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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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COMMISSION FILE
NO. 001-10253
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TCF FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 41-1591444
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
801 MARQUETTE AVENUE, MAIL CODE 100-01-A, MINNEAPOLIS, MINNESOTA 55402
(Address and Zip Code of principal executive offices)
Registrant's telephone number, including area code: 612-661-6500
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Securities registered pursuant to Section 12(b) of
the Act (all registered on the New York Stock Exchange):
COMMON STOCK (PAR VALUE $.01 PER SHARE)
PREFERRED SHARE PURCHASE RIGHTS
(Title of class)
Securities registered pursuant to Section 12(g) of the Act:
9.50% WINTHROP RESOURCES CORPORATION SENIOR NOTES DUE 2003
(Title of class)
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 of 15(d) of the Securities and Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K 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. [ ]
As of March 17, 2000 the aggregate market value of the voting stock held
by nonaffiliates of the registrant, computed by reference to the average of
the high and low prices on such date as reported by the New York Stock
Exchange, was $1,598,586,759.
As of March 17, 2000, there were outstanding 81,178,603 shares 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 annual report to shareholders for the
year ended December 31, 1999 are incorporated by reference into Parts I, II and
IV hereof.
Specific portions of the registrant's definitive proxy statement dated
March 30, 2000 are incorporated by reference into Part III hereof.
TABLE OF CONTENTS
PART I
PAGE
----
Item 1. Business.............................................................................................. 1
Forward-Looking Information.................................................................... 1
General........................................................................................ 1
Lending Activities............................................................................. 2
Investment Activities.......................................................................... 6
Sources of Funds............................................................................... 6
Other Information.............................................................................. 7
Activities of Subsidiaries of TCF Financial Corporation .................................... 7
Recent Accounting Developments.............................................................. 8
Competition................................................................................. 8
Employees................................................................................... 8
Regulation..................................................................................... 9
Taxation....................................................................................... 14
Item 2. Properties............................................................................................ 14
Item 3. Legal Proceedings..................................................................................... 15
Item 4. Submission of Matters to a Vote of Security Holders................................................... 16
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters.............................. 16
Item 6. Selected Financial Data............................................................................... 17
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................................................... 17
Item 7A. Quantitative and Qualitative Disclosures About Market Risk............................................ 17
Item 8. Financial Statements and Supplementary Data........................................................... 17
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure................................................................................ 17
PART III
Item 10. Directors and Executive Officers of the Registrant................................................... 17
Item 11. Executive Compensation............................................................................... 17
Item 12. Security Ownership of Certain Beneficial Owners and Management....................................... 18
Item 13. Certain Relationships and Related Transactions....................................................... 18
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K...................................... 18
Signatures..................................................................................................... 19
Index to Consolidated Financial Statements..................................................................... 20
Index to Exhibits.............................................................................................. 20
PART I
ITEM 1. BUSINESS
FORWARD-LOOKING INFORMATION
This Annual Report and other reports issued by TCF Financial Corporation
("TCF" or the "Company"), including reports filed with the Securities and
Exchange Commission, may contain "forward-looking" statements that deal with
future results, plans or performance. In addition, TCF's management may make
such statements orally to the media, or to securities analysts, investors or
others. Forward-looking statements deal with matters that do not relate strictly
to historical facts. TCF's future results may differ materially from historical
performance and forward-looking statements about TCF's expected financial
results or other plans are subject to a number of risks and uncertainties. These
include but are not limited to possible legislative changes and adverse
economic, business and competitive developments such as shrinking interest
margins; deposit outflows; reduced demand for financial services and loan and
lease products; changes in accounting policies and guidelines, or monetary and
fiscal policies of the federal government; changes in credit and other risks
posed by TCF's loan, lease and investment portfolios; technological,
computer-related or operational difficulties; adverse changes in securities
markets; results of litigation or other significant uncertainties.
GENERAL
TCF, a Delaware corporation based in Minneapolis, Minnesota, with $10.7
billion in assets, is the holding company of five federally chartered national
banks located in Minnesota, Illinois, Wisconsin, Michigan and Colorado. Unless
otherwise indicated, references herein to TCF include its direct and indirect
subsidiaries. TCF's subsidiary banks are collectively referred to herein as the
"TCF Banks." References herein to the "Holding Company" or "TCF Financial" refer
to TCF Financial Corporation on an unconsolidated basis. Where information is
incorporated in this report by reference to TCF's 1999 Annual Report, only those
portions specifically identified are so incorporated.
TCF's products include commercial, consumer and residential mortgage loan
products, leasing, insurance and mutual funds, and some of its products, such as
its commercial equipment and truck loans and leases, are offered in markets
outside areas served by its bank subsidiaries. TCF's primary focus, however, has
been on the delivery of retail banking products in markets served by its bank
subsidiaries. TCF's strategic emphasis on retail banking has allowed it to fund
its assets primarily with retail core deposits, minimize wholesale borrowings
and lower its interest-rate risk.
During the fourth quarter of 1999, TCF received approval of the Office of
the Comptroller of the Currency ("OCC") to merge four of its bank charters into
one national bank charter, based in Minnesota. The merger of the bank charters
located in Minnesota, Illinois, Wisconsin and Michigan (the "Charter Merger") is
expected to be completed in the second quarter of 2000. The merger of the bank
charters is not expected to significantly change the management approach or
operations within these geographic states. The resulting national bank will be
named TCF National Bank.
TCF has significantly expanded its retail banking franchise in recent
periods and had 338 retail banking branches at December 31, 1999. In the past
three years, TCF opened 164 new branches, of which 151 were supermarket
branches. This expansion includes TCF's January 1998 acquisition of 76 branches
and 178 automated teller machines ("ATMs") in Jewel-Osco stores in the Chicago,
Illinois area previously operated by Bank of America. Information concerning
this and other acquisitions is set forth in "Financial Review -- Results of
Operations - Performance Summary" on page 17 and in Note 2 of Notes to
Consolidated Financial Statements on page 41 of TCF's 1999 Annual Report,
incorporated herein by reference. TCF anticipates opening approximately 37 new
branches in 2000, and additional branches in subsequent years, including
approximately 25 Illinois Jewel-Osco supermarket branches per year in subsequent
years until branches have been installed in certain existing and all newly
constructed stores.
1
TCF's marketing strategy emphasizes attracting deposits held in checking,
passbook and statement savings, and money market accounts. These deposit
products provide TCF with a significant source of fee income. TCF engages in
commercial, residential and consumer lending activities, lease financing and in
the insurance services business, including the sale of single premium
tax-deferred annuities. TCF also has a broker dealer selling non-proprietary
mutual funds.
Non-interest income is a significant source of revenues for TCF and an
important factor in TCF's results of operations. Providing a wide range of
retail banking services is an integral component of TCF's business philosophy
and a major strategy for generating additional non-interest income. TCF's
non-interest income in future periods may be negatively impacted by pending
legislative proposals which, if enacted and not judicially restrained, could
limit loan, deposit or other fees and service charges. See "Forward-Looking
Information" and "Legislative, Legal and Regulatory Developments" on pages 32
and 33 of TCF's 1999 Annual Report, incorporated herein by reference, for
additional information.
TCF operated 82 bank branches in Minnesota, 151 in Illinois, 31 in
Wisconsin, 64 in Michigan and 10 in Colorado at December 31, 1999. TCF strives
to develop innovative banking products and services. Of TCF's 338 bank branches,
195 were supermarket bank branches at December 31, 1999. These supermarket bank
branches provide TCF with the opportunity to sell its consumer products and
services, including deposits and loans, at a relatively low entry cost and
feature extended hours, including Saturdays and Sundays. TCF's "Totally Free"SM
checking accounts and other deposit products provide it with a significant
source of low-interest cost funds and fee income. TCF has expanded its ATM
network to 1,406 machines at December 31, 1999, generally located in areas
served by the TCF Banks, and offers its customers an automated telephone banking
system.
Federal legislation imposes numerous legal and regulatory requirements on
financial institutions. Among the most significant of these requirements are
minimum regulatory capital levels and enforcement actions that can be taken by
regulators when an institution's regulatory capital is deemed to be inadequate.
TCF and each of the TCF Banks currently exceed all of their current minimum
regulatory capital requirements and are considered "well-capitalized" under
guidelines established by the Federal Reserve Board ("FRB") and the OCC pursuant
to the Federal Deposit Insurance Corporation Improvement Act of 1991. See
"REGULATION."
As federally chartered national banks, the TCF Banks are subject to
regulation and examination by the OCC and, in certain cases, by the Federal
Deposit Insurance Corporation ("FDIC"). The TCF Banks' deposits are insured to
$100,000 by the FDIC, and as such these institutions are subject to regulations
promulgated by the FDIC. The TCF Banks are members of the Federal Home Loan Bank
("FHLB") of Des Moines, Chicago, Topeka and/or Indianapolis, and are also member
banks within their respective Federal Reserve districts. Following the Charter
Merger, TCF National Bank will continue to hold FHLB advances from the FHLB of
Chicago and Indianapolis until such advances mature or are prepaid. TCF National
Bank will be required to hold common stock of these FHLB districts in the amount
of 5% of the outstanding balances of such advances. However, following the
Charter Merger, TCF National Bank will no longer be a member of either the FHLB
of Chicago or Indianapolis. TCF Financial is a bank holding company and is
subject to regulation and examination by the FRB. See "SOURCES OF FUNDS -
Borrowings" and "REGULATION -- Regulation of TCF Financial and Affiliate and
Insider Transactions."
The following description includes detailed information regarding the business
of TCF and its subsidiaries.
LENDING ACTIVITIES
GENERAL
TCF's lending activities reflect its community banking philosophy,
emphasizing loans to individuals and small to medium-sized businesses in its
primary market areas in Minnesota, Illinois, Wisconsin, Michigan and Colorado.
TCF is also engaged in lease financing and has expanded its consumer lending
operations in recent years.
See "Financial Review -- Financial Condition - Loans and Leases" on pages
24 through 26, Note 7 of Notes to Consolidated Financial Statements on pages 43
and 44 and "Other Financial Data" on pages 63 through 67 of TCF's 1999 Annual
Report, incorporated herein by reference, for additional information regarding
TCF's loan and lease portfolios.
2
RESIDENTIAL REAL ESTATE LENDING
TCF's residential mortgage loan originations (first mortgage loans for the
financing of one- to four-family homes) are predominantly secured by properties
in Minnesota, Illinois, Wisconsin and Michigan. TCF engages in both
adjustable-rate and fixed-rate residential real estate lending. Adjustable-rate
residential real estate loans held in TCF's portfolio totaled $2.2 billion at
December 31, 1999, compared with $2.1 billion at December 31, 1998. Loan
originations by TCF Mortgage Corporation ("TCF Mortgage"), a wholly owned
subsidiary, include loans purchased from loan correspondents.
TCF sells certain residential real estate loans in the secondary market,
primarily on a nonrecourse basis. TCF retains servicing rights for the majority
of the loans it sells into the secondary market. These sales provide additional
funds for loan originations and also generate fee income. TCF may also from time
to time purchase or sell servicing rights on residential real estate loans. At
December 31, 1999, 1998 and 1997, TCF serviced for others $2.9 billion, $3.7
billion and $4.4 billion, respectively, in residential real estate loans. During
1999, 1998 and 1997, TCF sold servicing rights on $344.6 million, $200.4 million
and $144.7 million of loans serviced for others at net gains of $3.1 million,
$2.4 million and $1.6 million, respectively.
Adjustable-rate residential real estate loans originated by TCF have
various adjustment periods and generally provide for limitations on the amount
the rate may adjust on each adjustment date, as well as the total amount of
adjustments over the lives of the loans. Accordingly, while this portfolio of
loans is rate sensitive, it may not be as rate sensitive as TCF's cost of funds.
In addition to such interest-rate risk, TCF faces credit risks resulting from
potential increased costs to borrowers as a result of rate adjustments on
adjustable-rate loans in its portfolio, which will depend upon the magnitude and
frequency of shifts in market interest rates. Some adjustable-rate residential
real estate loans originated by TCF in prior periods did not provide for
limitations on rate adjustments. Credit risk may also result from declines in
the values of underlying real estate collateral. See "-- Classified Assets, Loan
and Lease Delinquencies and Defaults."
TCF Mortgage and the TCF Banks generally adhere to Federal National
Mortgage Association ("FNMA"), Federal Home Loan Mortgage Corporation ("FHLMC"),
Veterans Administration ("VA") or Federal Housing Administration ("FHA")
guidelines in originating residential real estate loans. TCF generally requires
that all conventional first mortgage real estate loans with loan-to-value ratios
in excess of 80% carry private mortgage insurance.
CONSUMER LENDING
TCF makes consumer loans for personal, family or household purposes, such
as debt consolidation or the financing of home improvements, automobiles,
vacations and education. Consumer loans totaled $2.1 billion at December 31,
1999, with $1.1 billion, or 51%, having fixed interest rates and $1 billion, or
49%, having adjustable interest rates. The following discussion provides
additional information on TCF's consumer lending operations.
The consumer lending activities of the TCF Banks include a full range of
consumer-oriented products including real estate secured loans, loans secured by
personal property and unsecured personal loans. Each of these loan types can be
made on an open- or closed-end basis. Consumer loan borrowers generally have
higher debt-to-income ratios, and therefore consumer loans have a higher risk of
loss than residential loans. Consumer loans having adjustable interest rates
also present a credit risk similar to that posed by residential real estate
loans as a result of increased costs to borrowers in the event of a rise in
rates (see discussion above under "-- Residential Real Estate Lending").
Consumer loans secured by real estate may present additional credit risk in the
event of a decline in the value of real estate collateral.
In December 1998, TCF restructured its consumer finance company operations,
including the discontinuation of indirect automobile lending, the consolidation
of offices and a renewed focus on home equity lending. During 1999, $139.4
million of consumer finance automobile loans and $14.8 million of related
allowances were transferred to loans held for sale and were subsequently sold.
Losses of $1.4 million were recognized in connection with these sales, which are
included in gain on sales of loans held for sale. TCF closed its Pensacola,
Florida consumer finance loan collections facility during 1999. At December 31,
1999, consumer finance automobile loans totaled $7.7 million, compared with
$233.9 million at December 31, 1998.
3
TCF changed its home equity loan origination programs in early 1999. Under
the new programs and in response to intensifying price competition, TCF
implemented a tiered pricing structure for its home equity loans. TCF also
experienced an increase in the loan-to-value ratios on new home equity loans
originated in 1999. Many of these loans are secured by a first lien on the home
and include an advance to pay off an existing first lien mortgage loan, and many
have balances exceeding $100,000. These loans may carry a higher level of credit
risk than loans with a lower loan-to-value ratio. For additional information on
consumer lending, including TCF's consumer finance company operations, see
"Financial Review -- Financial Condition - Loans and Leases" on pages 24 through
26 of TCF's 1999 Annual Report, incorporated herein by reference.
TCF originates student loans for resale. TCF had $143.9 million of
education loans held for sale at December 31, 1999, compared with $138.3 million
at December 31, 1998. TCF generally retains the student loans it originates
until they are fully disbursed. Under a forward commitment agreement with the
Student Loan Marketing Association ("SLMA"), TCF can sell the student loans to
SLMA once they are fully disbursed, but must sell the student loans to SLMA
before they go into repayment status. These loans are originated in accordance
with designated guarantor and U.S. Department of Education guidelines and do not
involve any independent credit underwriting by TCF. TCF's future student loan
origination activity will be dependent on continued support of guaranteed
student loan programs by the U.S. Government and TCF's ability to continue to
sell such loans to SLMA or other parties. Recent federal legislation has limited
the role of private lenders in originating student loans and has reduced the
profitability of this activity. This legislation may reduce the volume of TCF's
student loan originations in future periods.
COMMERCIAL REAL ESTATE LENDING
TCF currently originates longer-term loans on commercial real estate and,
to a lesser extent, shorter-term construction loans. TCF is endeavoring to
increase its originations of commercial real estate loans to creditworthy
borrowers based in its primary markets. TCF may also engage in commercial real
estate loan brokerage activity. At December 31, 1999, adjustable-rate loans
represented 81% of commercial real estate loans outstanding. See "Financial
Review -- Financial Condition - Loans and Leases" on pages 24 through 26 of
TCF's 1999 Annual Report, incorporated herein by reference, for additional
information regarding the types of properties securing TCF's commercial real
estate loans.
At December 31, 1999, TCF's commercial construction and development loan
portfolio totaled $162.6 million. Construction and permanent commercial real
estate lending is generally considered to involve a higher level of risk than
single-family residential lending due to the concentration of principal in a
limited number of loans and borrowers. In addition, the nature of these loans is
such that they are generally less predictable and more difficult to evaluate and
monitor.
COMMERCIAL BUSINESS LENDING
TCF engages in general commercial business lending. Commercial business
loans may be secured by various types of business assets, including commercial
real estate, and in some cases may be made on an unsecured basis. TCF is seeking
to expand its commercial business lending activity and in particular its lending
to small and medium-sized businesses. TCF's commercial business lending
activities encompass loans with a broad variety of purposes, including corporate
working capital loans and loans to finance the purchase of equipment or other
acquisitions. TCF also makes loans to individuals who use the funds for business
or personal purposes. As part of its commercial business and commercial real
estate lending activities, TCF also issues standby letters of credit. At
December 31, 1999, TCF had 79 such standby letters of credit outstanding in the
aggregate amount of $22 million.
Recognizing the generally increased risks associated with commercial
business lending, TCF originates commercial business loans in order to increase
its short-term, variable-rate asset base and to contribute to its profitability
through the higher rates earned on these loans and the marketing of other bank
products. TCF concentrates on originating commercial business loans primarily to
middle-market companies based in its primary markets with borrowing requirements
of less than $15 million. Substantially all of TCF's commercial business loans
outstanding at December 31, 1999 were to borrowers based in its primary markets.
4
LEASE FINANCING
TCF provides a broad range of comprehensive lease and equipment finance
products addressing the financing needs of diverse companies including large
franchise organizations, small businesses, transportation owners and operators
and other equipment lessees. At December 31, 1999, TCF's lease and equipment
financing portfolio totaled $492.7 million, including $44.2 million of loans
classified as commercial business loans. TCF entered the leasing business in
June 1997 with the purchase of Winthrop Resources Corporation ("Winthrop"), a
financial services company that leases computers, telecommunications equipment,
point-of-sale systems and other business-essential equipment to companies
nationwide. In September 1999, TCF expanded its leasing operation with the
launch of TCF Leasing, Inc. ("TCF Leasing"), a general equipment finance company
with a focus on middle-market companies, truck finance, lease discounting and
trailer leasing.
TCF internally funds certain leases, and consequently retains the credit
risk on such leases. TCF also may arrange permanent financing of certain leases
through non-recourse discounting of lease rentals with various other financial
institutions at fixed interest rates. At December 31, 1999, 38.9% of TCF's lease
portfolio was funded on a non-recourse basis with other financial institutions,
compared with 45.9% at December 31, 1998. Proceeds from the assignment of the
lease rentals are equal to the present value of the remaining lease payments due
under the lease, discounted at the interest rate charged by the other financial
institutions. Interest rates for this type of financing are negotiated on a
transaction-by-transaction basis and reflect the financial strength of the lease
customer, the term of the lease and the prevailing interest rates. For a lease
discounted on a non-recourse basis, the other financial institution has no
recourse against TCF unless TCF is in default under the terms of the agreement
under which the lease and the leased equipment are assigned to the other
financial institution as collateral. The other financial institution may,
however, take title to the collateral in the event the customer fails to make
lease payments or certain other defaults by the lease customer occur under the
terms of the lease.
CLASSIFIED ASSETS, LOAN AND LEASE DELINQUENCIES AND DEFAULTS
TCF has established a classification system for individual commercial loans
or other assets based on OCC regulations under which all or part of a loan or
other asset may be classified as "substandard," "doubtful," "loss" or "special
mention." It has also established overall ratings for various credit portfolios.
A loan or other asset is placed in the substandard category when it is
considered to have a well-defined weakness. A loan or other asset is placed in
the doubtful category when some loss is likely but there is still sufficient
uncertainty to permit the asset to remain on the books at its full value. All or
a portion of a loan or other asset is classified as loss when it is considered
uncollectible, in which case it is generally charged off. In some cases, loans
or other assets for which there is perceived some possible exposure to credit
loss are classified as special mention. Loans and other assets that are
classified are subject to periodic review of their appropriate regulatory
classifications.
The following table summarizes information about TCF's non-accrual,
restructured and past due loans and leases:
AT DECEMBER 31,
------------------------------------------------
1999 1998 1997 1996 1995
------- ------- ------- ------- -------
(IN MILLIONS)
Non-accrual loans and leases $ 24.1 $ 33.7 $ 36.8 $ 26.4 $ 44.3
Restructured loans - - 1.3 3.0 1.6
------- ------- ------- ------- -------
Total non-accrual and restructured
loans and leases $ 24.1 $ 33.7 $ 38.1 $ 29.4 $ 45.9
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Accruing loans and leases 90 days
or more past due $ 5.8 $ - $ - $ - $ .7
------- ------- ------- ------- -------
------- ------- ------- ------- -------
5
The allowance for loan and lease losses is based upon management's periodic
analysis of TCF's loan and lease portfolios. Although appropriate levels of
reserves have been estimated based upon factors and trends identified by
management, there can be no assurance that the levels are adequate. Economic
stagnation or reversals in the economy could give rise to increasing risk of
credit losses and necessitate an increase in the required level of reserves. The
expansion of the Company's consumer lending and other lending and leasing
operations creates increased exposure to increases in delinquencies,
repossessions, foreclosures and losses that generally occur during economic
downturns or recessions.
Adverse economic developments are also likely to adversely affect
commercial lending operations and increase the risk of loan defaults and
credit losses on such loans. Carrying values of foreclosed commercial real
estate properties are generally based on appraisals prepared by certified or
licensed appraisers. TCF reviews each external commercial real estate
appraisal it receives for accuracy, completeness and reasonableness of
assumptions used. Weaknesses in real estate markets may result in declines in
property values and the sale of properties at less than previously estimated
values, resulting in additional charge-offs. TCF recognizes the effect of
such events in the periods in which they occur.
Additional information concerning TCF's allowance for loan and lease losses
is set forth in "Financial Review -- Financial Condition - Allowance for Loan
and Lease Losses" on pages 26 and 27, in Note 1 of Notes to Consolidated
Financial Statements on pages 39 through 41 and in Note 8 of Notes to
Consolidated Financial Statements on page 44 of TCF's 1999 Annual Report,
incorporated herein by reference.
INVESTMENT ACTIVITIES
The TCF Banks have authority to invest in various types of liquid assets,
including United States Treasury obligations and securities of various federal
agencies, deposits of insured banks, bankers' acceptances and federal funds, and
must meet minimum liquidity requirements prescribed by law. Liquidity may
increase or decrease depending upon the availability of funds and comparative
yields on investments in relation to the return on loans and leases. The TCF
Banks must also meet reserve requirements of the FRB, which are imposed based on
amounts on deposit in various types of deposit categories.
Information regarding the carrying values and fair values of TCF's
investments and securities available for sale is set forth in Notes 4 and 5 of
Notes to Consolidated Financial Statements on page 42 of TCF's 1999 Annual
Report, incorporated herein by reference. Additional information regarding
investments and securities available for sale is set forth in "Other Financial
Data" on pages 63 through 67 of TCF's 1999 Annual Report, incorporated herein by
reference.
SOURCES OF FUNDS
DEPOSITS
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 economic and competitive conditions, interest rates, money market
conditions and other factors. Higher-cost borrowings may be used to compensate
for reductions in normal sources of funds, such as deposit inflows at less than
projected levels or net deposit outflows, or to support expanded activities.
Consumer and commercial deposits are attracted principally from within
TCF's primary market areas through the offering of a broad selection of deposit
instruments including consumer and commercial demand deposit accounts,
Negotiable Order of Withdrawal or "NOW" (interest-bearing checking) accounts,
money market accounts, regular savings accounts, certificates of deposit and
retirement savings plans.
The composition of TCF's deposits has a significant impact on its cost of
funds. TCF's marketing strategy emphasizes attracting deposits held in checking,
regular savings and money market accounts. These accounts provide significant
fee income and are a source of low-interest cost funds. Checking, savings and
money market accounts comprised 56% of total deposits at December 31, 1999. In
addition, there were approximately 1.6 million retail checking, savings and
money market accounts at December 31, 1999, compared with approximately 1.4
million and 1.3 million such accounts at December 31, 1998 and 1997,
respectively.
6
Information concerning TCF's deposits is set forth in "Financial Review --
Financial Condition - Deposits" on pages 29 and 30 and in Note 10 of Notes to
Consolidated Financial Statements on page 46 of TCF's 1999 Annual Report,
incorporated herein by reference.
BORROWINGS
The FHLB System functions as a central reserve bank providing credit for
financial institutions through a regional bank located within a particular
financial institution's assigned region. The TCF Banks are members of the FHLB
System, and are required to own a minimum level of FHLB capital stock and are
authorized to apply for advances on the security of such stock and certain of
their loans and other assets (principally securities which are obligations of,
or guaranteed by, the United States Government), provided certain standards
related to creditworthiness have been met. TCF's FHLB advances totaled $1.8
billion at December 31, 1999, down $44.4 million from the balance at December
31, 1998. FHLB advances are made pursuant to several different credit programs.
Each credit program has its own interest rates and range of maturities. The FHLB
prescribes the acceptable uses to which the advances pursuant to each program
may be made as well as limitations on the size of advances. Acceptable uses
prescribed by the FHLB have included expansion of residential mortgage lending
and meeting short-term liquidity needs. In addition to the program limitations,
the amounts of advances for which an institution may be eligible are generally
based on the FHLB's assessment of the institution's creditworthiness.
As an additional source of funds, TCF may sell securities subject to its
obligation to repurchase these securities under repurchase agreements ("reverse
repurchase agreements") with the FHLMC or major investment bankers utilizing
government securities or mortgage-backed securities as collateral. Reverse
repurchase agreements totaled $1 billion at December 31, 1999, compared with
$367.3 million at December 31, 1998. Generally, securities with a value in
excess of the amount borrowed are required to be deposited as collateral with
the counterparty to a reverse repurchase agreement. The creditworthiness of the
counterparty is important in establishing that the overcollateralized amount of
securities delivered by TCF is protected and it is TCF's policy to enter into
reverse repurchase agreements only with institutions with a satisfactory credit
history.
The use of reverse repurchase agreements may expose TCF to certain risks
not associated with other sources of funds, including possible requirements to
provide additional collateral and the possibility that such agreements may not
be renewed. If for some reason TCF were no longer able to obtain reverse
repurchase agreement financing, it would be necessary for TCF to obtain
alternative sources of short-term funds. Such alternative sources of funds, if
available, may be higher-cost substitutes for the reverse repurchase agreement
funds.
Information concerning TCF's FHLB advances, reverse repurchase agreements
and other borrowings is set forth in "Financial Review -- Financial Condition -
Borrowings" on page 30 and in Note 11 of Notes to Consolidated Financial
Statements on pages 47 through 49 of TCF's 1999 Annual Report, incorporated
herein by reference.
OTHER INFORMATION
ACTIVITIES OF SUBSIDIARIES OF TCF FINANCIAL CORPORATION
TCF's business operations include those conducted by direct and indirect
subsidiaries of TCF Financial. During the year ended December 31, 1999, TCF's
subsidiaries were principally engaged in the following activities:
Mortgage Banking
TCF Mortgage and Standard Financial Mortgage Corporation originate,
purchase, sell and service residential mortgage loans.
7
Leasing
Winthrop and TCF Leasing provide a range of comprehensive lease finance
products. Winthrop leases high-technology and other business-essential equipment
to customers ranging from large corporations to small, growing businesses. TCF
Leasing, TCF's newly formed leasing and equipment finance subsidiary,
specializes in the leasing and financing of trucks and industrial equipment in
key markets in various regions of the United States.
Annuities and Investment Services
TCF Financial Insurance Agency, Inc., is an insurance agency engaging in
the sale of fixed-rate, single premium tax-deferred annuities. TCF Securities,
Inc. engages in the sale of non-proprietary mutual fund products, and in the
sale of variable-rate, single premium tax-deferred annuities.
Insurance, Title Insurance and Appraisal Services
Certain TCF subsidiaries provide various types of insurance, principally
credit-related, marketed primarily to TCF's customers. North Star Title, Inc.
("North Star") is a title insurance agent for several title insurance
underwriters, operating primarily in Minnesota, Illinois, Wisconsin and
Michigan, providing title insurance, real estate abstracting, and closing
services to affiliates and third parties. North Star Real Estate Services, Inc.
("North Star Real Estate") provides real estate appraisal services to its
affiliates and to third parties. In the 1999 fourth quarter, TCF sold North Star
and North Star Real Estate and recognized a gain of $5.5 million on the sale.
RECENT ACCOUNTING DEVELOPMENTS
There has been an ongoing review over many years of the accounting
principles and practices used by financial institutions. This review is expected
to continue by banking regulators, the Securities and Exchange Commission
("SEC"), the Financial Accounting Standards Board ("FASB"), the American
Institute of Certified Public Accountants ("AICPA") and other organizations. As
a result of this process, there have been new accounting pronouncements which
have had an impact on TCF. Further developments may be forthcoming in light of
this ongoing review process.
In June 1998, the FASB issued Statement of Financial Accounting Standards
("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging
Activities." Additional information on SFAS No. 133 is set forth in "Financial
Review -- Financial Condition - Recent Accounting Developments" on page 32 of
TCF's 1999 Annual Report, incorporated herein by reference.
COMPETITION
TCF National Bank Minnesota ("TCF Minnesota") is the third largest
depository institution in Minnesota. The other TCF Banks compete with a
number of larger depository institutions in their market areas. The TCF Banks
experience significant competition in attracting and retaining deposits and
in lending funds. TCF believes the primary factors in competing for deposits
are the ability to offer attractive rates and products, convenient office
locations and supporting data processing systems and services. Direct
competition for deposits comes primarily from other commercial banks, credit
unions and savings institutions. Additional significant competition for
deposits comes from institutions selling money market mutual funds and
corporate and government securities. The primary factors in competing for
loans are interest rates, loan origination fees and the range of services
offered. TCF competes for the origination of loans with commercial banks,
mortgage bankers, mortgage brokers, consumer finance companies, credit
unions, insurance companies and savings institutions. TCF also competes
nationwide with other leasing companies in the financing of high-technology
and business-essential equipment. Expanded use of the Internet has increased
the potential competition affecting TCF and its loan, lease and deposit
products.
EMPLOYEES
As of December 31, 1999, TCF had approximately 7,200 employees, including
2,400 part-time employees. TCF provides its employees with a comprehensive
program of benefits, some of which are on a contributory basis, including
comprehensive medical and dental plans, life insurance, accident insurance,
short- and long-term disability coverage, a pension plan and a shared
contribution stock ownership 401(k) plan.
8
REGULATION
The banking industry is generally subject to extensive regulatory
oversight. TCF Financial, as a publicly held bank holding company, and the TCF
Banks, as national banks with deposits insured by the FDIC, are subject to a
number of laws and regulations. Many of these laws and regulations have
undergone significant change in recent years. These laws and regulations impose
restrictions on activities, minimum capital requirements, lending and deposit
restrictions and numerous other requirements. Future changes to these laws and
regulations are likely and cannot be predicted with certainty.
RECENT DEVELOPMENTS
- Financial Modernization Act
On November 12, 1999, the President signed into law the Gramm-Leach-Bliley
Act (the "Act" or the "Gramm-Leach-Bliley Act"). The Act significantly changes
the regulatory structure and oversight of the financial services industry and
expands financial affiliation opportunities for bank holding companies. The Act
permits "financial holding companies" to engage in a range of activities that
are "financial in nature" or "incidental" thereto, such as banking, insurance,
securities activities, and merchant banking. To qualify to engage in expanded
financial activities, a financial holding company must make certain required
regulatory filings, and subsidiary depository institutions must be
well-capitalized, well-managed and rated "satisfactory" or better under the
Community Reinvestment Act. The Act also permits national banks to engage in
certain expanded financial activities through a financial subsidiary, provided
the bank and its depository institution affiliates are deemed well-capitalized
and well-managed and meet certain other regulatory requirements.
The Act also reforms the regulatory framework of the financial services
industry. Financial holding companies will be subject to primary supervision
by the FRB. However, unless subsidiary activity adversely impacts the holding
company, appropriate federal and state agencies will continue to have
significant regulatory authority over the subsidiaries. The Act preempts
state laws restricting the establishment of financial affiliations authorized
or permitted under the Act, subject to certain limited exceptions, including
an exception that allows state insurance regulators to impose certain
requirements on financial institutions, so long as they are not substantially
more adverse than those applying to other persons.
The Act removes the current blanket exemption for banks from the
broker-dealer registration requirements under the Securities Exchange Act of
1934, amends the Investment Company Act of 1940 with respect to bank common
trust fund and mutual fund activities, and amends the Investment Advisors Act of
1940 to require registration of banks that act as investment advisers for mutual
funds.
The Act prohibits financial institutions from sharing non-public financial
information on their customers to non- affiliated third parties unless the
customer is provided the opportunity to opt-out or the customer consents.
However, the Act allows a financial institution to disclose confidential
information pursuant to a joint marketing agreement (after full disclosure to
the customer), to perform services on behalf of the institution, to market the
institution's own products, and to protect against fraud. The Act directs
federal banking agencies to prescribe regulations within six months after the
date of enactment designed to further clarify and enforce the privacy
provisions.
The provisions of the Act relating to financial holding companies became
effective on or about March 15, 2000. Federal preemption provisions became
effective on the date of enactment. The privacy provisions generally become
effective in November 2000.
- Other Developments
In 1999, TCF sought and obtained regulatory approval to merge the
charters of the TCF Banks located in Minnesota, Illinois, Wisconsin and
Michigan. The Charter Merger is anticipated to be completed in the second
quarter of 2000. The merger of the bank charters is not expected to
significantly change the management approach or operations within these
geographic states.
9
REGULATORY CAPITAL REQUIREMENTS
TCF Financial and the TCF Banks are subject to both risk-based and
leverage capital requirements of the FRB and the OCC, respectively. These
requirements are described below. In addition, these regulatory agencies are
required by law to take prompt action when institutions do not meet certain
other minimum capital standards. The Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA") defines five levels of capital condition,
the highest of which is "well-capitalized," and requires that regulatory
authorities subject undercapitalized institutions to various restrictions
such as limitations on dividends or other capital distributions, limitations
on growth or activity restrictions. Undercapitalized banks must also develop
a capital restoration plan and the parent bank holding company is required to
guarantee compliance with the plan. TCF Financial and the TCF Banks believe
they would be considered "well-capitalized" under the FDICIA capital
standards.
The FRB's risk-based capital guidelines include among their objectives
making regulatory capital requirements more sensitive to differences in risk
profiles of banking organizations, factoring off-balance-sheet exposures into
the assessment of capital adequacy and minimizing disincentives to holding
liquid, low-risk assets. Under these guidelines, a bank holding company's assets
and certain off-balance sheet items are assigned to one of four risk categories,
each weighted differently in accordance with the perceived level of risk posed
by such assets or off-balance-sheet items.
FRB guidelines also prescribe two "tiers" of capital. "Tier 1" capital
includes common stockholders' equity; qualifying noncumulative perpetual
preferred stock (including related surplus); qualifying cumulative perpetual
preferred stock (including related surplus), subject to certain limitations; and
minority interests in the equity accounts of consolidated subsidiaries. Tier 1
capital excludes goodwill and certain other intangible and other assets.
"Supplementary" or "Tier 2" capital consists of the allowance for loan and
lease losses, subject to certain limitations; perpetual preferred stock and
related surplus, subject to certain conditions; hybrid capital instruments
(i.e., those with characteristics of both equity and debt), perpetual debt and
mandatory convertible debt securities; and term subordinated debt and
intermediate-term preferred stock (including related surplus), subject to
certain limitations. The maximum amount of Tier 2 capital that is allowed to be
included in an institution's qualifying total capital is 100% of Tier 1 capital,
net of goodwill and other intangible assets required to be deducted.
TCF Financial is currently required to maintain (i) Tier 1 capital equal to
at least four percent of its risk-weighted assets and (ii) total capital (the
sum of Tier 1 and Tier 2 capital) equal to eight percent of risk-weighted
assets. The FRB also requires bank holding companies to maintain a minimum Tier
1 "leverage ratio" (measuring Tier 1 capital as a percentage of adjusted total
assets) of at least three percent. Higher leverage ratio requirements (minimum
additional capital of 100 to 200 basis points) are imposed for institutions that
do not have the highest regulatory rating or that fail to meet certain other
criteria. At December 31, 1999, TCF believes it met all these requirements. See
Note 14 of Notes to Consolidated Financial Statements on page 51 of TCF's 1999
Annual Report, incorporated herein by reference. The FRB has not advised TCF of
any specific minimum Tier 1 leverage ratio applicable to it.
The FRB's guidelines indicate that the FRB expects that bank holding
companies experiencing internal growth or making acquisitions should maintain
stronger capital positions, substantially above the minimum supervisory levels,
without significant reliance on intangible assets. In addition, the guidelines
provide that the FRB will use Tier 1 leverage guidelines in its inspection and
supervisory process and as part of its analysis of applications to be approved
by the FRB (this would include applications relating to bank holding company
activities, acquisitions or other matters). The guidelines also indicate that
the FRB will review the Tier 1 leverage measure periodically and will consider
adjustments needed to reflect significant changes in the economy, financial
markets and banking practices.
The OCC also imposes on the TCF Banks regulatory capital requirements that
are substantially similar to those imposed by the FRB, and TCF believes each of
the TCF Banks complied with OCC regulatory capital requirements at December 31,
1999.
10
The FRB and the OCC also have adopted rules that could permit them to
quantify and account for interest-rate risk exposure and market risk from
trading activity and reflect these risks in higher capital requirements. New
legislation, additional rulemaking, or changes in regulatory policies may affect
future regulatory capital requirements applicable to TCF Financial and the TCF
Banks. The ability of TCF Financial and the TCF Banks to comply with regulatory
capital requirements may be adversely affected by legislative changes or future
rulemaking or policies of their regulatory authorities, or by unanticipated
losses or lower levels of earnings.
RESTRICTIONS ON DISTRIBUTIONS
Dividends or other capital distributions from the TCF Banks to TCF
Financial are an important source of funds to enable TCF Financial to pay
dividends on its common stock, to make payments on TCF Financial's other
borrowings, or for its other cash needs. The TCF Banks' ability to pay dividends
is heavily dependent on regulatory policies and regulatory capital requirements.
The ability to pay such dividends in the future may be adversely affected by new
legislation or regulations, or by changes in regulatory policies. In general,
the TCF Banks may not declare or pay a dividend to TCF Financial in excess of
100% of their net profits during a year combined with their retained net profits
for the preceding two years without prior approval of the OCC. The TCF Banks'
ability to make any capital distributions in the future may require regulatory
approval and may be restricted by their regulatory authorities. The TCF Banks'
ability to make any such distributions may also depend on their earnings and
ability to meet minimum regulatory capital requirements in effect during future
periods. These capital adequacy standards may be higher than existing minimum
capital requirements. The OCC also has the authority to prohibit the payment of
dividends by a national bank when it determines such payments would constitute
an unsafe and unsound banking practice. In addition, tax considerations may
limit the ability of the TCF Banks to make dividend payments in excess of their
current and accumulated tax "earnings and profits" ("E&P"). Annual dividend
distributions in excess of E&P could result in a tax liability based on the
amount of excess earnings distributed and current tax rates. See "Financial
Review -- Financial Condition - Liquidity Management" on page 29 and Note 13 of
Notes to Consolidated Financial Statements on pages 50 and 51 of TCF's 1999
Annual Report, incorporated herein by reference.
REGULATION OF TCF FINANCIAL AND AFFILIATE AND INSIDER TRANSACTIONS
TCF Financial is subject to regulation as a bank holding company. It is
required to register with the FRB and is subject to FRB regulations,
examinations and reporting requirements relating to bank holding companies. As
subsidiaries of a bank holding company, the TCF Banks are subject to certain
restrictions in their dealings with TCF Financial and with other companies
affiliated with TCF Financial, and also with each other.
A bank holding company must serve as a source of strength for its
subsidiary banks, and TCF Financial may be required to make up certain capital
deficiencies of the TCF Banks. The FRB may require a holding company to
contribute additional capital to an undercapitalized subsidiary bank. In
addition, Section 55 of the National Bank Act may permit the OCC to order the
pro rata assessment of shareholders of a national bank where the capital of the
bank has become impaired. If a shareholder fails to pay such an assessment
within three months, the OCC may order the sale of the shareholder's stock to
cover a deficiency in the capital of a subsidiary bank. In the event of a bank
holding company's bankruptcy, any commitment by the bank holding company to a
federal bank regulatory agency to maintain the capital of a subsidiary bank
would be assumed by the bankruptcy trustee and may be entitled to priority over
other creditors.
Under the Bank Holding Company Act ("BHCA"), a bank holding company must
obtain FRB approval before acquiring more than 5% control, or substantially all
of the assets, of another bank or bank holding company, or merging or
consolidating with another 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 FRB as being closely related and proper incidents to the
business of banking. As discussed, the Act permits any bank holding company that
qualifies as a financial holding company to engage in an expanded list of
activities, subject to certain restrictions. See "--Recent Developments."
11
RESTRICTIONS ON CHANGE IN CONTROL
Federal and state laws and regulations contain a number of provisions which
impose restrictions on changes in control of financial institutions such as the
TCF Banks, and which require regulatory approval prior to any such changes in
control. The Restated Certificate of Incorporation of TCF Financial and a
Shareholder Rights Plan adopted by TCF Financial in 1999, among other items,
contain features which may inhibit a change in control of TCF Financial.
ACQUISITIONS AND INTERSTATE OPERATIONS
Under federal law, interstate merger transactions may be approved by
federal bank regulators without regard to whether such transactions are
prohibited by the law of any state, unless the home state of one of the banks
opted out of the Riegle-Neal Interstate Banking and Branching Act of 1994 (the
"1994 Act") by adopting a law after the date of enactment of the 1994 Act and
prior to June 1, 1997 which applies equally to all out-of-state banks and
expressly prohibits merger transactions involving out-of-state banks. Interstate
acquisitions of branches by banks are permitted only if the law of the state in
which the branch is located permits such acquisitions. Interstate mergers and
branch acquisitions may also be subject to certain nationwide and statewide
insured deposit maximum concentration levels.
INSURANCE OF ACCOUNTS; DEPOSITOR PREFERENCE
The deposits of the TCF Banks are insured by the FDIC up to $100,000 per
insured depositor. Substantially all of TCF's deposits are Savings
Association Insurance Fund ("SAIF") insured, but TCF also has deposits
insured by the Bank Insurance Fund ("BIF"). The FDIC has established a
risk-based deposit insurance assessment under which deposit insurance
assessments are based upon an institution's capital strength and supervisory
condition, as determined by the institution's primary regulator. The annual
insurance premiums on bank deposits insured by the BIF and SAIF may vary
between $0 per $100 of deposits for banks classified in the highest capital
and supervisory evaluation categories to $.27 per $100 of deposits for banks
classified in the lowest capital and supervisory evaluation categories.
In addition to risk-based deposit insurance assessments, assessments may be
imposed on deposits insured by either the BIF or the SAIF to pay for the cost of
Financing Corporation ("FICO") funding. FICO assessment rates for 1999 ranged
from $.0116 to $.0122 per $100 of deposits annually for BIF-assessable deposits
and from $.0580 to $.0610 per $100 of deposits annually for SAIF-assessable
deposits.
An increase in deposit insurance rates could have a material adverse effect
on TCF, depending on the amount and duration of the increase. In addition, the
FDIC is authorized to terminate a depository institution's deposit insurance if
it finds that the institution is being operated in an unsafe and unsound manner
or has violated any rule, regulation, order or condition administered by the
institution's regulatory authorities. Any such termination of deposit insurance
is likely to have a material adverse effect on TCF, the severity of which would
depend on the amount of deposits affected by such a termination.
Under federal law, deposits and certain claims for administrative expenses
and employee compensation against an insured depository institution are afforded
a priority over other general unsecured claims against such an institution,
including federal funds and letters of credit, in the liquidation or other
resolution of such an institution by any receiver appointed by regulatory
authorities. Such priority creditors would include the FDIC.
EXAMINATIONS AND REGULATORY SANCTIONS
TCF is subject to periodic examination by the FRB, OCC and the FDIC. Bank
regulatory authorities may impose on institutions found to be operating in an
unsafe or unsound manner a number of restrictions or new requirements, including
but not limited to growth limitations, dividend restrictions, individual
increased regulatory capital requirements, increased loan and real estate 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.
12
Subsidiaries of TCF are also subject to state and/or self-regulatory
organization licensing, regulation and examination requirements in connection
with certain insurance, mortgage banking and securities brokerage activities.
NATIONAL BANK INVESTMENT LIMITATIONS
Permissible investments by national banks are limited by the National Bank
Act, as amended, and by rules of the OCC. The OCC is in the process of
finalizing regulations under the Gramm-Leach-Bliley Act which will permit banks
to engage in expanded activities subject, in the case of certain non-traditional
bank activities, to certain supervisory requirements, including a required
regulatory capital deduction and application of transactions with affiliates
limitations. See "--Recent Developments."
FUTURE LEGISLATIVE AND REGULATORY CHANGE; LITIGATION AND ENFORCEMENT ACTIVITY
There are a number of respects in which future legislative or regulatory
change, or changes in enforcement practices or court rulings, could adversely
affect TCF, and it is generally not possible to predict when or if such changes
may have an impact on TCF. Legislative proposals for tax reform have sought the
elimination of certain tax benefits for single premium annuities which, if
adopted, could impair TCF's ability to market annuity products. Recent
legislation and administrative action has limited the role of private lenders in
education loans and has adversely affected the profitablilty of student lending
activity. TCF's non-interest income in future periods may be negatively impacted
by pending state and federal legislative proposals which, if enacted, could
limit loan, deposit or other fees and service charges. Among other proposals,
state legislation has been proposed which could eliminate ATM surcharge fees
imposed by TCF, and which could restrict the sharing of customer information
among TCF-affiliated entities. These proposals could adversely affect TCF's
revenues and product marketing strategies. Financial institutions have also
increasingly been the subject of private class action lawsuits challenging
escrow account practices, private mortgage insurance requirements, the use of
loan brokers and other practices. Pending litigation against Visa and
Mastercard, if successful, could have an adverse impact on the revenues of debit
card issuers such as TCF.
The Community Reinvestment Act ("CRA") and other fair lending laws and
regulations impose nondiscriminatory lending requirements on financial
institutions. In recent periods, federal regulatory agencies, including the FRB
and the Department of Justice ("DOJ"), have sought a more rigorous enforcement
of the CRA and other fair lending laws and regulations. The DOJ is authorized to
use the full range of its enforcement authority under the fair lending laws. The
DOJ has authority to commence pattern or practice investigations of possible
lending discrimination on its own initiative or through referrals from the
federal financial institutions regulatory agencies, and to file lawsuits in
federal court where there is reasonable cause to believe that such violations
have occurred. The DOJ is also authorized to bring suit based on individual
complaints filed with the Department of Housing and Urban Development where one
of the parties to the complaint elects to have the case heard in federal court.
A successful challenge to an institution's performance under the CRA and related
laws and regulations could result in a wide variety of sanctions, including the
required payment of damages and civil money penalties, prospective and
retrospective injunctive relief, imposition of restrictions on mergers and
acquisitions activity, and restrictions on expansion activity. Private parties
may also have the ability to challenge an institution's performance under fair
lending laws in private class action litigation. The ultimate effects of the
foregoing or other possible legal and regulatory developments cannot be
predicted but may have an adverse impact on TCF.
OTHER LAWS AND REGULATIONS
TCF is subject to a wide array of other laws and regulations, both federal
and state, including, but not limited to, usury laws, the CRA and related
regulations, the Equal Credit Opportunity Act and Regulation B, Regulation D
reserve requirements, Regulation E Electronic Funds transfer requirements, the
Truth-in-Lending Act and Regulation Z, the Real Estate Settlement Procedures Act
and Regulation X, and the Truth-in-Savings Act and Regulation DD. TCF is also
subject to laws and regulations that may impose liability on lenders and owners
for clean-up costs and other costs stemming from hazardous waste located on
property securing real estate loans made by lenders or on real estate that is
owned by lenders following a foreclosure or otherwise. Although TCF's lending
procedures include measures designed to limit lender liability for hazardous
waste clean-up or other related liability, TCF has engaged in significant
commercial lending activity, and lenders may be held liable for clean up costs
relating to hazardous wastes under certain circumstances.
13
TAXATION
FEDERAL TAXATION
Bad Debt Reserves
TCF files consolidated federal income tax returns and is an accrual basis
taxpayer. The TCF Banks are subject to federal income tax under the Internal
Revenue Code of 1986, as amended (the "Code") in the same general manner as
other corporations. Prior to 1996, savings institutions were subject to special
bad debt reserve rules and certain other rules. During this period, a savings
institution that held 60% or more of its assets in "qualifying assets" (as
defined in the Code) was permitted to maintain reserves for bad debts and to
make annual additions to such reserves that qualified as deductions from taxable
income.
Beginning in 1996, the favorable bad debt method described above was
repealed, putting savings institutions on the same tax bad debt method as
commercial banks. This legislation requires recapture of the amount of the tax
bad debt reserves to the extent that they exceed the adjusted base year reserve
(the "applicable excess reserves"). The applicable excess reserves are
recaptured over a six-year period. This recapture period can be deferred for a
period of up to two years to the extent that a certain residential lending test
is met. TCF has previously provided taxes for the applicable excess reserves.
IRS Audit History
The statute of limitations on TCF's consolidated federal tax return is
closed through 1995, with the exception of certain filed refund claims.
See "Financial Review -- Results of Operations - Income Taxes" on page 23,
Note 1 of Notes to Consolidated Financial Statements on pages 39 through 41 and
Note 12 of Notes to Consolidated Financial Statements on pages 49 and 50 of
TCF's 1999 Annual Report, incorporated herein by reference, for additional
information regarding TCF's income taxes.
STATE TAXATION
TCF and/or its subsidiaries currently file tax returns in all 50 states and
local tax returns in certain cities and other taxing jurisdictions. TCF's
primary banking activities are in the states of Minnesota, Illinois, Wisconsin,
Michigan and Colorado. The tax rates in those jurisdictions are 9.8%, 7.3%,
7.9%, 2.3% and 5%, respectively. The methods of filing, and the methods for
calculating taxable and apportionable income, vary depending upon the laws of
the taxing jurisdiction.
ITEM 2. PROPERTIES
OFFICES
At December 31, 1999, TCF owned the buildings and land for 109 of its bank
branch offices, owned the buildings but leased the land for 5 of its bank branch
offices and leased the remaining 224 bank branch offices, all of which are well
maintained. The properties related to the bank branch offices owned by TCF had a
depreciated cost of approximately $59.7 million at December 31, 1999. At
December 31, 1999, the aggregate net book value of leasehold improvements
associated with leased bank branch office facilities was $17.3 million. In
addition to the above-referenced branch offices, TCF owned and leased other
facilities with an aggregate net book value of $12.6 million at December 31,
1999. See Note 9 of Notes to Consolidated Financial Statements on pages 45 and
46 of TCF's 1999 Annual Report, incorporated herein by reference.
14
ITEM 3. LEGAL PROCEEDINGS
From time to time, TCF is a party to legal proceedings arising out of its
general lending and operating activities. TCF is and expects to become engaged
in a number of foreclosure proceedings and other collection actions as part of
its loan collection activities. From time to time, borrowers have also brought
actions against TCF, in some cases claiming substantial amounts of damages. Some
financial services companies have recently been subjected to significant
exposure in connection with class actions and/or suits seeking punitive damages.
Among other possible developments, adverse decisions in litigation dealing with
ATM surcharge legislation, privacy concerns or pending litigation against Visa
and Mastercard affecting debit card fees could have an adverse impact on TCF.
Management, after review with its legal counsel, believes that the ultimate
disposition of its litigation will not have a material effect on TCF's financial
condition.
On November 2, 1993, TCF Minnesota filed a complaint in the United States
Court of Federal Claims seeking monetary damages from the United States for
breach of contract, taking of property without just compensation and deprivation
of property without due process. TCF Minnesota's claim is based on the
government's breach of contract in connection with TCF Minnesota's acquisitions
of certain savings institutions prior to the enactment of the Financial
Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA"), which
contracts allowed TCF Minnesota to treat the "supervisory goodwill" created by
the acquisitions as an asset that could be counted toward regulatory capital,
and provided for other favorable regulatory accounting treatment. The United
States has not yet answered TCF Minnesota's complaint. TCF Minnesota's complaint
involves approximately $80.3 million in supervisory goodwill.
In August 1995, Great Lakes Michigan filed with the United States Court
of Federal Claims a complaint seeking monetary damages from the United States
for breach of contract, taking of property without just compensation and
deprivation of property without due process. Great Lakes Michigan's claim is
based on the government's breach of contract in connection with Great Lakes
Michigan's acquisitions of certain savings institutions prior to the
enactment of FIRREA in 1989, which contracts allowed Great Lakes Michigan to
treat the "supervisory goodwill" created by the acquisitions as an asset that
could be counted toward regulatory capital, and provided for other favorable
regulatory accounting treatment. The United States has not yet answered Great
Lakes Michigan's complaint. Great Lakes Michigan's complaint involves
approximately $87.3 million in supervisory goodwill.
On July 1, 1996, the United States Supreme Court issued a decision
affirming the August 30, 1995 decision of the United States Court of Appeals for
the Federal Circuit, which decision had affirmed the Court of Federal Claims'
liability determinations in three other "supervisory goodwill" cases,
consolidated for review under the title WINSTAR CORP. v. UNITED STATES, 116
S.Ct. 2432 (1996). In rejecting the United States' consolidated appeal from the
Court of Federal Claims' decisions, the Supreme Court held in WINSTAR that the
United States had breached contracts it had entered into with the plaintiffs
which provided for the treatment of supervisory goodwill, created through the
plaintiffs' acquisitions of failed or failing savings institutions, as an asset
that could be counted toward regulatory capital. Two of the three cases
consolidated in the Supreme Court proceedings have since been tried before the
Court of Federal Claims on the issue of damages, and the third was settled
without trial. In one of the cases that proceeded to a damages trial, GLENDALE
FEDERAL BANK, FSB v. UNITED STATES, 43 Fed. Cl. 390 (1999), the Court of Federal
Claims issued a decision on April 9, 1999, awarding the plaintiff in that case
$908,948,000 in restitution and non-overlapping reliance damages. The GLENDALE
damages decision has been appealed to the United States Court of Appeals for the
Federal Circuit. The other case which went to trial was settled in June 1998.
On December 22, 1997, the Court of Federal Claims issued a decision finding
the existence of contracts and governmental breaches of those contracts in four
other "supervisory goodwill" cases, consolidated for purposes of that decision
only under the title CALIFORNIA FEDERAL BANK v. UNITED STATES, 39 Fed. Cl. 753
(1997). In reaching its decision, the Court of Federal Claims rejected a number
of "common issue" defenses that the government has raised in a number of
"supervisory goodwill" cases. In November 1998, the Court of Federal Claims
issued another decision in the CALIFORNIA FEDERAL case prohibiting the plaintiff
in that case from offering evidence as to a lost profits theory of damages. A
two-month trial regarding the plaintiff's other damages theories in that case
was concluded in early March 1999. On April 21, 1999, the Court of Federal
Claims entered judgment for the plaintiff in CALIFORNIA FEDERAL, and awarded the
plaintiff $22,966,523.42 in damages under a cost of replacement capital theory.
CALIFORNIA FEDERAL BANK v. UNITED STATES, 43 Fed Cl. 445 (1999). On May 6, 1999,
the Court denied plaintiff's motion for reconsideration of its damages decision
in the CALIFORNIA FEDERAL case. The CALIFORNIA FEDERAL decision has been
appealed to the United States Court of Appeals for the Federal Circuit.
15
On September 30, 1999, the Court of Federal Claims issued a damages
decision in another "supervisory goodwill" case, LASALLE TALMAN BANK vs. UNITED
STATES, awarding the plaintiff $5,008,700 in damages designed to reimburse the
plaintiff for certain "incidental" expenses caused by the government's breach.
The Court rejected all of the plaintiff's other damages claims. The LASALLE
TALMAN opinion has been appealed to the United States Court of Appeals for the
Federal Circuit. In addition, the Court of Federal Claims has issued favorable
liability decisions to the plaintiffs in several other "supervisory goodwill"
cases, and a number of such cases are currently engaged in or about to commence
trials on damage issues.
The government has indicated that it will have a number of affirmative
defenses against goodwill litigation filed against it. The TCF Minnesota and
Great Lakes Michigan actions involve a variety of different types of
transactions, contracts and contract provisions. There can be no assurance that
the U.S. Supreme Court decision in WINSTAR or the Court of Federal Claims'
recent decisions in GLENDALE, CALIFORNIA FEDERAL, LASALLE TALMAN and other cases
will mean that a similar result would be obtained in the actions filed by TCF
Minnesota and Great Lakes Michigan. There also can be no assurance that the
government will be determined liable in connection with the loss of supervisory
goodwill by either TCF Minnesota or Great Lakes Michigan or, even if a
determination favorable to TCF Minnesota or Great Lakes Michigan is made on the
issue of the government's liability, that a measure of damages will be employed
that will permit any recovery on TCF Minnesota's or Great Lakes Michigan's
claim. Because of the complexity of the issues involved in both the liability
and damages phases of this litigation, and the usual risks associated with
litigation, the Company cannot predict the outcome of TCF Minnesota's or Great
Lakes Michigan's cases, and investors should not anticipate any recovery.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
TCF's common stock trades on the New York Stock Exchange under the symbol
"TCB." The following table sets forth the high and low prices and dividends
declared for TCF's common stock. The stock prices represent the high and low
sale prices for the common stock on the New York Stock Exchange Composite Tape,
as reported by THE WALL STREET JOURNAL.
Dividends
High Low Declared
------------ ------------ ---------
1999:
First Quarter $27 1/4 $21 11/16 $.1625
Second Quarter 30 11/16 25 1/8 .1875
Third Quarter 29 3/8 26 5/8 .1875
Fourth Quarter 30 9/16 23 3/4 .1875
1998:
First Quarter $35 1/8 $29 1/4 $.125
Second Quarter 37 1/4 28 3/8 .1625
Third Quarter 32 7/16 19 7/8 .1625
Fourth Quarter 25 5/8 15 13/16 .1625
As of March 17, 2000, there were approximately 10,800 record holders of
TCF's common stock.
The Board of Directors of TCF has not adopted a formal dividend policy. The
Board of Directors intends to continue its present 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, financial condition and capital
requirements, the cash available to pay such dividends (derived mainly from
dividends and distributions from the TCF Banks), as well as regulatory and
contractual limitations and such other factors as the Board of Directors may
deem relevant. In general, the TCF Banks may not
16
declare or pay a dividend to TCF in excess of 100% of their net profits for
that year combined with their retained net profits for the preceding two
calendar years without prior approval of the OCC. Restrictions on the ability
of the TCF Banks to pay cash dividends or possible diminished earnings of the
indirect subsidiaries of the Holding Company may limit the ability of the
Holding Company to pay dividends in the future to holders of its common
stock. See "REGULATION -- Regulatory Capital Requirements," "REGULATION --
Restrictions on Distributions" and Note 13 of Notes to Consolidated Financial
Statements on pages 50 and 51 of TCF's 1999 Annual Report, incorporated
herein by reference. Federal income tax rules may also limit dividend
payments under certain circumstances. See "TAXATION," and Note 12 of Notes to
Consolidated Financial Statements on pages 49 and 50 of TCF's 1999 Annual
Report, incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The Other Financial Data on pages 63 through 67 of TCF's 1999 Annual
Report, presenting selected financial data, is incorporated herein by reference
and should be read in conjunction with the Consolidated Financial Statements and
related notes appearing on pages 34 through 62 of TCF's 1999 Annual Report,
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Financial Review on pages 17 through 33 of TCF's 1999 Annual Report,
presenting management's discussion and analysis of TCF's financial condition and
results of operations, is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The quantitative and qualitative disclosures about market risk set forth
on pages 30 through 32 of TCF's 1999 Annual Report are incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements, Notes to Consolidated Financial
Statements, Independent Auditors' Report and Other Financial Data set forth on
pages 34 through 67 of TCF's 1999 Annual Report are incorporated herein by
reference. See Index to Consolidated Financial Statements on page 20 of this
report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding directors and executive officers of TCF is set forth
on pages 3 through 13 and pages 15 through 18 of TCF's definitive proxy
statement dated March 30, 2000 and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding compensation of directors and executive officers of
TCF is set forth on page 7, pages 11 through 13 and pages 15 through 18 of TCF's
definitive proxy statement dated March 30, 2000 and is incorporated herein by
reference.
17
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding ownership of TCF's common stock by TCF's directors,
executive officers, and certain other shareholders is set forth on pages 8 and 9
of TCF's definitive proxy statement dated March 30, 2000 and is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and transactions between TCF
and management is set forth on page 6 of TCF's definitive proxy statement dated
March 30, 2000 and is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND EXHIBITS
1. Financial Statements
See Index to Consolidated Financial Statements on page 20 of this
report.
2. Financial Statement Schedules
All schedules to the Consolidated Financial Statements normally
required by the applicable accounting regulations are omitted
since the required information is included in the Consolidated
Financial Statements or the Notes thereto or is not applicable.
3. Exhibits
See Index to Exhibits on page 20 of this report.
(b) REPORTS ON FORM 8-K
None.
18
SIGNATURES
Pursuant to the requirements of Section 13 or Section 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this Report to
be signed on its behalf by the undersigned, thereunto duly authorized.
TCF FINANCIAL CORPORATION
Registrant
By /s/ WILLIAM A. COOPER
--------------------------
William A. Cooper
Chairman of the Board and
Chief Executive Officer
Dated: March 24, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
NAME TITLE DATE
---- ----- ----
/s/ WILLIAM A. COOPER Chairman of the Board, Chief Executive March 24, 2000
- ----------------------- Officer and Director
William A. Cooper
/s/ THOMAS A. CUSICK Vice Chairman of the Board, Chief Operating March 24, 2000
- ------------------------------ Officer and Director
Thomas A. Cusick
/s/ LYNN A. NAGORSKE President and Director March 24, 2000
- ------------------------------
Lynn A. Nagorske
/s/ NEIL W. BROWN Executive Vice President, Chief Financial March 24, 2000
- ------------------------------ Officer and Treasurer (Principal
Neil W. Brown Financial Officer)
/s/ DAVID M. STAUTZ Senior Vice President and Controller March 24, 2000
- ------------------------------ (Principal Accounting Officer)
David M. Stautz
/s/ WILLIAM F. BIEBER Director March 24, 2000
- ------------------------------
William F. Bieber
/s/ RUDY BOSCHWITZ Director March 24, 2000
- ------------------------------
Rudy Boschwitz
/s/ JOHN M. EGGEMEYER III Director March 24, 2000
- ------------------------------
John M. Eggemeyer III
/s/ ROBERT E. EVANS Director March 24, 2000
- ------------------------------
Robert E. Evans
/s/ LUELLA G. GOLDBERG Director March 24, 2000
- ------------------------------
Luella G. Goldberg
/s/ GEORGE G. JOHNSON Director March 24, 2000
- ------------------------------
George G. Johnson
/s/ DANIEL F. MAY Director March 24, 2000
- ------------------------------
Daniel F. May
/s/ THOMAS J. MCGOUGH Director March 24, 2000
- ------------------------------
Thomas J. McGough
/s/ GERALD A. SCHWALBACH Director March 24, 2000
- ------------------------------
Gerald A. Schwalbach
/s/ RALPH STRANGIS Director March 24, 2000
- ------------------------------
Ralph Strangis
19
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
The following consolidated financial statements of TCF and its subsidiaries,
included in TCF's 1999 Annual Report, are incorporated herein by reference in
this report:
PAGE
IN 1999
DESCRIPTION ANNUAL REPORT
----------- -------------
Independent Auditors' Report 62
Consolidated Statements of Financial Condition at
December 31, 1999 and 1998 34
Consolidated Statements of Operations for each of
the years in the three-year period ended
December 31, 1999 35
Consolidated Statements of Stockholders' Equity
for each of the years in the three-year period
ended December 31, 1999 36
Consolidated Statements of Cash Flows for each of
the years in the three-year period ended
December 31, 1999 38
Notes to Consolidated Financial Statements 39
Other Financial Data 63
INDEX TO EXHIBITS
EXHIBIT PAGE
NO. DESCRIPTION NO.
--- ----------- ---
3(a) Restated Certificate of Incorporation of TCF Financial Corporation, as amended and restated
through April 29, 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3(b) Restated Bylaws of TCF Financial Corporation, as amended and restated through October 25,
1999. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4(a) Rights Agreement, dated as of May 12, 1999, between TCF Financial Corporation and BankBoston,
N.A. [incorporated by reference to Exhibit 1 to TCF Financial Corporation's Registration
Statement on Form 8-A, No. 001-10253 (filed May 24, 1999)]
20
EXHIBIT PAGE
NO. DESCRIPTION NO.
--- ----------- ---
4(b) Indenture dated July 1, 1996 relating to 9.50% Senior Notes due 2003 between Winthrop
Resources Corporation ("Winthrop") and Norwest Bank Minnesota, National Association, as
Trustee [incorporated by reference to Exhibit 4.5 to Winthrop's Registration Statement on
Form S-2, File No. 333-04539 (filed May 24, 1996)]; as amended by First Supplemental
Indenture dated as of June 20, 1997 by and among Winthrop, TCF Financial Corporation and
Norwest Bank Minnesota, National Association, as Trustee [incorporated by reference to
Exhibit 4(d) to TCF Financial Corporation's Amendment No. 1 to Registration Statement on
Form S-4, File No. 333-25905 (filed May 21, 1997)]
4(c) Copies of instruments with respect to long-term debt will be furnished to the Securities
and Exchange Commission upon request.
10(a) Stock Option and Incentive Plan of TCF Financial Corporation, as amended [incorporated
by reference to Exhibit 10.1 to TCF Financial Corporation's Registration Statement on
Form S-4, No. 33-14203 (filed May 12, 1987)]; Second Amendment, Third Amendment and
Fourth Amendment to the Plan [incorporated by reference to Exhibit 10(a) to TCF Financial
Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1987,
No. 0-16431]; Fifth Amendment to the Plan [incorporated by reference to Exhibit 10(a) to
TCF Financial Corporation's Annual Report on Form 10-K for the fiscal year ended
December 31, 1989, No. 001-10253]; amendment dated January 21, 1991 [incorporated by
reference to Exhibit 10(a) to TCF Financial Corporation's Annual Report on Form 10-K
for the fiscal year ended December 31, 1990, No. 001-10253]; and as further amended by
amendment dated January 28, 1992 and amendment dated March 23, 1992 (effective April 15,
1992) [incorporated by reference to Exhibit 10(a) to TCF Financial Corporation's Annual
Report on Form 10-K for the fiscal year ended December 31, 1991, No. 001-10253]
10(b) TCF Financial 1995 Incentive Stock Program, as amended October 1, 1995 [incorporated by
reference to Exhibit 10(b) to TCF Financial Corporation's Annual Report on Form 10-K for
the fiscal year ended December 31, 1995, No. 001-10253]; as amended October 22, 1996
[incorporated by reference to Exhibit 10(a) to TCF Financial Corporation's Annual Report
on Form 10-K for the fiscal year ended December 31, 1996, No. 001-10253]; and as further
amended on May 11, 1999 [incorporated by reference to Exhibit 10(b) to TCF Financial
Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999, No.
001-10253]
10(c) Amended and Restated TCF Financial Corporation Executive Deferred Compensation Plan as
amended and restated effective as of January 1, 2000. . . . . . . . . . . . . . . . . . . .
10(d) Amended and Restated Trust Agreement for TCF Financial Corporation Executive Deferred
Compensation Plan effective September 1, 1998; amendment adopted effective November 1,
1998 [incorporated by reference to Exhibit 10(d) to TCF Financial Corporation's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1998, No. 001-10253]
10(e)* Employment Agreement of William A. Cooper, dated July 1, 1996 [incorporated by reference
to Exhibit 10(a) to TCF Financial Corporation's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1996, No. 001-10253]; as amended March 1, 1997 [incorporated by
reference to Exhibit 10(e) to TCF Financial Corporation's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996, No. 001-10253]
10(f)* Change in Control Agreement of William A. Cooper, dated July 1, 1996 [incorporated by
reference to Exhibit 10(b) to TCF Financial Corporation's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1996, No. 001-10253]
21
EXHIBIT PAGE
NO. DESCRIPTION NO.
--- ----------- ---
10(g)* Severance Agreement of Thomas A. Cusick, dated August 22, 1988 [incorporated by reference
to Exhibit 19(c) to TCF Financial Corporation's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1988, No. 0-16431]; amendment thereto dated December 4, 1990
[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, 1990, No. 001-10253]; and amendment
dated October 24, 1995 [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, 1995,
No. 001-10253]
10(h)* Severance Agreement of William E. Dove, dated August 22, 1988 [incorporated by reference
to Exhibit 19(d) to TCF Financial Corporation's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1988, No. 0-16431]; amendment thereto dated December 4, 1990
[incorporated by reference to Exhibit 10(g) to TCF Financial Corporation's Annual Report
on Form 10-K for the fiscal year ended December 31, 1990, No. 001-10253]; and amendment
thereto dated October 24, 1995 [incorporated by reference to Exhibit 10(g) to TCF Financial
Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, No.
001-10253]
10(i)* Severance Agreement of Lynn A. Nagorske, dated August 22, 1988 [incorporated by reference to
Exhibit 19(f) to TCF Financial Corporation's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1988, No. 0-16431]; amendment thereto dated December 4, 1990
[incorporated by reference to Exhibit 10(i) to TCF Financial Corporation's Annual Report on
Form 10-K for the fiscal year ended December 31, 1990, No. 001-10253]; and amendment thereto
dated October 24, 1995 [incorporated by reference to Exhibit 10(i) to TCF Financial
Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, No.
001-10253]
10(j)* Severance Agreement of Gregory J. Pulles, dated August 23, 1988 [incorporated by reference to
Exhibit 19(g) to TCF Financial Corporation's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1988, No. 0-16431]; amendment thereto dated December 4, 1990 [incorporated by
reference to Exhibit 10(j) to TCF Financial Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1990, No. 001-10253]; and amendment thereto dated October 24, 1995
[incorporated by reference to Exhibit 10(j) to TCF Financial Corporation's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995, No. 001-10253]
10(k)* Severance Agreement of Barry N. Winslow, dated December 30, 1988 and amendment thereto dated
December 4, 1990 [incorporated by reference to Exhibit 10(n) to TCF Financial Corporation's
Annual Report on Form 10-K for the fiscal year ended December 31, 1990, No. 001-10253]; and
amendment thereto dated October 24, 1995 [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, 1995,
No. 001-10253]
10(l) Supplemental Employee Retirement Plan, as amended and restated effective July 21, 1997
[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, 1997, No. 001-10253]; as amended effective
September 30, 1998 [incorporated by reference to Exhibit 10(m) to TCF Financial Corporation's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1998, No. 001-10253]; and
as further amended on May 11, 1999 [incorporated by reference to Exhibit 10(m) to TCF Financial
Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999,
No. 001-10253]
22
EXHIBIT PAGE
NO. DESCRIPTION NO.
--- ----------- ---
10(m) Trust Agreement for TCF Financial Corporation Supplemental Employee Retirement Plan, dated
August 21, 1991 [incorporated by reference to Exhibit 10.16 to TCF Financial Corporation's
Registration Statement on Form S-2, filed November 15, 1991, No. 33-43988]; as amended on
October 20, 1997 [incorporated by reference to Exhibit 10(n) to TCF Financial Corporation's
Annual Report on Form 10-K for the fiscal year ended December 31, 1997, No. 001-10253]
10(n) TCF Financial Corporation Senior Officer Deferred Compensation Plan as amended and restated
effective as of January 1, 2000. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10(o) Amended and Restated Trust Agreement for TCF Financial Corporation Senior Officer Deferred
Compensation Plan effective September 1, 1998; amendment adopted effective November 1, 1998
[incorporated by reference to Exhibit 10(p) to TCF Financial Corporation's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1998, No. 001-10253]
10(p) Directors Stock Program [incorporated by reference to Program filed with registrant's
definitive proxy statement dated March 22, 1996, No. 001-10253]; amendment adopted June 20,
1998 [incorporated by reference to Exhibit 10(q) to TCF Financial Corporation's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1998, No. 001-10253]
10(q) Management Incentive Plan-Executive [incorporated by reference to Plan filed with registrant's
definitive proxy statement dated March 16, 1994, No. 001-10253]; and 1995 Plan Acknowledgment
[incorporated by reference to Exhibit 10(s) to TCF Financial Corporation's Annual Report
on Form 10-K for the fiscal year ended December 31, 1995, No. 001-10253]; 1996 Management
Incentive Plan-Executive [incorporated by reference to Exhibit 10(t) to TCF Financial
Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, No.
001-10253]; 1997 Management Incentive Plan-Executive [incorporated by reference to Exhibit
10(t) to TCF Financial Corporation's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, No. 001-10253]; and 1998 Management Incentive Plan-Executive [incorporated
by reference to Exhibit 10(s) to TCF Financial Corporation's Annual Report on Form 10-K for
the fiscal year ended December 31, 1997, No. 001-10253]; and 1999 Management Incentive
Plan-Executive [incorporated by reference to Exhibit 10(r) to TCF Financial Corporation's
Annual Report on Form 10-K for the fiscal year ended December 31, 1998, No. 001-10253]
10(r) 1996 Performance-Based Incentive Policy [incorporated by reference to Policy filed with
registrant's definitive proxy statement dated March 22, 1996, No. 001-10253]; Incentive
Compensation 1997 Plan [incorporated by reference to Plan filed with registrant's definitive
proxy statement dated March 17, 1997, No. 001-10253]; and 1999 Performance-Based Incentive
Policy (approved by shareholders at the Annual Meeting on May 11, 1999) [incorporated by
reference to Exhibit 10(s) to TCF Financial Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998, No. 001-10253]
10(s) Supplemental Pension Agreement with Robert E. Evans, dated July 9, 1991 [incorporated by
reference to Exhibit 10.22 to TCF Financial Corporation's Registration Statement on Form S-4,
No. 33-57290 (filed January 22, 1993)]
10(t)* Employment Agreement of Robert J. Delonis, dated February 9, 1995 [incorporated by reference
to Exhibit 10(v) to TCF Financial Corporation's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994, No. 001-10253];, as amended December 18, 1995 [incorporated by
reference to Exhibit 10(w) to TCF Financial Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995, No. 001-10253]; as amended January 23, 1998 [incorporated
by reference to Exhibit 10(u) to TCF Financial Corporation's Annual Report on Form 10-K for
the fiscal year ended December 31, 1997, No. 001-10253]
23
EXHIBIT PAGE
NO. DESCRIPTION NO.
--- ----------- ---
10(u) TCF Directors Deferred Compensation Plan [incorporated by reference to Plan filed with registrant's
definitive proxy statement dated March 15, 1995, No. 001-10253]; as amended October 22, 1996
[incorporated by reference to Exhibit 10(x) to TCF Financial Corporation's Annual Report on Form 10-K
for the year ended December 31, 1996, No. 001-10253]; amendment adopted effective September 30, 1998
[incorporated by reference to Exhibit 10(v) to TCF Financial Corporation's Quarterly Report on Form
10-Q for the quarter ended September 30, 1998, No. 001-10253]; and as further amended on May 11, 1999
[incorporated by reference to Exhibit 10(v) to TCF Financial Corporation's Quarterly Report on Form
10-Q for the quarter ended September 30, 1999, No. 001-10253]
10(v) TCF Directors Retirement Plan dated October 24, 1995 [incorporated by reference to Exhibit 10(y) to
TCF Financial Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1995,
No. 001-10253]
10(w)* Employment Agreement of David Mackiewich dated September 5, 1997 [incorporated by reference to Exhibit
10(y) to TCF Financial Corporation's Annual Report on Form 10-K for the fiscal year ended December 31,
1997, No. 001-10253]; as amended on August 18, 1998 [incorporated by reference to Exhibit 10(y) to TCF
Financial Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1998,
No. 001-10253]; and as amended effective March 31, 1999. . . . . . . . . . . . . . . . . . . . . . . .
11 Computation of earnings per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13 TCF Financial Corporation 1999 Annual Report (portions incorporated by reference) . . . . . . . . . .
21 Subsidiaries of TCF Financial Corporation (as of March 15, 2000) . . . . . . . . . . . . . . . . . . .
23 Consent of KPMG LLP dated March 24, 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . .
27 Financial Data Schedules . . . . . . . . . . . . . . . . . . . . . . . . . (filed electronically)
* Executive Contract
24