<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
March 31, 1997
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, 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 April 30, 1997
- ------------------------------ -----------------------------
Common Stock, $.01 par value 34,612,658 shares
1
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TCF FINANCIAL CORPORATION AND SUBSIDIARIES
INDEX
Part I. Financial Information Pages
-----
Item 1. Financial Statements
Consolidated Statements of Financial Condition
at March 31, 1997 and December 31, 1996. . . . . . . . . 3
Consolidated Statements of Operations for the
Three Months Ended March 31, 1997 and 1996 . . . . . . . 4
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1997 and 1996 . . . . . . . 5
Consolidated Statements of Stockholders' Equity for
the Year Ended December 31, 1996 and for the
Three Months Ended March 31, 1997. . . . . . . . . . . . 6
Notes to Consolidated Financial Statements . . . . . . . . 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations for the Three
Months Ended March 31, 1997 and 1996 . . . . . . . 9-23
Supplementary Information. . . . . . . . . . . . . . . . . 24-25
Part II. Other Information
Items 1-6 . . . . . . . . . . . . . . . . . . . . . . . . . . 26-28
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Index to Exhibits. . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2
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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
March 31, December 31,
1997 1996
---------- ----------
<S> <C> <C>
ASSETS
Cash and due from banks $ 187,103 $ 238,670
Interest-bearing deposits with banks 1,793 372,132
U.S. Government and other marketable securities
held to maturity (fair value of $3,918 and $3,910) 3,918 3,910
Federal Home Loan Bank stock, at cost 50,810 66,061
Securities available for sale (amortized cost of $1,249,907
and $995,352) 1,242,457 999,554
Loans held for sale 199,154 203,869
Loans:
Residential real estate 2,215,775 2,261,237
Commercial real estate 848,340 861,056
Commercial business 190,491 156,712
Consumer 1,852,771 1,801,066
Unearned discounts and deferred fees (78,636) (84,109)
---------- ----------
Total loans 5,028,741 4,995,962
Allowance for loan losses (71,475) (70,749)
---------- ----------
Net loans 4,957,266 4,925,213
Premises and equipment 137,559 128,743
Real estate:
Total real estate 16,696 16,898
Allowance for real estate losses (1,137) (1,127)
---------- ----------
Net real estate 15,559 15,771
Accrued interest receivable 44,050 42,173
Goodwill 25,052 9,897
Deposit base intangibles 13,501 10,843
Mortgage servicing rights 16,561 17,360
Other assets 69,336 56,666
---------- ----------
$6,964,119 $7,090,862
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Checking $1,294,916 $1,212,771
Passbook and statement 863,778 783,026
Money market 653,813 631,922
Certificates 2,479,387 2,349,911
---------- ----------
Total deposits 5,291,894 4,977,630
---------- ----------
Securities sold under repurchase agreements 328,977 293,732
Federal Home Loan Bank advances 630,307 1,141,040
Subordinated debt 13,392 13,397
Collateralized obligations 40,374 40,505
Other borrowings 28,325 5,144
---------- ----------
Total borrowings 1,041,375 1,493,818
Accrued interest payable 18,905 18,943
Accrued expenses and other liabilities 70,076 50,965
---------- ----------
Total liabilities 6,422,250 6,541,356
---------- ----------
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; 35,949,238 and 35,942,123 shares issued 359 359
Additional paid-in capital 253,186 251,536
Unamortized deferred compensation (22,128) (7,693)
Retained earnings, subject to certain restrictions 366,655 344,205
Loan to Executive Deferred Compensation Plan (52) (68)
Unrealized gain (loss) on securities available for sale, net (4,515) 2,376
Treasury stock, at cost, 1,352,027 and 1,185,018 shares (51,636) (41,209)
---------- ----------
Total stockholders' equity 541,869 549,506
---------- ----------
$6,964,119 $7,090,862
---------- ----------
---------- ----------
</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
March 31,
-----------------------------
1997 1996
---------- ----------
<S> <C> <C>
Interest income:
Loans $119,077 $122,850
Loans held for sale 3,513 4,574
Securities available for sale 21,383 20,351
Investments 1,163 1,118
---------- ----------
Total interest income 145,136 148,893
---------- ----------
Interest expense:
Deposits 42,158 44,696
Borrowings 16,960 19,743
---------- ----------
Total interest expense 59,118 64,439
---------- ----------
Net interest income 86,018 84,454
Provision for credit losses 1,090 2,802
---------- ----------
Net interest income after provision for credit losses 84,928 81,652
---------- ----------
Non-interest income
Fee and service charge revenues 25,638 22,600
ATM network revenues 3,536 2,512
Title insurance revenues 2,749 3,587
Commissions on sales of annuities 1,934 2,169
Gain on sale of loans held for sale 877 1,483
Gain on sale of securities available for sale 1,369 85
Gain on sale of loan servicing 1,622 -
Gain on sale of branches - 1,245
Other 2,656 2,148
---------- ----------
Total non-interest income 40,381 35,829
---------- ----------
Non-interest expense:
Compensation and employee benefits 39,716 36,434
Occupancy and equipment 13,578 12,837
Advertising and promotions 4,929 4,732
Federal deposit insurance premiums and assessments 1,071 3,161
Amortization of goodwill and other intangibles 1,095 795
Provision for real estate losses 98 448
Other 17,441 17,399
---------- ----------
Total non-interest expense 77,928 75,806
---------- ----------
Income before income tax expense 47,381 41,675
Income tax expense 18,450 15,388
---------- ----------
Net income $ 28,931 $ 26,287
---------- ----------
---------- ----------
Per common share:
Net income $ .83 $ .73
---------- ----------
---------- ----------
Dividends declared $ .1875 $ .15625
---------- ----------
---------- ----------
</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>
Three Months Ended
March 31,
------------------------------
1997 1996
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 28,931 $ 26,287
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 5,328 4,664
Amortization of goodwill and other intangibles 1,095 795
Amortization of fees, discounts and premiums 200 (45)
Proceeds from sales of loans held for sale 124,739 241,664
Principal collected on loans held for sale 2,594 2,908
Originations and purchases of loans held for sale (122,679) (225,894)
Net (increase) decrease in other assets and
liabilities, and accrued interest 9,950 (5,268)
Provisions for credit and real estate losses 1,188 3,250
Gain on sale of securities available for sale (1,369) (85)
Gain on sale of loan servicing (1,622) -
Gain on sale of branches - (1,245)
Other, net 666 (841)
---------- ----------
Total adjustments 20,090 19,903
---------- ----------
Net cash provided by operating activities 49,021 46,190
---------- ----------
Cash flows from investing activities:
Principal collected on loans 379,090 475,932
Loan originations (385,826) (403,645)
Net decrease in interest-bearing deposits with banks 370,339 82
Proceeds from sales of securities available for sale 154,079 16,630
Proceeds from maturities of and principal collected on
securities available for sale 40,086 49,614
Purchase of securities available for sale (364,536) -
Proceeds from redemption of FHLB stock 15,251 6,902
Net decrease in short-term federal funds sold 45,000 -
Proceeds from sales of real estate 4,544 8,392
Proceeds from sales of loan servicing 457 -
Purchases of premises and equipment (5,046) (3,847)
Acquisition of BOC Financial Corporation,
net of cash acquired (24,093) -
Sales of deposits, net of cash paid - (24,198)
Other, net 2,683 391
---------- ----------
Net cash provided by investing activities 232,028 126,253
---------- ----------
Cash flows from financing activities:
Net increase (decrease) in deposits 148,606 (16,323)
Proceeds from securities sold under repurchase agreements
and federal funds purchased 2,788,088 3,585,402
Payments on securities sold under repurchase agreements
and federal funds purchased (2,752,843) (3,670,570)
Proceeds from FHLB advances 156,770 307,517
Payments on FHLB advances (667,503) (369,519)
Proceeds from other borrowings 87,250 85,262
Payments on collateralized obligations and other borrowings (64,249) (110,608)
Repurchases of common stock (27,316) (1,401)
Other, net (1,419) 2,362
---------- ----------
Net cash used by financing activities (332,616) (187,878)
---------- ----------
Net decrease in cash and due from banks (51,567) (15,435)
Cash and due from banks at beginning of period 238,670 233,619
---------- ----------
Cash and due from banks at end of period $ 187,103 $ 218,184
---------- ----------
---------- ----------
Supplemental disclosures of cash flow information:
Cash paid for:
Interest on deposits and borrowings $ 59,930 $ 64,079
---------- ----------
---------- ----------
Income taxes $ 4,161 $ 19,461
---------- ----------
---------- ----------
</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>
Unrealized
Loan to Gain
Unamor- Executive (Loss) on
tized Deferred Securities
Additional Deferred Compen- Available
Number of Common Common Paid-in Compen- Retained sation for Sale, Treasury
Shares Issued Stock Capital sation Earnings Plan Net Stock Total
---------- -------- -------- --------- -------- ------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 35,604,531 $356 $243,122 $(11,195) $283,821 $(131) $11,702 $ - $527,675
Net income - - - - 85,663 - - - 85,663
Dividends on common stock - - - - (25,279) - - - (25,279)
Purchase of 1,190,068 shares to
be held in treasury - - - - - - - (41,382) (41,382)
Issuance of 36,400 shares of
restricted stock, of which
3,000 shares were from
treasury 33,400 - 4,520 (4,609) - - - 102 13
Grant of 2,050 shares of
restricted stock to outside
directors from treasury - - 295 (366) - - - 71 -
Cancellation of shares of
restricted stock (23,200) - (636) 574 - - - - (62)
Amortization of deferred
compensation - - - 7,903 - - - - 7,903
Exercise of stock options 320,176 3 4,112 - - - - - 4,115
Issuance of common stock on
conversion of convertible
debentures 7,216 - 123 - - - - - 123
Payments on loan to Executive
Deferred Compensation Plan - - - - - 63 - - 63
Change in unrealized gain (loss)
on securities available for
sale, net - - - - - - (9,326) - (9,326)
---------- -------- -------- --------- -------- ------- -------- --------- --------
Balance, December 31, 1996 35,942,123 359 251,536 (7,693) 344,205 (68) 2,376 (41,209) 549,506
Net income - - - - 28,931 - - - 28,931
Dividends on common stock - - - - (6,481) - - - (6,481)
Purchase of 647,900 shares to
be held in treasury - - - - - - - (27,316) (27,316)
Issuance of 420,400 shares of
restricted stock from
treasury - - 1,564 (16,190) - - - 14,626 -
Grant of 11,992 shares of
restricted stock to outside
directors from treasury - - 72 (491) - - - 419 -
Issuance of 27,199 shares of
treasury stock to employee
benefit plans - - 190 - - - - 1,038 1,228
Amortization of deferred
compensation - - - 2,246 - - - - 2,246
Exercise of stock options, of
which 21,300 shares were
from treasury 6,822 - (181) - - - - 806 625
Issuance of common stock on
conversion of convertible
debentures 293 - 5 - - - - - 5
Payments on loan to Executive
Deferred Compensation Plan - - - - - 16 - - 16
Change in unrealized gain (loss)
on securities available for
sale, net - - - - - - (6,891) - (6,891)
---------- -------- -------- --------- -------- ------- -------- --------- --------
Balance, March 31, 1997 35,949,238 $359 $253,186 $(22,128) $366,655 $ (52) $(4,515) $(51,636) $541,869
---------- -------- -------- --------- -------- ------- -------- --------- --------
---------- -------- -------- --------- -------- ------- -------- --------- --------
</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, 1996 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) NATIONAL BANK CONVERSION
On April 7, 1997, TCF completed the conversion of its savings bank
subsidiaries to national banks and TCF became a national bank holding
company. In connection with the national bank conversions, TCF chartered a
new national bank subsidiary, Great Lakes National Bank Ohio ("Great Lakes
Ohio"). TCF now operates five national bank subsidiaries: TCF National
Bank Minnesota, TCF National Bank Illinois, TCF National Bank Wisconsin,
Great Lakes National Bank Michigan and Great Lakes Ohio.
(3) EARNINGS PER COMMON SHARE
The weighted average number of common and common equivalent shares
outstanding used to compute earnings per common share were 34,796,917 and
35,986,216 for the three months ended March 31, 1997 and 1996,
respectively.
(4) ACQUISITION
On January 16, 1997, TCF completed its purchase of BOC Financial
Corporation ("BOC"), an Illinois-based bank holding company with $183.1
million in assets and $168 million in deposits. BOC is the parent company
of the Bank of Chicago, s.b., which operates three branch offices in the
Chicago area. TCF accounted for the acquisition using the purchase method
of accounting.
7
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(5) PENDING ACQUISITIONS
On February 28, 1997, TCF and Winthrop Resources Corporation ("Winthrop")
signed a definitive merger agreement for TCF to acquire Winthrop in a tax-
free stock-for-stock exchange. Winthrop, with leased assets of $348
million, specializes in leasing high-tech and business equipment. The
merger is subject to approval by TCF's and Winthrop's stockholders and by
various regulatory agencies, and treatment of the transaction as a pooling
of interests for accounting purposes, among other conditions. The merger
is expected to be completed in the first half of 1997.
On March 17, 1997, TCF and Standard Financial, Inc. ("Standard") signed a
definitive merger agreement for TCF to acquire Standard. Standard is a
community-oriented thrift institution with $2.5 billion in assets and 14
full-service offices on the southwest side of Chicago and in the nearby
southwestern and western suburbs. The transaction will be structured as a
cash election merger in which holders of Standard's common stock will have
the right to choose either cash or TCF common stock, or a combination of
the two. The transaction will be a tax-free exchange for Standard's
stockholders to the extent they receive shares of TCF common stock. The
merger is subject to approval by Standard's stockholders, and required
regulatory filings and approvals, among other conditions. The merger is
expected to close in the third quarter of 1997 and be accounted for as a
purchase transaction.
8
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TCF FINANCIAL CORPORATION AND SUBSIDIARIES
Item 2. - Management's Discussion and Analysis of Financial
Condition and Results of Operations
RESULTS OF OPERATIONS
TCF reported record net income of $28.9 million, or 83 cents per common share,
for the first quarter of 1997, compared with $26.3 million, or 73 cents per
common share, for the same 1996 period. Cash earnings per common share, which
exclude amortization of goodwill and deposit base intangibles, were 86 cents per
common share for the 1997 first quarter, up 14.7% from 75 cents per common share
for the first quarter of 1996. Return on average assets was a record 1.67% for
the first quarter of 1997, compared with 1.48% for the same 1996 period. Return
on average realized common equity was 21.49% for the first three months of 1997,
compared with 19.97% for the first quarter of 1996.
In recent years, significant new federal legislation has imposed numerous new
legal and regulatory requirements on financial institutions. In addition to the
uncertainties posed by possible legislative change, there are many other
uncertainties that may make TCF's historical performance an unreliable indicator
of its future performance, and forward-looking information, including
projections of future performance, is subject to numerous possible adverse
developments, including but not limited to the possibility of adverse economic
developments which may increase default and delinquency risks in TCF's loan
portfolios; shifts in interest rates which may result in shrinking interest
margins; deposit outflows; interest rates on competing investments; demand for
financial services and loan products; increases generally in competitive
pressure in the banking and financial services industry; changes in accounting
policies or guidelines, or 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.
TCF's pending acquisitions are subject to additional uncertainties, including
the possibility that the transactions may not be completed or, if completed, the
possible failure to fully realize or realize within the expected time frame
expected cost savings from the transactions; lower than expected income or
revenues following the transactions, or higher than expected operating costs;
business disruption relating to the transactions (both before and after
completion); greater than expected costs or difficulties related to the
integration of the management of the acquired companies with that of TCF;
litigation costs and delays caused by litigation; higher than expected costs in
completing the acquisitions or unanticipated regulatory delays or constraints or
changes in the proposed transactions imposed by regulatory authorities; declines
in TCF's common stock price which permit the acquired company to elect not to
proceed with the transaction; and other unanticipated occurrences which may
delay consummation of the transactions, increase the costs related to the
transactions or decrease the expected financial benefits of the transactions.
NET INTEREST INCOME
Net interest income for the first quarter of 1997 was a record $86 million, up
1.9% from $84.5 million for the first quarter of 1996. The net interest
margin for the first quarter of 1997 was 5.31%, up from 5.06% for the same 1996
period. TCF's net interest income and net interest margin increased primarily
due to the growth of higher-yielding consumer loans and lower-cost retail
deposits. 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. TCF's net interest
margin for the fourth quarter of 1996 was 5.36%, unchanged from the third
quarter of 1996. Maintaining net interest margin
9
<PAGE>
growth is dependent on TCF's ability to generate higher yielding assets and
lower-cost retail deposits. TCF's net interest margin for the first quarter of
1997 was negatively affected by the acquisition of BOC and by the changing asset
mix of TCF's consumer finance subsidiaries, with greater emphasis on home equity
loans and less emphasis on automobile loans. Home equity loans generally have
lower interest rates and lower delinquency and charge-off rates than automobile
loans. In addition, competition for checking, savings and money market
deposits, an important source of lower cost funds for TCF, has intensified among
depository and other financial institutions. TCF may experience additional
compression in its net interest margin if the rates paid on deposits increase.
See "Asset/Liability Management - Interest-Rate Risk" and "Financial Condition -
Deposits."
The following rate/volume analysis details the increases (decreases) in net
interest income resulting from interest rate and volume changes during the
first quarter of 1997 as compared to the same period 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
March 31, 1997
Versus Same Period in 1996
-------------------------------------------------
Increase (Decrease) Due to
-------------------------------------------------
(In thousands) Volume Rate Total
--------- --------- ---------
<S> <C> <C> <C>
Securities available for sale $ 859 $ 173 $ 1,032
--------- --------- ---------
Loans held for sale (1,006) (55) (1,061)
--------- --------- ---------
Loans:
Residential real estate (6,220) (568) (6,788)
Commercial real estate (2,227) 24 (2,203)
Commercial business 264 83 347
Consumer 6,744 (1,873) 4,871
--------- --------- ---------
Total loans (1,439) (2,334) (3,773)
--------- --------- ---------
Investments:
Interest-bearing deposits with banks 123 (3) 120
Federal funds sold 21 (2) 19
U.S. Government and other marketable
securities held to maturity 2 - 2
FHLB stock (90) (6) (96)
--------- --------- ---------
Total investments 56 (11) 45
--------- --------- ---------
Total interest income (1,530) (2,227) (3,757)
--------- --------- ---------
Deposits:
Checking 1 (47) (46)
Passbook and statement (49) 40 (9)
Money market 103 43 146
Certificates (1,619) (1,010) (2,629)
--------- --------- ---------
Total deposits (1,564) (974) (2,538)
--------- --------- ---------
Borrowings:
Securities sold under repurchase agreements (1,781) 70 (1,711)
FHLB advances (1,319) 450 (869)
Subordinated debt (3) (11) (14)
Collateralized obligations (13) (19) (32)
Other borrowings (137) (20) (157)
--------- --------- ---------
Total borrowings (3,253) 470 (2,783)
--------- --------- ---------
Total interest expense (4,817) (504) (5,321)
--------- --------- ---------
Net interest income $ 3,287 $ (1,723) $ 1,564
--------- --------- ---------
--------- --------- ---------
</TABLE>
10
<PAGE>
PROVISIONS FOR CREDIT LOSSES
TCF provided $1.1 million for credit losses in the first quarter of 1997,
compared with $2.8 million for the same prior-year period. At March 31, 1997,
the allowances for loan and real estate losses and industrial revenue bond
reserves totaled $74.2 million, compared with $73.5 million at year-end
1996. 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 1996 gain
on sale of branches, non-interest income increased $5.8 million, or 16.8%, to
$40.4 million for the first quarter of 1997, compared with $34.6 million for the
same period in 1996. The increase was primarily due to increases in fee and
service charge revenues, automated teller machine ("ATM") network revenues,
gains on sale of securities available for sale and mortgage banking revenues.
Fee and service charge revenues totaled $25.6 million for the first quarter of
1997, a 13.4% increase from $22.6 million for the same 1996 period. The increase
is primarily due to expanded retail banking activities.
ATM network revenues totaled $3.5 million for the first quarter of 1997, a 40.8%
increase from $2.5 million for the same 1996 period. This increase reflects
TCF's efforts to provide banking services through its ATM network. TCF expanded
its network of ATMs to 949 at March 31, 1997, installing 32 ATMs during the
first quarter of 1997. The Company anticipates installing additional ATMs
during the remainder of 1997.
Title insurance revenues totaled $2.7 million during the first quarter of 1997,
compared with $3.6 million for the first quarter of 1996. Title insurance
revenues in 1996 were positively affected by an industry-wide increase in
residential real estate loan originations and refinancing activities. 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 $877,000 during the first quarter
of 1997, compared with $1.5 million during the same period in 1996. Gains on
sales of securities available for sale totaled $1.4 million during the first
quarter of 1997, an increase of $1.3 million from the $85,000 recognized during
the same period in 1996. Gains or losses on sales of loans held for sale and
securities available 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.
Results for the first quarter of 1997 include a pretax gain of $1.6 million on
the sale of $150 million of third-party loan servicing rights. TCF periodically
sells loan servicing rights depending on market conditions. TCF's third-party
residential loan servicing portfolio totaled $4.5 billion at March 31, 1997,
unchanged from December 31, 1996.
During the first quarter of 1996, TCF recognized a $1.2 million gain on the sale
of two Michigan branches.
11
<PAGE>
NON-INTEREST EXPENSE
Non-interest expense totaled $77.9 million for the first quarter of 1997, up
2.8% from $75.8 million for the same 1996 period. Compensation and employee
benefits expense totaled $39.7 million for the 1997 first quarter, compared with
$36.4 million for the same period in 1996. The increased expenses in 1997 were
primarily due to costs associated with expanded retail banking activities.
Federal deposit insurance premiums and assessments totaled $1.1 million for the
first quarter of 1997, compared with $3.2 million for the same period in 1996.
The decrease reflects a reduction, effective January 1, 1997, in the rate
charged to TCF by the Federal Deposit Insurance Corporation for federal deposit
insurance premiums from 23 basis points to 6.50 basis points as a result of
Federal legislation enacted on September 30, 1996 to recapitalize the Savings
Association Insurance Fund.
Amortization of goodwill and other intangibles totaled $1.1 million for the
first quarter of 1997, compared with $795,000 for the same 1996 period. The
increase is due to the amortization of goodwill and deposit base intangibles
resulting from the acquisition of BOC.
INCOME TAXES
TCF recorded income tax expense of $18.5 million, or 38.9% of income before
income tax expense, for the first quarter of 1997, compared with $15.4 million,
or 36.9%, for the same 1996 period. The higher rate in 1997 reflects the impact
of relatively higher non-deductible expenses, including increased goodwill
amortization resulting from the acquisition of BOC, and higher state tax rates
due to business expansion.
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 number of assumptions and is only one of a number of
measurements, 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
12
<PAGE>
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
$150.2 million, or (2)% of total assets, at March 31, 1997, compared with a
positive $60.6 million, or 1% of total assets, at December 31, 1996.
FINANCIAL CONDITION
Total consolidated assets decreased $126.7 million during the first quarter of
1997, and totaled $7 billion at March 31, 1997. The decrease reflects a $370.3
million decrease in interest-bearing deposits with banks, partially offset by
the impact of TCF's January 16, 1997 acquisition of BOC. At March 31, 1997,
BOC's assets consisted primarily of $128.1 million in securities available for
sale and $27.9 million in commercial loans. BOC's deposits totaled $160.9
million at March 31, 1997.
INVESTMENTS
Total investments decreased $385.6 million from year-end 1996 to $56.5
million at March 31, 1997, reflecting decreases of $370.3 million and $15.3
million in interest- bearing deposits with banks and FHLB stock, respectively.
SECURITIES AVAILABLE FOR SALE
Securities available for sale are carried at fair value with unrealized gains or
losses, net of deferred income taxes, reported as a separate component of
stockholders' equity. Securities available for sale increased $242.9 million
from year-end 1996 to $1.2 billion at March 31, 1997. The increase reflects the
acquisition of $83.1 million of securities available for sale as part of the BOC
transaction and purchases of $364.5 million of securities available for sale
during the 1997 first quarter, partially offset by sales of $154.1 million of
securities available for sale and payment and prepayment activity. At March 31,
1997, TCF's securities available-for-sale portfolio included $1.1 billion and
$104.3 million of fixed-rate and adjustable-rate mortgage-backed securities,
respectively. The following table summarizes securities available for sale:
<TABLE>
<CAPTION>
At March 31, 1997 At December 31, 1996
-------------------------- -------------------------
Amortized Fair Amortized Fair
(In thousands) Cost Value Cost Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Mortgage-backed securities:
FHLMC $ 667,712 $ 660,437 $ 318,441 $ 317,177
FNMA 449,595 446,759 539,475 542,147
GNMA 108,353 111,761 112,732 116,388
Private issuer 22,893 22,261 23,272 22,531
Collateralized mortgage
obligations 1,354 1,239 1,432 1,311
---------- ---------- ---------- ----------
$1,249,907 $1,242,457 $ 995,352 $ 999,554
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
LOANS HELD FOR SALE
Education and residential real estate loans held for sale are carried at the
lower of cost or market. Education loans held for sale increased $6.9 million
and residential real estate loans held for sale decreased $11.6 million from
year-end 1996, respectively, and totaled $153.2 million and $46 million at March
31, 1997.
13
<PAGE>
LOANS
The following table sets forth information about loans held in TCF's portfolio,
excluding loans held for sale:
At At
March 31, December 31,
(In thousands) 1997 1996
----------- ----------
Residential real estate $2,215,775 $2,261,237
----------- ----------
Commercial real estate:
Apartments 337,183 336,038
Other permanent 456,174 466,624
Construction and development 54,983 58,394
----------- ----------
848,340 861,056
----------- ----------
Total real estate 3,064,115 3,122,293
----------- ----------
Commercial business 190,491 156,712
----------- ----------
Consumer:
Home equity 1,357,583 1,293,871
Automobile and marine 409,263 416,535
Loans secured by deposits 8,769 8,230
Other secured 19,365 19,106
Unsecured 57,791 63,324
----------- ----------
1,852,771 1,801,066
----------- ----------
5,107,377 5,080,071
Less:
Unearned discounts on loans purchased 2,350 2,441
Deferred loan fees, net 4,157 6,129
Unearned discounts and finance charges, net 72,129 75,539
----------- ----------
$5,028,741 $4,995,962
----------- ----------
----------- ----------
Loans increased $32.8 million from year-end 1996 to $5 billion at March 31,
1997, of which $33.9 million was due to the acquisition of BOC. Residential
real estate loans totaled $2.2 billion at March 31, 1997, a decrease of $45.5
million from December 31, 1996. This decrease reflects payment and prepayment
activity, partially offset by the origination and retention of $44.4 million of
residential real estate loans.
Consumer loans increased $51.7 million from year-end 1996 to $1.9 billion at
March 31, 1997, reflecting a $63.7 million increase in home equity loans. The
growth in 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 higher-yielding, shorter-term
loans, including home equity loans. At March 31, 1997, TCF's average home
equity line of credit was approximately $37,000 and the average loan balance
outstanding was approximately $20,000, or 54% of the available line.
TCF has significantly expanded its consumer finance operations in recent years
and had 61 consumer finance offices in 16 states as of March 31, 1997. TCF's
consumer finance loan portfolio totaled $507 million at March 31, 1997, compared
with $496.3 million at December 31, 1996. The Company intends to concentrate on
increasing the outstanding loan balances of its existing consumer finance
offices and improving the profitability of its consumer finance subsidiaries
before considering any further expansion of this operation.
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 to a limited extent. The average individual balance of
consumer finance
14
<PAGE>
automobile and marine loans, and home equity loans were $8,000 and $30,000,
respectively, at March 31, 1997. At March 31, 1997 and December 31, 1996,
automobile and marine loans comprised $297.9 million, or 58.8%, and $299.6
million, or 60.4%, respectively, of total consumer finance loans. At March 31,
1997 and December 31, 1996, home equity loans comprised $198.2 million, or
39.1%, and $185.2 million, or 37.3%, respectively, of total consumer finance
loans. TCF's consumer finance subsidiaries are seeking to increase the
percentage of home equity loans to total consumer finance loans over time. Home
equity loans originated by the Company's consumer finance subsidiaries are
generally closed-end.
Through their purchases of automobile loans, TCF's consumer finance subsidiaries
provide indirect financing. The Company's 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 March 31, 1997 are $248 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 TCF's consumer
finance subsidiaries generally have been less stringent than those historically
adhered to by TCF's bank subsidiaries and, as a result, carry a higher level of
credit risk and higher interest rates. These portfolios also represent an
increased risk of loss in the event of adverse economic developments such as a
recession. TCF believes that important determinants of success in sub-prime
automobile financing include the ability to control borrower and dealer
misrepresentations at the point of origination; the evaluation of the
creditworthiness of sub-prime borrowers; and the maintenance of an active
program to monitor performance and collect payments. 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.
15
<PAGE>
Many of the consumer finance offices are new and are outside TCF's traditional
market areas. The geographic location of consumer finance loans may change
significantly in future periods. The following table sets forth the geographic
locations (based on the location of the office originating or purchasing the
loan) of TCF's consumer finance loan portfolio:
<TABLE>
<CAPTION>
At March 31, 1997 At December 31, 1996
---------------------- ------------------------
<S> <C> <C> <C> <C>
Loan Loan
(Dollars in thousands) Balance Percent Balance Percent
-------- ------- -------- ------
Illinois $131,512 25.9% $132,474 26.7%
Minnesota 96,901 19.1 99,279 20.0
Florida 36,540 7.2 33,458 6.7
Georgia 34,919 6.9 32,270 6.5
Wisconsin 33,047 6.5 33,328 6.7
Michigan 28,195 5.6 23,214 4.7
North Carolina 27,095 5.4 24,137 4.9
Missouri 25,010 4.9 26,185 5.3
Tennessee 18,371 3.6 17,313 3.5
Kentucky 16,492 3.3 17,198 3.5
Mississippi 15,441 3.1 15,579 3.1
Ohio 15,361 3.0 15,503 3.1
Other 28,094 5.5 26,398 5.3
-------- ------- -------- ------
Total consumer finance loans $506,978 100.0% $496,336 100.0%
-------- ------- -------- ------
-------- ------- -------- ------
</TABLE>
TCF's bank and consumer finance subsidiaries have also initiated the origination
of home equity loans with loan-to-value ratios in excess of 80%, and up to 100%,
that may carry no private mortgage insurance. These loans carry a higher level
of credit risk and higher interest rates.
Commercial real estate loans decreased $12.7 million from year-end 1996 to
$848.3 million at March 31, 1997. Commercial business loans increased $33.8
million in the first three months of 1997 to $190.5 million at March 31, 1997,
of which $24.6 million relates to the acquisition of BOC. 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 March 31, 1997, approximately 92% of TCF's commercial
real estate loans outstanding were secured by properties located in its primary
markets. At March 31, 1997, the average individual balance of commercial real
estate loans and commercial business loans was $549,000 and $210,000,
respectively.
Included in performing loans at March 31, 1997 are commercial real estate loans
aggregating $3 million with terms that have been modified in troubled debt
restructurings, unchanged from December 31, 1996.
At March 31, 1997, the recorded investment in loans that are considered to be
impaired was $9.4 million for which the related allowance for credit losses was
$2.6 million. The balance of impaired loans on non-accrual status was $7.8
million at March 31, 1997. The average recorded investment in impaired loans
during the three months ended March 31, 1997 was $10.1 million. For the three
months ended March 31, 1997, TCF recognized interest income on impaired loans of
$156,000, of which $147,000 was recognized using the cash basis method of income
recognition.
16
<PAGE>
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 Three Months Ended
March 31, 1997 March 31, 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 $70,749 $1,660 $72,409 $65,695 $1,960 $67,655
Acquired balance (1) 1,653 - 1,653 - - -
Provision for credit losses 1,140 (50) 1,090 3,002 (200) 2,802
Charge-offs (5,132) - (5,132) (3,586) - (3,586)
Recoveries 3,065 - 3,065 1,668 - 1,668
-------- -------- -------- -------- -------- --------
Net charge-offs (2,067) - (2,067) (1,918) - (1,918)
-------- -------- -------- -------- -------- --------
Balance at end of period $71,475 $1,610 $73,085 $66,779 $1,760 $68,539
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
Ratio of annualized net loan charge-offs
to average loans outstanding, excluding
loans held for sale .16% .15%
Allowance for loan losses as a
percentage of gross loan balances,
excluding loans held for sale 1.40% 1.27%
</TABLE>
- ---------------------------------
(1) Reflects acquisition of BOC.
Three Months Ended
March 31,
--------------------
Allowance for Real Estate Losses: 1997 1996
------ -----
Balance at beginning of period $1,127 $1,526
Provision for losses 98 448
Charge-offs (88) (643)
------ ------
Balance at end of period $1,137 $1,331
------ ------
------ ------
TCF has experienced an increase in the level of net loan charge offs related to
its consumer finance portfolio. As a result, net loan charge offs as a
percentage of average loans outstanding for TCF's consumer finance portfolio
were 2.83% for the three months ended March 31, 1997, compared with 1.62% for
the same period of 1996 and 3.00% for the three months ended December 31, 1996.
In addition, the net loan charge-offs as a percentage of average loans
outstanding for TCF's automobile and marine consumer finance portfolio were
4.41% for the three months ended March 31, 1997, compared with 2.53% for the
same period in 1996 and 4.42% for the three months ended December 31, 1996.
On an ongoing basis, TCF's loan and real estate portfolios are reviewed and
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
17
<PAGE>
allowances. Loans are charged off to the extent they are deemed to be
uncollectible. The unallocated portion of TCF's allowance for loan losses
totaled $23.6 million at March 31, 1997, compared with $22.4 million at December
31, 1996.
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.
TCF 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 March 31, 1997 was
$12.2 million, unchanged from December 31, 1996. Management has considered
these guarantees in its review of the adequacy of the industrial revenue bond
reserves, which are included in accrued expenses and 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
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.
18
<PAGE>
NON-PERFORMING ASSETS
Non-performing assets (principally non-accrual loans and real estate acquired
through foreclosure) totaled $44.9 million at March 31, 1997, down $1.2 million
from the December 31, 1996 total of $46.2 million. The decrease in non-
performing assets reflects the disposition of certain of Great Lakes' remaining
problem assets, partially offset by a $1.7 million increase in consumer finance
non-performing assets. At March 31, 1997, one commercial real estate loan
comprised $4.6 million, or 10.3%, of total non-performing assets. Properties
acquired are being actively marketed. Approximately 72% of non-performing
assets at March 31, 1997 consist of, or are secured by, real estate. The
accrual of interest income is generally discontinued when loans become 90 days
or more 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:
At At
March 31, December 31,
(Dollars in thousands) 1997 1996
-------- --------
Non-accrual loans (1):
Consumer:
Bank lending $ 1,921 1,746
Consumer finance lending 12,371 11,726
-------- --------
14,292 13,472
Residential real estate 3,559 3,996
Commercial real estate 7,434 7,604
Commercial business 376 1,149
-------- --------
25,661 26,221
Real estate and other assets (2) 19,272 19,937
-------- --------
Total non-performing assets $44,933 $46,158
-------- --------
-------- --------
Non-performing assets as a percentage
of net loans .91% .94%
Non-performing assets as a percentage
of total assets .65 .65
(1) Included in total loans in the Consolidated Statements of Financial
Condition.
(2) Includes residential real estate of $3 million and $2.8 million, commercial
real estate of $806,000 and $2.7 million and automobiles of $2.8 million
and $3.2 million at March 31, 1997 and December 31, 1996, respectively.
19
<PAGE>
TCF had accruing loans 90 days or more past due totaling $37,000 at March 31,
1997. The over 30-day delinquency rate on TCF's loans (excluding loans held
for sale and non-accrual loans) was .70% of gross loans outstanding at March
31, 1997, compared with .84% at year-end 1996. 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 March 31, 1997 At December 31, 1996
------------------------- -------------------------
Percentage Percentage
Principal of Gross Principal of Gross
(Dollars in thousands) Balances Loans Balances Loans
------- ------- -------- -------
<S> <C> <C> <C> <C>
Consumer:
Bank lending $ 7,482 .59% $ 7,473 .61%
Consumer finance lending 21,447 3.82 21,515 3.86
------- --------
28,929 1.57 28,988 1.62
Residential real estate 5,874 .27 8,330 .37
Commercial real estate 460 .05 5,114 .60
Commercial business 182 .10 9 .01
------- --------
$35,445 .70 $42,441 .84
------- --------
------- --------
</TABLE>
TCF's over 30-day delinquency rate on gross consumer loans was 1.57% at March
31, 1997, down from 1.62% at year-end 1996. Management continues to monitor the
consumer loan portfolio, which will generally have higher delinquencies,
especially consumer finance loans. TCF's over 30-day delinquency rate on gross
consumer finance loans was 3.82% at March 31, 1997, compared with 3.86% at
December 31, 1996. TCF's over 30-day delinquency rate on gross automobile and
marine and home equity consumer finance loans was 4.28% and 2.95% at March 31,
1997, compared with 4.24% and 3.09%, respectively, at December 31, 1996.
Consumer finance lending is generally considered to involve a higher level of
credit risk. 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 $17.2 million outstanding at
March 31, 1997 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 $16 million of such loans at
December 31, 1996. 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.
20
<PAGE>
DEPOSITS
Deposits totaled $5.3 billion at March 31, 1997, up $314.3 million from December
31, 1996, of which $160.9 million was due to the acquisition of BOC. Lower
interest-cost checking, savings and money market deposits totaled $2.8 billion,
up $184.8 million from year-end 1996, and comprised 53.1% of total deposits at
March 31, 1997. 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, increased to
3.30% at March 31, 1997 from 3.29% at December 31, 1996. The following table
summarizes TCF's deposits:
<TABLE>
<CAPTION>
At March 31, 1997 At December 31, 1996
---------------------------------------- ---------------------------------------
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% $ 762,309 14.4% 0.00% $ 694,824 14.0%
Interest bearing 1.05 532,607 10.1 1.04 517,947 10.4
---------- ------ ---------- ------
.43 1,294,916 24.5 .45 1,212,771 24.4
---------- ------ ---------- ------
Passbook and statement 1.79 863,778 16.3 1.75 783,026 15.7
Money market 3.11 653,813 12.4 3.10 631,922 12.7
Certificates 5.36 2,479,387 46.8 5.33 2,349,911 47.2
---------- ------ ---------- ------
3.30 $5,291,894 100.0% 3.29 $4,977,630 100.0%
---------- ------ ---------- ------
---------- ------ ---------- ------
</TABLE>
Certificates had the following remaining maturities:
<TABLE>
<CAPTION>
At March 31, 1997 At December 31, 1996
----------------------------------------------------------- --------------------------------------------------
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 $119.9 $ 490.2 $ 610.1 5.08% $ 81.2 $ 539.7 $ 620.9 5.16%
4-6 months 27.7 397.5 425.2 5.09 26.1 452.0 478.1 5.17
7-12 months 12.9 728.3 741.2 5.46 6.6 543.2 549.8 5.28
13-24 months 1.3 499.3 500.6 5.62 1.7 464.8 466.5 5.54
25-36 months .2 102.5 102.7 5.63 .1 130.3 130.4 5.68
37-48 months .1 45.8 45.9 5.69 .1 48.1 48.2 5.86
49-60 months - 43.3 43.3 6.44 - 42.8 42.8 6.35
Over 60 months - 10.4 10.4 5.51 - 13.2 13.2 5.66
------ -------- -------- ------- -------- --------
$162.1 $2,317.3 $2,479.4 5.36 $115.8 $2,234.1 $2,349.9 5.33
------ -------- -------- ------- -------- --------
------ -------- -------- ------- -------- --------
</TABLE>
BORROWINGS
Borrowings are used primarily to fund the purchase of investments and securities
available for sale. These borrowings totaled $1 billion as of March 31, 1997,
down $452.4 million from $1.5 billion at year-end 1996. The decrease was
primarily due to a decrease of $510.7 million in FHLB advances, partially offset
by an increase of $35.2 million in securities sold under repurchase agreements
and $15.9 million in TCF's bank line of credit. The weighted average rate on
borrowings increased to 5.91% at March 31, 1997, from 5.78% at December 31,
1996. At March 31, 1997, borrowings with a maturity of one year or less totaled
$572.6 million.
21
<PAGE>
TCF's borrowings consist of the following:
<TABLE>
<CAPTION>
At March 31, 1997 At December 31, 1996
------------------------------- -------------------------------
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 1997 $ 260,977 5.78% $ 225,732 5.88%
1998 68,000 6.18 68,000 6.18
---------- ----------
328,977 5.86 293,732 5.95
---------- ----------
Federal Home Loan Bank
advances 1997 145784 5.79 766,514 5.51
1998 435,300 5.74 310,300 5.88
1999 41,000 5.98 41,000 5.98
2000 8,074 7.24 8,074 7.24
2001 - - 15,000 6.97
2008 149 6.15 152 6.17
---------- ----------
630,307 5.79 1,141,040 5.66
---------- ----------
Subordinated debt:
Senior subordinated
debentures 2006 6,248 18.00 6,248 18.00
Convertible subordinated
debentures 2011 7,144 7.25 7,149 7.25
---------- ----------
13,392 12.27 13,397 12.26
---------- ----------
Collateralized obligations:
Collateralized notes 1997 37,500 5.94 37,500 5.94
Less unamortized discount 20 - 28 -
---------- ----------
37,480 5.94 37,472 5.94
---------- ----------
Collateralized mortgage
obligations 2008 1,375 6.50 1,555 6.50
2010 1,646 5.90 1,622 5.90
---------- ----------
3,021 6.17 3,177 6.19
Less unamortized discount 127 - 144 -
---------- ----------
2,894 6.40 3,033 6.44
---------- ----------
40,374 5.97 40,505 5.98
---------- ----------
Other borrowings:
Bank line of credit 1997 15,900 6.20 - -
Treasury tax and loan note 1997 12,425 5.69 5,131 5.21
Other 1998 - - 13 7.60
---------- ----------
28,325 5.97 5,144 5.21
---------- ----------
$1,041,375 5.91 $1,493,818 5.78
---------- ----------
---------- ----------
</TABLE>
On May 12, 1997, TCF announced that it will redeem the convertible
subordinated debentures (the "Debentures") on June 16, 1997 at par plus
accrued and unpaid interest to the date of redemption. The Debentures are
convertible into shares of TCF Common Stock at the conversion price of $17.04
per share plus cash in lieu of fractional shares at any time prior to the
close of business on June 9, 1997.
Effective January 1, 1997, TCF adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities," not
deferred by SFAS No. 127, "Deferral of the Effective Date of Certain
Provisions of FASB Statement No. 125." The adoption of SFAS No. 125 did not
impact TCF's financial condition or results of operations.
22
<PAGE>
STOCKHOLDERS' EQUITY
Stockholders' equity at March 31, 1997 was $541.9 million, or 7.8% of total
assets, down from $549.5 million, or 7.7% of total assets, at December 31, 1996.
The decrease in stockholders' equity is primarily due to the repurchase of
647,900 shares of TCF's common stock at a cost of $27.3 million, a $6.9 million
increase in net unrealized losses on securities available for sale and the
payment of $6.5 million in common stock dividends, partially offset by net
income of $28.9 million for the quarter.
On January 20, 1997, TCF's Board of Directors (the "Board") authorized the
repurchase of up to 5% of TCF's common stock, or approximately 1.7 million
shares. On February 25, 1997, TCF announced that the Board had formally
rescinded TCF's common stock repurchase program in connection with the pending
merger with Winthrop.
On April 22, 1997, TCF declared a quarterly dividend of 25 cents per common
share payable on May 30, 1997 to stockholders of record as of May 9, 1997.
On April 23, 1997, TCF's shareholders approved an increase in the number of
authorized shares of TCF common stock from 70,000,000 to 140,000,000.
On March 31, 1997, TCF's 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.
In February 1997, the Financial Accounting Standards Board issued SFAS
No. 128, "Earnings per Share." SFAS No. 128 establishes standards for
computing and presenting earnings per share ("EPS") and applies to
entities with publicly held common stock or potential common stock.
SFAS No. 128 supersedes the standards for computing EPS previously found
in Accounting Principles Board ("APB") Opinion No. 15, "Earnings per
Share." SFAS No. 128 is effective for financial statements issued for periods
ending after December 15, 1997, including interim periods; earlier application
is not permitted. SFAS No. 128 requires restatement of all prior-period EPS
data presented. It is too early to predict what effect SFAS No. 128 will have
on TCF's results of operations.
23
<PAGE>
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
Supplementary Information
<TABLE>
<CAPTION>
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------------------
At At At At At
(Dollars in thousands March 31, Dec. 31, Sept. 30, June 30, March 31,
except per-share data) 1997 1996 1996 1996 1996
- ----------------------------------------------------------------------------------------------------------------------------------
SELECTED FINANCIAL CONDITION DATA:
<S> <C> <C> <C> <C> <C>
Total assets $6,964,119 $7,090,862 $7,114,466 $7,000,871 $7,039,282
Investments (1) 56,521 442,103 400,799 157,368 59,202
Securities available for sale 1,242,457 999,554 997,964 1,049,183 1,117,439
Loans 5,028,741 4,995,962 5,049,508 5,124,106 5,174,923
Deposits 5,291,894 4,977,630 5,018,672 5,052,557 5,150,023
Borrowings 1,041,375 1,493,818 1,468,714 1,359,145 1,268,887
Stockholders' equity 541,869 549,506 522,515 523,788 541,019
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
THREE MONTHS ENDED
- ----------------------------------------------------------------------------------------------------------------------------------
March 31, Dec. 31, Sept. 30, June 30, March 31,
1997 1996 1996 1996 1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED OPERATIONS DATA:
Interest income $145,136 $142,194 $145,380 $146,394 $148,893
Interest expense 59,118 58,178 59,586 60,518 64,439
---------- ---------- ---------- ----------- ----------
Net interest income 86,018 84,016 85,794 85,876 84,454
Provision for credit losses 1,090 3,631 6,564 6,823 2,802
---------- ---------- ---------- ----------- ----------
Net interest income after
provision for credit losses 84,928 80,385 79,230 79,053 81,652
---------- ---------- ---------- ----------- ----------
Non-interest income:
Gain on sale of loans - 810 4,633 - -
Gain on sale of loan servicing 1,622 - - - -
Gain on sale of securities available
for sale 1,369 - - - 85
Gain on sale of branches - 1,022 - 480 1,245
Other non-interest income 37,390 39,821 38,050 37,152 34,499
---------- ---------- ---------- ----------- ----------
Total non-interest income 40,381 41,653 42,683 37,632 35,829
---------- ---------- ---------- ----------- ----------
Non-interest expense:
Provision for real estate losses 98 15 121 (151) 448
Amortization of goodwill and
other intangibles 1,095 783 795 794 795
FDIC special assessment - - 34,803 - -
Other non-interest expense 76,735 77,414 78,020 72,670 74,563
---------- ---------- ---------- ----------- ----------
Total non-interest expense 77,928 78,212 113,739 73,313 75,806
---------- ---------- ---------- ----------- ----------
Income before income tax expense 47,381 43,826 8,174 43,372 41,675
Income tax expense 18,450 16,397 2,878 16,721 15,388
---------- ---------- ---------- ----------- ----------
Net income $ 28,931 $ 27,429 $ 5,296 $ 26,651 $ 26,287
---------- ---------- ---------- ----------- ----------
---------- ---------- ---------- ----------- ----------
Per common share:
Net income $ .83 $ .79 $ .15 $ .75 $ .73
---------- ---------- ---------- ----------- ----------
---------- ---------- ---------- ----------- ----------
Dividends declared $ .1875 $ .1875 $ .1875 $ .1875 $ .15625
---------- ---------- ---------- ----------- ----------
---------- ---------- ---------- ----------- ----------
FINANCIAL RATIOS:
Return on average assets (2) 1.67% 1.64% .31% 1.54% 1.48%
Return on average realized
common equity (2) 21.49 20.53 3.97 20.04 19.97
Return on average common equity (2) 21.48 20.49 4.03 20.22 19.67
Average total equity to average assets 7.78 7.98 7.70 7.60 7.51
Net interest margin (2)(3) 5.31 5.36 5.36 5.27 5.06
</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.
24
<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>
Three Months Ended March 31,
---------------------------------------------------------------------------------------------
1997 1996
------------------------------------------- ----------------------------------------------
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 $1,188,012 $ 21,383 7.20% $1,140,564 $ 20,351 7.14%
---------- -------- ---------- --------
Loans held for sale 193,046 3,513 7.28 248,298 4,574 7.37
---------- -------- ---------- --------
Loans:
Residential real
estate 2,232,293 43,852 7.86 2,547,847 50,640 7.95
Commercial real estate 855,708 19,113 8.93 955,873 21,316 8.92
Commercial business 181,924 4,077 8.96 170,097 3,730 8.77
Consumer 1,753,395 52,035 11.87 1,551,383 47,164 12.16
---------- -------- ---------- --------
Total loans(3) 5,023,320 119,077 9.48 5,225,200 122,850 9.40
---------- -------- ---------- --------
Investments:
Interest-bearing
deposits with banks 11,542 146 5.06 1,858 26 5.60
Federal funds sold 3,940 51 5.18 2,336 32 5.48
U.S. Government and
other marketable
securities held
to maturity 3,913 50 5.11 3,746 48 5.13
FHLB stock 51,149 916 7.16 56,250 1,012 7.20
---------- -------- ---------- --------
Total investments 70,544 1,163 6.59 64,190 1,118 6.97
---------- -------- ---------- --------
Total interest-
earning assets 6,474,922 145,136 8.97 6,678,252 148,893 8.92
-------- ---- -------- ----
Other assets(4) 449,345 442,017
---------- ----------
Total assets $6,924,267 $7,120,269
---------- ----------
---------- ----------
Liabilities and
Stockholders' Equity:
Noninterest-bearing
deposits $ 714,709 $ 559,309
---------- ----------
Interest-bearing
deposits:
Checking 515,196 1,390 1.08 514,936 1,436 1.12
Passbook and
statement 795,936 3,673 1.85 806,723 3,682 1.83
Money market 641,739 4,902 3.06 626,874 4,756 3.03
Certificates 2,442,543 32,193 5.27 2,563,584 34,822 5.43
---------- -------- ---------- --------
Total interest-
bearing
deposits 4,395,414 42,158 3.84 4,512,117 44,696 3.96
---------- -------- ---------- --------
Borrowings:
Securities sold
under repurchase
agreements 442,191 6,195 5.60 569,308 7,906 5.55
FHLB advances 653,208 9,396 5.75 746,085 10,265 5.50
Subordinated debt 13,393 410 12.25 13,502 424 12.56
Collateralized
obligations 40,350 630 6.25 41,143 662 6.44
Other borrowings 22,477 329 5.85 31,756 486 6.12
---------- -------- ---------- --------
Total borrowings 1,171,619 16,960 5.79 1,401,794 19,743 5.63
---------- -------- ---------- --------
Total interest-
bearing
liabilities 5,567,033 59,118 4.25 5,913,911 64,439 4.36
-------- ---- -------- ----
Other liabilities(4) 103,881 112,400
---------- ----------
Total liabilities 6,385,623 6,585,620
---------- ----------
Stockholders' equity:(4)
Preferred equity - -
Common equity 538,644 534,649
---------- ----------
Total stockholders'
equity 538,644 534,649
---------- ----------
Total liabilities
and stockholders'
equity $6,924,267 $7,120,269
---------- ----------
---------- ----------
Net interest income $ 86,018 $ 84,454
---------- ---------
---------- ---------
Net interest rate spread 4.72% 4.56%
---- ----
---- ----
Net interest margin 5.31% 5.06%
---- ----
---- ----
</TABLE>
(1) Tax-exempt income was not significant and thus has not been presented on a
tax equivalent basis. Tax-exempt income of $56,000 and $131,000 was
recognized during the three months ended March 31, 1997 and 1996,
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.
25
<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 Minnesota filed a complaint in the United States Court
of Federal Claims seeking monetary damages from the United States for breach of
contract, taking of property without just compensation and deprivation of
property without due process. TCF Minnesota's claim is based on the
government's breach of contract in connection with TCF Minnesota's acquisitions
of certain savings institutions prior to the enactment of the Financial
Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA"), which
contracts allowed TCF Minnesota to treat the "supervisory goodwill" created by
the acquisitions as an asset that could be counted toward regulatory capital,
and provided for other favorable regulatory accounting treatment. The United
States has not yet answered TCF Minnesota's complaint. TCF Minnesota's
complaint involves approximately $80.3 million in supervisory goodwill.
In August 1995, Great Lakes 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. 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 United States 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 which provided for
the treatment of supervisory goodwill, created through the plaintiffs'
acquisitions of failed or failing savings institutions, as an asset that could
be counted toward regulatory capital. Two of the three cases consolidated in
the Supreme Court proceedings are now proceeding to trials before the Court of
Federal Claims on the issue of damages. One of these trials commenced on
February 24, 1997, and the other is currently scheduled to begin on September 2,
1997. In connection with the trials in those cases, the Court of Federal Claims
in December of 1996 denied the government's motion seeking to preclude the
plaintiffs in these cases from offering evidence regarding the scope and extent
of any lost profits they suffered as a result of the government's breach.
There are a variety of contracts and contract provisions in the TCF Minnesota
and Great Lakes transactions. The government has indicated that it will have a
number of affirmative defenses against goodwill litigation filed against it.
There can be no assurance that the U.S. Supreme Court decision in WINSTAR will
mean that a similar
26
<PAGE>
result would be obtained in the actions filed by TCF Minnesota 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 Minnesota or
Great Lakes or, even if a determination favorable to TCF Minnesota 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 Minnesota's or
Great Lakes' claim. Because of the complexity of the issues involved in both
the liability and damages phases of this litigation, and the usual risks
associated with litigation, the Company cannot predict the outcome of TCF
Minnesota's or Great Lakes' cases, and investors should not anticipate any
recovery.
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 23 1997, the Annual Meeting of the shareholders of TCF was held to
obtain the approval of shareholders of record as of March 7, 1997 in connection
with the three 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:
VOTE
----------------------------------------
Against or Broker
For Withheld Abstain Nonvote
---------- -------- ------- -------
1. Election of Directors:
Bruce G. Allbright 30,394,050 163,282 N/A N/A
Robert J. Delonis 30,296,153 261,179 N/A N/A
John M. Eggemeyer, III 30,393,539 163,793 N/A N/A
Daniel F. May 30,393,500 163,832 N/A N/A
William F. Bieber 30,289,993 267,339 N/A N/A
2. Ratification of KPMG Peat
Marwick LLP as independent
public accountants for 1997. 30,418,949 72,941 65,442 0
3. Approval of an increase in the
number of authorized shares of
TCF Common Stock. 28,479,332 1,962,877 115,123 0
ITEM 5. OTHER INFORMATION.
None.
27
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
See Index to Exhibits on page 30 of this report.
(b) Reports on Form 8-K.
A Current Report on Form 8-K, dated January 27, 1997, was filed in
connection with TCF's announcement that it has authorized the repurchase of
up to 5% of the Company's outstanding shares through open market or
privately negotiated transactions. A Current Report on Form 8-K, dated
February 19, 1997, was filed in connection with TCF's execution of a letter
of intent for the acquisition of Winthrop in a merger transaction
structured as a tax-free stock-for-stock exchange. A Current Report on
Form 8-K, dated March 5, 1997, was filed in connection with TCF's execution
of a definitive agreement relating to its pending acquisition of Winthrop,
and the formal rescission of TCF's stock repurchase program in connection
with the pending acquisition of Winthrop. A Current Report on Form 8-K,
dated March 21, 1997, was filed in connection with TCF's execution of a
definitive agreement relating to its pending acquisition of Standard. A
Current Report on Form 8-K, dated April 11, 1997, was filed in connection
with TCF's announcement that it has completed the conversion of its savings
bank subsidiaries to national banks and became a national bank holding
company.
28
<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: May 14, 1997
29
<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.
11 Computation of Earnings Per Common Share 31
30
<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
For Statements of Operations: March 31,
-------------------------------
1997 1996
----------- -----------
<S> <C> <C>
Net income $ 28,931 $ 26,287
----------- -----------
----------- -----------
Weighted average number of common and common
equivalent shares outstanding:
Weighted average common shares outstanding 34,715,463 35,777,159
Dilutive effect of stock option plans after
application of treasury stock method 81,454 209,057
----------- -----------
34,796,917 35,986,216
----------- -----------
----------- -----------
Net income per common share $ .83 $ .73
----------- -----------
----------- -----------
Computation of Fully Diluted Earnings
per common share (1):
Net income $ 28,931 $ 26,287
Add: Interest expense on 7 1/4% convertible
subordinated debentures 79 83
----------- -----------
Net income applicable to common stock $ 29,010 $ 26,370
----------- -----------
----------- -----------
Weighted average number of common and common
equivalent shares outstanding:
Weighted average common shares outstanding 34,715,463 35,777,159
Dilutive effect of stock option plans after
application of treasury stock method 81,454 213,801
Dilutive effect from assumed conversion of
7 1/4% convertible subordinated debentures 419,317 425,606
----------- -----------
35,216,234 36,416,566
----------- -----------
----------- -----------
Net income per common share $ .82 $ .72
----------- -----------
----------- -----------
</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%.
31
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 1ST
QUARTER 1997 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 187,103
<INT-BEARING-DEPOSITS> 1,793
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,242,457
<INVESTMENTS-CARRYING> 3,918
<INVESTMENTS-MARKET> 3,918
<LOANS> 5,028,741
<ALLOWANCE> 71,475
<TOTAL-ASSETS> 6,964,119
<DEPOSITS> 5,291,894
<SHORT-TERM> 572,566
<LIABILITIES-OTHER> 88,981
<LONG-TERM> 486,809
0
0
<COMMON> 359
<OTHER-SE> 541,510
<TOTAL-LIABILITIES-AND-EQUITY> 6,964,119
<INTEREST-LOAN> 119,077
<INTEREST-INVEST> 22,546
<INTEREST-OTHER> 3,513
<INTEREST-TOTAL> 145,136
<INTEREST-DEPOSIT> 42,158
<INTEREST-EXPENSE> 59,118
<INTEREST-INCOME-NET> 86,018
<LOAN-LOSSES> 1,140
<SECURITIES-GAINS> 1,369
<EXPENSE-OTHER> 77,928
<INCOME-PRETAX> 47,381
<INCOME-PRE-EXTRAORDINARY> 28,931
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,931
<EPS-PRIMARY> .83
<EPS-DILUTED> .82
<YIELD-ACTUAL> 5.31
<LOANS-NON> 25,661
<LOANS-PAST> 37
<LOANS-TROUBLED> 2,964
<LOANS-PROBLEM> 17,176
<ALLOWANCE-OPEN> 70,749
<CHARGE-OFFS> 5,132
<RECOVERIES> 3,065
<ALLOWANCE-CLOSE> 71,475
<ALLOWANCE-DOMESTIC> 47,861
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 23,614
</TABLE>
