TCF Financial Corporation
200 Lake Street East
Wayzata, MN 55391-1693
tcfbank.com
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TCF Financial Corporation
2018 Annual Report
Stockholder Information
Listing of Common Stock
Investor/Analyst Contact
The common stock of TCF Financial Corporation is listed
on the New York Stock Exchange under the symbol TCF.
Computershare Trust Company, N.A.
Transfer Agent
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
Timothy Sedabres
Senior Vice President
Investor Relations
(952) 745-2766
Justin Horstman
Vice President
Investor Relations
(952) 745-2756
Media Contact
Mark Goldman
Senior Vice President
Corporate Communications
(952) 475-7050
Annual Meeting
The Annual Meeting of Stockholders of TCF will be held
on Wednesday, April 24, 2019, 4:00 p.m. (local time) at the
DoubleTree by Hilton Minneapolis – Park Place,
1500 Park Place Boulevard, Minneapolis, Minnesota.
Available Information
Please visit our website at http://ir.tcfbank.com for 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
(952) 745-2760
investor@tcfbank.com
2018 Financial Highlights
14.74%
Adjusted return on average
tangible common equity (ROATCE)1
exceeded 2018 target range
(ROATCE1: 13.56%;
ROACE: 12.42%)
67.15%
Adjusted efficiency ratio1
within 2018 target range
(efficiency ratio: 69.34%)
$304
MILLION
Record net income
attributable to TCF
$1.5
BILLION
Total revenue
>100%
Total return to shareholders
through common stock dividends
and share repurchases
7.5%
Loan and lease growth
excluding auto finance2
(total loan and lease balances
declined 0.2%)
10.1%
Average non-interest bearing
deposit growth
1 See “Consolidated Financial Condition Analysis—Non-GAAP Financial Measures” in Item 7. “Management’s Discussion and Analysis of Financial Condition and
Results of Operation” of the accompanying 2018 Form 10-K for reconciliation of GAAP to non-GAAP measures
2 Calculated by subtracting auto finance balances of $2.0 billion and $3.2 billion at December 31, 2018 and December 31, 2017, respectively, from total loan and
lease balances of $19.1 billion at both December 31, 2018 and December 31, 2017
Financial Summary
Dollars in thousands, except per-share data
At or for the year ended December 31,
Operating Results
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
2016
2017
2018
$
848,106
$
925,238
$
992,007
465,900
448,299
470,885
1,314,006
1,373,537
1,462,892
65,874
68,443
46,768
909,887
1,059,934
1,014,400
338,245
116,528
9,593
212,124
19,388
–
245,160
(33,624)
10,147
401,724
86,096
11,270
268,637
304,358
19,904
5,779
11,588
3,481
Net income available to common stockholders
$
192,736
$
242,954
$
289,289
Period-end Balance Sheet Highlights
Total assets
Loans and leases
2016
2017
2018
$21,441,326
$23,002,159
$23,699,612
17,843,827
19,104,460
19,072,311
Loans and leases, excluding auto finance
15,196,086
15,904,821
17,090,034
Debt securities
Deposits
Per Common Share Information
Diluted earnings
Dividends declared
Book value per share
Tangible book value per share1
Financial Ratios
Return on average assets
Return on average common equity
Return on average tangible common equity1
Adjusted return on average tangible common equity1
Efficiency ratio
Adjusted efficiency ratio1
Net charge-offs as a percentage of average loans and leases
Non-performing assets as a percentage of total assets
Common equity Tier 1 capital ratio
1,604,749
1,870,594
2,618,917
17,242,522
18,335,002
18,903,686
$
2016
1.15
0.30
12.66
11.33
2016
1.05%
9.13
10.29
$
2017
1.44
0.30
13.96
12.92
2017
1.26%
10.80
15.73
69.25
77.17
0.26
1.06
10.24
0.24
0.59
10.79
$
2018
1.74
0.60
14.45
13.38
2018
1.37%
12.42
13.56
14.74
69.34
67.15
0.29
0.52
10.82
1 See “Consolidated Financial Condition Analysis—Non-GAAP Financial Measures” in Item 7. “Management’s Discussion and Analysis of Financial Condition and
Results of Operation” of the accompanying 2018 Form 10-K for reconciliation of GAAP to non-GAAP measures
1
Craig R. Dahl
Chairman, President and
Chief Executive Officer
Dear Shareholders:
TCF built on the positive momentum generated in 2017 to drive record net income in 2018. We delivered on
our adjusted return on capital and adjusted efficiency ratio commitments, reduced our risk profile through
the successful remix of our balance sheet, recognized the true value of our retail deposit base and generated
positive operating leverage for the organization.
As I look back at 2018 and think about our path moving
forward, I am most proud of how we are producing our
strong results. This includes our ability to execute on our
business strategies by competing as experts in all that we
do while working together with our customers to better
meet their financial needs.
Throughout 2018, we also became increasingly more forward-
looking as the Consumer Financial Protection Bureau (the
“CFPB”) and Office of the Comptroller of the Currency (the
“OCC”) matter was resolved and run-off of the auto finance
portfolio continued as planned. As a result, we positioned
ourselves to recently announce a transformational merger
of equals with Chemical Financial Corporation (“Chemical”).
We believe this will make us a premier Midwest bank with
the scale and profitability to enhance our ability to compete
and win in a continually evolving macro environment and
banking industry.
Delivering on commitments in 2018
We set out at the beginning of 2018 with two primary
objectives: lowering our efficiency ratio and improving our
return on capital. In fact, for the first time, we provided
formal targets for both metrics. Our rationale for doing
so was to clearly communicate our focus on improving in
areas we feel most directly impact our valuation. This focus
runs throughout the organization and is reflected in our
business plans to grow scalable businesses and leverage
our existing infrastructure, and is a key component in
our return on capital framework. In 2018, we reported an
adjusted efficiency ratio, excluding the impact of the
CFPB and OCC settlement and related expenses, of
67.15 percent*, within our target range of 66 percent to
68 percent. In addition, we reported an adjusted return
on average tangible common equity (“ROATCE”) of
14.74 percent*, exceeding our target range of 11.5 percent to
13.5 percent. This improvement in adjusted ROATCE was
achieved with higher common equity tier 1 capital, higher
net income and a reduced risk profile.
Throughout the year, we took several actions to optimize our
capital position as we redeemed higher-rate preferred stock,
doubled the common stock dividend and continued with our
share repurchase program. Even as we took these actions,
our common equity tier 1 capital grew over the course of
the year due to strong earnings and a balance sheet remix
toward more capital-efficient assets. Overall, we returned
over 100 percent of net income to shareholders via common
stock dividends and share repurchases.
2
Remixing the balance sheet
In late 2017, we made the decision to discontinue auto
finance loan originations and redeploy the run-off into
debt securities and other loans and leases to improve the
overall mix and drive higher returns over time. We were able
to generate interest-earning asset growth in 2018, even as
we remixed the balance sheet, while also increasing total
revenue. In addition, while total loan and lease balances
of $19.1 billion declined slightly during the year, balances
excluding the $1.2 billion of auto finance run-off increased
7.5 percent. Our outlook for continued profitable growth remains
strong as we compete as experts in our growth businesses.
By replacing much of the auto finance portfolio run-off,
our highest net charge-off portfolio, with debt securities,
our credit risk and liquidity profiles have improved
significantly. In 2018, provision for credit losses declined
32 percent, non-performing assets declined 10 percent
and our net charge-off rate was 0.29 percent, including
the auto finance portfolio and recoveries on previous
charge-offs related to consumer real estate non-accrual
loan sales. Shifting the mix of our balance sheet to higher
credit quality assets is important for us given where the
industry is in the credit cycle. As a result, the credit risk
profile of our balance sheet today is much lower than it
was several years ago.
The value of our retail-focused deposit base
Over the past few years, we have talked about how our retail-
focused deposit base sets us apart from peers and becomes
more valuable in a higher rate environment. This came to
fruition in 2018 due to our consumer deposits which made
up 83 percent of our deposit base. As interest rates increased
100 basis points in 2018, our cost of deposits in the fourth
quarter of 2018 increased just 26 basis points year-over-year.
While our overall deposit costs accelerated later in the year,
the increase was primarily driven by certificates of deposit
repricing at market rates and the use of promotional deposit
accounts to grow our customer base.
Deposit growth was driven by savings and non-interest
bearing deposit balances, which increased by $1.1 billion
in 2018. During the year, we focused on making it easier
to do business with TCF by continuing to invest in our
digital banking platform while enhancing the customer
experience. Our full-featured digital banking experience
now includes mobile deposits, advanced budgeting
tools and the ability for our customers to lock and
unlock their debit cards right from their mobile phones.
In addition, we have streamlined the online account
opening process by improving the user interface and
optimizing the platform for mobile devices. This is in
addition to previous enhancements including fingerprint
ID and facial recognition and instant issue debit cards.
As a result of these enhancements, we have been able to
attract new customers and expand our relationship with
existing customers while reducing attrition. We believe
we can continue to improve the customer experience
going forward, while leveraging investments into scalable
solutions and improving efficiencies across the company.
Generating positive operating leverage
A primary focus for me since I became CEO three years
ago has been to continue to grow our very strong revenue
base, but do so in a more efficient way. This is why we
provided an adjusted efficiency ratio target in 2018. After
operating with an average efficiency ratio of approximately
70 percent over the past five years, our efforts to improve
operating leverage resulted in an adjusted efficiency ratio
of 67.15 percent in 2018*. We generated total revenue of
$1.5 billion, up 6.5 percent from 2017, while improving
the mix as net gains on sales of loans and servicing fee
income declined.
Expenses were well controlled in 2018 as we reinvested
cost savings from the auto finance business into talent
and technology throughout the organization. This included
enhancements to our digital banking platform, expansion
of our TCF Home Loans business and investments in
Diluted Earnings
per Common Share
3-year CAGR of 15%
$1.74
$1.44
$1.15
2016
2017
2018
3
various back office initiatives. Our focus on managing
toward an efficiency ratio, and not the expense dollars,
gives us the flexibility to be opportunistic as we execute on
our strategies. For example, because of our strong revenue
performance during the year, we were able to pull forward
select investments in 2018, allowing us to accelerate future
growth and returns while remaining within our adjusted
efficiency ratio target range. Continuing to drive positive
operating leverage will remain an important part of how we
manage the business going forward.
A look ahead
2018 marked a positive step for TCF as execution of our
strategies resulted in tangible progress toward increasing
our return on capital and improving our efficiency ratio.
While we are pleased with this progress, we are not
satisfied. This is why we are so excited about our pending
merger with Chemical. This partnership brings together
two companies that are complementary in terms of
expertise, products, capabilities and geographic footprint.
We believe this positions us to accelerate value creation for
shareholders by delivering top quartile revenue generation
and significant efficiency ratio improvement, all leading to
a top quartile return on capital.
We expect the merger to close later in 2019. In the
meantime, we remain focused on executing our business
Total Loans and Leases
Strong loan and lease growth
excluding run-off of auto finance portfolio
(Dollars in billions)
■ Auto finance
■ Loans and leases (excluding auto finance)
$17.8
$2.6
$19.1
$3.2
$15.2
$15.9
$19.1
$2.0
$17.1
2016
2017
2018
4
model, which is built on our low cost, retail deposit
base which funds our in-footprint and national lending
businesses. Our ability to provide an exceptional customer
experience, while competing as experts, will remain a core
part of who we are moving forward.
On the retail banking side, we are focused on enhancing
our products and services to attract new customers while
eliminating reasons for existing customers to leave. The
launch of our new digital banking platform has helped, but
there is more work to be done. We have initiatives in place
to add additional product features and enhance customer
engagement to expand relationships. Meanwhile, we are
utilizing tools to better understand our customers and their
financial goals so we can provide customized solutions across
our suite of financial products and services. Continued
growth of our valuable deposit franchise will be important for
us moving forward.
Our collection of lending businesses gives us the ability
to be selective in how and where we deploy capital while
allowing us to manage concentrations across products and
geographies. We have made significant investments in our
consumer real estate business that will benefit us moving
forward. With the acquisition of the assets of Rubicon
Mortgage Advisors, LLC in late 2017 and the subsequent
build-out of TCF Home Loans in 2018, we now have the
expertise in place to be able to meet the mortgage needs
of our large, retail customer base and grow the business
over the course of 2019. This also supports our asset
liability strategy to add select longer duration assets to the
balance sheet given where we are in the interest rate cycle.
Our commercial banking business, which is primarily
spread across our key markets of Minneapolis-St. Paul,
Chicago, Detroit and Denver, saw strong originations in
2018. Over the past several years, we have not had to
stretch for commercial growth simply because we have
had more avenues for growth in other portfolios, such as
leasing and equipment finance and inventory finance. As a
result, we not only have the capacity to grow, but we have
strong talent in place to selectively choose when and where
we want to allocate capital without bowing to competitive
pressures on pricing or structure.
We have been in the leasing and equipment finance
business for the past 20 years. We are the 12th largest bank-
affiliated leasing company in the U.S. and have a level of
experience and expertise amongst the best in the industry.
Our ability to compete as experts is evident through
our focus on financing business-essential equipment
and being in select industries that drive strong credit
performance. From a growth standpoint, we continue to
see strong originations, a robust backlog and opportunities
for platform and portfolio purchases as some specialty
lending companies are experiencing pressure on their
margins given higher interest rates. Leasing and equipment
finance continues to be a key driver of the success within
our organization.
Our philosophy of competing as experts applies to
inventory finance as well, a business we have now been
in for over 10 years. Our reputation for providing an
exceptional experience for manufacturers and a network
of more than 10,800 active dealers is allowing us to retain
our exclusive manufacturer agreements and occasionally
win new programs. We can also grow with our existing
customer base through expansion of new manufacturer
products, additional dealers and increased sales. From a
credit standpoint, 76 percent of our portfolio is through
exclusive manufacturer programs, which include robust
risk mitigants such as repurchase and remarketing on
repossessed inventory, risk-based collateral inspections
and loss recourse and favorable loss rebate.
A strong credit culture is not only a principal for TCF as
a whole, but for me personally as a banker for over 40
years. We will not stray from our core credit framework
and underwriting discipline. The risk profile of our balance
sheet today is significantly better than it has been over
the past several years when we had higher concentrations
of consumer real estate and auto finance balances. In
addition, the credit profiles of our businesses continue
to outperform the industry. For example, our leasing and
equipment finance portfolio has averaged quarterly net
charge-offs of just 0.14 percent over the past five years,
consistently less than half of industry levels. This is a
function of not only the segments we are in, but those
we choose not to be in. We believe we are much better
positioned today than we were at the end of the last
credit cycle.
In addition, we are focused on controlling what we
can control. This starts with continuing to improve our
efficiency across the organization. We will need to continue
to invest in technology, automate processes and make it
easier to do business with us by making it easier for our
team members to serve our customers. Our commitment
to improving the efficiency ratio is not a singular goal for the
year, but a leadership belief to always look for efficiencies
throughout the course of operating the business.
Capital Return to Shareholders
Total payout ratio of 108% in 2018
(Dollars in millions)
■ Share repurchases
■ Common stock dividends
$312
$213
$99
2018
108%
$50
2016
26%
$60
$51
2017
25%
Total payout ratio
Our ability to continue to compete as experts in all
that we do requires strong talent. We are committed
to investing in our people and our culture through
enhancing team member engagement, expanding talent
development programs, enabling our team members to
deliver an exceptional customer experience, and fostering
collaboration. As we make these investments, I want to
share my admiration for the efforts put forth by everyone
from our board of directors to our management team to
our team members on the front lines. Your hard work and
dedication have not gone unnoticed.
As we prepare to create the premier Midwest bank with
Chemical, I am most excited about the complementary
nature of our businesses, people, values and culture.
Our hard work in the past has put us in position to take
a bold step for our future. As CEO of the new company,
I am confident in our ability to execute and accelerate the
value creation for our shareholders, customers and team
members. I look forward to the next chapter of TCF…
Craig R. Dahl
Chairman, President and Chief Executive Officer
* See “Consolidated Financial Condition Analysis—Non-GAAP Financial Measures” in Item 7. “Management’s Discussion and Analysis of Financial Condition and
Results of Operation” of the accompanying 2018 Form 10-K for reconciliation of GAAP to non-GAAP measures
5
Competing as Experts Across Our Businesses
Consumer Banking
Commercial Banking
TCF Consumer Banking includes our community bank and
consumer lending business. TCF Retail Banking generates
a retail-focused deposit base to fund our loan and lease
growth. We have been making significant investments in
our digital platform and customer experience to better
meet the evolving needs of our customers. In addition, by
acquiring the assets of Rubicon Mortgage Advisors, LLC,
now TCF Home Loans, in late 2017, we added a team of
experts to enhance our ability to offer mortgage products
to our large retail customer base.
$5.4B
YE 2018
loan balances
83%
of total
deposit balances
are consumer
Led by an experienced team of commercial bankers, TCF
Commercial Banking originates commercial real estate
and commercial business loans primarily within our retail
footprint. Because of our diversified growth channels in
other portfolios, we have not had to rely on growth in
commercial loans in recent years. As a result, we have
capacity to grow, but can be selective in when and where
we allocate our capital, without bowing to competitive
pressures on pricing or structure.
$3.9B
YE 2018
loan balances
8.1%
FY 2018
growth rate
Leasing and
Equipment Finance
TCF has been competing as experts in Leasing and
Equipment Finance for 20 years by providing a full array
of financing solutions to manufacturers, dealers and
end users. We have a proven track record of growing the
business organically, as well as through platform and
portfolio purchases. We focus on financing business-
essential equipment while taking a disciplined approach
by participating in select markets that drive strong credit
performance, which has allowed us to consistently
outperform industry averages.
$4.7B
YE 2018
loan and lease
balances
0.16%
2018 net
charge-off rate
6
Inventory
Finance
TCF is an industry leader in Inventory Finance, utilizing
manufacturer relationships to provide financing to dealers
in various industries, including powersports and lawn and
garden. We have grown this high-barrier-to-entry business
with our existing customer base as well as through the
addition of new exclusive program agreements. These
exclusive programs are structured with various risk
mitigants to minimize losses.
$3.1B
YE 2018
loan balances
More than
10,800
active dealers
Focused on Our People and Communities
Giving back to our communities
We believe in giving back to our communities through philanthropy and
volunteerism. In 2018, the TCF Foundation granted nearly $2.3 million to
650 charitable organizations focused on community development, human
services, arts and culture, and veterans’ services. Our team member-driven
philanthropy generated another $500,000 in incremental support for local
organizations. In addition, our team members gave generously of their
time, logging more than 20,000 hours volunteering for many worthwhile
non-profit organizations.
The TCF Foundation also matched the generous charitable contributions of
our team members. Through the Employee Matching Gift program, team
members’ contributions were matched 200% on gifts up to $10,000. The
TCF Foundation donated $1.3 million to non-profit organizations last year
through this program.
$2.3M
in grants to 650
charitable organizations
20,000+
volunteer hours
200K
students reached
by TCF Financial
Scholars Program
Leadership in financial education
Since 2013, TCF has focused on strengthening the financial capability of
teens and adults through two programs: the TCF Financial Scholars Program
for teens and the TCF Financial Fitness Program for adults. Partnering
with EVERFI, one of the nation’s leading providers of financial education
programming, these programs provide access to free, independently created
financial education content in an innovative online learning format.
765,000
hours of
student learning
Through the end of the 2018 academic year, the Financial Scholars Program
reached more than 200,000 students in 448 schools and promoted more
than 765,000 hours of learning. TCF’s Financial Fitness Program, available
to anyone free of charge on our website, reached more than 4,200 adults
who participated in 9,700 hours of learning.
Our commitment to corporate
social responsibility
We recently issued our first Corporate Social Responsibility Report,
outlining our commitment to helping to improve the quality of life in our
communities. We define our social responsibility commitments with five
pillars: Community, Education, People, Environment and Stewardship.
In this report, we provide specific accomplishments and updates on our
progress in each of these areas.
We invite you to read our full report at tcfbank.com/csr.
$124M
in community
development
investments and
loans
27%
reduction
in paper
consumption
7
Board of Directors
Craig R. Dahl
Chairman, President and
Chief Executive Officer
Director since 2012
Peter Bell
Former Chair,
Metropolitan Council
Director since 2009
William F. Bieber
Chairman,
ATEK Companies, Inc.
Director since 1997
Theodore J. Bigos
Owner,
Bigos Management, Inc.
Director since 2008
Karen L. Grandstrand
Shareholder,
Fredrikson & Byron, P.A.
Director since 2010
George G. Johnson
CPA/Chairman,
George Johnson & Company and
George Johnson Consultants
Director since 1998
Richard H. King
Executive Vice President,
Operations,
Thomson Reuters
Director since 2014
Vance K. Opperman
President and
Chief Executive Officer,
Key Investment, Inc.
Director since 2009
Roger J. Sit
Chief Executive Officer,
Global Chief Investment Officer
and Director,
Sit Investment Associates
Director since 2015
Julie H. Sullivan
President,
University of St. Thomas
Director since 2016
Barry N. Winslow
Retired Vice Chairman,
TCF Financial Corporation
Director since 2008
Theresa M. H. Wise
Chief Executive Officer
and Principal,
Utaza, LLC
Director since 2019
Executive Management Team
TCF FINANCIAL CORPORATION
TCF NATIONAL BANK
Consumer Banking
Wholesale Banking
Kevin Miller
Executive Vice President,
Community Banking
Brian M. Call
Executive Vice President,
Consumer Lending
Michael Shea
Executive Vice President,
Operations
TCF Capital Solutions
Gary A. Peterson
Chief Executive Officer
TCF Inventory Finance, Inc.
Rosario A. Perrelli
President and Chief Executive Officer
Commercial Banking
R. Patricia Kelly
President
Craig R. Dahl
Chairman, President and
Chief Executive Officer
Brian W. Maass
Executive Vice President,
Chief Financial Officer
Michael S. Jones
Executive Vice President,
Consumer Banking
William S. Henak
Executive Vice President,
Wholesale Banking
Thomas J. Butterfield
Executive Vice President,
Chief Information Officer
James M. Costa
Chief Risk Officer and
Chief Credit Officer
8
Patricia L. Jones
Executive Vice President,
Chief Administrative Officer
Andrew J. Jackson
Chief Audit Executive Officer
Susan D. Bode
Senior Vice President,
Chief Accounting Officer
Joseph T. Green
Senior Vice President,
General Counsel and Secretary
Timothy R. Sedabres
Senior Vice President,
Director of Investor Relations
Jason S. Sasanfar
Senior Vice President,
Treasurer
Form 10-K
For the fiscal year ended December 31, 2018
8
1
0
Other Financial Data 127 2
Risk Factors 7
Business 1
Selected Financial Data 23
Management’s Discussion and Analysis 24
Consolidated Financial Statements 60
Notes to Consolidated Financial Statements 66
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, 2018
or
¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from to
Commission File No. 001-10253
TCF Financial Corporation
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
Delaware
41-1591444
200 Lake Street East
Wayzata, Minnesota 55391-1693
(Address and Zip Code of principal executive offices)
(952) 745-2760
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
(Title of each class)
(Name of each exchange on which registered)
Common Stock (par value $.01 per share)
Depositary shares, each representing a 1/1000th interest in a share of 5.70% Series C Non-
Cumulative Perpetual Preferred Stock
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 every Interactive Data File required to be submitted 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 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. ¨
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
Non-accelerated filer ¨
Accelerated filer ¨
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 $3,817,422,395.
As of February 19, 2019, there were 163,980,779 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 2019 Annual Meeting of Stockholders to be held on April 24, 2019 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
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Exhibits, Financial Statement Schedules
Page
1
7
18
19
19
19
20
23
24
56
59
59
60
66
127
128
128
129
130
131
131
132
132
132
132
132
135
Part I
Item 1. Business
General
TCF Financial Corporation (together with its direct and indirect subsidiaries, "we," "us," "our," "TCF" or the "Company"),
a Delaware corporation incorporated on April 28,1987, is a national bank holding company based in Wayzata,
Minnesota. References herein to "TCF Financial" or the "Holding Company" refer to TCF Financial Corporation on an
unconsolidated basis. Its principal subsidiary, TCF National Bank ("TCF Bank"), is headquartered in Sioux Falls, South
Dakota. TCF Bank operates bank branches in Illinois, Minnesota, Michigan, Colorado, Wisconsin, Arizona and South
Dakota (TCF's "primary banking markets"). Through its direct subsidiaries, TCF Bank provides a full range of consumer-
facing and commercial services, including consumer banking services in 47 states, commercial banking services in
42 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.
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 an exceptional customer experience driven by
convenience through multiple points of contact, including digital banking, phone banking, a branch presence with select
locations open at least six days a week and with extended hours, and access to automated teller machine ("ATM")
networks. 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.
TCF generated total revenue, defined as net interest income plus total non-interest income, of $1.5 billion, $1.4 billion
and $1.3 billion in 2018, 2017 and 2016, respectively. TCF had total assets of $23.7 billion at December 31, 2018 and
was the 49th largest publicly traded bank holding company in the United States based on total assets at September
30, 2018.
On January 28, 2019, TCF entered into an Agreement and Plan of Merger (the "Merger Agreement") with Chemical
Financial Corporation ("Chemical"), a bank holding company with $21.5 billion in assets, headquartered in Detroit,
Michigan. The merger is expected to close in late 2019, subject to satisfaction of customary closing conditions, including
regulatory approvals and approval by the shareholders of TCF and Chemical. Under the terms of the Merger Agreement,
which has been unanimously approved by the boards of directors of both companies, each outstanding share of TCF
common stock will be converted into the right to receive, without interest, 0.5081 shares of Chemical common stock.
Also, at the effective time of the merger, each outstanding share of the 5.70% Series C non-cumulative perpetual
preferred stock of TCF will be converted into the right to receive, without interest, one share of a newly created series
of preferred stock of Chemical with equivalent rights and preferences (the "New Chemical Preferred Stock"). The
shares of Chemical common stock and the New Chemical Preferred Stock to be issued in the merger will be listed on
the Nasdaq. Following the completion of the merger, TCF and Chemical shareholders will own approximately 54%
and 46% of the combined company, respectively, on a fully diluted basis.
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"), continues to service existing auto
loans on its balance sheet and those that are 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.
The Company's reportable segments are Consumer Banking, Wholesale Banking and Enterprise Services.
1
Consumer Banking
Consumer Banking is comprised of all of the Company's consumer-facing businesses and includes retail banking,
consumer real estate and other, and auto finance. TCF's consumer banking strategy is primarily to generate deposits
and originate high credit quality secured consumer real estate loans for investment and for sale. Deposits are generated
from consumers and small businesses to provide a source of low cost funds, with a focus on building and maintaining
quality customer relationships.
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 and debit cards, (iii) check cashing and remittance services and (iv) residential, consumer and
small business lending.
Deposits are the 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 fees and service charges.
At December 31, 2018, TCF had 314 branches, consisting of 189 traditional branches, 122 supermarket branches
and three campus branches. TCF operates 120 branches in Illinois, 85 in Minnesota, 50 in Michigan, 33 in Colorado,
17 in Wisconsin, seven in Arizona and two in South Dakota. TCF also offers 845 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.
Providing a wide range of retail banking services is an integral component of TCF's business philosophy. Primary
drivers of 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 and debit 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 and Other 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 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's junior lien lending business is a national platform
focused on originating junior lien loans to high credit quality customers. TCF Home Loans, a division of TCF Bank,
originates first mortgage lien loans in our primary banking markets. TCF has two consumer real estate loan sale
programs: one that sells the nationally originated consumer real estate junior lien loans and one that sells the first
mortgage lien loans through correspondent relationships. TCF does not have any consumer real estate subprime
lending programs.
Auto Finance Gateway One services existing loans on new and used autos on its balance sheet and those that are
serviced for others.
Wholesale Banking
Wholesale Banking is comprised of commercial banking, 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, 2018 and 2017.
2
Commercial real estate loans originated by TCF are primarily secured by commercial real estate, including multi-family
housing, office buildings, health care facilities, warehouse and industrial buildings, hotel and motel buildings, self-
storage buildings and retail services buildings. The commercial real estate portfolio represented 75.5% and 77.3% of
TCF's total commercial portfolio at December 31, 2018 and 2017, 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, golf cart and turf equipment, manufacturing equipment,
medical equipment, trucks and trailers, furniture and fixtures, technology and data processing equipment, and
agricultural equipment. TCF's leasing and equipment finance businesses are TCF Equipment Finance, a division of
TCF Bank, and Winthrop Resources Corporation ("Winthrop"). 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 equipment and lawn and garden equipment. 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, internal audit, 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.
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 debt 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
counterparties.
See "Item 7. Management's Discussion and Analysis - Consolidated Income Statement Analysis - Reportable
Segments" and Note 24. Business Segments of Notes to Consolidated Financial Statements for further information.
3
Other Information
Activities of Subsidiaries of TCF TCF's business operations include those conducted by direct and indirect
subsidiaries of TCF Financial, all of which are consolidated for purposes of preparing TCF's consolidated financial
statements. TCF Bank's subsidiaries principally engage in leasing, inventory finance and auto finance activities. See
"Consumer Banking" and "Wholesale Banking" above for 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 and inventory, leasing of equipment
and origination of consumer real estate junior lien loans. 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, 2018, TCF had 5,544 employees, including 698 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 (the "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 (the "OCC"). TCF's consumer products are also regulated by the Consumer Financial
Protection Bureau (the "CFPB").
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 standards allowed institutions not subject to
the advanced approaches requirements 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. As of January 1, 2019, the Basel III capital standard requires 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, 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 Basel III capital standard
at December 31, 2018. 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.
4
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, to repurchase
common stock 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.
Under the Bank Holding Company Act of 1956 (the "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 (the "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 (the "DRR")
to 1.35% of estimated insured deposits from 1.15% and required this new minimum be reached by September 30,
2020. From July 1, 2016 to October 1, 2018, an additional surcharge of 4.5 cents for each $100 of an institution's
assessment base in excess of $10.0 billion was assessed to ensure the DRR reached this new minimum by the required
date. The DIF ratio calculated by the FDIC using estimated insured deposits as of September 30, 2018 was 1.36%.
5
In 2018, insurance premiums on bank deposits insured by the FDIC for banks with at least $10.0 billion in total assets
ranged from 1.5 cents to 40 cents per $100 of the institution's assessment base. TCF's FDIC insurance expense was
$15.1 million, $16.0 million and $15.9 million in 2018, 2017 and 2016, 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, 2018, the Financing Corporation assessment rate was 14 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.
National Bank Investment Limitations Permissible investments by national banks are limited by the National Bank
Act of 1864, as amended, and by rules of the OCC. Non-traditional bank activities permitted by the Gramm-Leach-
Bliley Act of 1999 will subject a bank to additional regulatory limitations or requirements, including a required regulatory
capital deduction and application of transactions with affiliates limitations in connection with such activities.
Taxation
Federal Taxation TCF's federal income tax returns are open and subject to examination for 2015 and later tax return
years. As a result of the Tax Cuts and Jobs Act ("Tax Reform"), enacted on December 22, 2017, 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. TCF recorded an additional net tax benefit of $1.1 million in the second
quarter of 2018 for the finalization of the provisional amounts recorded in 2017.
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 2014
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 2014 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.
6
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 (the "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 periodic filings required by the SEC are
also available on the SEC's website, www.sec.gov. 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 TCF's website. Stockholders may request these documents in print free of
charge by contacting the Corporate Secretary at TCF Financial Corporation, 200 Lake Street East, Mail Code EX0-01-
G, Wayzata, MN 55391-1693.
Item 1A. Risk Factors
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 and leases, 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 debt securities markets, government shutdowns, defaults, anticipated
defaults or rating agency downgrades of sovereign debt (including debt of the U.S.), 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 and its customers face 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, hacking, ransomware or identity theft. Hacking, cyber-attacks and identity theft risks, in
particular, could cause serious financial and reputational harm. Information security risks for financial institutions such
as TCF have generally increased in recent years in part because of the proliferation of new technologies, the use of
the internet and telecommunications technologies to conduct financial transactions and the increased sophistication
and activities of organized crime, hackers, terrorists, activists and other external parties, including foreign state-
sponsored parties. Additionally, cyber threats are rapidly evolving. TCF may not be able to anticipate or prevent all
such attacks and may be required to expend significant additional resources to continue to modify or enhance our
protective measures or to investigate and remediate any information security vulnerabilities or incidents.
7
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,
internal employee fraud or misappropriation of information, misplaced or lost data, human or programming errors and
attempts to disrupt its systems. In the future, TCF may incur increasing costs in an effort to minimize these risks and
could be held liable for damages and suffer reputational damage as a result of any security breach or loss. There can
be no assurance that such cyber incidents will not occur again and they could occur more frequently and on a more
significant scale. Due to the complexity and interconnectedness of our systems, efforts to minimize these risks by
enhancing our infrastructure and operating systems can create a risk of system disruptions and security issues, and
a significant and widespread disruption to our infrastructure or operating systems that support our business and
customers could adversely affect our business operations.
Other increasingly sophisticated and large-scale efforts on the part of third parties to breach data security with respect
to financial transactions include 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.
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 the amount of interest TCF receives on loans, leases and other investments and the amount of
interest TCF pays on deposits and other borrowings, as well as: (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 life of TCF's
interest-earning assets. A significant portion of TCF's loans, including certain consumer real estate, commercial real
estate and inventory finance loans, bear interest at variable- and adjustable-rates. Increases in market interest rates
can have a negative impact to our business, including reducing the amount of money our customers borrow or adversely
impacting their ability to make increased payments caused by any increase in interest rates. In addition, as interest
rates increase, in order to compete for deposits in our primary banking markets, TCF may have to offer more attractive
interest rates to depositors, or pursue other sources of liquidity, such as wholesale funding. 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, TCF's net interest income and earnings could be adversely affected due to the increase in interest expense
without a corresponding increase in interest income. Earnings could also be adversely affected if the interest rates
received on loans, leases and other investments decrease more quickly than the interest rates paid on deposits and
other borrowings due to the decrease in interest income without a corresponding decrease in interest expense. In
addition, we have a debt security portfolio that could decline substantially in value if interest rates increase materially
or if obligations of states and political subdivisions debt securities become subject to less favorable tax treatment.
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.
8
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. Transactions with other banks, businesses
or branches involve various risks, such as: difficulty in estimating the value of the other 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 product sales or other projected benefits; potential
disruption to TCF's business; potential diversion of TCF management's time and attention; slower than anticipated
growth; potential loss of key employees and customers of either company; and potential changes in banking or tax
laws or regulations, any of which could have a material adverse effect on TCF's financial condition and results of
operations.
Risks related to TCF's proposed merger with Chemical
TCF and Chemical have operated and, until the completion of the merger, will continue to operate, independently. The
success of the merger, including anticipated benefits and cost savings, will depend, in part, on TCF's and Chemical's
ability to successfully combine and integrate the businesses of TCF and Chemical in a manner that permits growth
opportunities and does not materially disrupt the existing customer relations or result in decreased revenues due to
loss of customers. It is possible that the integration process could result in the loss of key employees, the disruption
of either company's ongoing businesses or inconsistencies in standards, controls, procedures and policies that
adversely affect the combined company's ability to maintain relationships with customers, depositors, clients and
employees or to achieve the anticipated benefits and cost savings of the merger. If the combined companies experience
difficulties with the integration process, the anticipated benefits of the merger may not be realized fully or at all, or may
take longer to realize than expected.
TCF may have difficulty attracting and retaining key personnel until the proposed merger is complete, which could
cause customers to seek to discontinue or reduce their banking relationship with TCF. Some of our employees may
experience uncertainty about their future roles with the combined company following the proposed merger with
Chemical. If key employees depart because of issues relating to the uncertainty and difficulty of integration or a desire
not to remain with TCF, our business could be harmed. In addition, subject to certain exceptions, we have agreed to
operate our business in the ordinary course prior to the closing of the proposed merger with Chemical. This restriction
may prevent us from pursuing certain business opportunities that may arise prior to completion of the merger.
TCF has incurred, and will continue to incur, substantial expenses in connection with the negotiation and completion
of the transactions contemplated by the merger agreement with Chemical. If the merger is not completed, TCF would
have to recognize these expenses without realizing the expected benefits of the merger. These circumstances could
have an adverse effect on TCF's business, results of operations and stock price.
Under the merger agreement, both TCF and Chemical have agreed not to, subject to certain exceptions generally
related to their respective boards of directors' exercise of their fiduciary duties, as set forth in the merger agreement,
initiate or solicit, or knowingly facilitate or knowingly encourage, inquiries or proposals with respect to, engage or
participate in any discussions or negotiations concerning, or provide any confidential information relating to, certain
alternative business combination transactions. In addition, the merger agreement contains certain termination rights
for both TCF and Chemical. If the merger agreement is terminated under certain circumstances by TCF, including
termination of the merger agreement to accept an alternative business combination transaction as permitted by and
subject to the terms of the merger agreement, TCF would be required to pay Chemical a termination fee of $134.0 million,
which could have an adverse impact on TCF's financial condition. Further, these provisions might discourage a party
that might have an interest in merging with TCF or acquiring all or a significant part of TCF from considering or proposing
that merger or acquisition even if it were prepared to pay consideration with a higher per share price than that proposed
in the merger, or might result in a potential competing merger partner or acquiror proposing to pay a lower per share
price to acquire TCF than it might otherwise have proposed to pay.
9
Before the merger may be completed, TCF and Chemical must obtain approvals from the Board of Governors of the
Federal Reserve System. Other approvals, waivers or consents from regulators may also be required. These regulators
may impose conditions on the completion of the merger or require changes to the terms of the merger. Although TCF
and Chemical do not currently expect that any such conditions or changes would be imposed, there can be no assurance
that they will not be, and such conditions or changes could have the effect of delaying or preventing completion of the
merger or imposing additional costs on or limiting the revenues of the combined company following the merger, any
of which might have an adverse effect on the combined company following the merger.
Before the merger may be completed, TCF and Chemical must obtain the requisite approval of their respective
shareholders. There is no assurance that these approvals will be obtained.
Litigation filed against TCF, its board of directors or Chemical and its board of directors could prevent or delay the
completion of the merger or result in the payment of damages following completion of the merger.
In connection with the merger, lawsuits may be filed against TCF, Chemical, or the directors and officers of either
company in connection with the merger. The defense or settlement of any lawsuit or claim that remains unresolved at
the effective time of the merger may adversely affect the combined company's business, financial condition, results
of operations, cash flows and market price.
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, a downturn in the markets
in which we function, difficult credit markets, regulatory actions against us or operational problems that affect 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,
such as termination of or providing additional collateral pursuant to our derivative contracts. 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.
Competition for growth in deposits and evolving payment system developments could increase TCF's funding costs.
TCF relies on bank deposits as 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. A diminished availability of counterparties who satisfy
TCF's credit quality requirements could negatively impact our business. 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.
10
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, including failures due to cyber-attacks, 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 and
attempts to monitor ongoing compliance with any arrangements with TCF, 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. Furthermore, concentration among larger third party providers servicing large segments of the banking
industry can also potentially affect wide segments of the financial industry. Replacing these third party vendors could
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, whether suffered by TCF or its counterparties, computer malware, cyber-attacks,
electrical, internet 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 our financial condition
and results of operations. Furthermore, our customers' devices may become the target of cyber-attacks or information
security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of
TCF's or our customers' confidential, proprietary and other information, or otherwise disrupt TCF's, our customers' or
other third parties' business operations. For example, various retailers have reported they were victims of cyber-attacks
in which large amounts of their customers' data, including debit and credit card information, was obtained. In these
situations, we may incur costs to address fraudulent transaction activity affecting our customers.
In addition, certain of TCF's floating rate funding and certain products, such as variable- and adjustable-rate loans,
reference a benchmark rate, such as the London Interbank Offered Rate ("LIBOR"), to determine the applicable interest
rate or payment amount. In the event such benchmark rate or other referenced financial metric is significantly changed,
replaced, discontinued or otherwise unavailable to us, there may be uncertainty or differences in the calculation of the
applicable interest rate or payment amount depending on the terms of the governing instrument and there may be
significant work required to transition to using any new benchmark rate or other financial metric. This could result in
changes to previously recorded transactions, disputes, litigation or other actions with customers or counterparties
regarding the interpretation and enforceability of certain provisions of LIBOR-based contracts, create hedging
imbalances or require changes to our hedging strategies and may impact our existing transaction data, products,
systems, operations and pricing processes.
11
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 New
Albertson's Inc. (our supermarket partner for our Jewel-Osco locations) and SUPERVALU INC. (our supermarket
partner for our Cub Foods locations), could result in the loss of supermarket branches or could increase costs to
operate the supermarket branches. At December 31, 2018, TCF had 122 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. In October 2018, SUPERVALU INC. completed its merger with United Natural Foods, Inc. ("UNFI"),
becoming a wholly-owned subsidiary of UNFI. Should UNFI choose to sell any Cub Foods store, the buyer may
terminate the branch license or lease for that location after a specified notice period in certain circumstances at the
buyer's election. Furthermore, UNFI or an independent franchisee could choose to close any Cub Foods store after
a specified notice period at which point the branch license or lease as to that location would automatically terminate.
Difficult economic conditions, financial or labor difficulties in the supermarket industry, or a decrease in in-store customer
traffic or 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 without incurring additional costs or penalties. Any of the above risks 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 credit
losses. The level of the allowance for loan and lease losses represents management's best estimate of probable credit
losses incurred within the existing portfolio of loans and leases based on 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 disagree with the estimates determined by management. An increase in the provision for credit 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 and
the implementation of banking laws or regulations may change depending on leadership at federal banking agencies.
Since many new banking rules are issued with limited interpretive guidance, we may not sufficiently comply with or
anticipate the full impact of such new rules.
12
Future changes in regulations, regulatory policies, interpretation and enforcement of statutes, regulations or policies
could reduce revenues and increase compliance burdens and could limit the types of financial services and products
we may offer or increase 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,
leverage, deposit insurance and risk management 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 regarding how the term "abusive" will be interpreted. Regulatory actions that adversely impact our deposit,
lending, loan collection, campus banking programs or customer opt-in preferences with respect to overdrafts could
have a material adverse effect on our financial condition and results of operations. 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.
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, increased capital requirements, higher deposit insurance assessments, 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.
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 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. Privately-held competitors may have more
flexibility than TCF as a publicly-held enterprise. Adapting to industry changes in information technology systems, on
which TCF and the financial services industry generally highly depend, could also present operational issues and
require considerable capital spending. Decreased underwriting standards of competitors may also 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.
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,
repurchase common stock or pay other obligations, which could have a material adverse effect on TCF's financial
condition and results of operations. See Note 16. Regulatory Capital Requirements for further discussion on regulations
governing the payment of dividends by TCF Bank.
13
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. Changes
in those policies 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.
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, cyber-security, 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 technology-driven products and services 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, create
additional efficiencies in its operations, avoid disruptions relating to upgrading systems and prevent cyber-attacks and
security breaches. Many of TCF's competitors have substantially greater resources to invest in technological
improvements. TCF may not be able to effectively develop and 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.
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, offer new products and services within existing lines of
business, expand into new markets or pursue new distribution channels. There are substantial risks and uncertainties
associated with these efforts, particularly in instances where the markets are new or 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, or anticipated level of growth or profitability for new lines of
business and new products or services, may not be achieved. 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. 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.
14
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 create
geographical and product diversity in its loan portfolio. Disruptions in the financial markets, a decrease in demand for
loans 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.
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 been obligated to make significant repurchases of sold loans in the past. A material
increase in the amount of loans repurchased could have a material adverse effect on TCF's financial condition and
results of operations.
Changes in accounting policies or in accounting standards could materially affect how TCF reports its financial condition
and results of operations.
TCF's accounting policies are fundamental to the understanding of its financial condition and results of operations.
Some of these policies require the use of estimates and assumptions that may affect the value of TCF's assets or
liabilities and results of operations. The accounting policy for the allowance for loan and lease losses is critical because
it requires management to make challenging, 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 (the "FASB") and the SEC change the financial accounting
and reporting standards or the interpretation of those standards that govern the preparation of TCF's financial
statements. These changes are beyond TCF's control, can be difficult to predict and could materially impact how TCF
reports its financial condition and results of operations. Additionally, TCF could be required to apply a new or revised
standard retrospectively, resulting in it restating prior period financial statements in material amounts.
15
For example, in June 2016, the FASB issued Accounting Standards Update ("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 and requires the use of a current expected credit loss ("CECL") approach to determine
the allowance for credit losses for loans and held to maturity debt securities. In November 2018, the FASB issued ASU
No. 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, which clarifies that
receivables arising from operating leases are not within the scope of Subtopic 326-20 and should be accounted for in
accordance with Topic 842. CECL represents a significant change in U.S. generally accepted accounting principles
and may result in a material impact on our consolidated financial statements. The impact of these ASUs will depend
on the composition of TCF's portfolios and general economic conditions at the date of the adoption. TCF has established
a governance structure to implement these ASUs and is developing the methodologies and models to be used upon
adoption. Management will begin to test the new methodologies and models in 2019. The adoption of these ASUs 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.
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, unpredictable 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.
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 alleging violations of the Consumer Financial Protection Act (the "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. Pursuant to a restitution plan with the CFPB and OCC resulting from the litigation,
TCF Bank will pay restitution in the total amount of $25.0 million to certain current and former customers and TCF
Bank paid $5.0 million in civil money penalties. For further discussion, see "Item 3. Legal Proceedings" and Note 26.
Litigation Contingencies in this Annual Report on Form 10-K.
In addition, customers may make claims and take legal action pertaining to TCF's deposit products and sale and
servicing of its loan and lease products, account opening/origination practices, fees, employment practices, checking
account overdraft program "opt in" requirements, or fiduciary responsibilities. 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 addition, 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, TCF may have to engage in protracted and costly litigation which may be time consuming
and disruptive to TCF's operations and management. If TCF 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 TCF from utilizing certain technologies.
For a discussion of litigation risks related to our merger with Chemical, see "Litigation filed against TCF, its board of
directors or Chemical and its board of directors could prevent or delay the completion of the merger or result in the
payment of damages following completion of the merger" in this Risk Factors section.
16
We face a risk of noncompliance with the Bank Secrecy Act and other anti-money laundering statutes and regulations
and corresponding enforcement proceedings.
The federal Bank Secrecy Act, the Uniting and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001 and other laws and regulations require financial institutions, among other
duties, to institute and maintain effective anti-money laundering programs and to file suspicious activity and currency
transaction reports as appropriate. The federal Financial Crimes Enforcement Network, established by the U.S.
Treasury Department to administer the Bank Secrecy Act, is authorized to impose significant civil money penalties for
violations of those requirements and has engaged in coordinated enforcement efforts with the individual federal banking
regulators, as well as the U.S. Department of Justice, Drug Enforcement Administration and Internal Revenue Service.
There is also increased scrutiny of compliance with the rules enforced by the Office of Foreign Assets Control and
compliance with the Foreign Corrupt Practices Act. Federal and state bank regulators also have focused on compliance
with Bank Secrecy Act and anti-money laundering regulations. If our policies, procedures and systems are deemed
deficient or the policies, procedures and systems of the financial institutions that we may acquire in the future are
deficient, we would be subject to liability, including fines and regulatory actions such as restrictions on our ability to
pay dividends and the necessity to obtain regulatory approvals to proceed with certain aspects of our business plan,
including our acquisition plans, which would negatively impact our business, financial condition and results of
operations. Sanctions that the regulators have imposed on banks that have not complied with all requirements have
been especially severe. Failure to maintain and implement adequate programs to combat money laundering and
terrorist financing could also have serious reputational consequences for us. Any of these results could materially and
adversely affect our business, financial condition and results of operations.
TCF's framework for managing risks may not be effective in mitigating risk and any resulting loss.
TCF's risk management framework seeks to mitigate risk and any resulting loss. TCF has established processes
intended to identify, measure, monitor, report and analyze the types of risk to which TCF is subject, including legal and
compliance, operational, reputational, strategic and market risk such as interest rate, credit, liquidity and foreign
currency risk. However, as with any risk management framework, there are inherent limitations to TCF's risk
management strategies. There may exist, or develop in the future, risks that TCF has not appropriately anticipated or
identified. Any future breakdowns in TCF's risk management framework could have a material adverse effect on its
financial condition and results of operations.
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.
17
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.
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.
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 our reputation, 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.
18
Item 2. Properties
Offices TCF owns its headquarters office in Wayzata, Minnesota. Other operations facilities, located in Minnesota,
Illinois and California, 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, 2018, TCF leased or licensed 145 of its bank branch offices, owned the buildings
and land for 143 of its bank branch offices and owned the buildings and leased the land for the remaining 26 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.
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 which 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. 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 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. 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. On July 20, 2018, TCF Bank entered into a Stipulated Final
Judgment and Order (the "CFPB Settlement") with the CFPB to resolve the matter and has entered into a Consent
Order and a Consent Order For a Civil Money Penalty and related stipulations (collectively, the "OCC Consent Orders")
with the OCC to resolve related regulatory issues with the OCC (collectively, the CFPB Settlement and the OCC
Consent Orders are referred to herein as the "Consent Agreements"). The Consent Agreements provide, among other
things, for TCF Bank to submit a restitution plan to the CFPB and OCC pursuant to which TCF Bank will pay restitution
in the total amount of $25.0 million to certain current and former customers and require a notice to certain customers
opted-in to overdraft service reminding them of their current opt-in choice. TCF is working toward completion of the
restitution plan and expects to satisfy all the requirements in a timely fashion and in accordance with the terms of the
CFPB Settlement and the restitution plan. Pursuant to the Consent Agreements, TCF Bank paid $5.0 million in civil
money penalties, $3.0 million of which was paid to the OCC and $2.0 million of which was paid to the CFPB. In addition,
TCF Bank expects to incur approximately $2.0 million in administrative costs related to the administration of the
restitution plan required under the Consent Agreements.
Item 4. Mine Safety Disclosures
Not applicable.
19
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 19, 2019, there
were 5,151 holders of record of TCF's common stock.
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.
20
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 KBW NASDAQ Regional Banking Index and the Standard and Poor's
("S&P") 500 Index (assuming the investment of $100 in each index on December 31, 2013 and reinvestment of all
dividends).
TCF Total Stock Return Performance Chart
l
e
u
a
V
x
e
d
n
I
200
150
100
50
2013
2014
2015
2016
2017
2018
At December 31,
u TCF Financial Corporation l KBW NASDAQ Regional Banking Index
n S&P 500 Index
Index
2013
2014
2015
2016
2017
2018
TCF Financial Corporation
$
100.00
$
99.03
$
89.27
$
126.70
$
135.01
$
KBW NASDAQ Regional Banking Index
S&P 500 Index
Source: S&P Global Market Intelligence
100.00
100.00
102.42
113.69
108.48
115.26
150.80
129.05
153.45
157.22
131.65
126.59
150.33
At December 31,
21
Repurchases of TCF Stock
Share repurchase activity for the quarter ended December 31, 2018 was as follows:
Total Number
of Shares
Purchased
Average
Price Paid
Per Share
Total Number of Shares
Purchased as Part of
Publicly Announced Plan
Approximate Dollar Value of
Shares that May Yet Be
Purchased Under the Plan
Period
October 1 to October 31, 2018
Share repurchase program(1)
Employee transactions(2)
November 1 to November 30, 2018
Share repurchase program(1)
Employee transactions(2)
December 1 to December 31, 2018
Share repurchase program(1)
Employee transactions(2)
Total
— $
12,698
—
23.78
1,860,210
$
22.01
—
—
1,040,000
$
21.18
—
—
— $
N.A.
1,860,210
$
N.A.
1,040,000
$
N.A.
2,900,210
$
N.A.
141,025,633
N.A.
100,079,548
N.A.
78,052,490
N.A.
78,052,490
N.A.
Share repurchase program(1)
Employee transactions(2)
2,900,210
$
12,698
21.71
23.78
N.A. Not Applicable
(1) On July 25, 2018, the Board of Directors approved a $150.0 million increase to TCF's common stock repurchase program. 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. Repurchases under this authorization may be commenced or suspended at any time or from time to time.
(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.
22
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)
2018
2017
2016
2015
2014
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:
$
992,007
$
925,238
$
848,106
$
820,388
$
815,629
470,885
448,299
465,900
441,998
433,267
1,462,892
1,373,537
1,314,006
1,262,386
1,248,896
46,768
68,443
1,014,400
1,059,934
401,724
86,096
11,270
304,358
11,588
3,481
289,289
1.75
1.74
0.60
$
$
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
Loans and leases
$ 19,072,311
$ 19,104,460
$ 17,843,827
$ 17,435,999
$ 16,401,646
Total assets
Deposits
Borrowings
Total equity
Book value per common share
Tangible book value per common share(1)
Financial Ratios:
Return on average assets
Return on average common equity
Adjusted return on average common equity(1)
Return on average tangible common equity(1)
Adjusted return on average tangible common equity(1)
Net interest margin(2)
Common equity to assets
Dividend payout ratio
Efficiency ratio
Adjusted efficiency ratio(1)
Credit Quality Ratios:
23,699,612
23,002,159
21,441,326
20,689,609
19,393,656
18,903,686
18,335,002
17,242,522
16,719,989
15,449,882
1,449,472
2,556,260
14.45
13.38
1,249,449
2,680,584
13.96
12.92
1,077,572
2,444,645
12.66
11.33
1,039,938
2,306,917
11.94
10.59
1,235,535
2,135,364
11.10
9.72
1.37%
1.26%
1.05%
1.03%
0.96%
12.42
13.51
13.56
14.74
4.63
9.99
34.48
69.34
67.15
10.80
10.80
15.73
15.73
4.54
10.42
20.83
77.17
77.17
9.13
9.13
10.29
10.29
4.34
10.09
26.09
69.25
69.25
9.19
9.19
10.48
10.48
4.42
9.80
21.03
70.88
70.88
8.71
8.71
10.08
10.08
4.61
9.58
21.28
69.80
69.80
Non-accrual loans and leases as a percentage of total
loans and leases
Non-performing assets 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
0.56%
0.62%
1.02%
1.15%
1.32%
0.65
0.83
0.29
0.72
0.90
0.24
1.28
0.90
0.26
1.43
0.90
0.30
1.71
1.00
0.49
See "Item 7. Management's Discussion and Analysis - Consolidated Financial Condition Analysis - Non-GAAP Financial Measures" for further information.
(1)
(2) Net interest income on a fully tax-equivalent basis divided by average interest-earning assets.
23
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Table of Contents
Description
Overview
Pending Merger with Chemical Financial Corporation
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
Debt Securities Available for Sale and Debt Securities Held to Maturity
Loans and Leases
Credit Quality
Liquidity Management
Deposits
Borrowings
Contractual Obligations and Commitments
Capital Management
Non-GAAP Financial Measures
Critical Accounting Estimates
Recent Accounting Developments
Forward-looking Information
Page
25
26
26
26
27
27
31
31
32
33
33
36
36
37
41
48
48
49
49
50
50
52
53
53
24
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, 2018,
TCF Bank operated 314 bank branches in Illinois, Minnesota, Michigan, Colorado, Wisconsin, Arizona and South
Dakota (TCF's "primary banking markets"). Through its direct subsidiaries, TCF Bank provides a full range of consumer-
facing and commercial services, including consumer banking services in 47 states, commercial banking services in
42 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.
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 an exceptional customer experience driven by
convenience through multiple points of contact, including digital banking, phone banking, a branch presence with select
locations open at least six days a week and with extended hours, and access to automated teller machine ("ATM")
networks. 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, debt securities, investments
and other interest-earning assets (interest income) and interest paid on deposits and borrowings (interest expense),
represented 67.8% of TCF's total revenue for 2018, compared with 67.4% and 64.5% for 2017 and 2016, respectively.
Net interest income can change significantly from period to period based on interest rates, customer prepayment
patterns and the volume and mix of interest-earning assets, non-interest bearing deposits and interest-bearing liabilities.
TCF manages the risk of changes in interest rates on its net interest income through a management Asset & Liability
Committee ("ALCO") and through related interest rate risk monitoring and management policies. See "Part I, Item 1A.
Risk Factors" and "Item 7A. Quantitative and Qualitative Disclosures about Market Risk" for further discussion.
Non-interest income is a significant source of revenue for TCF and an important 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 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 secured by consumer real estate, which results in gains on sales, as well as servicing fee income. Primary
drivers of gains on sales include TCF's ability to originate loans, identify loan buyers and execute loan sales.
25
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"), continues to service existing auto
loans on its balance sheet and those that are 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.
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 2018, 2017 and 2016
and on information about TCF's financial condition, loan and lease portfolio, liquidity, funding resources, capital and
other matters.
Pending Merger with Chemical Financial Corporation On January 28, 2019, TCF entered into an Agreement and
Plan of Merger (the "Merger Agreement") with Chemical Financial Corporation ("Chemical"), a bank holding company
with $21.5 billion in assets, headquartered in Detroit, Michigan. The merger is expected to close in late 2019, subject
to satisfaction of customary closing conditions, including regulatory approvals and approval by the shareholders of
TCF and Chemical. Under the terms of the Merger Agreement, which has been unanimously approved by the boards
of directors of both companies, each outstanding share of TCF common stock will be converted into the right to receive,
without interest, 0.5081 shares of Chemical common stock. Also, at the effective time of the merger, each outstanding
share of the 5.70% Series C non-cumulative perpetual preferred stock of TCF will be converted into the right to receive,
without interest, one share of a newly created series of preferred stock of Chemical with equivalent rights and
preferences (the "New Chemical Preferred Stock"). The shares of Chemical common stock and the New Chemical
Preferred Stock to be issued in the merger will be listed on the Nasdaq. Following the completion of the merger, TCF
and Chemical shareholders will own approximately 54% and 46% of the combined company, respectively, on a fully
diluted basis.
Results of Operations
Performance Summary TCF reported net income of $304.4 million for 2018, compared with $268.6 million and
$212.1 million for 2017 and 2016, respectively. TCF reported diluted earnings per common share of $1.74 for 2018,
compared with $1.44 and $1.15 for 2017 and 2016, respectively.
Return on average assets on a fully tax-equivalent basis was 1.37% for 2018, compared with 1.26% and 1.05% for
2017 and 2016, respectively. Total average assets were $23.1 billion for 2018, compared with $22.1 billion and
$21.1 billion for 2017 and 2016, respectively. Return on average common equity ("ROACE") was 12.42% for 2018,
compared with 10.80% and 9.13% for 2017 and 2016, respectively. Return on average tangible common equity
("ROATCE") was 13.56% for 2018, compared with 15.73% and 10.29% for 2017 and 2016, respectively. Adjusted
ROATCE for 2018, which excludes the settlement with the Consumer Financial Protection Bureau (the "CFPB") and
the Office of the Comptroller of the Currency (the "OCC") of $32.0 million, including related expenses, was 14.74%.
Total average common equity was $2.3 billion for 2018, compared with $2.2 billion and $2.1 billion for 2017 and 2016,
respectively. Total average tangible common equity was $2.2 billion for 2018, compared with $2.0 billion and $1.9 billion
for 2017 and 2016, respectively. See "Consolidated Financial Condition Analysis — Non-GAAP Financial Measures"
in this Management's Discussion and Analysis for further information.
26
Consolidated Income Statement Analysis
Net Interest Income Net interest income was $992.0 million for 2018, compared with $925.2 million and $848.1 million
for 2017 and 2016, respectively. Net interest income represented 67.8% of TCF's total revenue for 2018, compared
with 67.4% and 64.5% for 2017 and 2016, respectively. The increase in net interest income in 2018 was primarily due
to increased interest income on the variable- and adjustable-rate loan portfolios (including the inventory finance loan
portfolio) as a result of interest rate increases and higher average balances, increased interest income on the leasing
and equipment finance loan and lease portfolio and higher average balances of debt securities available for sale,
partially offset by increased cost of funds and lower average balances of auto finance loans and decreased interest
income on the fixed-rate consumer real estate loans. 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 increased 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 increased primarily due to higher average balances of long-term borrowings
and increased average rates and higher average balances of certificates of deposit driven by the current interest rate
environment, partially offset by lower average rates on money market accounts.
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 4.63% for 2018, compared with 4.54% and 4.34% for 2017 and 2016, respectively.
27
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,
2018
2017
Change
Average
Balance
Interest(1)
Yields
and
Rates(1)
Average
Balance
Interest(1)
Yields
and
Rates(1)
Average
Balance
Interest
(Dollars in thousands)
Assets:
Investments and other
$
319,472
$
11,964
3.74% $
282,507
$
10,491
3.71% $
36,965
$
1,473
Debt securities held to maturity
154,619
3,970
2.57
170,006
4,436
2.61
(15,387)
(466)
Debt securities available for sale:
Taxable
Tax-exempt(2)
Loans and leases held for sale
Loans and leases:(3)
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
1,390,016
815,540
103,240
37,436
21,694
6,619
1,790,069
3,027,030
4,817,099
875,551
2,832,471
3,708,022
4,642,811
3,079,059
2,565,668
13,603
97,850
196,291
294,141
39,789
153,068
192,857
230,418
214,262
136,692
579
Total loans and leases
18,826,262
1,068,949
Total interest-earning assets
21,609,149
1,150,632
Other assets(4)
Total assets
Liabilities and Equity:
1,452,999
$ 23,062,148
Non-interest bearing deposits
$ 3,843,494
714
20,009
11,582
74,808
107,113
107,113
77
43,067
43,144
150,257
150,257
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
2,438,040
5,621,723
1,553,255
4,897,937
14,510,955
18,354,449
3,288
1,412,186
1,415,474
Total interest-bearing liabilities
15,926,429
Total deposits and borrowings
19,769,923
Accrued expenses and other liabilities
761,723
Total liabilities
20,531,646
Total TCF Financial Corp. stockholders'
equity
Non-controlling interest in subsidiaries
Total equity
2,506,179
24,323
2,530,502
Total liabilities and equity
$ 23,062,148
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
2.69
2.66
6.41
5.47
6.48
6.11
4.54
5.40
5.20
4.96
6.96
5.33
4.26
5.68
5.32
0.03
0.36
0.75
1.53
0.74
0.58
2.35
3.05
3.05
0.94
0.76
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
18,491,233
960,768
20,688,480
1,033,599
1,363,487
$ 22,051,967
$ 3,492,233
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
15,310,002
18,802,235
713,794
19,516,029
2,513,424
22,514
2,535,938
$ 22,051,967
379
4,255
10,139
51,239
66,012
66,012
58
27,749
27,807
93,819
93,819
Yields
and
Rates
(bps)
3
(4)
46
(56)
(155)
(17)
68
37
566,490
103,010
(105,438)
19,054
(1,222)
(9,987)
(144,326)
(11,335)
65,581
(78,745)
24,620
13,285
(102,147)
(7,798)
(33)
376,893
274,746
243,673
432,559
41,182
33,384
27,910
49,876
(539,658)
(16,282)
8
108,181
117,033
2,454
335,029
920,669
89,512
$ 1,010,181
$
351,261
(103,367)
733,443
(587,298)
402,875
445,653
796,914
335
15,754
1,443
23,569
41,101
41,101
84
56
36
75
40
(85)
48
32
2
27
28
39
27
20
(1,979)
19
125
15,318
15,337
56,438
56,438
81
82
33
26
172,753
170,774
616,427
967,688
47,929
1,015,617
(7,245)
1,809
(5,436)
$ 1,010,181
Net interest income and margin
$1,000,375
4.63
$ 939,780
4.54
$
60,595
9
(1)
(2)
(3)
(4)
Interest and yields are presented on a fully tax-equivalent basis.
The yield on tax-exempt debt securities available for sale is computed on a tax-equivalent basis using a statutory federal income tax rate of 21% and 35% for 2018 and 2017, respectively.
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 $288.4 million and $224.7 million for 2018 and 2017, respectively.
28
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
$
9,314
2.91% $
(37,075) $
1,177
Debt securities held to maturity
170,006
4,436
2.61
190,863
4,649
2.44
(20,857)
(213)
Debt securities available for sale:
Taxable
Tax-exempt(2)
Loans and leases held for sale
Loans and leases:(3)
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(4)
Total assets
Liabilities and Equity:
1,363,487
$22,051,967
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
Total interest-bearing liabilities
Total deposits and borrowings
Accrued expenses and other liabilities
Total liabilities
Total TCF Financial Corp. stockholders'
equity
Non-controlling interest in subsidiaries
Total equity
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
15,310,002
18,802,235
713,794
19,516,029
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
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
2,285,647
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
$ 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
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
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
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
Net interest income and margin
$ 939,780
4.54
$858,919
4.34
$ 80,861
20
(1)
(2)
(3)
(4)
Interest and yields are presented on a fully tax-equivalent basis.
The yield on tax-exempt debt 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.
29
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, 2018
December 31, 2017
Versus December 31, 2017
Versus December 31, 2016
(In thousands)
Interest income:
Investments and other
Debt securities held to maturity
Debt 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
$
1,384
$
89
$
1,473
$ (1,166) $
2,343
$
1,177
(396)
(70)
(466)
(530)
317
(213)
14,890
3,052
(7,212)
4,164
(4,274)
(2,775)
19,054
(1,222)
(9,987)
2,318
6,974
(174)
42
2,144
7,016
(21,553)
(1,489)
(23,042)
(7,966)
(3,369)
(11,335)
(19,589)
(1,979)
(21,568)
3,873
(4,575)
20,747
17,860
24,620
13,285
715
(18,630)
14,037
11,814
14,752
(6,816)
(4,770)
(3,028)
(7,798)
18,617
13,374
11,581
28,730
(28,060)
113
17,671
47,218
(16)
730
(3,298)
4,923
3,124
(28)
4,257
4,195
3,921
22,565
20,010
16,329
21,146
11,778
(105)
90,510
69,815
351
15,024
4,741
18,646
37,977
47
11,061
11,142
52,517
41,182
33,384
27,910
49,876
(16,282)
8
108,181
117,033
335
15,754
1,443
23,569
41,101
19
15,318
15,337
56,438
360
13,001
13,913
13,326
14,284
18,588
88
46,284
44,754
(218)
12,889
12,119
6,153
9,649
23,735
(65)
58,690
47,302
142
25,890
26,032
19,479
23,933
42,323
23
104,974
92,056
14
72
19
2,673
33
2,745
(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
$ 42,362
$ 18,233
$ 60,595
$ 40,815
$ 40,046
$ 80,861
(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.
30
Provision for Credit Losses The provision for credit losses was $46.8 million for 2018, compared with $68.4 million
and $65.9 million for 2017 and 2016, respectively. The decrease in 2018 was primarily due to run-off in and maturation
of the auto finance portfolio, partially offset by a decrease in recoveries on previous charge-offs related to the consumer
real estate non-accrual loan sales. The recoveries on previous charge-offs related to the consumer real estate non-
accrual loan sales were $6.6 million for 2018, compared with $13.3 million for 2017. The increase in 2017 was primarily
due to increased provision for credit losses attributable to the auto finance, commercial and leasing and equipment
finance portfolios, partially offset by a decrease in provision for credit losses attributable to the consumer real estate
portfolio.
The provision for credit losses is predominantly a function of TCF's reserving methodology used to determine the
appropriate level of the allowance for loan and lease losses, which 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 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.
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.
Non-interest Income The components of non-interest income were as follows:
(Dollars in thousands)
Leasing and equipment finance
Fees and service charges
Card revenue
ATM revenue
Gains on sales of loans, net
Servicing fee income
Gains (losses) on debt securities, net
Other
Year Ended December 31,
Change
2018
2017
2016
2018 / 2017
2017 / 2016
$
185,107
$
145,039
$
119,166
27.6%
21.7%
132,201
131,887
137,664
58,864
19,690
33,498
27,334
348
13,843
55,732
19,624
42,787
41,347
237
11,646
54,882
20,445
85,259
40,182
(581)
8,883
0.2
5.6
0.3
(21.7)
(33.9)
46.8
18.9
5.0
(4.2)
1.5
(4.0)
(49.8)
2.9
N.M.
31.1
(3.8)
Total non-interest income
$
470,885
$
448,299
$
465,900
Total non-interest income as a percentage of total revenue
32.2%
32.6%
35.5%
N.M. Not Meaningful
Leasing and Equipment Finance Leasing and equipment finance non-interest income was $185.1 million for 2018,
compared with $145.0 million and $119.2 million for 2017 and 2016, respectively. The increase in 2018 was primarily
due to increases in operating lease revenue and sales-type lease revenue. 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.
Fees and Service Charges Fees and service charges were $132.2 million for 2018, compared with $131.9 million and
$137.7 million for 2017 and 2016, respectively. The decrease in 2017 was primarily due to ongoing consumer behavior
changes, as well as higher average checking account balances per customer.
Gains on Sales of Loans, Net Net gains on sales of loans were $33.5 million for 2018, compared with $42.8 million
and $85.3 million for 2017 and 2016, respectively. The decreases in both periods were primarily due to the strategic
shift executed in 2017 to no longer sell auto finance loans and decreased volume of consumer real estate loans sold.
TCF sold $1.0 billion of consumer real estate loans in 2018, compared with $1.3 billion and $1.6 billion in 2017 and
2016, respectively. TCF did not sell any auto finance loans in 2018, compared with $424.7 million and $2.1 billion in
2017 and 2016, respectively. See Note 6. Loans and Leases of Notes to Consolidated Financial Statements for further
information.
Servicing Fee Income Servicing fee income was $27.3 million on $4.0 billion of average loans and leases serviced
for others for 2018, compared with $41.3 million on $5.2 billion of average loans and leases serviced for others for
2017 and $40.2 million on $4.9 billion of average loans and leases serviced for others for 2016. The decrease in 2018
was primarily due to continued run-off in the auto finance serviced for others portfolio.
31
Non-interest Expense The components of non-interest expense were as follows:
Year Ended December 31,
Change
(Dollars in thousands)
2018
2017
2016
2018 / 2017
2017 / 2016
Compensation and employee benefits
$
497,063
$
482,512
$
475,964
3.0 %
1.4 %
Occupancy and equipment
Operating lease depreciation
Foreclosed real estate and repossessed assets, net
Other
165,812
156,909
149,980
73,829
17,050
55,901
17,756
40,359
13,187
260,646
346,856
230,397
Total non-interest expense
$ 1,014,400
$ 1,059,934
$
909,887
5.7
32.1
(4.0)
(24.9)
(4.3)
4.6
38.5
34.6
50.5
16.5
Efficiency ratio
Adjusted efficiency ratio(1)
69.34%
67.15
77.17%
77.17
69.25%
69.25
(783) bps
792 bps
(1,002)
792
(1)
See "Consolidated Financial Condition Analysis - Non-GAAP Financial Measures" in this Management's Discussion and Analysis for further information.
Compensation and Employee Benefits Compensation and employee benefits expense was $497.1 million for 2018,
compared with $482.5 million and $476.0 million for 2017 and 2016, respectively. The increase in 2018 was primarily
due to higher salaries, higher medical claims expense, including a large medical claim of $7.4 million, and higher
incentive compensation, partially offset by lower headcount in the auto finance business. 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.
Occupancy and Equipment Occupancy and equipment expense was $165.8 million for 2018, compared with
$156.9 million and $150.0 million for 2017 and 2016, respectively. The increase in 2018 was primarily due to increased
software maintenance expense and software depreciation expense. The increase in 2017 was primarily due to
increased software maintenance expense and ATM expenses, partially offset by lower repairs and maintenance.
Depreciation and amortization expense related to premises and equipment was $48.6 million, $45.9 million and
$44.9 million for 2018, 2017 and 2016, respectively.
Operating Lease Depreciation Operating lease depreciation was $73.8 million for 2018, compared with $55.9 million
and $40.4 million for 2017 and 2016, respectively. The increases in both periods were primarily due to higher balances
of leased equipment.
Foreclosed Real Estate and Repossessed Assets, Net Net foreclosed real estate and repossessed assets expense
was $17.1 million for 2018, compared with $17.8 million and $13.2 million for 2017 and 2016, respectively. 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.
Other Non-interest Expense Other non-interest expense was $260.6 million for 2018, compared with $346.9 million
and $230.4 million for 2017 and 2016, respectively. The decrease in 2018 was primarily due to charges related to the
discontinuation of auto finance loan originations in 2017, as well as decreases in professional fees, loan and lease
processing expense and charitable contributions, partially offset by the settlement with the CFPB and the OCC of
$32.0 million, including related expenses. 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, as well as increases
in professional fees, charitable contributions, outside processing expense, advertising and marketing expense, and
card processing expense, partially offset by decreases in loan and lease processing expense and branch realignment
expense. See Note 23. Other Non-interest Expense of Notes to Consolidated Financial Statements for further
information.
32
Income Taxes Income tax expense was $86.1 million for 2018, compared with income tax benefit of $33.6 million
and income tax expense of $116.5 million for 2017 and 2016, respectively. Income tax expense was 21.4% of income
before income taxes for 2018. Income tax expense for 2018 was primarily impacted by the change in the corporate
statutory tax rate as a result of the Tax Cuts and Jobs Act, enacted on December 22, 2017 ("Tax Reform"). Income
tax expense for 2018 was also impacted by a net tax benefit of $1.1 million recorded in the second quarter of 2018
for the finalization of the provisional amounts recorded in 2017 related to Tax Reform. 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.
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), revenues and assets 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 other, and auto finance. TCF's consumer banking strategy is primarily to generate deposits
and originate high credit quality secured consumer real estate loans for investment and for sale. Effective December
1, 2017, the Company discontinued auto finance loan originations. TCF continues to service existing auto loans on its
balance sheet and those that are 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.
Consumer Banking generated net income available to common stockholders of $102.9 million for 2018, compared
with $23.1 million and $124.0 million for 2017 and 2016, respectively.
Consumer Banking net interest income was $556.1 million for 2018, compared with $574.6 million and $559.9 million
for 2017 and 2016, respectively. Consumer Banking net interest income was 56.1% of the Company's total net interest
income for 2018, compared with 62.1% and 66.0% for 2017 and 2016, respectively. The decrease in 2018 was primarily
due to lower average balances of auto finance loans, increased interest expense on deposits and decreased interest
income on the fixed-rate consumer real estate loans, partially offset by increased interest income on the variable- and
adjustable-rate consumer real estate loans, higher net funds transfer pricing credits and lower interest expense on
inter-company borrowings. The increase in 2017 was primarily due to an increase in interest income on loans primarily
due to higher average yields on auto finance loans and an increase in funds transfer pricing credits driven by deposits,
partially offset by a decrease in interest income on consumer real estate loans and an increase in total interest expense
due to an increase in interest expense on inter-company borrowings and an increase in funds transfer charges.
Consumer Banking provision for credit losses was $24.9 million for 2018, compared with $48.2 million and $50.8 million
for 2017 and 2016, respectively. The decrease in 2018 was primarily due to run-off in and maturation of the auto finance
portfolio, partially offset by a decrease in recoveries on previous charge-offs related to the consumer real estate non-
accrual loan sales. The recoveries on previous charge-offs related to the consumer real estate non-accrual loan sales
were $6.6 million for 2018, compared with $13.3 million for 2017. The decrease in 2017 was primarily due to a decrease
in the provision for credit losses attributable to the consumer real estate portfolio, partially offset by an increase in the
provision for credit losses attributable to the auto finance portfolio. The provision for credit losses is predominantly a
function of TCF's reserving methodology used to determine the appropriate level of the allowance for loan and lease
losses. For further information, see "Consolidated Income Statement Analysis — Provision for Credit Losses" and
"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.
33
Consumer Banking non-interest income was $269.2 million for 2018, compared with $290.0 million and $337.0 million
for 2017 and 2016, respectively. Consumer Banking non-interest income was 57.2% of the Company's total non-
interest income for 2018, compared with 64.7% and 72.3% for 2017 and 2016, respectively. The decrease in non-
interest income in 2018 was primarily due to decreased servicing fee income due to continued run-off in the auto
finance serviced for others portfolio and decreased gains on sales of loans primarily due to the strategic shift executed
in 2017 to no longer sell auto finance loans and decreased volume of consumer real estate loans sold. Servicing fee
income attributable to the Consumer Banking segment was $26.0 million for 2018, compared with $40.0 million for
2017. Average Consumer Banking loans serviced for others were $3.6 billion for 2018, compared with $4.8 billion for
2017. The decrease in 2017 was primarily due to a decrease in net gains on sales of loans as a result of the strategic
shift executed in 2017 to no longer sell auto finance loans and decreased volume of consumer real estate loans sold.
The decrease was also due to a decrease in fees and service charges as a result of ongoing consumer behavior
changes and higher average checking account balances per customer.
Consumer Banking non-interest expense was $666.7 million for 2018, compared with $743.7 million and $652.5 million
for 2017 and 2016, respectively. The decrease in 2018 was primarily due to charges related to the discontinuation of
auto finance loan originations in 2017, as well as a decrease in compensation and employee benefits expense as a
result of lower headcount in the auto finance business and a decrease in loan processing expense. These decreases
were partially offset by the settlement with the CFPB and the OCC of $32.0 million, including related expenses and
higher allocations of other non-interest expense from the Enterprise Services segment. 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.
Wholesale Banking
Wholesale Banking is comprised of commercial banking, 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 $181.6 million for 2018, compared
with $278.4 million and $130.0 million for 2017 and 2016, respectively.
Wholesale Banking net interest income was $379.7 million for 2018, compared with $359.3 million and $343.7 million
for 2017 and 2016, respectively. Wholesale Banking net interest income was 38.3% of the Company's total net interest
income for 2018, compared with 38.8% and 40.5% for 2017 and 2016, respectively. The increase in net interest income
in 2018 was primarily due to increased interest income on the variable- and adjustable-rate wholesale loan portfolios
and the leasing and equipment finance portfolio, partially offset by an increase in net funds transfer pricing charges
and higher interest expense on inter-company borrowings driven by increases in interest rates and higher average
balances of loans and leases. The increase in 2017 was primarily due to increased interest income on loans and leases
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, partially offset by an increase in net funds
transfer pricing charges driven by an increase in loans and leases and higher interest expense on inter-company
borrowings.
Wholesale Banking provision for credit losses was $21.8 million for 2018, compared with $20.2 million and $15.1 million
for 2017 and 2016, respectively. The increase in 2017 was primarily due to increased provision for credit losses
attributable to the commercial and leasing and equipment finance portfolios, partially offset by a decrease in the
provision for credit losses attributable to the inventory finance portfolio. The provision for credit losses is predominantly
a function of TCF's reserving methodology used to determine the appropriate level of the allowance for loan and lease
losses. For further information, see "Consolidated Income Statement Analysis — Provision for Credit Losses" and
"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.
34
Wholesale Banking non-interest income was $200.5 million for 2018, compared with $158.0 million and $128.9 million
for 2017 and 2016, respectively. Wholesale Banking non-interest income was 42.6% of the Company's total non-
interest income for 2018, compared with 35.2% and 27.7% for 2017 and 2016, respectively.The increase in non-interest
income for 2018 was primarily due to an increase in leasing and equipment finance non-interest income as a result of
increased operating lease revenue and sales-type lease revenue. 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.
Wholesale Banking non-interest expense was $311.9 million for 2018, compared with $277.4 million and $247.1 million
for 2017 and 2016, respectively. The increase in 2018 was primarily due to an increase in operating lease depreciation
as a result of higher balances of leased equipment, higher allocations of other non-interest expense from the Enterprise
Services segment and an increase in compensation and employee benefits expense. The increase in 2017 was primarily
due to an increase in operating lease depreciation primarily attributable to higher balances of leased equipment resulting
in part from the acquisition of EFLC and an increase in occupancy and equipment expense.
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, internal audit, 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 net income available to common stockholders of $4.9 million for 2018, compared with
a net loss available to common shareholders of $58.5 million and $61.3 million for 2017 and 2016, respectively.
Enterprise Services net interest income was $56.2 million for 2018, compared with net interest expense of $8.7 million
and $55.4 million for 2017 and 2016, respectively. The increase in net interest income in 2018 was due to asset
sensitivity of the funds transfer pricing mismatches as a result of rising interest rates, an increase in interest income
attributable to higher average balances of debt securities available for sale and an increase in interest income on inter-
company borrowings, partially offset by an increase in interest expense on deposits. The decrease in net interest
expense 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 debt 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.
Enterprise Services non-interest expense was $35.7 million for 2018, compared with $38.8 million and $10.3 million
for 2017 and 2016, respectively. The decrease in 2018 was primarily due to higher allocations of other non-interest
expense to the Consumer Banking and Wholesale Banking segments and decreases in professional fees and charitable
contributions, partially offset by an increase in compensation and employee benefits expense primarily driven by higher
medical claims expense and an increase in occupancy and equipment expense. 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.
35
Consolidated Financial Condition Analysis
Debt Securities Available for Sale and Debt Securities Held to Maturity Total debt securities available for sale
were $2.5 billion at December 31, 2018, compared with $1.7 billion at December 31, 2017. TCF's debt securities
available for sale portfolio consists primarily of fixed-rate mortgage-backed securities issued by the Federal National
Mortgage Association (the "FNMA") and the Federal Home Loan Mortgage Corporation (the "FHLMC"), and obligations
of states and political subdivisions. The increase in securities available for sale was primarily due to purchases of
fixed-rate mortgage-backed debt securities, partially offset by sales of obligations of states and political subdivisions
and proceeds from maturities of 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. TCF sold $251.3 million of obligations of states and political subdivisions during 2018.
There were no sales of debt securities available for sale in 2017 and 2016.
Total debt securities held to maturity were $148.9 million at December 31, 2018, compared with $161.6 million at
December 31, 2017. TCF's debt securities held to maturity portfolio consists primarily of fixed-rate mortgage-backed
securities issued by the FNMA. The decrease in debt securities held to maturity was primarily due to proceeds from
maturities of and principal collected on fixed-rate mortgage-backed securities.
The amortized cost, fair value and fully tax-equivalent yield of debt securities available for sale and debt securities
held to maturity by final contractual maturity were as follows. The final contractual maturities do not consider possible
prepayments and therefore expected maturities may differ because borrowers may have the right to prepay.
2018
At December 31,
2017
2016
Amortized
Cost
Fair Value
Tax-
equivalent
Yield
Amortized
Cost
Fair Value
Tax-
equivalent
Yield
Amortized
Cost
Fair Value
Tax-
equivalent
Yield
(Dollars in thousands)
Debt securities available for
sale:
Mortgage-backed securities:
Due in one year or less
$
— $
—
—% $
1.98% $
1
$
Due in 1-5 years
Due in 5-10 years
10,105
10,033
210,522
208,514
Due after 10 years
1,710,073
1,694,647
2.04
2.54
3.05
2.39
2.51
2.72
$
6
—
6
—
82,842
82,046
825,347
812,639
15,178
431,494
363,487
15,312
435,821
363,194
—
2.04
2.32
2.97
3.14
3.29
1
18
18
54,202
54,429
773,519
756,461
—
277,228
351,744
—
274,576
337,950
14,359
299,310
252,635
14,342
295,254
247,275
Obligations of states and
political subdivisions:
Due in 1-5 years
Due in 5-10 years
Due after 10 years
Total debt securities
available for sale
Debt securities held to
maturity:
Mortgage-backed securities:
Due in 5-10 years
Due after 10 years
Other securities:
Due in one year or less
Due in 1-5 years
Due in 5-10 years
Total debt securities held to
maturity
$2,497,004
$2,470,065
2.90
$1,718,354
$1,709,018
2.72
$1,456,712
$1,423,435
$
30
$
32
6.50% $
— $
—
—% $
— $
—
146,022
146,435
2.56
158,776
162,826
2.55
178,514
181,146
—
2,400
400
—
2,400
400
—
2.92
3.00
1,000
1,400
400
1,000
1,400
400
3.00
3.21
3.00
—
1,400
1,400
—
1,400
1,400
$ 148,852
$ 149,267
2.57
$ 161,576
$ 165,626
2.56
$ 181,314
$ 183,946
8.02%
2.28
1.93
2.25
—
3.13
3.20
2.63
—%
2.54
—
2.86
3.36
2.55
See Note 5. Debt Securities Available for Sale and Debt Securities Held to Maturity of Notes to Consolidated Financial
Statements for further information regarding TCF's debt securities available for sale and debt securities held to maturity.
36
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
2018
2017
2016
2015
2014
2018 / 2017
2018 / 2013
(Dollars in thousands)
Consumer real estate:
First mortgage lien
$ 2,444,380
$ 1,959,387
$ 2,292,596
$ 2,624,956
$ 3,139,152
24.8%
(8.3)%
Junior lien
2,965,960
2,860,309
2,791,756
2,839,316
2,543,212
Total consumer real estate
5,410,340
4,819,696
5,084,352
5,464,272
5,682,364
Commercial:
Commercial real estate
2,908,147
2,751,285
2,634,191
2,593,429
2,624,255
Commercial business
943,156
809,908
652,287
552,403
533,410
Total commercial
3,851,303
3,561,193
3,286,478
3,145,832
3,157,665
Leasing and equipment finance
4,699,740
4,761,661
4,336,310
4,012,248
3,745,322
Inventory finance
3,107,356
2,739,754
2,470,175
2,146,754
1,877,090
Auto finance
Other
1,982,277
3,199,639
2,647,741
2,647,596
1,915,061
21,295
22,517
18,771
19,297
24,144
Total loans and leases
$ 19,072,311
$ 19,104,460
$ 17,843,827
$ 17,435,999
$ 16,401,646
3.7
12.3
5.7
16.5
8.1
(1.3)
13.4
(38.0)
(5.4)
(0.2)
2.9
(3.1)
1.2
18.4
4.1
6.5
13.3
9.8
(4.5)
3.8
(In thousands)
Geographic Distribution:
California
Illinois
Minnesota
Michigan
Texas
Florida
Wisconsin
Colorado
New York
Other
Total
Consumer
Real Estate
Commercial
Leasing and
Equipment
Finance
Inventory
Finance
Auto
Finance
Other
Total
At December 31, 2018
$ 1,329,099
$
218,714
$
654,381
$
130,913
$
320,379
$
2
$ 2,653,488
1,064,791
863,910
392,431
41,680
214,223
185,359
263,066
56,028
999,753
494,830
743,567
558,991
167,867
151,013
369,881
191,169
47,438
195,911
104,553
138,816
452,670
257,472
70,120
89,886
257,121
85,169
75,051
140,492
163,134
147,102
108,032
39,799
118,489
74,039
28,491
31,892
182,478
120,567
15,283
29,613
112,812
907,833
2,478,810
2,099,175
1,066,723
5,978
4,731
5,651
9
34
833
3,500
40
517
1,920,718
1,820,303
1,268,273
1,007,838
890,411
749,508
617,033
591,928
7,552,811
$ 5,410,340
$ 3,851,303
$ 4,699,740
$ 3,107,356
$ 1,982,277
$
21,295
$ 19,072,311
37
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, 2018(1)
$
117,891
$
554,492
$ 1,621,895
$ 3,107,356
$
632,636
$
11,983
$ 6,046,253
406,641
2,630,236
2,955,013
4,885,808
666,575
122,832
—
—
1,348,137
1,504
3,052
6,260
7,343,079
5,682,979
$ 5,410,340
$ 3,851,303
$ 4,699,740
$ 3,107,356
$ 1,982,277
$
21,295
$ 19,072,311
(In thousands)
Amounts due:
Within 1 year
1 to 5 years
Over 5 years
Total
Amounts due after 1 year:
Fixed-rate loans and leases
$ 2,254,390
$
678,811
$ 3,076,022
$
— $ 1,349,641
$
9,165
$ 7,368,029
Variable- and adjustable-rate
loans and leases
3,038,059
2,618,000
1,823
—
—
147
5,658,029
Total after 1 year
$ 5,292,449
$ 3,296,811
$ 3,077,845
$
— $ 1,349,641
$
9,312
$ 13,026,058
(1)
This table does not include the effect of prepayments, which is an important consideration in management's interest-rate risk analysis. Company experience
indicates that loans and leases remain outstanding for significantly shorter periods than their contractual terms.
Consumer Real Estate TCF's consumer real estate portfolio represented 28.4% of TCF's total loan and lease portfolio
at December 31, 2018, compared with 25.2% at December 31, 2017. The consumer real estate portfolio is secured
by mortgages on residential real estate and consisted of $2.4 billion of first mortgage lien loans and $3.0 billion of
junior lien loans, compared with $2.0 billion and $2.9 billion, respectively, at December 31, 2017. The average loan
size was $126 thousand for first mortgage lien loans and $51 thousand for junior lien loans at December 31, 2018,
compared with $99 thousand and $48 thousand, respectively, at December 31, 2017. Loans are originated for
investment and for sale.The increase in the consumer real estate portfolio was primarily due to loan purchases of
$950.4 million during the year. Consumer real estate originations were $2.0 billion in 2018, compared with $2.3 billion
in 2017. TCF sold $1.0 billion of consumer real estate loans in 2018, compared with $1.3 billion in 2017. At December 31,
2018, 53.7% of the consumer real estate portfolio was in TCF's primary banking markets, compared with 61.5% at
December 31, 2017. At December 31, 2018, 56.7% of the consumer real estate portfolio carried a variable or adjustable
interest rate generally tied to the prime rate, compared with 62.2% at December 31, 2017. At December 31, 2018,
46.2% of TCF's consumer real estate loans consisted of closed-end loans, compared with 42.2% at December 31,
2017. 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 740 at December 31, 2018, compared with 738 at December 31, 2017. 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 737 at December 31, 2018, compared with 736 at December 31, 2017.
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, 2018, 77.4% of the consumer real estate portfolio had
been originated since January 1, 2009 with net charge-offs of 0.01% in 2018.
The consumer real estate junior lien portfolio was comprised of $2.8 billion of home equity lines of credit ("HELOCs")
and $164.8 million of amortizing consumer real estate junior lien mortgage loans at December 31, 2018, compared
with $2.7 billion and $206.2 million, respectively, at December 31, 2017. At December 31, 2018, $2.5 billion of the
consumer real estate junior lien HELOCs had a 10-year interest-only draw period and a 20-year amortization repayment
period, compared with $2.3 billion at December 31, 2017. At December 31, 2018 and 2017, all of these loans were
within the 10-year interest-only draw period and will not convert to amortizing loans until 2021 or later. At December 31,
2018, $308.8 million 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, compared with $400.4 million at December 31,
2017. As of December 31, 2018, 12.5% of these loans mature prior to 2021. Outstanding balances on consumer real
estate lines of credit were 66.1% of total lines of credit at December 31, 2018, compared with 66.9% at December 31,
2017.
38
Commercial TCF's commercial portfolio represented 20.2% of TCF's total loan and lease portfolio at December 31,
2018, compared with 18.6% at December 31, 2017. The commercial portfolio consisted of $2.9 billion of commercial
real estate loans and $943.2 million of commercial business loans at December 31, 2018, compared with $2.8 billion
and $809.9 million, respectively, at December 31, 2017. The increase in the commercial portfolio was primarily due to
originations outpacing payments. Total commercial originations were $2.8 billion in 2018, compared with $2.1 billion
in 2017. At December 31, 2018, 68.6% of TCF's commercial real estate loans outstanding were secured by properties
located in TCF's primary banking markets, compared with 74.7% at December 31, 2017. 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, 2018 and 2017. At December 31, 2018,
variable- and adjustable-rate loans represented 78.3% of total commercial loans outstanding, compared with 73.5%
at December 31, 2017.
TCF's commercial real estate loan portfolio by property and loan type was as follows:
(In thousands)
Multi-family housing
Office buildings
Health care facilities
Warehouse/industrial buildings
Hotels and motels
Self-storage
Retail services(1)
Residential home builders
Other
Total
At December 31,
2018
Construction
and
Development
Permanent
Total
Permanent
2017
Construction
and
Development
Total
$
846,422
$
185,187
$
1,031,609
$
791,201
$
178,517
$
969,718
388,547
283,317
284,040
252,404
233,261
187,732
24,397
10,463
34,937
41,100
31,066
44,231
43,040
2,050
15,007
946
423,484
324,417
315,106
296,635
276,301
189,782
39,404
11,409
305,853
262,889
309,804
199,336
246,369
251,903
—
18,397
56,177
34,632
4,795
41,176
44,676
5,052
—
508
362,030
297,521
314,599
240,512
291,045
256,955
—
18,905
$
2,510,583
$
397,564
$
2,908,147
$
2,385,752
$
365,533
$
2,751,285
(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 24.6% of TCF's total loan
and lease portfolio at December 31, 2018, compared with 24.9% at December 31, 2017. The leasing and equipment
finance portfolio consisted of $2.5 billion of leases and $2.2 billion of loans at December 31, 2018, compared with
$2.5 billion and $2.3 billion, respectively, at December 31, 2017. Leasing and equipment finance originations (including
operating lease originations) were $2.1 billion in 2018, compared with $2.0 billion in 2017. The uninstalled backlog of
approved transactions was $572.4 million at December 31, 2018, compared with $506.4 million at December 31, 2017.
The average loan and lease size was $75 thousand at December 31, 2018, compared with $77 thousand at
December 31, 2017.
At December 31, 2018, $93.0 million of TCF's lease portfolio was discounted with third-party financial institutions on
a non-recourse basis, compared with $119.5 million at December 31, 2017. These amounts are 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, 2018, lease residuals
totaled $138.3 million, or 9.5% of original equipment value, including $6.3 million related to non-recourse sales,
compared with $139.9 million, or 9.7% of original equipment value, including $6.2 million related to non-recourse sales
at December 31, 2017. See Note 2. Summary of Significant Accounting Policies of Notes to Consolidated Financial
Statements for further information on lease accounting.
39
TCF's leasing and equipment finance portfolio by equipment type was as follows:
(Dollars in thousands)
Specialty vehicles
Construction equipment
Golf cart and turf equipment
Manufacturing equipment
Medical equipment
Trucks and trailers
Furniture and fixtures
Technology and data processing equipment
Agricultural equipment
Other
Total
At December 31,
2018
2017
Balance
Percent
of Total
Balance
Percent
of Total
$
1,396,113
29.7% $
1,403,142
556,905
428,578
421,978
353,540
339,863
307,075
297,292
144,903
453,493
11.9
9.1
9.0
7.5
7.2
6.5
6.3
3.1
9.7
548,575
431,888
472,902
335,636
367,206
334,732
290,999
148,269
428,312
29.5%
11.5
9.1
9.9
7.1
7.7
7.0
6.1
3.1
9.0
$
4,699,740
100.0% $
4,761,661
100.0%
Inventory Finance TCF's inventory finance portfolio represented 16.3% of TCF's total loan and lease portfolio at
December 31, 2018, compared with 14.3% at December 31, 2017. The inventory finance portfolio consisted of
$3.1 billion of loans at December 31, 2018, compared with $2.7 billion at December 31, 2017. The increase was
primarily due to the addition of new exclusive programs driving strong originations, as well as growth with existing
customers resulting from new manufacturer products and increased customer sales. Inventory finance originations
were $8.9 billion in 2018, compared with $7.4 billion in 2017. Origination levels are impacted by the velocity of fundings
and repayments with dealers. TCF's inventory finance customers included more than 10,800 active dealers at
December 31, 2018, compared with more than 10,900 active dealers at December 31, 2017.
TCF's inventory finance portfolio by marketing segment was as follows:
(Dollars in thousands)
Powersports
Lawn and garden
Other
Total
At December 31,
2018
2017
Balance
Percent
of Total
Balance
Percent
of Total
$
1,275,128
41.0% $
1,187,049
667,429
1,164,799
21.5
37.5
606,173
946,532
43.3%
22.1
34.6
$
3,107,356
100.0% $
2,739,754
100.0%
Auto Finance TCF's auto finance portfolio represented 10.4% of TCF's total loan and lease portfolio at December 31,
2018, compared with 16.7% at December 31, 2017. The auto finance portfolio consisted of $2.0 billion of loans at
December 31, 2018, compared with $3.2 billion at December 31, 2017. The decrease was due to run-off as a result
of the discontinuation of auto finance loan originations effective December 1, 2017. There were no auto finance
originations in 2018, compared with $2.2 billion in 2017. TCF did not sell any auto finance loans in 2018, compared
with $424.7 million in 2017. The auto finance portfolio consisted of 20.7% new auto loans and 79.3% used auto loans
at December 31, 2018, compared with 19.9% and 80.1%, respectively, at December 31, 2017.
40
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.
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,
2018
2017
2016
2015
2014
2018
2017
2016
2015
2014
First mortgage lien
$ 4,557
$ 4,666
$ 8,725
$ 11,565
$ 13,370
0.19% 0.25% 0.40% 0.46% 0.49%
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
Junior lien
Total consumer real estate
Commercial
1,213
5,770
1
Leasing and equipment finance
10,638
Inventory finance
Auto finance
Other
Subtotal
1,268
5,934
1
6,389
208
9,077
9
1,404
1,519
2,091
10,129
13,084
15,461
—
4,523
55
6,102
20
1
2,292
118
3,573
20
—
2,549
75
4,263
0.04
0.11
—
0.23
0.01
0.59
— 0.14
310
11,657
28
28,404
21,618
20,829
19,088
22,348
0.15
0.04
0.13
—
0.14
0.01
0.28
0.04
0.11
Portfolios acquired with
deteriorated credit quality
178
1,561
—
1
88
Total
$ 28,582
$ 23,179
$ 20,829
$ 19,089
$ 22,436
4.65
0.15
13.18
0.12
(1)
Excludes non-accrual loans and leases
41
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
2018
2017
2016
2015
2014
At December 31,
$
80,739
$
88,092
$
98,606
$ 106,787
$ 111,933
4,174
8,491
—
5,054
1
12,249
10,263
—
3,464
3
20,304
4,802
—
2,323
6
24,731
2,904
51
799
11
80,375
924
527
—
89
98,459
$ 114,071
$ 126,041
$ 135,283
$ 193,848
16,192
$
34,282
$
71,961
$
79,055
$
87,685
3,946
1,754
453
6,362
—
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
—
28,707
$
41,606
$
81,342
$
95,324
$ 104,616
96,931
$ 122,374
$ 170,567
$ 185,842
$ 199,618
8,120
10,245
453
11,416
1
12,332
11,676
476
8,815
4
22,474
6,152
357
7,827
6
31,747
3,545
223
9,239
11
91,640
2,877
564
3,676
89
$
$
$
$
$ 127,166
$ 155,677
$ 207,383
$ 230,607
$ 298,464
Over 60-day delinquency as a percentage of total accruing TDR
loans
0.51%
0.36%
1.19%
1.54%
1.39%
Total TDR loans were $127.2 million at December 31, 2018, compared with $155.7 million at December 31, 2017.
Accruing TDR loans were $98.5 million at December 31, 2018, compared with $114.1 million at December 31, 2017.
The decrease in accruing TDR loans was primarily due to decreases in commercial and consumer real estate accruing
TDR loans driven by payments received outpacing additions. Non-accrual TDR loans were $28.7 million at
December 31, 2018, compared with $41.6 million at December 31, 2017. The decrease in non-accrual TDR loans was
primarily due to a decrease in consumer real estate non-accrual TDR loans driven by the non-accrual loan sale in the
third quarter of 2018, partially offset by an increase in commercial non-accrual TDR loans.
Loan modifications to borrowers who have not been granted concessions are not considered TDR loans and therefore
are not included in the table above. TDR loans are no longer disclosed as TDR loans in the calendar years after
modification if the loans were modified to an interest rate equal to or greater than the yields of new loan originations
with comparable risk at the time of restructuring and if the loan is performing based on the restructured terms; however,
these loans are still considered impaired and follow TCF's impaired loan reserve policies.
TCF 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.
42
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, 2018, 83.3% of total consumer
real estate TDR loans were accruing and TCF recognized more than 61% of the original contractual interest due on
accruing consumer real estate TDR loans in 2018 by modifying the loans to qualified customers instead of foreclosing
on the property. At December 31, 2018, 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, 2018.
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 Non-performing assets, consisting of non-accrual loans and leases and other real estate
owned, were as follows:
(Dollars in thousands)
Non-accrual loans and leases:
Consumer real estate
Commercial
Leasing and equipment finance
Inventory finance
Auto finance
Other
2018
2017
2016
2015
2014
At December 31,
$ 58,765
$
83,224
$ 152,471
$ 168,269
$ 173,271
15,025
15,264
8,283
8,578
3
6,785
17,089
4,116
7,366
2
5,919
10,880
5,134
7,038
3
10,325
11,262
1,098
9,509
3
25,035
12,670
2,082
3,676
—
Total non-accrual loans and leases
105,918
118,582
181,445
200,466
216,734
Other real estate owned:
Consumer real estate
Commercial real estate
Total other real estate owned
Total non-performing assets
13,519
3,884
17,403
17,907
318
18,225
34,070
12,727
46,797
42,912
7,070
49,982
44,932
20,718
65,650
$ 123,321
$ 136,807
$ 228,242
$ 250,448
$ 282,384
Non-accrual loans and leases as a percentage of total loans and
leases
Non-performing assets 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
0.56%
0.62%
1.02%
1.15%
1.32%
0.65
0.72
1.28
1.43
1.71
148.65
144.24
88.33
77.85
75.75
Non-performing assets were $123.3 million at December 31, 2018, compared with $136.8 million at December 31,
2017. The decrease was primarily due to the $34.7 million sale of consumer real estate non-accrual loans in the third
quarter of 2018, partially offset by increases in commercial and inventory finance non-accrual loans. 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.
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.
43
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
$
83,224
$
6,785
$
17,089
$
4,116
$
7,366
$
2
$
118,582
At or For the Year Ended December 31, 2018
Additions
Charge-offs
Transfers to other assets
Return to accrual status
Payments received
Sales
Other, net
54,922
(7,119)
(17,666)
(6,289)
(12,265)
(35,786)
(256)
19,037
(3,521)
—
—
(9,836)
—
2,560
30,170
(7,702)
(8,581)
(2,502)
(12,797)
—
(413)
21,714
12,492
(3,504)
(6,014)
(2,188)
(5,779)
—
(62)
(2,609)
(1,912)
—
(6,759)
—
—
Balance, end of period
$
58,765
$
15,025
$
15,264
$
8,283
$
8,578
$
101
(76)
—
—
(24)
—
—
3
138,436
(24,531)
(34,173)
(10,979)
(47,460)
(35,786)
1,829
$
105,918
(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
$
44
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.
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, 2018
Pass
Special Mention
Substandard
Doubtful
Total
$
5,338,036
$
7,353
$
64,951
$
— $
5,410,340
3,753,229
4,621,229
2,931,221
1,960,580
21,264
42,315
42,236
111,804
1,302
—
55,759
36,275
64,331
20,395
31
—
—
—
—
—
3,851,303
4,699,740
3,107,356
1,982,277
21,295
Total loans and leases
$
18,625,559
$
205,010
$
241,742
$
— $
19,072,311
(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
Total classified loans and leases were $241.7 million at December 31, 2018, compared with $285.4 million at
December 31, 2017. The decrease was primarily due to the $34.7 million sale of consumer real estate non-accrual
loans in the third quarter of 2018 and decreases in classified commercial and inventory finance loans.
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 $157.4 million appropriate to cover losses incurred
in the loan and lease portfolios at December 31, 2018. 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.
45
The total allowance for loan and lease losses is expected to absorb losses from any segment of the portfolio. The
allocation of TCF's allowance for loan and lease losses disclosed in the following table is subject to change based on
changes in the criteria used to evaluate the allowance and is not necessarily indicative of the trend of future losses in
any particular portfolio.
In conjunction with Note 7. 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,
2018
2017
2016
2015
2014
2018
2017
2016
2015
2014
(Dollars in thousands)
Consumer real estate:
First mortgage lien
$ 21,436
$ 26,698
$ 33,828
$ 36,888
$ 55,319
0.88%
1.36%
1.48%
1.41%
1.76%
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
23,430
44,866
20,470
47,168
25,620
59,448
31,104
67,992
30,042
85,361
22,877
18,305
41,182
23,791
12,456
34,329
822
24,842
12,353
37,195
22,528
13,233
50,225
692
22,785
22,215
24,616
9,910
7,970
6,751
32,695
30,185
31,367
21,350
13,932
32,310
534
19,018
11,128
26,486
1,245
18,446
10,020
18,230
745
0.79
0.83
0.79
1.94
1.07
0.51
0.40
1.73
3.86
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
157,446
171,041
160,269
156,054
164,169
0.83
0.90
0.90
0.90
1.00
1,429
1,479
1,115
1,044
943
N.A.
N.A.
N.A.
N.A.
N.A.
$ 158,875
$ 172,520
$ 161,384
$ 157,098
$ 165,112
0.83
0.90
0.90
0.90
1.01
46
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,
2018
2017
2016
2015
2014
$
171,041
$
160,269
$
156,054
$
164,169
$
252,230
(3,585)
(3,544)
(7,129)
—
(3,585)
(3,585)
(9,695)
(6,928)
(49,833)
(7,558)
(84,728)
5,679
6,072
11,751
182
46
228
2,252
736
11,289
3,447
29,703
(55,025)
46,768
(5,338)
(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)
(100,967)
1,513
5,354
6,867
754
2,133
2,887
3,705
826
1,491
5,860
23,013
(51,534)
52,944
(9,525)
21,636
(79,331)
95,737
(104,467)
$
157,446
$
171,041
$
160,269
$
156,054
$
164,169
Net charge-offs as a percentage of average loans and
leases
0.29%
0.24%
0.26%
0.30%
0.49%
(1)
Primarily includes the transfer of the allowance for loan and lease losses to loans and leases held for sale.
Net loan and lease charge-offs for 2018 were $55.0 million, or 0.29% of average loans and leases, compared with
$44.4 million, or 0.24% of average loans and leases, for 2017 and $45.2 million, or 0.26% of average loans and leases,
for 2016. The increase in net loan and lease charge-offs in 2018 was primarily due to a decrease in recoveries in the
consumer real estate portfolio and increased net charge-offs in the auto finance and inventory finance portfolios,
partially offset by lower charge-offs in the consumer real estate portfolio. The decrease in net loan and lease charge-
offs in 2017 was 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.
47
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.
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 and 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 Bank had $208.4 million of net liquidity qualifying interest-bearing deposits at the Federal Reserve Bank at
December 31, 2018, compared with $242.6 million at December 31, 2017. Certain debt securities held to maturity and
debt securities available for sale provide the ability to liquidate or pledge unencumbered securities as needed. At
December 31, 2018, the balance of these securities was $2.6 billion, of which $1.6 million was pledged as collateral
to secure certain deposits and borrowings.
TCF Financial had net liquidity qualifying cash of $90.4 million at December 31, 2018, compared with $79.8 million at
December 31, 2017.
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. 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. TCF primarily borrows from the Federal Home Loan Bank (the
"FHLB") of Des Moines. TCF had $1.2 billion of additional borrowing capacity at the FHLB of Des Moines at
December 31, 2018, 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. Lending activities, such as loan originations, loan purchases and equipment
purchases for lease financing, are the primary uses of TCF's funds.
TCF Commercial Finance Canada, Inc. ("TCFCFC") 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 under
the line of credit with the counterparty at December 31, 2018 and 2017.
Deposits Deposits were $18.9 billion at December 31, 2018, compared with $18.3 billion at December 31, 2017.
Non-interest bearing checking accounts represented 20.7% of total deposits at December 31, 2018, compared with
20.0% of total deposits at December 31, 2017. TCF's weighted-average interest rate for deposits, including non-interest
bearing deposits, was 0.58% for 2018 compared with 0.38% for 2017.
Certificates of deposit were $4.8 billion at December 31, 2018, compared with $5.0 billion at December 31, 2017. The
maturities of certificates of deposit with denominations equal to or greater than $100,000 at December 31, 2018 were
as follows:
(In thousands)
Three months or less
Over three through six months
Over six through 12 months
Over 12 months
Total
$
$
549,273
258,607
1,013,156
407,739
2,228,775
48
Borrowings Borrowings were $1.4 billion at December 31, 2018, compared with $1.2 billion at December 31, 2017.
TCF primarily borrows from the FHLB of Des Moines.
See Note 12. Short-term Borrowings and Note 13. Long-term Borrowings of Notes to Consolidated Financial Statements
and "Consolidated Financial Condition Analysis — Liquidity Management" in this Management's Discussion and
Analysis 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, 2018, the aggregate contractual obligations and commitments were as follows:
(In thousands)
Contractual Obligations:
Certificates of deposit
Long-term borrowings
Contractual interest payments(1)
Annual rental commitments under non-cancelable
operating leases
Investments in affordable housing limited liability entities
Campus marketing agreement
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
$
4,790,680
$
3,891,081
$
872,625
$
11,220
$
15,754
1,453,637
202,661
41,672
117,745
1,145,214
59,693
123,909
57,815
23,302
6,703
26,309
23,697
2,742
1,000
42,304
33,615
5,484
4,853
115,625
17,075
22,848
133
5,484
850
151,126
8,148
32,448
370
9,592
—
Total
$
6,658,707
$
4,104,246
$
2,163,788
$
173,235
$
217,438
(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
$
1,627,960
$
37,920
$
17,993
$
10,090
$
1,561,957
1,127,368
153,339
2,908,667
152,593
153,339
343,852
694,439
233,953
—
—
46,383
—
712,432
244,043
1,608,340
Standby letters of credit and guarantees on industrial
revenue bonds
Total
20,662
19,621
482
559
—
$
2,929,329
$
363,473
$
712,914
$
244,602
$
1,608,340
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 liabilities related to TCF's acquisition of EFLC and a
leasing and equipment finance loan and lease portfolio purchase in 2017. See Note 9. Goodwill and Other Intangible
Assets for further information.
49
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 for growth, as well as 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, 2018 and 2017. See Note 16. Regulatory Capital Requirements of Notes to Consolidated Financial
Statements for further information.
Equity Total equity was $2.6 billion, or 10.8% of total assets, at December 31, 2018, compared with $2.7 billion, or
11.7%, at December 31, 2017.
Preferred Stock Preferred stock was $169.3 million at December 31, 2018, compared with $265.8 million at
December 31, 2017. The decrease was due to the redemption of all 4,000,000 shares of the outstanding 6.45% Series
B non-cumulative perpetual preferred stock on March 1, 2018. See Note 15. Equity of Notes to Consolidated Financial
Statements for further information regarding TCF's preferred stock.
Treasury Stock and Other Treasury stock and other was $252.2 million at December 31, 2018, compared with
$40.8 million at December 31, 2017. The increase was primarily due to repurchases of TCF common stock. See Note
15. Equity of Notes to Consolidated Financial Statements for further information.
Common Stock Dividends Dividends to common stockholders on a per share basis were 15.0 cents for each quarter
of 2018, compared with 7.5 cents for each quarter of 2017. TCF's common stock dividend payout ratio was 34.5% for
2018, compared with 20.8% for 2017. TCF Financial's primary funding sources for dividends are earnings and dividends
received from TCF Bank.
Common Stockholders' Equity Total common stockholders' equity was $2.4 billion, or 9.99% of total assets, at
December 31, 2018, compared with $2.4 billion, or 10.42%, at December 31, 2017. Tangible common equity was
$2.2 billion, or 9.32% of total tangible assets, at December 31, 2018, compared with $2.2 billion, or 9.72%, at
December 31, 2017. Book value per common share was $14.45 at December 31, 2018, compared with $13.96 at
December 31, 2017. Tangible book value per common share was $13.38 at December 31, 2018, compared with $12.92
at December 31, 2017. See "Consolidated Financial Condition Analysis — Non-GAAP Financial Measures" in this
Management's Discussion and Analysis for further information.
Non-GAAP Financial Measures This report contains the following financial measures that are not recognized under
generally accepted accounting principles in the United States ("GAAP") (i.e. non-GAAP): tangible book value per
common share, adjusted ROACE, ROATCE, adjusted ROATCE, adjusted efficiency ratio and tangible common equity
to tangible assets. The adjusted ROACE, adjusted ROATCE and adjusted efficiency ratios are adjusted for the
settlement with the CFPB and the OCC of $32.0 million, including related expenses. Management uses these non-
GAAP financial measures internally to measure performance and believes that these non-GAAP financial measures
provide meaningful information to investors that will permit them to assess the ability of the Company's capital levels
to withstand unexpected market or economic conditions and to assess the performance of the Company in relation to
other banking institutions on the same basis as that applied by management, analysts and banking regulators.
These non-GAAP financial measures are not defined by GAAP and other entities may calculate them differently than
TCF does. Non-GAAP financial measures have inherent limitations and are not required to be uniformly applied.
Although these non-GAAP financial measures are frequently used by stakeholders in the evaluation of a company,
they have limitations as analytical tools and should not be considered in isolation or as a substitute for analyses of
results as reported under GAAP. The following tables provide a reconciliation of each non-GAAP financial measure to
the most directly comparable GAAP financial measure.
50
The computations of adjusted ROACE, ROATCE and adjusted ROATCE were as follows:
(Dollars in thousands)
2018
2017
2016
2015
2014
Net income available to common stockholders
(a)
$
289,289
$ 242,954
$ 192,736
$ 177,735
$ 154,799
For the Year Ended December 31,
Plus: Goodwill impairment
Plus: Other intangibles amortization and impairment(1)
Less: Income tax expense attributable to other
intangibles amortization and impairment
Adjusted net income available to common
stockholders
Net income available to common stockholders
adjusted for CFPB/OCC settlement:
—
3,426
73,041
2,354
801
1,050
—
1,388
493
—
1,562
562
—
1,686
624
(b)
$
291,914
$ 317,299
$ 193,631
$ 178,735
$ 155,861
Net income available to common stockholders
$
289,289
$ 242,954
$ 192,736
$ 177,735
$ 154,799
Plus: CFPB/OCC settlement adjustment
Less: Income tax expense attributable to CFPB/
OCC settlement adjustment
Net income available to common stockholders
adjusted for CFPB/OCC settlement
Plus: Goodwill impairment
Plus: Other intangibles amortization and
impairment(1)
Less: Income tax expense attributable to other
intangibles amortization and impairment
Adjusted net income available to common
stockholders adjusted for CFPB/OCC settlement
32,000
6,491
(c)
314,798
—
3,426
801
—
—
242,954
73,041
2,354
1,050
—
—
—
—
—
—
192,736
177,735
154,799
—
—
—
1,388
1,562
1,686
493
562
624
(d)
$
317,423
$ 317,299
$ 193,631
$ 178,735
$ 155,861
Average balances:
Total equity
$ 2,530,502
$ 2,535,938
$ 2,394,701
$ 2,217,204
$ 2,058,442
Less: Non-controlling interest in subsidiaries
24,323
22,514
21,525
19,514
17,014
Total TCF Financial Corporation stockholders' equity
2,506,179
2,513,424
2,373,176
2,197,690
2,041,428
Less: Preferred stock
176,971
264,474
263,240
263,240
263,240
Average total common stockholders' equity
(e)
2,329,208
2,248,950
2,109,936
1,934,450
1,778,188
Less:
Goodwill, net
Other intangibles, net(1)
154,757
22,162
219,144
12,807
225,640
2,414
225,640
3,913
225,640
5,498
Average tangible common stockholders' equity
(f)
$ 2,152,289
$ 2,016,999
$ 1,881,882
$ 1,704,897
$ 1,547,050
Average total common stockholders' equity adjusted
for CFPB/OCC settlement:
Average total common stockholders' equity
$ 2,329,208
$ 2,248,950
$ 2,109,936
$ 1,934,450
$ 1,778,188
Plus: CFPB/OCC settlement adjustment to average
total common stockholders' equity
Average total common stockholders' equity
adjusted for CFPB/OCC settlement
Less:
Goodwill, net
Other intangibles, net(1)
Adjusted average tangible common
stockholders' equity
ROACE
Adjusted ROACE
ROATCE
Adjusted ROATCE
(1)
Includes non-mortgage servicing assets.
1,048
—
—
—
—
(g)
2,330,256
2,248,950
2,109,936
1,934,450
1,778,188
154,757
22,162
219,144
12,807
225,640
2,414
225,640
3,913
225,640
5,498
(h)
$ 2,153,337
$ 2,016,999
$ 1,881,882
$ 1,704,897
$ 1,547,050
(a) / (e)
(c) / (g)
(b) / (f)
(d) / (h)
12.42%
10.80%
9.13%
9.19%
8.71%
13.51
13.56
14.74
10.80
15.73
15.73
9.13
10.29
10.29
9.19
10.48
10.48
8.71
10.08
10.08
51
The computation of the adjusted efficiency ratio was as follows:
For the Year Ended December 31,
(Dollars in thousands)
Non-interest expense
2018
2017
(a)
$ 1,014,400
$ 1,059,934
Less: CFPB/OCC settlement adjustment
Adjusted non-interest expense
(b)
$
$
32,000
—
982,400
$ 1,059,934
992,007
$
925,238
470,885
448,299
$
$
$
2016
909,887
—
909,887
848,106
465,900
$
$
$
2015
894,747
—
894,747
820,388
441,998
$
$
$
2014
871,777
—
871,777
815,629
433,267
(c)
$ 1,462,892
$ 1,373,537
$ 1,314,006
$ 1,262,386
$ 1,248,896
Net interest income
Non-interest income
Total revenue
Efficiency ratio
Adjusted efficiency ratio
(a) / (c)
(b) / (c)
69.34%
67.15
77.17%
77.17
69.25%
69.25
70.88%
70.88
69.80%
69.80
The computations of the tangible common equity to tangible assets and tangible book value per common share
were as follows:
(Dollars in thousands, except per share data)
2018
2017
2016
2015
2014
Total equity
$ 2,556,260
$ 2,680,584
$ 2,444,645
$ 2,306,917
$ 2,135,364
Less: Non-controlling interest in subsidiaries
18,459
17,827
17,162
16,001
13,715
At December 31,
Total TCF Financial Corporation
stockholders' equity
Less: Preferred stock
2,537,801
2,662,757
2,427,483
2,290,916
2,121,649
169,302
265,821
2,396,936
263,240
263,240
263,240
2,164,243
2,027,676
1,858,409
Total common stockholders' equity
(d)
2,368,499
Less:
Goodwill, net
Other intangibles, net(1)
Tangible common stockholders' equity
Total assets
Less:
Goodwill, net
Other intangibles, net(1)
Tangible assets
Common stock shares outstanding
154,757
20,518
154,757
23,687
225,640
1,738
225,640
3,126
225,640
4,641
$ 2,193,224
$ 2,218,492
$ 1,936,865
$ 1,798,910
$ 1,628,128
$ 23,699,612
$ 23,002,159
$ 21,441,326
$ 20,689,609
$ 19,393,656
154,757
20,518
154,757
23,687
225,640
1,738
225,640
3,126
225,640
4,641
$ 23,524,337
$ 22,823,715
$ 21,213,948
$ 20,460,843
$ 19,163,375
163,923,227
171,669,419
170,991,940
169,844,464
167,461,002
(e)
(f)
(g)
(h)
Common equity to assets
Tangible common equity to tangible assets
(d) / (f)
(e) / (g)
9.99%
9.32
10.42%
9.72
10.09%
9.13
9.80%
8.79
9.58%
8.50
Book value per common share
(d) / (h) $
Tangible book value per common share
(e) / (h)
$
14.45
13.38
$
13.96
12.92
$
12.66
11.33
$
11.94
10.59
11.10
9.72
(1)
Includes non-mortgage servicing assets.
Critical Accounting Estimates
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. The accounting policy for the allowance for loan and lease losses is critical because
it requires management to make challenging, 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.
See Note 2. Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements for further
discussion of the accounting policy for the allowance for loan and lease losses.
52
Recent Accounting Developments
For a description of new accounting standards issued, but not yet adopted by the Company, see Note 2. Summary of
Significant Accounting Policies of Notes to Consolidated Financial Statements.
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:
deterioration in general economic, political and banking industry conditions; cyber-security breaches, hacking, denial
of service, security breaches, loss or theft of information, or other cyber-attacks that disrupt TCF's business operations
or damage its reputation; fluctuation in interest rates that result in decreases in the value of assets or a mismatch
between yields earned on TCF's interest-earning assets and the rates paid on its deposits and borrowings; lack of
access to liquidity; inability to pay and receive dividends; adverse effects related to competition from traditional
competitors, non-bank providers of financial services and new technologies; soundness of other financial institutions
and other counterparty risk, including the risk of default, operational disruptions, security breaches, or diminished
availability of counterparties who satisfy our credit quality requirements; adverse developments affecting TCF's
branches, including its supermarket branches; risks related to developing new products, markets or lines of business;
changes in the allowance for loan and lease losses dictated by new market conditions, regulatory requirements or
accounting standards; new consumer protection and supervisory requirements or regulatory reform related to capital,
leverage, liquidity or risk management; adverse changes in monetary, fiscal or tax policies; heightened regulatory
practices or requirements related to enterprise risk management, the Bank Secrecy Act and anti-money laundering
compliance activity; deficiencies in TCF's compliance programs or risk mitigation frameworks; the effect of any negative
publicity or reputational damage; technological or operational difficulties; failure to keep pace with technological change,
including with respect to customer demands or system upgrades; risks related to TCF's loan sales activity; dependence
on accurate and complete information from customers and counterparties; the failure to attract and retain key
employees; inability to successfully execute on TCF's growth strategy through acquisitions or expanding existing
business relationships; changes in accounting standards or interpretations of existing standards; adverse federal, state
or foreign tax assessments; litigation or government enforcement actions; ineffective internal controls; and the effects
of man-made and natural disasters, any of which may negatively affect our operations and/or our customers.
53
This report also contains forward-looking statements regarding TCF's outlook or expectations with respect to the
planned merger with Chemical. Examples of forward-looking statements include, but are not limited to, statements
regarding the outlook and expectations of TCF and Chemical with respect to their planned merger, the strategic benefits
and financial benefits of the merger, including the expected impact of the transaction on the combined company's
future financial performance (including anticipated accretion to earnings per share, the tangible book value earn-back
period and other operating and return metrics), and the timing of the closing of the transaction. Such risks, uncertainties
and assumptions, include, among others, the following:
•
•
•
•
•
•
•
•
•
•
•
•
the failure to obtain necessary regulatory approvals when expected or at all (and the risk that such approvals
may result in the imposition of conditions that could adversely affect the combined company or the expected
benefits of the transaction);
the failure of either TCF or Chemical to obtain shareholder approval, or to satisfy any of the other closing
conditions to the transaction on a timely basis or at all;
the occurrence of any event, change or other circumstances that could give rise to the right of one or both of
the parties to terminate the merger agreement;
the possibility that the anticipated benefits of the transaction, including anticipated cost savings and strategic
gains, are not realized when expected or at all, including as a result of the impact of, or problems arising from,
the integration of the two companies or as a result of the strength of the economy, competitive factors in the
areas where TCF and Chemical do business, or as a result of other unexpected factors or events;
the impact of purchase accounting with respect to the transaction, or any change in the assumptions used
regarding the assets purchased and liabilities assumed to determine their fair value;
diversion of management's attention from ongoing business operations and opportunities;
potential adverse reactions or changes to business or employee relationships, including those resulting from
the announcement or completion of the transaction;
the ability of either company to effectuate share repurchases and the prices at which such repurchases may
be effectuated;
the outcome of any legal proceedings that may be instituted against TCF or Chemical;
the integration of the businesses and operations of TCF and Chemical, which may take longer than anticipated
or be more costly than anticipated or have unanticipated adverse results relating to TCF's or Chemical's existing
businesses;
business disruptions following the merger; and
other factors that may affect future results of TCF and Chemical including changes in asset quality and credit
risk; the inability to sustain revenue and earnings growth; changes in interest rates and capital markets; inflation;
customer borrowing, repayment, investment and deposit practices; the impact, extent and timing of
technological changes; capital management activities; and other actions of the Federal Reserve Board and
legislative and regulatory actions and reforms.
Additional factors that could cause results to differ materially from those described above can be found in the risk
factors described in Part I, Item 1A of this Annual Report on Form 10-K under the heading "Risk Factors" and Chemical's
Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2017. Annualized, pro forma, projected
and estimated numbers are used for illustrative purpose only, are not forecasts and may not reflect actual results. TCF
and Chemical disclaim any obligation to update or revise any forward-looking statements contained in this
communication, which speak only as of the date hereof, whether as a result of new information, future events or
otherwise, except as required by law.
54
Important Additional Information and Where to Find It
In connection with the proposed merger, Chemical will file with the SEC a Registration Statement on Form S-4 that
will include the Joint Proxy Statement of TCF and Chemical and a Prospectus of Chemical, as well as other relevant
documents regarding the proposed transaction. A definitive Joint Proxy Statement/Prospectus will also be sent to TCF
and Chemical shareholders. INVESTORS ARE URGED TO READ THE REGISTRATION STATEMENT AND THE
JOINT PROXY STATEMENT/PROSPECTUS REGARDING THE MERGER WHEN IT BECOMES AVAILABLE AND
ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR
SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION.
This Annual Report on Form 10-K does not constitute an offer to sell or the solicitation of an offer to buy any securities
or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.
A free copy of the Joint Proxy Statement/Prospectus once available, as well as other filings containing information
about TCF and Chemical, may be obtained at the SEC's Internet site (http://www.sec.gov). You will also be able to
obtain these documents, free of charge, from TCF by accessing TCF's website at http://www.tcfbank.com (which
website is not incorporated herein by reference) or from Chemical by accessing Chemical's website at http://
www.chemicalbank.com (which website is not incorporated herein by reference). Copies of the Joint Proxy Statement/
Prospectus once available can also be obtained, free of charge, by directing a request to TCF Investor Relations at
Investor Relations, TCF Financial Corporation, 200 Lake Street East, EXO-02C, Wayzata, MN 55391 by calling (952)
745-2760 or by sending an e-mail to investor@tcfbank.com, or to Chemical Investor Relations at Investor Relations,
Chemical Financial Corporation, Chemical Financial Corporation, 333 W. Fort Street, Suite 1800, Detroit, MI 48226,
Dennis L. Klaeser (800) 867-9757 or by sending an e-mail to dennis.klaeser@ChemicalBank.com.
Participants in Solicitation
TCF and Chemical and certain of their respective directors and executive officers may be deemed to be participants
in the solicitation of proxies from TCF and Chemical shareholders in respect of the transaction described in the Joint
Proxy Statement/Prospectus. Information regarding TCF's directors and executive officers is contained in this Annual
Report on Form 10-K for the year ended December 31, 2018, its Proxy Statement on Schedule 14A, dated March 14,
2018, and certain of its Current Reports on Form 8-K, which are filed with the SEC. Information regarding Chemical's
directors and executive officers is contained in Chemical's Annual Report on Form 10-K for the year ended December
31, 2017, its Proxy Statement on Schedule 14A, dated March 16, 2018, and certain of its Current Reports on Form 8-
K, which are filed with the SEC. Additional information regarding the interests of those participants and other persons
who may be deemed participants in the transaction may be obtained by reading the Joint Proxy Statement/Prospectus
regarding the proposed merger when it becomes available.
55
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 established interest rate risk
policy limits. 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
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 new loan spreads,
prepayment rates, basis risk and deposit assumptions.
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 change. 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
-100 basis points
Impact on Net Interest Income
December 31, 2018
$
63.9
36.5
(71.8)
6.2%
3.5
(7.0)
56
As of December 31, 2018, approximately 65% of TCF's loan and lease balances were expected to reprice, amortize
or prepay in the next 12 months and approximately 59% of TCF's deposit balances were low or no cost deposits. TCF
believes that the mix of assets repricing compared with low or no cost deposits positions TCF well for rising interest
rates. Currently our interest rate risk profile is such that we project net interest income will benefit from a rising rate
environment, as our assets reprice faster and to a greater degree than our liabilities. In a declining interest rate
environment, our assets would reprice downward to a greater degree than our liabilities. Since 2016, management
has taken steps to manage this interest rate risk position. While management continues to take action to advance TCF
toward being less asset sensitive, the risk of lower net interest income as a result of a declining interest rate environment
remains. Since deposit costs are already at a low level, management believes that lower interest rates are unlikely to
impact our low or no cost deposits to the same degree as TCF’s interest rate sensitive assets.
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 current or anticipated earnings or capital arising from an obligor's failures 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.
57
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 debt securities available for sale portfolio related to obligations of states and
political subdivisions. The Company maintains a set of underwriting criteria and regularly monitors credit performance
under the direction and supervision of the TCF Bank Credit Committee to manage this risk. The remainder of the debt
securities available for sale portfolio and the debt securities held to maturity portfolio consist primarily of fixed-rate
mortgage-backed securities issued and guaranteed by the FNMA and the FHLMC, and therefore credit risk is minimal.
All investment related counterparties and transaction limits are reviewed and approved annually by both ALCO and
the TCF Bank Credit Committee.
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 Bank 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 Bank'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. TCF’s liability liquidity is sourced primarily through deposits and other secured sources
of funding. See "Item 7. Management's Discussion and Analysis - Consolidated Income Statement Analysis - Liquidity
Management" for further information.
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.
58
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, 2018 and 2017, 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,
2018, 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, 2018 and
2017, and the results of its operations and its cash flows for each of the years in the three-year period ended
December 31, 2018, 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, 2018, 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 26, 2019 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 26, 2019
59
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Financial Condition
(Dollars in thousands, except per share data)
Assets:
Cash and due from banks
Investments
Debt securities held to maturity
Debt 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
Long-term borrowings
Accrued expenses and other liabilities
Total liabilities
Equity:
At December 31,
2018
2017
$
587,057
$
91,654
148,852
2,470,065
90,664
2,444,380
2,965,960
5,410,340
3,851,303
4,699,740
3,107,356
1,982,277
21,295
19,072,311
(157,446)
18,914,865
427,534
154,757
814,164
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
$
$
23,699,612
$
23,002,159
6,381,327
$
6,122,257
1,609,422
4,790,680
18,903,686
1,449,472
790,194
21,143,352
6,300,127
5,287,606
1,764,998
4,982,271
18,335,002
1,249,449
737,124
20,321,575
Preferred stock, par value $0.01 per share, 30,000,000 shares authorized;
7,000 and 4,007,000 shares issued
169,302
265,821
Common stock, par value $0.01 per share, 280,000,000 shares authorized;
173,584,846 and 172,158,449 shares issued
Additional paid-in capital
Retained earnings, subject to certain restrictions
Accumulated other comprehensive income (loss)
Treasury stock at cost, 9,661,619 and 489,030 shares and other
Total TCF Financial Corporation stockholders' equity
Non-controlling interest in subsidiaries
Total equity
Total liabilities and equity
See accompanying notes to consolidated financial statements.
1,736
885,089
1,766,994
(33,138)
(252,182)
2,537,801
18,459
2,556,260
$
23,699,612
$
1,722
877,217
1,577,311
(18,517)
(40,797)
2,662,757
17,827
2,680,584
23,002,159
60
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
(Dollars in thousands, except per share data)
2018
2017
2016
Year Ended December 31,
Interest income:
Loans and leases
Debt securities available for sale
Debt 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:
Leasing and equipment finance
Fees and service charges
Card revenue
ATM revenue
Gains on sales of loans, net
Servicing fee income
Gains (losses) on debt securities, net
Other
Total non-interest income
Non-interest expense:
Compensation and employee benefits
Occupancy and equipment
Operating lease depreciation
Foreclosed real estate and repossessed assets, net
Other
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
Weighted-average common shares outstanding:
Basic
Diluted
See accompanying notes to consolidated financial statements.
850,546
26,573
4,649
48,962
930,730
61,788
20,836
82,624
848,106
65,874
782,232
119,166
137,664
54,882
20,445
85,259
40,182
(581)
8,883
465,900
475,964
149,980
40,359
13,187
230,397
909,887
338,245
116,528
221,717
9,593
212,124
19,388
—
192,736
1.15
1.15
$
1,065,137
$
954,246
$
54,574
3,970
18,583
33,278
4,436
27,097
1,142,264
1,019,057
107,113
43,144
150,257
992,007
46,768
945,239
185,107
132,201
58,864
19,690
33,498
27,334
348
13,843
470,885
497,063
165,812
73,829
17,050
260,646
1,014,400
401,724
86,096
315,628
11,270
304,358
11,588
3,481
66,012
27,807
93,819
925,238
68,443
856,795
145,039
131,887
55,732
19,624
42,787
41,347
237
11,646
448,299
482,512
156,909
55,901
17,756
346,856
1,059,934
245,160
(33,624)
278,784
10,147
268,637
19,904
5,779
289,289
$
242,954
$
1.75
$
1.74
1.44
$
1.44
$
$
61
165,585,493
166,561,705
168,679,501
169,089,244
167,219,964
167,807,451
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
(In thousands)
2018
2017
2016
Net income attributable to TCF Financial Corporation
$
304,358
$
268,637
$
212,124
Year Ended December 31,
Other comprehensive income (loss), net of tax:
Net unrealized gains (losses) on debt 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
(11,669)
10,450
(13,368)
(34)
(14,621)
16,454
(2,746)
4,921
(29)
18,600
Comprehensive income
$
289,737
$
287,237
$
See accompanying notes to consolidated financial statements.
(18,894)
(756)
1,300
(29)
(18,379)
193,745
62
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
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
4,006,900 169,887,030 $ 263,240 $
1,699 $ 851,836 $1,240,347 $
(15,346) $ (50,860) $2,290,916 $
16,001 $2,306,917
212,124
—
Balance, December 31,
2015
Net income
Other comprehensive
income (loss), net of tax
Net investment by
(distribution to) non-
controlling interest
Dividends on 7.50%
Series A Preferred
Stock
Dividends on 6.45%
Series B Preferred
Stock
Dividends on common
stock of $0.30 per
common share
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
principle
Balance, January 1,
2017
Reclassification of
stranded tax effects
from AOCI to retained
earnings
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 7.50%
Series A Preferred
Stock
Dividends on 6.45%
Series B Preferred
Stock
Dividends on 5.70%
Series C Preferred
Stock
Dividends on common
stock of $0.30 per
common share
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
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
511,420
636,056
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
5
6
—
—
—
5,833
6,548
—
(12,938)
—
(6,450)
—
(50,182)
—
—
—
—
—
—
—
—
212,124
9,593
221,717
(18,379)
—
(18,379)
—
(8,432)
(8,432)
—
(12,938)
—
(12,938)
—
(6,450)
—
(6,450)
—
(50,182)
—
(50,182)
—
—
5,838
6,554
—
—
—
5,838
6,554
—
—
(1,441)
—
1,441
—
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
(1,319)
—
—
—
—
—
4,006,900 171,034,506
263,240
1,710
864,095
1,381,582
(33,725)
(49,419) 2,427,483
17,162
2,444,645
—
—
—
—
—
—
—
—
—
—
—
—
7,000
(6,900)
— 169,302
— (166,721)
—
—
—
—
—
—
—
—
—
—
—
—
—
1,381,448
(257,505)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
3,392
268,637
—
—
—
(5,779)
—
—
(11,320)
—
—
(6,450)
(2,134)
—
(50,617)
14
23,240
(2)
7,667
— (17,785)
—
—
—
—
—
—
—
—
—
—
—
268,637
10,147
278,784
18,600
—
18,600
—
(9,482)
(9,482)
169,302
—
169,302
— (172,500)
— (172,500)
(9,163)
(9,163)
—
(9,163)
—
(11,320)
—
(11,320)
—
—
(6,450)
(2,134)
—
—
(6,450)
(2,134)
—
(50,617)
—
(50,617)
—
—
23,254
7,665
—
17,785
—
—
—
—
23,254
7,665
—
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
(18,379)
—
—
—
—
—
—
(3,392)
—
18,600
—
—
—
—
—
—
—
—
—
—
See accompanying notes to consolidated financial statements.
63
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Equity, Continued
(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
4,007,000 172,158,449 $ 265,821 $
1,722 $ 877,217 $1,577,311 $
(18,517) $ (40,797) $2,662,757 $
17,827 $2,680,584
—
—
—
—
—
(116)
—
—
(116)
—
(116)
4,007,000 172,158,449
265,821
1,722
877,217
1,577,195
(18,517)
(40,797) 2,662,641
17,827
2,680,468
Balance, December 31,
2017
Change in accounting
principle
Balance, January 1,
2018
Net income
Other comprehensive
income (loss), net of tax
Net investment by
(distribution to) non-
controlling interest
Redemption of Series B
Preferred Stock
Repurchases of
9,188,589 shares of
common stock
Dividends on 6.45%
Series B Preferred
Stock
Dividends on 5.70%
Series C Preferred
Stock
Dividends on common
stock of $0.60 per
common share
Common stock warrants
exercised
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,
2018
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(4,000,000)
— (96,519)
—
—
—
—
—
—
—
—
—
—
—
—
1,088,918
34,627
302,852
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
11
—
3
304,358
—
—
—
(3,481)
(14,621)
—
—
—
—
—
304,358
11,270
315,628
(14,621)
—
(14,621)
—
(10,638)
(10,638)
— (100,000)
— (100,000)
—
— (212,929)
(212,929)
— (212,929)
(1,613)
(9,975)
—
(99,490)
(11)
715
8,334
—
(1,166)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(1,613)
(9,975)
(99,490)
—
715
378
8,715
—
1,166
—
—
—
—
—
—
—
—
(1,613)
(9,975)
(99,490)
—
715
8,715
—
7,000 173,584,846 $ 169,302 $
1,736 $ 885,089 $1,766,994 $
(33,138) $(252,182) $2,537,801 $
18,459 $2,556,260
See accompanying notes to consolidated financial statements.
64
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
Cash flows from operating activities:
Year Ended December 31,
2017
2018
2016
Net income
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
$
315,628
$
278,784
$
221,717
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 debt securities
Proceeds from maturities of and principal collected on debt securities
Purchases of debt securities
Redemption of Federal Home Loan Bank stock
Purchases of Federal Home Loan Bank stock
Proceeds from sales of loans and leases
Principal collected on loans and leases, net of loan and lease originations and purchases
Acquisition of Equipment Financing & Leasing Corporation, net of cash acquired
Purchases of lease equipment
Proceeds from sales of assets
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
Redemption of Series B preferred stock
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.
46,768
222,602
—
58,986
372,354
(375,622)
(39,881)
(2,121)
(41,949)
556,765
254,146
185,029
(1,232,618)
269,002
(278,000)
903,606
172,849
—
(1,230,094)
88,942
(56,091)
20,935
(902,294)
549,157
160
9,380,950
(9,182,536)
(2,000)
(100,000)
—
—
(212,929)
715
(11,588)
(99,490)
—
(997)
(10,638)
310,804
(34,725)
621,782
587,057
139,026
(26,308)
105,247
848,941
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)
(1,038,208)
63,875
(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)
—
(1,197,281)
76,885
(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
$
$
$
$
65
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
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. Its principal
subsidiary, TCF National Bank ("TCF Bank"), is headquartered in Sioux Falls, South Dakota. TCF Bank operates bank
branches in Illinois, Minnesota, Michigan, Colorado, Wisconsin, Arizona and South Dakota (TCF's "primary banking
markets"), providing an exceptional customer experience driven by convenience through multiple points of contact,
including digital banking, phone banking, a branch presence with select locations open at least six days a week and
with extended hours, and access to automated teller machine ("ATM") networks. Through its direct subsidiaries, TCF
Bank provides a full range of consumer-facing and commercial services, including consumer banking services in 47
states, commercial banking services in 42 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 have been 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"), continues to service existing auto
loans on its balance sheet and those that are 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
Allowance for Loan and Lease Losses TCF's reserving methodology used to determine the appropriate level of
the allowance for loan and lease losses contains critical accounting estimates. 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.
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.
66
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 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 quarterly 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.
Debt Securities Held to Maturity Debt 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 debt securities available for
sale to debt 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 debt security. Such amounts are then amortized over the remaining life of the transferred
debt security as an adjustment of the yield on those debt securities. TCF evaluates debt securities held to maturity for
other than temporary impairment on a quarterly basis. Declines in value considered other than temporary, if any, would
be recorded in non-interest income within gains (losses) on debt securities, net. See Note 5. Debt Securities Available
for Sale and Debt Securities Held to Maturity for further information on debt securities held to maturity.
Debt Securities Available for Sale Debt 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 debt securities sold is determined on a specific identification basis and gains or losses on sales of debt
securities available for sale are recognized on trade dates. Discounts and premiums on debt securities available for
sale are amortized using a level yield method over the expected life of the debt security, or to the earliest call date for
premiums on debt securities with call features. TCF evaluates debt securities available for sale for other than temporary
impairment on a quarterly basis. Declines in value considered other than temporary, if any, would be recorded in non-
interest income within gains (losses) on debt securities, net. See Note 5. Debt Securities Available for Sale and Debt
Securities Held to Maturity for further information on debt securities available for sale.
67
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 recorded 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.
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 the acquisition date and the fair value discount or premium is recognized
as an adjustment to yield over the remaining life of each loan or lease. Credit discounts are included in the determination
of fair value; therefore, an allowance for loan and lease losses is not recorded at the acquisition date. Purchased loans
are evaluated at the acquisition date and classified as purchased loans or purchased credit impaired ("PCI") loans.
Loans are considered PCI loans if it is probable at the acquisition date 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. If subsequent to acquisition there is credit deterioration
in excess of the acquisition date credit discount for PCI loans or purchased loans and leases, an additional allowance
for loan and lease losses is established.
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.
68
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.
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 and depreciated on a
straight-line basis over the term of the lease to its estimated salvage value. Depreciation expense on the leased
equipment is recorded in non-interest expense. Operating lease rental income is recognized when it is due and is
recorded as a component of leasing and equipment finance 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 the estimated useful lives of owned assets, over the lease term
for capitalized leases and over the estimated useful life of the related asset or the lease term, whichever is shorter,
for leasehold improvements. 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.
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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 at fair value in accrued expenses and other
liabilities. The tax credits and amortization of the investments are recorded as a component of income tax expense
(benefit). See Note 10. Investments in Affordable Housing Limited Liability Entities for further information on
investments in affordable housing limited liability entities.
Interest-only Strips TCF sells 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 goodwill and other intangible assets.
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Derivative Instruments All derivative instruments are recognized at fair value within other assets or accrued expenses
and other liabilities. The Company's derivative instruments may be subject to master netting arrangements and
collateral arrangements and qualify for offset in the Consolidated Statements of Financial Condition. A master netting
arrangement with a counterparty creates a right of offset for amounts due to and from that same counterparty that is
enforceable in the event of a default or bankruptcy. The Company's policy is to recognize amounts subject to master
netting arrangements and collateral arrangements on a net basis in the Consolidated Statements of Financial Condition.
The value of derivative instruments will vary over their contractual terms as the related underlying rates fluctuate. The
accounting for changes in the fair value of a derivative instrument depends on whether or not the contract has been
designated and qualifies as a hedge. To qualify as a hedge, a contract must be highly effective at reducing the risk
associated with the exposure being hedged. In addition, for a contract to be designated as a hedge, the risk
management objective and strategy must be documented at inception. Hedge documentation must also identify the
hedging instrument, the asset or liability and type of risk to be hedged and how the effectiveness of the contract is
assessed prospectively and retrospectively. To assess effectiveness, TCF uses statistical methods such as regression
analysis. A contract that has been, and is expected to continue to be effective at offsetting changes in fair values or
the net investment, must be assessed and documented at least quarterly. If it is determined that a contract is not
highly effective at hedging the designated exposure, hedge accounting is discontinued.
Upon origination of a derivative instrument, the contract is designated either as a hedge of the exposure to changes
in the fair value of an asset or liability due to changes in market risk ("fair value hedge"), a hedge of the volatility of an
investment in foreign operations driven by changes in foreign currency exchange rates ("net investment hedge") or is
not designated as a hedge.
Fair Value Hedges 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 ("LIBOR") plus a fixed number of basis points on the $150.0 million notional amount through February 27, 2025,
the maturity date of the subordinated debt.
The interest rate swap substantially offsets the change in fair value of the hedged underlying subordinated 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 recorded in interest expense -
borrowings effective January 1, 2018 and were previously recorded in other non-interest income.
Net Investment Hedges Forward foreign exchange contracts, which generally settle within 34 days, are used to manage
the foreign exchange risk associated with the Company's net investment in TCF Commercial Finance Canada, Inc.
("TCFCFC"), 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 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 recorded in other non-interest
income. These contracts have original fixed maturity dates ranging from three to 11 years.
Certain of TCF's forward foreign exchange contracts are not designated as hedges and are generally settled within
34 days. Changes in the fair value of these forward foreign exchange contracts are recorded in other non-interest
expense.
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 with original lock expirations generally within three months. They are not designated as hedges and
accordingly, changes in the valuation of these commitments are recorded in gains on sales of loans, net.
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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 recorded in other non-interest expense.
See Note 20. Derivative Instruments for further information on derivative instruments.
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 (benefit) 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 based on analyses of many factors, including interpretation
of income tax laws, the evaluation of uncertain tax positions, differences between the tax and financial reporting bases
of assets and liabilities (temporary differences), estimates of amounts due or owed, the timing of reversals of temporary
differences and current financial accounting standards. Additionally, there can be no assurance that estimates and
interpretations used in determining income tax assets or liabilities will not be challenged by taxing authorities. Actual
results could differ significantly from the estimates and tax law interpretations used in determining the current and
deferred income tax assets and liabilities.
In the preparation of income tax returns, tax positions are taken based on interpretation of income tax laws for which
the outcome is uncertain. At each balance sheet date, management 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 (benefit) 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 record interest and penalties, if any, related to unrecognized
tax benefits in income tax expense (benefit).
See Note 14. Income Taxes for further information on income taxes.
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 and employee benefits 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 expense. Compensation and employee benefits 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 and employee benefits 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 (benefit).
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.
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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.
Recently Adopted Accounting Pronouncements
Effective January 1, 2018, the Company adopted Accounting Standards Update ("ASU") No. 2018-14: Compensation
- Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the
Disclosure Requirements for Defined Benefit Plans, which eliminates, adds and modifies certain annual disclosure
requirements for employers that sponsor defined benefit pension and/or other postretirement benefit plans. The
adoption of this ASU was on a retrospective basis. The adoption of this guidance did not have a material impact on
our consolidated financial statements.
Effective January 1, 2018, the Company adopted 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 have been 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 was on a modified retrospective basis and resulted in the Company recording a cumulative effect reduction to
the opening balance of retained earnings of $116 thousand.
Effective January 1, 2018, the Company adopted 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
was on a prospective basis and will be applicable to an award modified on or after January 1, 2018. The adoption of
this guidance did not have a material impact on our consolidated financial statements.
Effective January 1, 2018, the Company adopted ASU No. 2017-07: Compensation - Retirement Benefits (Topic 715):
Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which changes
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 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 is eligible for capitalization in assets. The other
components of net periodic benefit cost are 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 was on a modified retrospective basis. The adoption of this guidance did not have a material
impact on our consolidated financial statements.
Effective January 1, 2018, the Company adopted ASU No. 2017-05: Other Income - Gains and Losses from the
Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and
Accounting for Partial Sales of Nonfinancial Assets, 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 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 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 was on a modified retrospective basis. The adoption of this guidance did not
have a material impact on our consolidated financial statements.
Effective January 1, 2018, the Company adopted 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 was on a prospective basis. TCF will evaluate future transactions to determine
if they should be accounted for as acquisitions (or disposals) of assets or businesses.
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Effective January 1, 2018, the Company adopted 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 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 was on a retrospective basis. The adoption of this guidance did not have an impact on our consolidated financial
statements.
Effective January 1, 2018, the Company adopted ASU No. 2016-17, Consolidation (Topic 810): Interests Held through
Related Parties That Are under Common Control, which changes the way in which a single decision maker considers
indirect interests when performing the primary beneficiary analysis under the variable interest model. Under the
amended guidance, indirect interests held by a related party would be considered on a proportional basis. The adoption
of this ASU was on a retrospective basis. The adoption of this guidance did not have a material impact on our
consolidated financial statements.
Effective January 1, 2018, the Company adopted ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers
of Assets Other Than Inventory, which requires the income tax effects of intercompany sales and transfers of assets,
other than inventory, to be recognized in the period the transaction occurs. The adoption of this ASU was on a modified
retrospective basis. The adoption of this guidance did not have a material impact on our consolidated financial
statements.
Effective January 1, 2018, the Company adopted 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 was on a retrospective basis. The adoption of this guidance did
not have a material impact on our consolidated financial statements.
Effective January 1, 2018, the Company adopted ASU No. 2016-04, Liabilities - Extinguishments 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 was on a modified retrospective basis. The adoption of this
guidance did not have a material impact on our consolidated financial statements.
Effective January 1, 2018, the Company adopted ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10):
Recognition and Measurement of Financial Assets and Financial Liabilities and ASU No. 2018-03, Technical Corrections
and Improvements to Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial
Assets and Financial Liabilities, which amend the classification and measurement of investments in equity securities,
simplify the impairment analysis of equity investments without readily determinable fair values, require separate
presentation of certain fair value changes for financial liabilities measured at fair value and eliminate certain disclosure
requirements associated with the fair value of financial instruments. The adoption of these ASUs was on a prospective
basis. The adoption of this guidance did not have a material impact on our consolidated financial statements.
Effective January 1, 2018, the Company adopted the following ASUs using the modified retrospective method with no
cumulative-effect adjustment to opening retained earnings: ASU No. 2014-09, Revenue from Contracts with Customers
(Topic 606); ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date;
ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations
(Reporting Revenue Gross versus Net); ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606):
Identifying Performance Obligations and Licensing; ASU No. 2016-12, Revenue from Contracts with Customers (Topic
606): Narrow-Scope Improvements and Practical Expedients; ASU No. 2016-20, Technical Corrections and
Improvements to Topic 606, Revenue from Contracts with Customers; 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 and ASU No. 2017-14, Income Statement - Reporting Comprehensive Income (Topic 220), Revenue
Recognition (Topic 605), and Revenue from Contracts with Customers (Topic 606).
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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 did not have a material
impact on the Company's consolidated financial statements.
Recently Issued Accounting Pronouncements
In November 2018, the Financial Accounting Standards Board (the "FASB") issued ASU No. 2018-18, Collaborative
Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606, which makes targeted
improvements to the accounting for collaborative arrangements in response to questions raised as a result of the
issuance of ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The adoption of this ASU will be
required beginning with TCF's Quarterly Report on Form 10-Q for the quarter ending March 31, 2020. Early adoption
is allowed. The adoption of this guidance will not have a material impact on our consolidated financial statements.
In October 2018, the FASB issued ASU No. 2018-17, Consolidation (Topic 810): Targeted Improvements to Related
Party Guidance for Variable Interest Entities, which provides an elective exemption to private companies from applying
variable interest entities ("VIE") guidance to all entities under common control if certain criteria are met. In addition,
this ASU contains an amendment applicable to all entities which amends how a decision maker or service provider
determines whether its fee is a variable interest in a VIE when a related party under common control also has an
interest in the VIE. The adoption of this ASU will be required beginning with TCF's Quarterly Report on Form 10-Q for
the quarter ending March 31, 2020. Early adoption is allowed. The adoption of this guidance will not have a material
impact on our consolidated financial statements.
In October 2018, the FASB issued ASU No. 2018-16, Derivatives and Hedging (Topic 815): Inclusion of the Secured
Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge
Accounting Purposes, which permits the use of the OIS Rate based on SOFR as a U.S. benchmark interest rate for
hedge accounting purposes under Topic 815 in addition to the interest rates on direct Treasury obligations of the U.S.
government, the LIBOR swap rate, the OIS Rate based on the Fed Funds Effective Rate and the Securities Industry
and Financial Markets Association Municipal Swap Rate. The adoption of this ASU will be required beginning with
TCF's Quarterly Report on Form 10-Q for the quarter ending March 31, 2019. Prospective application is required for
qualifying new or redesignated hedging relationships entered into on or after the date of adoption. Early adoption is
allowed. The adoption of this guidance will not have a material impact on our consolidated financial statements.
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In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic
350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a
Service Contract (a consensus of the FASB Emerging Issues Task Force), which requires the decision to capitalize
or expense implementation costs incurred in a cloud computing arrangement (i.e. a hosting arrangement) that is a
service contract to follow the internal-use software guidance in Accounting Standards Codification ("ASC") 350-40.
TCF's policy has been to expense these costs as incurred. The adoption of this ASU will be required beginning with
TCF's Quarterly Report on Form 10-Q for the quarter ending March 31, 2020. Both retrospective and prospective
application are allowed. Early adoption is allowed. Management has elected to early adopt this ASU beginning with
the quarter ending March 31, 2019 on a prospective basis. The adoption of this guidance will not have a material
impact on our consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework -
Changes to the Disclosure Requirements for Fair Value Measurement, which eliminates, adds and modifies certain
disclosure requirements for fair value measurements. The adoption of this ASU will be required beginning with TCF's
Quarterly Report on Form 10-Q for the quarter ending March 31, 2020. Certain of the amendments require prospective
application, while the remainder require retrospective application. Early adoption is allowed either for the entire standard
or only the provisions that eliminate or modify the requirements. Management is currently evaluating the potential
impact of this guidance on our consolidated financial statements.
In June 2018, the FASB issued ASU No. 2018-07, Compensation - Stock Compensation (Topic 718): Improvements
to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for share-based payments to
nonemployees by aligning it more consistently with the accounting for share-based payments to employees. The new
guidance in ASC 718 supersedes the guidance in ASC 505-50. 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, 2019. 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 debt 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. In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial
Instruments - Credit Losses, which clarifies that receivables arising from operating leases are not within the scope of
Subtopic 326-20 and should be accounted for in accordance with Topic 842. The adoption of these ASUs 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 to our consolidated financial statements. The impact of these
ASUs 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 these ASUs and is developing the methodologies and models
to be used upon adoption. Management will begin to test the new methodologies and models in 2019.
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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 leveraged leases from ASC 840
into ASC 842. In January 2018, the FASB issued ASU No. 2018-01, Leases (Topic 842): Land Easement Practical
Expedient for Transition to Topic 842, which amends the new lease guidance to add an optional transition practical
expedient that permits an entity to continue applying its current accounting policy for land easements that exist or
expire before Topic 842's effective date. In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements
to Topic 842, Leases, which makes narrow scope improvements to the standard for specific issues. In July 2018, the
FASB also issued ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, which provides an optional transition
method allowing the standard to be applied at the adoption date and provides a practical expedient related to separating
components of a contract for lessors. In December 2018, the FASB issued ASU No. 2018-20, Leases (Topic 842):
Narrow-Scope Improvements for Lessors, which allows lessors to elect to account for all sales taxes as lessee costs,
instead of determining whether they are lessee or lessor costs in each individual jurisdiction. It requires lessor costs
paid by lessees directly to third parties to be excluded from revenue and requires lessors to account for costs excluded
from the consideration of a contract that are paid by the lessor as revenue. It also requires certain variable payments
to be allocated (rather than recognized) to lease and nonlease components when changes occur in the facts and
circumstances on which the variable payments are based. 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 evaluated and will elect the practical expedients and optional transition method,
which allow for existing leases to be accounted for consistent with current guidance and the new guidance applied at
the adoption date. Management has evaluated TCF’s leasing contracts and activities and developed the methodologies
and processes to estimate and account for the right-of-use assets and lease liabilities based on the present value of
future lease payments. TCF adopted this guidance on January 1, 2019 by recording right-of-use assets and lease
liabilities totaling $91.9 million and $112.8 million, respectively. While the increase to consolidated total assets resulting
from the right-of-use assets recorded will increase TCF's risk-weighted assets, management does not expect the
impact to capital ratios to be material. The adoption of this guidance is not expected to result in a material change to
lessee expense recognition. The changes to lessor accounting, as well as changes in customer behavior driven by
the adoption of these ASUs, could materially impact the results of TCF's lessor subsidiaries. Management expects
earlier recognition of expense due to a narrower definition of initial direct costs and the timing of revenue recognition
to be impacted for certain leases, resulting in more revenue being deferred over the lease term.
Note 3. Cash and Due from Banks
At December 31, 2018 and 2017, TCF Bank was required by Federal Reserve regulations to maintain reserves of
$106.2 million and $107.0 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 obligations. 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 $38.3 million and $36.5 million at December 31, 2018 and
2017, respectively.
TCF had cash held in interest-bearing accounts of $307.8 million and $324.2 million at December 31, 2018 and 2017,
respectively.
77
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,
2018
2017
$
$
54,019
$
37,635
91,654
$
45,021
37,623
82,644
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 2018, 2017 and 2016.
The yield on these investments, which have no stated contractual maturity, was 4.34% and 2.96% at December 31,
2018 and 2017, respectively.
Note 5. Debt Securities Available for Sale and Debt Securities Held to Maturity
Debt securities were as follows:
2018
2017
At December 31,
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
$1,930,696
$
9,222
$
26,728
$ 1,913,190
$ 908,189
$
308
$
13,812
$ 894,685
4
566,304
—
46
—
4
6
—
—
6
9,479
556,871
810,159
7,967
3,799
814,327
$2,497,004
$
9,268
$
36,207
$ 2,470,065
$1,718,354
$
8,275
$
17,611
$1,709,018
$ 146,052
$
1,460
$
1,045
$
146,467
$ 158,776
$
4,462
$
412
$ 162,826
(In thousands)
Debt securities available
for sale:
Mortgage-backed
securities:
U.S. Government
sponsored enterprises
and federal agencies
Other
Obligations of states and
political subdivisions
Total debt securities
available for sale
Debt securities held to
maturity:
Mortgage-backed
securities:
U.S. Government
sponsored enterprises
and federal agencies
Other securities
2,800
—
—
2,800
2,800
—
—
2,800
Total debt securities held
to maturity
$ 148,852
$
1,460
$
1,045
$
149,267
$ 161,576
$
4,462
$
412
$ 165,626
At December 31, 2018 and 2017, mortgage-backed debt securities with a carrying value of $1.6 million and $0.9 million,
respectively, were pledged as collateral to secure certain deposits and borrowings.
We have assessed each debt security with unrealized losses included in the table above for credit impairment. As part
of that assessment we evaluated and concluded that it is more likely than not that we will not be required to and do
not intend to sell any of the debt securities prior to recovery of the amortized cost. Unrealized losses on debt securities
available for sale and debt securities held to maturity were due to changes in interest rates.
78
Net gains (losses) on debt securities were $348 thousand, $237 thousand and $(581) thousand for 2018, 2017 and
2016, respectively. During 2018, TCF sold $251.3 million of debt securities available for sale. There were no sales of
debt securities available for sale in 2017 and 2016. There were no impairment charges recognized on debt securities
available for sale in 2018, 2017 and 2016 and no impairment charges recognized on debt securities held to maturity
in 2018 and 2017. The net gains on debt securities in 2018 and 2017 were primarily related to recoveries on previously
impaired debt securities held to maturity and included net gains of $127 thousand on the sale of debt securities available
for sale in 2018. The net loss on debt securities in 2016 was primarily due to impairment charges of $716 thousand
recognized on debt securities held to maturity.
Gross unrealized losses and fair value of debt securities available for sale and debt securities held to maturity aggregated
by investment category and the length of time the securities were in a continuous loss position were as follows:
(In thousands)
Debt securities available for sale:
Mortgage-backed securities:
U.S. Government sponsored enterprises
and federal agencies
Obligations of states and political
subdivisions
Total debt securities available for sale
Debt securities held to maturity:
Mortgage-backed securities:
U.S. Government sponsored enterprises
and federal agencies
Total debt securities held to maturity
(In thousands)
Debt securities available for sale:
Mortgage-backed securities:
U.S. Government sponsored enterprises
and federal agencies
Obligations of states and political
subdivisions
Total debt securities available for sale
Debt securities held to maturity:
Mortgage-backed securities:
U.S. Government sponsored enterprises
and federal agencies
Total debt securities held to maturity
$
$
$
$
$
$
$
$
At December 31, 2018
Less than 12 months
12 months or more
Total
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
102,709
$
184
$
838,482
$
26,544
$
941,191
$
26,728
3,620
—
526,817
9,479
530,437
9,479
106,329
$
184
$ 1,365,299
$
36,023
$ 1,471,628
$
36,207
3,074
3,074
$
$
14
14
$
$
31,738
31,738
$
$
1,031
1,031
$
$
34,812
34,812
$
$
1,045
1,045
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
103,759
486
207,516
3,313
311,275
3,799
510,057
$
3,172
$
636,101
$
14,439
$ 1,146,158
$
17,611
13,309
13,309
$
$
132
132
$
$
11,470
11,470
$
$
280
280
$
$
24,779
24,779
$
$
412
412
79
The amortized cost and fair value of debt securities available for sale and debt securities held to maturity by final
contractual maturity were as follows. The final contractual maturities do not consider possible prepayments and
therefore expected maturities may differ because borrowers may have the right to prepay.
(In thousands)
Debt 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,
2018
2017
Amortized
Cost
Fair Value
Amortized
Cost
Fair Value
$
— $
— $
6
$
24,464
509,832
24,375
503,768
15,178
514,336
6
15,312
517,867
1,962,708
1,941,922
1,188,834
1,175,833
Total debt securities available for sale
$
2,497,004
$
2,470,065
$
1,718,354
$
1,709,018
Debt 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
$
2,400
430
2,400
432
1,400
400
146,022
146,435
158,776
Total debt securities held to maturity
$
148,852
$
149,267
$
161,576
$
Interest income attributable to debt securities available for sale was as follows:
1,000
1,400
400
162,826
165,626
(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,
2018
2017
2016
$
$
37,436
$
18,382
$
17,138
14,896
54,574
$
33,278
$
16,238
10,335
26,573
At December 31,
2018
2017
$
2,444,380
$
2,965,960
5,410,340
2,510,583
397,564
2,908,147
943,156
3,851,303
4,699,740
3,107,356
1,982,277
21,295
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
$
19,072,311
$
19,104,460
(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 $(2.2) million and
$33.3 million at December 31, 2018 and 2017, respectively.
80
Loan Sales During 2018, 2017 and 2016, TCF sold $1.0 billion, $1.3 billion and $1.6 billion, respectively, of consumer
real estate loans, received cash of $1.1 billion, $1.4 billion and $1.7 billion, respectively, and recognized net gains of
$33.5 million, $37.3 million and $50.4 million, respectively. Related to these sales, TCF retained interest-only strips of
$4.8 million, $3.4 million and $16.9 million during 2018, 2017 and 2016, respectively. Included in consumer real estate
loans sold in 2018 and 2017 were $34.7 million and $71.2 million, respectively, of non-accrual loans, which were sold
servicing released. TCF generally retains servicing on loans sold.
During 2018, TCF did not sell any auto finance loans. During 2017 and 2016, TCF sold $424.7 million and $2.1 billion,
respectively, of auto finance loans, received cash of $431.9 million and $2.1 billion, respectively, and recognized net
gains of $5.5 million and $34.8 million, respectively. Related to the sales during 2016, TCF retained interest-only strips
of $5.7 million. Included in auto finance loans sold in 2016 were amounts related to the completion of securitizations.
The auto finance securitizations qualify for sale accounting and were executed by transferring the recorded investment
to trusts. TCF transferred auto finance loans of $1.4 billion, with servicing retained, to trusts, received cash of $1.5 billion,
recorded a securitization receivable of $18.6 million and recognized net gains of $12.5 million. These trusts are
considered VIEs 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 at December 31, 2018 and 2017, as the contractual servicing fees
are adequate to compensate TCF for its servicing responsibilities based on the amount demanded by the marketplace.
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
Total interest-only strips
Contractual liabilities attributable to:
Consumer real estate loan sales
At December 31,
2018
2017
$
$
$
15,316
$
1,519
16,835
$
16,440
4,946
21,386
1,321
$
1,234
TCF recorded impairment charges on the consumer real estate interest-only strips of $0.3 million, $1.1 million and
$0.8 million in 2018, 2017 and 2016, respectively. TCF recorded impairment charges on the auto finance interest-only
strips of $0.4 million, $0.5 million and $2.4 million in 2018, 2017 and 2016, respectively.
TCF's agreements to sell consumer real estate and auto 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. For repurchases related to auto finance loans, 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. Losses related to repurchases pursuant to such representations, warranties
and covenants were immaterial for 2018, 2017 and 2016.
81
Leasing and Equipment Finance Portfolio The leasing and equipment finance portfolio consisted of $2.5 billion of
leases and $2.2 billion of loans at December 31, 2018 and $2.5 billion of leases and $2.3 billion of loans at
December 31, 2017.
Future minimum lease payments receivable for direct financing, sales-type and operating leases at December 31,
2018 were as follows:
(In thousands)
2019
2020
2021
2022
2023
Thereafter
Total
$
986,449
739,766
520,985
301,757
145,156
57,194
$
2,751,307
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 $1.0 billion and $771.3 million during 2018 and
2017, respectively. No PCI loans were acquired during 2018. 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 represented 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, 2018 and 2017, the outstanding contractual balance of these PCI loans was $7.0 million and
$16.4 million, respectively.
The changes in accretable yield and carrying value of all PCI loans were as follows:
At or For the Year Ended December 31,
2018
2017
(In thousands)
Balance, beginning of period
Additions due to acquisitions of loans
Accretion
Reclassifications from non-accretable difference
Payments received
Balance, end of period
Accretable Yield
Carrying Amount
Accretable Yield
Carrying Amount
$
$
1,051
$
11,844
$
— $
—
(215)
370
(245)
—
215
(356)
(7,886)
2,635
(25)
312
(1,871)
961
$
3,817
$
1,051
$
17
13,951
25
—
(2,149)
11,844
82
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, 2018
(In thousands)
Consumer
Real Estate
Commercial
Leasing and
Equipment
Finance
Inventory
Finance
Auto
Finance
Other
Total
Balance, beginning of period
$
47,168
$
37,195
$
22,528
$
13,233
$
50,225
$
692
$
171,041
Charge-offs
Recoveries
Net (charge-offs) recoveries
Provision for credit losses
Other(1)
(7,129)
11,751
4,622
(2,038)
(4,886)
(3,585)
228
(3,357)
7,344
—
(9,695)
2,252
(7,443)
8,960
(254)
(6,928)
736
(6,192)
5,613
(198)
(49,833)
11,289
(38,544)
22,648
—
(7,558)
3,447
(4,111)
4,241
—
(84,728)
29,703
(55,025)
46,768
(5,338)
Balance, end of period
$
44,866
$
41,182
$
23,791
$
12,456
$
34,329
$
822
$
157,446
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
(1)
Primarily includes the transfer of the allowance for loan and lease losses to loans and leases held for sale.
83
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, 2018
$
$
22,134
$
36,411
$
20,108
$
11,621
$
34,157
$
822
$
125,253
22,732
4,771
3,683
835
172
—
32,193
44,866
$
41,182
$
23,791
$
12,456
$
34,329
$
822
$
157,446
Collectively evaluated for impairment
$ 5,295,817
$ 3,815,422
$ 4,672,168
$ 3,099,073
$ 1,968,645
$ 21,291
$ 18,872,416
Individually evaluated for impairment
114,523
35,881
23,755
8,283
13,632
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
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
—
196,078
3,817
—
—
3,817
—
—
$ 5,410,340
$ 3,851,303
$ 4,699,740
$ 3,107,356
$ 1,982,277
$ 21,295
$ 19,072,311
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
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
84
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, 2018
(In thousands)
Consumer real estate:
First mortgage lien
$
2,403,391
$
3,281
$
1,276
$
2,407,948
$
36,432
$
2,444,380
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
2,942,414
5,345,805
2,903,629
932,648
3,836,277
4,670,021
3,098,763
1,962,042
21,264
18,934,172
3,639
1,213
4,494
—
1
1
7,996
310
8,326
11
21,138
—
—
1,276
—
—
—
2,642
—
3,331
17
7,266
178
2,943,627
5,351,575
2,903,629
932,649
3,836,278
4,680,659
3,099,073
1,973,699
21,292
22,333
58,765
4,518
10,507
15,025
15,264
8,283
8,578
3
2,965,960
5,410,340
2,908,147
943,156
3,851,303
4,695,923
3,107,356
1,982,277
21,295
18,962,576
105,918
19,068,494
3,817
—
3,817
Total
$
18,937,811
$
21,138
$
7,444
$
18,966,393
$
105,918
$ 19,072,311
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
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,
2018
2017
2016
$
$
10,921
$
15,009
$
1,351
2,982
9,570
$
12,027
$
20,604
4,152
16,452
85
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,
2018
2017
$
$
3,306
$
9,046
12,352
$
7,324
10,552
17,876
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. When a loan is modified as a TDR, principal balances are
generally not forgiven. 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,
2018
2017
Accruing
TDR Loans
Non-accrual
TDR Loans
Total TDR
Loans
Accruing
TDR Loans
Non-accrual
TDR Loans
Total TDR
Loans
$
80,739
$
16,192
$
96,931
$
88,092
$
34,282
$
122,374
4,174
8,491
—
5,054
1
3,946
1,754
453
6,362
—
8,120
10,245
453
11,416
1
12,249
10,263
—
3,464
3
83
1,413
476
5,351
1
12,332
11,676
476
8,815
4
$
98,459
$
28,707
$
127,166
$
114,071
$
41,606
$
155,677
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, 2018, $7.8 million, or 48.2%,
were loans discharged in Chapter 7 bankruptcy that were not reaffirmed by the borrower, of which 56.5% were current.
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. All eligible loans are re-aged to
current delinquency status upon modification.
The allowance on accruing consumer real estate TDR loans was $15.5 million, or 19.2% of the outstanding balance,
at December 31, 2018 and $17.1 million, or 19.4% of the outstanding balance, at December 31, 2017. At December 31,
2018 and 2017, 0.3% and 0.5%, respectively, of accruing consumer real estate TDR loans were 60 days or more
delinquent. The allowance on accruing TDRs and the percentage of accruing TDR loans that were 60 days or more
delinquent were not material for the remaining classes of finance receivables at December 31, 2018 and 2017.
Unfunded commitments to consumer real estate loans classified as TDRs were $0.6 million and $0.4 million at
December 31, 2018 and 2017, respectively. There were no unfunded commitments to commercial loans classified as
TDRs at December 31, 2018 and $0.5 million at December 31, 2017. At December 31, 2018 and 2017, no additional
funds were committed to leasing and equipment finance, inventory finance or auto finance loans classified as TDRs.
Loan modifications to troubled borrowers are no longer disclosed 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.
86
Interest income on TDR loans is recognized based on the restructured terms. Unrecognized interest represents the
financial impact of TDR loans and is the difference between interest income recognized on accruing TDR loans and
the contractual interest that would have been recorded had the loans performed in accordance with their original
contractual terms. The following table summarizes the financial effects of consumer real estate accruing TDR loans.
The financial effects of TDR loans for the remaining classes of finance receivables were not material for 2018, 2017
and 2016.
(In thousands)
Year ended December 31, 2018:
Consumer real estate:
First mortgage lien
Junior lien
Total consumer real estate
Year ended December 31, 2017:
Consumer real estate:
First mortgage lien
Junior lien
Total consumer real estate
Year ended December 31, 2016:
Consumer real estate:
First mortgage lien
Junior lien
Total consumer real estate
Contractual
Interest Due
Interest
Income
Unrecognized
Interest
$
$
$
$
$
$
4,161
$
2,473
$
1,642
1,122
5,803
$
3,595
$
4,522
$
2,707
$
1,923
1,327
6,445
$
4,034
$
4,722
$
2,765
$
2,325
1,632
7,047
$
4,397
$
1,688
520
2,208
1,815
596
2,411
1,957
693
2,650
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 the periods
presented 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
Commercial business
Leasing and equipment finance
Auto finance
Defaulted TDR loans modified during the applicable period
Year Ended December 31,
2018
2017
2016
$
$
3,514
$
3,081
$
302
3,816
4,697
—
1,436
579
3,660
—
555
1,169
9,949
$
5,384
$
8,193
1,630
9,823
—
—
1,693
11,516
(1)
The loan balances presented are not materially different than the pre-modification loan balances as TCF's loan modifications generally do not forgive principal
amounts.
87
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
2018
Loan
Balance
Related
Allowance
Recorded
Unpaid
Contractual
Balance
2017
Loan
Balance
Related
Allowance
Recorded
$
64,529
$
61,744
$
16,848
$
91,624
$
80,802
$
13,792
25,861
90,390
4,905
12,317
17,222
15,763
7,364
917
2
24,264
86,008
4,474
9,192
13,666
15,763
7,371
646
1
5,656
22,504
32,327
123,951
29,544
110,346
4,165
17,957
1,108
3,663
4,771
1,856
835
81
—
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
Total impaired loans with an allowance recorded
131,658
123,455
30,047
158,339
144,312
21,394
Impaired loans without an allowance recorded:
Consumer real estate:
First mortgage lien
Junior lien
Total consumer real estate
Commercial real estate
Commercial business
Total commercial
Inventory finance
Auto finance
Other
Total impaired loans without an allowance recorded
11,829
10,427
22,256
4,275
1,328
5,603
911
15,071
329
44,170
9,586
1,337
10,923
4,208
1,325
5,533
912
10,770
—
28,138
—
—
—
—
—
—
—
—
—
—
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
—
—
—
—
—
—
—
—
—
—
Total impaired loans
$ 175,828
$ 151,593
$
30,047
$ 207,193
$ 171,448
$
21,394
88
The average loan balances 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
Total impaired loans with an allowance
recorded
Impaired loans without an allowance recorded:
Consumer real estate:
First mortgage lien
Junior lien
Total consumer real estate
Commercial:
Commercial real estate
Commercial business
Total commercial
Inventory finance
Auto finance
Year Ended December 31,
2018
2017
2016
Average
Loan
Balance
Interest
Income
Recognized
Average
Loan
Balance
Interest
Income
Recognized
Average
Loan
Balance
Interest
Income
Recognized
$
71,273
$
2,172
$
92,702
$
2,748
$
114,164
$
26,904
98,177
5,588
8,517
14,105
16,433
4,335
831
3
1,090
3,262
40,477
133,179
1,488
4,236
54,888
169,052
—
130
130
82
70
—
—
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
3,597
2,606
6,203
353
—
353
40
56
112
—
133,884
3,544
165,050
4,599
192,201
6,764
10,016
1,460
11,476
4,350
662
5,012
1,865
9,284
689
182
871
231
1
232
172
302
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
—
1,959
8,723
Total impaired loans without an allowance
recorded
Total impaired loans
27,637
1,577
30,502
2,477
36,905
$
161,521
$
5,121
$
195,552
$
7,076
$
229,106
$
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,
2018
2017
$
17,403
$
14,574
15,540
18,225
12,630
22,622
Other real estate owned and repossessed and returned assets were written down $3.4 million, $6.2 million and
$8.3 million in 2018, 2017 and 2016, respectively.
89
Note 8. Premises and Equipment, Net
Premises and equipment, net were as follows:
(In thousands)
Land
Office buildings
Leasehold improvements
Furniture, equipment and computer software
Premises and equipment leased under capital leases
Subtotal
Less: Accumulated depreciation and amortization
Premises and equipment, net
At December 31,
2018
2017
$
144,754
$
268,495
51,868
404,743
3,180
873,040
445,506
$
427,534
$
146,688
272,428
48,543
363,445
—
831,104
409,555
421,549
Depreciation and amortization expense related to premises and equipment was $48.6 million, $45.9 million and
$44.9 million for 2018, 2017 and 2016, respectively. TCF leases certain premises and equipment under operating
leases. Lease expense was $38.0 million, $36.4 million and $36.5 million for 2018, 2017 and 2016, respectively.
Sublease income was $1.0 million for 2018, 2017 and 2016, respectively.
At December 31, 2018, the total future minimum rental payments for operating leases of premises and equipment
were as follows:
(In thousands)
2019
2020
2021
2022
2023
Thereafter
Total
$
26,309
25,160
17,144
12,258
10,590
32,448
$
123,909
90
Note 9. Goodwill and Other Intangible Assets
Goodwill, net was as follows:
(In thousands)
Goodwill related to consumer banking segment
Goodwill related to wholesale banking segment
Goodwill, net
At December 31,
2018
2017
$
$
141,245
$
13,512
154,757
$
141,245
13,512
154,757
Included in goodwill at December 31, 2018 and 2017 was accumulated impairment losses resulting from the impairment
charge of $73.0 million in 2017 related to the acquisition of Gateway One as a result of the Company's decision to
discontinue auto finance loan originations effective December 1, 2017. Goodwill related to Gateway One was fully
impaired at December 31, 2017. There was no impairment of goodwill in 2018 and 2016.
Other intangible assets, net were as follows:
2018
2017
At December 31,
(In thousands)
Gross
Amount
Accumulated
Amortization
Impairment
Net
Amount
Gross
Amount
Accumulated
Amortization
Impairment
Net
Amount
Program agreement
$
14,700
$
408
$
— $
14,292
$
14,700
$
49
$
— $
14,651
Non-compete agreement
Customer base intangibles
Deposit base intangibles
9,250
2,000
3,049
3,643
1,950
2,502
—
—
—
5,607
50
547
9,000
3,330
3,049
1,081
2,630
2,289
—
368
—
7,919
332
760
Total
$
28,999
$
8,503
$
— $
20,496
$
30,079
$
6,049
$
368
$
23,662
There was no impairment of other intangible assets in 2018 and 2016. There was an impairment charge of $0.4 million
in 2017 related to the customer base intangible asset attributable to Gateway One as a result of the Company's decision
to discontinue auto finance loan originations effective December 1, 2017. The Gateway One customer base intangible
asset was fully impaired at December 31, 2017 and written off in 2018.
Amortization expense for intangible assets was $3.4 million, $2.0 million and $1.4 million for 2018, 2017 and 2016,
respectively. Amortization expense for intangible assets is estimated to be $3.1 million for 2019, $2.7 million for 2020,
$2.7 million for 2021, $1.6 million for 2022 and $1.3 million for 2023.
On June 16, 2017, TCF Bank acquired 100% of the outstanding shares of Equipment Financing & Leasing Corporation
("EFLC"). 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 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 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 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. The intangible asset is amortized on a straight-line
basis over its estimated useful life.
91
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,
2018
2017
90,871
$
56,167
82,399
48,973
Amortization expense with respect to TCF's investments in affordable housing limited liability entities was $9.9 million,
$9.6 million and $4.8 million for 2018, 2017 and 2016, respectively, offset by tax credits and other benefits of
$11.6 million, $12.5 million and $7.1 million, respectively. At December 31, 2018, the expected payments for unfunded
affordable housing commitments will be payable in 2019 through 2033.
Investments in affordable housing limited liability entities are considered VIEs because TCF, as a limited partner, lacks
the power to direct the activities that most significantly impact the entities' economic performance. TCF has concluded
it is not the primary beneficiary of the investments in affordable housing limited liability entities and therefore, they are
not consolidated. At December 31, 2018 and 2017, the carrying amount of the VIE investments was $90.9 million and
$81.9 million, respectively. The maximum exposure to loss on the VIE investments was $91.1 million and $81.9 million
at December 31, 2018 and 2017, respectively. The maximum exposure to loss on the VIE investments is limited to the
carrying amount of the investments and the potential recapture of any recognized tax credits. TCF believes the likelihood
of the tax credits being recaptured is remote, as a loss would require the managing entity to fail to meet certain
government compliance requirements. Further, certain of TCF's investments in affordable housing limited liability
entities include guaranteed minimum returns which are backed by an investment grade credit-rated company, which
reduces the risk of loss.
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
At December 31,
2018
2017
Amount
Year-to-Date
Weighted-average
Rate
Amount
Year-to-Date
Weighted-average
Rate
—% $
0.03
0.01
0.36
0.75
1.53
0.58
3,671,915
2,628,212
6,300,127
5,287,606
1,764,998
4,982,271
$
18,335,002
—%
0.01
0.01
0.09
0.47
1.14
0.38
$
3,921,710
2,459,617
6,381,327
6,122,257
1,609,422
4,790,680
$
18,903,686
92
Annual maturities for certificates of deposit at December 31, 2018 were as follows:
(In thousands)
2019
2020
2021
2022
2023
Thereafter
Total
$
3,891,081
857,528
15,097
6,878
4,342
15,754
$
4,790,680
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 $782.4 million and $735.7 million at December 31, 2018 and 2017,
respectively.
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:
2018
At December 31,
2017
2016
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
$
$
$
$
$
—
—
—
156
1,977
1,155
3,288
—
8,565
—% $
—
— $
1.91% $
2.22
2.64
2.35
N.A.
N.A.
$
$
—
—
—
142
3,730
1,395
5,267
2,868
6,171
—% $
2,159
—
2,232
— $
4,391
0.10%
1.75
0.94
1.30% $
156
0.71%
0.78
1.92
1.10
N.A.
N.A.
$
$
5,235
1,660
7,051
3,391
5,907
0.41
1.75
0.73
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.
93
Note 13. Long-term Borrowings
Long-term borrowings were as follows:
(Dollars in thousands)
Stated
Maturity
Amount
Stated Rate
Amount
Stated Rate
Federal Home Loan Bank advances
2019
$
—
—% $
600,000
1.40% -
1.75%
2020
1,100,000
2.55% -
2.79
275,000
1.76
-
1.78
At December 31,
2018
2017
Subtotal
Subordinated bank notes
Hedge-related basis adjustment(1)
Subtotal
Discounted lease rentals
Subtotal
Capital lease obligation
2022
2025
2018
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
Subtotal
2024 - 2038
1,100,000
109,095
148,461
(4,165)
253,391
—
41,605
28,258
16,781
5,765
567
92,976
67
86
89
93
105
2,665
3,105
2.53
2.64
2.88
3.04
4.89
-
-
-
-
-
6.25
4.60
—
6.00
6.50
5.82
5.95
6.07
3.73
3.73
3.73
3.73
3.73
3.73
875,000
108,867
148,252
(2,157)
254,962
52,347
34,978
19,736
10,077
2,349
—
119,487
—
—
—
—
—
—
—
2.55
2.53
2.64
2.88
3.04
-
-
-
-
-
6.25
4.60
7.95
6.00
6.50
5.00
5.43
—
—
—
—
—
—
—
Total long-term borrowings
$
1,449,472
$
1,249,449
(1) Related to subordinated bank notes with a stated maturity of 2025.
At December 31, 2018, TCF Bank had pledged loans secured by consumer and commercial real estate and FHLB
stock with an aggregate carrying value of $4.3 billion as collateral for FHLB advances. At December 31, 2018, $1.1 billion
of the FHLB advances outstanding were prepayable at TCF's option.
94
Note 14. Income Taxes
Applicable income taxes in the Consolidated Statements of Income were as follows:
(In thousands)
Year Ended December 31, 2018:
Federal
State
Foreign
Total
Year Ended December 31, 2017:
Federal
State
Foreign
Total
Year Ended December 31, 2016:
Federal
State
Foreign
Total
Current
Deferred
Total
$
$
$
$
$
$
9,424
$
54,858
$
13,251
4,435
3,722
406
27,110
$
58,986
$
64,282
16,973
4,841
86,096
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
Reconciliations to TCF's effective income tax rates from the statutory federal income tax rates were as follows:
Federal income tax rate
Increase (decrease) resulting from:
State income tax, net of federal tax
Tax-exempt income
Stock compensation
Non-controlling interest tax effect
Investments in affordable housing limited liability entities
Foreign tax effects
Tax Reform effects, net
Nondeductible goodwill impairment effect
State tax settlements, net of federal tax
Other, net
Effective income tax rate
Year Ended December 31,
2018
2017
2016
21.00%
35.00 %
35.00%
3.34
(1.64)
(0.64)
(0.59)
(0.34)
0.26
(0.26)
—
—
0.30
21.43%
3.92
(3.86)
(1.15)
(1.45)
(0.89)
(0.67)
(53.29)
10.43
(1.38)
(0.38)
3.04
(2.07)
—
(0.99)
(0.24)
(0.50)
—
—
0.19
0.02
(13.72)%
34.45%
As a result of the Tax Cuts and Jobs Act, enacted on December 22, 2017 ("Tax Reform"), TCF recorded a reasonable
estimate of a net tax benefit of $130.7 million in its consolidated financial statements for 2017, primarily resulting from
the re-measurement of the Company's estimated net deferred tax liability. Certain of these amounts were provisional
in nature, as all the information necessary to record more precise amounts was not available, prepared or analyzed
for 2017. TCF recorded an additional net tax benefit of $1.1 million in the second quarter of 2018 for the finalization
of the provisional amounts recorded in 2017.
TCF has determined the effects of its global intangible low taxed income and its foreign derived intangible income to
be immaterial. These effects will be included in income tax expense (benefit) in the period in which they are paid or
received.
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.
95
As a result of Tax Reform, TCF recorded 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. TCF recorded an additional $0.2 million charge
in the second quarter of 2018 for the finalization of the provisional amounts recorded in 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, 2018, the estimated withholding taxes that could be due
on these earnings was $3.9 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,
2018
2017
2016
$
4,645
$
4,690
$
4,249
903
1,438
(970)
—
(144)
200
86
(331)
—
—
546
627
(84)
(525)
(123)
Balance, end of period
$
5,872
$
4,645
$
4,690
The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $3.7 million
and $2.2 million at December 31, 2018 and 2017, respectively. TCF recognizes increases and decreases for interest
and penalties related to unrecognized tax benefits, where applicable, in income tax expense. TCF recognized
approximately $0.1 million of tax expense, $0.6 million of tax benefit and $0.9 million of tax expense for 2018, 2017
and 2016, respectively, related to interest and penalties. Interest and penalties of approximately $0.7 million and
$0.6 million were accrued at December 31, 2018 and 2017, respectively.
TCF's federal income tax returns are open and subject to examination for 2015 and later tax return years. TCF's various
state income tax returns are generally open for 2014 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 2014 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.
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 and other carryforwards
Debt 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
96
At December 31,
2018
2017
$
33,546
$
32,686
20,591
9,235
2,524
1,900
100,482
(14,291)
86,191
297,603
40,130
17,465
7,921
2,290
7,319
372,728
$
286,537
$
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
The net operating losses and other carryforwards at December 31, 2018 consisted of state net operating losses of
$3.3 million that expire in 2019 through 2038, federal credit carryforwards of $2.8 million that expire in 2038 and
charitable contribution carryforwards of $0.2 million that expire in 2022. The valuation allowance at December 31,
2018 and 2017 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)
Series C non-cumulative perpetual preferred stock
Series B non-cumulative perpetual preferred stock
Total preferred stock
At December 31,
2018
2017
$
$
169,302
—
169,302
$
$
169,302
96,519
265,821
At December 31, 2018 and 2017, TCF had 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. 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 March 1, 2018, TCF redeemed all 4,000,000 of the outstanding shares 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") for $100.0 million. Deferred stock issuance costs of $3.5 million originally
recorded as a reduction to preferred stock upon the issuance of the Series B Preferred Stock were reclassified to
retained earnings and resulted in a one-time, non-cash reduction to net income available to common stockholders
utilized in the computation of earnings per common share and diluted earnings per common share for 2018. Dividends
were 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.
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 one-
time, non-cash 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.
Restricted Retained Earnings Retained earnings at TCF Bank at December 31, 2018 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.
97
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,
2018
2017
$
$
222,816
$
29,366
252,182
$
10,265
30,532
40,797
TCF repurchased $212.9 million and $9.2 million of its common stock in 2018 and 2017, respectively, pursuant to its
share repurchase program. These shares were recorded as treasury stock. No repurchases of common stock were
made in 2016. At December 31, 2018, TCF had the authority to repurchase an additional $78.1 million in aggregate
value of shares pursuant to its share repurchase program.
TCF reissued 16,000 shares of treasury stock at a cost of $378 thousand in 2018 related to grants of restricted stock
awards. There were no reissuances of treasury stock in 2017 or 2016.
The cost of TCF common stock held in trust for TCF's deferred compensation plans, including the 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.
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 During 2018, 3,194,787 warrants were exercised at an exercise price of $16.93 and 5,201 warrants expired
on November 14, 2018. The exercise of the warrants resulted in the issuance of 1,088,918 common shares. No warrants
were exercised in 2017 and 2016.
98
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 $235.4 million at December 31, 2018, without
prior approval of the Office of the Comptroller of the Currency (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.
The Basel III capital standards allowed institutions not subject to the advanced approaches requirements 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. As of January 1, 2019, the Basel III
capital standard requires 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, 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,
2018
2017
2018
2017
Well-capitalized
Standard
Minimum
Capital
Requirement(1)
(Dollars in thousands)
Regulatory Capital:
Common equity Tier 1 capital
$ 2,224,183
$ 2,242,410
$ 2,282,013
$ 2,409,027
Tier 1 capital
Total capital
2,408,393
2,750,581
2,522,178
2,889,323
2,300,472
2,675,347
2,426,854
2,837,374
Regulatory Capital Ratios:
Common equity Tier 1 capital ratio
10.82%
10.79%
11.10%
11.59%
6.50%
4.50%
Tier 1 risk-based capital ratio
Total risk-based capital ratio
Tier 1 leverage ratio
11.72
13.38
10.44
12.14
13.90
11.12
11.19
13.01
9.97
11.68
13.65
10.70
8.00
10.00
5.00
6.00
8.00
4.00
(1) Excludes capital conservation buffer of 1.875% and 1.25% at December 31, 2018 and 2017, respectively.
99
Note 17. Stock Compensation
TCF maintains four stock compensation plans: (i) The TCF Financial 2015 Omnibus Incentive Plan (the "Omnibus
Incentive Plan"), (ii) the TCF Financial Incentive Stock Program (the "Incentive Stock Program"), (iii) the 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, 2018, there were 4,796,822 shares
reserved for issuance under the Omnibus Incentive Plan.
At December 31, 2018, there were 264,373 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,
2018
2017
2016
$
18,052
$
17,944
$
24,925
1.6
1.6
1.6
At December 31, 2018, there were 406,575 performance-based restricted stock units granted and outstanding 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 that will vest 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. The remaining weighted-average performance period of the restricted stock
units was 1.6 years at December 31, 2018.
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,
2018
2017
2016
$
16,549
$
12,687
$
3,871
5,661
8,715
3,103
100
TCF's restricted stock award and stock option transactions under the Omnibus Incentive Plan and the Incentive Stock
Program were as follows:
Outstanding at December 31, 2015
Granted
Exercised
Forfeited/canceled
Vested
Outstanding at December 31, 2016
Granted
Exercised
Forfeited/canceled
Vested
Outstanding at December 31, 2017
Granted
Exercised
Forfeited/canceled
Vested
Outstanding at December 31, 2018
Restricted Stock Awards
Weighted-
average
Grant Date
Fair Value
13.09
12.13
—
13.59
13.10
12.81
16.47
—
11.38
13.65
13.65
21.65
—
15.12
12.24
16.70
Shares
3,273,086
$
899,000
—
(230,486)
(405,425)
3,536,175
583,388
—
(577,020)
(902,880)
2,639,663
763,446
—
(234,974)
(878,689)
2,289,446
Shares
1,379,000
—
(857,000)
(118,000)
—
404,000
—
(38,000)
—
—
366,000
—
(366,000)
—
—
—
Stock Options
Weighted-
average
Remaining
Contractual
Life in Years
2.17
$
—
—
—
—
1.06
—
—
—
—
0.06
—
—
—
—
—
Weighted-
average
Exercise
Price
14.07
—
13.04
15.75
—
15.75
—
15.75
—
—
15.75
—
15.75
—
—
—
In 2008, TCF granted stock options under the Incentive Stock Program and during 2018, all of the outstanding stock
options were exercised.
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, 2018, the fair value of the assets in these
plans was $13.8 million and included $11.1 million invested in TCF common stock, compared with a total fair value of
$15.7 million including $12.0 million invested in TCF common stock at December 31, 2017. 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 $6.3 million and $9.6 million at December 31, 2018 and 2017, 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.
101
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 "Supplemental Plan"), (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 and/or after-tax basis, subject to the annual
covered compensation limitation imposed by the Internal Revenue Service ("IRS"). TCF matches the contributions of
all participants with TCF common stock at the rate of $1 per dollar for employees with one or more years of service
up to a maximum company contribution of 5.0% of the employee's covered compensation per pay period subject to
the annual covered compensation limitation imposed by the IRS. Employee contributions vest immediately and
matching contributions made subsequent to January 1, 2016 vest immediately. Company 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, 2018, the fair value of the assets in the 401K totaled
$319.4 million and included $152.0 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,
$12.3 million and $12.6 million for 2018, 2017 and 2016, respectively.
TCF 401K Supplemental Plan The Supplemental Plan, a non-qualified plan, allows certain employees to contribute
up to 50% of their salary and bonus. TCF matching contributions to this plan totaled $1.3 million, $1.2 million and
$1.7 million for 2018, 2017 and 2016, 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, 2018 and 2017, the fair value of the assets in the plan totaled $51.7 million and
$52.7 million, respectively, and included $23.0 million and $26.0 million, respectively, invested in TCF common stock.
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 employees who were
hired prior to June 30, 2004, were at least 21 years old and had worked 1,000 hours. 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. TCF makes a monthly interest credit to each
participant's account. The interest rate used to determine the monthly interest credit is based on the one-year average
of the 5-year Treasury Constant Maturity Rate plus 25 basis points, rounded to the nearest quarter point, capped at
12% and determined at the beginning of each year. The weighted-average interest crediting rate was 2.25% and 1.50%
for 2018 and 2017, respectively. All participant accounts are 100% vested. The information set forth in the following
tables is based on current actuarial reports using the measurement date of December 31.
The measurement of the projected benefit obligation, prepaid pension asset, pension liability and annual pension
expense involves 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.
102
The funded status of the Pension Plan was as follows:
(In thousands)
Change in projected benefit obligation:
Projected 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
Fair value of plan assets, end of period
Funded status of plan, end of period
Amounts recognized in the Consolidated Statements of Financial Condition:
Prepaid (accrued) benefit cost, end of period
At or For the Year Ended December 31,
2018
2017
$
31,389
$
983
(630)
(3,412)
28,330
36,863
(607)
(3,412)
32,844
4,514
$
33,174
1,138
765
(3,688)
31,389
39,377
1,174
(3,688)
36,863
5,474
$
$
4,514
$
5,474
The accumulated benefit obligation for the Pension Plan was $28.3 million and $31.4 million at December 31, 2018
and 2017, respectively.
The discount rate used to determine the projected benefit obligation for the Pension Plan was 3.95% and 3.30% in
2018 and 2017, respectively. The discount rate used to determine the projected benefit obligation was determined by
matching estimated benefit cash flows to a yield curve derived from corporate bonds rated AA by either Moody's or
Standard and Poor's. Bonds containing call or put provisions were excluded. The average estimated duration of benefit
cash flows for the Pension Plan was 6.6 years.
TCF's Pension Plan investment policy permits investments in cash, money market mutual funds, direct fixed income
securities to include U.S. Treasury securities and 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 Pension Plan assets include mutual funds, U.S. Treasury Bills, interest-bearing cash, mortgage-backed securities
and a collective investment fund. The Pension Plan assets are measured at fair value on a recurring basis and grouped
in three levels, based on the markets in which the assets are traded and the degree and reliability of estimates and
assumptions used to determine fair value. Mutual funds, U.S. Treasury Bills and interest-bearing cash are categorized
as Level 1. The fair value of Level 1 assets is based on quotes from independent asset pricing services based on
active markets. Mortgage-backed securities are categorized as Level 2. The fair value of level 2 assets is based on
prices obtained from independent pricing sources that are based on observable transactions of similar instruments,
but not quoted markets. At December 31, 2018 and 2017, there were no assets categorized as Level 3. The fair value
of the collective investment fund is based on the net asset value ("NAV") of units as a practical expedient, and therefore
the asset is not classified in the fair value hierarchy.
103
The Pension Plan's investments measured at fair value on a recurring basis were as follows:
(In thousands)
Mutual funds
U.S. Treasury Bills
Interest-bearing cash
Mortgage-backed securities
Collective investment fund (measured at NAV of units as a practical expedient)
At December 31, 2018
Level 1
Level 2
Level 3
Total
$
21,566
$
— $
— $
21,566
2,993
83
—
—
—
—
3,399
—
—
—
—
—
2,993
83
3,399
4,812
Total investments at fair value
$
24,642
$
3,399
$
— $
32,853
(In thousands)
Mutual funds
Interest-bearing cash
Mortgage-backed securities
Collective investment fund (measured at NAV of units as a practical expedient)
At December 31, 2017
Level 1
Level 2
Level 3
Total
$
27,178
$
— $
— $
27,178
63
—
—
—
4,613
—
—
—
—
63
4,613
4,995
Total investments at fair value
$
27,241
$
4,613
$
— $
36,849
The net periodic benefit plan (income) cost included in other non-interest expense for the Pension Plan was as follows:
(In thousands)
Interest cost
Return on plan assets
Recognized actuarial (gain) loss
Net periodic benefit plan (income) cost
$
$
Year Ended December 31,
2018
2017
2016
$
1,138
$
983
607
(630)
960
$
(1,174)
765
729
$
1,281
(1,898)
(625)
(1,242)
Pension Plan actual return (loss) on plan assets, net of administrative expenses was (1.6)%, 3.2% and 4.9% for 2018,
2017 and 2016, respectively.
The actuarial assumptions used in the Pension Plan valuation are reviewed annually. The assumptions used to
determine the estimated net benefit plan cost for the Pension Plan were as follows:
Discount rate
Expected long-term rate of return on plan assets
Year Ended December 31,
2018
2017
2016
3.30%
1.50
3.60%
1.50
3.75%
1.50
The expected long-term rate of return on plan assets is determined by reference to historical market returns and future
expectations. The 10-year expected average return of the index consistent with the Pension Plan's current investment
strategy was 2.5%, net of administrative expenses.
TCF is eligible to contribute up to $11.4 million to the Pension Plan until the 2018 federal income tax return extended
due date under various IRS funding methods. TCF made no cash contributions to the Pension Plan in 2018, 2017 and
2016, respectively. TCF does not expect to be required to contribute to the Pension Plan in 2019.
The expected future benefit payments used to determine the projected benefit obligation of the Pension Plan were as
follows:
(In thousands)
2019
2020
2021
2022
2023
2024 - 2028
$
3,241
2,793
2,410
2,298
2,478
9,399
104
Postretirement Plan The Postretirement Plan provides health care benefits to eligible retired employees who retired
prior to December 31, 2009. 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 provisions for full-time
and retired employees then eligible for these benefits were not changed. 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.
The funded status of the Postretirement Plan was as follows:
(In thousands)
Change in benefit obligation:
Benefit obligation, beginning of period
Interest cost on benefit obligation
Actuarial (gain) loss
Benefits paid
Benefit obligation, end of period
Change in fair value of plan assets:
Fair value of plan assets, beginning of period
Benefits paid
TCF contributions
Fair value of plan assets, end of period
Funded status of plan, 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)
At or For the Year Ended December 31,
2018
2017
$
3,717
$
110
(115)
(392)
3,320
—
(392)
392
—
4,164
133
(248)
(332)
3,717
—
(332)
332
—
$
$
(3,320) $
(3,717)
(3,320) $
(147)
(3,717)
(193)
The changes recognized in accumulated other comprehensive income (loss) attributable to the Postretirement Plan
were as follows:
(In thousands)
At or For the Year Ended December 31,
2018
2017
2016
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
$
$
(193) $
(239) $
46
46
(147) $
(193) $
(285)
46
(239)
Prior service credits of the Postretirement Plan of $46 thousand were included within accumulated other comprehensive
income (loss) at December 31, 2018 and are expected to be recognized as components of net periodic benefit cost
during 2019.
The net periodic benefit plan (income) cost included in other non-interest expense for the Postretirement Plan was as
follows:
(In thousands)
Interest cost
Recognized actuarial (gain) loss
Amortization of prior service cost
Net periodic benefit plan (income) cost
Year Ended December 31,
2018
2017
2016
$
$
110
$
133
$
(115)
(46)
(248)
(46)
(51) $
(161) $
151
(211)
(46)
(106)
105
The discount rate used to determine the estimated net periodic benefit plan (income) cost for the Postretirement Plan
was 3.15%, 3.40% and 3.50% for 2018, 2017 and 2016, respectively.
The assumptions used to determine the benefit obligation for the 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
Year Ended December 31,
2018
2017
3.85%
5.6
4.5
2038
3.15%
5.7
4.5
2038
The discount rate used to determine the benefit obligation was determined by matching estimated benefit cash flows
to a yield curve derived from corporate bonds rated AA by either Moody's or Standard and Poor's. Bonds containing
call or put provisions were excluded. The average estimated duration of benefit cash flows for the Postretirement Plan
was 6.1 years.
TCF contributed $0.4 million, $0.3 million and $0.3 million to the Postretirement Plan in 2018, 2017 and 2016,
respectively. TCF expects to contribute $0.4 million to the Postretirement Plan in 2019. TCF currently has no plans to
pre-fund the Postretirement Plan in 2019.
The expected future benefit payments used to determine the benefit obligation of the Postretirement Plan were as
follows:
(In thousands)
2019
2020
2021
2022
2023
2024 - 2028
$
431
402
374
347
320
1,233
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,
2018
2017
$
$
1,627,960
$
1,127,368
153,339
2,908,667
20,662
2,929,329
$
1,484,065
1,033,973
126,249
2,644,287
12,992
2,657,279
106
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 2023. Collateral held consists primarily
of commercial real estate mortgages. Since the conditions under which TCF is required to fund these commitments
may not materialize, the cash requirements are expected to be less than the total outstanding commitments.
Note 20. Derivative Instruments
Derivative instruments, recognized at fair value within other assets or accrued expenses and other liabilities on the
Consolidated Statements of Financial Condition, were as follows:
(In thousands)
Derivatives designated as hedging instruments:
Interest rate contract
Forward foreign exchange contracts
Total derivatives designated as hedging instruments
Derivatives not designated as hedging instruments:
Interest rate contracts
Forward foreign exchange contracts
Interest rate lock commitments
Other contracts
Total derivatives not designated as hedging instruments
Total derivatives before netting
Netting(1)
Total derivatives, net
(In thousands)
Derivatives designated as hedging instruments:
Interest rate contract
Forward foreign exchange contracts
Total derivatives designated as hedging instruments
Derivatives not designated as hedging instruments:
Interest rate contracts
Forward foreign exchange contracts
Interest rate lock commitments
Other contracts
Total derivatives not designated as hedging instruments
Total derivatives before netting
Netting(1)
Total derivatives, net
$
$
At December 31, 2018
Fair Value
Notional Amount
Derivative Assets
Derivative Liabilities
150,000
$
157,271
1,095,449
254,274
28,007
13,020
393
$
2,980
3,373
7,516
3,709
652
—
11,877
15,250
(6,982)
$
8,268
$
At December 31, 2017
Fair Value
—
—
—
3,732
13
28
583
4,356
4,356
(991)
3,365
Notional Amount
Derivative Assets
Derivative Liabilities
150,000
$
77,879
592,383
330,928
18,015
13,804
405
$
—
405
1,392
—
223
—
1,615
2,020
(457)
$
1,563
$
—
1,744
1,744
1,688
4,619
—
615
6,922
8,666
(7,098)
1,568
(1)
Includes balance sheet netting of derivative asset and derivative liability balances, related cash collateral and portfolio level counterparty valuation adjustments.
107
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. Derivative instruments subject to master netting arrangements and collateral arrangements are recognized
on a net basis in the Consolidated Statements of Financial Condition. The gross amounts recognized, gross amounts
offset and net amount presented of derivative instruments were as follows:
(In thousands)
Derivative assets:
Interest rate contracts
Forward foreign exchange contracts
Interest rate lock commitments
Total derivative assets
Derivative liabilities:
Interest rate contracts
Forward foreign exchange contracts
Interest rate lock commitments
Other contracts
Total derivative liabilities
(In thousands)
Derivative assets:
Interest rate contracts
Interest rate lock commitments
Total derivative assets
Derivative liabilities:
Interest rate contracts
Forward foreign exchange contracts
Other contracts
Total derivative liabilities
At December 31, 2018
Gross Amounts
Recognized
Gross Amounts
Offset(1)
Net Amount
Presented
7,909
$
6,689
652
(395) $
(6,587)
—
15,250
$
(6,982) $
3,732
$
(395) $
13
28
583
(13)
—
(583)
7,514
102
652
8,268
3,337
—
28
—
4,356
$
(991) $
3,365
At December 31, 2017
Gross Amounts
Recognized
Gross Amounts
Offset(1)
Net Amount
Presented
1,797
$
223
2,020
$
1,688
$
6,363
615
(457) $
—
(457) $
(457) $
(6,026)
(615)
8,666
$
(7,098) $
1,340
223
1,563
1,231
337
—
1,568
$
$
$
$
$
$
$
$
(1)
Includes the amounts with counterparties subject to enforceable master netting arrangements that have been offset in the Consolidated Statements of Financial
Condition.
Derivatives Designated as Hedging Instruments
Interest Rate Contract TCF Bank entered into an interest rate swap agreement which was designated as a fair value
hedge of its contemporaneously issued subordinated debt. The interest rate swap agreement effectively converts the
fixed interest rate to a floating rate based on the three-month LIBOR plus a fixed number of basis points on the
$150.0 million notional amount. The carrying amount of the hedged subordinated debt including the cumulative basis
adjustment related to the application of fair value hedge accounting is recorded in Long-term borrowings on the
Consolidated Statements of Financial Condition and was as follows:
Carrying Amount
of the Hedged Liability
At December 31,
Cumulative Amount of
Fair Value Hedging Adjustments
Included in the Carrying Amount
of the Hedged Liability
At December 31,
(In thousands)
2018
2017
2018
2017
Subordinated bank note - 2025
$
144,296
$
146,095
$
(4,165) $
(2,157)
108
The gain (loss) related to the fair value hedge and the line within the Consolidated Statements of Income where the
gain (loss) was recorded were as follows:
(In thousands)
Gain (loss) of fair value hedge:
Hedged item
Derivative designated as a hedging instrument
Income statement line where the gain (loss) on the fair value hedge was recorded:
Interest expense - borrowings
Other non-interest income
Year Ended December 31,
2018
2017
2016
$
$
2,163
$
(2,275)
808
$
(609)
43,144
$
— $
—
11,646
1,140
(1,178)
—
8,883
Forward Foreign Exchange Contracts Certain of TCF's forward foreign exchange contracts are used to manage the
foreign exchange risk associated with the Company's net investment in TCFCFC. These forward foreign exchange
contracts have been designated as net investment hedges. The effect of net investment hedges on accumulated other
comprehensive income was as follows:
(In thousands)
Year Ended December 31,
2018
2017
2016
Forward foreign exchange contracts
$
13,762
$
(4,430) $
(1,213)
Derivatives Not Designated as Hedging Instruments Certain other interest rate contracts, forward foreign exchange
contracts, interest rate lock commitments and other contracts have not been designated as hedging instruments. The
effect of these derivatives on the Consolidated Statements of Income was as follows:
Location of Gain (Loss)
2018
2017
2016
Year Ended December 31,
(In thousands)
Interest rate contracts
Other non-interest income
Forward foreign exchange contracts
Other non-interest expense
Interest rate lock commitments
Other contracts
Net gain (loss) recognized
Gains on sales of loans, net
Other non-interest expense
$
$
(409) $
(268) $
23,707
806
(274)
(15,748)
(73)
(311)
71
(13,689)
(419)
(629)
23,830
$
(16,400) $
(14,666)
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, 2018 and 2017, credit risk-related contingent features existed on forward foreign exchange contracts
with a notional value of $25.7 million and $39.8 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 $0.5 million and
$0.8 million in additional collateral at December 31, 2018 and 2017, respectively. There were no forward foreign
exchange contracts containing credit risk-related features in a liability position at December 31, 2018 and $0.4 million
at December 31, 2017.
At December 31, 2018, TCF had posted $9.1 million and $1.3 million of cash collateral related to its interest rate
contracts and other contracts, respectively, and had received $6.7 million of cash collateral related to its forward foreign
exchange contracts.
109
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. Debt
securities available for sale, certain loans held for sale, interest-only strips, interest rate contracts, forward foreign
exchange contracts, interest rate lock commitments, other contracts, forward loan sales commitments, and assets and
liabilities held in trust for deferred compensation plans are recorded at fair value on a recurring basis. From time to
time we may be required to record at fair value other assets on a non-recurring basis, such as certain debt securities
held to maturity, loans, goodwill, other intangible assets, other real estate owned, repossessed and returned assets
or 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. The
levels are 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, which includes valuations 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.
Debt Securities Available for Sale Debt 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 for which the fair value option has been elected are categorized as Level 3.
The fair value of these loans is recorded utilizing internal valuation models which use quoted investor prices to estimate
the fair value.
Loans Loans for which repayment is expected to be provided solely by the value of the underlying collateral, categorized
as Level 3 and recorded at fair value on a non-recurring basis, are valued based on the fair value of that collateral less
estimated selling costs. Such loans include non-accrual impaired loans as well as certain delinquent non-accrual
consumer real estate and auto finance loans. The fair value of the collateral is determined based on internal estimates
and assessments provided by third-party appraisers.
Interest-only Strips The fair value of interest-only strips, categorized as Level 3, represents the present value of
future cash flows expected to be received by TCF on certain assets. TCF uses available market data, along with its
own empirical data and discounted cash flow models, to arrive at the 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 fair value of the
interest-only strips may fluctuate significantly from period to period.
110
Derivative Instruments
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 may consider the forward curve, the
discount curve and credit valuation adjustments related to counterparty and/or borrower non-performance risk.
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 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 Level 3 inputs, TCF has determined that the significant inputs
used in the valuation of these commitments fall within Level 3 and therefore the interest rate lock commitments are
categorized as Level 3.
Other Contracts TCF's swap agreement, categorized as Level 3, is related to the sale of TCF's Visa Class B stock.
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 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 Level 3 inputs,
TCF has determined that the significant inputs used in the valuation of these commitments fall within Level 3 and
therefore the forward loan sales commitments 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.
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.
111
The balances of assets and liabilities measured at fair value on a recurring and non-recurring basis were as follows:
(In thousands)
Level 1
Level 2
Level 3
Total
Recurring fair value measurements through net income:
At December 31, 2018
Assets:
Loans held for sale
Interest rate contracts(1)
Forward foreign exchange contracts(1)
Interest rate lock commitments(1)
Forward loan sales commitments
Assets held in trust for deferred compensation plans
Total assets
Liabilities:
Interest rate contracts(1)
Forward foreign exchange contracts(1)
Interest rate lock commitments(1)
Other contracts(1)
Forward loan sales commitments
$
$
$
— $
— $
18,070
$
—
—
—
—
33,217
7,909
3,709
—
—
—
—
—
652
152
—
33,217
$
11,618
$
18,874
$
18,070
7,909
3,709
652
152
33,217
63,709
— $
3,732
$
— $
3,732
—
—
—
—
13
—
—
—
—
—
28
583
178
—
13
28
583
178
33,217
37,751
Liabilities held in trust for deferred compensation plans
33,217
Total liabilities
$
33,217
$
3,745
$
789
$
Recurring fair value measurements through other
comprehensive income:
Assets:
Debt securities available for sale:
Mortgage-backed securities:
U.S. Government sponsored enterprises and federal
agencies
Other
Obligations of states and political subdivisions
Interest-only strips
Forward foreign exchange contracts(1)
Total assets
Non-recurring fair value measurements:
Loans
Other real estate owned
Repossessed and returned assets
Total non-recurring fair value measurements
$
$
$
$
— $
1,913,190
$
— $
1,913,190
—
—
—
—
—
556,871
—
2,980
4
—
16,835
—
4
556,871
16,835
2,980
— $
2,473,041
$
16,839
$
2,489,880
— $
—
—
— $
57,663
$
—
4,358
9,397
5,165
— $
4,358
$
72,225
$
57,663
9,397
9,523
76,583
(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.
112
(In thousands)
Level 1
Level 2
Level 3
Total
Recurring fair value measurements through net income:
At December 31, 2017
Assets:
Loans held for sale
Interest rate contracts(1)
Interest rate lock commitments(1)
Forward loan sales commitments
Assets held in trust for deferred compensation plans
Total assets
Liabilities:
Interest rate contracts(1)
Forward foreign exchange contracts(1)
Other contracts(1)
Forward loan sales commitments
Liabilities held in trust for deferred compensation plans
Total liabilities
Recurring fair value measurements through other
comprehensive income:
Assets:
Debt securities available for sale:
Mortgage-backed securities:
U.S. Government sponsored enterprises and federal
agencies
Other
Obligations of states and political subdivisions
Interest-only strips
Total assets
Liabilities:
Forward foreign exchange contracts(1)
Total liabilities
Non-recurring fair value measurements:
Loans
Other real estate owned
Repossessed and returned assets
Total non-recurring fair value measurements
$
$
$
$
$
$
$
$
$
$
— $
— $
3,356
$
—
—
—
29,962
29,962
$
— $
—
—
—
29,962
29,962
$
1,797
—
—
—
—
223
68
—
1,797
$
3,647
$
1,688
$
4,619
—
—
—
— $
—
615
5
—
6,307
$
620
$
3,356
1,797
223
68
29,962
35,406
1,688
4,619
615
5
29,962
36,889
— $
894,685
$
— $
894,685
—
—
—
—
814,327
—
6
—
21,386
6
814,327
21,386
— $
1,709,012
$
21,392
$
1,730,404
— $
— $
— $
—
—
1,744
1,744
$
$
— $
— $
— $
72,287
$
—
3,669
14,036
4,388
— $
3,669
$
90,711
$
1,744
1,744
72,287
14,036
8,057
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.
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
transfers occurred. TCF had no transfers in 2018, 2017 and 2016.
113
The changes in Level 3 assets and liabilities measured at fair value on a recurring basis were as follows:
(In thousands)
Debt
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, 2015
$
34
$
10,568
$
44,332
$
716
$
(305) $
265
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
Principal paydowns / settlements
Asset (liability) balance, December 31, 2017
Total net gains (losses) included in:
Net income
Other comprehensive income (loss)
Sales
Originations
Principal paydowns / settlements
—
—
—
—
(16)
18
—
—
—
—
(12)
6
—
—
—
—
(2)
(48)
—
(343,949)
2,980
159
—
339,930
22,620
(3)
(29,939)
6,498
40,152
129
—
(215,381)
212,509
3,939
(452)
—
3,377
(399)
(25,630)
3,356
21,386
454
—
(332,288)
346,560
2,616
1,195
—
4,797
(12)
(13,159)
(419)
(629)
—
—
—
—
297
—
—
—
315
(619)
96
—
—
—
—
361
(74)
(310)
(298)
—
—
—
—
223
401
—
—
—
—
—
—
—
314
(615)
(274)
—
—
—
306
—
—
—
—
63
(89)
—
—
—
—
Asset (liability) balance, December 31, 2018
$
4
$
18,070
$
16,835
$
624
$
(583) $
(26)
Fair Value Option
TCF Bank originates first mortgage lien loans in its primary banking markets and sells the loans through correspondent
relationships. TCF elected the fair value option for these loans. This election facilitates the offsetting of changes in fair
value 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,
2018
2017
$
$
18,070
$
17,517
553
$
3,356
3,268
88
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, 2018 and
2017. 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 $10.0 million, $4.9 million and $7.6 million for 2018, 2017 and 2016, respectively, and are included in net gains
on sales of loans. These amounts exclude the impacts from the interest rate lock commitments and forward loan sales
commitments which are also included in net gains on sales of loans.
114
Disclosures About Fair Value of Financial Instruments
Management discloses the estimated fair value of financial instruments, including assets and liabilities on and off the
Consolidated Statements of Financial Condition, for which it is practicable to estimate fair value. These fair value
estimates were made at December 31, 2018 and 2017 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
Debt 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
At December 31, 2018
Estimated Fair Value
Level 1
Level 2
Level 3
Total
$
91,654
$
— $
91,654
$
— $
91,654
148,852
72,594
5,410,340
2,908,147
943,156
2,169,577
3,107,356
1,982,277
21,295
(157,446)
19,432
—
—
—
—
—
—
—
—
—
—
—
146,467
—
—
—
—
—
—
—
—
—
—
2,800
74,078
149,267
74,078
5,461,209
2,872,829
890,828
2,131,147
3,091,593
1,935,017
16,928
—
19,025
5,461,209
2,872,829
890,828
2,131,147
3,091,593
1,935,017
16,928
—
19,025
Total financial instrument assets
$ 16,717,234
$
— $
238,121
$ 16,495,454
$ 16,733,575
Financial instrument liabilities:
Deposits
Long-term borrowings
$ 18,903,686
$ 14,113,006
$ 4,820,442
$
— $ 18,933,448
1,449,472
—
1,451,550
—
1,451,550
Total financial instrument liabilities
$ 20,353,158
$ 14,113,006
$ 6,271,992
$
— $ 20,384,998
Financial instruments with off-balance sheet risk:(3)
Commitments to extend credit
Standby letters of credit
Total financial instruments with off-balance sheet risk
$
$
18,555
$
— $
18,555
$
— $
18,555
(77)
—
(77)
—
(77)
18,478
$
— $
18,478
$
— $
18,478
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.
115
(In thousands)
Financial instrument assets:
Investments
Debt 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
At December 31, 2017
Estimated Fair Value
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.
116
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
Less: Earnings allocated to participating securities
Earnings allocated to common stock
Weighted-average common shares outstanding used in basic earnings per
common share calculation
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,
2018
2017
2016
304,358
$
268,637
$
11,588
3,481
289,289
42
19,904
5,779
242,954
42
212,124
19,388
—
192,736
49
289,247
$
242,912
$
192,687
165,585,493
168,679,501
167,219,964
1.75
$
1.44
$
1.15
289,247
$
242,912
$
192,687
165,585,493
168,679,501
167,219,964
600,884
2,332
372,996
353,610
28,625
27,508
505,162
82,325
—
Weighted-average common shares outstanding used in diluted earnings
per common share calculation
Diluted earnings per common share
166,561,705
169,089,244
167,807,451
$
1.74
$
1.44
$
1.15
(1)
Amounts represent the deferred stock issuance costs originally recorded in preferred stock that were reclassified to retained earnings.
For 2018 and 2017, there were 878,366 and 750,623, respectively, 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, there were 4,707,629 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.
117
Note 23. Other Non-interest Expense
Other non-interest expense was as follows:
(In thousands)
Consumer Financial Protection Bureau and OCC settlement charge(1)
Advertising and marketing
Professional fees
Outside processing
Card processing and issuance costs
FDIC insurance
Loan and lease processing
Severance
Goodwill impairment
Other
Total other non-interest expense
(1)
See Note 26. Litigation Contingencies for further information.
Note 24. Business Segments
Year Ended December 31,
2018
2017
2016
$
32,000
$
— $
28,120
21,529
20,574
17,461
15,056
13,649
6,324
—
26,927
33,070
20,473
18,325
16,049
22,149
22,299
73,041
105,933
114,523
$
260,646
$
346,856
$
—
22,264
19,335
15,313
15,856
15,912
26,193
5,280
—
110,244
230,397
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 other, and auto finance. Wholesale Banking is comprised of commercial banking, 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, internal audit, 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.
118
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, 2018:
Consumer
Banking
Wholesale
Banking
Enterprise
Services
Consolidated
Interest income:
Loans and leases
Debt securities available for sale
Debt securities held to maturity
Loans held for sale and other
Funds transfer pricing - credits
Total interest income
Interest expense:
Deposits
Borrowings
Funds transfer pricing - charges
Total interest expense
Net interest income (expense)
Provision for credit losses
Net interest income (expense) after provision for credit
losses
Non-interest income:
Leasing and equipment finance
Fees and service charges
Card revenue
ATM revenue
Gains on sales of loans, net
Servicing fee income
Gains (losses) on debt securities, net
Other
Total non-interest income
Non-interest expense:
Compensation and employee benefits
Occupancy and equipment
Operating lease depreciation
Foreclosed real estate and repossessed assets, net
Other
Total non-interest expense
Income (loss) before income tax expense (benefit)
Income tax expense (benefit)
Income (loss) after income tax expense (benefit)
Income attributable to non-controlling interest
Preferred stock dividends
Impact of preferred stock redemption
Net income (loss) available to common stockholders
Revenues from external customers:
Interest income
Non-interest income
Total
Total assets
$
430,762
$
638,188
$
(3,813) $
1,065,137
—
—
10,413
404,770
845,945
79,680
43,398
166,787
289,865
556,080
24,922
—
91
306
35,370
673,955
9,611
79,660
205,001
294,272
379,683
21,846
54,574
3,879
7,864
(440,140)
(377,636)
17,822
(79,914)
(371,788)
(433,880)
56,244
—
54,574
3,970
18,583
—
1,142,264
107,113
43,144
—
150,257
992,007
46,768
531,158
357,837
56,244
945,239
—
119,541
58,811
19,687
33,488
26,042
—
11,611
269,180
215,548
105,000
—
14,600
331,600
666,748
133,590
30,706
102,884
—
—
—
185,107
12,660
53
3
10
1,292
221
1,201
200,547
94,709
20,141
73,829
2,443
120,824
311,946
246,438
53,614
192,824
11,270
—
—
—
—
—
—
—
—
127
1,031
1,158
186,806
40,671
—
7
(191,778)
35,706
21,696
1,776
19,920
—
11,588
3,481
185,107
132,201
58,864
19,690
33,498
27,334
348
13,843
470,885
497,063
165,812
73,829
17,050
260,646
1,014,400
401,724
86,096
315,628
11,270
11,588
3,481
$
$
$
$
102,884
$
181,554
$
4,851
$
289,289
441,175
$
634,772
$
66,317
$
1,142,264
269,180
200,547
1,158
470,885
710,355
$
835,319
$
67,475
$
1,613,149
8,193,021
$
12,229,071
$
3,277,520
$
23,699,612
119
(In thousands)
At or For the Year Ended December 31, 2017:
Consumer
Banking
Wholesale
Banking
Enterprise
Services
Consolidated
Interest income:
Loans and leases
Debt securities available for sale
Debt securities held to maturity
Loans held for sale and other
Funds transfer pricing - credits
Total interest income
Interest expense:
Deposits
Borrowings
Funds transfer pricing - charges
Total interest expense
Net interest income (expense)
Provision for credit losses
Net interest income (expense) after provision for credit
losses
Non-interest income:
Leasing and equipment finance
Fees and service charges
Card revenue
ATM revenue
Gains on sales of loans, net
Servicing fee income
Gains (losses) on debt securities, net
Other
Total non-interest income
Non-interest expense:
Compensation and employee benefits
Occupancy and equipment
Operating lease depreciation
Foreclosed real estate and repossessed assets, net
Other
Total non-interest expense
Income (loss) before income tax expense (benefit)
Income tax expense (benefit)
Income (loss) after income tax expense (benefit)
Income attributable to non-controlling interest
Preferred stock dividends
Impact of preferred stock redemption
Net income (loss) available to common stockholders
Revenues from external customers:
Interest income
Non-interest income
Total
Total assets
$
433,627
$
527,141
$
(6,522) $
954,246
—
—
22,698
367,149
823,474
55,237
49,879
143,748
248,864
574,610
48,227
—
101
81
25,499
552,822
2,745
47,460
143,336
193,541
359,281
20,216
33,278
4,335
4,318
(392,648)
(357,239)
8,030
(69,532)
(287,084)
(348,586)
(8,653)
—
33,278
4,436
27,097
—
1,019,057
66,012
27,807
—
93,819
925,238
68,443
526,383
339,065
(8,653)
856,795
—
121,728
55,728
19,621
42,787
39,996
—
10,135
289,995
224,420
109,848
—
14,097
395,364
743,729
72,649
49,513
23,136
—
—
—
145,039
10,159
4
3
—
1,351
237
1,192
157,985
86,397
20,402
55,901
3,279
111,452
277,431
219,619
(68,883)
288,502
10,147
—
—
—
—
—
—
—
—
—
319
319
171,695
26,659
—
380
(159,960)
38,774
(47,108)
(14,254)
(32,854)
—
19,904
5,779
145,039
131,887
55,732
19,624
42,787
41,347
237
11,646
448,299
482,512
156,909
55,901
17,756
346,856
1,059,934
245,160
(33,624)
278,784
10,147
19,904
5,779
$
$
$
$
23,136
$
278,355
$
(58,537) $
242,954
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
8,894,798
$
11,571,587
$
2,535,774
$
23,002,159
120
(In thousands)
At or For the Year Ended December 31, 2016:
Consumer
Banking
Wholesale
Banking
Enterprise
Services
Consolidated
Interest income:
Loans and leases
Debt securities available for sale
Debt securities held to maturity
Loans held for sale and other
Funds transfer pricing - credits
Total interest income
Interest expense:
Deposits
Borrowings
Funds transfer pricing - charges
Total interest expense
Net interest income (expense)
Provision for credit losses
Net interest income (expense) after provision for credit
losses
Non-interest income:
Leasing and equipment finance
Fees and service charges
Card revenue
ATM revenue
Gains on sales of loans, net
Servicing fee income
Gains (losses) on debt securities, net
Other
Total non-interest income
Non-interest expense:
Compensation and employee benefits
Occupancy and equipment
Operating lease depreciation
Foreclosed real estate and repossessed assets, net
Other
Total non-interest expense
Income (loss) before income tax expense (benefit)
Income tax expense (benefit)
Income (loss) after income tax expense (benefit)
Income attributable to non-controlling interest
Preferred stock dividends
Net income (loss) available to common stockholders
Revenues from external customers:
Interest income
Non-interest income
Total
Total assets
$
$
$
$
$
397,886
$
457,908
$
(5,248) $
850,546
—
—
46,073
352,096
796,055
56,105
42,595
137,504
236,204
559,851
50,819
—
172
50
21,452
479,582
1,014
25,104
109,811
135,929
343,653
15,055
26,573
4,477
2,839
(373,548)
(344,907)
4,669
(46,863)
(247,315)
(289,509)
(55,398)
—
26,573
4,649
48,962
—
930,730
61,788
20,836
—
82,624
848,106
65,874
509,032
328,598
(55,398)
782,232
—
130,542
54,879
20,441
85,205
38,560
—
7,364
119,166
7,122
3
4
54
1,622
(581)
1,491
336,991
128,881
243,445
96,512
—
10,552
301,951
652,460
193,563
69,523
124,040
—
—
84,692
10,954
40,359
2,035
109,075
247,115
210,364
70,805
139,559
9,593
—
—
—
—
—
—
—
—
28
28
147,827
42,514
—
600
(180,629)
10,312
(65,682)
(23,800)
(41,882)
—
19,388
124,040
$
129,966
$
(61,270) $
443,959
$
452,882
$
33,889
$
336,991
128,881
28
119,166
137,664
54,882
20,445
85,259
40,182
(581)
8,883
465,900
475,964
149,980
40,359
13,187
230,397
909,887
338,245
116,528
221,717
9,593
19,388
192,736
930,730
465,900
780,950
$
581,763
$
33,917
$
1,396,630
8,885,412
$
10,391,305
$
2,164,609
$
21,441,326
121
Note 25. Parent Company Financial Information
TCF Financial's 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 TCF Bank
Accounts receivable from TCF Bank
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
Management 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 (loss) of
TCF Bank
Income tax benefit
Income before equity in undistributed earnings (loss) of TCF Bank
Equity in undistributed earnings (loss) of TCF Bank
Net income
Preferred stock dividends
Impact of preferred stock redemption
At December 31,
2018
2017
$
$
$
$
91,132
$
2,426,329
23,780
4,253
80,471
2,563,552
22,015
5,739
2,545,494
$
2,671,777
7,693
$
7,693
2,537,801
2,545,494
$
9,020
9,020
2,662,757
2,671,777
Year Ended December 31,
2018
2017
2016
$
200
$
183
$
155
431,000
20,532
426
451,958
21,825
301
4,139
26,265
425,893
952
426,845
(122,487)
304,358
11,588
3,481
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
—
Net income available to common stockholders
$
289,289
$
242,954
$
192,736
122
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:
Equity in undistributed (earnings) loss of TCF Bank
Depreciation and amortization
Provision (benefit) for deferred income taxes
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:
Purchases of premises and equipment
Proceeds from sales of assets
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Redemption of Series B preferred stock
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
Year Ended December 31,
2018
2017
2016
$
304,358
$
268,637
$
212,124
(206,067)
(151,790)
122,487
4,986
(583)
(402)
379
3,001
434,226
(3)
727
724
(100,000)
—
—
(212,929)
715
(11,588)
(99,490)
—
(997)
(424,289)
10,661
80,471
9,110
4,690
—
(2,494)
(3,408)
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)
—
1,032
(443)
65,065
(69)
22
(47)
—
—
—
—
5,838
(19,388)
(50,182)
(377)
(701)
(64,810)
208
69,503
69,711
$
91,132
$
80,471
$
TCF Financial's operations are conducted through its banking subsidiary, TCF Bank. As a result, TCF Financial's cash
flows 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, 2018, TCF Bank could
pay $235.4 million in additional dividends to TCF Financial without prior regulatory approval. See Note 16. Regulatory
Capital Requirements of Notes to Consolidated Financial Statements for further information.
123
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
(the "CFPB") which 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. 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 (the "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. 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. On July 20,
2018, TCF Bank entered into a Stipulated Final Judgment and Order (the "CFPB Settlement") with the CFPB to resolve
the matter and has entered into a Consent Order and a Consent Order For a Civil Money Penalty and related stipulations
(collectively, the "OCC Consent Orders") with the OCC to resolve related regulatory issues with the OCC (collectively,
the CFPB Settlement and the OCC Consent Orders are referred to herein as the "Consent Agreements"). The Consent
Agreements provide, among other things, for TCF Bank to submit a restitution plan to the CFPB and OCC pursuant
to which TCF Bank will pay restitution in the total amount of $25.0 million to certain current and former customers and
require a notice to certain customers opted-in to overdraft service reminding them of their current opt-in choice. TCF
is working toward completion of the restitution plan and expects to satisfy all the requirements in a timely fashion and
in accordance with the terms of the CFPB Settlement and the restitution plan. Pursuant to the Consent Agreements,
TCF Bank paid $5.0 million in civil money penalties, $3.0 million of which was paid to the OCC and $2.0 million of
which was paid to the CFPB. In addition, TCF Bank expects to incur approximately $2.0 million in administrative costs
related to the administration of the restitution plan required under the Consent Agreements.
124
Note 27. Accumulated Other Comprehensive Income (Loss)
The components of other comprehensive income (loss), reclassifications from accumulated other comprehensive
income (loss) to various financial statement line items and the related tax effects were as follows:
(In thousands)
Year Ended December 31, 2018:
Net unrealized gains (losses) on debt securities available for sale and interest-
only strips:
Before Tax
Tax Effect
Net of Tax
Net unrealized gains (losses) arising during the period
$
(16,373) $
4,002
$
(12,371)
Reclassification of net (gains) losses from accumulated other comprehensive
income (loss) to:
Total interest income
Gains (losses) on debt securities, net
Other non-interest expense
Amounts reclassified from accumulated other comprehensive income (loss)
Net unrealized gains (losses) on debt securities available for sale and
interest-only strips
Net unrealized gains (losses) on net investment hedges
Foreign currency translation adjustment(1)
Recognized postretirement prior service cost:
Reclassification of amortization of prior service cost to Other non-interest
expense
Total other comprehensive income (loss)
Year Ended December 31, 2017:
Net unrealized gains (losses) on debt securities available for sale and interest-
only strips:
Net unrealized gains (losses) arising during the period
Reclassification of net (gains) losses from accumulated other comprehensive
income (loss) to:
Total interest income
Other non-interest expense
Amounts reclassified from accumulated other comprehensive income (loss)
Net unrealized gains (losses) on debt securities available for sale and
interest-only strips
Net unrealized gains (losses) on net investment hedges
Foreign currency translation adjustment(1)
Recognized postretirement prior service cost:
Reclassification of amortization of prior service cost to Other non-interest
expense
Total other comprehensive income (loss)
Year Ended December 31, 2016:
Net unrealized gains (losses) on debt securities available for sale and interest-
only strips:
Net unrealized gains (losses) arising during the period
Reclassification of net (gains) losses from accumulated other comprehensive
$
$
$
$
income (loss) to:
Total interest income
Other non-interest expense
Amounts reclassified from accumulated other comprehensive income (loss)
Net unrealized gains (losses) on debt securities available for sale and
interest-only strips
Net unrealized gains (losses) on net investment hedges
Foreign currency translation adjustment(1)
Recognized postretirement prior service cost:
1,066
(127)
90
1,029
(15,344)
13,762
(13,368)
(46)
(335)
31
(23)
(327)
3,675
(3,312)
—
12
731
(96)
67
702
(11,669)
10,450
(13,368)
(34)
(14,996) $
375
$
(14,621)
24,244
$
(8,857) $
15,387
963
(755)
208
24,452
(4,430)
4,921
(46)
572
287
859
(7,998)
1,684
—
17
24,897
$
(6,297) $
1,535
(468)
1,067
16,454
(2,746)
4,921
(29)
18,600
(32,408) $
12,323
$
(20,085)
1,764
149
1,913
(30,495)
(1,213)
1,300
(665)
(57)
(722)
11,601
457
—
1,099
92
1,191
(18,894)
(756)
1,300
Reclassification of amortization of prior service cost to Other non-interest
expense
(46)
17
(29)
Total other comprehensive income (loss)
$
(30,454) $
12,075
$
(18,379)
(1)
Foreign investments are deemed to be permanent in nature and, therefore, TCF does not provide for taxes on foreign currency translation adjustments.
125
Reclassifications of net (gains) losses from accumulated other comprehensive income (loss) for debt securities available
for sale and interest-only strips were recorded in the Consolidated Statements of Income in interest income for those
debt securities that were previously transferred to held to maturity, in gains (losses) on debt securities, net for sales
of debt securities available for sale and in other non-interest expense for interest-only strips. During 2014, TCF
transferred $191.7 million of available for sale mortgage-backed debt securities to held to maturity. At December 31,
2018 and 2017, the unrealized holding loss on the transferred debt securities retained in accumulated other
comprehensive income (loss) totaled $11.0 million and $12.1 million, respectively. These amounts are amortized over
the remaining lives of the transferred debt securities. The tax effects of the reclassifications included in the table above
were recorded in income tax expense (benefit) in the Consolidated Statements of Income.
The components of accumulated other comprehensive income (loss) were as follows:
Net Unrealized
Gains (Losses)
on Debt
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
(In thousands)
At or For the Year Ended December 31, 2018:
Balance, beginning of period
$
(16,353) $
4,536
$
(6,843) $
143
$
Other comprehensive income (loss)
(12,371)
10,450
(13,368)
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, 2017:
Balance, beginning of period
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)
$
$
$
$
—
(34)
(34)
702
(11,669)
—
10,450
—
(13,368)
(28,022) $
14,986
$
(20,211) $
109
$
(28,601) $
6,493
$
(11,764) $
147
$
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)
Balance, end of period
$
(28,601) $
6,493
$
(11,764) $
147
$
(18,517)
(15,289)
668
(14,621)
(33,138)
(33,725)
17,562
1,038
18,600
(3,392)
(18,517)
(15,346)
(19,541)
1,162
(18,379)
(33,725)
Note 28. Pending Merger with Chemical Financial Corporation
On January 28, 2019, TCF entered into an Agreement and Plan of Merger (the "Merger Agreement") with Chemical
Financial Corporation ("Chemical"), a bank holding company with $21.5 billion in assets, headquartered in Detroit,
Michigan. The merger is expected to close in late 2019, subject to satisfaction of customary closing conditions, including
regulatory approvals and approval by the shareholders of TCF and Chemical. Under the terms of the Merger Agreement,
which has been unanimously approved by the boards of directors of both companies, each outstanding share of TCF
common stock will be converted into the right to receive, without interest, 0.5081 shares of Chemical common stock.
Also, at the effective time of the merger, each outstanding share of the 5.70% Series C non-cumulative perpetual
preferred stock of TCF will be converted into the right to receive, without interest, one share of a newly created series
of preferred stock of Chemical with equivalent rights and preferences (the "New Chemical Preferred Stock"). The
shares of Chemical common stock and the New Chemical Preferred Stock to be issued in the merger will be listed on
the Nasdaq. Following the completion of the merger, TCF and Chemical shareholders will own approximately 54%
and 46% of the combined company, respectively, on a fully diluted basis.
126
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,
2018
Sep. 30,
2018
Jun. 30,
2018
Mar. 31,
2018
Dec. 31,
2017
Sep. 30,
2017
Jun. 30,
2017
Mar. 31,
2017
Net interest income
$ 248,888 $ 249,121 $ 250,799 $ 243,199 $ 241,860 $ 234,103 $ 227,161 $ 222,114
Provision for credit losses
18,894
2,270
14,236
11,368
22,259
14,545
19,446
12,193
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 or
notice to redeem preferred stock
Net income available to common
stockholders
Earnings per common share:
Basic
Diluted
$
$
229,994
246,851
236,563
231,831
219,601
219,558
207,715
209,921
128,133
116,445
114,103
112,204
120,892
109,230
114,663
103,514
249,958
246,423
272,039
245,980
347,806
235,035
233,087
244,006
108,169
116,873
20,013
28,034
78,627
16,418
98,055
(7,313)
21,631
(110,965)
93,753
30,704
89,291
25,794
69,429
20,843
88,156
88,839
62,209
76,424
103,652
63,049
63,497
48,586
2,504
2,643
3,460
2,663
2,253
2,521
3,065
2,308
85,652
2,494
86,196
58,749
73,761
101,399
2,494
2,494
4,106
3,746
60,528
6,464
60,432
4,847
46,278
4,847
—
—
—
3,481
—
5,779
—
—
83,158 $
83,702 $
56,255 $
66,174 $
97,653 $
48,285 $
55,585 $
41,431
0.51 $
0.51 $
0.34 $
0.39 $
0.58 $
0.29 $
0.33 $
0.51
0.51
0.34
0.39
0.57
0.29
0.33
0.25
0.25
127
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, 2018.
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, 2018,
that materially affected, or are reasonably likely to materially affect, TCF's internal control over financial reporting.
128
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, 2018. 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, 2018.
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, 2018.
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.
129
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 and subsidiaries’ (the Company) internal control over financial reporting
as of December 31, 2018, 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, 2018, 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, 2018 and
2017, 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, 2018, and the related notes (collectively, the consolidated financial
statements), and our report dated February 26, 2019 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 26, 2019
130
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 2019 Annual Meeting of Stockholders to be held on April 24, 2019 ("2019 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 2019 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 2019 Proxy and is incorporated herein by reference: Election of Directors - Background of the Nominees;
Corporate Governance - Board Committees, Committee Memberships, and Meetings in 2018; 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 and Julie H. Sullivan, are independent and that Directors
Johnson, Opperman, Sit and Sullivan each meet the requirements of audit committee financial experts. Additional
information regarding Ms. Grandstrand, Mr. Johnson, Mr. King, Mr. Opperman, Mr. Sit and Dr. Sullivan and the other
directors is set forth in the section Election of Directors - Background of the Nominees in TCF's 2019 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 the 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.
131
Item 11. Executive Compensation
Information regarding compensation of directors and executive officers of TCF is set forth in the following sections of
TCF's 2019 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
2019 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 2019 Proxy and is incorporated herein by reference.
Item 14. Principal Accounting Fees and Services
Information regarding principal accounting fees and services and the Audit Committee's pre-approval policies and
procedures relating to audit and non-audit services provided by the Company's independent registered public
accounting firm is set forth in the section entitled Independent Registered Public Accountants in TCF's 2019 Proxy
and is incorporated herein by reference.
Part IV
Item 15. Exhibits, Financial Statement Schedules
1. Financial Statements
The following consolidated financial statements of TCF Financial Corporation are filed as part of this report:
Description
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Financial Condition at December 31, 2018 and 2017
Consolidated Statements of Income for each of the years in the three-year period ended December 31,
2018
Consolidated Statements of Comprehensive Income for each of the years in the three-year period ended
December 31, 2018
Consolidated Statements of Equity for each of the years in the three-year period ended December 31, 2018
Consolidated Statements of Cash Flows for each of the years in the three-year period ended
December 31, 2018
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
Page
59
60
61
62
63
65
66
All financial statement schedules have been included in the Consolidated Financial Statements or the
Notes thereto, or are either inapplicable or not required.
132
3. Exhibits
Exhibit
Number
2.1
3(a)
3(b)
4(a)
4(b)
4(c)
4(d)
4(e)
10(a)*
10(a)-1*
10(a)-2*
10(a)-3*
10(a)-4*
10(a)-5*
10(a)-6*#
10(a)-7*#
10(b)*
10(b)-1*
10(b)-2*
10(b)-3*
10(c)*
10(d)*
10(e)*
10(e)-1*
10(f)*
10(i)*
10(j)*
Description
Agreement and Plan of Merger by and between TCF Financial Corporation and Chemical Financial Corporation, dated as of
January 27, 2019 [incorporated by reference to Exhibit 2.1 of TCF Financial Corporation's Current Report on Form 8–K filed
January 28, 2019 (No.19546413)]
Amended and Restated Certificate of Incorporation of TCF Financial Corporation [incorporated by reference to Exhibit 3.1 of TCF
Financial Corporation’s Quarterly Report on Form 10-Q filed May 3, 2018 (No. 18803407)]
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 January 28, 2019 (No.19546413)]
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 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.
Amended and Restated TCF Financial 2015 Omnibus Incentive Plan [incorporated by reference to Exhibit 10.1 to TCF Financial
Corporation's Current Report on Form 8-K filed April 27, 2018 (No. 18784131)]
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 TCF Financial Corporation Management Incentive Plan - Executive Award
Form of Performance-Based Restricted Stock Unit Agreement under the TCF Financial 2015 Omnibus Incentive Plan
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 between Craig R. Dahl and TCF Financial Corporation, effective as of April 25, 2018 [incorporated by
reference to Exhibit 10.3 to TCF Financial Corporation’s Current Report on Form 8-K filed April 27, 2018 (No. 18784131)]
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 [incorporated by reference to Exhibit 10(f) to TCF Financial Corporation's Annual Report on Form
10-K for the fiscal year ended December 31, 2017 (No. 18635448)]
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)]
133
10(k)*
10(k)-1*
10(k)-2*
10(l)*
10(l)-1*
10(m)*
10(n)*
10(o)*
10(p)*
10(q)
10(r)*
21#
23#
31.1#
31.2#
32.1#
32.2#
101#
Amended and Restated Directors Stock Grant Program [incorporated by reference to Exhibit 10.2 to TCF Financial Corporation’s
Current Report on Form 8-K filed April 27, 2018 (No. 18784131)]
Form of Director’s Restricted Stock Agreement dated January 24, 2012 [incorporated by reference to Exhibit 10(j)-1 to TCF Financial
Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012 (No. 12986667)]
Form of Deferred Director’s Restricted Stock Agreement dated January 24, 2012 [incorporated by reference to Exhibit 10(j)-2 to
TCF Financial Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012 (No. 12986667)]
TCF Financial Corporation TCF Directors Deferred Compensation Plan as amended and restated through January 24, 2005
[incorporated by reference to Exhibit 10(r) to TCF Financial Corporation’s Current Report on Form 8-K filed January 27, 2005 (No.
05552640)]
TCF Financial Corporation TCF Directors 2005 Deferred Compensation Plan, adopted effective as of January 6, 2005, as amended
and restated through January 24, 2005 [incorporated by reference to Exhibit 10(r)-1 to TCF Financial Corporation’s Current Report
on Form 8-K filed January 27, 2005 (No. 05552640)]; and as amended by Amendment of Directors 2005 Deferred Compensation
Plan effective July 19, 2010 [incorporated by reference to Exhibit 10(r)-1 to TCF Financial Corporation’s Quarterly Report on Form
10-Q for the quarter ended September 30, 2010 (No. 101147679)]
Trust Agreement for TCF Directors Deferred Compensation Plan [incorporated by reference to Exhibit 10(d) to TCF Financial
Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2000 (No. 1584625)]; as amended by amendment
adopted April 30, 2001 [incorporated by reference to Exhibit 10(s) to TCF Financial Corporation’s Quarterly Report on Form 10-
Q for the quarter ended June 30, 2001 (No. 1706058)]; as amended by amendment adopted October 10, 2001 [incorporated by
reference to Exhibit 10(s) to TCF Financial Corporation’s Annual Report on Form 10-K for the year ended December 31, 2001
(No. 02568362)]; and as amended by amendments adopted May 3, 2002 [incorporated by reference to Exhibit 10(s) to TCF
Financial Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002 (No. 02730799)]; and as amended
by Third Amendment of TCF Directors Deferred Compensation Trust effective as of June 30, 2003 [incorporated by reference to
Exhibit 10(s) to TCF Financial Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 (No. 03830138)]
Summary of Non-Employee Director Compensation [incorporated by reference to Exhibit 10.1 to TCF Financial Corporation's
Current Report on Form 8–K filed February 20, 2019 (No. 19616276)]
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)]
TCF 401K Plan, as amended and restated effective January 24, 2018 [incorporated by reference to Exhibit 99.1 to TCF Financial
Corporation's Current Report on Form S-8 filed July 30, 2018 (No. 18978481)]
Form of Change in Control Severance Agreement, as executed by certain executives [incorporated by reference to Exhibit 10.1
to TCF Financial Corporation's Current Report on Form 8-K filed March 2, 2018 (No. 18662196)]
Subsidiaries of TCF Financial Corporation (as of December 31, 2018)
Consent of KPMG LLP dated February 26, 2019
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 period ended December 31, 2018, 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
*Management Contract
# Filed herein
134
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 26, 2019
135
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
Date
February 26, 2019
February 26, 2019
February 26, 2019
February 26, 2019
February 26, 2019
February 26, 2019
February 26, 2019
February 26, 2019
February 26, 2019
February 26, 2019
February 26, 2019
February 26, 2019
February 26, 2019
February 26, 2019
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. Grandstrand
Karen L. Grandstrand
Director
/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/ Roger J. Sit
Roger J. Sit
/s/ Julie H. Sullivan
Julie H. Sullivan
/s/ Barry N. Winslow
Barry N. Winslow
Director
Director
Director
/s/ Theresa M. H. Wise
Theresa M. H. Wise
Director
136
2018 Financial Highlights
Stockholder Information
Listing of Common Stock
The common stock of TCF Financial Corporation is listed
on the New York Stock Exchange under the symbol TCF.
Transfer Agent
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
Investor/Analyst Contact
Timothy Sedabres
Senior Vice President
Investor Relations
(952) 745-2766
Justin Horstman
Vice President
Investor Relations
(952) 745-2756
Media Contact
Mark Goldman
Senior Vice President
Corporate Communications
(952) 475-7050
Annual Meeting
The Annual Meeting of Stockholders of TCF will be held
on Wednesday, April 24, 2019, 4:00 p.m. (local time) at the
DoubleTree by Hilton Minneapolis – Park Place,
1500 Park Place Boulevard, Minneapolis, Minnesota.
Available Information
Please visit our website at http://ir.tcfbank.com for 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
(952) 745-2760
investor@tcfbank.com
14.74%
Adjusted return on average
tangible common equity (ROATCE)1
exceeded 2018 target range
(ROATCE1: 13.56%;
ROACE: 12.42%)
67.15%
Adjusted efficiency ratio1
within 2018 target range
(efficiency ratio: 69.34%)
$304
MILLION
Record net income
attributable to TCF
$1.5
BILLION
Total revenue
>100%
Total return to shareholders
through common stock dividends
and share repurchases
7.5%
Loan and lease growth
excluding auto finance2
(total loan and lease balances
declined 0.2%)
10.1%
Average non-interest bearing
deposit growth
1 See “Consolidated Financial Condition Analysis—Non-GAAP Financial Measures” in Item 7. “Management’s Discussion and Analysis of Financial Condition and
Results of Operation” of the accompanying 2018 Form 10-K for reconciliation of GAAP to non-GAAP measures
2 Calculated by subtracting auto finance balances of $2.0 billion and $3.2 billion at December 31, 2018 and December 31, 2017, respectively, from total loan and
lease balances of $19.1 billion at both December 31, 2018 and December 31, 2017
TCF Financial Corporation
200 Lake Street East
Wayzata, MN 55391-1693
tcfbank.com
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TCF Financial Corporation
2018 Annual Report