which provides guidance for recognizing gains and losses from the transfer of
nonfinancial assets in contracts with non-customers. The ASU also clarifies that Accounting Standards Codification
("ASC") 610-20 applies to the derecognition of nonfinancial assets and in substance nonfinancial assets unless other
specific guidance applies or the sale is to a customer. The new guidance does not apply to the derecognition of
businesses, nonprofit activities, financial assets, including equity method investments, or to revenue contracts with
customers. The adoption of this ASU will be required on either a full 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. The adoption
of this guidance 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. Upon adoption, TCF will evaluate future transactions to determine if they should
be accounted for as acquisitions (or disposals) of assets or businesses.
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.
The adoption of this guidance will not have a material impact on our consolidated financial statements.
54
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. The adoption of this guidance will not
have a material impact 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 ASU requires the use of a current expected credit loss ("CECL") approach to determine the allowance
for credit losses for loans and held to maturity securities. CECL requires loss estimates for the remaining estimated
life of the asset using historical loss data as well as reasonable and supportable forecasts based on current economic
conditions. 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. CECL represents a significant change in GAAP and may result in a material impact on our
consolidated financial statements. The impact of the ASU will depend on the composition of TCF's portfolios and
general economic conditions at the date of adoption. Additionally, there are several implementation questions which
could affect the adoption impact once resolved. TCF has established a governance structure to implement the ASU
and is in the process of assessing its current processes and determining future methodologies to be used upon adoption.
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.
The adoption of this guidance will not have a material impact on our consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which, along with 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. In September 2017, the FASB issued ASU No. 2017-13, Revenue Recognition (Topic 605),
Revenue from Contracts with Customers (Topic 606), Leases (Topic 840) and Leases (Topic 842): Amendments to
SEC Paragraphs, which rescinds certain SEC Observer comments and staff announcements from the lease guidance
and incorporates SEC staff announcements on the effect of a change in tax law on leverage leases from ASC 840 into
ASC 842. The adoption of these ASUs 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 has started to
implement this ASU which has included an initial evaluation of TCF's leasing contracts and activities. Management
has evaluated and plans to elect the practical expedients, which would allow for existing leases to be accounted for
consistent with current guidance, with the exception of the balance sheet recognition for lessees. The adoption of this
guidance is not expected to result in a material change to lessee expense recognition. While there are limited changes
to lessor accounting, there are certain implementation questions whose resolution may result in changes in recognition
and measurement from current practice. Management will continue to evaluate the impact of this guidance on our
consolidated financial statements.
55
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. In September 2017, the FASB issued ASU 2017-13, Revenue
Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840) and Leases (Topic
842): Amendments to SEC Paragraphs, which rescinds certain SEC Observer comments on accounting for
management fees based on a formula that is codified in ASC 605. In November 2017, the FASB issued ASU 2017-14,
Income Statement - Reporting Comprehensive Income (Topic 220), Revenue Recognition (Topic 605) and Revenue
from Contracts with Customers (Topic 606), which amends certain paragraphs in ASC 605 by superseding the
paragraphs with a link to ASC 606.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. TCF plans to
apply the modified retrospective method with a cumulative-effect adjustment to opening retained earnings.
TCF derives a majority of its revenue from loans and leases, as well as any related servicing fee revenue, which are
not within the scope of these ASUs. These ASUs are applicable to most of the fees and service charges, card and
ATM revenue earned by TCF, as well as the gains on sales of certain non-financial assets. However, the recognition
of these revenue streams does not change in a significant manner as a result of the adoption of these ASUs. The
majority of this revenue is both charged to the customer and earned either at a point in time or on a transactional basis.
As a result, the revenue expected to be recognized in any future year related to remaining performance obligations,
contracts where revenue is recognized when invoiced and contracts with variable consideration related to undelivered
performance obligations are not material. In addition, receivables related to fees and service charges and the related
bad debt expense are not material. There are no material contract assets, contract liabilities or deferred contract costs
recorded in the Company's Consolidated Statements of Financial Condition. As a significant majority of the Company's
revenue streams are not included in the scope of these ASUs and the recognition of revenue for the revenue streams
within the scope of these ASUs are not significantly changed, the adoption of this guidance will not have a material
impact on the Company's consolidated financial statements.
56
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, targets, guidance, statements of the Company's
plans and objectives, forecasts of market trends and other matters, are forward-looking statements based on the
Company's assumptions and beliefs. Such statements may be identified by such words or phrases as "will likely result,"
"are expected to," "will continue," "outlook," "will benefit," "is anticipated," "estimate," "project," "management believes"
or similar expressions. These forward-looking statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from those discussed in such statements and no assurance can be given that the
results in any forward-looking statement will be achieved. For these statements, TCF claims the protection of the safe
harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Any forward-
looking statement speaks only as of the date on which it is made and we disclaim any obligation to subsequently revise
any forward-looking statement to reflect events or circumstances after such date or to reflect the occurrence of
anticipated or unanticipated events.
Certain factors could cause the Company's future results to differ materially from those expressed or implied in any
forward-looking statements contained herein. These factors include the factors discussed in Part I, Item 1A. of this
Annual Report on Form 10-K under the heading "Risk Factors," the factors discussed below and any other cautionary
statements, written or oral, which may be made or referred to in connection with any such forward-looking statements.
Since it is not possible to foresee all such factors, these factors should not be considered as complete or exhaustive.
Adverse Economic or Business Conditions; Competitive Conditions; Credit and Other Risks. Deterioration in
general economic and banking industry conditions, including those arising from government shutdowns, defaults,
anticipated defaults or rating agency downgrades of sovereign debt (including debt of the U.S.), or increases in
unemployment; adverse economic, business and competitive developments such as shrinking interest margins,
reduced demand for financial services and loan and lease products, deposit outflows, increased deposit costs due to
competition for deposit growth and evolving payment system developments, deposit account attrition or an inability to
increase the number of deposit accounts; customers completing financial transactions without using a bank; adverse
changes in credit quality and other risks posed by TCF's loan, lease, investment, securities held to maturity and
securities available for sale portfolios, including declines in commercial or residential real estate values, changes in
the allowance for loan and lease losses dictated by new market conditions or regulatory requirements, or the inability
of home equity line borrowers to make increased payments caused by increased interest rates or amortization of
principal; deviations from estimates of prepayment rates and fluctuations in interest rates that result in decreases in
the value of assets such as interest-only strips that arise in connection with TCF's loan sales activity; interest rate risks
resulting from fluctuations in prevailing interest rates or other factors that result in a mismatch between yields earned
on TCF's interest-earning assets and the rates paid on its deposits and borrowings; foreign currency exchange risks;
counterparty risk, including the risk of defaults by our counterparties or diminished availability of counterparties who
satisfy our credit quality requirements; decreases in demand for the types of equipment that TCF leases or finances;
the effect of any negative publicity; the effects of man-made and natural disasters, including fires, floods, tornadoes,
hurricanes, acts of terrorism, civil disturbances and environmental damage, which may negatively affect our operations
and/or our customers.
Legislative and Regulatory Requirements. New consumer protection and supervisory requirements and regulations,
including those resulting from action by the Consumer Financial Protection Bureau ("CFPB") and changes in the scope
of Federal preemption of state laws that could be applied to national banks and their subsidiaries; the imposition of
requirements that adversely impact TCF's deposit, lending, loan collection and other business activities such as
mortgage foreclosure moratorium laws, further regulation of financial institution campus banking programs, restrictions
on arbitration or new restrictions on loan and lease 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; governmental regulations or judicial actions affecting
the security interests of creditors; 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 including those resulting from 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.
57
Earnings/Capital Risks and Constraints, Liquidity Risks. Limitations on TCF's ability to carry out its share
repurchase program, pay dividends or 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 including those 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 effectuate, and risks of claims related to, sales
of loans; risks related to new product additions and addition of distribution channels (or entry into new markets) for
existing products.
Technological and Operational Matters. Technological or operational difficulties, loss or theft of information, cyber-
attacks and other security breaches, counterparty failures and the possibility that deposit account losses (fraudulent
checks, etc.) may increase; failure to keep pace with technological change, such as by failing to develop and maintain
technology necessary to satisfy customer demands, costs and possible disruptions related to upgrading systems; the
failure to attract and retain key employees.
Litigation Risks. Results of litigation or government enforcement actions such as TCF's pending litigation with the
CFPB and related matters, 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; 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 the impact of the Tax Cuts and Jobs Act tax reform
legislation and adoption of federal or state legislation that would increase federal or 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.
58
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 and foreign
currency 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.
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, including 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
changes to interest-earning assets and new business activities is factored into the simulation model.
(Dollars in millions)
Immediate Change in Interest Rates:
+200 basis points
+100 basis points
$
2017
97.5
53.1
10.1% $
5.5
2016
97.2
52.1
10.9%
5.9
Impact on Net Interest Income
December 31,
59
As of December 31, 2017, approximately 61% of TCF's loan and lease balances were expected to reprice, amortize
or prepay in the next 12 months and approximately 61% of TCF's deposit balances were 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 planned changes to interest-earning assets 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.
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, 2017 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.
60
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 federal banking regulators. 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 16. Regulatory Capital Requirements and Note 25.
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 on 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, 2017. In addition, TCF held unencumbered obligations of states and political subdivisions totaling
$814.3 million at December 31, 2017.
Deposits are TCF's primary source of funding. TCF also maintains secured sources of funding, which primarily include
$1.6 billion of additional borrowing capacity at the FHLB of Des Moines at December 31, 2017, 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 on 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 2. Summary of Significant Accounting Policies and Note 20. Derivative Instruments
of Notes to Consolidated Financial Statements for further information.
61
Item 8. Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
TCF Financial Corporation:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of financial condition of TCF Financial Corporation
and subsidiaries (the "Company") as of December 31, 2017 and 2016, 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, 2017, and the related notes (collectively, the "consolidated financial statements"). In our opinion, the
consolidated financial statements present fairly, in all material respects, the financial position of the Company as of
December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the years in the three-
year period ended December 31, 2017, 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) ("PCAOB"), the Company’s internal control over financial reporting as of December 31, 2017, based on criteria
established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission, and our report dated February 23, 2018 expressed an unqualified opinion on the
effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
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 are a public accounting
firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with
the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of
material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks
of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the
amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the Company's auditor since 1991.
Minneapolis, Minnesota
February 23, 2018
62
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, net
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,
2017
2016
$
621,782
$
82,644
161,576
1,709,018
134,862
1,959,387
2,860,309
4,819,696
3,561,193
4,761,661
2,739,754
3,199,639
22,517
19,104,460
(171,041)
18,933,419
421,549
154,757
782,552
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
$
$
23,002,159
$
21,441,326
6,300,127
$
5,287,606
1,764,998
4,982,271
18,335,002
—
1,249,449
1,249,449
737,124
20,321,575
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
Preferred stock, par value $0.01 per share, 30,000,000 shares authorized;
4,007,000 and 4,006,900 shares issued, respectively
265,821
263,240
Common stock, par value $0.01 per share, 280,000,000 shares authorized;
172,158,449 and 171,034,506 shares issued, respectively
Additional paid-in capital
Retained earnings, subject to certain restrictions
Accumulated other comprehensive income (loss)
Treasury stock at cost, 489,030 and 42,566 shares, respectively and other
Total TCF Financial Corporation stockholders' equity
Non-controlling interest in subsidiaries
Total equity
Total liabilities and equity
See accompanying notes to consolidated financial statements.
1,722
877,217
1,577,311
(18,517)
(40,797)
2,662,757
17,827
2,680,584
$
23,002,159
$
1,710
862,776
1,382,901
(33,725)
(49,419)
2,427,483
17,162
2,444,645
21,441,326
63
Consolidated Statements of Income
(In thousands, except per-share data)
2017
2016
2015
Year Ended December 31,
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 (benefit)
Income tax expense (benefit)
Income after income tax expense (benefit)
Income attributable to non-controlling interest
Net income attributable to TCF Financial Corporation
Preferred stock dividends
Impact of preferred stock redemption
Net income available to common stockholders
Earnings per common share:
Basic
Diluted
See accompanying notes to consolidated financial statements.
$
954,246
$
850,546
$
33,278
4,436
27,097
1,019,057
66,012
27,807
93,819
925,238
68,443
856,795
131,887
55,732
19,624
207,243
5,460
37,327
41,347
84,134
145,039
11,646
448,062
237
448,299
483,235
156,909
345,456
985,600
55,901
17,756
677
1,059,934
245,160
(33,624)
278,784
10,147
268,637
19,904
5,779
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
—
242,954
$
192,736
$
1.44
1.44
$
$
1.15
1.15
$
$
$
$
$
64
832,736
15,648
5,486
38,060
891,930
48,226
23,316
71,542
820,388
52,944
767,444
144,999
54,387
21,544
220,930
30,580
40,964
31,229
102,773
108,129
10,463
442,295
(297)
441,998
457,743
144,962
229,255
831,960
39,409
23,193
185
894,747
314,695
108,872
205,823
8,700
197,123
19,388
—
177,735
1.07
1.07
Consolidated Statements of Comprehensive Income
(In thousands)
2017
2016
2015
Net income attributable to TCF Financial Corporation
$
268,637
$
212,124
$
197,123
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
16,454
(2,746)
4,921
(29)
18,600
Comprehensive income
$
287,237
$
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
65
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
TCF Financial Corporation
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
197,123
—
Balance, December 31,
2014
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
Balance, December 31,
2015
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
Balance,
December 31, 2016
Change in accounting
principles
Net income
Other comprehensive
income (loss), net of tax
Net investment by
(distribution to) non-
controlling interest
Public offering of Series C
Preferred Stock
Redemption of Series A
Preferred Stock
Repurchase of 446,464
shares of common stock
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
Balance,
December 31, 2017
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
—
(1,460)
—
212,124
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,588,111
795,351
—
—
—
—
—
—
—
—
—
—
—
—
—
—
16
8
—
—
—
—
—
24,819
8,427
—
1,460
—
—
—
—
—
—
—
—
—
—
—
—
—
511,420
636,056
—
—
—
—
—
—
—
—
—
—
—
—
—
—
5
6
—
—
—
—
—
5,833
6,548
—
(1,441)
—
—
—
—
—
—
—
—
—
—
—
—
7,000
— 169,302
(6,900)
— (166,721)
—
—
—
—
—
—
—
—
—
1,381,448
(257,505)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
14
23,240
(2)
7,667
—
(17,785)
—
—
(19,388)
(37,302)
—
—
—
—
—
(19,388)
(50,182)
—
—
—
268,637
—
—
—
(5,779)
—
(19,904)
(50,617)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(4,436)
—
—
—
—
—
(18,379)
—
—
—
—
—
(3,392)
—
18,600
—
—
—
—
—
—
—
—
197,123
8,700
205,823
(4,436)
—
(4,436)
—
(6,414)
(6,414)
(19,388)
(37,302)
24,835
8,435
(19,388)
(50,182)
5,838
6,554
—
—
—
—
—
(19,388)
(37,302)
24,835
8,435
—
—
—
—
—
—
(19,388)
(50,182)
5,838
6,554
—
212,124
9,593
221,717
(18,379)
—
(18,379)
—
(8,432)
(8,432)
—
1,441
—
—
—
—
268,637
10,147
278,784
18,600
—
18,600
—
(9,482)
(9,482)
169,302
— (172,500)
(9,163)
(9,163)
—
—
—
—
(19,904)
(50,617)
23,254
7,665
—
17,785
—
—
—
—
—
—
—
—
—
169,302
(172,500)
(9,163)
(19,904)
(50,617)
23,254
7,665
—
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
1,319
2,073
4,007,000 172,158,449 $ 265,821 $
1,722 $ 877,217 $1,577,311 $
(18,517) $ (40,797) $2,662,757 $
17,827 $ 2,680,584
See accompanying notes to consolidated financial statements.
66
Consolidated Statements of Cash Flows
(In thousands)
Cash flows from operating activities:
Year Ended December 31,
2016
2017
2015
Net income
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
$
278,784
$
221,717
$
205,823
Provision for credit losses
Depreciation and amortization
Impairment of goodwill and other intangible assets
Provision (benefit) 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
Acquisition of Equipment Financing & Leasing Corporation, net of cash acquired
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
Payments on liabilities related to acquisition and portfolio purchase
Net proceeds from public offering of Series C preferred stock
Redemption of Series A preferred stock
Repurchases of common stock
Common shares sold to TCF employee benefit plans
Dividends paid on preferred stock
Dividends paid on common stock
Stock compensation tax (expense) benefit
Exercise of stock options
Net investment by (distribution to) non-controlling interest
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 and leases to other assets
Transfer of loans and leases from held for investment to held for sale, net
See accompanying notes to consolidated financial statements.
68,443
206,567
73,409
(53,729)
280,640
(430,121)
(51,965)
(96,380)
(36,196)
239,452
—
137,544
(354,608)
246,002
(254,000)
1,618,791
(1,808,603)
(8,120)
10,188
(1,038,208)
53,687
(48,428)
26,103
(1,419,652)
1,094,612
(4,747)
9,990,967
(9,816,286)
(3,000)
169,302
(172,500)
(9,163)
23,254
(19,904)
(50,617)
—
(57)
(9,482)
1,192,379
12,179
609,603
621,782
86,411
62,115
100,608
1,320,210
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)
—
—
—
—
5,838
(19,388)
(50,182)
(377)
(701)
(8,432)
484,186
(279,734)
889,337
609,603
78,930
23,064
107,768
2,739,126
$
$
$
$
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)
—
—
—
—
24,835
(19,388)
(37,302)
558
2,570
(6,414)
1,027,068
(225,913)
1,115,250
889,337
64,855
79,687
107,403
1,752,587
$
$
67
Notes to Consolidated Financial Statements
Note 1. 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. TCF Bank operates bank
branches in Illinois, Minnesota, Michigan, Colorado, Wisconsin, Arizona and South Dakota (TCF's primary banking
markets), providing convenient financial services, 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. Through its direct subsidiaries, TCF Bank also provides a full range of consumer facing
and commercial services, including providing consumer banking services in 46 states, commercial banking services
in 34 states, commercial leasing and equipment financing in all 50 states and, to a limited extent, in foreign countries
and commercial inventory financing in all 50 states and Canada and, to a limited extent, in other foreign countries.
The accompanying consolidated financial statements are prepared in conformity with U.S. generally accepted
accounting principles ("GAAP"). The preparation of financial statements in conformity with 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. All significant intercompany accounts and transactions have
been eliminated in consolidation. Certain reclassifications have been made to prior period financial statements to
conform to the current period presentation.
Effective April 1, 2017, the Company executed its strategic shift from an originate-to-sell and originate-to-hold model
to an entirely originate-to-hold model for its auto finance business and effective December 1, 2017, the Company
discontinued auto finance loan originations. The determination was based on management's review of strategic
alternatives and the financial outlook of the auto finance loan origination business compared with alternative uses of
capital. TCF's subsidiary, Gateway One Lending & Finance, LLC ("Gateway One"), will continue to service existing
auto loans on its balance sheet and those serviced for others. The decision to discontinue auto finance loan originations
resulted in a goodwill impairment charge of $73.0 million, an other intangible assets impairment charge of $0.4 million
and approximately $14.8 million of expenses related to severance, other asset impairments and lease termination
expenses in 2017.
Note 2. Summary of Significant Accounting Policies
Critical Accounting Estimates
Critical accounting estimates occur in certain accounting policies and procedures and are particularly susceptible to
significant change. Policies that contain critical accounting estimates include the determination of the allowance for
loan and lease losses 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 believed
to be appropriate to provide for probable loan and lease losses incurred in the portfolio as of the balance sheet date,
including known or anticipated problem loans and leases, as well as for loans and leases which are not currently
known to require specific allowances. Loans classified as troubled debt restructuring ("TDR") loans are considered
impaired loans, along with non-accrual commercial, equipment finance and 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 on 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 on the fair
value of the collateral less estimated selling costs.
68
Impairment on commercial loans, inventory finance loans and leasing and equipment finance loans and leases is
generally based on 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 on 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 estimated selling costs.
Impairment on auto finance loans is generally based on 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 on 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 that 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 that 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 on 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. See Note 7. Allowance for Loan and Lease Losses and Credit Quality Information for
further information on the allowance for loan and lease losses.
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. 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 that 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.
69
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. See
Note 14. Income Taxes for further information on income taxes.
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. See Note 5. Securities Available for Sale and Securities Held to Maturity
for further information on securities held to maturity.
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). 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. 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 earliest call date for premiums on securities with call
features. 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. See Note 5. Securities Available for Sale and Securities Held to Maturity for
further information on securities available for sale.
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 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, 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. See Note 6. Loans and Leases for further information on loans and leases.
70
TCF acquires loans and leases through business combinations and purchases of loan and lease portfolios. These
loans and leases are recorded at fair value at acquisition and the fair value discount or premium is recognized as an
adjustment to yield over the remaining life of each loan or lease. Loans are considered purchased credit impaired
("PCI") loans if it is probable at acquisition that all contractually required payments will not be collected. Upon acquisition,
the acquired PCI loans are recorded at fair value without a corresponding allowance for loan losses as the non-
accretable discount is adequate to absorb expected remaining credit losses. The excess of expected cash flows to be
collected over the initial fair value of the acquired portfolios is referred to as the accretable yield and is accreted into
interest income over the estimated life of the acquired portfolios using the effective yield method. The accretable yield
is affected by changes in interest rate indices for variable-rate acquired portfolios, changes in prepayment assumptions
and changes in the expected principal and interest payments over the estimated life of the loan. These acquired loans
are classified as accruing and interest income continues to be recognized unless expected credit losses exceed the
non-accretable discount.
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 nine 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. See Note 7. Allowance for Loan and
Lease Losses and Credit Quality Information for further information on non-accrual loans and leases.
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 that 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. 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.
71
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 records impairment, if necessary,
which is charged to non-interest expense in the periods in which it becomes 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 that achieve sale treatment, the related lease
cash flow stream and the non-recourse financing are derecognized. For those transactions that 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.
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. See Note 8. Premises and Equipment, Net for further information on
premises and equipment.
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. See Note 7.
Allowance for Loan and Lease Losses and Credit Quality Information for further information on other real estate owned
and repossessed and returned assets.
Investments in Affordable Housing Limited Liability Entities TCF has investments in affordable housing limited
liability entities that either operate qualified affordable housing projects or 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 accrued expenses and other liabilities. The
tax credits and amortization of the investments are reflected in the Consolidated Statements of Income as a component
of income tax expense. See Note 10. Investments in Affordable Housing Limited Liability Entities for further information
on investments in affordable housing limited liability entities.
72
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 that 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). 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. See Note 6. Loans and Leases for further information on interest-only
strips.
Goodwill and Other 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 basis or accelerated method 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 has the option to perform a qualitative assessment of goodwill. TCF may
also elect to perform a quantitative test without first performing a qualitative analysis. If the qualitative assessment is
performed and 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 a discounted cash flow
analysis in determining the 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. See Note 9. Goodwill and Other Intangible Assets for further information
on intangible assets.
Derivative Instruments All derivative instruments are recognized at fair value within other assets or accrued expenses
and other liabilities on 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.
73
Fair Value Hedges 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.
Net Investment Hedges Forward foreign exchange contracts, which generally settle within 35 days, are used to manage
the foreign exchange risk associated with the Company's net investment in TCF Commercial Finance Canada, Inc.,
a wholly-owned indirect Canadian subsidiary of TCF Bank. Changes in net investment hedges recorded within other
comprehensive income (loss) are subsequently reclassified to non-interest expense during the period in which the
foreign investment is substantially liquidated or when other elements of the currency translation adjustment are
reclassified to income.
Derivatives Not Designated as Hedges Certain of TCF's forward foreign exchange contracts are not designated as
hedges and are generally settled within 35 days. Changes in the fair value of these forward foreign exchange contracts
are reflected in other non-interest expense.
TCF executes interest rate contracts with commercial banking customers to facilitate their respective risk management
strategies. Those interest rate contracts are simultaneously hedged with offsetting interest rate contracts that TCF
executes with a third party and generally settles through a central clearing house, minimizing TCF's net risk exposure.
As the interest rate contracts do not meet hedge accounting requirements, changes in the fair value of both the customer
contracts and the offsetting contracts 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. See Note 20. Derivative Instruments for further
information on derivative instruments.
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 (detriments) related to stock compensation, where the fair value on vesting or exercise of the
award is greater than (less than) the grant date value less any proceeds on exercise, are recognized in income tax
expense. See Note 17. Stock Compensation for further information on stock-based compensation.
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.
74
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. See Note 22. Earnings Per Common Share for further information on earnings per share.
New Accounting Pronouncements Adopted
During the fourth quarter of 2017, the Company adopted Accounting Standards Update ("ASU") No. 2018-02: Income
Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated
Other Comprehensive Income, which allows reclassification of certain stranded income tax effects in accumulated
other comprehensive income to retained earnings resulting from the Tax Cuts and Jobs Act of 2017 ("Tax Reform").
As a result of the adoption, the Company recorded a reclassification from accumulated other comprehensive income
(loss) to retained earnings of $3.4 million.
During the second quarter of 2017, the Company adopted ASU No. 2017-08: Receivables - Nonrefundable Fees and
Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities, which clarifies the
premium amortization period on purchased callable debt securities should be to the earliest call date, rather than the
contractual maturity date. The adoption of this ASU was on a modified retrospective basis and required any adjustments
as a result of the adoption during an interim period to be reflected as of January 1, 2017. The adoption of this ASU did
not have an impact on our consolidated financial statements.
Effective January 1, 2017, the Company adopted ASU No. 2016-09, Compensation - Stock Compensation (Topic 718):
Improvements to Employee Share-Based Payment Accounting, which simplified 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. As a result of the adoption, the Company recorded a
cumulative effect reduction to the opening balance of retained earnings of $1.3 million and a corresponding increase
to additional paid-in capital. This cumulative effect adjustment to retained earnings was related to a policy election to
account for forfeitures as they occur, thereby eliminating the need for an estimated forfeiture reserve against future
cancellations. The adoption of this ASU on a prospective basis requires that tax benefits related to stock compensation
be recorded to income tax expense, instead of to additional paid-in capital. The Company elected the prospective
basis regarding the presentation of stock compensation tax (expense) benefit in the Consolidated Statement of Cash
Flows as an operating activity and as a result prior periods were not adjusted.
Effective January 1, 2017, the Company adopted ASU Nos. 2016-05, Derivatives and Hedging (Topic 815): Effects of
Derivative Contract Novations on Existing Hedge Accounting Relationships, 2016-06, Derivatives and Hedging (Topic
815): Contingent Put and Call Options in Debt Instruments and 2016-07, Investments - Equity Method and Joint
Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting. The adoption of these ASUs did
not have an impact on our consolidated financial statements.
Note 3. Cash and Due from Banks
At December 31, 2017 and 2016, TCF Bank was required by Federal Reserve regulations to maintain reserves of
$107.0 million and $103.7 million, respectively, in cash on hand or at the Federal Reserve Bank.
TCF maintains cash balances that are restricted as to their use in accordance with certain contractual agreements
primarily related to the 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 $36.5 million and $51.3 million at December 31, 2017 and 2016, respectively.
TCF had cash held in interest-bearing accounts of $324.2 million and $326.5 million at December 31, 2017 and 2016,
respectively.
75
Note 4. 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,
2017
2016
$
$
45,021
$
37,623
82,644
$
37,022
37,692
74,714
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 2017, 2016 or 2015.
The yield on these investments, which have no stated contractual maturity, was 2.96% and 2.59% at December 31, 2017
and 2016, respectively.
Note 5. Securities Available for Sale and Securities Held to Maturity
Securities were as follows:
2017
2016
At December 31,
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
$ 908,189
$
308
$
13,812
$
894,685
$ 827,722
$
423
$
17,254
$ 810,891
(In thousands)
Securities available for sale:
Mortgage-backed securities:
U.S. Government
sponsored enterprises
and federal agencies
Other
6
—
—
6
18
—
—
18
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
810,159
7,967
3,799
814,327
628,972
394
16,840
612,526
$1,718,354
$
8,275
$
17,611
$ 1,709,018
$1,456,712
$
817
$
34,094
$1,423,435
$ 158,776
$
4,462
$
412
$
162,826
$ 178,514
$
3,072
$
440
$ 181,146
Other securities
2,800
—
—
2,800
2,800
—
—
2,800
Total securities held to
maturity
$ 161,576
$
4,462
$
412
$
165,626
$ 181,314
$
3,072
$
440
$ 183,946
At December 31, 2017 and 2016, mortgage-backed securities with a carrying value of $0.9 million and $7.5 million,
respectively, were pledged as collateral to secure certain deposits and borrowings. We have assessed each security
with unrealized losses included in the table above for credit impairment. As part of that assessment, we evaluated and
concluded that we do not intend to sell any of the securities and that it is more likely than not that we will not be required
to sell prior to recovery of the amortized cost. Unrealized losses on securities available for sale and securities held to
maturity were primarily due to changes in interest rates.
76
Gains (losses) on securities, net was $0.2 million for 2017, compared with $(0.6) million and $(0.3) million for 2016
and 2015, respectively. There were no sales of securities available for sale during 2017 or 2016. In 2015, TCF sold
$0.2 million of securities available for sale and received cash proceeds of $0.2 million. There were no impairment
charges recognized on securities available for sale in 2017, 2016 or 2015.TCF received $0.2 million in recoveries on
previously impaired securities held to maturity for 2017, compared with impairment charges of $0.7 million and
$0.3 million for 2016 and 2015, respectively.
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, 2017
Less than 12 months
12 months or more
Total
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
406,298
$
2,686
$
428,585
$
11,126
$
834,883
$
13,812
(In thousands)
Securities available for sale:
Mortgage-backed securities:
U.S. Government sponsored
enterprises and federal agencies $
Obligations of states and political
subdivisions
Total securities available for sale
$
510,057
$
3,172
$
636,101
$
14,439
$
1,146,158
$
103,759
486
207,516
3,313
311,275
3,799
17,611
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:
13,309
13,309
$
$
132
132
$
$
11,470
11,470
$
$
280
280
$
$
24,779
24,779
$
$
412
412
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
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
$
27,090
27,090
$
$
440
440
$
$
— $
— $
— $
— $
27,090
27,090
$
$
440
440
77
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.
(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,
2017
2016
Amortized
Cost
Fair Value
Amortized
Cost
Fair Value
$
6
$
6
$
15,178
514,336
15,312
517,867
1
$
18
1
18
331,430
329,005
1,188,834
1,175,833
1,125,263
1,094,411
Total securities available for sale
$
1,718,354
$
1,709,018
$
1,456,712
$
1,423,435
Securities held to maturity:
Due in one year or less
Due in 1-5 years
Due in 5-10 years
Due after 10 years
$
1,000
$
1,000
$
— $
1,400
400
1,400
400
1,400
1,400
158,776
162,826
178,514
Total securities held to maturity
$
161,576
$
165,626
$
181,314
$
Interest income attributable to securities available for sale was as follows:
—
1,400
1,400
181,146
183,946
(In thousands)
Taxable interest income
Tax-exempt interest income
Total interest income
Note 6. 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,
2017
2016
2015
$
$
18,382
$
16,238
$
14,896
10,335
33,278
$
26,573
$
13,930
1,718
15,648
At December 31,
2017
2016
$
1,959,387
$
2,860,309
4,819,696
2,385,752
365,533
2,751,285
809,908
3,561,193
4,761,661
2,739,754
3,199,639
22,517
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
$
19,104,460
$
17,843,827
(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 $33.3 million and
$54.1 million at December 31, 2017 and 2016, respectively.
78
Loan Sales The following tables summarize the net sales proceeds for consumer real estate and auto finance loans
sold, the securitization receivable recorded, the interest-only strips received, the recorded investment in loans sold,
including accrued interest, and the net gains, as applicable. TCF generally retains servicing on loans sold. Included
in consumer real estate loans sold in 2017 were $71.2 million of non-accrual loans, which were sold servicing released.
The auto finance securitizations included in 2016 and 2015 qualify for sale accounting and are executed 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. 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.
Year Ended December 31, 2017
(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
$
$
1,344,038
$
430,977
$
— $
430,977
3,377
—
(1,309,239)
(424,726)
—
—
38,176
$
6,251
$
— $
—
(424,726)
6,251
(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)
(1)
(2)
Includes transaction fees and other sales related adjustments.
Excludes subsequent adjustments and valuation adjustments while held for sale.
Year Ended December 31, 2015
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
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,
2017
2016
$
$
16,440
$
4,946
1,234
$
—
27,260
12,892
701
168
TCF recorded impairment charges on the consumer real estate interest-only strips of $1.1 million in 2017, compared
with $0.8 million in 2016 and none in 2015. TCF recorded impairment charges on the auto finance interest-only strips
of $0.5 million, $2.4 million and $0.9 million in 2017, 2016 and 2015, respectively.
79
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 2017, 2016 and 2015, 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 reimburse TCF for the cost of such repurchases.
Leasing and Equipment Finance Portfolio The leasing and equipment finance portfolio consisted of $2.5 billion of
leases and $2.3 billion of loans at December 31, 2017, compared with $2.3 billion of leases and $2.0 billion of loans
at December 31, 2016.
Future minimum lease payments receivable for direct financing, sales-type and operating leases as of
December 31, 2017 were as follows:
(In thousands)
2018
2019
2020
2021
2022
Thereafter
Total
$
951,164
721,392
509,644
308,679
139,613
54,039
$
2,684,531
Acquired Loans and Leases TCF acquires loans and leases through business combinations and purchases of loan
and lease portfolios. TCF purchased loans and leases at fair value of $771.3 million and $193.6 million during 2017
and 2016, respectively. Included in loans and leases acquired during 2017 were $14.0 million of leasing and equipment
finance PCI loans that TCF acquired on September 29, 2017. On the acquisition date, the leasing and equipment
finance PCI loans had contractually required payments receivable of $24.0 million, expected cash flows of $16.6 million
and a fair value (initial carrying amount) of $14.0 million. The $7.4 million difference between the contractually required
payments receivable and the expected cash flows represents the non-accretable difference. The $2.6 million difference
between the expected cash flows and fair value represented the initial accretable yield. At December 31, 2017, the
outstanding balance of these PCI loans was $16.4 million.
The changes in accretable yield and carrying value of all PCI loans were as follows:
(In thousands)
Balance, beginning of period
Additions due to acquisitions of loans
Accretion
Reclassifications from non-accretable difference
Payments received
Balance, end of period
At or For the Year Ended December 31, 2017
Accretable Yield
Carrying Amount
$
$
— $
2,635
(25)
312
(1,871)
1,051
$
17
13,951
25
—
(2,149)
11,844
80
Note 7. 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, 2017
(In thousands)
Consumer
Real Estate
Commercial
Leasing and
Equipment
Finance
Inventory
Finance
Auto
Finance
Other
Total
Balance, beginning of period
$
59,448
$
32,695
$
21,350
$
13,932
$
32,310
$
534
$
160,269
Charge-offs
Recoveries
Net (charge-offs) recoveries
Provision for credit losses
Other(1)
(11,861)
(5,431)
(10,816)
(3,014)
(41,101)
20,781
8,920
(12,318)
(8,882)
833
(4,598)
9,098
—
2,065
(8,751)
10,067
(138)
838
(2,176)
1,367
110
6,625
(34,476)
56,712
(4,321)
(6,869)
3,510
(3,359)
3,517
—
(79,092)
34,652
(44,440)
68,443
(13,231)
Balance, end of period
$
47,168
$
37,195
$
22,528
$
13,233
$
50,225
$
692
$
171,041
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(1)
(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(1)
(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
(1)
Primarily includes the transfer of the allowance for loan and lease losses to held for sale.
81
The allowance for loan and lease losses and loans and leases outstanding by type of allowance methodology were
as follows:
(In thousands)
Allowance for loan and lease losses:
Collectively evaluated for impairment
Individually evaluated for impairment
Total
Loans and leases outstanding:
Consumer
Real Estate Commercial
Leasing and
Equipment
Finance
Inventory
Finance
Auto
Finance
Other
Total
At December 31, 2017
$
$
28,851
$
35,635
$
19,083
$
12,945
$
49,900
$
691
$
147,105
18,317
1,560
3,445
288
325
1
23,936
47,168
$
37,195
$
22,528
$
13,233
$
50,225
$
692
$
171,041
Collectively evaluated for impairment
$ 4,675,626
$ 3,524,864
$ 4,721,905
$ 2,735,638
$ 3,188,810
$ 22,513
$ 18,869,356
Individually evaluated for impairment
144,070
36,329
27,912
4,116
10,829
Collectively evaluated for impairment
$ 4,884,653
$ 3,242,389
$ 4,320,129
$ 2,465,041
$ 2,638,380
$ 18,765
$ 17,569,357
Individually evaluated for impairment
199,699
44,089
16,165
5,134
9,360
Loans acquired with deteriorated
credit quality
Total
(In thousands)
Allowance for loan and lease losses:
Collectively evaluated for impairment
Individually evaluated for impairment
Total
Loans and leases outstanding:
Loans acquired with deteriorated
credit quality
Total
4
—
223,260
11,844
—
—
11,844
—
—
$ 4,819,696
$ 3,561,193
$ 4,761,661
$ 2,739,754
$ 3,199,639
$ 22,517
$ 19,104,460
Consumer
Real Estate Commercial
Leasing and
Equipment
Finance
Inventory
Finance
Auto
Finance
Other
Total
At December 31, 2016
$
$
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
6
—
274,453
17
—
—
16
—
1
$ 5,084,352
$ 3,286,478
$ 4,336,310
$ 2,470,175
$ 2,647,741
$ 18,771
$ 17,843,827
82
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. 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. TCF's accruing and non-accrual loans and leases were as follows:
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, 2017
(In thousands)
Consumer real estate:
First mortgage lien
$
1,892,771
$
4,073
$
593
$
1,897,437
$
61,950
$
1,959,387
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
2,837,767
4,730,538
2,744,500
809,907
3,554,407
4,726,339
2,735,430
3,183,196
22,506
18,952,416
10,283
1,268
5,341
—
1
1
4,272
191
6,078
3
15,886
361
—
593
—
—
—
2,117
17
2,999
6
5,732
1,200
2,839,035
4,736,472
2,744,500
809,908
3,554,408
4,732,728
2,735,638
3,192,273
22,515
21,274
83,224
6,785
—
6,785
17,089
4,116
7,366
2
2,860,309
4,819,696
2,751,285
809,908
3,561,193
4,749,817
2,739,754
3,199,639
22,517
18,974,034
118,582
19,092,616
11,844
—
11,844
Total
$
18,962,699
$
16,247
$
6,932
$
18,985,878
$
118,582
$ 19,104,460
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
(In thousands)
Consumer real estate:
First mortgage lien
$
2,177,746
$
6,581
$
2,144
$
2,186,471
$
106,125
$
2,292,596
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
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
5,551
—
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
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
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,
2017
2016
2015
$
$
15,009
$
20,604
$
2,982
4,152
12,027
$
16,452
$
21,459
4,305
17,154
83
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,
2017
2016
$
$
7,324
$
10,552
17,876
$
13,675
21,372
35,047
Loan Modifications for Borrowers with Financial Difficulties Included within loans and leases in the previous
accruing and non-accrual loans and leases 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. For purposes of this disclosure, PCI loans have been excluded.
TDR loans were as follows:
(In thousands)
Consumer real estate
Commercial
Leasing and equipment finance
Inventory finance
Auto finance
Other
Total
At December 31,
2017
2016
Accruing
TDR Loans
Non-accrual
TDR Loans
Total TDR
Loans
Accruing
TDR Loans
Non-accrual
TDR Loans
Total TDR
Loans
$
88,092
$
34,282
$
122,374
$
98,606
$
71,961
$
170,567
12,249
10,263
—
3,464
3
83
1,413
476
5,351
1
12,332
11,676
476
8,815
4
20,304
4,802
—
2,323
6
2,170
1,350
357
5,504
—
22,474
6,152
357
7,827
6
$
114,071
$
41,606
$
155,677
$
126,041
$
81,342
$
207,383
The allowance on accruing consumer real estate TDR loans was $17.1 million, or 19.4% of the outstanding balance,
at December 31, 2017 and $19.3 million, or 19.6% of the outstanding balance, at December 31, 2016. At
December 31, 2017, 0.5% of accruing consumer real estate TDR loans were more than 60 days delinquent, compared
with 1.5% at December 31, 2016.
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, 2017, $22.3 million, or 65.0%,
were loans discharged in Chapter 7 bankruptcy that were not reaffirmed by the borrower, of which 70.0% were current.
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, of which 82.2% were current. All eligible loans are re-aged to current delinquency
status upon modification.
The allowance on accruing commercial TDR loans was $0.6 million, or 4.6% of the outstanding balance, at
December 31, 2017 and $1.1 million, or 5.6% of the outstanding balance, at December 31, 2016. No accruing
commercial TDR loans were 60 days or more delinquent at December 31, 2017 or 2016.
The allowance on accruing TDRs for the remaining classes of finance receivables was not material at
December 31, 2017 and 2016. No accruing TDR loans for the remaining classes of finance receivables were 60 days
or more delinquent at December 31, 2017 or 2016.
Unfunded commitments to consumer real estate and commercial loans classified as TDRs were $0.9 million and
$0.4 million at December 31, 2017 and 2016, respectively. At December 31, 2017 and 2016, no additional funds were
committed to leasing and equipment finance, inventory finance or auto finance loans classified as TDRs.
84
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.
Interest income on TDR loans is recognized based on the restructured terms. 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 2017, unrecognized interest income for consumer real estate
first mortgage lien accruing TDR loans and consumer real estate junior lien accruing TDR loans was $1.8 million and
$0.6 million, respectively. 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 on consumer real estate accruing TDR loans for 2017 and 2016 was 4.2%, which compares to the
original contractual average rate for the same periods 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%.The unrecognized interest
income for the remaining classes of finance receivables was not material for 2017, 2016 and 2015.
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. The following table summarizes the TDR loans that defaulted during 2017, 2016
and 2015, that were modified during the respective reporting period or within one year of the beginning of the respective
reporting period.
(In thousands)
Defaulted TDR loan balances modified during the applicable period:(1)
Consumer real estate:
First mortgage lien
Junior lien
Total consumer real estate
Leasing and equipment finance
Auto finance
Defaulted TDR loans modified during the applicable period
Year Ended December 31,
2017
2016
2015
$
$
3,081
$
8,193
$
579
3,660
555
1,169
1,630
9,823
—
1,693
5,384
$
11,516
$
1,674
821
2,495
45
1,039
3,579
(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.
85
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. For purposes of this disclosure, PCI
loans have been excluded. 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 table, the loan balance of impaired
loans represents the amount recorded within loans and leases on the Consolidated Statements of Financial Condition,
whereas the unpaid contractual balance represents the balances legally owed by the borrowers.
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
At December 31,
Unpaid
Contractual
Balance
2017
Loan
Balance
Related
Allowance
Recorded
Unpaid
Contractual
Balance
2016
Loan
Balance
Related
Allowance
Recorded
$
91,624
$
80,802
$
13,792
$ 122,704
$ 104,601
$
16,835
32,327
123,951
29,544
110,346
4,165
17,957
62,481
185,185
51,410
156,011
5,829
22,664
6,810
7,841
14,651
17,105
1,296
1,333
3
6,702
7,841
14,543
17,105
1,298
1,016
4
1,000
560
1,560
1,345
288
243
1
10,083
10,075
14
14
10,097
10,089
9,900
4,357
5,801
6
9,900
4,365
5,419
6
1,262
3
1,265
1,044
628
1,126
1
Total impaired loans with an allowance recorded
158,339
144,312
21,394
215,346
185,790
26,728
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
Total impaired loans without an allowance recorded
12,898
17,697
30,595
4,552
—
4,552
2,810
10,566
331
48,854
10,445
1,583
12,028
4,491
—
4,491
2,818
7,799
—
27,136
—
—
—
—
—
—
—
—
—
—
18,539
26,915
45,454
21,601
354
21,955
767
3,919
85
12,674
1,882
14,556
15,780
354
16,134
769
2,408
—
72,180
33,867
—
—
—
—
—
—
—
—
—
—
Total impaired loans
$ 207,193
$ 171,448
$
21,394
$ 287,526
$ 219,657
$
26,728
86
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,
2017
2016
2015
Average
Loan
Balance
Interest
Income
Recognized
Average
Loan
Balance
Interest
Income
Recognized
Average
Loan
Balance
Interest
Income
Recognized
$
92,702
$
2,748
$
114,164
$
3,597
$
112,698
$
40,477
133,179
1,488
4,236
54,888
169,052
2,606
6,203
56,885
169,583
8,388
3,927
12,315
13,502
2,831
3,218
5
16
97
113
58
192
—
—
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
5,438
3,353
8,791
852
—
852
18
76
22
2
Total impaired loans with an allowance
recorded
Impaired loans without an allowance recorded:
165,050
4,599
192,201
6,764
211,573
9,761
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
Total impaired loans
11,560
1,733
13,293
10,136
177
10,313
1,794
5,102
921
438
1,359
709
4
713
196
209
7,951
1,201
9,152
23,468
1,970
25,438
523
1,792
449
672
1,121
743
—
743
95
—
19,188
3,959
23,147
40,828
2,033
42,861
564
962
30,502
2,477
36,905
1,959
67,534
1,045
1,817
2,862
1,957
5
1,962
114
—
4,938
$
195,552
$
7,076
$
229,106
$
8,723
$
279,107
$
14,699
Other Real Estate Owned and Repossessed and Returned Assets
Other real estate owned and repossessed and returned assets were as follows:
(In thousands)
Other real estate owned
Repossessed and returned assets
Consumer real estate loans in process of foreclosure
At December 31,
2017
2016
$
18,225
$
12,630
22,622
46,797
9,969
32,133
Other real estate owned and repossessed and returned assets were written down $6.2 million, $8.3 million and
$12.8 million, which were included in foreclosed real estate and repossessed assets, net expense for 2017, 2016 and
2015, respectively.
87
Note 8. Premises and Equipment, Net
Premises and equipment, net were as follows:
(In thousands)
Land
Office buildings
Leasehold improvements
Furniture and equipment
Subtotal
Less: Accumulated depreciation and amortization
Premises and equipment, net
At December 31,
2017
2016
$
146,688
$
272,428
48,543
363,445
831,104
409,555
$
421,549
$
144,221
271,597
50,796
341,621
808,235
389,863
418,372
Depreciation and amortization expense related to premises and equipment was $45.9 million, $44.9 million and
$40.8 million in 2017, 2016 and 2015, respectively. TCF leases certain premises and equipment under operating
leases. Lease expense was $36.4 million, $36.5 million and $36.1 million in 2017, 2016 and 2015, respectively. Sublease
income was $1.0 million in 2017, 2016 and 2015, respectively.
At December 31, 2017, the total future minimum rental payments for operating leases of premises and equipment
were as follows:
(In thousands)
2018
2019
2020
2021
2022
Thereafter
Total
$
29,892
29,915
25,313
16,885
12,205
44,429
$
158,639
Note 9. Goodwill and Other Intangible Assets
Goodwill, net was as follows:
(In thousands)
At December 31,
2017
Accumulated
Impairment
Loss
Gross
Amount
Net Amount
Gross
Amount
2016
Accumulated
Impairment
Loss
Net Amount
Goodwill related to consumer banking segment $
214,286
$
73,041
$
141,245
$
214,286
$
— $
214,286
Goodwill related to wholesale banking segment
13,512
—
13,512
11,354
—
11,354
Total
$
227,798
$
73,041
$
154,757
$
225,640
$
— $
225,640
Effective April 1, 2017, the Company executed its strategic shift from an originate-to-sell and originate-to-hold model
to an entirely originate-to-hold model for its auto finance business and effective December 1, 2017, the Company
discontinued auto finance loan originations. The decision to discontinue auto finance loan originations resulted in a
goodwill impairment charge of $73.0 million related to the acquisition of Gateway One and an impairment charge of
$0.4 million related to the customer base intangible asset attributable to Gateway One. The Gateway One goodwill
and customer base intangible asset were fully impaired at December 31, 2017. There was no impairment of goodwill
or the other intangible assets in 2016 or 2015.
88
On June 16, 2017, TCF Bank acquired 100% of the outstanding shares of Equipment Financing & Leasing Corporation
("EFLC"). EFLC provides operating leases and direct financing leases of material handling equipment primarily to
Fortune 500 customers. TCF Bank paid $9.0 million in cash upon closing, recorded a liability of $5.9 million to be paid
within three years and assumed $64.2 million of EFLC's debt that was subsequently paid off. Assets acquired consisted
of $46.4 million of operating lease equipment, $5.9 million of direct financing leases, $21.3 million of amortizable
intangible assets, $2.2 million related to goodwill and approximately $3.3 million of cash, other assets and other
liabilities, net. The weighted-average amortization periods of the acquired program agreement, non-compete
agreement and customer base intangibles were 15 years, five years and three years, respectively. The amortizable
intangible assets are amortized on an accelerated method over their estimated useful lives.
On December 15, 2017, TCF Bank acquired the assets of Rubicon Mortgage Advisors, LLC. TCF recorded an
amortizable intangible asset of $3.0 million related to a non-compete agreement as part of the acquisition. The weighted-
average amortization period of the acquired non-compete agreement was four years and is amortized on a straight-
line basis over its estimated useful life.
Other intangible assets, net were as follows:
2017
2016
At December 31,
Gross
Amount
Accumulated
Amortization
Impairment
Net
Amount
Gross
Amount
Accumulated
Amortization
Impairment
Net
Amount
(In thousands)
Other intangible assets:
Program agreement
$
14,700
$
49
$
— $
14,651
$
— $
— $
— $
Non-compete agreement
Customer base intangibles
Deposit base intangibles
Tradename
Total
9,000
3,330
3,049
—
1,081
2,630
2,289
—
—
368
—
—
7,919
332
760
—
4,590
2,730
3,049
300
4,590
2,002
2,069
300
—
—
—
—
$
30,079
$
6,049
$
368
$
23,662
$
10,669
$
8,961
$
— $
1,708
—
—
728
980
—
Amortization expense for intangible assets was $2.0 million, $1.4 million and $1.6 million for 2017, 2016 and 2015,
respectively. Amortization expense for intangible assets is estimated to be $3.3 million for 2018, $2.9 million for 2019,
$2.7 million for 2020, $2.7 million for 2021 and $1.6 million for 2022.
Note 10. Investments in Affordable Housing Limited Liability Entities
Investments in affordable housing limited liability entities and unfunded commitments were as follows:
(In thousands)
Investments in affordable housing limited liability entities
$
Accrued expenses and other liabilities - unfunded commitments
At December 31,
2017
2016
82,399
$
48,973
30,279
12,082
During 2017, 2016 and 2015, TCF recognized amortization expense with respect to its investments in affordable
housing limited liability entities of $9.6 million, $4.8 million and $3.3 million, respectively, offset by tax credits and other
benefits of $12.5 million, $7.1 million and $3.9 million, respectively. At December 31, 2017, the expected payments
for unfunded affordable housing commitments will be payable in 2018 through 2021.
At December 31, 2017 and 2016, six and four, 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, 2017 and 2016, the carrying amount of the VIE investments was $81.9 million and $29.8 million,
respectively. The maximum exposure to loss on the VIE investments was $81.9 million and $29.8 million at
December 31, 2017 and 2016, 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.
89
Note 11. 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
2017
Amount
At December 31,
% of
Total
Weighted-
average
Rate
2016
Amount
% of
Total
—% $ 3,671,915
20.0%
—% $ 3,454,962
20.0%
0.01
0.01
0.09
0.47
1.14
0.38
2,628,212
6,300,127
5,287,606
1,764,998
4,982,271
14.4
34.4
28.8
9.6
27.2
$ 18,335,002
100.0%
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%
Annual maturities for certificates of deposit at December 31, 2017 were as follows:
(In thousands)
2018
2019
2020
2021
2022
Thereafter
Total
$ 3,251,222
1,498,121
201,936
10,811
6,414
13,767
$ 4,982,271
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 $735.7 million and $561.0 million at December 31, 2017 and 2016,
respectively.
90
Note 12. 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:
2017
At December 31,
2016
2015
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 funds purchased
Securities sold under repurchase agreements
Line of Credit - TCF Commercial Finance Canada, Inc.
Total
Maximum month-end balances for the period ended:
Securities sold under repurchase agreements
Line of Credit - TCF Commercial Finance Canada, Inc.
N.A. Not Applicable.
$
$
$
$
$
—
—
—
142
3,730
1,395
5,267
2,868
6,171
—% $
—
— $
1.30% $
0.78
1.92
1.10
N.A.
N.A.
$
$
2,159
2,232
4,391
156
5,235
1,660
7,051
3,391
5,907
0.10% $
5,381
1.75
0.94
—
$
5,381
0.03%
—
0.03
0.71% $
225
0.45%
0.41
1.75
0.73
16,431
2,166
$
18,822
N.A.
N.A.
$
62,995
5,519
0.06
1.96
0.28
N.A.
N.A.
Securities sold under short-term repurchase agreements are related to TCF Bank's Repurchase Investment Sweep
Agreement product and are collateralized by mortgage-backed securities.
Note 13. Long-term Borrowings
Long-term borrowings were as follows:
(Dollars in thousands)
Stated
Maturity
Amount
Stated Rate
Amount
Stated Rate
At December 31,
2017
2016
Federal Home Loan Bank advances
2018
$
Subtotal
Subordinated bank notes
Hedge-related basis adjustment(1)
Subtotal
Discounted lease rentals
Subtotal
Other long-term borrowings
Total long-term borrowings
2019
2020
2022
2025
2017
2018
2019
2020
2021
2022
2017
—
600,000
275,000
875,000
108,867
148,252
(2,157)
254,962
—
52,347
34,978
19,736
10,077
2,349
119,487
—
—% $
375,000
0.72% -
0.81%
1.40% -
1.76
-
1.75
1.78
6.25
4.60
—
7.95
6.00
6.50
5.00
5.43
—
2.55
2.53
2.64
2.88
3.04
-
-
-
-
-
300,000
0.78
-
0.81
—
675,000
108,654
148,052
(1,349)
255,357
57,081
42,132
24,671
11,753
4,423
—
140,060
2,764
—
6.25
4.60
7.88
7.95
6.00
6.90
4.57
—
1.36
2.45
2.55
2.53
2.64
2.88
-
-
-
-
-
$
1,249,449
$
1,073,181
(1) Related to subordinated bank notes with a stated maturity of 2025 at December 31, 2017.
At December 31, 2017, TCF Bank had pledged loans secured by consumer and commercial real estate and FHLB
stock with an aggregate carrying value of $4.4 billion as collateral for FHLB advances. At December 31, 2017,
$875.0 million of the FHLB advances outstanding were prepayable at TCF's option.
91
Note 14. Income Taxes
Tax Reform was enacted on December 22, 2017, resulting in changes in U.S. corporate tax rates, business-related
exclusions, deductions and credits. Enactment of Tax Reform requires TCF to reflect the changes associated with the
law's provisions in its consolidated financial statements as of and for the year ended December 31, 2017. The law is
complex and has extensive implications for TCF's federal, state and foreign current and deferred income taxes.
As a result of Tax Reform, TCF has recorded a reasonable estimate of a net tax benefit of $130.7 million in its
consolidated financial statements for the year ended December 31, 2017, primarily resulting from the re-measurement
of the Company's estimated net deferred tax liability. Certain of these amounts are provisional in nature, as all the
information necessary to record more precise amounts is not yet available, prepared or analyzed. Examples include
information associated with TCF’s deemed repatriation tax; like-kind-exchange program; the timing of payments
associated with certain liabilities; reports, tax forms and forecasts from various partnership investments; grantor letters
and tax forms from various trusts; and the results of detailed analyses of information associated with several deferred
tax items. TCF will obtain, prepare and analyze this information during the measurement period, up to and including
the period in which it files its 2017 consolidated federal income tax return. TCF may adjust these provisional amounts
during the measurement period as it obtains, prepares or analyzes this additional information.
Applicable income taxes in the Consolidated Statements of Income were as follows:
(In thousands)
Year ended December 31, 2017:
Federal
State
Foreign
Total
Year ended December 31, 2016:
Federal
State
Foreign
Total
Year ended December 31, 2015:
Federal
State
Foreign
Total
Current
Deferred
Total
$
$
$
$
$
$
14,384
$
(62,913) $
(48,529)
237
5,484
9,340
(156)
9,577
5,328
20,105
$
(53,729) $
(33,624)
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
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:
Tax Reform effects, net
Nondeductible goodwill impairment effect
State income tax, net of federal tax
Tax-exempt income
Non-controlling interest tax effect
State tax settlements, net of federal tax
Stock compensation
Investments in affordable housing limited liability entities
Foreign tax effects
Other, net
Effective income tax rate
92
Year Ended December 31,
2017
2016
2015
35.00 %
35.00%
35.00%
(53.29) —
10.43
3.92
(3.86)
(1.45)
(1.38)
(1.15)
(0.89)
(0.67)
(0.38)
—
—
3.04
(2.07)
(0.99)
0.19
—
(0.24)
(0.50)
0.02
—
—
2.87
(0.93)
(0.97)
(0.12)
—
(0.18)
(0.53)
(0.54)
(13.72)%
34.45%
34.60%
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 a result of Tax Reform, TCF recognized a $2.0 million charge related to U.S. federal income tax on the deemed
repatriation of undistributed foreign earnings as of December 31, 2017. Due to the shift to a worldwide territorial tax
regime as part of Tax Reform, future repatriations of foreign earnings will no longer be subject to U.S. federal income
tax. However, these foreign earnings may be subject to foreign withholding taxes should they be distributed in the form
of dividends. As of December 31, 2017, the estimated withholding taxes that could be due on these earnings was
$3.6 million.
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,
2017
2016
2015
$
4,690
$
4,249
$
4,649
200
86
(331)
—
—
546
627
(84)
(525)
(123)
323
—
(157)
(425)
(141)
Balance, end of period
$
4,645
$
4,690
$
4,249
The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $2.2 million
and $1.6 million at December 31, 2017 and 2016, respectively. TCF recognizes increases and decreases for interest
and penalties related to unrecognized tax benefits, where applicable, in income tax expense. TCF recognized
approximately $0.6 million of tax benefit, $0.9 million of tax expense and $0.2 million of tax benefit in 2017, 2016 and
2015, respectively, related to interest and penalties. Interest and penalties of approximately $0.6 million and $1.2 million
were accrued at December 31, 2017 and 2016, respectively.
TCF's federal income tax returns are open and subject to examination for 2014 and later tax return years. TCF's various
state income tax returns are generally open for 2013 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 2013 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.
93
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
Net operating losses
Securities available for sale
Accrued expense
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,
2017
2016
$
41,339
$
21,150
16,452
5,345
2,507
3,603
90,396
(14,267)
76,129
246,221
30,109
12,489
8,047
2,475
4,715
304,056
$
227,927
$
75,976
41,105
11,924
17,606
3,730
5,548
155,889
(10,377)
145,512
348,933
32,430
17,017
11,245
3,870
7,375
420,870
275,358
The net operating losses at December 31, 2017 consisted of state net operating losses that expire in 2018 through
2037. The valuation allowance at December 31, 2017 and 2016 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 15. Equity
Preferred Stock
Preferred stock was as follows:
(In thousands)
7.50% Series A non-cumulative perpetual preferred stock
6.45% Series B non-cumulative perpetual preferred stock
5.70% Series C non-cumulative perpetual preferred stock
Total preferred stock
At December 31,
2017
2016
$
$
— $
96,519
169,302
265,821
$
166,721
96,519
—
263,240
At December 31, 2017 and 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 $0.01 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%. TCF paid cash dividends to holders of the Series B Preferred Stock of
$6.5 million in 2017, 2016 and 2015. The Series B Preferred Stock may be redeemed at TCF's option in whole or in
part at any time. On January 30, 2018, TCF's Board of Directors approved the redemption of all outstanding shares
of the Series B Preferred Stock on March 1, 2018.
94
At December 31, 2017, there were 7,000,000 depositary shares outstanding, each representing a 1/1000th ownership
interest in a share of the 5.70% Series C non-cumulative perpetual preferred stock of TCF Financial Corporation, par
value $0.01 per share, with a liquidation preference of $25,000 per share (equivalent to $25 per depositary share) (the
"Series C Preferred Stock"). Dividends are payable on the Series C 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, which
commenced on December 1, 2017, at a per annum rate of 5.70%. TCF paid cash dividends to holders of the Series
C Preferred Stock of $2.1 million in 2017. The Series C Preferred Stock may be redeemed at TCF's option in whole
or in part on December 1, 2022 or on any dividend payment date thereafter.
The Series C Preferred Stock was issued on September 14, 2017 for an aggregate public offering price of $175.0 million.
Net proceeds of the offering to TCF, after deducting deferred stock issuance costs of $5.7 million, were $169.3 million.
On October 16, 2017, TCF redeemed the 6,900,000 depositary shares, each representing a 1/1000th ownership interest
in a share of the 7.50% Series A non-cumulative perpetual preferred stock of TCF Financial Corporation, par value
$0.01 per share, with a liquidation preference of $25,000 per share (equivalent to $25 per depositary share) (the "Series
A Preferred Stock") for $172.5 million using the net proceeds from the offering of its Series C depositary shares and
additional cash on hand. Deferred stock issuance costs of $5.8 million originally recorded as a reduction to preferred
stock upon the issuance of the Series A Preferred Stock were reclassified to retained earnings and resulted in a non-
cash, one-time reduction to net income available to common stockholders utilized in the computation of earnings per
common share and diluted earnings per common share for 2017. Dividends were 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 7.50%. TCF paid cash dividends to holders of the Series A
Preferred Stock of $11.3 million in 2017 and $12.9 million in both 2016 and 2015.
Restricted Retained Earnings Retained earnings at TCF Bank at December 31, 2017 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,
2017
2016
$
$
10,265
$
30,532
40,797
$
1,102
48,317
49,419
TCF repurchased 446,464 shares of its common stock in 2017 at an average cost of $20.51 per share under its share
repurchase program. These shares are recorded as treasury stock. No repurchases of common stock were made in
2016 or 2015. At December 31, 2017, TCF had approximately $140.8 million in aggregate value of shares remaining
in its stock repurchase program authorized by TCF's Board of Directors.
The cost of TCF common stock held in trust for TCF's deferred compensation plans, including the Executive, Senior
Officer, Winthrop and Directors Deferred Compensation Plans, TCF Employees Deferred Stock Compensation Plan
and the TCF 401K Supplemental Plan, is reported 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. Upon
resignation, death, disability or termination of a deferred compensation plan participant or based on other contractual
requirements, the shares held in trust are distributed to the respective plan's participant or beneficiary, as applicable.
See Note 17. Stock Compensation and Note 18. Employee Benefit Plans for further information on deferred
compensation plans.
95
Non-controlling Interest in Subsidiaries 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.
Warrants At December 31, 2017, 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 and now trade under the symbol "TCFWS". As a
result, TCF has no further obligation to the federal government in connection with the CPP.
Note 16. Regulatory Capital Requirements
TCF and TCF Bank are subject to minimum capital requirements administered by the federal banking regulators. Failure
to meet minimum capital requirements can initiate certain mandatory, and possible additional discretionary, actions by
the federal banking regulators 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 $529.8 million at December 31, 2017, 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 federal banking regulators. 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 phases in through 2019. Institutions not subject to the advanced approaches requirements
were allowed to opt out of including components of accumulated other comprehensive income (loss) in common equity
Tier 1 capital. TCF and TCF Bank made the one-time permanent election to not include accumulated other
comprehensive income (loss) in regulatory capital. 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,
2017
2016
2017
2016
Well-capitalized
Standard
Minimum
Capital
Requirement(1)
(Dollars in thousands)
Regulatory Capital:
Common equity Tier 1 capital
$ 2,242,410
$ 1,970,323
$ 2,409,027
$ 2,144,966
Tier 1 capital
Total capital
2,522,178
2,889,323
2,248,221
2,635,925
2,426,854
2,837,374
2,162,128
2,583,512
Regulatory Capital Ratios:
Common equity Tier 1 capital ratio
10.79%
10.24%
11.59%
11.14%
6.50%
4.50%
Tier 1 risk-based capital ratio
Total risk-based capital ratio
Tier 1 leverage ratio
12.14
13.90
11.12
11.68
13.69
10.73
11.68
13.65
10.70
11.23
13.42
10.32
8.00
10.00
5.00
6.00
8.00
4.00
(1) Excludes capital conservation buffer of 1.25% and 0.625% as of December 31, 2017 and 2016.
96
Note 17. Stock Compensation
TCF maintains four stock compensation plans: (i) The TCF Financial 2015 Omnibus Incentive Plan ("Omnibus Incentive
Plan"), (ii) the TCF Financial Incentive Stock Program ("Incentive Stock Program"), (iii) the Executive, Senior Officer,
Winthrop and Directors Deferred Compensation Plans and (iv) the TCF Employees Deferred Stock Compensation
Plan.
Omnibus Incentive Plan and Incentive Stock Program The Omnibus Incentive Plan and the 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, 2017, there were 1,446,047 and 366,000
shares reserved for issuance under the Omnibus Incentive Plan and Incentive Stock Program, respectively.
At December 31, 2017, there were 350,000 shares of performance-based restricted stock awards outstanding 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,
2017
2016
2015
$
17,944
$
24,925
$
25,919
1.6
1.6
2.1
At December 31, 2017, there were 360,988 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 TCF's peer group, which includes publicly-traded banks and thrift institutions with assets between
$10 billion and $50 billion as selected by TCF's Compensation Committee. 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 had vested as of December 31, 2017. The
remaining weighted-average performance period of the restricted stock units was 1.7 years at December 31, 2017.
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,
2017
2016
2015
$
12,687
$
8,715
$
5,661
3,103
5,931
2,127
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, 2017, 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 %
97
TCF's restricted stock award and stock option transactions since December 31, 2014 under the Omnibus Incentive
Plan and the Incentive Stock Program were as follows:
Outstanding at December 31, 2014
2,858,494
$ 6.16
Restricted Stock Awards
Shares
Grant Date Fair
Value Range
Weighted-
average
Grant Date
Fair Value
786,933
12.86
—
— -
(156,332)
(216,009)
899,000
(230,486)
(405,425)
—
— -
583,388
13.96
—
— -
(577,020)
(902,880)
-
-
-
-
-
-
6.80
9.65
6.16
9.48
-
-
-
-
6.16
9.65
7.73
7.73
9.36
7.73
-
-
-
$ 16.02
$
16.28
—
15.96
15.96
16.28
13.24
—
15.96
15.96
16.28
19.42
—
15.87
16.02
19.42
12.73
14.45
—
13.20
13.16
13.09
12.13
—
13.59
13.10
12.81
16.47
—
11.38
13.65
13.65
N.A.
Stock Options
Weighted-
average
Remaining
Contractual
Life in Years
Weighted-
average
Exercise
Price
Shares
1,579,000
—
(200,000)
—
—
2.98
$
—
—
—
—
1,379,000
2.17
—
(857,000)
(118,000)
—
404,000
—
(38,000)
—
—
366,000
366,000
—
—
—
—
1.06
—
—
—
—
0.06
13.91
—
12.85
—
—
14.07
—
13.04
15.75
—
15.75
—
15.75
—
—
15.75
15.75
Outstanding at December 31, 2015
3,273,086
Outstanding at December 31, 2016
3,536,175
Granted
Exercised
Forfeited/canceled
Vested
Granted
Exercised
Forfeited/canceled
Vested
Granted
Exercised
Forfeited/canceled
Vested
Outstanding at December 31, 2017
2,639,663
Exercisable at December 31, 2017
N.A.
N.A. Not Applicable.
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 Directors 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, 2017, the fair
value of the assets in these plans totaled $15.7 million and included $12.0 million invested in TCF common stock,
compared with a total fair value of $14.0 million, including $10.5 million invested in TCF common stock at
December 31, 2016. The plans' assets invested in TCF common stock are held in trust and are included in treasury
stock and other. See Note 15. Equity for further information on treasury stock and other.
TCF Employees Deferred Stock Compensation Plan The TCF Employees Deferred Stock Compensation 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 $9.6 million and $35.6 million at December 31, 2017 and 2016, respectively. The
plan's assets invested in TCF common stock are held in trust and are included in treasury stock and other. See Note
15. Equity for further information on treasury stock and other.
Upon resignation, death, disability or termination of a deferred compensation plan participant or based on other
contractual requirements, the plan participant's assets are distributed.
98
Note 18. Employee Benefit Plans
TCF maintains four employee benefit plans: (i) the TCF 401K Plan (the "401K"), (ii) the TCF 401K Supplemental Plan
(the "SERP"), (iii) the TCF Cash Balance Pension Plan (the "Pension Plan") and (iv) the Postretirement Plan.
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"). Effective January 1, 2018, participants could
make contributions of up to 50% of their covered compensation on a tax-deferred and/or after-tax basis, subject to the
annual covered compensation limitation imposed by the 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, 2017, the fair value of the assets in the 401K totaled
$346.8 million and included $164.9 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 $12.3 million,
$12.6 million and $10.6 million in 2017, 2016 and 2015, respectively.
TCF 401K Supplemental Plan The SERP, a non-qualified plan, allows certain employees to contribute up to 50% of
their salary and bonus. TCF matching contributions to this plan totaled $1.2 million, $1.7 million and $1.0 million in
2017, 2016 and 2015, 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, 2017, the fair value of the assets in the plan totaled $52.7 million and included $26.0 million invested
in TCF common stock, compared with a total fair value of $48.2 million, including $27.9 million invested in TCF common
stock at December 31, 2016. The plan's assets invested in TCF common stock are held in trust and included in treasury
stock and other. See Note 15. Equity for further information on treasury stock and other.
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 U.S. 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.
99
Postretirement Plan TCF provides health care benefits for eligible retired employees. 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,
2017
2016
2017
2016
$
33,174
$
35,953
$
4,164
$
4,570
1,138
765
(3,688)
31,389
39,377
1,174
(3,688)
—
1,281
(625)
(3,435)
33,174
40,914
1,898
(3,435)
—
36,863
39,377
133
(248)
(332)
3,717
—
—
(332)
332
—
151
(211)
(346)
4,164
—
—
(346)
346
—
$
$
$
5,474
$
6,203
$
(3,717) $
(4,164)
5,474
$
6,203
$
(3,717) $
(4,164)
—
—
(193)
(239)
5,474
$
6,203
$
(3,910) $
(4,403)
The accumulated benefit obligation for the Pension Plan was $31.4 million and $33.2 million at December 31, 2017
and 2016, respectively.
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 on 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.
100
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,
2017
2016
$
26,473
$
705
63
26,121
2,430
65
4,613
5,766
4,995
$
36,849
$
4,989
39,371
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,
2017
2016
2015
$
$
(239) $
(285) $
46
46
(193) $
(239) $
(331)
46
(285)
The Pension Plan does not have any accumulated other comprehensive income (loss).
The net periodic benefit plan (income) cost included in compensation and employee benefits expense for the Pension
Plan and the Postretirement Plan were as follows:
(In thousands)
Interest cost
Return 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,
2017
2016
2015
1,138
$
1,281
$
(1,174)
765
729
(1,898)
(625)
$
(1,242) $
1,216
447
(1,436)
227
Postretirement Plan
Year Ended December 31,
2017
2016
2015
133
$
151
$
(248)
(46)
(211)
(46)
(161) $
(106) $
154
(173)
(46)
(65)
$
$
$
$
Pension Plan actual return on plan assets, net of administrative expenses was 3.2% and 4.9% in 2017 and 2016,
respectively, and a loss of 1.0% in 2015.
101
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,
2017
2016
2015
2017
2016
2015
3.60%
3.75%
3.25%
3.40%
3.50%
3.25%
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, 2017 and are expected to be recognized as components of net periodic
benefit cost during 2018.
The actuarial assumptions used in the Pension Plan valuation are reviewed annually. The expected long-term rate of
return on plan assets is determined by reference to historical market returns and future expectations. The 10-year
expected average return of the index consistent with the Pension Plan's current investment strategy was 2.0%, 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:
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.
Pension Plan
Postretirement Plan
Year Ended December 31,
Year Ended December 31,
2017
2016
2017
2016
3.30%
3.60%
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
3.15%
5.7
4.5
2038
3.40%
5.8
4.5
2038
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 6.5 and 6.9 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
$
119
(5)
(161)
For 2017, TCF is eligible to contribute up to $11.0 million to the Pension Plan until the 2017 federal income tax return
extended due date under various IRS funding methods. During 2017, 2016 and 2015, TCF made no cash contributions
to the Pension Plan. TCF does not expect to be required to contribute to the Pension Plan in 2018. TCF contributed
$0.3 million, $0.3 million and $0.4 million to the Postretirement Plan in 2017, 2016 and 2015, respectively. TCF expects
to contribute $0.5 million to the Postretirement Plan in 2018. TCF currently has no plans to pre-fund the Postretirement
Plan in 2018.
102
The expected future benefit payments used to determine projected benefit obligations were as follows:
(In thousands)
2018
2019
2020
2021
2022
2023 - 2027
Pension Plan
Postretirement Plan
$
3,200
$
3,342
2,842
2,405
2,377
9,844
454
428
402
376
351
1,387
Note 19. 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,
2017
2016
$
$
1,484,065
$
1,425,585
1,033,973
126,249
2,644,287
12,992
898,809
125,648
2,450,042
8,782
2,657,279
$
2,458,824
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 mortgages.
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 2021. 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.
103
Note 20. Derivative Instruments
Derivative instruments were as follows:
(In thousands)
Derivative Assets:
Derivatives designated as hedges:
Interest rate contracts
Derivatives not designated as hedges:
Interest rate contracts
Interest rate lock commitments
Total derivative assets
Derivative Liabilities:
Derivatives designated as hedges:
Forward foreign exchange 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, 2017
Notional
Amount
Gross Amounts
Recognized
Gross Amounts
Offset
Net Amount
Presented
$
150,000
$
405
$
(405) $
—
169,377
17,974
1,392
223
(52)
—
$
2,020
$
(457) $
1,340
223
1,563
$
77,879
$
1,744
$
(1,744) $
—
330,928
423,006
13,804
41
4,619
1,688
615
—
(4,282)
(457)
(615)
—
337
1,231
—
—
$
8,666
$
(7,098) $
1,568
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
104
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
2017
2016
2015
Year Ended December 31,
Other non-interest income
$
(609) $
(1,178) $
Other non-interest income
808
1,140
(142)
209
Forward foreign exchange contracts
Other non-interest expense
(15,748)
(13,689)
74,292
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)
(73)
(268)
(311)
(419)
71
(629)
431
4
—
(16,201) $
(14,704) $
74,794
(4,430) $
(4,430) $
(1,213) $
(1,213) $
7,613
7,613
$
$
$
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, 2017 and 2016, credit risk-related contingent features existed on forward foreign exchange contracts
with a notional value of $39.8 million and $78.1 million, respectively. 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 $0.8 million and
$1.6 million in additional collateral at December 31, 2017 and 2016, respectively. There were $0.4 million of forward
foreign exchange contracts containing credit risk-related features in a net liability position at December 31, 2017 and
none at December 31, 2016.
At December 31, 2017, TCF had posted $7.6 million, $7.5 million and $1.4 million of cash collateral related to its interest
rate contracts, forward foreign exchange contracts and other contracts, respectively.
105
Note 21. 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 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, goodwill, other intangible assets, 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.
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 securities, categorized as Level 3, is estimated using probability of loss based on risk rating definitions. 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 Held for Sale Loans held for sale are generally carried at the lower of cost or fair value. Estimated fair values
are based on recent loan sale transactions and any available price quotes on loans with similar coupons, maturities
and credit quality. Certain other loans 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
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.
106
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.
Derivative Instruments
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 contracts with commercial banking customers to facilitate their
respective risk management strategies. Certain of these interest rate contracts are simultaneously hedged by offsetting
interest rate contracts 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 interest rate
contracts, 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 TCF's interest rate lock commitments are derivative instruments that are recorded
at fair value using an internal valuation model that utilizes estimated rates of successful loan closings and quoted
investor prices. While this model uses both Level 2 and 3 inputs, TCF has determined that the inputs significant in the
valuation of these commitments fall within Level 3 and therefore they are categorized as Level 3.
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 swap agreement is based on TCF's estimated exposure related to the Visa covered litigation
through a probability analysis of the funding and estimated settlement amounts.
Forward Loan Sales Commitments TCF enters into forward loan sales commitments to sell certain consumer real
estate loans. 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 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.
107
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
stock and other equity, and U.S. Treasury notes. The fair value of these assets, categorized as Level 1, is based on
prices obtained from independent asset pricing services based on active markets. The fair value of the liabilities equals
the fair value of the assets.
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.
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, 2017
Level 1
Level 2
Level 3
Total
U.S. Government sponsored enterprises and federal agencies
$
— $
894,685
$
— $
894,685
6
—
3,356
21,386
—
223
68
—
6
814,327
3,356
21,386
1,797
223
68
29,962
25,039
$ 1,765,810
— $
—
615
5
—
6,363
1,688
615
5
29,962
38,633
Other
Obligations of states and political subdivisions
Loans held for sale
Interest-only strips
Interest rate contracts(1)
Interest rate lock commitments(1)
Forward loan sales commitments
—
—
—
—
—
—
—
Assets held in trust for deferred compensation plans
29,962
—
814,327
—
—
1,797
—
—
—
Total assets
Forward foreign exchange contracts(1)
Interest rate contracts(1)
Other contracts(1)
Forward loan sales commitments
Liabilities held in trust for deferred compensation plans
Total liabilities
Non-recurring Fair Value Measurements:
Loans
Other real estate owned:
Consumer
Commercial
Repossessed and returned assets
Total non-recurring fair value measurements
$
$
$
$
$
$
$
29,962
$ 1,710,809
— $
—
—
—
29,962
6,363
1,688
—
—
—
29,962
$
8,051
$
620
$
— $
— $
72,287
$
72,287
—
—
—
—
—
3,669
13,951
85
4,388
13,951
85
8,057
— $
3,669
$
90,711
$
94,380
(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.
108
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
— $
—
21
619
13
—
469
3,256
21
619
13
23,363
27,741
(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 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)
Other contracts(1)
Forward loan sales commitments
Liabilities held in trust for deferred compensation plans
Total liabilities
Non-recurring Fair Value Measurements:
Securities held to maturity
Loans
Other real estate owned:
Consumer
Commercial
$
$
$
$
$
$
23,363
$ 1,429,419
— $
—
—
—
—
23,363
469
3,256
—
—
—
—
23,363
$
3,725
$
653
$
— $
— $
2,400
$
2,400
—
—
—
—
—
—
113,954
113,954
25,751
3,874
25,751
3,874
Repossessed and returned assets
Total non-recurring fair value measurements
5,567
151,546
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.
148,779
— $
2,767
2,767
2,800
—
$
$
$
(1)
Management assesses the appropriate classification of financial assets and liabilities within the fair value hierarchy
by monitoring the level of available 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 2017, 2016 or 2015.
109
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
Held for Sale
Interest-only
Strips
Interest
Rate Lock
Commitments
Other
Contracts
Forward
Loan Sales
Commitments
Asset (liability) balance, December 31, 2014
$
55
$
3,308
$
69,789
$
285
$
(621) $
(23)
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
Asset (liability) balance, December 31, 2016
Total net gains (losses) included in:
Net income
Other comprehensive income (loss)
Sales
Originations
—
—
—
(21)
34
—
—
—
—
(16)
18
—
—
—
—
(68)
(289,751)
297,079
—
10,568
(48)
—
(343,949)
339,930
(3)
6,498
129
—
(215,381)
212,509
6,960
—
7,495
(39,912)
44,332
2,980
159
—
22,620
(29,939)
40,152
3,939
(452)
—
3,377
Principal paydowns / settlements
(12)
(399)
(25,630)
431
—
—
—
716
—
—
—
316
(305)
(419)
(629)
—
—
—
—
297
—
—
—
315
(619)
288
—
—
—
265
96
—
—
—
—
361
(74)
(310)
(298)
—
—
—
—
—
—
—
314
—
—
—
—
63
Asset (liability) balance, December 31, 2017
$
6
$
3,356
$
21,386
$
223
$
(615) $
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,
2017
2016
$
$
3,356
$
3,268
88
$
6,498
6,563
(65)
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, 2017 or 2016.
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 $4.9 million, $7.6 million and $6.3 million for 2017, 2016 and 2015, respectively, and are 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.
110
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, 2017 and 2016, 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 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, 2017
Level 1
Level 2
Level 3
Total
$
82,644
$
— $
82,644
$
— $
82,644
161,576
134,752
4,819,696
2,751,285
809,908
2,300,479
2,739,754
3,199,639
22,517
(171,041)
19,179
—
—
—
—
—
—
—
—
—
—
—
162,826
—
—
—
—
—
—
—
—
—
—
2,800
139,458
165,626
139,458
4,916,475
2,710,237
776,989
2,260,692
2,723,045
3,197,794
21,129
—
18,595
4,916,475
2,710,237
776,989
2,260,692
2,723,045
3,197,794
21,129
—
18,595
Total financial instrument assets
$ 16,870,388
$
— $
245,470
$ 16,767,214
$ 17,012,684
Financial instrument liabilities:
Deposits
Long-term borrowings
$ 18,335,002
$ 13,352,731
$ 5,023,526
$
— $ 18,376,257
1,249,449
—
1,255,333
—
1,255,333
Total financial instrument liabilities
$ 19,584,451
$ 13,352,731
$ 6,278,859
$
— $ 19,631,590
Financial instruments with off-balance sheet risk:(3)
Commitments to extend credit
Standby letters of credit
Total financial instruments with off-balance sheet risk
$
$
19,423
$
— $
19,423
$
— $
19,423
(83)
—
(83)
—
(83)
19,340
$
— $
19,340
$
— $
19,340
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.
111
(In thousands)
Financial instrument assets:
Investments
Securities held to maturity
Loans 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.
112
Note 22. 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 attributable to TCF Financial Corporation
Preferred stock dividends
Impact of preferred stock redemption(1)
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
Warrants
$
$
$
$
Year Ended December 31,
2017
2016
2015
268,637
$
212,124
$
19,904
5,779
242,954
42
19,388
—
192,736
49
197,123
19,388
—
177,735
45
242,912
$
192,687
$
177,690
168,679,501
167,219,964
165,696,678
1.44
$
1.15
$
1.07
242,912
$
192,687
$
177,690
168,679,501
167,219,964
165,696,678
353,610
28,625
27,508
505,162
82,325
—
335,193
210,049
—
Weighted-average common shares outstanding for diluted earnings per
common share
169,089,244
167,807,451
166,241,920
Diluted earnings per common share
$
1.44
$
1.15
$
1.07
(1) Represents the amount of deferred stock issuance costs originally recorded in preferred stock upon the issuance of the Series A Preferred Stock that were
reclassified to retained earnings during 2017 as the Company redeemed all outstanding Series A Preferred Stock.
For 2017, there were 0.8 million of outstanding shares related to non-participating restricted stock that were not included
in the computation of diluted earnings per common share because they were anti-dilutive. For 2016 and 2015, there
were 4.7 million and 4.5 million, respectively, of outstanding shares related to warrants and non-participating restricted
stock that were not included in the computation of diluted earnings per common share because they were anti-dilutive.
113
Note 23. Other Non-interest Expense
Other non-interest expense was as follows:
(In thousands)
Goodwill impairment
Professional fees
Advertising and marketing
Severance
Loan and lease processing
Outside processing
Card processing and issuance costs
FDIC insurance
Other
Total other non-interest expense
Note 24. Business Segments
Year Ended December 31,
2017
2016
2015
$
73,041
$
— $
33,070
26,927
22,299
22,149
20,473
18,325
16,049
19,335
22,264
5,280
26,193
15,313
15,856
15,912
113,123
111,267
$
345,456
$
231,420
$
—
19,615
22,782
4,942
24,641
14,332
16,591
20,262
106,090
229,255
The Company's 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 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 capital management, 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.
114
Certain information for each of TCF's reportable segments, including reconciliations of TCF's consolidated totals, was
as follows:
(In thousands)
At or For the Year Ended December 31, 2017:
Net interest income (expense)
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
Impact of preferred stock redemption
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, 2016:
Net interest income (expense)
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 (expense)
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
$
$
$
$
$
$
$
$
$
$
$
$
$
$
Consumer
Banking
Wholesale
Banking
Enterprise
Services
Consolidated
$
574,610
$
359,281
$
(8,653) $
48,227
289,995
743,729
49,513
23,136
—
—
—
20,216
157,985
277,431
(68,883)
288,502
10,147
—
—
—
319
38,774
(14,254)
(32,854)
—
19,904
5,779
925,238
68,443
448,299
1,059,934
(33,624)
278,784
10,147
19,904
5,779
23,136
8,894,798
$
$
278,355
11,571,587
$
$
(58,537) $
242,954
2,535,774
$
23,002,159
456,325
$
520,801
$
41,931
$
1,019,057
289,995
157,985
319
448,299
746,320
$
678,786
$
42,250
$
1,467,356
559,851
$
343,653
$
(55,398) $
50,819
336,991
652,460
69,523
124,040
—
—
15,055
128,881
247,115
70,805
139,559
9,593
—
124,040
8,885,412
$
$
129,966
10,391,305
$
$
44,328
320,399
645,939
61,384
105,462
—
—
8,616
119,779
244,921
70,127
136,049
8,700
—
105,462
9,169,093
$
$
127,349
9,569,760
$
$
—
28
10,312
(23,800)
(41,882)
—
19,388
(61,270) $
—
1,820
3,887
(22,639)
(35,688)
—
19,388
(55,076) $
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
2,164,609
$
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) $
1,950,756
$
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
115
Note 25. 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 banks
Investment in bank subsidiary
Accounts receivable from bank subsidiary
Other assets
Total assets
Liabilities and Equity:
Accrued expenses and 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 bank
subsidiary
Income tax benefit
Income before equity in undistributed earnings of bank subsidiary
Equity in undistributed earnings of bank subsidiary
Net income
Preferred stock dividends
Impact of preferred stock redemption
At December 31,
2017
2016
$
$
$
$
80,471
$
2,563,552
22,015
5,739
69,711
2,338,885
19,967
9,476
2,671,777
$
2,438,039
9,020
$
9,020
2,662,757
2,671,777
$
10,556
10,556
2,427,483
2,438,039
Year Ended December 31,
2017
2016
2015
$
183
$
155
$
306
65,000
15,660
13
80,673
17,801
275
1,785
19,861
60,995
1,575
62,570
206,067
268,637
19,904
5,779
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
—
Net income available to common stockholders
$
242,954
$
192,736
$
177,735
116
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,
2017
2016
2015
$
268,637
$
212,124
$
197,123
Equity in undistributed earnings of bank subsidiary
(206,067)
(151,790)
(171,959)
Depreciation and amortization
Provision (benefit) for deferred income taxes
Gains on sales of assets, net
Net change in accounts receivable from bank subsidiary, other assets and
accrued expenses and other liabilities
Net cash provided by (used in) operating activities
Cash flows from investing activities:
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:
Net proceeds from public offering of Series C preferred stock
Redemption of Series A preferred stock
Repurchases of common stock
Common shares sold to TCF employee benefit plans
Dividends paid on preferred stock
Dividends paid on common stock
Stock compensation tax (expense) benefit
Exercise of stock options
Net cash provided by (used in) financing activities
Net change in cash and due from banks
Cash and due from banks at beginning of period
Cash and due from banks at end of period
9,110
4,690
—
(5,902)
70,468
(23)
—
(23)
169,302
(172,500)
(9,163)
23,254
(19,904)
(50,617)
—
(57)
(59,685)
10,760
69,711
4,734
(592)
—
589
65,065
(69)
22
(47)
—
—
—
5,838
(19,388)
(50,182)
(377)
(701)
(64,810)
208
69,503
$
80,471
$
69,711
$
2,147
1,595
(50)
(2,434)
26,422
(65)
92
27
—
—
—
24,835
(19,388)
(37,302)
558
2,570
(28,727)
(2,278)
71,781
69,503
TCF Financial's operations are conducted through its banking subsidiary, TCF Bank. As a result, TCF Financial'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, 2017, TCF Bank could
pay a total of approximately $529.8 million in dividends to TCF Financial without prior regulatory approval.
117
Note 26. 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 federal regulators 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 (the "Court"), captioned Consumer Financial Protection Bureau v. TCF National Bank, alleging violations
of the Consumer Financial Protection Act ("CFPA") 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. On September 8,
2017, the Court issued a ruling on the motion made by TCF Bank to dismiss the complaint of the CFPB. In its ruling,
the Court granted TCF Bank's motion to dismiss the CFPB's Regulation E claims and also dismissed the CFPB's unfair,
deceptive and abusive conduct claims under the CFPA for periods prior to July 21, 2011. The Court did not grant TCF
Bank's motion to dismiss CFPA claims for periods on or after July 21, 2011. TCF Bank rejects the claims made by the
CFPB in its complaint and intends to continue 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) TCF 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.
118
Note 27. 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, 2017:
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
$
24,244
$
(8,857) $
15,387
Reclassification of net (gains) losses from accumulated other comprehensive
income (loss)
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 from accumulated other comprehensive
income (loss)
Total other comprehensive income (loss)
Year Ended December 31, 2016:
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 from accumulated other comprehensive
income (loss)
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 from accumulated other comprehensive
income (loss)
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 from accumulated other comprehensive
$
$
$
$
income (loss)
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 from accumulated other comprehensive
income (loss)
Total other comprehensive income (loss)
208
24,452
(4,430)
4,921
(46)
859
(7,998)
1,684
—
17
24,897
$
(6,297) $
1,067
16,454
(2,746)
4,921
(29)
18,600
(32,408) $
12,323
$
(20,085)
1,913
(30,495)
(1,213)
1,300
(46)
(722)
11,601
457
—
17
1,191
(18,894)
(756)
1,300
(29)
(30,454) $
12,075
$
(18,379)
(2,523) $
955
$
(1,568)
1,159
(1,364)
7,613
(8,304)
(46)
(407)
548
(2,900)
—
17
$
(2,101) $
(2,335) $
752
(816)
4,713
(8,304)
(29)
(4,436)
(1) Foreign investments are deemed to be permanent in nature and therefore TCF does not provide for taxes on foreign currency translation adjustments.
Reclassifications of net (gains) losses to net income for securities available for sale and interest-only strips were
recorded in the Consolidated Statements of Income in interest income for those securities that were previously
transferred to held to maturity, in gains (losses) on securities, net for sales of securities and in other non-interest
expense for interest-only strips. These reclassifications to net income are included in the table above in the line called
Reclassification of net (gains) losses from accumulated other comprehensive income (loss). During 2014, TCF
transferred $191.7 million of available for sale mortgage-backed securities to held to maturity. At December 31, 2017
and 2016, the unrealized holding loss on the transferred securities retained in accumulated other comprehensive
income (loss) totaled $12.1 million and $13.0 million, respectively. These amounts are amortized over the remaining
lives of the transferred securities. See Note 18. Employee Benefit Plans, for further information regarding TCF's
recognized postretirement prior service cost. The tax effect of these reclassifications was recorded in income tax
expense in the Consolidated Statements of Income.
119
The components of accumulated other comprehensive income (loss) were as follows:
(In thousands)
At or For the Year Ended December 31, 2017:
Securities
Available for
Sale and
Interest-only
Strips
Net
Investment
Hedges
Foreign
Currency
Translation
Adjustment
Recognized
Postretirement
Prior
Service Cost
Total
Balance, beginning of period
$
(28,601) $
6,493
$
(11,764) $
147
$
Other comprehensive income (loss)
Amounts reclassified from accumulated other
comprehensive income (loss)
Net other comprehensive income (loss)
Adoption impact of ASU 2018-02
Balance, end of period
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
$
$
$
$
$
15,387
1,067
16,454
(4,206)
(2,746)
—
(2,746)
789
4,921
—
4,921
—
—
(29)
(29)
25
(16,353) $
4,536
$
(6,843) $
143
$
(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
$
(33,725)
17,562
1,038
18,600
(3,392)
(18,517)
(15,346)
(19,541)
1,162
(18,379)
(33,725)
(10,910)
(5,159)
723
(4,436)
(15,346)
120
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,
2017
Sep. 30,
2017
Jun. 30,
2017
Mar. 31,
2017
Dec. 31,
2016
Sep. 30,
2016
Jun. 30,
2016
Mar. 31,
2016
Net interest income
$ 241,860 $ 234,103 $ 227,161 $ 222,114 $ 211,446 $ 212,018 $ 212,984 $ 211,658
Provision for credit losses
22,259
14,545
19,446
12,193
19,888
13,894
13,250
18,842
Quarter Ended
Net interest income after provision for
credit losses
Non-interest income
Non-interest expense
Income (loss) before income tax
expense (benefit)
Income tax expense (benefit)
Income after income tax expense
(benefit)
Income attributable to non-controlling
interest
Net income attributable to TCF Financial
Corporation
Preferred stock dividends
Impact of preferred stock redemption
Net income available to common
stockholders
Earnings per common share:
Basic
Diluted
$
$
$
219,601
219,558
207,715
209,921
191,558
198,124
199,734
192,816
120,892
109,230
114,663
103,514
115,668
119,674
117,956
112,602
347,806
235,035
233,087
244,006
225,359
228,878
227,316
228,334
(7,313)
(110,965)
93,753
30,704
89,291
25,794
69,429
20,843
81,867
29,762
88,920
30,257
90,374
29,706
77,084
26,803
103,652
63,049
63,497
48,586
52,105
58,663
60,668
50,281
2,253
2,521
3,065
2,308
2,013
2,371
2,974
2,235
101,399
60,528
60,432
3,746
—
6,464
5,779
4,847
—
46,278
4,847
—
50,092
4,847
—
56,292
4,847
—
57,694
4,847
—
48,046
4,847
—
97,653 $
48,285 $
55,585 $
41,431 $
45,245 $
51,445 $
52,847 $
43,199
0.58 $
0.57 $
0.29 $
0.29 $
0.33 $
0.33 $
0.25 $
0.25 $
0.27 $
0.27 $
0.31 $
0.31 $
0.32 $
0.31 $
0.26
0.26
121
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 on that
evaluation, management concluded that the Company's disclosure controls and procedures were effective as of
December 31, 2017.
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, 2017,
that materially affected, or are reasonably likely to materially affect, TCF's internal control over financial reporting.
122
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, 2017. 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, 2017.
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, 2017.
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.
123
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
TCF Financial Corporation:
Opinion on Internal Control Over Financial Reporting
We have audited TCF Financial Corporation's and subsidiaries’ (the "Company") internal control over financial reporting
as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by
the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained,
in all material respects, effective internal control over financial reporting as of December 31, 2017, based on criteria
established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) ("PCAOB"), the consolidated statements of financial condition of the Company as of December 31, 2017 and
2016, 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, 2017, and the related notes (collectively, the "consolidated financial
statements"), and our report dated February 23, 2018 expressed an unqualified opinion on those consolidated financial
statements.
Basis for Opinion
The Company'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 are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. 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 of internal control over financial reporting 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.
Definition and Limitations of Internal Control Over Financial Reporting
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.
Minneapolis, Minnesota
February 23, 2018
124
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 2018 Annual Meeting of Stockholders to be held on April 25, 2018 (the "2018 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 2018 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 2018 Proxy and is incorporated herein by reference: Election of Directors - Background of the Nominees;
Corporate Governance - Board Committees, Committee Memberships, and Meetings in 2017; 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, Dr. Sullivan
and Mr. Zona and the other directors is set forth in the section Election of Directors - Background of the Nominees in
TCF's 2018 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.
125
Item 11. Executive Compensation
Information regarding compensation of directors and executive officers of TCF is set forth in the following sections of
TCF's 2018 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
2018 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 2018 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 2018 Proxy
and is incorporated herein by reference.
126
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, 2017 and 2016
Consolidated Statements of Income for each of the years in the three-year period ended December 31,
2017
Consolidated Statements of Comprehensive Income for each of the years in the three-year period ended
December 31, 2017
Consolidated Statements of Equity for each of the years in the three-year period ended December 31, 2017
Consolidated Statements of Cash Flows for each of the years in the three-year period ended
December 31, 2017
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
21
62
63
64
65
66
67
68
121
123
124
130
127
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,
Chairman, President and Chief Executive Officer
(Principal Executive Officer)
Dated: February 23, 2018
128
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
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
/s/ Karen L. Grandstand
Karen L. Grandstrand
Director
/s/ Thomas F. Jasper
Thomas F. Jasper
Director, Vice Chairman and Chief Operating Officer
/s/ George G. Johnson
George G. Johnson
Director
/s/ Richard H. King
Richard H. King
Director
/s/ Vance K. Opperman
Vance K. Opperman
Lead Director
/s/ James M. Ramstad
James M. Ramstad
Director
/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
Director
Director
Director
129
Date
February 23, 2018
February 23, 2018
February 23, 2018
February 23, 2018
February 23, 2018
February 23, 2018
February 23, 2018
February 23, 2018
February 23, 2018
February 23, 2018
February 23, 2018
February 23, 2018
February 23, 2018
February 23, 2018
February 23, 2018
February 23, 2018
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(a)-7*
10(a)-8*#
10(b)*
10(b)-1*
10(b)-2*
10(b)-3*
10(c)
10(d)*
10(e)*
10(e)-1*
10(f)*#
10(g)*
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 November 6, 2017 (No. 171178634)]
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. 091243195)]
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 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)]
Form of Stock Certificate representing the Series C Non-Cumulative Perpetual Preferred Stock [incorporated by reference to
Exhibit 4.1 to TCF Financial Corporation’s Current Report on Form 8-K filed September 14, 2017 (No. 171084863)]
Deposit Agreement dated September 14, 2017 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 4.2 to TCF Financial Corporation’s Current Report on Form 8-K filed September 14, 2017 (No. 171084863)]
Form of Depositary Receipt [included as part of Exhibit 4.2 to TCF Financial Corporation’s Current Report on Form 8-K filed
September 14, 2017 (No. 171084863)]
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 [incorporated by reference to Exhibit 10
(a) to TCF Financial Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 2016 (No. 17624401)]
Form of Restricted Stock Award Agreement under the TCF Financial 2015 Omnibus Incentive Plan [incorporated by reference to
Exhibit 10(a)-1 to TCF Financial Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 2016 (No.
17624401)]
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)]
Form of Amended and Restated 2017 Management Incentive Plan - Executive Award as executed by certain executives of TCF
[incorporated by reference to Exhibit 10.1 to TCF Financial Corporation’s Current Report on Form 8-K filed July 21, 2017 (No.
17976977)]
Form of TCF Financial Corporation Management Incentive Plan - Executive Award
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)]
TCF 401K Supplemental Plan, as amended effective October 18, 2016 [incorporated by reference to Exhibit 10(e)-1 to TCF
Financial Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 2016 (No. 17624401)]
Trust Agreement for TCF 401K Plan Supplemental Plan effective November 1, 2017, by and between TCF Financial Corporation
and Reliance Trust Company
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)]
130
10(h)*
10(i)*
10(j)*
10(k)*
10(k)-1*
10(k)-2*
10(l)*
10(l)-1*
10(m)*
10(n)*#
10(o)*
10(p)*
12(a)#
12(b)#
21#
23#
31.1#
31.2#
32.1#
32.2#
101#
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)]
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
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, 2017, 2016, 2015, 2014 and 2013
Consolidated Ratios of Earnings to Fixed Charges and Preferred Stock Dividends for years ended December 31, 2017, 2016,
2015, 2014 and 2013
Subsidiaries of TCF Financial Corporation (as of December 31, 2017)
Consent of KPMG LLP dated February 23, 2018
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, 2017, 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
131
CORPORATE
INFORMATION
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 TCF.
At December 31, 2017, TCF had approximately 171.7 million
shares of common stock outstanding.
INVESTOR/ANALYST CONTACT
Jason Korstange
Senior Vice President
Investor Relations
(952) 745-2755
Justin Horstman
Vice President
Investor Relations
(952) 745-2756
MEDIA CONTACT
Mark Goldman
Senior Vice President
Corporate Communications
(952) 475-7050
AVAILABLE INFORMATION
Please visit our website at http://ir.tcfbank.com for free
access to TCF investor information, news releases, investor
presentations, quarterly conference calls, annual reports,
and SEC filings. Information may also be obtained, free of
charge, from:
TCF Financial Corporation
Investor Relations
200 Lake Street East
Mail Code: EX0-02-C
Wayzata, MN 55391-1693
(952) 745-2760
ANNUAL MEETING
The Annual Meeting of Stockholders of TCF will be held
on Wednesday, April 25, 2018, 4:00 p.m. (local time) at the
Marriott Minneapolis West, 9960 Wayzata Boulevard,
St. Louis Park, Minnesota.
TRANSFER AGENT AND REGISTRAR
Computershare Trust Company, N.A.
PO Box 505000
Louisville, KY 40233
(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 505000
Louisville, KY 40233
(800) 443-6852
www.computershare.com/investor
A-2
STOCK PRICE PERFORMANCE (Dollars)
Stock Price*
Dividends*
Stock Split 9/3/04
Stock Split 11/28/97
Stock Split 11/30/95
$35
30
25
20
15
10
5
$1.50
1.25
1.00
0.75
0.50
0.25
6-86
12-87
12-89
12-91
12-93
12-95
12-97
12-99
12-01
12-03
12-05
12-07
12-09
12-11
12-13
12-15
12-17
*Stock split adjusted
For more historical information on TCF’s stock price and dividend, visit http://ir.tcfbank.com.
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
Last Review
October 2017
Stable
Moody’s
Outlook
TCF National Bank:
Long-term Issuer
Long-term Deposits
Short-term Deposits
Preferred Stock
Subordinated Debt
BBB-
A-3
BBB
A-2
BB-
BBB-
Last Review
January 2018
Stable
Baa2
A2
Prime-1
Ba1
Baa2
A-3
EXECUTIVE MANAGEMENT TEAM
TCF FINANCIAL CORPORATION
TCF NATIONAL BANK
Consumer Banking
Executive Vice President,
Retail Banking
Kevin Miller
Executive Vice President,
Consumer Lending
Richard J. Chenitz
Executive Vice President,
Operations
Michael Shea
Executive Vice President,
Risk and Compliance
Claire M. Graupmann
Chief Operating Officer,
Auto Finance
Andrew B. Sturm
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
President
R. Patricia Kelly
President,
TCF Capital Funding
Joseph P. Gaffigan
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
A-4
BOARD OF DIRECTORS
Craig R. Dahl 5,8
Chairman and Chief
Executive Officer
Director since 2012
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
Karen L. Grandstrand 1,2,4,5,6,7
Shareholder,
Fredrikson & Byron, P.A.
Director since 2010
Thomas F. Jasper
Vice Chairman and
Chief Operating Officer
Director since 2012
George G. Johnson 2,3,6,7
CPA/Chairman,
George Johnson & Company and
George Johnson Consultants
Richard H. King 2,6,7,8
Executive Vice President,
Operations,
Thomson Reuters
Director since 1998
Director since 2014
Vance K. Opperman 1,2,4,5,6,7,8
President and
Chief Executive Officer,
Key Investment, Inc.
Director since 2009
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
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
1 Advisory Committee – TCF 401K Plan
2 Audit Committee
3 BSA and Compliance Committee
4 Compensation, Nominating and Corporate Governance Committee
5 Executive Committee
6 Finance Committee
7 Risk Committee
8 Technology Committee
A-5
OFFICES (as of December 31, 2017)
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 (38)
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)
MICHIGAN
Regional Office
17440 College Parkway
Livonia, MI 48152
Traditional Branches
Metro Detroit Area (49)
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-6
OUR MISSION
TCF strives to consistently deliver superior performance by
providing the essential means to enhance the rhythm of
customers’ lives and help them achieve their goals. Unified
by the passion to act as an ally of our customers, we lend
prudently in diverse, niche segments and fund these assets
through core deposits, both generated through a great
customer experience within our communities.
OUR VISION
We will be a sound,
well-capitalized, principled
bank that gathers core
deposits and lends under
the fundamental concept of
diversification that enables
us to consistently achieve
superior returns for our
employees, customers
and shareholders.
OUR VALUES
Lead with integrity
Be nimble
Build relationships
Be prudent
Create opportunities
Win as a passionate team
A-7
TCF Financial Corporation
200 Lake Street East
Wayzata, MN 55391-1693
tcfbank.com
TCFIR9368
E Printed on recycled paper. Please recycle.