<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended
June 30, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
__________________
Commission File
No. 0-16431
__________________
TCF FINANCIAL CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 41-1591444
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
801 Marquette Avenue, Suite 302, Minneapolis, Minnesota 55402
-------------------------------------------------------------
(Address and Zip Code of principal executive offices)
Registrant's telephone number, including area code: (612) 661-6500
----------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
--------- --------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding at
Class July 31, 1996
- ---------------------------- -------------
Common Stock, $.01 par value 34,962,495 shares
1
<PAGE>
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
INDEX
Part I. Financial Information PAGES
-----
Item 1. Financial Statements
Consolidated Statements of Financial Condition
at June 30, 1996 and December 31, 1995. . . . . . . . . 3
Consolidated Statements of Operations for the
Three and Six Months Ended June 30, 1996 and 1995 . . . 4
Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1996 and 1995 . . . . . . . . 5
Consolidated Statements of Stockholders' Equity for
the Year Ended December 31, 1995 and for the
Six Months Ended June 30, 1996. . . . . . . . . . . . . 6
Notes to Consolidated Financial Statements. . . . . . . . 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations for the Three
and Six Months Ended June 30, 1996 and 1995 . . . . 8-22
Supplementary Information . . . . . . . . . . . . . . . . 23-24
Part II. Other Information
Items 1-6 . . . . . . . . . . . . . . . . . . . . . . . . . . . 25-26
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Index to Exhibits. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Financial Condition
(Dollars in thousands, except per-share data)
(Unaudited)
<TABLE>
<CAPTION>
At At
June 30, December 31,
1996 1995
---------- -----------
<S> <C> <C>
ASSETS
Cash and due from banks $ 219,772 $ 233,619
Interest-bearing deposits with banks 97,737 533
Federal funds sold 5,000 -
U.S. Government and other marketable securities
held to maturity (fair value of $3,821 and $3,716) 3,821 3,716
Federal Home Loan Bank stock, at cost 50,810 60,096
Securities available for sale (amortized cost of $1,058,433
and $1,182,240) 1,049,183 1,201,490
Loans held for sale 233,018 242,413
Loans:
Residential real estate 2,428,471 2,618,725
Commercial real estate 923,486 970,763
Commercial business 157,138 167,663
Consumer 1,703,015 1,593,439
Unearned discounts and deferred fees (88,004) (73,489)
---------- ----------
Total loans 5,124,106 5,277,101
Allowance for loan losses (69,243) (65,695)
---------- ----------
Net loans 5,054,863 5,211,406
Premises and equipment 120,569 120,763
Real estate:
Total real estate 16,488 24,466
Allowance for real estate losses (1,149) (1,526)
---------- ----------
Net real estate 15,339 22,940
Accrued interest receivable 47,822 49,120
Due from brokers - 6,767
Goodwill 10,951 11,503
Deposit base intangibles 11,881 12,918
Mortgage servicing rights 16,941 16,286
Other assets 63,164 46,341
---------- ----------
$7,000,871 $7,239,911
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Checking $1,125,695 $1,103,272
Passbook and statement 849,846 841,115
Money market 634,236 616,667
Certificates 2,442,780 2,630,498
---------- ----------
Total deposits 5,052,557 5,191,552
---------- ----------
Securities sold under repurchase agreements 469,643 438,426
Federal Home Loan Bank advances 792,244 893,587
Subordinated debt 13,422 13,520
Collateralized obligations 41,028 41,391
Other borrowings 42,808 54,520
---------- ----------
Total borrowings 1,359,145 1,441,444
Accrued interest payable 16,076 14,905
Accrued expenses and other liabilities 49,305 64,335
---------- ----------
Total liabilities 6,477,083 6,712,236
---------- ----------
Stockholders' equity:
Preferred stock, par value $.01 per share, 30,000,000
shares authorized; none issued and outstanding - -
Common stock, par value $.01 per share, 70,000,000 shares
authorized; 35,924,268 and 35,604,531 shares issued 359 356
Additional paid-in capital 247,377 243,122
Unamortized deferred compensation (9,500) (11,195)
Retained earnings, subject to certain restrictions 324,554 283,821
Loan to Executive Deferred Compensation Plan (100) (131)
Unrealized gain (loss) on securities available for
sale, net (6,098) 11,702
Treasury stock, at cost, 963,818 shares in 1996 (32,804) -
---------- ----------
Total stockholders' equity 523,788 527,675
---------- ----------
$7,000,871 $7,239,911
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
Annual financial statements are subject to audit.
3
<PAGE>
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per-share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest income:
Interest on loans $121,635 $121,791 $244,485 $237,258
Interest on loans held for sale 4,536 4,607 9,110 8,573
Interest on securities available for sale 19,171 1,290 39,522 2,902
Interest on investments 1,052 1,372 2,170 3,272
Interest on mortgage-backed securities
held to maturity - 22,581 - 48,427
-------- -------- -------- --------
Total interest income 146,394 151,641 295,287 300,432
-------- -------- -------- --------
Interest expense:
Interest on deposits 42,974 49,081 87,670 97,386
Interest on borrowings 17,544 23,268 37,287 48,106
-------- -------- -------- --------
Total interest expense 60,518 72,349 124,957 145,492
-------- -------- -------- --------
Net interest income 85,876 79,292 170,330 154,940
Provision for credit losses 6,823 2,924 9,625 9,612
-------- -------- -------- --------
Net interest income after provision for
credit losses 79,053 76,368 160,705 145,328
-------- -------- -------- --------
Non-interest income:
Fee and service charge revenues 25,011 22,542 47,611 43,295
Data processing revenue 2,634 2,640 5,146 5,064
Commissions on sales of annuities 2,366 2,562 4,535 4,928
Title insurance revenues 3,604 2,867 7,191 5,140
Gain (loss) on sale of loans held for sale 594 (204) 2,077 372
Loss on sale of mortgage-backed securities - - - (21,037)
Gain (loss) on sale of securities available
for sale - 60 85 (190)
Gain on sale of loan servicing - 1,006 - 1,529
Gain on sale of branches 480 1,061 1,725 1,103
Other 2,943 1,574 5,091 2,782
-------- -------- -------- --------
Total non-interest income 37,632 34,108 73,461 42,986
-------- -------- -------- --------
Non-interest expense:
Compensation and employee benefits 35,992 34,233 72,426 69,886
Occupancy and equipment 12,476 12,517 25,313 25,012
Advertising and promotions 4,621 4,275 9,353 8,727
Federal deposit insurance premiums and
assessments 3,202 3,451 6,363 6,923
Amortization of goodwill and other
intangibles 794 791 1,589 1,581
Provision for real estate losses (151) 378 297 541
Merger-related expenses - - - 21,733
Cancellation cost on early termination
of interest-rate exchange contracts - - - 4,423
Other 16,379 15,989 33,778 29,968
-------- -------- -------- --------
Total non-interest expense 73,313 71,634 149,119 168,794
-------- -------- -------- --------
Income before income tax expense
and extraordinary item 43,372 38,842 85,047 19,520
Income tax expense 16,721 15,448 32,109 7,765
-------- -------- -------- --------
Income before extraordinary item 26,651 23,394 52,938 11,755
Extraordinary item:
Penalties on early repayment of FHLB
advances, net of tax benefit of $578 - - - (963)
-------- -------- -------- --------
Net income 26,651 23,394 52,938 10,792
Dividends on preferred stock - - - 678
-------- -------- -------- --------
Net income available to common
shareholders $ 26,651 $ 23,394 $ 52,938 $ 10,114
-------- -------- -------- --------
-------- -------- -------- --------
Per common share:
Income before extraordinary item $ .75 $ .66 $ 1.48 $ .32
Extraordinary item - - - (.03)
-------- -------- -------- --------
Net income $ .75 $ .66 $ 1.48 $ .29
-------- -------- -------- --------
-------- -------- -------- --------
Dividends declared $ .1875 $ .15625 $ .34375 $ .28125
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
Annual financial statements are subject to audit.
4
<PAGE>
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------
1996 1995
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 52,938 $ 10,792
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization 9,467 8,868
Amortization of goodwill and other intangibles 1,589 1,581
Amortization of fees, discounts and premiums (211) (1,320)
Proceeds from sales of loans held for sale 458,611 178,998
Principal collected on loans held for sale 6,991 5,455
Originations and purchases of loans held for sale (430,597) (243,748)
Net increase in other assets and liabilities,
and accrued interest (10,587) (16,437)
Provisions for credit and real estate losses 9,922 10,153
(Gain) loss on sale of securities available for
sale (85) 190
Loss on sale of mortgage-backed securities - 21,037
Gain on sale of branches (1,725) (1,103)
Gain on sale of loan servicing - (1,529)
Penalties on early repayment of borrowings - 1,541
Cancellation cost on early termination of
interest-rate exchange contracts - 4,423
Write-off of equipment - 13,435
Other, net (2,376) 620
---------- ----------
Total adjustments 40,999 (17,836)
---------- ----------
Net cash provided (used) by operating
activities 93,937 (7,044)
---------- ----------
Cash flows from investing activities:
Proceeds from sales of mortgage-backed securities - 211,117
Principal collected on mortgage-backed securities - 78,147
Principal collected on loans 963,372 562,040
Loan originations (853,836) (789,126)
Net (increase) decrease in interest-bearing deposits
with banks (97,204) 191,471
Proceeds from sales of securities available for sale 16,630 90,218
Proceeds from maturities of and principal collected on
securities available for sale 106,449 74,794
Proceeds from redemption of FHLB stock 11,054 24,049
Net (increase) decrease in short-term federal funds
sold (5,000) 6,900
Proceeds from sales of real estate 18,617 8,531
Payments for acquisition and improvement of real estate (1,421) (1,483)
Proceeds from sales of loan servicing - 1,724
Purchases of premises and equipment (7,825) (10,160)
Sales of deposits, net of cash paid (31,679) (45,743)
Other, net 6,547 (746)
---------- ----------
Net cash provided by investing activities 125,704 401,733
---------- ----------
Cash flows from financing activities:
Net decrease in deposits (106,050) (102,130)
Proceeds from securities sold under repurchase
agreements and federal funds purchased 6,653,432 5,030,457
Payments on securities sold under repurchase
agreements and federal funds purchased (6,636,715) (4,774,017)
Proceeds from FHLB advances 627,117 1,073,795
Payments on FHLB advances (728,460) (1,624,218)
Payments for termination of interest-rate exchange
contracts - (4,581)
Proceeds from other borrowings 219,794 -
Payments on collateralized obligations and other
borrowings (217,461) (1,002)
Proceeds from exercise of stock warrants and stock
options 1,395 14,473
Repurchases of common stock (32,840) -
Other, net (13,700) (630)
---------- ----------
Net cash used by financing activities (233,488) (387,853)
---------- ----------
Net increase (decrease) in cash and due from banks (13,847) 6,836
Cash and due from banks at beginning of period 233,619 224,266
---------- ----------
Cash and due from banks at end of period $ 219,772 $ 231,102
---------- ----------
---------- ----------
Supplemental disclosures of cash flow information:
Cash paid for:
Interest on deposits and borrowings $ 123,473 $ 149,905
---------- ----------
---------- ----------
Income taxes $ 52,033 $ 2,781
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
Annual financial statements are subject to audit.
5
<PAGE>
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Loan to Unrealized
Executive Gain
Number Unamor- Deferred (Loss) on
of tized Compen- Securities
Common Pre- Additional Deferred sation Available
Shares ferred Common Paid-in Compen- Retained Plan and for Sale,
Issued Stock Stock Capital sation Earnings ESOP debt Net
---------- ------ ------- ---------- --------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 34,172,346 $ 27 $342 $251,174 $ (6,986) $244,779 $(1,695) $ (1,160)
Net income - - - - - 60,688 - -
Dividends on preferred stock - - - - - (678) - -
Dividends on common stock - - - - - (20,968) - -
Purchase of 32,400 shares to
be held in treasury - - - - - - - -
Issuance of 308,400 shares
of restricted stock, of
which 304,400 shares were
from treasury 4,000 - - 5,166 (10,628) - - -
Grant of 45,000 shares of
restricted stock to
outside directors - - - 369 (1,431) - - -
Issuance of 373,760 shares
from treasury to effect
merger with Great Lakes (373,760) - (4) (6,370) - - - -
Issuance of shares to
Dividend Reinvestment Plan 600 - - 11 - - - -
Redemption of preferred stock - (27) - (27,073) - - - -
Repurchase and cancellation
of shares (2,676) - - (52) - - - -
Cancellation of shares of
restricted stock (9,089) - - (175) 175 - - -
Amortization of deferred
compensation - - - - 7,675 - - -
Exercise of stock options 392,012 - 4 4,700 - - - -
Exercise of stock warrants 1,265,280 - 12 12,718 - - - -
Issuance of common stock on
conversion of convertible
debentures 155,818 - 2 2,654 - - - -
Payments on Loan to Executive
Deferred Compensation Plan - - - - - - 64 -
Payments on Employee Stock
Ownership Plan debt - - - - - - 1,500 -
Change in unrealized gain
(loss) on securities
available for sale, net - - - - - - - 12,862
---------- ------ ----- -------- --------- --------- ------ -------
Balance, December 31, 1995 35,604,531 - 356 243,122 (11,195) 283,821 (131) 11,702
Net income - - - - - 52,938 - -
Dividends on common stock - - - - - (12,205) - -
Purchase of 964,868 shares to
be held in treasury - - - - - - - -
Issuance of shares of
restricted stock 33,400 - - 1,305 (1,292) - - -
Grant of 1,050 shares of
restricted stock to
outside directors
from treasury - - - 15 (51) - - -
Cancellation of shares of
restricted stock (21,200) - - (549) 530 - - -
Amortization of deferred
compensation - - - - 2,508 - - -
Exercise of stock options 301,788 - 3 3,386 - - - -
Issuance of common stock on
conversion of convertible
debentures 5,749 - - 98 - - - -
Payments on Loan to Executive
Deferred Compensation Plan - - - - - - 31 -
Change in unrealized gain
(loss) on securities
available for sale, net - - - - - - - (17,800)
---------- ------ ----- -------- --------- --------- ------ --------
Balance, June 30, 1996 35,924,268 $ - $359 $247,377 $ (9,500) $ 324,554 $ (100) $ (6,098)
---------- ------ ----- -------- --------- --------- ------ --------
---------- ------ ----- -------- --------- --------- ------ --------
<CAPTION>
Treasury
Stock Total
--------- --------
<S> <C> <C>
Balance, December 31, 1994 $(11,012) $475,469
Net income - 60,688
Dividends on preferred stock - (678)
Dividends on common stock - (20,968)
Purchase of 32,400 shares to
be held in treasury (824) (824)
Issuance of 308,400 shares
of restricted stock, of
which 304,400 shares were
from treasury 5,462 -
Grant of 45,000 shares of
restricted stock to
outside directors - (1,062)
Issuance of 373,760 shares
from treasury to effect
merger with Great Lakes 6,374 -
Issuance of shares to
Dividend Reinvestment Plan - 11
Redemption of preferred stock - (27,100)
Repurchase and cancellation
of shares - (52)
Cancellation of shares of
restricted stock - -
Amortization of deferred
compensation - 7,675
Exercise of stock options - 4,704
Exercise of stock warrants - 12,730
Issuance of common stock on
conversion of convertible
debentures - 2,656
Payments on Loan to Executive
Deferred Compensation Plan - 64
Payments on Employee Stock
Ownership Plan debt - 1,500
Change in unrealized gain
(loss) on securities
available for sale, net - 12,862
-------- --------
Balance, December 31, 1995 - 527,675
Net income - 52,938
Dividends on common stock - (12,205)
Purchase of 964,868 shares to
be held in treasury (32,840) (32,840)
Issuance of shares of
restricted stock - 13
Grant of 1,050 shares of
restricted stock to
outside directors
from treasury 36 -
Cancellation of shares of
restricted stock - (19)
Amortization of deferred
compensation - 2,508
Exercise of stock options - 3,389
Issuance of common stock on
conversion of convertible
debentures - 98
Payments on Loan to Executive
Deferred Compensation Plan - 31
Change in unrealized gain
(loss) on securities
available for sale, net - (17,800)
-------- --------
Balance, June 30, 1996 $(32,804) $523,788
-------- --------
-------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
Annual financial statements are subject to audit.
6
<PAGE>
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments
(consisting of normal recurring accruals) considered necessary for a
fair presentation. The results of operations for interim periods
are not necessarily indicative of the results to be expected for the
entire year.
The accompanying unaudited consolidated financial statements have
been prepared in accordance with the instructions to Form 10-Q and
therefore do not include all information and notes necessary for
complete financial statements in conformity with generally accepted
accounting principles. The material under the heading "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" is written with the presumption that the users of the
interim financial statements have read or have access to the most
recent Annual Report on Form 10-K of TCF Financial Corporation
("TCF" or the "Company"), which contains the latest audited
financial statements and notes thereto, together with Management's
Discussion and Analysis of Financial Condition and Results of
Operations as of December 31, 1995 and for the year then ended. All
significant intercompany accounts and transactions have been
eliminated in consolidation. Certain reclassifications have been
made to prior period financial statements to conform to the current
period presentation. For consolidated statements of cash flows
purposes, cash and cash equivalents include cash and due from banks.
(2) EARNINGS PER COMMON SHARE
The weighted average number of common and common equivalent shares
outstanding used to compute earnings per common share were
35,452,286 and 35,693,048 for the three months ended June 30, 1996
and 1995, respectively, and 35,719,284 and 35,423,122 for the six
months ended June 30, 1996 and 1995, respectively.
(3) PENDING ACQUISITION
On June 25, 1996, TCF signed a stock purchase agreement to acquire
BOC Financial Corporation, an Illinois-based holding company with
$192 million in assets and $173 million in deposits, for cash. BOC
Financial Corporation is the parent company of the Bank of Chicago
which operates three branch offices in the Chicago area. The
acquisition, which will be accounted for as a purchase, is
contingent upon regulatory approvals and is expected to close prior
to or in the fourth quarter of 1996.
7
<PAGE>
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
Item 2. - Management's Discussion and Analysis of Financial
Condition and Results of Operations
RESULTS OF OPERATIONS
TCF's results of operations for the second quarter and first six months of
1996 show continued improvement in the Company's core operating earnings.
TCF reported record net income of $26.7 million, or 75 cents per common
share, for the second quarter of 1996, up 13.9% from $23.4 million, or 66
cents per common share, for the same 1995 period. For the first six months
of 1996, TCF reported net income of $52.9 million, or $1.48 per common share,
compared with $10.8 million, or 29 cents per common share, for the same 1995
period.
TCF's 1995 first quarter results included certain merger-related charges
incurred in connection with TCF's February 8, 1995 acquisition of Great Lakes
Bancorp, A Federal Savings Bank ("Great Lakes"). On an after-tax basis,
these merger-related charges totaled $32.8 million, or 92 cents per common
share for the first six months of 1995. Net income for the first six months
of 1995 was $43.6 million, or $1.21 per common share, excluding the $32.8
million in after-tax merger-related charges.
Return on average assets was 1.54% and 1.51% for the second quarter and first
six months of 1996, respectively, compared with 1.27% and 1.18% before
merger-related charges for the same 1995 periods. On the same basis, return
on average realized common equity was 20.04% and 20.07% for the second
quarter and first six months of 1996, respectively, compared with 20.41% and
19.04% for the same 1995 periods.
There are uncertainties that may make TCF's historical performance an
unreliable indicator of its future performance. Forward-looking information,
including projections of future performance, is subject to numerous possible
adverse developments. These include, but are not limited to, the possibility
of adverse economic developments which may increase default and delinquency
risks in TCF's loan portfolios, and in particular its growing consumer
finance portfolios; shifts in interest rates which may result in shrinking
interest rate margins; deposit outflows; interest rates on competing
investments; demand for financial services and loan products; changes in
accounting policies or guidelines, monetary and fiscal policies of the
Federal government; changes in the quality or composition of TCF's loan and
investment portfolios; or other significant uncertainties. In addition,
federal legislation has been proposed that would significantly affect the
banking industry. See "Financial Condition - Recent Legislative and
Regulatory Developments."
NET INTEREST INCOME
Net interest income for the second quarter of 1996 was a record $85.9
million, up 8.3% from $79.3 million for the second quarter of 1995. The net
interest margin for the second quarter of 1996 was a record 5.27%, up from
4.58% for the same 1995 period. Net interest income for the first six months
of 1996 totaled $170.3 million, up 9.9% from $154.9 million for the same 1995
period. The net interest margin for the first six months of 1996 was 5.16%,
up from 4.45% for the same period in 1995. TCF's net interest income and net
interest margin increased primarily due to increased yields and growth of
consumer loans, the November 30, 1995 redemption of $34.5 million of 10%
subordinated capital notes, the favorable impact of the 1995 Great Lakes
merger-related restructuring activities, and increased capital. Changes in
net interest income are dependent upon the movement of interest rates, the
volume and the mix of interest-earning assets and interest-bearing
liabilities, and the level of non-performing assets. See "Asset/Liability
Management - Interest-Rate Risk" and "Financial Condition - Deposits."
8
<PAGE>
The following rate/volume analysis details the increases (decreases) in net
interest income resulting from interest rate and volume changes during the
second quarter and first six months of 1996 as compared to the same periods
last year. Changes attributable to the combined impact of volume and rate
have been allocated proportionately to the change due to volume and the
change due to rate.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1996 June 30, 1996
Versus Same Period in 1995 Versus Same Period in 1995
----------------------------- ------------------------------
Increase (Decrease) Due to Increase (Decrease) Due to
----------------------------- ------------------------------
(In thousands) Volume Rate Total Volume Rate Total
------ ---- ----- ------ ---- -----
<S> <C> <C> <C> <C> <C> <C>
Securities available for sale $ 17,948 $ (67) $ 17,881 $ 36,705 $ (85) $ 36,620
-------- ------- -------- -------- ------- --------
Loans held for sale 247 (318) (71) 1,341 (804) 537
-------- ------- -------- -------- ------- --------
Mortgage-backed securities
held to maturity (22,581) - (22,581) (48,427) - (48,427)
-------- ------- -------- -------- ------- --------
Loans:
Residential real estate (5,273) 469 (4,804) (7,981) 2,485 (5,496)
Commercial real estate (1,236) 315 (921) (1,906) 435 (1,471)
Commercial business (733) (407) (1,140) (1,134) (769) (1,903)
Consumer 6,431 278 6,709 13,672 2,425 16,097
-------- ------- -------- -------- ------- --------
Total loans (811) 655 (156) 2,651 4,576 7,227
-------- ------- -------- -------- ------- --------
Investments:
Interest-bearing deposits
with banks (6) (13) (19) (228) (33) (261)
Federal funds sold (159) (1) (160) (240) (13) (253)
U.S. Government and other
marketable securities
held to maturity 3 (4) (1) 6 (9) (3)
FHLB stock (122) (18) (140) (567) (18) (585)
-------- ------- -------- -------- ------- --------
Total investments (284) (36) (320) (1,029) (73) (1,102)
-------- ------- -------- -------- ------- --------
Total interest income (5,481) 234 (5,247) (8,759) 3,614 (5,145)
-------- ------- -------- -------- ------- --------
Deposits:
Checking (54) (221) (275) (158) (606) (764)
Passbook and statement (298) (861) (1,159) (723) (1,594) (2,317)
Money market (308) (812) (1,120) (837) (1,523) (2,360)
Certificates (2,567) (986) (3,553) (4,805) 530 (4,275)
-------- ------- -------- -------- ------- --------
Total deposits (3,227) (2,880) (6,107) (6,523) (3,193) (9,716)
-------- ------- -------- -------- ------- --------
Borrowings:
Securities sold under
repurchase agreements (1,105) (776) (1,881) 305 (1,620) (1,315)
FHLB advances (2,136) (939) (3,075) (5,777) (2,273) (8,050)
Subordinated debt (1,263) 413 (850) (2,404) 642 (1,762)
Collateralized obligations (12) (92) (104) (23) (170) (193)
Other borrowings 231 (45) 186 526 (25) 501
-------- ------- -------- -------- ------- --------
Total borrowings (4,285) (1,439) (5,724) (7,373) (3,446) (10,819)
-------- ------- -------- -------- ------- --------
Total interest expense (7,512) (4,319) (11,831) (13,896) (6,639) (20,535)
-------- ------- -------- -------- ------- --------
Net interest income $ 2,031 $ 4,553 $ 6,584 $ 5,137 $10,253 $ 15,390
-------- ------- -------- -------- ------- --------
-------- ------- -------- -------- ------- --------
</TABLE>
PROVISIONS FOR CREDIT LOSSES
TCF provided $6.8 million for credit losses in the second quarter of 1996,
compared with $2.9 million for the same prior-year period. In the first six
months of 1996, TCF provided $9.6 million for credit losses, relatively
unchanged from the first six months of 1995. The provision for credit losses
in the first quarter of 1995 includes $5 million in merger-related
provisions, which were established to conform Great Lakes' credit loss
reserve practices and methods to those of TCF and to allow for the
accelerated disposition of Great Lakes' remaining problem assets.
9
<PAGE>
At June 30, 1996, the allowances for loan and real estate losses and
industrial revenue bond reserves totaled $72.1 million, compared with $69.2
million at year-end 1995. See "Financial Condition - Allowances for Loan and
Real Estate Losses and Industrial Revenue Bond Reserves."
NON-INTEREST INCOME
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.
Excluding the gain on sale of branches, non-interest income increased $4.1
million, or 12.4%, to $37.2 million for the second quarter of 1996, compared
with $33 million for the same period in 1995. The increase was primarily due
to increases in fee and service charge revenues, title insurance revenues,
gains on sales of loans held for sale and mutual fund revenues. For the
first six months of 1996, non-interest income, excluding the gain on sale of
branches and the 1995 losses from merger-related asset sales at Great Lakes,
totaled $71.7 million, compared with $63.2 million for the same period in
1995.
Fee and service charge revenues totaled $25 million and $47.6 million for the
second quarter and first six months of 1996, respectively, representing
increases of 11% and 10% from $22.5 million and $43.3 million for the same
1995 periods. These increases are primarily due to expanded retail banking
activities.
Title insurance revenues totaled $3.6 million and $7.2 million during the
second quarter and first six months of 1996, respectively, compared with $2.9
million and $5.1 million for the same 1995 periods. Title insurance revenues
are cyclical in nature and are largely dependent on the level of residential
real estate loan originations and refinancings.
Gains on sales of loans held for sale totaled $594,000 during the second
quarter of 1996, compared with losses on sales of loans held for sale of
$204,000 during the same period in 1995. For the six months ended June 30,
1996, TCF recognized gains on sales of loans held for sale of $2.1 million,
compared with $372,000 during the same 1995 period. Gains or losses on sales
of loans held for sale may fluctuate significantly from period to period due
to changes in interest rates and volumes, and results in any period related
to these transactions may not be indicative of results which will be obtained
in future periods.
During the second quarter of 1996, TCF recognized a $480,000 gain on the sale
of one Wisconsin branch, compared with a $1.1 million gain on the sale of
three Minnesota branches during the same 1995 period. Results for the first
six months of 1996 also include a $1.2 million gain on the sale of two
Michigan branches. The branches sold were located outside TCF's primary
retail markets.
Other non-interest income totaled $2.9 million and $5.1 million for the
second quarter and first six months of 1996, respectively, compared with $1.6
million and $2.8 million for the same 1995 periods. The increases reflect
increased commissions earned on sales of mutual fund and insurance products
and the 1996 second quarter gain on the sale of TCF's investment in a leasing
company joint venture.
During the first quarter of 1995, Great Lakes sold $232.2 million of
collateralized mortgage obligations from its held-to-maturity portfolio at a
pretax loss of $21 million. Also in the 1995 first quarter, Great Lakes sold
$17.3 million of securities available for sale at a pretax loss of $310,000.
These merger-related asset sales were completed as part of TCF's strategy to
reduce Great Lakes' interest-rate and credit risk to levels consistent with
TCF's existing interest-rate risk position and credit risk policy.
10
<PAGE>
NON-INTEREST EXPENSE
Non-interest expense (excluding the provision for real estate losses) totaled
$73.5 million for the second quarter of 1996, up 3.1% from $71.3 million for
the same 1995 period. For the first six months of 1996, non-interest
expense, excluding the item noted above and 1995 merger-related charges,
totaled $148.8 million, up 4.7% from $142.1 million for the same 1995 period.
Compensation and employee benefits expense totaled $36 million and $72.4
million for the 1996 second quarter and first six months, respectively,
compared with $34.2 million and $69.9 million for the same periods in 1995.
The increased expenses in 1996 were primarily due to costs associated with
expanded consumer lending and consumer finance operations, and other retail
banking activities.
Federal deposit insurance premiums and assessments totaled $3.2 million and
$6.4 million for the second quarter and first six months of 1996,
respectively, compared with $3.5 million and $6.9 million for the same
periods in 1995. The decreases were primarily due to lower deposit levels
and a decrease in the deposit insurance premium rate of Great Lakes
subsequent to its acquisition by TCF.
Other expense totaled $16.4 million and $33.8 million for the second quarter
and first six months of 1996, compared with $16 million and $30 million for
the same 1995 periods. The increase for the first six months of 1996 was
primarily due to initial costs associated with the consolidation of certain
back office operations, and the expansion of TCF's consumer lending and
consumer finance operations, and other retail banking activities. In
addition, the increase reflects an increase in state business taxes due to
improved profitability.
Merger-related expenses for the first quarter of 1995 include $13.9 million
of equipment charges associated with the integration of Great Lakes' data
processing system into TCF's, $4.7 million of employment contract, severance
and employee benefit costs reflecting the consolidation of certain Great
Lakes functions, and $2.2 million of professional fees and $864,000 of other
expenses which were incurred by Great Lakes as a direct result of the merger.
During the first quarter of 1995, Great Lakes prepaid $112.3 million of
Federal Home Loan Bank ("FHLB") advances at a pretax loss of $1.5 million.
This amount, net of a $578,000 income tax benefit, was recorded as an
extraordinary item. Interest-rate exchange contracts with notional principal
amounts totaling $544.5 million were terminated by Great Lakes at a pretax
loss of $4.4 million. These actions were taken in order to reduce Great
Lakes' level of higher-cost wholesale borrowings and to reduce interest-rate
risk.
INCOME TAXES
TCF recorded income tax expense of $16.7 million and $32.1 million for the
second quarter and first six months of 1996, or 38.6% and 37.8% of income
before income tax expense and extraordinary item, respectively, compared with
$15.4 million and $7.8 million, or 39.8%, for the comparable 1995 periods.
The lower rates in 1996 reflect increased profitability and the lack of
merger-related expenses in 1996.
ASSET/LIABILITY MANAGEMENT - INTEREST-RATE RISK
TCF's results of operations are dependent to a large degree on its net
interest income, which is the difference between interest income and interest
expense. Like most financial institutions, TCF's interest income and cost of
funds are significantly affected by general economic conditions and by
policies of regulatory authorities. The mismatch between maturities and
interest-rate sensitivities of assets and liabilities results in
interest-rate risk. Although the measure is subject to a
11
<PAGE>
number of assumptions and is only one of a number of methods used to measure
interest-rate risk, management believes the interest-rate gap (difference
between interest-earning assets and interest-bearing liabilities repricing
within a given period) is an important indication of TCF's exposure to
interest-rate risk and the related volatility of net interest income in a
changing interest rate environment. In addition to the interest-rate gap
analysis, management also utilizes a simulation model to measure and manage
TCF's interest-rate risk.
For an institution with a negative interest-rate gap for a given period, the
amount of its interest-bearing liabilities maturing or otherwise repricing
within such period exceeds the amount of interest-earning assets repricing
within the same period. In a rising interest rate environment, institutions
with negative interest-rate gaps will generally experience more immediate
increases in the cost of their liabilities than in the yield on their assets.
Conversely, the yield on assets of institutions with negative interest-rate
gaps will generally decrease more slowly than the cost of their funds in a
falling interest rate environment.
TCF's Asset/Liability Management Committee manages TCF's interest-rate risk
based on interest rate expectations and other factors. Management's
estimates and assumptions could be significantly affected by external
factors such as prepayment rates other than those assumed, early withdrawals
of deposits, changes in the correlation of various interest-bearing
instruments, and competition. Decisions by management to purchase or sell
assets, or retire debt could change the maturity/repricing and spread
relationships. TCF's one-year adjusted interest-rate gap was a negative
$297.1 million, or (4)% of total assets, at June 30, 1996, compared with a
negative $189.5 million, or (3)% of total assets, at December 31, 1995.
FINANCIAL CONDITION
INVESTMENTS
Total investments increased $93 million from year-end 1995 to $157.4 million
at June 30, 1996, reflecting an increase in interest-bearing deposits with
banks.
SECURITIES AVAILABLE FOR SALE
Securities available for sale are carried at fair value with the unrealized
gains or losses, net of deferred income taxes, reported as a separate
component of stockholders' equity. Securities available for sale decreased
$152.3 million from year-end 1995 to $1 billion at June 30, 1996, primarily
due to repayment and prepayment activity. At June 30, 1996, TCF's securities
available-for-sale portfolio included $934.9 million and $114.3 million of
fixed-rate and adjustable-rate mortgage-backed securities, respectively. The
following table summarizes securities available for sale:
<TABLE>
<CAPTION>
At June 30, 1996 At December 31, 1995
------------------ -----------------------
Amortized Fair Amortized Fair
(In thousands) Cost Value Cost Value
--------- -------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Government and other
marketable securities $ - $ - $ 1,004 $ 1,062
---------- ---------- ---------- ----------
Mortgage-backed securities:
FHLMC 320,431 316,254 356,021 360,631
FNMA 588,943 582,907 643,572 655,568
GNMA 121,890 123,908 134,550 138,723
Private issuer 25,575 24,654 28,148 26,903
Collateralized mortgage
obligations 1,594 1,460 18,945 18,603
---------- ---------- ---------- ----------
1,058,433 1,049,183 1,181,236 1,200,428
---------- ---------- ---------- ----------
$1,058,433 $1,049,183 $1,182,240 $1,201,490
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
12
<PAGE>
LOANS HELD FOR SALE
Education and residential real estate loans held for sale are carried at the
lower of cost or market. Education and residential real estate loans held
for sale decreased $6 million and $3.4 million, respectively, from year-end
1995 and totaled $157.7 million and $75.3 million, respectively, at June 30,
1996. TCF's third-party residential loan servicing portfolio totaled $4.5
billion at June 30, 1996, unchanged from December 31, 1995.
LOANS
The following table sets forth information about loans held in TCF's
portfolio, excluding loans held for sale:
<TABLE>
<CAPTION>
At At
June 30, December 31,
(In thousands) 1996 1995
---------- ------------
<S> <C> <C>
Residential real estate $2,428,471 $2,618,725
---------- ----------
Commercial real estate:
Apartments 377,371 405,975
Other permanent 481,710 504,861
Construction and development 64,405 59,927
---------- ----------
923,486 970,763
---------- ----------
Total real estate 3,351,957 3,589,488
---------- ----------
Commercial business 157,138 167,663
---------- ----------
Consumer:
Home equity 1,154,227 1,112,996
Automobile and marine 407,249 323,074
Credit card 40,938 45,123
Loans secured by deposits 9,902 10,034
Other secured 19,214 18,364
Unsecured 71,485 83,848
---------- ----------
1,703,015 1,593,439
---------- ----------
5,212,110 5,350,590
Less:
Unearned discounts on loans purchased 2,855 3,126
Deferred loan fees, net 6,930 8,390
Unearned discounts and finance charges, net 78,219 61,973
---------- ----------
$5,124,106 $5,277,101
---------- ----------
---------- ----------
</TABLE>
Loans decreased $153 million from year-end 1995 to $5.1 billion at June 30,
1996. Residential real estate loans totaled $2.4 billion at June 30, 1996, a
decrease of $190.3 million from December 31, 1995. This decrease largely
reflects an increase in loan repayment activity.
Consumer loans totaled $1.7 billion at June 30, 1996, an increase of $109.6
million from December 31, 1995. This change was primarily due to an $84.2
million increase in automobile and marine loans and a $41.2 million increase
in home equity loans. The growth in automobile and marine loans and home
equity loans reflects TCF's expanded consumer lending and consumer finance
operations. Consumer loan growth in recent years reflects TCF's emphasis on
expanding its portfolio of these higher-yielding, shorter-term loans,
including home equity lines of credit. At June 30, 1996, TCF's average home
equity line of credit was $35,000 and the average loan balance outstanding
was $19,000, or 54% of the available line.
13
<PAGE>
TCF continues to expand its consumer finance lending through its consumer
finance subsidiaries, collectively referred to herein as the "Consumer
Finance Subsidiaries." TCF has significantly expanded its consumer finance
operations in recent periods and opened four consumer finance offices during
the first six months of 1996. As of June 30, 1996, TCF had 74 consumer
finance offices in 16 states. As a result of this expansion, TCF's consumer
finance loan portfolio totaled $464.1 million at June 30, 1996, compared with
$374.4 million at December 31, 1995. The Company intends to concentrate on
increasing the outstanding loan balances of these existing offices and
improving the profitability of the Consumer Finance Subsidiaries in 1996.
The Consumer Finance Subsidiaries primarily originate automobile and home
equity loans and purchase automobile loans, and also engage in the
origination of loans through loan brokers. Automobile and marine loans
comprise $281.2 million, or 60.6% of total consumer finance loans outstanding
at June 30, 1996. Home equity loans comprise $169.6 million, or 36.5% of
total consumer finance loans outstanding at June 30, 1996. The average
individual balance of consumer finance automobile and marine loans, and home
equity loans were $9,000 and $30,000, respectively, at June 30, 1996. The
Consumer Finance Subsidiaries are seeking to increase the percentage of home
equity loans to total consumer finance loans over time.
Through their purchases of automobile loans, the Consumer Finance
Subsidiaries provide indirect financing. The Consumer Finance Subsidiaries
serve as an alternative source of financing to customers who might otherwise
not be able to obtain financing from more traditional sources. Included in
the consumer finance loans at June 30, 1996 are $229.8 million of sub-prime
automobile and marine loans which carry a higher level of credit risk and
higher interest rates. The term sub-prime refers to the Company's assessment
of credit risk and bears no relationship to the prime rate of interest or
persons who are able to borrow at that rate. There can be no assurances that
the Company's sub-prime lending criteria are the same as those utilized by
other lenders. Loans classified as sub-prime are to borrowers that because
of significant past credit problems or limited credit histories are unable to
obtain credit from traditional sources. Although competition in the
sub-prime lending market has increased, the Company believes that sub-prime
borrowers represent a substantial market and their demand for financing has
not been adequately served by traditional lending sources. The underwriting
criteria for loans originated by the Consumer Finance Subsidiaries generally
have been less stringent than those historically adhered to by TCF's savings
bank subsidiaries and, as a result, carry a higher level of credit risk and
higher interest rates. The rapid expansion of the higher-risk lending
engaged in by the Consumer Finance Subsidiaries is expected, as these
portfolios mature, to result in increases in consumer loan loss and
delinquency ratios. These portfolios also represent an increased risk of
loss in the event of adverse economic developments. Although TCF believes
that experienced finance company management and appropriate underwriting
criteria enable the Consumer Finance Subsidiaries to effectively evaluate the
creditworthiness of sub-prime borrowers and the adequacy of the collateral,
sub-prime lending is inherently more risky than traditional lending and there
can be no assurance that all appropriate underwriting criteria have been
identified or weighted properly in the assessment of credit risk, or will
afford adequate protection against the higher risks inherent in lending to
sub-prime borrowers. Applicable underwriting criteria include standards for
term; amount of downpayment, installment payment and interest rate; amount of
loan in relation to the value of the collateral; credit history and debt
serviceability; and other factors. These criteria are subject to change from
time to time as circumstances may warrant.
14
<PAGE>
The following table sets forth the geographical locations (based on the
location of the office originating or purchasing the loan) of TCF's consumer
finance loan portfolio (dollars in thousands):
<TABLE>
<CAPTION>
At June 30, 1996 At December 31, 1995
------------------- --------------------
Loan Loan
Balance Percent Balance Percent
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Illinois $132,132 28.5% $116,866 31.2%
Minnesota 102,426 22.1 96,533 25.7
Wisconsin 34,032 7.3 27,911 7.4
Georgia 28,975 6.2 23,044 6.2
Florida 28,013 6.0 19,925 5.3
Missouri 24,069 5.2 19,295 5.2
North Carolina 18,286 3.9 8,053 2.2
Kentucky 17,556 3.8 13,017 3.5
Tennessee 15,316 3.3 11,474 3.1
Ohio 15,311 3.3 11,459 3.1
Other 48,002 10.4 26,817 7.1
-------- ----- -------- -----
Total consumer finance loans $464,118 100.0% $374,394 100.0%
-------- ----- -------- -----
-------- ----- -------- -----
</TABLE>
Since many of the consumer finance offices are new and are outside TCF's
traditional market areas, the geographical location of consumer finance loans
may change significantly in future periods. TCF believes that the most
important requirements to succeed in the sub-prime financing market are the
ability to control borrower and dealer misrepresentations at the point of
origination; the development and consistent implementation of objective
underwriting criteria specifically designed to evaluate the creditworthiness
of sub-prime borrowers; and the maintenance of an active program to monitor
performance and collect payments.
Commercial real estate loans decreased $47.3 million from year-end 1995 to
$923.5 million at June 30, 1996. Commercial business loans decreased
$10.5 million in the first six months of 1996 to $157.1 million at June 30,
1996. TCF is seeking to expand its commercial real estate and commercial
business lending activity to borrowers located in its primary midwestern
markets in an attempt to maintain the size of these lending portfolios and,
where feasible under local economic conditions, achieve some growth in these
lending categories over time. These loans generally have larger individual
balances and a greater inherent risk of loss. The risk of loss is difficult
to quantify and is subject to fluctuations in real estate values. At June
30, 1996, approximately 92% of TCF's commercial real estate loans outstanding
were secured by properties located in its primary markets. At June 30, 1996,
the average individual balance of commercial real estate loans and commercial
business loans was $583,000 and $211,000, respectively.
Included in performing loans at June 30, 1996 are commercial real estate
loans aggregating $1.6 million with terms that have been modified in troubled
debt restructurings, unchanged from December 31, 1995.
The results of hotel and motel operations are susceptible to changes in
prevailing economic conditions. Included in commercial real estate loans at
June 30, 1996 are $78.8 million of loans secured by hotel and motel
properties. Seven loans comprise $42 million, or 53.3%, of the total hotel
and motel portfolio. Of the total hotel and motel portfolio balance, three
loans totaling $14 million are included in loans subject to management
concern and two loans totaling $2.3 million are included in non-accrual
loans. TCF continues to closely monitor the performance of these loans and
properties.
15
<PAGE>
At June 30, 1996, the recorded investment in loans that are considered to be
impaired was $21.8 million for which the related allowance for credit losses
was $4.9 million. All of these loans were on non-accrual status. The average
recorded investment in impaired loans during the three and six months ended
June 30, 1996 was $25.3 million and $26.5 million, respectively. For the
three and six months ended June 30, 1996, TCF recognized interest income on
impaired loans of $258,000 and $397,000, respectively, all of which was
recognized using the cash basis method of income recognition.
ALLOWANCES FOR LOAN AND REAL ESTATE LOSSES AND INDUSTRIAL REVENUE BOND RESERVES
A summary of the activity of the allowances for loan and real estate losses
and industrial revenue bond reserves, and selected statistics follows
(dollars in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1996 June 30, 1996
----------------------------------- -----------------------------------
Industrial Industrial
Revenue Revenue
Allowance for Loan Losses and Allowance for Bond Allowance for Bond
Industrial Revenue Bond Reserves: Loan Losses Reserves Total Loan Losses Reserves Total
------------ ---------- ----- ------------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of period $66,779 $1,760 $68,539 $65,695 $1,960 $67,655
Provision for credit losses 6,823 - 6,823 9,825 (200) 9,625
Charge-offs (6,876) (100) (6,976) (10,462) (100) (10,562)
Recoveries 2,517 - 2,517 4,185 - 4,185
------- ------ ------- ------- ------ -------
Net charge-offs (4,359) (100) (4,459) (6,277) (100) (6,377)
------- ------ ------- ------- ------ -------
Balance at end of period $69,243 $1,660 $70,903 $69,243 $1,660 $70,903
------- ------ ------- ------- ------ -------
------- ------ ------- ------- ------ -------
Allowance for loan losses as a
percentage of gross loan balances,
excluding loans held for sale 1.33% 1.33%
Ratio of annualized net loan
charge-offs to average loans
outstanding, excluding loans held
for sale .34 .24
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1995 June 30, 1995
----------------------------------- -----------------------------------
Industrial Industrial
Revenue Revenue
Allowance for Loan Losses and Allowance for Bond Allowance for Bond
Industrial Revenue Bond Reserves: Loan Losses Reserves Total Loan Losses Reserves Total
------------ ---------- ----- ------------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of period $62,383 $2,684 $65,067 $56,343 $2,759 $59,102
Provision for credit losses 2,999 (75) 2,924 9,762 (150) 9,612
Charge-offs (4,514) - (4,514) (6,887) - (6,887)
Recoveries 1,728 - 1,728 3,378 - 3,378
------- ------ ------- ------- ------ -------
Net charge-offs (2,786) - (2,786) (3,509) - (3,509)
------- ------ ------- ------- ------ -------
Balance at end of period $62,596 $2,609 $65,205 $62,596 $2,609 $65,205
------- ------ ------- ------- ------ -------
------- ------ ------- ------- ------ -------
Allowance for loan losses as a
percentage of gross loan balances,
excluding loans held for sale 1.16% 1.16%
Ratio of annualized net loan
charge-offs to average loans
outstanding, excluding loans held
for sale .21 .13
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
Allowance for Real Estate Losses: June 30, June 30,
-------------------- ------------------
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Balance at beginning of period $1,331 $1,973 $1,526 $ 2,576
Provision for losses (151) 378 297 541
Charge-offs (31) (782) (674) (1,548)
------ ------ ------ -------
Balance at end of period $1,149 $1,569 $1,149 $ 1,569
------ ------ ------ -------
------ ------ ------ -------
</TABLE>
On an ongoing basis, TCF's loan and real estate portfolios are carefully
reviewed and thoroughly analyzed as to credit risk, performance, collateral
value and quality. The allowance for loan losses is maintained at a level
believed to be adequate by management to provide for estimated loan losses.
Management's judgment as to the adequacy of the allowance is a result of
ongoing review of larger individual loans, the overall risk characteristics
of the portfolio, changes in the character or size of the portfolio, the
level of non-performing assets, net charge-offs, geographic location and
prevailing economic conditions. The allowance for loan losses is established
for known or anticipated problem loans, as well as for loans which are not
currently known to require specific allowances for loss. Loans are charged
off to the extent they are deemed to be uncollectible. The unallocated
portion of TCF's allowance for loan losses totaled $21.9 million at June 30,
1996, compared with $17.8 million at December 31, 1995.
The allowance for real estate losses is based on management's periodic
analysis of real estate holdings and is maintained at a level believed to be
adequate by management to provide for estimated real estate losses. The
allowance for real estate losses is established to reduce the carrying value
of real estate to fair value less disposition costs. A weakness in
commercial real estate markets may result in declines in the values of TCF's
real estate or the sale of individual 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. The provision for
real estate losses for the second quarter and first six months of 1996
reflects a reduction in the balance of real estate.
TCF, as the acquiring entity of Republic Capital Group, Inc., guarantees
certain industrial development and housing revenue bonds issued by
municipalities to finance commercial and multi-family real estate owned by
third parties. The balance of such financial guarantees at June 30, 1996 was
$12.4 million, down from $13.5 million at December 31, 1995. The provision
for credit losses on industrial revenue bond financial guarantees reflects a
reduction in the balance of the financial guarantees. Management has
considered these guarantees in its review of the adequacy of the industrial
revenue bond reserves, which are included in other liabilities in the
Consolidated Statements of Financial Condition.
The adequacy of the allowances for loan and real estate losses and industrial
revenue bond reserves is highly dependent upon management's estimates of
variables affecting valuation, appraisals of collateral, evaluations of
performance and status, and the amounts and timing of future cash flows
expected to be received on impaired loans. Such estimates, appraisals,
evaluations and cash flows may be subject to frequent adjustments due to
changing economic conditions and the economic prospects of borrowers or
properties. These estimates are reviewed periodically and adjustments, if
necessary, are reported in the provisions for credit and real estate losses
in the periods in which they become known. Management believes the
allowances for loan and real estate losses and industrial revenue bond
reserves are adequate.
Non-Performing Assets
Non-performing assets (principally non-accrual loans and real estate acquired
through foreclosure) totaled $55.9 million at June 30, 1996, down $14.8
million, or 20.9%,
17
<PAGE>
from the December 31, 1995 total of $70.7 million. The decrease in
non-performing assets reflects the accelerated disposition of certain of
Great Lakes' remaining problem assets. At June 30, 1996, six commercial real
estate loans or properties comprised $15.4 million, or 27.5%, of total
non-performing assets. These loans or properties had been written down by
$929,000 as of June 30, 1996. Properties acquired are being actively
marketed. Approximately 84% of non-performing assets at June 30, 1996
consist of, or are secured by, real estate. The accrual of interest income
is generally discontinued when loans become more than 90 days past due with
respect to either principal or interest unless such loans are adequately
secured and in the process of collection. Non-performing assets are
summarized in the following table:
<TABLE>
<CAPTION>
At At
June 30, December 31,
(Dollars in thousands) 1996 1995
--------- ------------
<S> <C> <C>
Loans (1):
Residential real estate $ 7,420 $ 7,045
Commercial real estate 19,175 22,255
Commercial business 2,657 7,541
Consumer 8,582 7,487
------- -------
37,834 44,328
Real estate and other assets (2) 18,111 26,402
------- -------
Total non-performing assets $55,945 $70,730
------- -------
------- -------
Non-performing assets as a percentage
of net loans 1.11% 1.36%
Non-performing assets as a percentage
of total assets .80 .98
</TABLE>
(1) Included in total loans in the Consolidated Statements of Financial
Condition.
(2) Includes commercial real estate of $3.7 million and $11.4 million and
automobiles of $2.2 million and $2.5 million at June 30, 1996 and
December 31, 1995, respectively.
TCF had accruing loans 90 days or more past due totaling $220,000 at June 30,
1996, compared with $761,000 at December 31, 1995. These loans are in the
process of collection and management believes they are adequately secured.
The over 30-day delinquency rate on TCF's loans (excluding loans held for
sale and non-accrual loans) was .84% of gross loans outstanding at June 30,
1996, compared with .78% at year-end 1995. TCF's delinquency rates are
determined using the contractual method. The following table sets forth
information regarding TCF's over 30-day delinquent loan portfolio, excluding
loans held for sale and non-accrual loans:
<TABLE>
<CAPTION>
At June 30, 1996 At December 31, 1995
--------------------- ---------------------
Percentage Percentage
Principal of Gross Principal of Gross
(Dollars in thousands) Balances Loans Balances Loans
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Consumer:
Savings bank lending $ 9,111 .78% $11,110 .96%
Consumer finance lending 18,710 3.51 16,188 3.77
------- -------
27,821 1.64 27,298 1.72
Residential real estate 14,813 .61 12,056 .46
Commercial real estate 728 .08 1,411 .15
Commercial business 213 .14 591 .37
------- -------
$43,575 .84 $41,356 .78
------- -------
------- -------
</TABLE>
TCF's over 30-day delinquency rate on gross consumer loans was 1.64% at June
30, 1996, down from 1.72% at year-end 1995. Management continues to monitor
the consumer loan
18
<PAGE>
portfolio, which will generally have higher delinquencies, especially
consumer finance loans. TCF's over 30-day delinquency rate on gross consumer
finance loans was 3.51% at June 30, 1996, compared with 3.77% at December 31,
1995. Consumer finance lending is generally considered to involve a higher
level of credit risk. The underwriting criteria for loans originated by the
Consumer Finance Subsidiaries are generally less stringent than those
historically adhered to by TCF's savings bank subsidiaries and, as a result,
these loans have a higher level of credit risk and higher interest rates.
TCF believes that it has in place experienced personnel and acceptable
standards for maintaining credit quality that are consistent with its goals
for expanding its portfolio of these higher-yielding loans, but no assurance
can be given as to the level of future delinquencies and loan charge-offs.
In addition to the non-accrual, restructured and accruing loans 90 days or
more past due, there were commercial real estate and commercial business
loans with an aggregate principal balance of $36.2 million outstanding at
June 30, 1996 for which management has concerns regarding the ability of the
borrowers to meet existing repayment terms. This amount consists of loans
that were classified for regulatory purposes as substandard, doubtful or
loss, or were to borrowers that currently are experiencing financial
difficulties or that management believes may experience financial
difficulties in the future. This compares with $56.5 million of such loans
at December 31, 1995. Although these loans are secured by commercial real
estate or other corporate assets, they may be subject to future modifications
of their terms or may become non-performing. Management is monitoring the
performance and classification of such loans and the financial condition of
these borrowers.
DEPOSITS
Deposits totaled $5.1 billion at June 30, 1996, down $139 million from
December 31, 1995. The decrease reflects the previously described branch
sales during the first half of 1996. Lower interest-cost checking, savings
and money market deposits totaled $2.6 billion, up $48.7 million from
year-end 1995, and comprised 51.7% of total deposits at June 30, 1996.
Checking, savings and money market deposits are an important source of lower
cost funds and fee income for TCF. The Company's weighted average rate for
deposits, including non-interest bearing deposits, decreased to 3.36% at June
30, 1996 from 3.60% at December 31, 1995. The following table summarizes
TCF's deposits:
<TABLE>
<CAPTION>
At June 30, 1996 At December 31, 1995
------------------------------ -------------------------------
Weighted Weighted
Average % of Average % of
(Dollars in thousands) Rate Amount Total Rate Amount Total
-------- ---------- ------ -------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Checking:
Non-interest bearing 0.00% $ 611,740 12.1% 0.00% $ 573,004 11.0%
Interest bearing 1.04 513,955 10.2 1.06 530,268 10.2
---------- ----- ---------- -----
.48 1,125,695 22.3 .51 1,103,272 21.2
Passbook and statement 1.73 849,846 16.8 1.88 841,115 16.2
Money market 3.05 634,236 12.6 3.12 616,667 11.9
Certificates 5.33 2,442,780 48.3 5.56 2,630,498 50.7
---------- ----- ---------- -----
3.36 $5,052,557 100.0% 3.60 $5,191,552 100.0%
---------- ----- ---------- -----
---------- ----- ---------- -----
</TABLE>
19
<PAGE>
Certificates had the following remaining maturities:
<TABLE>
<CAPTION>
At June 30, 1996 At December 31, 1995
--------------------------------------------- --------------------------------------------
Weighted Weighted
(Dollars in Negotiable Average Negotiable Average
millions) Rate Other Total Rate Rate Other Total Rate
----------- ----- ----- -------- ---------- ----- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Maturity:
0-3 months $ 90.0 $ 629.9 $ 719.9 5.14% $141.0 $ 617.4 $ 758.4 5.45%
4-6 months 16.7 447.8 464.5 5.21 26.7 474.8 501.5 5.50
7-12 months 6.4 591.3 597.7 5.34 5.5 575.4 580.9 5.52
13-24 months 2.2 417.5 419.7 5.52 1.3 472.5 473.8 5.62
25-36 months .4 127.5 127.9 5.64 1.8 158.8 160.6 5.77
37-48 months - 55.6 55.6 5.80 .1 82.2 82.3 5.74
49-60 months - 29.3 29.3 6.03 - 26.5 26.5 5.64
Over 60 months - 28.2 28.2 6.23 - 46.5 46.5 6.46
------ -------- -------- ------ -------- --------
$115.7 $2,327.1 $2,442.8 5.33 $176.4 $2,454.1 $2,630.5 5.56
------ -------- -------- ------ -------- --------
------ -------- -------- ------ -------- --------
</TABLE>
BORROWINGS
Borrowings are used primarily to fund the purchase of investments and
securities available for sale. These borrowings totaled $1.4 billion as of
June 30, 1996, down $82.3 million from year-end 1995. The decrease was
primarily due to decreases of $101.3 million in FHLB advances and $14.5
million in federal funds purchased, partially offset by a $31.2 million
increase in securities sold under repurchase agreements. The weighted
average rate on borrowings decreased to 5.73% at June 30, 1996, from 5.98% at
December 31, 1995. At June 30, 1996, borrowings with a maturity of one year
or less totaled $1 billion.
In June 1996, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." The
statement provides consistent standards for distinguishing transfers of
financial assets that are sales from transfers that are secured borrowings,
among other things. The statement requires that a transfer of a financial asset
in which the transferor surrenders control over the financial asset shall
generally be accounted for as a sale, with appropriate recognition of gain or
loss. The statement provides that the transferor has surrendered control if and
only if certain conditions are met. The statement is effective for transfers
and servicing of financial assets and extinguishments of liabilities occurring
after December 31, 1996, and will be applied prospectively. Earlier or
retroactive application will not be permitted. It is too early to predict what
effect, if any, the statement will have on TCF's financial condition or results
of operations.
20
<PAGE>
TCF's borrowings consist of the following:
<TABLE>
<CAPTION>
At June 30, 1996 At December 31, 1995
------------------------------------ ------------------------
Weighted Weighted
Year of Average Average
(Dollars in thousands) Maturity Amount Rate Amount Rate
-------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C>
Securities sold under
repurchase agreements 1996 $ 359,709 5.49% $ 363,426 5.91%
1997 109,934 5.99 75,000 6.12
---------- ----------
469,643 5.60 438,426 5.94
---------- ----------
Federal Home Loan Bank
advances 1996 335,000 5.49 589,339 5.79
1997 240,014 5.65 90,014 5.90
1998 153,000 5.81 128,000 5.76
1999 41,000 6.01 63,000 6.38
2000 8,074 7.24 8,074 7.24
2001 15,000 6.97 15,000 6.97
2008 156 6.17 160 6.15
---------- ----------
792,244 5.67 893,587 5.87
---------- ----------
Subordinated debt:
Senior subordinated
debentures 2006 6,248 18.00 6,248 18.00
Convertible subordinated
debentures 2011 7,174 7.25 7,272 7.25
---------- ----------
13,422 12.25 13,520 12.22
---------- ----------
Collateralized obligations:
Collateralized notes 1997 37,500 5.94 37,500 6.19
Less unamortized discount 44 - 59 -
---------- ----------
37,456 5.94 37,441 6.20
---------- ----------
Collateralized mortgage
obligations 2008 2,172 6.50 2,627 6.50
2010 1,575 5.90 1,530 5.90
---------- ----------
3,747 6.25 4,157 6.28
Less unamortized discount 175 - 207 -
---------- ----------
3,572 6.55 3,950 6.61
---------- ----------
41,028 6.00 41,391 6.24
---------- ----------
Other borrowings:
Federal funds purchased 1996 - - 14,500 5.58
Bank line of credit 1996 29,200 6.32 40,000 6.53
Treasury tax and loan note 1996 13,591 5.37 - -
Other 1998 17 7.60 20 7.60
---------- ----------
42,808 6.02 54,520 6.28
---------- ----------
$1,359,145 5.73 $1,441,444 5.98
---------- ----------
---------- ----------
</TABLE>
STOCKHOLDERS' EQUITY
Stockholders' equity at June 30, 1996 was $523.8 million, or 7.5% of total
assets, down from $527.7 million, or 7.3% of total assets, at December 31, 1995.
The decrease in stockholders' equity is primarily due to the repurchase of
964,868 shares of TCF's common stock at a cost of $32.8 million, payments of
$12.2 million in dividends on TCF's common stock and an increase of $17.8
million in net unrealized losses on securities available for sale, partially
offset by net income of $52.9 million for the first six months of 1996.
21
<PAGE>
On December 19, 1995, TCF's Board of Directors (the "Board") authorized the
repurchase of up to 5% of TCF common stock, or approximately 1.8 million
shares. During the first six months of 1996, TCF completed its repurchase of
137,158 shares of stock remaining from its initial 5% stock repurchase
program, authorized by the Board in January 1994. TCF purchased a total of
964,868 shares of stock under these plans during the first six months of
1996. The repurchased shares will be used primarily for employee benefit
plans.
On July 23, 1996, TCF declared a quarterly dividend of 18.75 cents per common
share payable on August 30, 1996 to stockholders of record as of August 9,
1996.
At June 30, 1996, TCF's savings bank subsidiaries exceeded their fully
phased-in capital requirements and believe that they would be considered
"well-capitalized" under guidelines established pursuant to the Federal
Deposit Insurance Corporation Improvement Act of 1991.
RECENT LEGISLATIVE AND REGULATORY DEVELOPMENTS
Key legislative developments are expected to have a significant impact on the
thrift industry. Inadequate funding of the Savings Association Insurance Fund
("SAIF") has given rise to a large deposit insurance premium disparity
between banks insured by the Bank Insurance Fund ("BIF") and SAIF-insured
thrifts, which pay significantly higher deposit insurance premiums.
Legislation which would rectify this disparity has been pending for over a
year but has not yet been enacted. Proposed legislation would recapitalize
the SAIF by imposing on thrift institutions a one-time special assessment,
the amount of which would vary significantly depending on when the assessment
is imposed, future losses of the insurance fund and other factors.
New federal legislation very recently approved by Congress would, if signed
into law by the President, repeal the reserve method of accounting for thrift
bad debt reserves. This legislation would also eliminate the recapture of a
thrift institution's bad debt reserve under certain circumstances, including
the institution's conversion to a bank or as a result of similar charter
changes.
TCF is pursuing a number of possible operating alternatives at this time,
including the continued operation of the savings bank subsidiaries and the
creation of new national bank subsidiaries, the chartering of new state
savings banks in one or more states, and consummation of the purchase of an
existing institution which would result in the acquisition of a state savings
bank charter. These initiatives are in various stages of the regulatory
approval process. In addition, if legislation is enacted which would
recapitalize the SAIF, management is considering the conversion of TCF's
savings bank subsidiaries to commercial banks. The ultimate impact of these
developments is uncertain at this time.
22
<PAGE>
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
Supplementary Information
<TABLE>
<CAPTION>
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------
At At At At At At
(Dollars in thousands June 30, March 31, Dec. 31, Sept. 30, June 30, March 31,
except per-share data) 1996 1996 1995 1995 1995 1995
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SELECTED FINANCIAL CONDITION DATA:
Total assets $7,000,871 $7,039,282 $7,239,911 $7,331,962 $7,432,692 $7,369,061
Investments(1) 157,368 59,202 64,345 73,651 64,874 91,969
Securities available for sale 1,049,183 1,117,439 1,201,490 32,117 38,575 89,693
Mortgage-backed securities
held to maturity - - - 1,199,231 1,251,705 1,291,370
Loans 5,124,106 5,174,923 5,277,101 5,323,912 5,329,880 5,237,533
Deposits 5,052,557 5,150,023 5,191,552 5,181,765 5,249,819 5,371,461
Borrowings 1,359,145 1,268,887 1,441,444 1,553,693 1,589,861 1,445,327
Stockholders' equity 523,788 541,019 527,675 490,542 495,550 470,501
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Three Months Ended
- --------------------------------------------------------------------------------------------------------------------
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31,
1996 1996 1995 1995 1995 1995
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SELECTED OPERATIONS DATA:
Interest income $146,394 $148,893 $153,222 $154,036 $151,641 $148,791
Interest expense 60,518 64,439 70,451 72,549 72,349 73,143
-------- -------- -------- -------- -------- --------
Net interest income 85,876 84,454 82,771 81,487 79,292 75,648
Provision for credit losses 6,823 2,802 2,649 2,951 2,924 6,688
-------- -------- -------- -------- -------- --------
Net interest income after
provision for credit losses 79,053 81,652 80,122 78,536 76,368 68,960
-------- -------- -------- -------- -------- --------
Non-interest income:
Loss on sale of mortgage-backed
securities - - - - - (21,037)
Gain on sale of loan servicing - - 3 3 1,006 523
Gain (loss) on sale of
securities available for sale - 85 - - 60 (250)
Gain on sale of branches 480 1,245 - - 1,061 42
Other non-interest income 37,152 34,499 35,620 34,164 31,981 29,600
-------- -------- -------- -------- -------- --------
Total non-interest income 37,632 35,829 35,623 34,167 34,108 8,878
-------- -------- -------- -------- -------- --------
Non-interest expense:
Provision for real estate losses (151) 448 1,068 195 378 163
Amortization of goodwill and
other intangibles 794 795 791 791 791 790
Merger-related expenses - - - - - 21,733
Cancellation cost on early
termination of interest-rate
exchange contracts - - - - - 4,423
Other non-interest expense 72,670 74,563 74,140 71,554 70,465 70,051
-------- -------- -------- -------- -------- --------
Total non-interest expense 73,313 75,806 75,999 72,540 71,634 97,160
-------- -------- -------- -------- -------- --------
Income (loss) before income tax
expense (benefit) and
extraordinary item 43,372 41,675 39,746 40,163 38,842 (19,322)
Income tax expense (benefit) 16,721 15,388 14,263 15,750 15,448 (7,683)
-------- -------- -------- -------- -------- --------
Income (loss) before
extraordinary item 26,651 26,287 25,483 24,413 23,394 (11,639)
Extraordinary item:
Penalties on early repayment of
FHLB advances, net of tax
benefit of $578 - - - - - (963)
-------- -------- -------- -------- -------- --------
Net income (loss) 26,651 26,287 25,483 24,413 23,394 (12,602)
Dividends on preferred stock - - - - - 678
-------- -------- -------- -------- -------- --------
Net income (loss) available
to common shareholders $ 26,651 $ 26,287 $ 25,483 $ 24,413 $ 23,394 $(13,280)
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
Per common share:
Income (loss) before
extraordinary item $ .75 $ .73 $ .71 $ .68 $ .66 $ (.36)
Extraordinary item - - - - - (.03)
-------- -------- -------- -------- -------- --------
Net income (loss) $ .75 $ .73 $ .71 $ .68 $ .66 $ (.39)
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
Dividends declared $ .1875 $ .15625 $ .15625 $ .15625 $ .15625 $ .125
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
FINANCIAL RATIOS:
Return on average assets (2) 1.54% 1.48% 1.40% 1.32% 1.27% (.67)%
Return on average common
equity (2) 20.22 19.67 20.21 20.44 20.48 (11.86)
Return on average realized common
equity (2) 20.04 19.97 20.29 20.38 20.41 (11.83)
Average total equity to average
assets 7.60 7.51 6.95 6.56 6.53 6.33
Net interest margin (2)(3) 5.27 5.06 4.86 4.71 4.58 4.31
</TABLE>
- -------------
(1) Includes interest-bearing deposits with banks, federal funds sold, U.S.
Government and other marketable securities held to maturity and FHLB stock.
(2) Annualized.
(3) Net interest income divided by average interest-earning assets.
23
<PAGE>
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
Supplementary Information (Continued)
Consolidated Average Balance Sheets, Interest and Dividends
Earned or Paid, and Related Interest Yields and Rates
<TABLE>
<CAPTION>
Six Months Ended June 30,
--------------------------------------------------------------------------------
1996 1995
-------------------------------------- --------------------------------------
Interest Interest
Average Yields and Average Yields and
(Dollars in thousands) Balance Interest(1) Rates (2) Balance Interest(1) Rates (2)
------- ----------- ----------- ------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Securities available
for sale $1,107,754 $ 39,522 7.14% $ 79,005 $ 2,902 7.35%
---------- -------- ---------- --------
Loans held for sale 242,890 9,110 7.50 208,379 8,573 8.23
---------- -------- ---------- --------
Mortgage-backed
securities
held to maturity - - - 1,362,790 48,427 7.11
---------- -------- ---------- --------
Loans:
Residential real
estate 2,496,653 98,942 7.93 2,696,921 104,438 7.74
Commercial real estate 946,205 42,238 8.93 988,425 43,709 8.84
Commercial business 166,289 7,282 8.76 191,235 9,185 9.61
Consumer 1,574,064 96,023 12.20 1,349,384 79,926 11.85
---------- -------- ---------- --------
Total loans(3) 5,183,211 244,485 9.43 5,225,965 237,258 9.08
---------- -------- ---------- --------
Investments:
Interest-bearing
deposits with banks 2,392 64 5.35 10,761 325 6.04
Federal funds sold 2,002 57 5.69 10,408 310 5.96
U.S. Government and
other marketable
securities held
to maturity 3,774 98 5.19 3,553 101 5.69
FHLB stock 54,450 1,951 7.17 70,251 2,536 7.22
---------- -------- ---------- --------
Total investments 62,618 2,170 6.93 94,973 3,272 6.89
---------- -------- ---------- --------
Total interest-
earning assets 6,596,473 295,287 8.95 6,971,112 300,432 8.62
-------- ------ -------- ------
Other assets(4) 433,833 453,218
---------- ----------
Total assets $7,030,306 $7,424,330
---------- ----------
---------- ----------
Liabilities and
Stockholders' Equity:
Noninterest-bearing
deposits $ 579,811 $ 474,979
---------- ----------
Interest-bearing
deposits:
Checking 517,271 2,858 1.11 541,458 3,622 1.34
Passbook and
statement 809,225 7,304 1.81 878,373 9,621 2.19
Money market 630,132 9,529 3.02 680,525 11,889 3.49
Certificates 2,523,475 67,979 5.39 2,699,869 72,254 5.35
---------- -------- ---------- --------
Total interest-
bearing
deposits 4,480,103 87,670 3.91 4,800,225 97,386 4.06
---------- -------- ---------- --------
Borrowings:
Securities sold
under repurchase
agreements 528,400 14,641 5.54 518,412 15,956 6.16
FHLB advances 712,740 19,511 5.47 918,982 27,561 6.00
Subordinated debt 13,462 940 13.97 50,378 2,702 10.73
Collateralized
obligations 41,074 1,286 6.26 41,729 1,479 7.09
Other borrowings 30,046 909 6.05 12,686 408 6.43
---------- -------- ---------- --------
Total borrowings 1,325,722 37,287 5.63 1,542,187 48,106 6.24
---------- -------- ---------- --------
Total interest-
bearing
liabilities(5) 5,805,825 124,957 4.30 6,342,412 145,492 4.59
-------- -------- -------- -------
Other liabilities(4) 115,121 128,679
---------- ----------
Total liabilities 6,500,757 6,946,070
---------- ----------
Stockholders' equity:(4)
Preferred equity - 25,019
Common equity 529,549 453,241
---------- ----------
Total stockholders'
equity 529,549 478,260
---------- ----------
Total liabilities
and stockholders'
equity $7,030,306 $7,424,330
---------- ----------
---------- ----------
Net interest income $170,330 $154,940
-------- --------
-------- --------
Net interest rate spread 4.65% 4.03%
-------- -------
-------- -------
Net interest margin 5.16% 4.45%
-------- -------
-------- -------
</TABLE>
(1) Tax-exempt income was not significant and thus has not been presented
on a tax equivalent basis. Tax-exempt income of $202,000 and $224,000
was recognized during the six months ended June 30, 1996 and 1995,
respectively.
(2) Annualized.
(3) Average balance of loans includes non-accrual loans and is presented
net of unearned income.
(4) Average balance is based upon month-end balances.
(5) Includes $29,000 and $647,000 of interest expense on interest-rate
exchange contracts and interest-rate cap agreements for the six months
ended June 30, 1996 and 1995, respectively.
24
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. 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 in damages. TCF
is also from time to time involved in litigation relating to its retail banking,
consumer credit and mortgage banking operations and related consumer financial
services, including class action litigation. 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 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's claim is based on the government's breach of contract in
connection with TCF'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 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.
Because TCF's suit has been stayed pending final appellate resolution of another
case addressing the government's liability for breach of supervisory goodwill
contracts (the WINSTAR case, discussed below) the United States has not yet
answered TCF's complaint. TCF's complaint involves approximately $80.3 million
in supervisory goodwill.
In August 1995, Great Lakes 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' claim is based on the government's
breach of contract in connection with Great Lakes' acquisitions of certain
savings institutions prior to the enactment of FIRREA in 1989, which contracts
allowed Great Lakes 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' complaint, and the Court has entered a stay of
proceedings pending final appellate resolution of the WINSTAR case, discussed
below. Great Lakes' 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 U.S. Court of Appeals for the Federal Circuit,
which decision had affirmed Court of Federal Claims' liability determinations in
three other "supervisory goodwill" cases, consolidated for review under the
title WINSTAR CORP. V. UNITED STATES, 64 U.S.L.W. 4739 (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' acquisitions of failed or failing
savings institutions, as an asset that could be counted toward regulatory
capital.
There are a variety of contracts and contract provisions in the TCF and Great
Lakes transactions. The government has indicated that it will have a number of
affirmative defenses in goodwill litigation filed against it. There can be no
assurance that the U.S. Supreme Court decision in WINSTAR will mean that a
similar result would be obtained in the actions filed by TCF and Great Lakes.
There also can be no assurance that the government will be determined liable in
connection with the loss of supervisory goodwill by either TCF or Great Lakes
or, even if a determination
25
<PAGE>
favorable to TCF or Great Lakes 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's or Great Lakes' claim.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On April 24, 1996, the Annual Meeting of the shareholders of TCF was held to
obtain the approval of shareholders of record as of March 8, 1996 in connection
with the four matters indicated below. Following is a brief description of each
matter voted on at the meeting, and the number of votes cast for, against or
withheld, as well as the number of abstentions and broker nonvotes, as to each
such matter:
<TABLE>
<CAPTION>
Vote
-------------------------------------------
Against or Broker
For Withheld Abstain Nonvote
---------- ---------- ------- --------
<S> <C>
1. Election of Directors:
William A. Cooper . . . . . . . . 27,584,520 441,456 N/A N/A
Thomas A. Cusick. . . . . . . . . 27,610,651 415,325 N/A N/A
Rudy Boschwitz. . . . . . . . . . 27,690,632 335,344 N/A N/A
Thomas J. McGough . . . . . . . . 27,801,704 224,272 N/A N/A
Ronald A. Ward. . . . . . . . . . 27,718,716 307,260 N/A N/A
2. Ratification of KPMG Peat
Marwick LLP as independent
public accountants for
1996. . . . . . . . . . . . . . . . 27,869,569 77,195 79,212 0
3. Approval of a Directors
Stock Grant Program . . . . . . . . 26,442,342 1,354,294 229,339 1
4. Approval of a Performance-
Based Incentive Policy. . . . . . . 26,744,999 1,025,479 255,498 0
</TABLE>
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
See Index to Exhibits on page 28 of this report.
(b) Reports on Form 8-K.
None.
26
<PAGE>
SIGNATURES
Pursuant to the requirements 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
/s/ Ronald J. Palmer
--------------------------------------------
Ronald J. Palmer, Executive Vice President,
Chief Financial Officer and Treasurer
(Principal Financial Officer)
/s/ Mark R. Lund
--------------------------------------------
Mark R. Lund, Senior Vice President,
Assistant Treasurer and Controller
(Principal Accounting Officer)
Dated: August 12, 1996
27
<PAGE>
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
INDEX TO EXHIBITS
FOR FORM 10-Q
Exhibit Sequentially
Number Description Numbered Page
----------- ----------- -------------
4(a) Copies of instruments with respect N/A
to long-term debt will be furnished
to the Securities and Exchange
Commission upon request.
10(a) Employment Agreement dated July 1, 1996 -
between TCF Financial Corporation and
William A. Cooper
10(b) Change in Control Agreement dated -
July 1, 1996 between TCF Financial
Corporation and William A. Cooper
11 Computation of Earnings Per Common Share -
27 Financial Data Schedule -
28
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into as of July 1, 1996 between TCF
FINANCIAL CORPORATION, a Delaware corporation (the "Company"), and WILLIAM A.
COOPER (the "Executive").
R E C I T A L S:
WHEREAS, the Executive is now and has been Chairman of the Board and Chief
Executive Officer of the Company;
WHEREAS, the Executive, the Company and its subsidiary TCF Bank Minnesota
fsb ("TCF Bank") are parties to the employment agreement dated as of July 1,
1993 (the "Prior Agreement");
WHEREAS, the Executive and the Company wish to enter into this Agreement to
provide for the continued employment of Executive in his current positions and
to supersede and replace the Prior Agreement;
WHEREAS, the Executive and the Company are willing to enter into this
Agreement upon the terms and conditions set forth herein; and
WHEREAS, the Executive and the Company are contemporaneous with the
execution and delivery of this Agreement entering into the Change in Control
Agreement (the "CIC Agreement") and the CIC Agreement is material consideration
for the Executive to enter into this Agreement,
NOW, THEREFORE, in consideration of the mutual premises and agreements set
forth herein, the parties hereby agree as follows:
1. EMPLOYMENT AND DUTIES. The parties hereby agree that, during the term
of this Agreement as set forth in paragraph 2 below, the Executive shall be
employed as Chairman of the Board and Chief Executive Officer of the Company
with overall charge and responsibility for the business and affairs of the
Company and the Executive's powers and authority shall be superior to those of
any other officer or employee of the Company or its subsidiaries. In
discharging such duties and responsibilities, the Executive may also serve as an
executive officer and/or director of any direct or indirect subsidiary of the
Company (collectively the "TCF Subsidiaries"). The salary, other compensation
and benefits provided herein may be allocated among the Company and the TCF
Subsidiaries based upon the portion of the Executive's services provided to the
Company and each of the TCF Subsidiaries, respectively, and the Executive shall
assist the Company in making such allocation as the Company may reasonably
request. During the term of this Agreement, the Executive shall apply on a
full-time basis (allowing for usual vacations and sick leave) all of his skill
and experience to the performance of his duties in his positions with the
Company and the TCF Subsidiaries. It is understood that
1
<PAGE>
the Executive may have other business investments and participate in other
business ventures which may, from time to time, require minor portions of his
time, but which shall not interfere or be inconsistent with his duties under
this Agreement. The Executive shall perform his duties at the Company's
principal executive offices in Minneapolis, Minnesota or at such other
location as may be mutually agreed upon by the Executive and the Company;
provided that the Executive shall travel to other locations at such times as
may be necessary for the performance of his duties under this Agreement.
2. TERM OF EMPLOYMENT. Unless sooner terminated as provided in paragraph
4 below, the term of this Agreement shall commence on the date hereof and shall
continue through December 31, 1999; provided that the term shall be
automatically extended for one year on each January 1st commencing January 1,
1998 unless either party gives written notice to the other prior to the date on
which the automatic extension would be effective.
3. COMPENSATION AND BENEFITS. During the term of this Agreement, the
Executive shall be entitled to the following compensation and benefits:
(a) BASE SALARY. As compensation for the Executive's services, the
Executive shall be paid a base salary at a minimum annual rate of $600,000
payable in accordance with the Company's customary payroll policy, which salary
shall be reviewed and may be increased from time to time at the discretion of
the Board of Directors (the "Base Salary"); provided that the amount of the Base
Salary shall not be reduced after it has been increased by the Board of
Directors without the Executive's written consent.
(b) BONUS. The Executive shall, in addition to the Base Salary, also be
entitled to a cash or deferred annual bonus (the "Annual Bonus") based on the
achievement by the Company of performance goals established by the Personnel
Committee of the Company's Board of Directors.
(c) STOCK INCENTIVES. The Executive shall be eligible to receive stock
options, restricted stock and stock appreciation rights under any stock based
plan from time to time adopted by the Company (the "Stock Plans"), including the
Time Accelerated Restricted Stock Award Program ("TARSAP"), at least on the same
basis as other executive officers of the Company as from time to time determined
by the Board of Directors or Personnel Committee thereof of the Company.
(d) REIMBURSEMENT OF EXPENSES. The Company shall reimburse the Executive
for all business expenses properly documented, including without limitation, the
Executive's legal fees incurred in the preparation of this Agreement.
(e) AUTOMOBILE. The Company shall provide to Executive, in accordance
with the Company's practice from time to time for senior executives, with the
use of a full-size automobile and all related expenses associated therewith.
2
<PAGE>
(f) CLUB DUES AND FEES. The Company shall pay the initiation fees, annual
dues and assessments for the Executive for business and country clubs as
selected by the Executive. Upon termination of employment of Executive under
any circumstances, Executive shall be entitled to purchase said memberships from
Employer for an amount equal to the original initiation fee for the respective
club.
(g) INSURANCE. The Company shall, at its expense, provide the Executive
with insurance coverage under an individual policy of life insurance in an
amount equal to five (5) times Executive's Base Salary; provided, that, if the
Executive is not insurable at standard rates, the Company shall purchase such
coverage in an amount that can be purchased with the premiums that would have
been paid had the Executive been insurable at standard rates; and provided
further, that if the Executive is not insurable, the Company shall pay such
premiums to Executive, as additional compensation. Such individual insurance
policy shall be a term insurance policy. Upon termination of employment of
Executive under any circumstances, at the Executive's option, the Company shall,
at no cost to the Executive, transfer to Executive the life insurance policy
maintained by the Company under this paragraph 3(g).
(h) OTHER BENEFITS. The Executive shall be entitled to participate and
shall be included in any employee benefit plan, pension plan, supplemental
employee retirement plan, fringe benefit programs or similar plan of the Company
now existing or established hereafter to the extent that he is eligible under
the general provisions thereof.
4. TERMINATION OF EMPLOYMENT.
(a) DEATH OR DISABILITY. In the event of the Executive's death or
disability as defined in the Company's long term disability plan then in effect,
the employment of the Executive hereunder shall terminate and the Company's
obligation to make further Base Salary and Annual Bonus (to the extent not yet
earned) payments hereunder shall thereupon terminate as of the end of the month
in which such death or disability occurs. The Executive's (and his
beneficiaries') rights to other compensation and benefits shall be determined
under the Company's benefit plans and policies applicable to Company executives
then in effect.
(b) TERMINATION FOR CAUSE BY THE COMPANY. By following the procedure set
forth in paragraph 4(e), the Company shall have the right to terminate the
employment of the Executive for "Cause" in the event the Executive: (i) has
engaged in willful and recurring misconduct in not following the legitimate
directions of the Board of Directors of the Company; (ii) has been convicted of
a felony and all appeals from such conviction have been exhausted; (iii) has
engaged in habitual drunkenness; (iv) has been excessively absent from work
which absence is not related to disability, illness, sick leave or vacations; or
(v) has engaged in continuous conflicts of interest between his personal
interests and the interests of the Company. If the employment of the Executive
is terminated by the Company for Cause, the Company's obligation to make further
Base Salary and Annual Bonus (to the extent not yet earned) payments hereunder
shall thereupon terminate, except the Executive shall receive the Base Salary
through the end of the month during which such a termination occurs. The
Executive's rights to other
3
<PAGE>
compensation and benefits shall be determined under the Company's benefit
plans and policies applicable to executives of the Company then in effect.
(c) TERMINATION FOR GOOD REASON BY THE EXECUTIVE. By following the
procedure set forth in paragraph 4(e), the Executive shall have the right to
terminate the Executive's employment with the Company for "Good Reason" in the
event (i) the Executive is not at all times the duly elected Chairman of the
Board and Chief Executive Officer of the Company; (ii) there is any material
reduction in the scope of the Executive's authority and responsibility
(provided, however, in the event of any illness or injury which disables the
Executive from performing the Executive's duties, the Company may reassign the
Executive's duties to one or more other employees until the Executive is able to
perform such duties); (iii) there is a reduction in the Executive's Base Salary,
an amendment to any stock incentive plan, pension plan or supplemental employee
retirement plan applicable to the Executive which is materially adverse to the
Executive, or a material reduction in the other benefits to which the Executive
is entitled under paragraph 3(h) above; (iv) the Company requires the
Executive's principal place of employment to be anywhere other than the
Company's principal executive offices, or there is a relocation of the Company's
principal executive offices outside of Minneapolis, Minnesota; or (v) the
Company otherwise fails to perform its obligations under this Agreement. If the
employment of the Executive is terminated by the Executive for Good Reason
before a Change in Control (as defined in the CIC Agreement), the Executive
shall be entitled to the severance benefits set forth in paragraph 4(f) below.
(d) TERMINATION WITHOUT CAUSE. The Company may terminate the Executive's
employment without Cause prior to the expiration of the term of this Agreement.
If the employment of the Executive is terminated by the Company without Cause
before a Change in Control, the Executive shall be entitled to the severance
benefits set forth in paragraph 4(f) below.
(e) NOTICE AND RIGHT TO CURE.
(i) TERMINATION BY COMPANY FOR CAUSE. If the Company proposes to
terminate the employment of the Executive for Cause under paragraph 4(b),
the Company shall give written notice to the Executive specifying the
reasons for such proposed determination with particularity and, in the case
of a termination for Cause under paragraphs 4(b)(i) (including any breach
of the provisions of paragraph 5 below), (iii) or (iv), the Executive shall
have a reasonable opportunity to correct any curable situation to the
reasonable satisfaction of the Board of Directors of the Company, which
period shall be no less than thirty (30) days from the Executive's receipt
of the notice of proposed termination. Notwithstanding the foregoing, the
Executive's employment shall not be terminated for Cause unless and until
there shall be delivered to the Executive a copy of the resolution duly
adopted by the affirmative vote of not less than the majority of the
members of the Board of Directors of the Company at a meeting called and
held for the purpose (after reasonable notice to the Executive and an
opportunity for the Executive, together with his legal counsel, to be heard
before the Board of Directors)
4
<PAGE>
finding that, in the opinion of the Company's Board of Directors, the
Executive has engaged in conduct justifying a termination for Cause.
(ii) TERMINATION BY EXECUTIVE FOR GOOD REASON. If the Executive
proposes to terminate his employment for Good Reason under paragraph 4(c)
above, the Executive shall give written notice to the Company, specifying
the reason therefor with particularity. In the event the Executive
proposes to terminate his employment for Good Reason under paragraph
4(c)(i), (ii), (iii) or (iv) above, the termination shall be effective on
the date of such notice. In the event the Executive proposed to terminate
his employment for Good Reason under paragraph 4(c)(v) above, the Company
will have an opportunity to correct any curable situation to the reasonable
satisfaction of the Executive within the period of time specified in the
notice which shall not be less than thirty (30) days. If such correction
is not so made or the circumstances or situation is such that it is not
curable, the Executive may, within thirty (30) days after the expiration of
the time so fixed within which to correct such situation, give written
notice to the Company that his employment is terminated for Good Reason
effective forthwith.
(f) SEVERANCE BENEFITS. If the Executive is entitled to severance
benefits under this paragraph 4(f) pursuant to paragraph 4(c) or (d), the
Executive shall be provided to the following benefits:
(i) BASE SALARY. The Company shall continue to pay to the Executive
his Base Salary when and as such Base Salary would have been paid from the
date of termination (the "Termination Date") through the third anniversary
of the Termination Date (the "Severance Period") as if the Executive
continued to be employed by the Company during the Severance Period and
regardless of the death or disability of the Executive subsequent to the
date of termination.
(ii) ANNUAL BONUS. If the effective date of such termination occurs
before the Annual Bonus for any preceding calendar year has been paid, the
Company shall pay to the Executive the amount of the Executive's Annual
Bonus for such preceding calendar year when and as it would have been paid
if the Executive remained employed by the Company. In addition, the
Company shall pay the Executive an amount equal to the average of the
Annual Bonus paid or payable to the Executive in respect of the three
calendar years immediately preceding the year in which the termination
occurs for each calendar year ending during the Severance Period, which
amounts shall be paid no later than 30 days after the end of each such
calendar year as if the Executive remained employed by the Company (and
regardless of the death or disability of the Executive subsequent to the
date of termination).
(iii) DISABILITY, LIFE INSURANCE AND MEDICAL/DENTAL COVERAGES. The
Executive shall be entitled to the disability coverage, life insurance and
medical/dental coverage which he and/or his family received under
paragraphs 3(g) and (h) as if he continued to be employed by the Company
during the Severance Period, the Company shall pay the
5
<PAGE>
full cost of disability coverage and life insurance reasonably equivalent
to the benefits provided to Executive when he was an employee, and shall
pay an amount equal to the employer's portion of medical/dental coverage
during said term (in each case whether such coverage or insurance was
provided by the Company or any of the TCF Subsidiaries); provided that if
Executive obtains new employment with comparable benefits during the
Severance Period, all entitlements under this paragraph 4(f)(iii) shall
cease. Nothing in this paragraph shall be construed as providing Executive
with coverage under any plan of Employer to which Executive would not
otherwise be entitled and in the event any coverage is unavailable, e.g.,
if Executive is uninsurable, Employer's obligations under this paragraph
may be satisfied by paying to Executive the cost of such coverage if it
were available, as determined in good faith by the Company.
(iv) CONTINUED VESTING AND ACCRUAL. If the Executive participated in
any retirement plans of the Company or TCF Subsidiaries which are based on
the number of years of service with the Company, including pension or
retirement plans, or the Executive is entitled to any other non-stock based
compensatory arrangement or benefits, the Executive shall be treated as
employed by the Company for the compensation payable under paragraph
4(f)(i) and (ii) during the Severance Period, including for the purposes of
benefit accrual and vesting of benefits.
(v) STOCK INCENTIVES. Not later than thirty (30) days after the date
on which the Executive's employment terminates, the Company shall pay the
Executive a lump sum cash payment equal to the sum of:
(A) the amount by which the fair market value (determined as of
the Termination Date) of the number of shares of stock subject to any
stock option which is forfeited or which otherwise becomes
nonexercisable by the Executive by reason of his termination of
employment exceeds the option price for such shares;
(B) such additional amounts (or the fair market value of such
additional property) in excess of the amount determined pursuant to
paragraph 4(f)(v) (A) that would have been paid or distributed to the
Executive upon his exercise of any such forfeited stock options, had
such options been exercisable, and exercised, by the Executive as of
the Termination Date;
(C) an amount equal to the fair market value (determined as of
the Termination Date) of any shares of restricted stock forfeited by
the Executive by reason of his termination of employment; and
(D) an amount equal to the amount that the Executive would have
received if any stock appreciation right which is forfeited or which
otherwise becomes nonexercisable by the Executive by reason of his
termination of employment had been exercisable, and exercised, by
Executive as of the Termination Date.
6
<PAGE>
It is understood and agreed that the payments under this paragraph 4(f)(v)
is to occur only to the extent Executive is not entitled to exercise his
options or stock appreciation rights, or to retain or receive his
restricted stock, after the termination of his employment under the
provisions of Executive's stock option, restricted stock, or stock
appreciation rights agreements.
(g) BENEFITS IN LIEU OF SEVERANCE PAY POLICY. The severance benefits
provided for in this paragraph 4 are in lieu of any benefits that would
otherwise be provided to the Executive under the Company's severance pay policy
and the Executive shall not be entitled to any benefits under the Company's
severance pay policy.
(h) NO FUNDING OF SEVERANCE. Nothing contained in this Agreement or
otherwise shall require the Company to segregate, earmark or otherwise set aside
any funds or other assets to provide for any payments required to be made under
this paragraph 4 and the rights of the Executive to the severance benefits
hereunder shall be solely those of a general, unsecured creditor of the Company.
However, the Company may, in its discretion, deposit cash or property, or a
combination of both, equal in value to all or a portion of the amounts
anticipated to be payable hereunder into a trust, the assets of which are to be
distributed by such times as determined by the trustee of such trust; provided
that such assets shall be subject at all times to the rights of the Company's
general creditors.
(i) TERMINATION AFTER CHANGE IN CONTROL. Upon or within twenty-four
months after a Change in Control (as defined in the CIC Agreement) if the
employment of the Executive is terminated for any reason by the Executive or by
the Company other than a termination by the Company for Cause, the Executive
shall be entitled to the severance benefits set forth in paragraph 2 of the CIC
Agreement.
5. COVENANT NOT TO COMPETE; NON-SOLICITATION COVENANT.
(a) COVENANT NOT TO COMPETE. While Executive is actively employed by the
Company and, in the event of a termination of employment other than (i) a
termination by the Company without Cause, (ii) a termination by the Executive
for Good Reason or (iii) a termination for any reason after a Change in Control,
for a period of one year after such termination of the Executive's employment,
the Executive agrees that he will not directly or indirectly substantially
compete with the Company or the TCF Subsidiaries. The Executive shall be deemed
to be substantially competing with the Company and the TCF Subsidiaries if,
without the prior written approval of the Board of Directors of the Company, he
becomes an officer, employee, agent, partner or director of any financial
business enterprise in Iowa, Michigan, Minnesota, North Dakota, Ohio, South
Dakota, Wisconsin, or the Chicago metropolitan area.
(b) NON-SOLICITATION COVENANT. While the Executive is actively employed
with the Company and, in the event of a termination of employment by the Company
or the Executive for any reason prior to a Change in Control, for a period of
one year after the Executive's termination of employment, the Executive agrees
that, except with the prior written permission
7
<PAGE>
of the Board of Directors of the Company, he will not offer to hire, entice
away, or in any manner attempt to persuade any officer, employee, or agent of
the Company or any of the TCF Subsidiaries to discontinue his or her
relationship with the Company or any of the TCF subsidiaries nor will he
directly or indirectly solicit, divert, take away or attempt to solicit any
business of the Company or any of its subsidiaries as to which Executive has
acquired any knowledge during the term of his employment with the Company.
(c) REMEDIES. If the Executive commits a breach, or threatens to commit a
breach, of any of the provisions of this paragraph 5, the Company shall have the
following rights and remedies, in addition to any rights and remedies otherwise
available at law or equity:
(i) The right and remedy to have the provisions of this paragraph 5
specifically enforced by any court having equity jurisdiction, it being
acknowledged and agreed by the Executive that any such breach or threatened
breach will cause irreparable injury to the Company and the TCF
Subsidiaries and that money damages will not provide an adequate remedy to
the Company and the TCF Subsidiaries; and
(ii) The right and remedy to require the Executive to account for and
pay over to the Company all compensation, profits, monies, accruals,
increments, or other benefits, other than those payable under this
Agreement, derived or received by the Executive or the enterprise in
competition with the Company or any of the TCF Subsidiaries as the result
of any transactions constituting a breach of any part of this paragraph 5,
and Executive agrees to account for and pay over to the Company such
amounts promptly upon demand therefor.
6. BENEFICIARIES. In the event of the Executive's death after his
termination of employment, any amount or benefit payable or distributable to him
pursuant to this Agreement shall be paid to the beneficiary designated by the
Executive for such purpose in the last written instrument received by the
Company prior to the Executive's death, if any, or, if no beneficiary has been
designated, to the Executive's estate, but such designation shall not be deemed
to supersede any beneficiary designation under any benefit plan of the Company.
Whenever this Agreement provides for the written designation of a beneficiary of
beneficiaries of the Executive, the Executive shall have the right to revoke
such designation and to redesignate a beneficiary or beneficiaries by written
notice to either the Company to such effect, except to the extent, if any,
restricted by law.
7. RIGHTS IN THE EVENT OF DISPUTE. In the event of a dispute between the
Company and the Executive regarding his employment or this Agreement, it is the
intention of this Agreement that the dispute shall be resolved as expeditiously
as possible, consistent with fairness to both sides, and that during pendency of
the dispute the Executive and the Company shall be on equal footing, as follows:
(a) ARBITRATION. Any claim or dispute relating to the Executive's
employment or the terms and performance of this Agreement, shall be resolved by
binding private arbitration before
8
<PAGE>
three arbitrators and any award rendered by any arbitration panel, or a
majority thereof, may be filed and a judgment obtained in any court having
jurisdiction over the parties unless the relief granted in the award is
delivered within ten (10) days of the award. Either party may request
arbitration by written notice to the other party. Within thirty (30) days of
receipt of such notice by the opposing party, each party shall appoint a
disinterested arbitrator and the two arbitrators selected thereby shall
appoint a third neutral arbitrator; in the event the two arbitrators cannot
agree upon the third arbitrator within then (10) days after their
appointment, then the neutral arbitrator shall be appointed by the Chief
Judge of Hennepin County (Minnesota) District Court. Any arbitration
proceeding conducted hereunder shall be in the City of Minneapolis and shall
follow the procedures set forth in the Rules of Commercial Arbitration of the
American Arbitration Association, and both sides shall cooperate in as
expeditious a resolution of the proceeding as is reasonable under the
circumstances. The arbitration panel shall have the power to enter any
relief it deems fair and just on any claim, including interim and final
equitable relief, along with any procedural order that is reasonable under
the circumstances.
(b) EXPENSES OF PROSECUTION/DEFENSE OF CLAIM. During the pendency of a
dispute between the Company and the Executive relating to the Executive's
employment or the terms or performance of this Agreement, the Company shall
promptly pay the Executive's reasonable expenses of representation upon delivery
of periodic billings for same, provided that (i) Executive (or a person claiming
on his behalf) shall promptly repay all amounts paid hereunder at the conclusion
of the dispute if the resolution thereof includes a finding that the Executive
did not act in good faith in the matter in dispute or in the dispute proceeding
itself, and (ii) no claim for expenses of representation shall be submitted by
the Executive or any person acting on his behalf unless made in writing to the
Board of Directors within one year of the performance of the services for which
such claim is made.
8. NO OBLIGATION TO MITIGATE DAMAGES. In the event the Executive becomes
eligible to receive compensation or benefits subsequent to the termination of
his employment under this Agreement, the Executive shall have no obligation to
seek other employment in an effort to mitigate damages. To the extent the
Executive shall accept other employment after his termination of employment, the
compensation and benefits received from such employment shall not reduce the
compensation and benefits otherwise due under this Agreement, except as provided
in paragraph 4(f)(iii) above.
9. OTHER BENEFITS. The benefits provided under this Agreement shall,
except to the extent otherwise specifically provided herein, be in addition to,
and not in derogation or diminution of, any benefits that Executive or his
beneficiary may be entitled to receive under any other plan or program now or
hereafter maintained by the Company, or its subsidiaries. The parties expressly
agree that the Executive shall be entitled to the compensation and benefits as
set forth in the CIC Agreement and nothing contained in this Agreement shall
reduce or limit the compensation and benefits to which the Executive is entitled
under the CIC Agreement.
9
<PAGE>
10. SUCCESSORS. The Company shall require any successor (whether direct
or indirect, by purchase, merger, consolidation, or otherwise) to all or
substantially all of the business and/or assets of the Company, to expressly
assume and agree to perform its obligations under this Agreement in the same
manner and to the same extent that the Company would be required to perform them
if no succession had taken place unless, in the opinion of legal counsel
mutually acceptable to the Company and the Executive, such obligations have been
assumed by the successor as a matter of law. Failure of the Company to obtain
such agreement prior to the effectiveness of any such succession (unless the
foregoing opinion is rendered to the Executive) shall entitle the Executive to
terminate his employment and to receive the payments provided for in paragraph
4(f) above as if the Executive terminated this Agreement for Good Reason. The
Executive's rights under this Agreement shall inure to the benefit of, and shall
be enforceable by, the Executive's legal representative or other successors in
interest, but shall not otherwise be assignable or transferable.
11. SEVERABILITY. If any provision of this Agreement or the application
thereof is held invalid or unenforceable, the invalidity or unenforceability
thereof shall not affect any other provisions or applications of this Agreement
which can be given effect without the invalid or unenforceable provision or
application.
12. SURVIVAL. The rights and obligations of the parties pursuant to this
Agreement shall survive the term of the employment to the extent that any
performance is required hereunder after the expiration or termination of such
term.
13. NOTICES. All notices under this Agreement shall be in writing and
shall be deemed effective when delivered in person (in the Company's case, to
its Secretary) or 48 hours after deposit thereof in the U.S. mails, postage
prepaid, addressed, in the case of the Executive, to his last known address as
carried on the personnel records of the Company and, in the case of the Company,
to the corporate headquarter,s, attention of the Secretary, or to such other
address as the party to be notified may specify by written notice to the other
party.
14. PRIOR AGREEMENTS. This Agreement supersedes and replaces all prior
agreements or understandings of terms of the Executive's employment with the
Company, including the Prior Agreement. This Agreement does not supersede or
replace the CIC Agreement or any agreements between the Company and Executive
pursuant to any plans or programs of the Company, including any stock option
agreement, restricted stock agreement or supplemental retirement agreement.
15. AMENDMENTS AND CONSTRUCTION. This Agreement may only be amended in a
writing signed by the parties hereto. This Agreement shall be construed under
the laws of the State of Minnesota. Paragraph headings are for convenience only
and shall not be considered a part of the terms and provisions of the Agreement.
10
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
day and year first written above.
TCF FINANCIAL CORPORATION
ATTEST:
By /s/ Thomas A. Cusick
----------------------------
/s/ Gregory J. Pulles Its Vice Chairman
- ------------------------------- ----------------------------
Vice Chairman, General Counsel
and Secretary
WITNESS:
/s/ Miriam A. Enge /s/ William A. Cooper
- ------------------------------- -------------------------------
William A. Cooper
11
<PAGE>
CHANGE IN CONTROL AGREEMENT
THIS AGREEMENT, made and entered into as of July 1, 1996 between TCF
FINANCIAL CORPORATION, a Delaware corporation (the "Company") and WILLIAM A.
COOPER (the "Executive").
R E C I T A L S:
WHEREAS, the Executive is now and has been Chairman of the Board and
Chief Executive Officer of the Company;
WHEREAS, the Executive and the Company are contemporaneous with the
execution and delivery of this Agreement entering into an employment
agreement (the "Employment Agreement");
WHEREAS, the Board of Directors of the Company believes it is imperative
to diminish the inevitable distraction of the Executive by virtue of the
personal uncertainties and risks created by any pending or threatened Change
in Control (as defined below) of the Company; and
WHEREAS, as a partial inducement for the Executive to enter into the
Employment Agreement with the Company, the Company desires to provide the
Executive with certain compensation and benefits in the event a Change in
Control of the Company occurs,
NOW, THEREFORE, in consideration of the mutual premises and agreements
set forth herein, the parties hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall
have the following meanings:
(a) CHANGE IN CONTROL. A "Change in Control" shall be deemed to have
occurred if, prior to the expiration of the term of the Employment Agreement:
(i) the shareholders of the Company adopt a resolution providing for
the dissolution, liquidation, merger, consolidation, or other corporate
reorganization of the Company under circumstances in which the Company will
not be the surviving party; or
(ii) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934) (other than the Company or any of
its subsidiaries or any employee benefit plan of the Company or any of its
subsidiaries) becomes a beneficial owner, directly or indirectly, of
securities of the Company representing 25% or more of the voting power of
all of the Company's then outstanding securities; or
(iii) during any period of two consecutive years individuals who at
the beginning of such period constituted the Board of Directors of the
Company (the "Incumbent
1
<PAGE>
Directors") together with any director (the "New Incumbent Director")
whose nomination or election was approved by at least two-thirds of
the Incumbent Directors and any New Incumbent Director who was previously
elected, in each case who are directors at the time of the nomination or
election of such director cease for any reason to constitute at least a
majority, the Board of Directors of the Company; or
(iv) the Board of Directors of the Company approves the sale of all,
or substantially all, of the business or assets of the Company.
(b) TERMINATION DATE. "Termination Date" means the date on which the
Executive's employment with the Company is terminated.
2. TERMINATION UPON CHANGE IN CONTROL. In the event of a Change in
Control, and within twenty-four (24) months after such Change in Control, the
Executive terminates his employment for any reason or the Executive's employment
is terminated by the Company for any reason other Cause (as defined in the
Employment Agreement), then the Executive shall be entitled to the following
severance benefits (which benefits in either case are referred to as the
"Termination Payments"):
(a) BASE SALARY. The Company shall pay the Executive a lump sum cash
payment, no later than thirty (30) days after the date on which his employment
terminates, in an amount equal to the Base Salary (as defined in the Employment
Agreement) multiplied by three (3).
(b) ANNUAL BONUS. If the Termination Date (as defined below) occurs
before the Annual Bonus (as defined in the Employment Agreement) for any
preceding calendar year has been paid, the Company shall pay to the Executive
the amount of the Executive's Annual Bonus for such preceding calendar year as
soon as it is determinable. In addition, not later than thirty (30) days after
the date on which the Executive's employment terminates, the Company shall pay
the Executive a lump such cash payment equal to the average of the Annual Bonus
paid or payable to the Executive in respect of the three calendar years
immediately preceding the year in which the Change in Control occurred
multiplied by three (3).
(c) INSURANCE. The Company shall, at its expense, continue the insurance
coverage provided to the Executive under paragraph 3(g) of the Employment
Agreement from the Termination Date through the earlier to occur of (i) the
third anniversary of the Termination Date or (ii) the date on which Executive
obtains comparable coverage provided by a new employer.
(d) STOCK INCENTIVES. Not later than thirty (30) days after the date on
which the Executive's employment terminates, the Company shall pay the Executive
a lump sum cash payment equal to the sum of:
(i) the amount by which the fair market value (determined as of the
Termination Date) of the number of shares of stock subject to any stock
option which is forfeited or
2
<PAGE>
which otherwise becomes nonexercisable by the Executive by reason of his
termination of employment exceeds the option price for such shares;
(ii) such additional amounts (or the fair market value of such
additional property) in excess of the amount determined pursuant to
paragraph 1(d)(i) that would have been paid or distributed to the Executive
upon his exercise of any such forfeited stock options, had such options
been exercisable, and exercised, by the Executive as of the Termination
Date;
(iii) an amount equal to the fair market value (determined as of the
Termination Date) of any shares of restricted stock forfeited by the
Executive by reason of his termination of employment; and
(iv) an amount equal to the amount that the Executive would have
received if any stock appreciation right which is forfeited or which
otherwise becomes nonexercisable by the Executive by reason of his
termination of employment had been exercisable, and exercised, by Executive
as of the Termination Date.
It is understood and agreed that the payments under this paragraph 1(d) is to
occur only to the extent Executive is not entitled to exercise his options or
stock appreciation rights, or to retain or receive his restricted stock,
after the termination of his employment under the provisions of Executive's
stock option, restricted stock, or stock appreciation rights agreements. The
provisions of this paragraph 1(d) shall not apply to any restricted stock
grants under any agreement with the Company, including the OSPIP Agreement or
the TARSAP Agreement, in the event a "Change in Control" shall have occurred
within the meaning of any such agreement.
3. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) GROSS-UP PAYMENT. Anything to the contrary notwithstanding, in the
event it shall be determined that any payment, distribution or benefit made
or provided by the Company to or for the benefit of the Executive (whether
pursuant to this Agreement or otherwise) (a "Payment"), would be subject to
the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986,
as amended, (the "Code") or any interest or penalties with respect to such
excise tax (such excise tax, together with any such interest and penalties,
are collectively referred to as the "Excise Tax"), then the Company shall pay
the Executive in cash an amount (the "Gross-Up Payment") such that after
payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including but not limited to income
taxes (and any interest and penalties imposed with respect thereto) and the
Excise Tax, imposed upon the Gross-Up Payment, the Executive retains an
amount of the Gross-up Payment equal to the Excise Tax imposed on the
Payments.
(b) DETERMINATION OF GROSS-UP PAYMENT. Subject to paragraph 3(c) below,
all determinations required to be made under this paragraph 2, including whether
a Gross-Up Payment is required and the amount of the Gross-Up Payment, shall be
made by the firm of
3
<PAGE>
independent public accountants selected by the Company to audit its financial
statements for the year immediately preceding the Change in Control (the
"Accounting Firm") which shall provide detailed supporting calculations to
the Company and the Executive within thirty (30) days after the Termination
Date. In the event that the Accounting Firm is serving as accountant or
auditor for the individual, entity or group effecting the Change in Control,
the Executive shall appoint another nationally recognized accounting firm to
make the determinations required under this paragraph 3 (which accounting
firm shall then be referred to as the "Accounting Firm"). All fees and
expenses of the Accounting Firm in connection with the work it performs
pursuant to this paragraph 3 shall be promptly paid by the Company. An
Gross-Up Payment (as determined pursuant to this paragraph 3) shall be paid
by the Company to the Executive within five (5) days of the receipt of the
Accounting Firm's determination. If the Accounting Firm determines that no
Excise Tax is payable by the Executive, it shall furnish the Executive with a
written opinion that failure to report the Excise Tax on the Executive's
applicable federal income tax return would not result in the imposition of a
negligence or a similar penalty. Any determination by the Accounting Firm
shall be binding upon the Company and the Executive. As a result of the
uncertainty in the application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm, it is possible that Gross-up
Payments which will not have been made by the Company should have been made
("Underpayment"). In the event that the Company exhausts its remedies
pursuant to paragraph 3(c) below, and the Executive is thereafter required to
make a payment of Excise Tax, the Accounting Firm shall promptly determine
the amount of the Underpayment that has occurred and any such Underpayment
shall be paid by the Company to the Executive within five (5) days after such
determination.
(c) CONTEST. The Executive shall notify the Company in writing of any
claim made by the Internal Revenue Service that, if successful, would require
the Company to pay a Gross-Up Payment. Such notification shall be given as
soon as practicable but no later than ten (10) business days after the
Executive knows of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the thirty (30)
day period following the date on which it gives such notice to the Company
(or such shorter period ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies the Executive in
writing prior to the expiration of such period that it desires to contest
such claim, the Employee shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim;
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, without
limitation, accepting legal representation with respect to such claim by an
attorney selected by the Company and reasonably acceptable to the
Executive;
(iii) cooperate with the Company in good faith in order effectively to
contest such claim;
4
<PAGE>
(iv) permit the Company to participate in any proceedings relating to
such claim; provided, however, that the Company shall bear and pay directly
all costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify and hold the
Executive harmless, on an after-tax basis, for any Excise Tax or income
tax, including interest and penalties with respect thereto, imposed as a
result of such representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this paragraph 3(c), the Company
shall control all proceedings taken in connection with such contest and, at
its sole option, may pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect
of such claim and may, at its sole option, either direct the Executive to
pay the tax claimed and sue for a refund or contest the claim in any
permissible manner, and the Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to
pay such claim and sue for a refund, the Company shall advance the amount
of such payment to the Executive, on an interest-free basis, from any
Excise Tax or income tax, including interest or penalties with respect
thereto, imposed with respect to such advance or with respect to any
imputed income with respect to such advance; and further provided that any
extension of the statute of limitations relating to payment of taxes for
the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder
and the Executive shall be entitled to settle or contest, as the case may
be, any other issue raised by the Internal Revenue Service or any other
taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to paragraph 3(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of paragraph 3(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to paragraph 3(c), a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of thirty (30)
days after such determination, then such advance shall be forgiven and shall not
be required to be repaid and the amount of such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be paid.
4. BENEFITS IN LIEU OF SEVERANCE PAY POLICY. The severance benefits
provided for in paragraph 2 are in lieu of any benefits that would otherwise be
provided to the Executive under the Company's severance pay policy and the
Executive shall not be entitled to any benefits under the Company's severance
pay policy.
5
<PAGE>
5. RIGHTS IN THE EVENT OF DISPUTE. In the event of a dispute between the
Company and the Executive regarding this Agreement, it is the intention of this
Agreement that the dispute shall be resolved as expeditiously as possible,
consistent with fairness to both sides, and that during pendency of the dispute
the Executive and the Company shall be on equal footing, as follows:
(a) ARBITRATION. Any claim or dispute relating to the terms and
performance of this Agreement, shall be resolved by binding private arbitration
before three arbitrators and any award rendered by any arbitration panel, or a
majority thereof, may be filed and a judgment obtained in any court having
jurisdiction over the parties unless the relief granted in the award is
delivered within ten (10) days of the award. Either party may request
arbitration by written notice to the other party. Within thirty (30) days of
receipt of such notice by the opposing party, each party shall appoint a
disinterested arbitrator and the two arbitrators selected thereby shall appoint
a third neutral arbitrator; in the event the two arbitrators cannot agree upon
the third arbitrator within then (10) days after their appointment, then the
neutral arbitrator shall be appointed by the Chief Judge of Hennepin County
(Minnesota) District Court. Any arbitration proceeding conducted hereunder
shall be in the City of Minneapolis and shall follow the procedures set forth in
the Rules of Commercial Arbitration of the American Arbitration Association, and
both sides shall cooperate in as expeditious a resolution of the proceeding as
is reasonable under the circumstances. The arbitration panel shall have the
power to enter any relief it deems fair and just on any claim, including interim
and final equitable relief, along with any procedural order that is reasonable
under the circumstances.
(b) EXPENSES OF PROSECUTION/DEFENSE OF CLAIM. During the pendency of a
dispute between the Company and the Executive relating to the terms or
performance of this Agreement, the Company shall promptly pay the Executive's
reasonable expenses of representation upon delivery of periodic billings for
same, provided that (i) Executive (or a person claiming on his behalf) shall
promptly repay all amounts paid hereunder at the conclusion of the dispute if
the resolution thereof includes a finding that the Executive did not act in good
faith in the matter in dispute or in the dispute proceeding itself, and (ii) no
claim for expenses of representation shall be submitted by the Executive or any
person acting on his behalf unless made in writing to the Board of Directors
within one year of the performance of the services for which such claim is made.
6. OTHER BENEFITS. The benefits provided under this Agreement shall,
except to the extent otherwise specifically provided herein, be in addition to,
and not in derogation or diminution of, any benefits that Executive or his
beneficiary may be entitled to receive under any other plan or program now or
hereafter maintained by the Company, or its subsidiaries.
7. SUCCESSORS. The Company shall require any successor (whether direct
or indirect, by purchase, merger, consolidation, or otherwise) to all or
substantially all of the business and/or assets of the Company, to expressly
assume and agree to perform its obligations under this Agreement in the same
manner and to the same extent that the Company would be required to perform them
if no succession had taken place unless, in the opinion of legal counsel
mutually
6
<PAGE>
acceptable to the Company and the Executive, such obligations have been
assumed by the successor as a matter of law. The Executive's rights under
this Agreement shall inure to the benefit of, and shall be enforceable by,
the Executive's legal representative or other successors in interest, but
shall not otherwise be assignable or transferable.
8. SEVERABILITY. If any provision of this Agreement or the application
thereof is held invalid or unenforceable, the invalidity or unenforceability
thereof shall not affect any other provisions or applications of this Agreement
which can be given effect without the invalid or unenforceable provision or
application.
9. SURVIVAL. The rights and obligations of the parties pursuant to this
Agreement shall survive the termination of the Executive's employment with the
Company to the extent that any performance is required hereunder after such
termination.
10. NOTICES. All notices under this Agreement shall be in writing and
shall be deemed effective when delivered in person (in the Company's case, to
its Secretary) or 48 hours after deposit thereof in the U.S. mails, postage
prepaid, addressed, in the case of the Executive, to his last known address
as carried on the personnel records of the Company and, in the case of the
Company, to the corporate headquarter,s, attention of the Secretary, or to
such other address as the party to be notified may specify by written notice
to the other party.
11. AMENDMENTS AND CONSTRUCTION. This Agreement may only be amended in
a writing signed by the parties hereto. This Agreement shall be construed
under the laws of the State of Minnesota. Paragraph headings are for
convenience only and shall not be considered a part of the terms and
provisions of the Agreement.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first written above.
TCF FINANCIAL CORPORATION
ATTEST:
By /s/ Thomas A. Cusick
-----------------------------------------
/s/ Gregory J. Pulles Its Vice Chairman
- --------------------------------- --------------------------------------
Vice Chairman, General Counsel
and Secretary
WITNESS:
/s/ Miriam A. Enge /s/ William A. Cooper
- --------------------------------- -------------------------------------------
William A. Cooper
7
<PAGE>
Exhibit 11 - Computation of Earnings Per Common Share
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
Computation of Earnings Per Common Share
(Dollars in thousands, except per-share data)
(Unaudited)
<TABLE>
<CAPTION>
Computation of Earnings Per Common Share Three Months Ended Six Months Ended
for Statements of Operations: June 30, June 30,
- ---------------------------------------- ------------------- -----------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income before extraordinary item $ 26,651 $ 23,394 $ 52,938 $ 11,755
Less: Dividends on preferred stock - - - 678
----------- ----------- ----------- -----------
Income applicable to common stock before
extraordinary item 26,651 23,394 52,938 11,077
Extraordinary item - - - (963)
----------- ----------- ----------- -----------
Income applicable to common stock $ 26,651 $ 23,394 $ 52,938 $ 10,114
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Weighted average number of common and common
equivalent shares outstanding:
Weighted average common shares outstanding 35,325,980 35,173,068 35,551,569 34,761,810
Dilutive effect of stock option plans and
common stock warrants after application
of treasury stock method 126,306 519,980 167,715 661,312
----------- ----------- ----------- -----------
35,452,286 35,693,048 35,719,284 35,423,122
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Earnings per common share:
Income before extraordinary item $ .75 $ .66 $ 1.48 $ .32
Extraordinary item - - - (.03)
----------- ----------- ----------- -----------
Net income $ .75 $ .66 $ 1.48 $ .29
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
<CAPTION>
Computation of Fully Diluted Earnings
Per Common Share (1):
<S> <C> <C> <C> <C>
Income before extraordinary item $ 26,651 $ 23,394 $ 52,938 $ 11,755
Add: Interest expense on 7 1/4% convertible
subordinated debentures 80 102 163 210
Less: Dividends on preferred stock - - - 678
----------- ----------- ----------- -----------
Income applicable to common stock before
extraordinary item 26,731 23,496 53,101 11,287
Extraordinary item - - - (963)
----------- ----------- ----------- -----------
Income applicable to common stock $ 26,731 $ 23,496 $ 53,101 $ 10,324
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Weighted average number of common and common
equivalent shares outstanding:
Weighted average common shares outstanding 35,325,980 35,173,068 35,551,569 34,761,810
Dilutive effect of stock option plans and
common stock warrants after application
of treasury stock method 126,306 534,240 167,715 705,776
Dilutive effect from assumed conversion of
7 1/4% convertible subordinated debentures 421,009 546,420 423,308 564,340
----------- ----------- ----------- -----------
35,873,295 36,253,728 36,142,592 36,031,926
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Earnings per common share:
Income before extraordinary item $ .75 $ .65 $ 1.47 $ .32
Extraordinary item - - - (.03)
----------- ----------- ----------- -----------
Net income $ .75 $ .65 $ 1.47 $ .29
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
(1) This calculation is submitted in accordance with Regulation S-K Item
601(b)(11) although not required by footnote 2 to paragraph 14 of APB
Opinion No. 15 because it results in dilution of less than 3%.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 2ND
QUARTER 1996 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 219,772
<INT-BEARING-DEPOSITS> 97,737
<FED-FUNDS-SOLD> 5,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,049,183
<INVESTMENTS-CARRYING> 3,821
<INVESTMENTS-MARKET> 3,821
<LOANS> 5,124,106
<ALLOWANCE> 69,243
<TOTAL-ASSETS> 7,000,871
<DEPOSITS> 5,052,557
<SHORT-TERM> 1,037,434
<LIABILITIES-OTHER> 65,381
<LONG-TERM> 321,711
0
0
<COMMON> 359
<OTHER-SE> 523,429
<TOTAL-LIABILITIES-AND-EQUITY> 7,000,871
<INTEREST-LOAN> 244,485
<INTEREST-INVEST> 41,692
<INTEREST-OTHER> 9,110
<INTEREST-TOTAL> 295,287
<INTEREST-DEPOSIT> 87,670
<INTEREST-EXPENSE> 124,957
<INTEREST-INCOME-NET> 170,330
<LOAN-LOSSES> 9,825
<SECURITIES-GAINS> 85
<EXPENSE-OTHER> 149,119
<INCOME-PRETAX> 85,047
<INCOME-PRE-EXTRAORDINARY> 52,938
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 52,938
<EPS-PRIMARY> 1.48
<EPS-DILUTED> 1.47
<YIELD-ACTUAL> 5.16
<LOANS-NON> 37,834
<LOANS-PAST> 220
<LOANS-TROUBLED> 1,592
<LOANS-PROBLEM> 36,229
<ALLOWANCE-OPEN> 65,695
<CHARGE-OFFS> 10,462
<RECOVERIES> 4,185
<ALLOWANCE-CLOSE> 69,243
<ALLOWANCE-DOMESTIC> 47,343
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 21,900
</TABLE>
