<PAGE>
FORM 10-Q - QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
[x] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended
September 30, 1998
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, Mail Code 100-01-A, Minneapolis, Minnesota 55402
- -------------------------------------------------------------------------------
(Address and Zip Code of principal executive offices)
Registrant's telephone number, including area code: (612) 661-6500
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 October 31, 1998
- --------------------------------------- 86,890,471 shares
Common Stock, $.01 par value
1
<PAGE>
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Part I. Financial Information Pages
-----
<S> <C>
Item 1. Financial Statements
Consolidated Statements of Financial Condition
at September 30, 1998 and December 31, 1997................................................ 3
Consolidated Statements of Operations for the Three
and Nine Months Ended September 30, 1998 and 1997.......................................... 4
Consolidated Statements of Cash Flows for the Nine
Months Ended September 30, 1998 and 1997................................................... 5
Consolidated Statements of Stockholders' Equity for
the Year Ended December 31, 1997 and for the
Nine Months Ended September 30, 1998....................................................... 6
Notes to Consolidated Financial Statements................................................... 7-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations for the Three
and Nine Months Ended September 30, 1998 and 1997.................................. 10-23
Supplementary Information.................................................................... 24-25
Part II. Other Information
Items 1-6......................................................................................... 26-27
Signatures ................................................................................................. 28
Index to Exhibits .......................................................................................... 29
</TABLE>
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
September 30, December 31,
1998 1997
------------- ------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 360,793 $ 297,010
Interest-bearing deposits with banks 933 20,572
Federal funds sold 23,000 -
U.S. Government and other marketable securities
held to maturity (fair value of $4,208 and $4,061) 4,208 4,061
Federal Reserve Bank stock, at cost 23,107 22,977
Federal Home Loan Bank stock, at cost 84,243 82,002
Securities available for sale (amortized cost of $1,650,128 and $1,411,979) 1,673,722 1,426,131
Loans held for sale 193,588 244,612
Loans and leases:
Residential real estate 3,727,318 3,623,845
Commercial real estate 812,040 859,916
Commercial business 267,123 240,207
Consumer 1,910,016 1,976,699
Lease financing 376,142 368,521
------------- ------------
Total loans and leases 7,092,639 7,069,188
Allowance for loan and lease losses (78,955) (82,583)
------------- ------------
Net loans and leases 7,013,684 6,986,605
Premises and equipment 171,763 165,790
Other real estate owned 13,693 18,353
Accrued interest receivable 54,066 54,336
Due from brokers - 126,662
Goodwill 168,578 177,700
Deposit base intangibles 17,134 19,821
Mortgage servicing rights 21,115 19,512
Other assets 76,812 78,516
------------- ------------
$ 9,900,439 $ 9,744,660
------------- ------------
------------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Checking $ 1,722,571 $ 1,468,657
Passbook and statement 1,176,010 1,134,678
Money market 706,201 698,312
Certificates 3,128,586 3,605,663
------------- ------------
Total deposits 6,733,368 6,907,310
------------- ------------
Securities sold under repurchase agreements and federal
funds purchased 158,079 112,444
Federal Home Loan Bank advances 1,598,456 1,339,578
Discounted lease rentals 189,326 228,596
Subordinated debt 28,750 34,998
Other borrowings 185,337 11,536
------------- ------------
Total borrowings 2,159,948 1,727,152
Accrued interest payable 26,338 23,510
Accrued expenses and other liabilities 111,359 133,008
------------- ------------
Total liabilities 9,031,013 8,790,980
------------- ------------
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, 280,000,000 shares
authorized; 92,919,016 and 92,821,529 shares issued 929 928
Additional paid-in capital 501,061 460,684
Unamortized deferred compensation (25,723) (25,457)
Retained earnings, subject to certain restrictions 584,769 508,969
Loan to Executive Deferred Compensation Plan (6,406) -
Shares held in trust for deferred compensation plans,
at cost (37,803) -
Accumulated other comprehensive income 14,262 8,556
Treasury stock, at cost, 5,491,045 shares in 1998 (161,663) -
------------- ------------
Total stockholders' equity 869,426 953,680
------------- ------------
$ 9,900,439 $ 9,744,660
------------- ------------
------------- ------------
</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 Nine Months Ended
September 30, September 30,
----------------------- -------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest income:
Loans $145,567 $132,333 $441,238 $373,118
Lease financing 12,407 10,833 36,911 27,722
Loans held for sale 3,402 4,146 10,655 11,338
Securities available for sale 21,480 24,355 66,573 67,562
Investments 2,373 1,586 8,231 4,135
-------- -------- -------- --------
Total interest income 185,229 173,253 563,608 483,875
-------- -------- -------- --------
Interest expense:
Deposits 53,662 50,193 164,130 135,549
Borrowings 26,943 23,206 78,405 65,744
-------- -------- -------- --------
Total interest expense 80,605 73,399 242,535 201,293
-------- -------- -------- --------
Net interest income 104,624 99,854 321,073 282,582
Provision for credit losses 4,544 6,341 13,360 11,936
-------- -------- -------- --------
Net interest income after provision for credit losses 100,080 93,513 307,713 270,646
-------- -------- -------- --------
Non-interest income:
Fee and service charge revenues 33,875 25,785 92,320 73,378
ATM network revenues 13,509 8,360 36,239 21,960
Leasing revenues 9,688 9,299 23,949 23,651
Title insurance revenues 5,247 3,698 14,790 9,721
Commissions on sales of annuities 2,059 1,991 6,482 6,035
Commissions on sales of mutual funds 1,566 903 4,301 2,885
Gain on sale of loans held for sale 2,679 1,825 6,041 3,231
Other 2,640 2,056 8,482 5,855
-------- ------- -------- --------
71,263 53,917 192,604 146,716
-------- ------- -------- --------
Gain on sale of loan servicing 2,414 - 2,414 1,622
Gain (loss) on sale of securities available for sale (43) 2,852 2,246 5,330
Gain on sale of branches 226 10,635 6,534 13,445
Gain on sale of joint venture interest - - 5,580 -
-------- -------- ------- --------
2,597 13,487 16,774 20,397
-------- -------- -------- --------
Total non-interest income 73,860 67,404 209,378 167,113
-------- -------- -------- --------
Non-interest expense:
Compensation and employee benefits 56,446 45,055 164,395 129,380
Occupancy and equipment 18,299 14,365 53,246 42,074
Advertising and promotions 5,157 5,228 15,881 15,334
Federal deposit insurance premiums and assessments 1,375 1,183 4,154 3,313
Amortization of goodwill and other intangibles 2,828 10,559 8,570 12,913
Other 27,777 21,963 72,688 60,622
-------- -------- -------- --------
Total non-interest expense 111,882 98,353 318,934 263,636
-------- -------- -------- --------
Income before income tax expense 62,058 62,564 198,157 174,123
Income tax expense 25,477 25,354 81,482 68,951
-------- -------- -------- --------
Net income $ 36,581 $ 37,210 $116,675 $105,172
-------- -------- -------- --------
-------- -------- -------- --------
Net income per common share:
Basic $ .42 $ .44 $ 1.31 $ 1.28
-------- -------- -------- --------
-------- -------- -------- --------
Diluted $ .42 $ .43 $ 1.30 $ 1.25
-------- -------- -------- --------
-------- -------- -------- --------
Dividends declared per common share $ .1625 $ .125 $ .45 $ .34375
-------- -------- -------- --------
-------- -------- -------- --------
</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>
Nine Months Ended
September 30,
----------------------------------
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 116,675 $ 105,172
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 21,583 16,796
Amortization of goodwill and other intangibles 8,570 12,913
Amortization of fees, discounts and premiums 6,470 125
Proceeds from sales of loans held for sale 455,587 422,192
Principal collected on loans held for sale 6,927 6,457
Originations and purchases of loans held for sale (459,819) (487,728)
Net increase in other assets and liabilities,
and accrued interest (7,729) (28,472)
Provision for credit losses 13,360 11,936
Gain on sale of securities available for sale (2,246) (5,330)
Gain on sale of joint venture interest (5,580) -
Gain on sale of branches (6,534) (13,445)
Gain on sale of loan servicing (2,414) (1,622)
Other, net (2,767) (5,972)
----------- -----------
Total adjustments 25,408 (72,150)
----------- -----------
Net cash provided by operating activities 142,083 33,022
----------- -----------
Cash flows from investing activities:
Principal collected on loans and leases 2,277,809 1,311,659
Originations and purchases of loans (2,260,529) (1,392,855)
Purchases of equipment for lease financing (126,356) (140,879)
Proceeds from sales of loans 19,875 1,639
Net decrease in interest-bearing deposits with banks 19,639 465,375
Proceeds from sales of securities available for sale 231,438 416,945
Proceeds from maturities of and principal collected on
securities available for sale 472,216 280,643
Purchases of securities available for sale (816,616) (382,761)
Proceeds from redemption of FHLB stock 1,784 15,880
Purchases of FRB stock (130) (22,663)
Proceeds from sale of joint venture interest 6,351 -
Net (increase) decrease in short-term federal funds sold (23,000) 24,000
Proceeds from sales of loan servicing 635 2,286
Purchases of premises and equipment (30,862) (23,201)
Acquisitions of Standard Financial, Inc. and BOC Financial
Corporation, net of cash acquired - (218,896)
Sales of deposits, net of cash paid (117,928) (171,174)
Other, net 15,985 24,706
----------- -----------
Net cash provided (used) by investing activities (329,689) 190,704
----------- -----------
Cash flows from financing activities:
Net (decrease) increase in deposits (47,157) 134,774
Proceeds from securities sold under repurchase agreements
and federal funds purchased 3,017,287 8,481,194
Payments on securities sold under repurchase agreements
and federal funds purchased (2,971,652) (8,676,392)
Proceeds from FHLB advances 880,700 818,825
Payments on FHLB advances (621,306) (1,114,611)
Proceeds from discounted lease rentals 41,490 126,630
Proceeds from other borrowings 769,156 502,229
Payments on other borrowings (595,401) (446,766)
Payments on subordinated debt (6,248) -
Repurchases of common stock (165,960) (27,316)
Payments of dividends on common stock (40,875) (26,607)
Proceeds from issuance of common stock - 29,266
Other, net (8,645) (2,933)
----------- -----------
Net cash provided (used) by financing activities 251,389 (201,707)
----------- -----------
Net increase in cash and due from banks 63,783 22,019
Cash and due from banks at beginning of period 297,010 236,446
----------- -----------
Cash and due from banks at end of period $ 360,793 $ 258,465
----------- -----------
----------- -----------
Supplemental disclosures of cash flow information:
Cash paid for:
Interest on deposits and borrowings $ 230,833 $ 196,685
----------- -----------
----------- -----------
Income taxes $ 90,642 $ 77,261
----------- -----------
----------- -----------
</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>
Shares
Loan to Held in Accumu-
Unamor- Executive Trust for lated
Addi- tized Deferred Deferred Other
Number tional Deferred Compen- Compen- Compre-
of Common Common Paid-in Compen- Retained sation sation hensive Treasury
Shares Issued Stock Capital sation Earnings Plan Plans Income Stock Total
------------- ----- ------- -------- -------- --------- --------- -------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1996 85,242,232 $852 $274,320 $ (7,693) $402,109 $ (68) $ - $ 2,376 $(41,209) $630,687
Net income - - - - 145,061 - - - - 145,061
Dividends on common
stock - - - - (38,201) - - - - (38,201)
Issuance of 1,400,000
shares of common
stock from
treasury, net - - 2,532 - - - - - 26,734 29,266
Issuance of 7,700,000
shares of common
stock to effect
purchase acquisition,
of which 1,194,268
were from treasury 6,505,732 65 162,937 - - - - - 22,805 185,807
Purchase of 1,295,800
shares to be held
in treasury - - - - - - - - (27,316) (27,316)
Issuance of 929,200
share of restricted
stock, of which
869,200 shares were
from treasury 60,000 - 10,102 (25,270) - - - - 15,168 -
Grant of 23,984 shares
of restricted stock
to outside directors
from treasury - - 421 (840) - - - - 419 -
Cancellation of shares
of restricted stock (2,000) - (58) 15 - - - - - (43)
Issuance of 133,784
shares of treasury
stock to employee
benefit plans - 1 374 - - - - - 2,555 2,930
Repurchase and
cancellation of shares (86) - (2) - - - - - - (2)
Amortization of deferred
compensation - - - 8,331 - - - - - 8,331
Exercise of stock options,
of which 44,600 shares
were from treasury 176,585 2 2,917 - - - - - 844 3,763
Issuance of common stock
on conversion of
convertible debentures 839,066 8 7,141 - - - - - - 7,149
Payments on Loan to
Executive Deferred
Compensation Plan - - - - - 68 - - - 68
Change in unrealized
gain on securities
available for sale,
net of tax and
reclassification
adjustment - - - - - - - 6,180 - 6,180
---------- ---- -------- -------- -------- ------- -------- ------- --------- --------
Balance,
December 31, 1997 92,821,529 928 460,684 (25,457) 508,969 - - 8,556 - 953,680
Net income - - - - 116,675 - - - - 116,675
Dividends on common stock - - - - (40,875) - - - - (40,875)
Purchase of 5,618,500
shares to be held in
treasury - - - - - - - - (165,728) (165,728)
Issuance of 108,200
shares of restricted
stock, of which 61,000
shares were from
treasury 47,200 1 2,564 (4,498) - - - - 1,933 -
Cancellation of shares
of restricted stock (11,400) - (219) 192 - - - - - (27)
Grant of shares of
restricted stock to
outside directors - - (59) (173) - - - - - (232)
Amortization of deferred
compensation - - - 4,213 - - - - - 4,213
Exercise of stock options,
of which 66,455 shares
were from treasury 61,687 - 288 - - - - - 2,132 2,420
Shares held in trust for
deferred compensation
plans - - 37,803 - - - (37,803) - - -
Loan to Executive Deferred
Compensation Plan - - - - - (6,406) - - - (6,406)
Change in unrealized gain
on securities available
for sale, net of tax and
reclassification
adjustment - - - - - - - 5,706 - 5,706
---------- ---- -------- -------- -------- ------- -------- ------- --------- --------
Balance,
September 30, 1998 92,919,016 $929 $501,061 $(25,723) $584,769 $(6,406) $(37,803) $14,262 $(161,663) $869,426
---------- ---- -------- -------- -------- ------- -------- ------- --------- --------
---------- ---- -------- -------- -------- ------- -------- ------- --------- --------
</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
(Unaudited)
(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, 1997 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) COMPREHENSIVE INCOME
Effective January 1, 1998, TCF adopted Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income." The statement establishes standards for reporting and display
of comprehensive income and its components in a full set of
general-purpose financial statements. The statement requires that all
items that are required to be recognized under accounting standards as
components of comprehensive income be disclosed in the financial
statements.
Comprehensive income is defined as the change in equity during a period
from transactions and other events from non-owner sources.
Comprehensive income is the total of net income and other comprehensive
income, which for TCF is comprised entirely of unrealized gains and
losses on securities available for sale.
7
<PAGE>
The following table summarizes the components of comprehensive income for the
periods noted:
<TABLE>
<CAPTION>
Three Nine
Months Ended Months Ended
(In thousands) September 30, September 30,
------------------ -------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income $ 36,581 $ 37,210 $ 116,675 $ 105,172
Other comprehensive income, net of tax:
Unrealized holding gains arising during the period on securities available for
sale (net of tax expense of $4,799 and $5,251 for the three months
ended September 30, 1998 and 1997, respectively, and $4,625 and $6,408
for the nine months ended September 30, 1998 and 1997, respectively) 7,330 7,615 7,063 10,402
Reclassification adjustment for (gains) losses included in net income (net of
tax expense (benefit) of ($15) and $1,305 for the three months ended
September 30, 1998 and 1997, respectively, and $889 and $2,032 for the
nine months ended September 30, 1998 and 1997, respectively) 28 (1,547) (1,357) (3,298)
--------- --------- --------- ---------
Total other comprehensive income 7,358 6,068 5,706 7,104
--------- --------- --------- ---------
Comprehensive income $ 43,939 $ 43,278 $ 122,381 $ 112,276
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
(3) DEFERRED COMPENSATION PLANS
During the third quarter of 1998, TCF applied the consensus reached in
the Emerging Issues Task Force ("EITF") Issue No. 97-14, "Accounting
for Deferred Compensation Arrangements Where Amounts Earned Are Held
in a Rabbi Trust and Invested." As a result, the assets of TCF's
deferred compensation plans were consolidated with those of TCF. The
cost of TCF common stock held by the deferred compensation plans is
reported separately in a manner similar to treasury stock (that is,
changes in fair value are not recognized) with a corresponding
deferred compensation obligation reflected in additional paid-in
capital. The application of EITF 97-14 did not impact TCF's total
stockholders' equity or results of operations for 1998 or any prior
period.
(4) EARNINGS PER COMMON SHARE
The weighted average number of common shares outstanding used to
compute basic earnings per common share were 87,133,594 and 85,124,188
for the three months ended September 30, 1998 and 1997, respectively,
and 89,157,432 and 82,398,577 for the nine months ended September 30,
1998 and 1997, respectively. The weighted average number of common and
common equivalent shares outstanding used to compute diluted earnings
per common share were 87,973,243 and 86,438,280 for the three months
ended September 30, 1998 and 1997, respectively, and 90,020,436 and
84,173,668 for the nine months ended September 30, 1998 and 1997,
respectively.
8
<PAGE>
(5) ACQUISITION
On January 30, 1998, TCF National Bank Illinois ("TCF Illinois")
completed its acquisition of 76 branches in Jewel-Osco stores in the
Chicago area previously operated by Bank of America. TCF Illinois
converted existing deposits by offering TCF Illinois products to Bank
of America customers and acquired the related fixed assets and 178
automated teller machines ("ATM") located in Jewel-Osco stores. TCF
accounted for the acquisition using the purchase method of accounting.
9
<PAGE>
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
Item 2. - Management's Discussion and Analysis of Financial
Condition and Results of Operations
RESULTS OF OPERATIONS
TCF reported net income of $36.6 million and $116.7 million for the third
quarter and first nine months of 1998, respectively, compared with $37.2 million
and $105.2 million for the same 1997 periods. Diluted earnings per common share
were 42 cents and $1.30 for the third quarter and first nine months of 1998,
respectively, compared with 43 cents and $1.25 for the same 1997 periods. Return
on average assets was 1.54% and 1.63% for the third quarter and first nine
months of 1998, respectively, compared with 1.80% and 1.84% for the same 1997
periods. Return on average realized common equity was 16.75% and 17.13% for the
third quarter and first nine months of 1998, respectively, compared with 19.37%
and 20.60% for the same 1997 periods. Diluted cash earnings per common share,
which exclude amortization and reduction of goodwill and deposit base
intangibles, were 44 cents and $1.42 for the third quarter and first nine months
of 1998, respectively, compared with 51 cents and $1.35 for the same 1997
periods. On the same basis, cash return on average assets was 1.64% and 1.78%
for the third quarter and first nine months of 1998, respectively, compared with
2.13% and 1.99% for the same 1997 periods, and cash return on average tangible
equity was 22.48% and 23.41% for the third quarter and first nine months of
1998, respectively, compared with 25.94% and 24.32% for the same periods in
1997. As TCF's September 4, 1997 acquisition of Standard Financial, Inc.
("Standard") was accounted for as a purchase transaction, TCF's results for
periods prior to the acquisition have not been restated. Since Standard's
performance ratios were lower than TCF's, the Company's performance ratios for
1998 were negatively impacted by the acquisition of Standard. The Company's
performance ratios for 1998 will continue to be negatively impacted due to the
inclusion of Standard for the entire year.
TCF has significantly expanded its retail banking franchise in recent periods
and had 310 retail banking branches at September 30, 1998. Since July 1,
1995, TCF has opened 141 branches, of which 124 were supermarket branches.
The cost of this expansion resulted in a $2.6 million after-tax reduction in
earnings for the third quarter of 1998 and a $7.3 million after-tax reduction
in earnings in the first nine months of 1998. TCF anticipates opening nine
more branches in the remainder of 1998, and additional branches in subsequent
years, including 25 Jewel-Osco supermarket branches per year in subsequent
years until branches have been installed in all targeted stores. See
"Financial Condition - Forward-Looking Information."
TCF's 1997 third quarter results reflect a branch reorganization at Great
Lakes National Bank Michigan ("Great Lakes Michigan") and Great Lakes
National Bank Ohio ("Great Lakes Ohio"), including the sale of all eight
Great Lakes Ohio branches and related deposits for a net gain of $10.6
million, the accelerated amortization of Great Lakes Michigan's remaining
$8.7 million of deposit base intangibles, and the write-off of $1 million of
Great Lakes Michigan's teller equipment.
NET INTEREST INCOME
Net interest income for the third quarter of 1998 was $104.6 million, up 4.8%
from $99.9 million for the third quarter of 1997. The net interest margin for
the third quarter of 1998 was 4.82%, compared with 5.24% for the same 1997
period and 4.94% for the second quarter of 1998. Net interest income for the
first nine months of 1998 totaled $321.1 million, up 13.6% from $282.6
million for the same 1997 period. The net interest margin for the first nine
months of 1998 was 4.90%, compared with 5.31% for the same period in 1997.
TCF's net interest income increased primarily due to the acquisition of
Standard and the growth of lower interest-cost retail deposits. TCF's net
interest margins for 1998 were negatively impacted due to the impact of
Standard's lower net interest margin, loan prepayments and the purchase of
$671.4 million of mortgage-backed securities yielding approximately 6.5%
during the third quarter of 1998. Although these mortgage-backed securities
are expected to contribute to future earnings, they will continue to
negatively impact TCF's net interest margin. Changes in net interest income
are dependent upon the movement of interest rates, the volume
10
<PAGE>
and the mix of interest-earning assets and interest-bearing
liabilities, and the level of non-performing assets. Achieving net interest
margin growth is dependent on TCF's ability to generate higher-yielding assets
and lower-cost retail deposits. The current interest rate environment and the
resulting increase in prepayment activity has made it more difficult for TCF to
increase the balance of such higher-yielding assets. 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 compression in its net interest margin if the rates paid on deposits
increase, or if yields earned on loans and leases or other interest-earning
assets decline or decline faster or by a greater amount than declines in rates
paid on deposits or borrowings. See "Market Risk - 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 third
quarter and first nine months of 1998 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 Nine Months Ended
September 30, 1998 September 30, 1998
Versus Same Period in 1997 Versus Same Period in 1997
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 $ (1,817) $ (1,058) $ (2,875) $ 656 $ (1,645) $ (989)
-------- -------- -------- -------- -------- --------
Loans held for sale (530) (214) (744) (200) (483) (683)
-------- -------- -------- -------- -------- --------
Loans and leases:
Residential real estate 19,267 (3,789) 15,478 67,457 (4,063) 63,394
Commercial real estate (631) (614) (1,245) (789) (829) (1,618)
Commercial business 1,083 (138) 945 3,661 (200) 3,461
Consumer 197 (2,141) (1,944) 7,591 (4,708) 2,883
Lease financing 946 628 1,574 4,603 4,586 9,189
-------- -------- -------- -------- -------- --------
Total loans and leases 20,862 (6,054) 14,808 82,523 (5,214) 77,309
-------- -------- -------- -------- -------- --------
Investments:
Interest-bearing deposits
with banks (119) (5) (124) (419) 3 (416)
Federal funds sold 379 (2) 377 2,400 - 2,400
U.S. Government and other
marketable securities
held to maturity 3 3 6 8 11 19
FHLB stock 459 (35) 424 1,518 (28) 1,490
FRB stock 103 1 104 603 - 603
-------- -------- -------- -------- -------- --------
Total investments 825 (38) 787 4,110 (14) 4,096
-------- -------- -------- -------- -------- --------
Total interest income 19,340 (7,364) 11,976 87,089 (7,356) 79,733
-------- -------- -------- -------- -------- --------
Deposits:
Checking 310 (133) 177 907 (122) 785
Passbook and statement 1,086 (717) 369 3,387 (577) 2,810
Money market 347 (222) 125 916 (336) 580
Certificates 3,320 (522) 2,798 25,843 (1,437) 24,406
-------- -------- -------- -------- -------- --------
Total deposits 5,063 (1,594) 3,469 31,053 (2,472) 28,581
-------- -------- -------- -------- -------- --------
Borrowings:
Securities sold under
repurchase agreements and
federal funds purchased (2,753) 32 (2,721) (12,175) 186 (11,989)
FHLB advances 7,522 (39) 7,483 26,390 154 26,544
Discounted lease rentals (907) (36) (943) (363) (258) (621)
Subordinated debt (171) (152) (323) (455) 294 (161)
Other borrowings 64 177 241 (1,345) 233 (1,112)
-------- -------- -------- -------- -------- --------
Total borrowings 3,755 (18) 3,737 12,052 609 12,661
-------- -------- -------- -------- -------- --------
Total interest expense 8,818 (1,612) 7,206 43,105 (1,863) 41,242
-------- -------- -------- -------- -------- --------
Net interest income $ 10,522 $ (5,752) $ 4,770 $ 43,984 $ (5,493) $ 38,491
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
</TABLE>
11
<PAGE>
PROVISION FOR CREDIT LOSSES
TCF provided $4.5 million for credit losses in the third quarter of 1998,
compared with $6.3 million for the same prior-year period. In the first nine
months of 1998, TCF provided $13.4 million for credit losses, compared with
$11.9 million for the same 1997 period. At September 30, 1998, the allowance for
loan and lease losses and industrial revenue bond reserves totaled $80.3
million, compared with $84 million at year-end 1997. See "Financial Condition -
Allowance for Loan and Lease 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 gains or
losses on sales of loan servicing, securities available for sale and branches,
non-interest income increased $17.3 million, or 32.2%, to $71.3 million for the
third quarter of 1998, from $53.9 million for the 1997 third quarter. For the
first nine months of 1998, non-interest income, excluding the items noted above
and a gain on the sale of a joint venture interest, totaled $192.6 million,
compared with $146.7 million for the same period in 1997. The increases were
primarily due to increased deposit, ATM and title insurance revenues, and
reflect TCF's expanded retail banking activities.
Fee and service charge revenues totaled $33.9 million and $92.3 million for the
third quarter and first nine months of 1998, respectively, representing
increases of 31.4% and 25.8% from $25.8 million and $73.4 million for the same
1997 periods. These increases are primarily due to expanded retail banking
activities.
ATM network revenues totaled $13.5 million and $36.2 million for the third
quarter and first nine months of 1998, respectively, representing increases of
61.6% and 65% from $8.4 million and $22 million for the same 1997 periods. These
increases reflect TCF's effort to provide banking services through its ATM
network. TCF's network of ATMs totaled 1,396 at September 30, 1998, an increase
of 240 ATMs from December 31, 1997. On January 30, 1998, TCF acquired 178 ATMs
in connection with its acquisition of 76 branches in Jewel-Osco stores. See Note
5 of Notes to Consolidated Financial Statements. The Company anticipates
installing additional ATMs during the remainder of 1998.
Leasing revenues totaled $9.7 million and $23.9 million for the third quarter
and first nine months of 1998, respectively, representing increases of $389,000
and $298,000 from $9.3 million and $23.7 million for the same 1997 periods.
Leasing revenues can fluctuate as a result of changes in the mix of leases
classified as sales-type, direct financing or operating leases in accordance
with generally accepted accounting principles. In addition, leasing revenues may
be negatively impacted by a decline in economic activity and a resulting
decrease in demand for leased equipment.
Title insurance revenues totaled $5.2 million and $14.8 million for the third
quarter and first nine months of 1998, respectively, representing increases of
41.9% and 52.1% from $3.7 million and $9.7 million for the same 1997 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 $2.7 million and $6 million for
the third quarter and first nine months of 1998, respectively, representing
increases of $854,000 and $2.8 million from the amounts recognized during the
same periods in 1997. 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.
12
<PAGE>
Results for the third quarter and first nine months of 1998 included a pretax
gain of $2.4 million on the sale of $200.4 million of third-party loan servicing
rights. Results for the first nine months of 1997 included a pretax gain of $1.6
million on the sale of $144.7 million of third-party loan servicing rights. TCF
periodically sells and purchases loan servicing rights depending on market
conditions. TCF's third-party residential loan servicing portfolio totaled $4
billion at September 30, 1998, compared with $4.4 billion at December 31, 1997.
Gains (losses) on sales of securities available for sale totaled ($43,000) and
$2.2 million for the third quarter and first nine months of 1998, respectively,
compared with $2.9 million and $5.3 million for the comparable 1997 periods. TCF
periodically sells securities available for sale based on market conditions.
During the third quarter of 1998, TCF recognized a $226,000 gain on the sale of
one branch, compared with a $10.6 million gain on the previously mentioned sale
of all eight Ohio branches during the same 1997 period. Results for the first
nine months of 1998 include gains of $5.6 million on the sale of TCF's joint
venture interest in Burnet Home Loans and $6.5 million on the sales of seven
branches, compared with gains of $13.4 million on the sales of 10 branches for
the same 1997 period.
NON-INTEREST EXPENSE
Non-interest expense totaled $111.9 million for the third quarter of 1998, up
13.8% from $98.4 million for the same 1997 period. For the first nine months of
1998, non-interest expense totaled $318.9 million, up 21% from $263.6 million
for the same 1997 period. Compensation and employee benefits expense totaled
$56.4 million and $164.4 million for the 1998 third quarter and first nine
months, respectively, compared with $45.1 million and $129.4 million for the
comparable periods in 1997. Occupancy and equipment expenses totaled $18.3
million and $53.2 million for the third quarter and first nine months of 1998,
respectively, compared with $14.4 million and $42.1 million for the same 1997
periods. The increased expenses in 1998 were primarily due to the costs
associated with expanded retail banking activities, including the acquisition of
Standard and the opening of 88 branches in Jewel-Osco stores.
Amortization of goodwill and other intangibles totaled $2.8 million and $8.6
million for the third quarter and first nine months of 1998, respectively,
compared with $10.6 million and $12.9 million for the same 1997 periods. The
decreases are primarily due to the previously mentioned 1997 accelerated
amortization of $8.7 million of deposit base intangibles, partially offset by
the amortization of goodwill and deposit base intangibles resulting from the
acquisition of Standard. Reductions of goodwill associated with branch sales,
which are reported as a component of gains on sales of branches, totaled $3.3
million for the first nine months of 1998.
YEAR 2000
During 1998, TCF has continued to address the "Year 2000" computer issue. The
Year 2000 issue relates to the use of two digits rather than four by computer
systems to define the applicable year and whether such systems will properly
process information when the year changes to 2000. Failure of computer systems
to properly recognize the Year 2000 could potentially result in the production
of erroneous data, miscalculations of financial information such as interest,
system failures, business disruption and other operational problems.
TCF has established a Year 2000 Task Force and has evaluated its data processing
and other systems with imbedded technologies, such as ATMs, vaults and security
systems, to determine whether they are Year 2000 compliant. Remediation of
certain software is in process, and TCF expects substantially all such work to
be complete by the end of 1998, leaving 1999 for testing. Such testing includes
testing of individual application systems
13
<PAGE>
and "integration testing," which tests the way multiple systems work
together. Many of TCF's data processing applications are supplied by
third-party vendors. TCF has also evaluated whether such vendor supplied
applications are or will be Year 2000 compliant. Additionally, federal
banking regulators are conducting special examinations of FDIC-insured banks
and savings associations to determine whether they are taking necessary steps
to prepare for the Year 2000 issue, and are closely monitoring the progress
made by these institutions in completing key steps required by their
individual Year 2000 plans.
TCF has incurred $2.7 million of internal and external costs of replacement,
renovation and testing of its critical internal computer hardware and software
and imbedded technologies through September 30, 1998, and expects such costs to
total $9.1 million over the three-year period ending December 31, 1999. Of the
$2.7 million of Year 2000 costs incurred through September 30, 1998, $700,000
have been capitalized. Approximately $1.9 million of future Year 2000 costs are
expected to be capitalized.
TCF's Year 2000 Task Force is also developing contingency plans to mitigate
potential delays or other problems. TCF's contingency plans include back-up
solutions for mission-critical applications and business continuation plans for
significant vendors and other business partners. Alternative courses of action
for dealing with non-compliant systems are difficult to identify in general
terms because they depend on the nature of the system, whether internal or
external personnel are responsible for the system, and the cost and availability
of replacement systems, among other factors. Although TCF believes its plans
address significant contingencies over which it is able to exercise some
control, there may be contingencies which cannot be readily identified or
contingencies over which it has little or no control and for which few, if any,
alternatives are available (for example, system failures that affect the Federal
Reserve System.)
The effect of the Year 2000 issue on TCF will also depend on the way the Year
2000 issue is addressed by TCF's customers, including significant borrowers,
vendors, service providers, counterparties, competitors, utilities, governmental
agencies and other entities with which TCF does business. TCF has surveyed and
continues to monitor parties with which it does business to determine how they
are addressing the Year 2000 issue and whether computer hardware and software
and other services provided to TCF will be, or are, Year 2000 compliant.
Additionally, TCF's applicable lending and investment units have implemented
procedures for identifying, managing, and underwriting Year 2000 credit risk.
TCF is also monitoring the Year 2000 preparation of entities such as the Federal
Reserve System, which provides services for processing and settling payments and
securities transactions between banks.
The Year 2000 efforts of third parties are ultimately not within TCF's control,
and their failure to remediate Year 2000 issues successfully could result in a
disruption in the services TCF provides, including deposit and loan services,
and could increase TCF's operating costs and credit risk. At the present time,
it is not possible to determine with certainty whether any such events are
likely to occur, or to quantify any potential negative impact they may have on
TCF's future results of operations and financial condition.
The foregoing discussion regarding Year 2000, including the discussion of the
timing and effectiveness of implementation and costs of TCF's Year 2000 efforts,
contains forward-looking statements which are based on management's best
estimates derived using assumptions considered reasonable. See "Financial
Condition - Forward-Looking Information." These forward-looking statements
involve inherent risks and uncertainties, and actual results could differ
materially from those contemplated by such statements. Factors that might cause
material differences include, but are not limited to, availability and cost of
programmers and other systems personnel, TCF's ability to locate and correct all
relevant Year 2000 computer code, including imbedded technologies, and the
ability of TCF's customers, including significant borrowers, vendors,
competitors and counterparties to effectively address the Year 2000 issue. Such
material differences
14
<PAGE>
could result in, among other things, business disruption, operational
problems, financial loss, legal liability and similar risks.
INCOME TAXES
TCF recorded income tax expense of $25.5 million and $81.5 million for the third
quarter and first nine months of 1998, or 41.1% of income before income tax
expense, respectively, compared with $25.4 million and $69 million, or 40.5% and
39.6%, respectively, for the comparable 1997 periods. The higher tax rates in
1998 reflect the impact of relatively higher non-deductible expenses, including
goodwill amortization resulting from the acquisition of Standard, and higher
state taxes due to business expansion.
MARKET RISK - 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,
and the Company's ability to manage its interest-rate risk. Although TCF manages
other risks, such as credit and liquidity risk, in the normal course of its
business, the Company considers interest-rate risk to be its most significant
market risk. TCF, like most financial institutions, has a material interest-rate
risk exposure to changes in both short-term and long-term interest rates as well
as variable index interest rates (e.g., prime).
TCF's Asset/Liability Management Committee manages TCF's interest-rate risk
based on interest rate expectations and other factors. The principal objective
of TCF's asset/liability management activities is to provide maximum levels of
net interest income while maintaining acceptable levels of interest-rate risk
and liquidity risk and facilitating the funding needs of the Company.
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, competition and changes in interest rates. Decisions by management
to purchase or sell assets, or retire debt could change the maturity/repricing
and spread relationships. TCF's one-year interest-rate gap was a positive $237.1
million, or 2% of total assets, at September 30, 1998, compared with a negative
$184.7 million, or (2)% of total assets, at December 31, 1997.
15
<PAGE>
FINANCIAL CONDITION
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 accumulated other
comprehensive income, which is a separate component of stockholders' equity.
Securities available for sale increased $247.6 million from year-end 1997 to
$1.7 billion at September 30, 1998. The increase reflects purchases of $816.6
million of securities available for sale, partially offset by sales of $229.2
million and payment and prepayment activity. At September 30, 1998, TCF's
securities available-for-sale portfolio included $1.3 billion and $327.9 million
of fixed-rate and adjustable-rate mortgage-backed securities, respectively. The
following table summarizes securities available for sale:
<TABLE>
<CAPTION>
At September 30, 1998 At December 31, 1997
---------------------- ----------------------
Amortized Fair Amortized Fair
(In thousands) Cost Value Cost Value
--------- ----- --------- -----
<S> <C> <C> <C> <C>
Mortgage-backed securities:
FHLMC $ 964,452 $ 980,353 $ 701,195 $ 710,799
FNMA 533,491 540,973 466,820 469,900
GNMA 35,960 36,802 43,079 43,993
Private issuer 115,301 114,670 199,738 200,325
Collateralized mortgage
obligations 924 924 1,147 1,114
---------- ---------- ---------- ----------
$1,650,128 $1,673,722 $1,411,979 $1,426,131
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</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 decreased $7.8 million
and residential real estate loans held for sale decreased $43.2 million from
year-end 1997, respectively, and totaled $127.5 million and $66.1 million at
September 30, 1998.
16
<PAGE>
LOANS AND LEASES
The following table sets forth information about loans and leases held in TCF's
portfolio, excluding loans held for sale:
<TABLE>
<CAPTION>
At At
September 30, December 31,
(In thousands) 1998 1997
------------ -----------
<S> <C> <C>
Residential real estate $ 3,720,692 $ 3,619,527
Unearned premiums and deferred loan fees 6,626 4,318
----------- -----------
3,727,318 3,623,845
----------- -----------
Commercial real estate:
Apartments 264,412 294,231
Other permanent 452,946 481,759
Construction and development 96,592 86,174
Unearned discounts and deferred loan fees (1,910) (2,248)
----------- -----------
812,040 859,916
----------- -----------
Total real estate 4,539,358 4,483,761
----------- -----------
Commercial business 266,588 239,728
Deferred loan costs 535 479
----------- -----------
267,123 240,207
----------- -----------
Consumer:
Home equity 1,529,335 1,519,644
Automobile 370,863 444,903
Loans secured by deposits 8,169 10,112
Other secured 20,044 19,955
Unsecured 35,567 44,607
Unearned discounts and deferred loan fees (53,962) (62,522)
----------- -----------
1,910,016 1,976,699
----------- -----------
Lease financing:
Direct financing leases 357,264 344,889
Sales-type leases 33,562 40,592
Lease residuals 28,726 28,789
Unearned income and deferred lease costs (43,410) (45,749)
----------- -----------
376,142 368,521
----------- -----------
$ 7,092,639 $ 7,069,188
----------- -----------
----------- -----------
</TABLE>
Loans and leases increased $23.5 million from year-end 1997 to $7.1 billion at
September 30, 1998, reflecting increases of $103.5 million, $26.9 million and
$7.6 million in residential real estate and commercial business loans and lease
financings, respectively, partially offset by decreases of $66.7 million and
$47.9 million in consumer and commercial real estate loans, respectively. TCF's
growth in its loan and lease portfolios has been negatively impacted by growth
in prepayment activity due to lower long-term interest rates. Unearned discounts
and deferred fees totaled $92.1 million at September 30, 1998 and $105.7 million
at December 31, 1997.
Consumer loans, comprised of bank originated and consumer finance originated
loans, decreased $66.7 million from year-end 1997 to $1.9 billion at September
30, 1998, reflecting decreases of $74 million and $9 million in automobile and
unsecured loans, respectively, partially offset by an increase of $9.7 million
in home equity loans. TCF continues its emphasis on expanding its home equity
portfolio.
17
<PAGE>
TCF had 53 consumer finance offices in 15 states as of September 30, 1998. TCF's
consumer finance loan portfolio totaled $475.3 million at September 30, 1998,
compared with $521.5 million at December 31, 1997. The Company is seeking to
improve the profitability of its consumer finance activities and is reviewing
curtailment of its remaining indirect automobile lending activities. See
"Forward-Looking Information."
The consumer finance subsidiaries primarily originate home equity loans and
purchase automobile loans. The average individual balances of consumer finance
automobile and home equity loans were $8,000 and $34,000, respectively, at
September 30, 1998. At September 30, 1998 and December 31, 1997, automobile
loans comprised $254.6 million, or 53.6%, and $292.6 million, or 56.1%,
respectively, of total consumer finance loans. At September 30, 1998 and
December 31, 1997, home equity loans comprised $211.5 million, or 44.5%, and
$218.8 million, or 42%, 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. Included in the consumer finance loans at September
30, 1998 are $201 million of sub-prime automobile loans which carry a higher
level of credit risk and higher interest rates. Loans classified as sub-prime
are generally made to borrowers who are unable to obtain credit from traditional
sources because of significant past credit problems or limited credit histories.
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 assurance that the Company's sub-prime lending
criteria are the same as those utilized by other lenders.
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 on a
limited basis up to 100%, that carry no private mortgage insurance. These loans
carry a higher level of credit risk and are made at higher interest rates.
Commercial real estate loans decreased $47.9 million from year-end 1997 to $812
million at September 30, 1998. Commercial business loans increased $26.9 million
in the first nine months of 1998 to $267.1 million at September 30, 1998.
At September 30, 1998, there were no commercial real estate loans with terms
that have been modified in troubled debt restructurings included in performing
loans, compared with $1.3 million at December 31, 1997.
At September 30, 1998, the recorded investment in loans that are considered to
be impaired was $8.6 million for which the related allowance for credit losses
was $2.4 million. All of the impaired loans were on non-accrual status. The
average recorded investment in impaired loans during the three and nine months
ended September 30, 1998 was $8.3 million and $8.5 million, respectively.
Lease financings increased $7.6 million from year-end 1997 to $376.1 million at
September 30, 1998, reflecting a $12.4 million increase in direct financing
leases, partially offset by a decrease of $7 million in sales type leases. TCF
internally funds certain leases and consequently retains the credit risk on such
leases.
18
<PAGE>
ALLOWANCE FOR LOAN AND LEASE LOSSES AND INDUSTRIAL REVENUE BOND RESERVES
A summary of the activity of the allowance for loan and lease losses and
industrial revenue bond reserves, and selected statistics follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, 1998 September 30, 1998
-------------------------------------- --------------------------------------
Industrial Industrial
Allowance for Revenue Allowance for Revenue
Loan and Bond Loan and Bond
(Dollars in thousands) Lease Losses Reserves Total Lease Losses Reserves Total
------------- ---------- ----- -------------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of period $80,138 $1,301 $81,439 $82,583 $1,460 $84,043
Provision for credit losses 4,544 - 4,544 13,519 (159) 13,360
Charge-offs (7,696) - (7,696) (22,489) - (22,489)
Recoveries 1,969 - 1,969 5,342 - 5,342
------- ------ ------- ------- ------ -------
Net charge-offs (5,727) - (5,727) (17,147) - (17,147)
------- ------ ------- ------- ------ -------
Balance at end of period $78,955 $1,301 $80,256 $78,955 $1,301 $80,256
------- ------ ------- ------- ------ -------
------- ------ ------- ------- ------ -------
Ratio of annualized net loan and lease
charge-offs to average loans and leases
outstanding, excluding loans held
for sale .32% .32%
Allowance for loan and lease losses as
a percentage of total loan and lease
balances, excluding loans held for sale 1.11% 1.11%
<CAPTION>
Three Months Ended Nine Months Ended
September 30, 1997 September 30, 1997
-------------------------------------- --------------------------------------
Industrial Industrial
Allowance for Revenue Allowance for Revenue
Loan and Bond Loan and Bond
(Dollars in thousands) Lease Losses Reserves Total Lease Losses Reserves Total
------------- ---------- ----- -------------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of period $72,466 $1,560 $74,026 $71,865 $1,660 $73,525
Acquired balance 8,939 - 8,939 10,592 - 10,592
Provision for credit losses 6,391 (50) 6,341 12,086 (150) 11,936
Charge-offs (7,290) - (7,290) (19,236) - (19,236)
Recoveries 1,533 - 1,533 6,732 - 6,732
------- ------ ------- ------- ------ -------
Net charge-offs (5,757) - (5,757) (12,504) - (12,504)
------- ------ ------- ------- ------ -------
Balance at end of period $82,039 $1,510 $83,549 $82,039 $1,510 $83,549
------- ------ ------- ------- ------ -------
------- ------ ------- ------- ------ -------
Ratio of annualized net loan and lease
charge-offs to average loans and leases
outstanding, excluding loans held
for sale .39% .30%
Allowance for loan and lease losses as
a percentage of total loan and lease
balances, excluding loans held for sale 1.16% 1.16%
</TABLE>
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 4.09% and 3.85% for the third quarter and nine months ended September 30,
1998, respectively, compared with 2.95% for the same periods of 1997 and 3.61%
for the three months ended June 30, 1998. In addition, the net loan charge-offs
as a percentage of average loans outstanding for TCF's indirect consumer finance
portfolio were 6.06% and 5.37% for the third quarter and nine months ended
September 30, 1998, compared with 3.94% and 4.21% for the same periods in 1997
and 4.40% for the three months ended June 30, 1998.
19
<PAGE>
Management believes the allowance for loan and lease losses and industrial
revenue bond reserves are adequate. The unallocated portion of TCF's allowance
for loan and lease losses totaled $24.4 million at September 30, 1998, compared
with $29.4 million at December 31, 1997.
NON-PERFORMING ASSETS
Non-performing assets (principally non-accrual loans and leases and other real
estate owned) totaled $53.5 million at September 30, 1998, down $5.3 million
from the December 31, 1997 total of $58.7 million. Approximately 71% of
non-performing assets at September 30, 1998 consist of, or are secured by, real
estate. The accrual of interest income is generally discontinued when loans and
leases become 90 days or more past due with respect to either principal or
interest unless such loans and leases are adequately secured and in the process
of collection. Non-performing assets are summarized in the following table:
<TABLE>
<CAPTION>
At At
September 30, December 31,
(Dollars in thousands) 1998 1997
------------ -----------
<S> <C> <C>
Non-accrual loans and leases (1):
Consumer:
Bank lending $ 4,037 $ 3,495
Consumer finance lending 16,107 17,542
---------- ----------
20,144 21,037
Residential real estate 8,749 8,451
Commercial real estate 4,754 3,818
Commercial business 3,841 3,370
Lease financing 117 117
---------- ----------
37,605 36,793
Other real estate owned and other assets (2) 15,870 21,953
---------- ----------
Total non-performing assets $ 53,475 $ 58,746
---------- ----------
---------- ----------
Non-performing assets as a percentage
of net loans and leases .76% .84%
Non-performing assets as a percentage
of total assets .54% .60%
</TABLE>
(1) Included in total loans and leases in the Consolidated Statements of
Financial Condition.
(2) Includes residential real estate of $11.7 million and $11.2 million,
commercial real estate of $1.8 million and $6.7 million and automobiles
of $2.1 million and $2.6 million at September 30, 1998 and December 31,
1997, respectively.
20
<PAGE>
TCF had accruing loans and leases 90 days or more past due totaling $66,000 at
September 30, 1998. The over 30-day delinquency rate on TCF's loans and leases
(excluding loans held for sale and non-accrual loans and leases) was .67% of
gross loans and leases outstanding at September 30, 1998, compared with .72% at
year-end 1997. TCF's delinquency rates are determined using the contractual
method. The following table sets forth information regarding TCF's over 30-day
delinquent loans and leases, excluding loans held for sale and non-accrual loans
and leases:
<TABLE>
<CAPTION>
At September 30, 1998 At December 31, 1997
-------------------------- ---------------------------
Principal Percentage of Principal Percentage of
(Dollars in thousands) Balances Portfolio Balances Portfolio
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Consumer:
Bank lending $ 6,326 .44% $ 9,646 .66%
Consumer finance lending 28,106 5.55 28,964 5.13
------- -------
34,432 1.77 38,610 1.91
Residential real estate 8,102 .22 10,567 .29
Commercial real estate 1,603 .20 1,173 .14
Commercial business 3,258 1.24 396 .17
Lease financing 525 .13 886 .21
------- -------
$47,920 .67 $51,632 .72
------- -------
------- -------
</TABLE>
TCF's over 30-day delinquency rate on gross consumer loans was 1.77% at
September 30, 1998, down from 1.91% at year-end 1997. Management continues to
monitor the consumer loan portfolio, which will generally have higher
delinquencies, especially consumer finance loans. TCF's over 60-day delinquency
rate on gross consumer finance loans was 1.42% at September 30, 1998, compared
with 1.25% at December 31, 1997. TCF's over 60-day delinquency rate on gross
automobile and home equity consumer finance loans was 1.93% and .68% at
September 30, 1998, compared with 1.65% and .6%, respectively, at December 31,
1997. 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, but no assurance can be
given as to the level of future delinquencies and loan charge-offs.
In addition to the non-accrual loans and leases, there were commercial real
estate loans, commercial business loans, and lease financings with an aggregate
principal balance of $13.8 million outstanding at September 30, 1998 for which
management has concerns regarding the ability of the borrowers to meet existing
repayment terms. This amount consists of loans and leases 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
$23.6 million of such loans and leases at December 31, 1997. Although these
loans and leases 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 leases and the financial condition of these borrowers.
DEPOSITS
Deposits totaled $6.7 billion at September 30, 1998, down $173.9 million from
December 31, 1997. The decrease reflects a $477.1 million decrease in
higher-rate certificates, and includes the effects of the previously
described branch sales. Lower interest-cost checking, savings and money
market deposits totaled $3.6 billion, up $303.1 million from year-end 1997,
and comprised 53.6% of total deposits at September 30, 1998. 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 3.08% at September 30,
1998, from 3.42% at December 31, 1997. This decrease reflects growth in lower
interest-cost checking,
21
<PAGE>
savings and money market deposits, decreases in rates paid on such deposits,
and a lower proportion of higher-rate certificates at September 30, 1998 than
at December 31, 1997.
BORROWINGS
Borrowings totaled $2.2 billion as of September 30, 1998, up $432.8 million from
year-end 1997. The increase was primarily due to increases of $258.9 million in
FHLB advances, $45.8 million in securities sold under repurchase agreements,
$114.8 million in treasury, tax and loan notes and $59.5 million in TCF's bank
line of credit, partially offset by a decrease of $39.3 million in discounted
lease rentals. The increase in FHLB advances and securities sold under
repurchase agreements reflects the previously mentioned purchase of $671.4
million in securities available for sale in the third quarter of 1998. The
weighted-average rate on borrowings decreased to 6.02% at September 30, 1998,
from 6.43% at December 31, 1997. At September 30, 1998, borrowings with a
maturity of one year or less totaled $1 billion.
STOCKHOLDERS' EQUITY
Stockholders' equity at September 30, 1998 was $869.4 million, or 8.8% of total
assets, down from $953.7 million, or 9.8% of total assets, at December 31, 1997.
The decrease in stockholders' equity is primarily due to the repurchase of
5,618,500 shares of TCF's common stock at a cost of $165.7 million and the
payment of $40.9 million in common stock dividends, partially offset by net
income of $116.7 million for the first nine months of 1998.
On January 19, 1998, TCF's Board of Directors (the "Board") authorized the
repurchase of up to 5% of TCF's common stock, or approximately 4.6 million
shares. On June 22, 1998, the Board authorized another repurchase of up to 5% of
TCF's common stock, or approximately 4.5 million shares. TCF purchased a total
of 5,618,500 shares of common stock under these plans during the first nine
months of 1998. TCF has remaining authorization of 3.5 million shares under its
June 22, 1998 5% stock repurchase program.
During the third quarter of 1998, loans totaling $6.4 million were made by TCF
to the Executive Deferred Compensation Plan trustee on a nonrecourse basis to
purchase shares of TCF common stock for the accounts of participants. The loans
are repayable over five years, bear interest of 7.41% and are secured by the
shares of TCF common stock purchased with the loan proceeds. These loans are
reflected as a reduction of stockholders' equity as required by generally
accepted accounting principles.
On October 19, 1998, TCF announced a quarterly dividend of 16.25 cents per
common share, payable on November 30, 1998 to shareholders of record as of
November 6, 1998.
At September 30, 1998, TCF and its bank subsidiaries exceeded their regulatory
capital requirements and are considered "well-capitalized" under guidelines
established by the Federal Reserve Board and the Federal Deposit Insurance
Corporation Improvement Act of 1991.
RECENT ACCOUNTING DEVELOPMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No.
133 requires recognition of all derivative instruments as either assets or
liabilities in the statement of financial condition and measurement of those
instruments at fair value. A derivative may be designated as a hedge of an
exposure to changes in the fair value of a recognized asset or liability, an
exposure to variable cash flows of a forecasted transaction, or a foreign
currency exposure. The accounting for gains and losses associated with changes
in the fair value of a derivative and the impact on TCF's consolidated
statements will depend on its hedge designation and whether the hedge is
22
<PAGE>
highly effective in offsetting changes in the fair value or cash flows of the
underlying hedged item. The statement is effective for all fiscal quarters of
fiscal years beginning after June 15, 1999. It is too early to predict what
effect, if any, the statement will have on TCF.
FORWARD-LOOKING INFORMATION
There are a number of important factors which could cause TCF's future results
to differ materially from historical performance and which make any
forward-looking statements about TCF's financial results subject to a number of
risks and uncertainties. These include but are not limited to possible
legislative changes; adverse economic developments which may increase default
and delinquency risks in TCF's loan and lease portfolios or lead to other
adverse developments; increases in bankruptcy filings by TCF's loan and lease
customers; shifts in interest rates which may result in shrinking interest
margins, increased borrowing costs or other adverse developments; deposit
outflows; interest rates on competing investments; demand for financial services
and loan and lease products; increases in competition in the banking and
financial services industry; changes in accounting policies or guidelines, or
monetary and fiscal policies of the federal government; inflation; changes in
the quality or composition of TCF's loan, lease and investment portfolios;
adverse changes in securities markets; results of litigation or other
significant uncertainties. TCF's year 2000 compliance initiatives or other
required technological changes are subject to certain uncertainties which may
delay or increase the cost of implementation. To some extent, TCF's operations
will be dependent on the year 2000 compliance achieved by outside vendors,
borrowers and government agencies or instrumentalities such as the Federal
Reserve System, and also on the cooperation of such parties in testing the
effectiveness of compliance initiatives. TCF's 1997 and 1998 acquisitions (and
its commitment to construct additional Jewel-Osco branches in future periods)
are subject to additional uncertainties, including the possible failure to fully
realize anticipated benefits from the transactions. Significant uncertainties in
such transactions include lower than expected income or revenue or higher than
expected operating costs; greater than expected costs or difficulties related to
the integration and retention of employees of the acquired business operations;
and other unanticipated occurrences which may increase the costs related to the
transactions or decrease the expected financial benefits of the transactions.
23
<PAGE>
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
Supplementary Information
SELECTED QUARTERLY FINANCIAL DATA (Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
At At At At At At At
(Dollars in thousands Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31,
except per-share data) 1998 1998 1998 1997 1997 1997 1997
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED FINANCIAL
CONDITION DATA:
Total assets $9,900,439 $9,393,060 $9,664,849 $9,744,660 $9,796,154 $7,403,760 $7,317,584
Investments (1) 135,491 122,888 246,364 129,612 130,261 82,098 60,458
Securities available for sale 1,673,722 1,122,490 1,306,853 1,426,131 1,628,126 1,181,126 1,242,457
Loans and leases 7,092,639 7,103,686 7,036,646 7,069,188 7,052,032 5,382,356 5,354,941
Deposits 6,733,368 6,741,288 6,925,024 6,907,310 6,976,687 5,243,574 5,291,894
Borrowings 2,159,948 1,617,240 1,631,021 1,727,152 1,754,445 1,349,369 1,273,411
Stockholders' equity 869,426 906,485 948,070 953,680 919,952 701,063 626,716
- ----------------------------------------------------------------------------------------------------------------------------------
Three Months Ended
- ----------------------------------------------------------------------------------------------------------------------------------
Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31,
1998 1998 1998 1997 1997 1997 1997
- ----------------------------------------------------------------------------------------------------------------------------------
SELECTED OPERATIONS DATA:
Interest income $185,229 $186,903 $191,476 $198,739 $173,253 $157,242 $153,380
Interest expense 80,605 79,606 82,324 87,725 73,399 64,605 63,289
-------- -------- -------- -------- -------- -------- --------
Net interest income 104,624 107,297 109,152 111,014 99,854 92,637 90,091
Provision for credit losses 4,544 2,882 5,934 5,859 6,341 4,097 1,498
-------- -------- -------- -------- -------- -------- --------
Net interest income after
provision for credit losses 100,080 104,415 103,218 105,155 93,513 88,540 88,593
-------- -------- -------- -------- -------- -------- --------
Non-interest income:
Gain on sale of loan servicing 2,414 - - - - - 1,622
Gain (loss) on sale of securities
available for sale (43) 1,787 502 3,179 2,852 1,093 1,385
Gain on sale of joint venture
interest - - 5,580 - - - -
Gain on sale of branches 226 4,260 2,048 742 10,635 2,810 -
Other non-interest income 71,263 63,531 57,810 55,634 53,917 49,051 43,748
-------- -------- -------- -------- -------- -------- --------
Total non-interest income 73,860 69,578 65,940 59,555 67,404 52,954 46,755
-------- -------- -------- -------- -------- -------- --------
Non-interest expense:
Amortization of goodwill and other
intangibles 2,828 2,826 2,916 2,844 10,559 1,161 1,193
Other non-interest expense 109,054 102,857 98,453 95,082 87,794 82,982 79,947
-------- -------- -------- -------- -------- -------- --------
Total non-interest expense 111,882 105,683 101,369 97,926 98,353 84,143 81,140
-------- -------- -------- -------- -------- -------- --------
Income before income tax expense 62,058 68,310 67,789 66,784 62,564 57,351 54,208
Income tax expense 25,477 28,110 27,895 26,895 25,354 22,416 21,181
-------- -------- -------- -------- -------- -------- --------
Net income $ 36,581 $ 40,200 $ 39,894 $ 39,889 $ 37,210 $ 34,935 $ 33,027
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
Per common share:
Basic earnings $ .42 $ .45 $ .44 $ .44 $ .44 $ .43 $ .41
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
Diluted earnings $ .42 $ .45 $ .43 $ .43 $ .43 $ .42 $ .40
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
Diluted cash earnings (3) $ .44 $ .48 $ .49 $ .46 $ .51 $ .43 $ .41
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
Dividends declared $ .1625 $ .1625 $ .125 $ .125 $ .125 $ .125 $ .09375
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
FINANCIAL RATIOS:
Return on average assets (2) 1.54% 1.69% 1.66% 1.63% 1.80% 1.90% 1.82%
Cash return on average assets (2)(3) 1.64 1.84 1.86 1.73 2.13 1.95 1.87
Return on average realized common
equity (2) 16.75 17.52 16.99 17.28 19.37 21.35 21.26
Return on average common equity (2) 16.58 17.37 16.83 17.10 19.20 21.37 21.26
Cash return on average tangible
equity (2)(3) 22.48 23.73 23.78 23.09 25.94 23.48 23.35
Average total equity to average assets 9.28 9.75 9.83 9.53 9.38 8.91 8.56
Net interest margin (2)(4) 4.82 4.94 4.94 4.93 5.24 5.41 5.31
</TABLE>
- ---------------------------------
(1) Includes interest-bearing deposits with banks, federal funds sold, U.S.
Government and other marketable securities held to maturity, FRB stock
and FHLB stock.
(2) Annualized.
(3) Excludes amortization and reduction of goodwill and deposit base
intangibles.
(4) 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>
Nine Months Ended September 30,
--------------------------------------------------------------------------------
1998 1997
---------------------------------------- ---------------------------------------
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 (3) $1,279,872 $ 66,573 6.94% $1,257,257 $ 67,562 7.17%
---------- ---------- ---------- ----------
Loans held for sale 199,286 10,655 7.13 202,903 11,338 7.45
---------- ---------- ---------- ----------
Loans and leases:
Residential real
estate 3,671,236 201,800 7.33 2,356,250 138,406 7.83
Commercial real estate 839,638 56,066 8.90 851,284 57,684 9.03
Commercial business 260,196 16,587 8.50 198,637 13,126 8.81
Consumer 1,933,632 166,785 11.50 1,817,742 163,902 12.02
Lease financings 376,538 36,911 13.07 326,257 27,722 11.33
---------- ---------- ---------- ----------
Total loans and
leases (4) 7,081,240 478,149 9.00 5,550,170 400,840 9.63
---------- ---------- ---------- ----------
Investments:
Interest-bearing
deposits with banks 3,414 145 5.66 13,430 561 5.57
Federal funds sold 59,910 2,491 5.54 2,175 91 5.58
U.S. Government and
other marketable
securities held
to maturity 4,143 174 5.60 3,943 155 5.24
FHLB stock 82,202 4,385 7.11 52,929 2,895 7.29
FRB stock 23,080 1,036 5.98 9,646 433 5.99
---------- ---------- ---------- ----------
Total investments 172,749 8,231 6.35 82,123 4,135 6.71
---------- ---------- ---------- ----------
Total interest-
earning assets 8,733,147 563,608 8.60 7,092,453 483,875 9.10
---------- ---- ------- ----
Other assets (5) 817,553 540,444
---------- ----------
Total assets $9,550,700 $7,632,897
---------- ----------
---------- ----------
Liabilities and
Stockholders' Equity:
Non-interest bearing
deposits $ 985,558 $ 765,766
---------- ----------
Interest-bearing
deposits:
Checking 664,491 5,175 1.04 531,057 4,390 1.10
Passbook and
statement 1,134,941 14,769 1.74 836,382 11,959 1.91
Money market 699,517 15,676 2.99 647,722 15,096 3.11
Certificates 3,322,605 128,510 5.16 2,604,886 104,104 5.33
---------- ---------- ---------- ----------
Total interest-
bearing
deposits 5,821,554 164,130 3.76 4,620,047 135,549 3.91
---------- ---------- ---------- ----------
Borrowings:
Securities sold under
repurchase agree-
ments and federal
funds purchased 111,863 4,950 5.90 395,367 16,939 5.71
FHLB advances 1,275,914 56,193 5.87 676,794 29,649 5.84
Discounted lease
rentals 212,390 12,973 8.14 218,344 13,594 8.30
Subordinated debt 30,099 2,376 10.53 38,949 2,537 8.68
Other borrowings 39,713 1,913 6.42 64,125 3,025 6.29
---------- ---------- ---------- ----------
Total borrowings 1,669,979 78,405 6.26 1,393,579 65,744 6.29
---------- ---------- ---------- ----------
Total interest-
bearing
liabilities 7,491,533 242,535 4.32 6,013,626 201,293 4.46
---------- ---- ---------- ----
Other liabilities (5) 156,585 170,017
---------- ----------
Total liabilities 8,633,676 6,949,409
Stockholders' equity (5) 917,024 683,488
---------- ----------
Total liabilities
and stockholders'
equity $9,550,700 $7,632,897
---------- ----------
---------- ----------
Net interest income $ 321,073 $ 282,582
---------- ----------
---------- ----------
Net interest-rate spread 4.28% 4.64%
---- ----
---- ----
Net interest margin 4.90% 5.31%
---- ----
---- ----
</TABLE>
(1) Tax-exempt income was not significant and thus has not been presented on
a tax equivalent basis. Tax-exempt income of $112,000 and $158,000 was
recognized during the nine months ended September 30, 1998 and 1997,
respectively.
(2) Annualized.
(3) Average balance and yield of securities available for sale is based upon
the historical amortized cost balance.
(4) Average balance of loans and leases includes non-accrual loans and
leases, and is presented net of unearned income.
(5) 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 generally arising out
of its general lending, deposit 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, mortgage banking
and deposit 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 National Bank Minnesota ("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 National Bank Michigan ("Great Lakes Michigan")
filed with the United States Court of Federal Claims a complaint seeking
monetary damages from the United States for breach of contract, taking of
property without just compensation and deprivation of property without due
process. Great Lakes Michigan's claim is based on the government's breach of
contract in connection with Great Lakes Michigan's acquisitions of certain
savings institutions prior to the enactment of FIRREA in 1989, which contracts
allowed Great Lakes Michigan to treat the "supervisory goodwill" created by the
acquisitions as an asset that could be counted toward regulatory capital, and
provided for other favorable regulatory accounting treatment. The United States
has not yet answered Great Lakes Michigan's complaint. Great Lakes Michigan's
complaint involves approximately $87.3 million in supervisory goodwill.
On July 1, 1996, the United States Supreme Court issued a decision affirming the
August 30, 1995 decision of the United States Court of Appeals for the Federal
Circuit, which decision had affirmed the Court of Federal Claims' liability
determinations in three other "supervisory goodwill" cases, consolidated for
review under the title WINSTAR CORP. V. UNITED STATES, 116 S.Ct. 2432 (1996). In
rejecting the United States' consolidated appeal from the Court of Federal
Claims' decisions, the Supreme Court held in WINSTAR that the United States had
breached contracts it had entered into with the plaintiffs which provided for
the treatment of supervisory goodwill, created through the plaintiffs'
acquisitions of failed or failing savings institutions, as an asset that could
be counted toward regulatory capital. Two of the three cases consolidated in the
Supreme Court proceedings have since been tried before the Court of Federal
Claims on the issue of damages. One of these trials commenced on February 24,
1997, the submission of evidence at trial was completed in April 1998,
post-trial briefing was completed in the summer of 1998, and final arguments
were heard in September of this year. The Court of Federal Claims has not yet
determined the amount, if any, that the plaintiff may recover in damages from
the government's breach of contract. The other case settled in June 1998. In
connection with the trials in those cases, the Court of Federal Claims in
December of 1996 denied the
26
<PAGE>
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.
On December 22, 1997, the Court of Federal Claims issued a decision finding the
existence of contracts and governmental breaches of those contracts in four
other "supervisory goodwill" cases, consolidated for purposes of that decision
only under the title CALIFORNIA FEDERAL BANK V. UNITED STATES, 39 Fed Cl. 753
(1997). In reaching its decision, the Court of Federal Claims rejected a number
of "common issue" defenses that the government has raised in a number of
"supervisory goodwill" cases.
The government has indicated that it will have a number of affirmative defenses
against goodwill litigation filed against it. The TCF Minnesota and Great Lakes
Michigan actions involve a variety of different types of transactions, contracts
and contract provisions. There can be no assurance that the U.S. Supreme Court
decision in WINSTAR or the Court of Federal Claims' recent decision in
CALIFORNIA FEDERAL will mean that a similar result would be obtained in the
actions filed by TCF Minnesota and Great Lakes Michigan. There also can be no
assurance that the government will be determined liable in connection with the
loss of supervisory goodwill by either TCF Minnesota or Great Lakes Michigan or,
even if a determination favorable to TCF Minnesota or Great Lakes Michigan is
made on the issue of the government's liability, that a measure of damages will
be employed that will permit any recovery on TCF Minnesota's or Great Lakes
Michigan's claim. Because of the complexity of the issues involved in both the
liability and damages phases of this litigation, and the usual risks associated
with litigation, the Company cannot predict the outcome of TCF Minnesota's or
Great Lakes Michigan's cases, and investors should not anticipate any recovery.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
The Securities and Exchange Commission has amended its Rule 14a-4, which governs
the use by the Company of its discretionary voting authority with respect to
certain shareholder proposals. Pursuant to this amendment, the Company's proxy
card for its 1999 annual meeting of shareholders may confer discretionary
authority on any matter as to which the Company does not receive notice by at
least sixty days prior to the date of the 1999 annual meeting.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
See Index to Exhibits on page 29 of this report.
(b) Reports on Form 8-K.
None.
27
<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/ Neil W. Brown
----------------------------------------
Neil W. Brown, 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: November 12, 1998
28
<PAGE>
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
INDEX TO EXHIBITS
FOR FORM 10-Q
<TABLE>
<CAPTION>
Exhibit Sequentially
Number Description Numbered Page
------ ----------- -------------
<S> <C> <C>
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(c) Amended and Restated TCF Financial Corporation
Executive Deferred Compensation Plan effective
November 1, 1998.
10(d) Amended and Restated Trust Agreement for TCF
Financial Corporation Executive Deferred
Compensation Plan effective September 1,
1998; amendment adopted effective November 1, 1998.
10(m) Supplemental Employee Retirement Plan, as amended
and restated effective July 21, 1997 [incorporated by
reference to Exhibit 10(m) to TCF Financial Corporation's
Annual Report on Form 10-K for the year ended December 31,
1997, No. 0-16431]; amendment adopted effective September
30, 1998.
10(o) TCF Financial Corporation Senior Officer Deferred
Compensation Plan as amended and restated
effective November 1, 1998.
10(p) Amended and Restated Trust Agreement for TCF
Financial Corporation Senior Officer Deferred
Compensation Plan effective September 1, 1998;
amendment adopted effective November 1, 1998.
10(q) Directors Stock Program [incorporated by reference
to Program filed with registrant's definitive
proxy statement dated March 22, 1996, No. 0-16431];
amendment adopted June 20, 1998.
10(v) TCF Directors Deferred Compensation Plan [incorporated
by reference to Plan filed with registrant's
definitive proxy statement dated March 15, 1995,
No. 0-16431], as amended October 22, 1996
[incorporated by reference to Exhibit 10(x) to
TCF Financial Corporation's Annual Report on
Form 10-K for the year ended December 31, 1996,
No. 0-16431]; amendment adopted effective
September 30, 1998.
11 Computation of Earnings Per Common Share.
</TABLE>
29
<PAGE>
10-19-98
TCF FINANCIAL EXECUTIVE DEFERRED COMPENSATION PLAN
(Amended and Restated effective as of November 1, 1998)
1. DEFERRAL OF INCENTIVE COMPENSATION AND SALARIES.
a. From time to time eligible employees ("Employees") of TCF
Financial Corporation ("TCF Financial") or any of its direct or indirect
subsidiaries (each such corporation being referred to hereinafter as the
"Company") may, by written notice, elect to have payment of a portion of
their salary for the next succeeding calendar year, and/or all or a portion
of their incentive compensation payable for the next succeeding calendar
year, deferred as hereinafter provided. Each such deferral of compensation
shall be (and is hereinafter referred to as) a "Deferred Amount."
Notwithstanding the foregoing, however, an Employee may not elect to defer
any portion of salary or incentive compensation with respect to any calendar
year, unless such Employee's deferrals with respect to such year are at least
$1,000 in the aggregate, and no deferral may be made of any salary or
incentive compensation payable within 12 months after such Employee has
received a distribution of pre-tax from the TCF Employees Stock Ownership
Plan - 401(k) pursuant to the financial hardship withdrawal provisions of
such plan.
b. Any elections with respect to Deferred Amounts of salary shall
be exercised in writing by the Employee prior to the latest to occur of the
following: (i) the beginning of the calendar year for which the salary is to
be earned; (ii) such Employee's first day of employment service in that year;
or (iii) the first day of the calendar month next following the date the
Employee first becomes eligible to participate in the Plan. Any election
with respect to Deferred Amounts of incentive compensation shall be made no
later than December 31 of the calendar year preceding the calendar year in
which the periods of service are rendered for which the incentive
compensation is to be paid. An election of Deferred Amounts, once made, is
irrevocable, except as provided in paragraph 6 hereof.
c. Deferred Amounts shall be subject to the rules set forth in
this document, and each Employee shall have the right to receive cash
payments on account of previously Deferred Amounts only in the amounts and
under the circumstances hereinafter set forth.
d. Employees eligible to participate in this Plan are Employees of
a Company who have been designated by TCF Financial as subject to the
reporting requirements of Section 16(a) under the Securities Exchange Act of
1934. Eligibility shall be determined annually as of the latest practicable
date prior to the commencement of each new calendar year. In the event an
Employee ceases to be eligible for this Plan during the course of a calendar
year, the Employee's eligibility shall nevertheless continue through the end
of that calendar year. Notwithstanding the foregoing, individuals who become
employees of a Company as a result of a merger or acquisition shall not be
eligible Employees under
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this Plan unless and until TCF Financial has adopted a resolution identifying
them as eligible Employees.
2. PERSONNEL COMMITTEE. The Committee (the "Committee") shall consist
of such members of the Personnel Committee of the Board of Directors of TCF
Financial Corporation who qualify as non-employee directors from time to time
under Rule 16b-3 of the Securities and Exchange Commission. Full power and
authority to construe, interpret, and administer this Plan document shall be
vested in the Committee. The Committee shall have full power and authority
to make each determination provided for in this Plan document, and in this
connection, to promulgate such rules and regulations as the Committee
considers necessary or appropriate for the implementation and management of
this Plan. The Committee shall have sole and absolute discretion in the
performance of its powers and duties under this Plan. All determinations made
by the Committee shall be final, conclusive and binding upon the Companies,
each Employee and former Employee and their designees, unless found by a
court of competent jurisdiction to have been arbitrary and capricious. The
Committee shall have authority to designate officers of TCF Financial and to
delegate authority to such officers to receive documents which are required
to be filed with the Committee, to execute and provide directions to the
Trustee and other administrators, and to do such other actions as the
Committee may specify on its behalf, and any such actions undertaken by such
officers shall be deemed to have the same authority and effect as if done by
the Committee itself.
3. DEFERRED COMPENSATION ACCOUNTS. Each Company shall establish on its
books a separate account ("Account"), including sub-accounts pursuant to
Exhibit A hereto and Section 10 hereof, for each of its Employees who becomes
a participant in this Plan, and each such Account shall be maintained as
follows:
a. Each Account shall be credited with the Deferred Amounts
elected by the Employee for whom such Account is established as of the date
on which such Deferred Amount would otherwise have been paid to the Employee.
b. To the extent that a Company has made contributions to the
Trust described in paragraph 4 with respect to an Employee's Deferred
Amounts, the Employee's Account shall thereafter be adjusted as described in
paragraph 4. To the extent such contributions have not been made with respect
to an Employee's Deferred Amounts, and within 30 days after the date on which
such Deferred Amounts are credited to an Employee's Account, they shall have
been deemed to have been invested in such investments as shall be permitted
by the Committee and as the Employee shall direct. Any investment direction
by an Employee shall be consistent with Section 10 and Exhibit A and shall be
irrevocable with respect to the calendar year to which it applies, unless the
Committee allows additional elections. While an Employee's Account is deemed
to be so invested, it shall be credited with all interest, dividends (whether
in stock, cash, or other property), stock splits, or other property that
would have been received if the Deferred Amounts had actually been so
invested. All cash deemed to have been received with respect to investments
deemed to have been made for an Employee's Account shall be
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deemed to be reinvested in such investments as the Employee shall direct as
of a date selected by the Committee, which date shall be not less than 30
days after receipt of such direction, and the balance credited to an
Employee's Account as of any date shall be equal to the fair market value of
the investments deemed to have been made for such Account as of such date.
c. Although the value of an Employee's Account is to be measured
by the value of and income from certain investments, the value of and income
from such investments are merely a measuring device to determine the payments
to be made to each Employee hereunder. Each Employee, and each other
recipient of an Employee's Deferred Amounts pursuant to paragraph 7, shall be
and remain an unsecured general creditor of the Company by which he is
employed with respect to any payments due and owing to such Employee
hereunder. If a Company should from time to time, in its discretion,
actually purchase the investments deemed to have been made for an Employee's
Account, either directly or through the trust described in paragraph 4, such
investments shall be solely for the Company's or such trust's own account,
and the Employees shall have no right, title or interest therein.
d. Sub-accounts shall be maintained as provided in Exhibit A
hereto and in Section 10 hereof.
4. TRUST. TCF Financial may establish a trust (of the type commonly
known as a "rabbi trust") to aid in the accumulation of assets for payment of
Deferred Amounts. In the event that such a Trust is established, the amounts
credited to the Employee's Accounts shall be adjusted as follows:
a. Each Company may, in its discretion, contribute to the trust an
amount equal to the balance credited to the Account of each Employee (other
than Employees who have made the election described in paragraph 3.c.)
employed by such Company on the date of such contribution. Thereafter, each
Company may, in its discretion, contribute to the trust an amount equal to
the Deferred Amounts of the Employees employed by such Company within five
business days after the Deferred Amount is earned by the Employee. The
assets of the trust shall be invested in such investments as may be permitted
by the Committee and directed by an Employee for his own Account. Any
investment direction of an Employee shall be made consistent with Section 10
and shall be irrevocable with respect to the calendar year to which it
applies, unless the Committee allows additional elections. Insofar as the
trustee of the Trust ("Trustee") has acquired an investment for an Employee's
Account pursuant to such directions, the Employee shall have the right to
determine confidentially whether such investment will be tendered in a tender
or exchange offer, and to direct the Trustee accordingly. The terms of the
trust shall be consistent with the terms of this Plan. The Trustee shall be
a corporate trustee independent of the Company or, if individual(s), shall
not include at any time any person who is or has been eligible for
participation in this Plan. Nothing herein shall be construed as requiring
the Company to make any contributions to the trust. To the extent
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such contributions are actually made, the trust assets shall remain subject
to the claims of the Company's general creditors in the event of its
insolvency.
b. The trust shall provide for separate accounts in the name of
each Employee who has elected a Deferred Amount. Except as provided in
paragraph 4.d., from and after the date as of which such accounts are
established, the balances in the Accounts established for Employees pursuant
to this Plan shall be equal to the balances credited to such separate
accounts. Each such separate account shall then be adjusted as follows:
(i) Contributions made by the Companies to the trust on behalf
of such Employee, and all dividends or other distributions made
with respect to property allocated to such separate account, and
shall be credited to such separate account and invested as the
Employee shall direct.
(ii) Each Employee's separate account shall be increased by
the amount of any increase in the fair market value, as determined
by the Trustee, of any assets allocated to such separate account,
and shall be decreased by any decrease in the fair market value of
such assets, as determined by the Trustee.
(iii) Each Employee's separate account shall be reduced by
any distributions made to the Employee from the trust which are
chargeable to such separate account.
c. An Employee's right to direct the investment of the Employee's
separate account shall continue during any period of distribution subsequent
to the Employee's termination of employment in the same manner as if the
Employee had continued as an active Employee, although the Committee may, in
its discretion, add additional registered mutual funds or collective or
common trustee funds which are available only for the accounts of terminated
Employees if the Committee deems such funds to be particularly appropriate or
suitable for such accounts.
d. The adjustments described in this paragraph 4 shall only be
made to an Employee's Account to the extent that a Company has made
contributions to the trust pursuant to this paragraph 4. If for any reason
such contributions have not been made then, and only to that extent, the
Employee's Account shall be adjusted as provided in paragraph 3.b.
e. Sub-Accounts shall be maintained as provided in Exhibit A
hereto and in Section 10 hereof.
5. PAYMENT OF DEFERRED AMOUNTS. Not later than 30 days after an
Employee's "Distribution Event" (as defined herein), the Trustee shall
commence distribution of the amounts credited to such Employee's Account.
Notwithstanding the foregoing sentence, if an Employee's distribution
requires Committee action then the commencement of distributions shall occur
not later than 30 days after such Committee action or, if later,
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after the Employee's Distribution Event. Provided, that the Committee shall
take any action required of it no later than its next regularly scheduled
meeting after the Employee's Distribution Event. An Employee's "Distribution
Event" is the first to occur of the following: (i) termination of employment;
(ii) disability or (iii) the date one year after a "Change in Control: (as
defined herein). Commencing within such 30 day period, the balance credited
to the Employee's Account shall be paid as follows:
a. 15-YEAR PAYMENT SCHEDULE SUBJECT TO ACCELERATION BY COMMITTEE.
For distributions not subject to paragraph 5.b, c, d or k, payment shall be
in fifteen annual installments unless the Committee approves a different
schedule. The Committee may determine on a case by case basis to approve a
different payment schedule for an Employee after taking into account whether
the Employee has executed or will execute a non-competition agreement in form
and scope reasonably acceptable to the Committee. The Committee may also
consider such other factors as the Committee considers appropriate in each
case. Any alternative payment schedule the Committee approves under this
paragraph 5.a. may be in the form of installments over such period as the
Committee selects, in the form of a lump sum, or any combination of
installments and lump sum payments. For distributions from the Accounts of
Employees who did not consent to the terms of this paragraph 5.a., the
balance in the Account shall be paid as provided in paragraph b of this
section.
(I) The first payment under paragraph 5.a. shall be paid on a date
the Committee selects which is no later than 30 days after the
Committee's direction as to the form and timing of
distributions is made or, if later, 30 days after the
Employee's Distribution Event. If no date is selected, the
first payment shall be on the date that is the later of 30
days after the Committee's action or 30 days after the
Employee's Distribution Event. Succeeding installments (if
any) shall be paid on January 31 of each calendar year
following the calendar year in which the first payment was
made.
(II) Each payment shall be made in cash or in kind as the Committee,
in its discretion, shall determine except that all assets of
an Employee's Account invested in common stock of TCF
Financial (" TCF Stock") shall be distributed in the form of
TCF Stock. If the Committee makes no instruction, any assets
of the Employee's Account invested in assets other than TCF
Stock shall be distributed in the form of cash. Annual
installments are intended to be substantially equal in value.
To that end, each annual distribution shall be determined as
follows. The amount credited to Employee's Account, as
reported on the latest available account statement, shall be
multiplied by a fraction, the numerator of which is one and
the denominator of which is the number if installments
remaining to be paid, including the current installment. The
value of any portion of the account distributed in cash shall
be equal to the cash received upon its liquidation by the
Trustee, provided
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that such liquidation occurs on the latest practicable date
prior to the distribution date.
(III) Notwithstanding the foregoing subparagraph (I), an Employee who
has terminated employment and commenced receiving payments may
elect each year to have the payment otherwise due on January
31 of the next succeeding year paid as monthly installments
instead, with each payment made on the last day of each month.
Any such election shall be made in writing and delivered to
the Committee on or before December 1 prior to any year for
which it is to be effective. Such election may also indicate
the assets to be liquidated in connection with each monthly
payment (subject to the requirement that any assets invested
in TCF Stock must be distributed in kind). The amount of each
monthly payment shall be equal to the amount that would
otherwise be paid in one payment in January, divided by 12.
Any asses to be liquidated in order to pay monthly benefits
shall be liquidated on the last practicable date prior to the
installment's payment date. In no event shall this
subparagraph be construed as allowing the executive to
lengthen or shorten the number of years over which his or her
benefits will be paid; the election herein pertains only to
timing of payments within a year.
b. PRE-1996 LUMP SUM PAYMENT. For distributions to Employees who
did not consent to the terms of paragraph 5.a. at the time it was added to
the Plan, distribution shall occur on or about the 30th day after the
Employee's Distribution Event. Distribution shall consist of a single lump
sum equal to the total value of the Employee's Account unless the termination
of employment was due to retirement or disability (as defined herein), in
which case the distribution shall be in five annual installments. However,
the Committee shall reduce the number of the installments if necessary to
provide for annual payments of at least $15,000. In addition, if the value of
the Employee's Account is less than $15,000 as of any annual installment
payment date, the Account shall be paid in full as of such installment
payment date. Distributions shall be in the form of cash, except that any
portion of the Account invested in TCF Stock shall be distributed in kind.
The value of any portion of the account distributed in cash shall be equal to
the cash received upon its liquidation by the Trustee, provided that such
liquidation occurs on the latest practicable date prior to the distribution
date.
c. AUTOMATIC LUMP SUM DISTRIBUTION IN EXCHANGE FOR NON-COMPETITION
COVENANT OR REDUCTION IN ACCOUNT BALANCE. Effective on and after September
30, 1998, each Employee who so elects in accordance with this paragraph c
shall be entitled to receive a lump sum form of distribution. A lump sum
distribution shall consist of a single distribution of the entire value of
the Employee's Account (unless the Employee elects to apply the election to
only the portion of the Account invested in TCF Stock or to only the portion
of the Account invested in assets other than TCF Stock) on or about 30 days
after the later of the Employee's Distribution Event or the date on which the
Employee's election is filed with TCF Financial. The distribution shall be
in the form of cash, except that any portion of the Employee's Account
invested in TCF Stock shall be distributed in kind. The value of any portion
of the Account distributed in cash shall be
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equal to the cash received upon its liquidation by the Trustee, provided that
such liquidation occurs on the latest practicable date prior to the
distribution date. An Employee's election under this paragraph c may occur at
any time prior to or after the commencement of distributions to such
Employee. If distributions have already commenced, such election shall apply
only to the balance of the Employee's Account at the time of the election.
The election shall be made on such form as TCF Financial reasonably requires
and shall be accompanied by either: (a) a noncompetition agreement reasonably
acceptable to the Committee (see paragraph (i ) below); or (b) the Employee's
written acceptance of a reduction by 5% in the Employee's Account, whichever
the Employee elects to provide. If the Employee elects the reduction in his
or her Account, such reduction shall be accomplished by TCF Financial and the
Trustee on or about 30 days after such election is made.
d. CHANGE IN CONTROL DISTRIBUTION. In the event of a Change in
control (as defined herein) all Accounts in the Plan will be distributed to
all Employees. If the Employee's Account is subject to paragraph 5.a.,
distribution will be subject to the provisions of paragraph 5.a. If the
Employee's Account is subject to paragraphs 5.b or c. distribution will be in
the form of a lump sum. The first payment shall occur on or about 30 days
after the earlier of (i) the date one year after the Change in Control, or
(ii) the date of the Employee's termination of employment or disability. Any
portion of the Account invested in TCF Stock (or common stock of a successor
company) shall be distributed in kind. The value of any portion of the
account distributed in cash shall be equal to the cash received upon its
liquidation by the Trustee, provided that such liquidation occurs on the
latest practicable date prior to the distribution date.
e. For purposes of this section, an Employee's employment is
considered to terminate as of the date which is the later of (i) Employee's
last date of service for the Company, or (ii) the last date on which there is
an employment relationship between the Employee and a Company.
f. For purposes of this section, an Employee is disabled as of the
date the Employee is eligible for payments under the long term disability
plan of a Company.
g. In the event installment payments commence and any installments
are unpaid at the time of Employee's death, the payments shall be made at the
times and in such amounts as if Employee were living to the persons specified
in paragraph 7.a.
h. For purposes of this section, an Employee's termination of
employment is a retirement if so determined by the Committee under all the
facts and circumstances.
i. A non-competition agreement shall be reasonably acceptable to
the Committee for purposes of this Section 5 if it has a value as of the
Committee's action date, equal to at least five percent of the then-current
value of the Employee's Account. Valuation shall be determined in all cases
on the basis of an independent appraisal, unless such an appraisal is deemed
unnecessary by both the Committee and the Employee.
j. For purposes of this Plan, a Change in Control shall be deemed
to have occurred if (i) any "person" as defined in sections 13(d) and 14(d)
of the Securities Exchange Act of 1934 (the "Exchange Act") is or becomes the
"beneficial owner" as defined in Rule 13d-3 under the Exchange Act, directly
or indirectly, of securities of TCF financial representing more than fifty
percent (50%) or more of the combined voting power of TCF Financial's then
outstanding securities. (For purposes of this clause (i), the
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<PAGE>
term "beneficial owner" does not include any employee benefit plan maintained
by TCF Financial that invests in TCF Financial's voting securities.); or (ii)
during any period of two (2) consecutive years there shall cease to be a
majority of the Board comprised as follows: individuals who at the beginning
of such period constitute the Board or new directors whose nomination for
election by the company's shareholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved; or (iii) the shareholders of TCF
Financial approve a merger or consolidation of TCF Financial with any other
corporation, other than a merger or consolidation which would result in the
voting securities of TCF Financial outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least fifty
percent (50%) of the combined voting power of the voting securities of TCF
Financial or such surviving entity outstanding immediately after such merger
or consolidation, or the shareholders of TCF Financial approve a plan of
complete liquidation of TCF Financial or an agreement for the sale or
disposition by TCF Financial of all or substantially all TCF Financial's
assets; provided, however, that no Change in Control will be deemed to have
occurred if such merger, consolidation, sale or disposition of assets, or
liquidation is not subsequently consummated. The date of a Change in
Control, for purposes of this Plan, is the date on which the Change in
Control is consummated.
k. Notwithstanding any other provision of this Section 5 or any
payment schedule approved by the Committee pursuant to this Section 5 and
regardless of whether payments have commenced under this Section 5, in the
event that the Internal Revenue Service should finally determine with respect
to an Employee who has terminated employment with the Company that part or
all of the value of the Employee's Deferred Amounts or Plan Account which
have not actually been distributed to the Employee, or that part or all of a
related Trust Account which has not actually been distributed to the
Employee, is nevertheless required to be included in the Employee's gross
income for federal and/or State income tax purposes, then the Deferred
Amounts or the Account or the part thereof that was determined to be
includible in gross income shall be distributed to the Employee in a lump sum
as soon as practicable after such determination without any action or
approval by the Committee. A "final determination" of the Internal Revenue
Service for purposes of this paragraph 5.i. is a determination in writing by
said Service ordering the payment of additional tax, reporting of additional
gross income or otherwise requiring Plan amounts to be included in gross
income, which is not appealable or which the Employee does not appeal within
the time prescribed for appeals.
6. EMERGENCY PAYMENTS. In the event of an "unforeseeable emergency" as
determined hereafter, the Committee may determine the amounts payable under
paragraph 5 hereof and pay all or a part of such amounts without regard to
the payment dates provided in paragraph 5 to the extent the Committee
determines that such action is necessary in light of immediate and heavy
needs of the Employee (or his beneficiary) occasioned by severe financial
hardship. For the purposes of this paragraph 6, an "unforeseeable emergency"
is a severe financial hardship to the Employee resulting from a sudden and
unexpected illness or accident of the Employee or beneficiary, or of a
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dependent (as defined in Section 152(a) of the Internal Revenue Code of 1986,
as amended) of the Employee or beneficiary, loss of the Employee's or
beneficiary's property due to casualty, or other similar extraordinary and
unforeseeable circumstances arising as a result of events beyond the control
of the Employee or beneficiary. Payments shall not be made pursuant to this
paragraph 6 to the extent that such hardship is or may be relieved: (a)
through reimbursement or compensation by insurance or otherwise, (b) by
liquidation of the Employee's or beneficiary's assets, to the extent the
liquidation of such assets would not itself cause severe financial hardship,
or (c) by cessation of the Employee's deferrals under the Plan. Such action
shall be taken only if Employee (or Employee's legal representatives or
successors) signs an application describing fully the circumstances which are
deemed to justify the payment, together with an estimate of the amounts
necessary to prevent such hardship, which application shall be approved by
the Committee after making such inquiries as the Committee deems necessary or
appropriate.
7. METHOD OF PAYMENTS.
a. In the event of Employee's death, payments shall be made to the
persons (including a trustee or trustees) named in the last written
instrument signed by Employee and received by the Committee prior to
Employee's death, or if Employee fails to so name any person, the amounts
shall be paid to Employee's estate or the appropriate distributee thereof.
The Committee, the Company, and the Trustee shall be fully protected in
making any payments due hereunder in accordance with what the Committee
believes to be such last written instrument received by it.
b. Payments due to a legally incompetent person may be made in such
of the following ways as the Committee shall determine:
(i) directly to such incompetent person,
(ii) to the legal representative of such incompetent person, or
(iii) to some near relative of the incompetent person to be used
for the latter's benefit.
c. Except as otherwise provided in paragraphs 7.a. and b., all
payments to persons entitled to benefits hereunder shall be made to such
persons in person or upon their personal receipt or endorsement, and shall
not be grantable, transferable, or otherwise assignable in anticipation of
payment thereof, in whole or in part, by the voluntary or involuntary acts of
any such persons, or by operation of law, and shall not be pledged,
encumbered, or otherwise liable or taken for any obligation of such person.
d. All payments to persons entitled to benefits hereunder shall be
made out of the general assets, and shall be the sole obligations, of the
Employer(s) by which the Eligible Employee was employed, except to the extent
that such payments are made out of the trust described in paragraph 4.
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8. CLAIMS PROCEDURES.
a. If a claim for benefits made by any person (the "Applicant") is
denied, the Committee shall furnish to the Applicant within 90 days after its
receipt of such claim (or within 180 days after such receipt if special
circumstances require an extension of time) a written notice which: (i)
specifies the reasons for the denial, (ii) refers to the pertinent provisions
of the Plan on which the denial is based, (iii) describes any additional
material or information necessary for the perfection of the claim and
explains why such material or information is necessary, and (iv) explains the
claim review procedures.
b. Upon the written request of the Applicant submitted within 60
days after his receipt of such written notice, the Committee shall afford the
Applicant a full and fair review of the decision denying the claim and, if so
requested: (i) permit the Applicant to review any documents which are
pertinent to the claim, (ii) permit the Applicant to submit to the Committee
issues and comments in writing, and (iii) afford the Applicant an opportunity
to meet with a quorum of the Committee as a part of the review procedure.
c. Within 60 days after its receipt of a request for review (or
within 120 days after such receipt if special circumstances, such as the need
to hold a hearing, require an extension of time) the Committee shall notify
the Applicant in writing of its decision and the reasons for its decision and
shall refer the Applicant to the provisions of the Plan which form the basis
for its decision.
9. MISCELLANEOUS.
a. Except as limited by paragraph 7.c. and except that an Employee
shall have a continuing power to designate a new recipient in the event of
Employee's death at any time prior to such death without the consent or
approval of any person theretofore named as Employee's recipient by an
instrument meeting the requirements of paragraph 7.a., this document shall be
binding upon and inure to the benefit of each Company, the Employees, their
legal representatives, successors and assigns, and all persons entitled to
benefits hereunder.
b. Any notice given in connection with this document shall be in
writing and shall be delivered in person or by registered mail or overnight
delivery service, return receipt requested. Any notice given by registered
mail or overnight delivery service shall be deemed to have been given upon
the date of delivery indicated on the return receipt, if correctly addressed.
c. Nothing in this document shall interfere with the rights of any
Employee to participate or share in any profit sharing or pension plan which
is now in force or which may at some future time become a recognized plan of
any Company.
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d. Nothing in this document shall be construed as an employment
agreement nor as in any way impairing the right of any Company to terminate
an Employee's employment at will.
e. This Plan constitutes a mere promise by the Company to make
benefit payments in the future, and it is intended to be unfunded for tax
purposes and for the purposes of Title I of ERISA. The rights of an Employee
or beneficiary to receive benefit payments hereunder are solely those of an
unsecured general creditor of the Company.
10. INVESTMENT ELECTIONS BY EMPLOYEES; LEVERAGING; PURCHASE PROCEDURES
FOR PURPOSES OF RULE 16B-3..
a. Employees may elect to liquidate funds in their Deferred
Compensation Accounts under Section 3 or 4 and reinvest them as directed,
PROVIDED that any investment election shall be exercised in writing by the
Employee and approved by the Committee or its approved representative under
such terms and conditions as the Committee deems appropriate (Exhibit A to
this Plan), and FURTHER PROVIDED, that on and after September 30, 1998 any
investments in TCF Stock shall be subject to paragraph b of this section 10.
b. If an Employee directs or retains any investment in shares of
TCF Stock on or after September 30, 1998, the Employee's Account shall
include a TCF Stock Account which shall operate as follows:
i. All shares of TCF Stock allocated to the Employee's Account
on September 30, 1998 (excluding any shares held in suspense
pursuant to paragraph c of this section) shall be allocated on that
date to the Employee's TCF Stock Account and the fixed number of
shares so allocated shall be the beginning balance of the TCF Stock
Account.
ii. Thereafter, the TCF Stock Account shall be increased by
the number of shares, if any, of TCF Stock purchased (or deemed to
be purchased) from Deferred Amounts, dividends and/or interest
pursuant to the Employee's directions under Section 3 of this Plan
and shall also be increased by any shares of TCF Stock released
from pledge pursuant to paragraph c of this section.
iii. The balance of shares of the TCF Stock Account shall in
no event be decreased.
iv. Shares allocated to the Employee's TCF Stock Account
shall be subject to all of the restrictions and other provisions of
this Committee's action dated 8-24-98 establishing separate
accounts for TCF Stock as compared to non-TCF Stock assets.
c. In the event the Trustee engages in borrowing on behalf of an
Employee's account pursuant to directions of the Committee under section
5.1(f) of the Trust, all shares of TCF Stock acquired with the proceeds of
such borrowing shall be pledged by the Trustee to secure the repayment of
such loan and any shares of TCF Stock so pledged shall be held in suspense
(unallocated) in the Employee's TCF Stock Account pursuant to this paragraph
c. Shares held in suspense (unallocated) under this
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paragraph c shall be treated as follows: (i) they shall not be credited to
the balance of the Employee's TCF Stock Account under paragraph a of this
section and shall not be distributed or distributable to the Employee,
whether as part of a distribution pursuant to section 5 of this Plan or
otherwise, during any time when they are pledged; (ii) they shall not be used
for any other purpose than the repayment of principal and/or interest
payments as they come due on the loan entered into by the Trustee in
connection with the purchase of such shares; and (iii) they shall not in any
event be credited to or inure to the benefit of any other Employee's Account
in the Plan and/or Trust. Dividends paid on shares held in suspense shall be
credited to the Employee's Account in TCF Stock or in other assets as the
Employee shall direct, to the extent such dividends exceed then-current
amounts of principal and interest due on the loan. In the event the Employee
has a distribution of his or her entire Account balance or entire remaining
Account balance in the Plan, the Trustee shall be directed to liquidate a
sufficient number of the shares of TCF Stock held in suspense in order to
repay the balance due on the loan in full and the remainder of the shares
held in suspense, if any, shall be released from the pledge, allocated to the
Employee's TCF Stock Account and included in the distribution.
Notwithstanding the foregoing, the lender may elect to release from pledge
any shares of TCF Stock held in suspense under this paragraph c prior to
complete repayment of the loan and in such event the Trustee and the
administrator of the Plan shall thereafter immediately allocate such shares
to the Employee's TCF Stock Account and shall increase the balance thereof as
provided in paragraph a of this section.
d. Any election of Deferred Amounts of salary or incentive
compensation under paragraph 1.b. shall be exercised in writing by the
Employee and filed with the Committee no later than the date prior to the
date the first salary or incentive compensation, part or all of which is to
become a Deferred Amount, is earned.
e. Any investment election under paragraph 3 or 4 relating to
initial or periodic investment of Deferred Amounts in TCF Stock, whether as a
result of an initial or yearly election to participate in the Plan or a
change in the level of participation in the Plan, shall be exercised in
writing by the Employee and filed with the Committee no later than the date
prior to the date the first salary or incentive compensation, part or all of
which is to become a Deferred Amount, is earned. Deferred Amounts of salary
or incentive compensation, to the extent they are forwarded to the trustee,
shall be so forwarded on or immediately after the payroll date of the salary
or incentive compensation which is being deferred and shall be deemed to be
invested on the same date on which the Trustee purchases the designated
investments. The Trustee shall purchase such investments as soon as
practicable after the payroll date for which the Deferred Amount is received,
and in the case of investments consisting of TCF Stock, no later than two
weeks after such payroll date, with the exact date and purchase terms to be
determined by a stock broker or other investment professional on the basis of
such person's judgment as to the best available purchase price for the Plan
and Trust. If Deferred Amounts are not forwarded to the Trustee, investments
in equity securities of TCF Financial shall be deemed to occur at the average
of the high and low trading price for such securities on the payroll date.
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f. Any investment election under paragraph 3 or 4 relating to
liquidation of existing investments and reinvestment or reapplication of
proceeds within the Plan or Trust shall be consistent with Exhibit A hereto,
shall be exercised in writing and filed with the Committee by the Employee on
any date, provided that any such election which is a discretionary purchase
of TCF Stock is at least six months after the date of the Employee's last
such discretionary election (as defined in Rule 16b-3) of a sale of TCF Stock
under any other benefit plan of the Company. Liquidation and/or reinvestment
of funds within the Plan or Trust under Section 3 or 4 shall occur as soon as
practicable after the Employee's election is filed with the Committee,
provided that the Committee determines it is a valid election and, in the
case of investment or reinvestment in TCF Stock, such election is implemented
by the Trustee no later than two weeks after the date such election is filed
with the Committee and determined to be valid, with the exact date(s) and
terms of any such transaction involving TCF Stock to be determined by a stock
broker or other investment professional on the basis of such person's
judgment as to the then best available purchase price for the Plan and Trust.
If Deferred Amounts have not been forwarded to the Trustee, to the extent
there are no actual funds to implement the Employee's election, such election
shall be deemed to be implemented at the average of the high and low sales
prices for TCF Stock on the date the election was filed with the Committee
and determined to be valid and, for other investments, on such basis as the
Trustee reasonably determines.
g. For purposes of this Section 10, filing with the corporate
secretary of TCF Financial shall be deemed to be a filing with the Committee.
11. SPECIAL PROVISIONS REGARDING OSPIP AND DEFERRED STOCK. Effective
for deferrals of incentive compensation with respect to the 1992 calendar
year and thereafter, Employees' deferrals of incentive compensation payable
in the form of common stock of TCF Financial pursuant to the Officer's Stock
Performance Incentive Plan ("OSPIP") or otherwise subject to issuance as
Deferred Stock under the Stock Option and Incentive Plan of TCF Financial ,
the TCF Financial 1995 Stock Incentive Plan, or any successor stock option
plan or restricted stock plan of TCF Financial shall be credited to the
Employee's account as "Deferred Stock" and the Employee shall be prohibited
from making any investment election with respect to such Deferred Stock until
the date or dates specified in an award agreement entered into pursuant to
the Stock Option and Incentive Plan by TCF Financial, subject to acceleration
upon the occurrence of events as specified in such agreement. Upon and after
such date or dates, the Deferred Stock credits to the Employee's account
shall be subject to investment elections the same as any other credits in the
Employee's accounts. In the event TCF Financial so notifies the Trustee,
dividend credits on Deferred Stock shall be withheld until such time as the
Deferred Stock becomes subject to investment elections. In the event the
Employee's employment terminates or in the event of the Employee's
disability, any Deferred Stock credits not yet subject to investment election
by the Employee shall be reduced to zero and no benefits shall be payable
with respect to them. Deferred Stock credits shall not be distributable
pursuant to paragraph 6 (Emergency Payments) until they are subject to
investment election by the Employee.
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12. TERMINATION OR AMENDMENT. This Plan may be amended at any time and
from time to time, upon the approval of the Board of Directors of TCF
Financial; PROVIDED, that, if the amendment is adopted prior to a change in
control (as defined in section 5(j) hereof), no such amendment shall (without
the consent of all participants, including any terminated participants and
beneficiaries then receiving distributions) alter any participant's or
beneficiary's right to payments of amounts previously credited to such
participant's or beneficiary's Account or delay the time or times at which a
participant or beneficiary is entitled to receive payments with respect to
the participant's Deferred Amounts under the Plan. If the amendment is
adopted after a change in control, as defined in section 5(j) hereof, the
approval of the Board of Directors and the consent of all participants,
terminated participants and beneficiaries shall be required for the
amendment. In the event that all of the Plan's participants and
beneficiaries do not consent to a proposed amendment, such amendment shall
not take effect but the Plan Accounts of the consenting participants shall be
transferred to a separate plan that is identical to this Plan in all
respects, except that it may include the proposed amendment. The Board of
Directors may terminate this Plan in its discretion, except that any such
termination shall require the consent of all participants (including any
terminated participants and beneficiaries then receiving distributions),
unless it is an automatic termination of the Plan under section 5(k) hereof.
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EXHIBIT A
(Action of 16b-3 Sub-Committee of the Personnel Committee Establishing TCF Stock
Accounts and Diversified Accounts effective as of September 30, 1998)
1. Effective as of September 30, 1998 (the "Effective Date"), each
participant's Account in the Plan and Trust shall be divided into two
sub-accounts: a "TCF Stock Account" and a "Diversified Account". All
shares of common stock of TCF Financial ("TCF Stock") in a participant's
Account on the Effective Date shall be allocated as of that Date to the
Participant's TCF Stock Account. All other investments in a participant's
Account on the Effective Date shall be allocated as of that Date to the
participant's Diversified Account. Thereafter, the Sub-Accounts shall
operate as follows:
a. The TCF Stock Account shall consist solely of shares of TCF Stock (and
cash or cash equivalent money market funds for fractional shares or
for funds held temporarily prior to investment). The Diversified
Account shall not at any time include any shares of TCF Stock. Except
as permitted by paragraph e, below, no transfer of assets will be
permitted from the TCF Stock Account to the Diversified Account or
from the Diversified Account to the TCF Stock Account.
b. A participant's TCF Stock Account shall hold all shares of TCF Stock
allocated to it on or after the Effective Date and such shares shall
not be subject to sale, transfer, assignment, pledge or other
hypothecation in any manner. Upon the occurrence of a Distribution
Event (as defined in the Plans) the shares will be distributed from
the Plan and Trust to the participant in an in-kind distribution
pursuant to the terms of the Plan.
c. The Diversified Account shall not at any time purchase or invest in
any shares of TCF Stock, but shall invest in such investments as the
participant directs and as the Committee permits from time to time.
d. Any new Deferred Amounts for a participant after the Effective Date
shall be allocated to either the participant's TCF Stock Account or to
such participant's Diversified Account, as the participant shall
direct in an irrevocable election filed before the beginning of each
calendar year and applicable throughout the calendar year. The
Deferred Amounts shall be credited to the applicable sub-Account as of
the same date that they are otherwise credited to the participant's
Account under Section 3.a. of the Plans and Section 4.2 of the Trusts.
e. Dividends generated by a participant's TCF Stock Account shall be
reinvested in the TCF Stock Account, or in the Diversified Account, as
the participant directs in an irrevocable election filed before the
beginning of each calendar year and applicable throughout the calendar
year. Any interest or dividends generated by a participant's
Diversified Account shall be reinvested in the Diversified Account, or
in the participant's TCF Stock Account, as the participant directs in
an irrevocable election filed before the beginning of each calendar
year and applicable throughout the calendar year, unless management
determines that the reinvestment of interest and dividends within or
from the Diversified Account is not administratively feasible. If the
participant does not file an election with
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respect to the investment of interest and/or dividends, all interest
and dividends shall be reinvested in the asset that generated them.
f. Notwithstanding the election provisions of paragraphs 1.d and 1.e.,
any participant may make a one-time only investment election for the
fourth quarter of 1998 with respect to new Deferred Amounts and
dividends and interest generated during that calendar quarter,
provided that the election is filed prior to the beginning of the
calendar quarter, is irrevocable and applies to the entire calendar
quarter.
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9/28/98
TRUST AGREEMENT FOR
TCF FINANCIAL EXECUTIVE DEFERRED COMPENSATION PLAN
THIS TRUST AGREEMENT, made effective as of the 1st day of September,
1998, by and between TCF Financial Corporation, a Delaware corporation ("TCF
Financial") and U.S. Bank National Association (the "Trustee"),
W I T N E S S E T H:
WHEREAS, TCF Financial has established the TCF Financial Executive
Deferred Compensation Plan (the "Plan"), which plan is now in full force and
effect; and
WHEREAS, the Plan is a nonqualified deferred compensation plan for
select management of TCF Financial and its subsidiaries (the "Companies" or,
individually, the "Company"), and TCF Financial wishes to establish a
convenient method for discharging its obligations to pay deferred
compensation under said Plan;
NOW, THEREFORE, the parties to this Agreement do hereby agree as follows:
ARTICLE 1
ESTABLISHMENT AND ACCEPTANCE OF TRUST
SECTION 1.1. This Trust shall be known as the "TRUST FOR TCF FINANCIAL
EXECUTIVE DEFERRED COMPENSATION PLAN." The Trustee hereby accepts the Trust
subject to all of the terms and conditions of this Agreement, and agrees to
hold and administer the assets of the Trust and to execute the Trust in
accordance with the provisions hereof. The assets deposited with the Trustee
and held pursuant to this Trust are referred to herein collectively as the
"Trust Fund."
SECTION 1.2. TCF Financial has obtained a ruling from the Internal
Revenue Service that the amounts credited to the accounts of Plan
participants pursuant to Article 4 will not be included in their gross income
for federal income tax purposes until such time as they are actually paid or
otherwise made available to such participants.
ARTICLE 2
CONTRIBUTIONS TO THE TRUST
SECTION 2.1. The Trustee shall receive from time to time such
amounts in cash or other property acceptable to the Trustee as the Companies
shall contribute pursuant to the terms of the
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Plan. Each such contribution shall be accompanied by a statement designating
the Plan participant on behalf of whom such contribution is being made and,
if more than one account has been established for such participant pursuant
to Section 4, the account to which such contribution will be credited. The
Trustee shall be under no obligation to collect any such contributions, and
all responsibility for determining the amount, timing, and types of
contributions made to the Trustee shall be upon the Companies or their
designees. Nothing in this Agreement shall be construed as requiring the
Companies, or any of them, to make any contributions to the Trust.
SECTION 2.2. All contributions so received and all proceeds,
investments, reinvestments, and income thereof in the Trustee's possession
shall be held, invested, and, with all disbursements therefrom, accounted for
by the Trustee as provided in this Agreement.
SECTION 2.3. No portion of the Trust Fund shall be diverted to or used
for any purpose other than the payment of benefits pursuant to the Plan, or
for the payment of expenses of administering the Plan and the Trust, or for
the payment of expenses incurred in the making and administering of Trust
investments pursuant to Sections 4 and 5, until such time as the Companies'
obligations to make payments pursuant to the Plan have been fully discharged;
PROVIDED, and notwithstanding anything in this Agreement to the contrary, at
all times during the continuance of this Trust, the principal and income of
the Trust Fund shall be subject to the claims of the general creditors of the
Companies. At any time that the Trustee has actual knowledge, or has
determined, that a Company is "Insolvent," it shall deliver any undistributed
principal and income credited to the accounts established for participants
employed by such Company to satisfy such claims as a court of competent
jurisdiction may direct. The Board of Directors and the Chief Executive
Officer of each Company shall have the duty to inform the Trustee of that
Company's Insolvency. If a Company or any person claiming to be a creditor
of a Company alleges in writing to the Trustee that such Company has become
Insolvent, and if the Trustee determines such allegation is made in good
faith and upon reasonable grounds, the Trustee shall immediately suspend
payments from the accounts established for participants employed by such
Company and shall hold all assets of such accounts subject to claims of such
Company's creditors. The Trustee shall then request, within 10 days, from
such Company sufficient information to determine if the Company is Insolvent.
If the Company shall fail or refuse to supply sufficient information from
which the Trustee may determine if the Company is Insolvent within 30 days of
the Trustee's request, the Trustee shall promptly request such information
from the party which alleged that the Company is Insolvent. If, on the basis
of the information so provided, the Trustee determines that the Company is
not Insolvent, it shall immediately resume payments from the accounts
established for participants employed by such Company, together with payment
of any amounts held back by the Trustee while making a determination as to
Insolvency. If the Trustee determines the Company is Insolvent, or if it has
not received sufficient information to make a determination as to the
Company's solvency, it shall resume such payments only after the Trustee has
determined that the Company is no longer Insolvent. Unless the Trustee has
actual knowledge of a Company's Insolvency, it shall have no duty to inquire
whether any Company is Insolvent. The Trustee may in all events rely on such
evidence concerning the Companies' solvency as may be furnished to the
Trustee which will give it a reasonable basis for making a determination
concerning the Companies' solvency, and
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nothing in this Agreement shall in any way diminish any right of the Plan's
participants or their beneficiaries to pursue their rights as general
creditors of the Companies with respect to benefits payable to them pursuant
to the Plan. To assist the Trustee with its determinations required
hereunder, the Trustee may rely upon the advice of legal counsel and/or other
professional counsel retained by the Trustee and such counsel's reasonable
fees and expenses shall be payable from the assets of the Trust or, at TCF
Financial's election, may be directly paid by TCF Financial and/or one or
more of the Companies, PROVIDED that TCF Financial is notified in advance of
the Trustee's retention of legal counsel and TCF Financial or the Committee
consents thereto, which consent shall not be unreasonably withheld. A
Company shall be considered "Insolvent" for the purposes of this Agreement if
it is unable to pay its debts as they mature, or if it is a party as a debtor
to a proceeding pending under the U.S. Bankruptcy Code, or under any other
applicable state or federal bankruptcy law.
ARTICLE 3
PAYMENTS FROM THE TRUST FUND
SECTION 3.1.
a. When a Plan participant or beneficiary becomes entitled to
benefits pursuant to the Plan, the committee appointed to administer the Plan
(the "Committee") shall notify and direct the Trustees in writing of:
i. the name, social security number, and mailing address of
such participant or beneficiary;
ii. the amount and form of the distributions to be made to
such participant or beneficiary under the Plan;
iii. the period for which such distributions are to be made;
and
iv. the date on which such distributions are to commence.
Upon receipt of such notice and direction, the Trustee shall commence
payments due to such participant or beneficiary out of the Trust assets.
Such payments shall be debited to the account or accounts established for
such participant as provided in Section 4 and shall continue until the
earliest of: (A) the date on which the last payment due to such participant
or beneficiary has been made; (B) the balance credited to the account or
accounts from which such payments are to be made has been reduced to zero;
or (C) the Trustee receives written notice and direction from the Committee
to cease distributions because a Company will continue such payments out of
its general assets.
b. If the Trustee receives written notice and direction from the
Committee that a Company will continue any payments due pursuant to this
section 3.1 out of its general assets, the Trustee shall discontinue the
making of such distributions out of the Trust Fund;
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PROVIDED, that the Trustee shall resume such distributions (and shall make
any payments then in arrears) if it receives written notice and direction
from the Committee that the Company will no longer make such payments from
its general assets.
c. Distributions due pursuant to this section 3.1 shall be made at
such times, and in such form, as may be provided for under the Plan.
d. A "Directing Party" for purposes of this Agreement shall
include TCF Financial, the Committee, or any participant or beneficiary
authorized by this Agreement to direct the Trustee, as applicable
(collectively referred to for purposes of this Agreement as the "Directing
Party").
e. Notwithstanding paragraphs a, and b of this Section, the
following shall apply on and after a Change in Control (as defined in Section
5(j) of the Plan). If the Trustee receives notification from any source that
a distribution may be due to a participant or beneficiary, the Trustee shall
promptly request from the Committee all relevant information and directions
relative to such distribution(s) and if the Committee shall fail to provide
such information and/or directions within 30 days, the Trustee shall accept
and act upon any information and/or directions received from the participant
or beneficiary with respect to commencement or re-commencement of the payment
of distributions to such participant or beneficiary. In connection with
providing such information and/or directions, the participant or beneficiary
shall be deemed a "Directing Party" for purposes of this Agreement.
f. The Trustee shall be held harmless and shall not be liable
for its acts with respect to distributions from the Trust Fund when following
the directions of the Committee, or for failure to act in the absence of such
directions, nor shall the Trustee be liable or responsible for any payment
made by it in good faith and in the exercise of reasonable care without
knowledge of the changed condition or status of any payee.
SECTION 3.2. Except to the extent that such amounts are promptly paid
by the Companies, the Trustee shall also pay out of the Trust Fund: (a) all
broker fees and other expenses incurred in connection with the sale or
purchase of investments; (b) all personal property taxes, income taxes, and
other taxes of any kind (including taxes payable by the Companies, net of any
related tax savings to the Companies) at any time levied or assessed under
any present or future law upon, or with respect to, the Trust Fund or any
property included in the trust Fund; and (c) its own compensation and all
other reasonable expenses of administering the Plan and the Trust, including
legal and/or other professional fees reasonably incurred by the Trustee
and/or the Trust pursuant to Section 2.3 of this Agreement. Expenses shall
be charged to the Trust Fund without allocation among the accounts
established pursuant to Section 4, unless an expense is directly attributable
to one or more of such accounts, in which case such expense shall be charged
directly to such accounts. The Trustee may dispose of Trust investments, if
necessary to provide cash assets for the payment of expenses.
SECTION 3.3. As directed by the Committee, the Trustee shall withhold
all or any part of any distribution required to be made hereunder as the
Committee reasonably deems necessary
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and proper to protect the Trustee or the Trust Fund against any liability or
claim on account of any estate, inheritance, income, or other tax, and the
Trustee may discharge any such liability with any part or all of any such
payment so withheld.
SECTION 3.4. Distributions pursuant to Section 3.1 shall be deemed to
have been sufficiently made if they are sent by first class mail to the
participant at the address provided to the Trustee by the Committee. If any
such distribution is returned to the Trustee unclaimed, the Trustee shall
notify the Committee and shall not make any further distributions to such
payee until it receives further directions from the Committee.
ARTICLE 4
INVESTMENTS OF THE TRUST FUND; PARTICIPANTS' ACCOUNTS
SECTION 4.1. Except as otherwise specifically provided herein, the
Trustee shall invest, reinvest, and hold the assets of the Trust Fund in such
investments as may be permitted by the Committee and as each Plan participant
shall direct in writing for his own account. Insofar as the Trustee has
acquired an investment for a Plan participant's Account pursuant to such
directions, the participant shall have the right to determine confidentially
whether such investment will be tendered in a tender or exchange offer, and
to direct the Trustee accordingly. The Trustee shall not be restricted to
those investments which are authorized by the laws of any State for the
investment of trust funds. In addition, the Trustee may, for reasonable
periods of time, hold in its banking department any part or all of the Trust
Fund uninvested or in cash without liability for interest thereon, pending
the investment of such funds or the payment of costs, expenses, or benefits
payable under the Plan in the banking department of any corporate Trustee
serving hereunder or of any other bank, trust company or other financial
institution including those affiliated in ownership with the Trustee. The
Trustee shall not be liable for any action taken or omitted by it pursuant to
such written directions which shall be deemed to be authorized by the
Committee and to be directions of the Committee. Notwithstanding the
foregoing provisions of this Section 4.1, the rights of each Plan participant
to direct the investment of his account shall be subject to the claims of the
general creditors of the Company by which such participant is employed. Any
investment direction of a participant shall be made by each December 31 as
applicable to the next succeeding calendar year and shall be irrevocable with
respect to such calendar year, unless the Committee shall direct otherwise.
SECTION 4.2. The Trustee shall establish one or more separate accounts
for each Plan participant, and each such account shall be designated by the
name of the participant for whom it has been established. The assets of the
Trust Fund initially deposited with the Trustee shall be allocated among
these accounts in accordance with the instructions of the Committee. All
contributions received by the Trustee on behalf of a participant, and all
dividends or distributions made with respect to property allocated to such
participant's account, shall then be credited to such account and invested as
the participant shall direct. Distributions made by the Trustee to a Plan
participant shall only be made from such Participant's account to the extent
of the balance thereof.
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SECTION 4.3. Notwithstanding the foregoing, a Plan participant's right
to direct the investment of his account during any period of distribution
subsequent to his retirement or disability shall be the same as an active
participant's unless the Committee directs otherwise. Notwithstanding the
foregoing provisions of this Section 4.3, the rights of each Plan participant
to direct the investment of his Account (which directions shall be deemed to
be directions of the Committee) shall be subject to the claims of the general
creditors of the Company by which such participant is employed.
SECTION 4.4. In the event the Trustee is directed to engage in
borrowing on behalf of a Plan participant's Account as directed by the
Committee pursuant to Section 5.1(f) hereof, the Trustee shall pledge as
security for any such loan all shares of TCF Stock acquired with the proceeds
of such loan and shall hold such shares in suspense (unallocated), pursuant
to the terms of section 10.c. of the Plan, until such time, if any, as the
shares are released from pledge. During any time when such shares are held in
suspense, they shall not be deemed to be part of the Plan participant's
Account in the Trust under this Article 4, except that dividends paid on such
shares shall be subject to investment direction of the participant to the
extent they exceed principal and/or interest payments on such loan. In the
event any shares are released from pledge, the shares shall thereafter be
immediately allocated to the participant's Account under this Article 4. In
no event shall such shares be credited to or inure to the benefit of the
Account of another participant under this Article 4.
ARTICLE 5
POWERS AND DUTIES OF THE TRUSTEE
SECTION 5.1. In addition to the powers and discretions conferred upon
the Trustee by any other provision of this Agreement, but subject to the
provisions of Article 4 hereof, the Trustee shall have all the usual powers
conferred by law on trustees and shall also have the following express powers
with respect to the Trust Fund:
a. To retain, to exchange for any other property, to sell in any
manner and at any time, to divide, subdivide, partition, mortgage, improve,
alter, remodel, repair, and develop in any manner any property, real or
personal, to lease such property for any period of time, and to grant options
to sell or lease any such property, without regard to restrictions and
without the approval of any court.
b. As directed by the Committee, to vote stock held by the Trust
Fund personally or by proxy, and to delegate the Trustee's voting powers with
respect to such stock to such proxy.
c. To exercise subscription, conversion, and other rights and
options as directed by the Committee, and to make payments form the Trust Fund
in connection therewith.
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d. At the direction of the Committee, to take any action and to
abstain from taking any action with respect to any reorganization,
consolidation, merger, dissolution, recapitalization, refinancing, and any
other plan or change affecting any property constituting a part of the Trust
Fund, and in connection therewith to delegate its discretionary powers and to
pay assessments, subscriptions, and other charges from the Trust Fund.
e. In any manner, and to any extent, to waive, modify, reduce,
compromise, release, settle, and extend the time of payment of any claim of
whatsoever nature in favor of or against the Trustee or all or any part of
the Trust Fund.
f. At the direction of the Committee, to borrow money from any
person (including, but not limited to, TCF Financial, its successors, assigns
or affiliates) and to pledge assets of the Trust Fund as security for
repayment of any such loan. Any money which is borrowed by the Trustee at
the direction of the Committee for the purpose of purchasing investments
directed by a participant shall be repaid only from the assets of such
participant's account and the Trustee shall pledge only the assets of such
participant's account as collateral for the loan. For the purposes of
Section 2.3, loan repayments shall be deemed to be expenses incurred in
connection with the making and administering of Trust investments.
g. Notwithstanding any language in the Trust instrument, neither
the Committee nor the Trustee on behalf of the Trust shall have power to
start, to enter into or otherwise engage in any business enterprise, or to
continue to operate any business enterprise, that becomes part of the Trust
estate, if such activity constitutes "carrying on business" as referred to in
Section 301.7701-2 of the procedure and administration regulations.
h. The Trustee is expressly authorized to the fullest extent
permitted by law to (i) retain the services of U.S. Bancorp Piper Jaffray
Inc. and/or U.S. Bancorp Investments, Inc., each being affiliates of U.S.
Bank National Association, and/or any other registered broker-dealer
organization hereafter affiliated with U.S. Bank National Association, and
any future successors in interest thereto (collectively for the purposes of
this paragraph referred to as the "Affiliated Entities"), to provide services
to assist in or facilitate the purchase or sale of investment securities in
the Trust, (ii) acquire as assets of the Trust shares of mutual funds to
which Affiliated Entities provides, for a fee, services in any capacity and
(iii) acquire in the Trust any other services or products of any kind or
nature from the Affiliated Entities regardless of whether the same or similar
services or products are available from other institutions. The Trust may
directly or indirectly (through mutual funds fees and charges for example)
pay management fees, transaction fees and other commissions to the Affiliated
Entities for the services or products provided to the Trust and/or such
mutual funds at such Affiliated Entities' standard or published rates without
offset (unless required by law) from any fees charged by the Trustee for its
services as Trustee. The Trustee may also deal directly with the Affiliated
Entities regardless of the capacity in which it is then acting, to purchase,
sell, exchange or transfer assets of the Trust even though the Affiliated
Entities are receiving compensation or otherwise profiting from such
transaction or are acting as a principal in such transaction. Each of the
Affiliated Entities is authorized to (i) effect transactions on national
securities exchanges for the Trust as directed by
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the Trustee, and (ii) retain any transactional fees related thereto,
consistent with Section 11(a)(1) of the Securities Exchange Act of 1934, as
amended, and related Rule 11a2-2(T). Included specifically, but not by way
of limitation, in the transactions authorized by this provision are
transactions in which any of the Affiliated Entities are serving as an
underwriter or member of an underwriting syndicate for a security being
purchased or are purchasing or selling a security for its own account. In
the event the Trustee is directed by a Directing Party (as defined in Section
3.1(d) of this Agreement), the Directing Party shall be authorized, and
expressly retains the right hereunder, to direct the Trustee to retain the
services of, and conduct transactions with, Affiliated Entities fully in the
manner described above.
SECTION 5.2. The Trustee shall have no duties whatsoever except as are
specifically set forth as such in this Agreement, and no implied covenant or
obligation will be read into this Agreement against the Trustee.
SECTION 5.3. If there is more than one Trustee, the action of all of
the Trustees at the time acting hereunder, and any instrument executed by all
of the Trustees, shall be considered the action or instrument of the Trustee.
Such action may be taken at a meeting or in writing without a meeting, and
the Trustees may authorize any one or more of them to perform routine
functions, to sign routine papers, and to perform established or customary
administrative and ministerial functions.
ARTICLE 6
ACCOUNTS OF THE TRUSTEE; VALUATION OF TRUST FUND
SECTION 6.1. The Trustee shall keep accurate and detailed accounts of
all investments, receipts, disbursements, distributions, and other
transactions. Such accounts will be open to inspection and audit by the
Companies or the Committee, or by any authorized representative thereof, at
all reasonable times during business days.
SECTION 6.2. As of each December 31st, and at such other times as the
Committee may reasonably require, the Trustee shall determine the fair market
value of the Trust Fund, and of each participant's Account, and shall notify
the Committee in writing of the fair market value as so determined within 30
days thereof. In addition, for purposes of determining the amount of any
lump sum distribution payable pursuant to the Plan, the Trustee shall
determine the fair market value of a Plan participant's Accounts as of the
last day of the calendar month coincident with or following such
participant's termination of employment. The fair market value of the Trust
Fund, and of each participant's Account, shall be the fair market value of
all securities and other assets then held in the Trust Fund or in such
Account, including all income received since the last valuation and income
accrued and unpaid at the close of the valuation period. In determining fair
market value, the Trustee may rely upon any information that it believes to
be reliable, including reports of sales and of bid and asked prices of issues
listed on an exchange as disclosed in newspapers of general circulation or in
generally recognized financial services, quotations with respect to unlisted
issues as supplied by any reputable broker or investment bank, or from any
other source that the Trustee believes to be reliable, or the Trustee may
make any
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such determination based upon its own analysis of such records or reports of
any company issuing such stock or other securities as are made available to
them.
ARTICLE 7
ADMINISTRATIVE PROVISIONS
SECTION 7.1. Except as otherwise specifically provided herein, the
Trustee may rely upon the authenticity, truth, and accuracy of, and will be
fully protected in acting upon:
a. Any copy of a resolution of the Board of Directors of TCF
Financial or any of the Companies, if certified by the Secretary or an
Assistant Secretary of the appropriate Company under its corporate seal.
b. Any notice, direction, certification, approval, or other
writing of the Committee, if evidenced by an instrument signed in the name of
the Committee by one or more of its members or by the Secretary of TCF
Financial.
c. Any notice, direction, certification, or other writing, given
by a Plan participant pursuant to Section 4.1 which is believed by the
Trustee to be genuine and to have been sent by such participant.
SECTION 7.2. The Trustee shall receive such reasonable compensation as
may from time to time be agreed upon by TCF Financial and the Trustee. The
Trustee shall be held harmless and shall be fully indemnified by TCF
Financial, its successors and assigns from any liability, including
reasonable legal and professional services expenses, for any actions directed
by a Directing Party (as that term is defined in paragraph d. of Section 3.1).
SECTION 7.3. No person dealing with the Trustee shall be obligated to
see to the application of any property paid or delivered to the Trustee or to
inquire into the expediency or propriety of any transaction or the Trustee's
authority to consummate the same.
SECTION 7.4. Ownership of the assets comprising the Trust Fund shall be
in the Trustee, in its capacity as Trustee, and participants in the Plan and
their beneficiaries shall have no right or interest in or to such assets,
except as specifically provided herein. The rights of any participant or his
beneficiaries to any benefits or future payments hereunder or under the
provisions of the Plan shall be solely those of unsecured, general creditors
of the Companies, and such rights shall not be subject to attachment,
garnishment or other legal process by any creditor of any such participant or
beneficiary. Except to the extent that a Plan participant shall have a
continuing right to designate a beneficiary of any amount payable in the
event of his death, no such participant or beneficiary shall have any right
to alienate, anticipate, commute, pledge, encumber, transfer, or assign any
of the benefits or payments which he may expect to receive, contingently or
otherwise, under the Plan or this Agreement.
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SECTION 7.5 Communications to the Trustee shall be deemed sufficiently
made if sent by mail addressed to the Trustee at its address on file with the
Committee. Communications to the Companies or the Committee will be deemed
sufficiently made if sent by mail addressed to the Committee, in care of TCF
Financial, at its principal place of business.
ARTICLE 8
SUCCESSION OF TRUSTEES
SECTION 8.1. The Trustee acting hereunder shall be one or more
individuals, or one or more qualified corporations, or any combination of
individuals and qualified corporations, appointed by TCF Financial to serve
in such capacity; PROVIDED, that an individual who is or has been eligible
to participate in the Plan shall not be eligible to serve as a Trustee. The
number of Trustees shall not be increased or decreased except with the
written consent of all of the Plan's participants (excluding any terminated
participants and beneficiaries then receiving distributions pursuant to the
Plan, other than terminated participants entitled to a lump sum
distribution). Upon any determination to increase the number of Trustees, or
upon the death, disability, removal, or resignation of any Trustee, the
vacancy or vacancies so created shall be filled by such individuals or
qualified corporations as may be appointed by the Board of Directors of TCF
Financial and approved in writing by all of the Plan's participants
(excluding any terminated participants and beneficiaries then receiving
distributions pursuant to the Plan, other than terminated participants
entitled to a lump sum distribution). If the Board of Directors of TCF
Financial and all of the Plan's participants (excluding any terminated
participants and beneficiaries then receiving distributions pursuant to the
Plan, other than terminated participants entitled to a lump sum distribution)
shall fail to agree upon such appointment, and if there is no other Trustee
then acting, a successor Trustee or Trustees shall be appointed by a court of
competent jurisdiction. Any such appointment shall be effective upon the
acceptance thereof in writing by the person so appointed and the delivery of
a signed copy of such acceptance to the Trustee then in office.
SECTION 8.2. The Trustee, and any successor to any Trustee, may be
removed by the Board of Directors of TCF Financial at any time upon the
receipt by Board of Directors of TCF Financial of the consent of all of the
Plan's participants (excluding any terminated participants and beneficiaries
then receiving distributions pursuant to the Plan, other than terminated
participants entitled to a lump sum distribution) to such removal and upon
the giving of 30 days' prior written notice to such Trustee and to any other
Trustees then acting. Such removal shall be effective on the date specified
in such written notice; PROVIDED, that notice shall theretofore have been
given to the Trustee of the appointment of a successor Trustee or Trustees in
the manner hereinafter set forth. Notwithstanding the foregoing, a Trustee
who dies or who becomes eligible to be a participant in the Plan shall
automatically cease to be a Trustee, effective as of the date of death of the
date such eligibility commences, whichever is applicable.
SECTION 8.3. The Trustee, and any successor to any Trustee, may resign
as Trustee hereunder by filing with the Committee a written resignation which
shall take effect 30 days after
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the date of such filing, unless prior thereto a successor Trustee or Trustees
shall have been appointed.
SECTION 8.4. All of the provisions set forth herein with respect to the
Trustee shall relate to each successor Trustee so appointed with the same
force and effect as if such successor Trustee originally had been named
herein as a Trustee.
SECTION 8.5. Upon the appointment of a successor Trustee, the removed
or resigning Trustee shall transfer and deliver those assets of the Trust
Fund in its possession or under its control to the remaining Trustee or
Trustees, if any, or otherwise to the successor Trustee or Trustees, together
with all such instruments of transfer, conveyance, assignment, and further
assurance as the remaining or successor Trustee may reasonably require. Any
removed or resigning Trustee shall, at the request of the Committee, or may,
in its own discretion, file with the Committee an account of its actions as
Trustee. The receipt and approval by the Committee of the final account of
the removed or resigning Trustee shall be a full and complete acquittal and
discharge from liability of such removed or resigning Trustee, and any
successor Trustee shall have no liability whatsoever for the acts or
omissions of any prior Trustee in which it did not participate. If the
Committee shall fail to express in writing its objections to any account
delivered by any removed or resigning Trustee within six months from the date
of receipt by the Committee of such account, such account shall be considered
as approved by the Committee.
ARTICLE 9
AMENDMENT AND TERMINATION OF THE TRUST
SECTION 9.1. This Agreement may be amended at any time and from time to
time, upon the approval of the Board of Directors of TCF Financial;
PROVIDED, that no such amendment shall take effect unless and until it has
been consented to in writing by all of the Plan's participants (excluding any
terminated participants and beneficiaries then receiving distributions
pursuant to the Plan, other than terminated participants entitled to a lump
sum distribution.). In the event that all of the Plan's participants do not
consent to a proposed amendment, such amendment shall not take effect but the
Trust assets credited to the accounts of the consenting participants
(together with the accounts of any participants or beneficiaries whose
consent is not required) shall be transferred to a separate trust established
pursuant to an agreement that is identical to this Agreement in all respects,
except that it may include the proposed amendment.
SECTION 9.2. This Trust shall not be terminated until such time as all
of the Companies' obligations to make distributions pursuant to the Plan have
been fully discharged unless all of the Plan's participants (excluding any
terminated participants and beneficiaries then receiving distributions
pursuant to the Plan other than terminated participants entitled to a lump
sum distribution) shall consent in writing to an earlier termination. If all
of the Plan's participants,
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terminated participants and beneficiaries do not consent to an early
termination, the Trust shall terminate with respect to such consenting
participants (and with respect to participants or beneficiaries whose consent
is not required) but shall continue in effect with respect to the
nonconsenting participants. Upon a termination or partial termination of the
Trust, the Trust assets, if any, that remain in the accounts established for
participants in the Plan (or for the consenting participants (and
participants or beneficiaries whose consent is not required), if fewer than
all of the Plan's participants have consented to a termination for which the
participants' consent is required) shall be paid or distributed to TCF
Financial or its successor in interest.
ARTICLE 10
MISCELLANEOUS
SECTION 10.1. Each Company making a contribution to the Trust Fund
pursuant to the provisions of the Plan shall, by virtue of its making such
contribution, become a party to this Agreement and shall have the same rights
and obligations as if it had executed this Agreement as one of the original
parties thereto.
SECTION 10.2. Nothing contained in this Agreement shall be deemed to
constitute a contract of employment between the Companies and any employee of
any of them.
SECTION 10.3. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be the original, and all of
such counterparts shall together constitute one and the same document.
SECTION 10.4. Except when otherwise indicated by the context, any
masculine terminology used in this Agreement shall also include the feminine
and neuter, and the definition of any term herein in the singular shall also
include the plural (and vice versa). The headings of Articles of this
Agreement are for convenience of reference only and shall have no substantive
effect on the provisions of this Agreement.
SECTION 10.5. Any notice required hereunder may be waived by the person
entitled thereto.
SECTION 10.6. This Agreement shall be construed and interpreted in
accordance with the laws of the State of Minnesota, except to the extent
superseded by applicable federal laws.
SECTION 10.7. This Agreement shall constitute the entire agreement
among the parties hereto with respect to the subject matter hereof, and shall
supersede and replace all previous agreements relating to the same subject
matter, both written and oral.
SECTION 10.8. The effective date of this restated Agreement shall be
September 1, 1998.
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ARTICLE 11
SPECIAL PROVISIONS FOR EMPLOYEES SUBJECT TO SECTION 16 OF THE SECURITIES AND
EXCHANGE ACT OF 1934
SECTION 11.1. Notwithstanding anything in this Trust Agreement to the
contrary, for an Employee who is subject to liability under Section 16 of the
Securities and Exchange Act of 1934, the Committee shall administer
participation elections and investment elections pursuant to the provisions
of Paragraph 10 of the Plan.
ARTICLE 12
SPECIAL PROVISIONS REGARDING OSPIP AND DEFERRED STOCK
SECTION 12.1. Effective for deferrals of incentive compensation earned
in 1992 and thereafter the Trustee shall accept as directed by the Committee
contributions of common stock of TCF Financial Corporation issued in the name
of the Trustee pursuant to the Deferred Stock award provisions of the Stock
Option and Incentive Plan of TCF Financial or any successor plan thereto.
Each such contribution of Deferred Stock shall be accompanied by a
designation of the date or dates on which such Stock shall become
transferable by the Trustee as well as any events which may cause
acceleration of such dates. Deferred Stock shall not be transferable by the
Trustee prior to such date or dates. If a Plan participant or beneficiary
becomes entitled to benefits from the Plan, any Deferred Stock which is not
yet transferable shall be returned to TCF Financial and cancelled. In all
other respects, Deferred Stock held by the Trustee shall be subject to the
same terms and conditions as apply to other stock held by the Trustee.
IN WITNESS WHEREOF, TCF Financial and the Trustee have caused this
Agreement to be executed effective as of the day and year first above written.
TCF Financial Corporation
[NO SEAL]
By:______________________________
Title:___________________________
Attest:
By_________________________________
As its_____________________________
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U.S. Bank National Association
[NO SEAL]
By:______________________________
Title:___________________________
As Trustee as aforesaid.
Attest:
By_________________________________
As its_____________________________
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10-12-98
AMENDMENT TO TRUST AGREEMENT FOR
TCF FINANCIAL CORPORATION EXECUTIVE DEFERRED COMPENSATION PLAN
Section 9.1 is amended to read as follows in full effective for amendments
adopted after November 1, 1998:
SECTION 9.1. This Agreement may be amended at any time and from time to
time, upon the approval of the Board of Directors of TCF Financial;
PROVIDED, that, if the amendment is adopted prior to a change in control (as
defined in section 5(j) of the Plan), no such amendment shall (without the
consent of the participant, including any terminated participants and
beneficiaries then receiving distributions) alter any participant's or
beneficiary's right to payments of amounts previously credited to such
participant's or beneficiary's Account or delay the time or times at which a
participant or beneficiary is entitled to receive payments with respect to
the participant's Deferred Amounts under the Plan). If the amendment is
adopted after a change in control, as defined in section 5(j) of the Plan,
the approval of the Board of Directors and the consent of all participants,
terminated participants and beneficiaries shall be required for the
amendment. In the event that all of the Plan's participants and
beneficiaries do not consent to a proposed amendment, such amendment shall
not take effect but the Trust assets credited to the accounts of the
consenting participants shall be transferred to a separate trust established
pursuant to an agreement that is identical to this Agreement in all respects,
except that it may include the proposed amendment.
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8-24-98
WRITTEN ACTION OF THE 16B-3 SUBCOMMITTEE OF THE
PERSONNEL COMMITTEE OF
TCF FINANCIAL CORPORATION
AND PLAN AMENDMENT FOR
APPROVAL BY BOARD OF DIRECTORS
Re: Requiring All Distributions to be in the Form of TCF Stock
AMENDMENT TO SERP
FURTHER RESOLVED, that effective as of September 30, 1998, the TCF
Supplemental Employees Retirement Plan is amended to require all
distributions of Accounts invested in TCF Stock to be in the form of TCF
Stock.
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10-19-98
TCF FINANCIAL SENIOR OFFICER
DEFERRED COMPENSATION PLAN
(Amended and Restated effective November 1, 1998).
1. DEFERRAL OF INCENTIVE COMPENSATION AND SALARIES.
a. From time to time eligible employees ("Employees") of TCF
Financial Corporation ("TCF Financial") or any of its direct or indirect
subsidiaries (each such corporation being referred to hereinafter as the
"Company") may, by written notice, elect to have payment of a portion of
their salary for the next succeeding calendar year, and/or all or a portion
of their incentive compensation payable for the next succeeding calendar
year, deferred as hereinafter provided. Each such deferral of compensation
shall be (and is hereinafter referred to as) a "Deferred Amount."
Notwithstanding the foregoing, however, an Employee may not elect to defer
any portion of salary or incentive compensation with respect to any calendar
year, unless such Employee's deferrals with respect to such year are at least
$1,000 in the aggregate, and no deferral may be made of any salary or
incentive compensation payable within 12 months after such Employee has
received a distribution of pre-tax deposits from the TCF Employees Stock
Ownership Plan - 401(k) pursuant to the financial hardship withdrawal
provisions of such plan.
b. Any elections with respect to Deferred Amounts of salary shall
be exercised in writing by the Employee prior to the latest to occur of the
following: (i) the beginning of the calendar year for which the salary is to
be earned; (ii) such Employee's first day of employment service in that year;
or (iii) the first day of the calendar month next following the date the
Employee first becomes eligible to participate in the Plan. Any election
with respect to Deferred Amounts of incentive compensation shall be made no
later than December 31 of the calendar year preceding the calendar year in
which the periods of service are rendered for which the incentive
compensation is to be paid. An election of Deferred Amounts, once made, is
irrevocable, except as provided in paragraph 6 hereof.
c. Deferred Amounts shall be subject to the rules set forth in
this document, and each Employee shall have the right to receive cash
payments on account of previously Deferred Amounts only in the amounts and
under the circumstances hereinafter set forth.
a. Employees eligible to participate in this Plan are Employees of
a Company who hold the office of Senior Vice President of TCF Financial
Corporation or TCF National Bank Minnesota or President or Executive Vice
President of an insured institution subsidiary of TCF Financial or President
of a direct or indirect
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subsidiary of TCF Financial; PROVIDED, that an employee who is eligible to
participate in the TCF Financial Executive Deferred Compensation Plan shall
not be eligible to participate in this Plan. Effective on and after February
9, 1995, employees of Great Lakes National Bank Michigan ("Great Lakes") are
eligible for this plan if they hold the officer position of Senior Vice
President or above and are selected for eligibility in the plan by the
Chairman and President of Great Lakes. Effective on and after September 1,
1997, the Executive Vice President, Senior Vice President and Vice President,
Sales and Marketing of Winthrop Resources Corporation are eligible to
participate in this Plan. Effective on and after November 1, 1998, Employees
of a Company who hold the office of General Counsel of an insured institution
subsidiary of TCF Financial or of a finance company subsidiary, direct or
indirect, of TCF Financial are also eligible to participate in this Plan.
Notwithstanding the foregoing, individuals who become employees of a Company
as a result of a merger or acquisition shall not be eligible Employees under
this Plan unless and until TCF Financial has adopted a resolution or amended
this Plan to identify them as eligible Employees.
2. PERSONNEL COMMITTEE. The Committee (the "Committee") shall consist
of such members of the Personnel Committee of the Board of Directors of TCF
Financial Corporation who qualify as non-employee directors from time to time
under Rule 16b-3 of the Securities and Exchange Commission. Full power and
authority to construe, interpret, and administer this Plan document shall be
vested in the Committee. The Committee shall have full power and authority
to make each determination provided for in this Plan document, and in this
connection, to promulgate such rules and regulations as the Committee
considers necessary or appropriate for the implementation and management of
this Plan. The Committee shall have sole and absolute discretion in the
performance of its powers and duties under this Plan. All determinations made
by the Committee shall be final, conclusive and binding upon the Companies,
each Employee and former Employee and their designees, unless found by a
court of competent jurisdiction to have been arbitrary and capricious. The
Committee shall have authority to designate officers of TCF Financial and to
delegate authority to such officers to receive documents which are required
to be filed with the Committee, to execute and provide directions to the
Trustee and other administrators, and to do such other actions as the
Committee may specify on its behalf, and any such actions undertaken by such
officers shall be deemed to have the same authority and effect as if done by
the Committee itself.
3. DEFERRED COMPENSATION ACCOUNTS. Each Company shall establish on its
books a separate account ("Account") for each of its Employees who becomes a
participant in this Plan, and each such Account shall be maintained as
follows:
a. Each Account shall be credited with the Deferred Amounts elected
by the Employee for whom such Account is established as of the date on which
such Deferred Amount would otherwise have been paid to the Employee.
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<PAGE>
b. To the extent that a Company has made contributions to the
Trust described in paragraph 4 with respect to an Employee's Deferred
Amounts, the Employee's Account shall thereafter be adjusted as described in
paragraph 4. To the extent such contributions have not been made with
respect to an Employee's Deferred Amounts, and within 30 days after the date
on which such Deferred Amounts are credited to an Employee's Account, they
shall be deemed to have been invested in such investments as shall be
permitted by the Committee and as the Employee shall direct. While an
Employee's Account is deemed to be so invested, it shall be credited with all
interest, dividends (whether in stock, cash, or other property), stock
splits, or other property that would have been received if the Deferred
Amounts had actually been so invested. All cash deemed to have been received
with respect to investments deemed to have been made for an Employee's
Account shall be deemed to have been reinvested in such investments as the
Employee shall direct as of a date selected by the Committee, which date
shall be not less than 30 days after receipt of such direction, and the
balance credited to an Employee's Account as of any date shall be equal to
the fair market value of the investments deemed to have been made for such
Account as of such date.
c. Although the value of an Employee's Account is to be measured
by the value of and income from certain investments, the value of and income
from such investments are merely a measuring device to determine the payments
to be made to each Employee hereunder. Each Employee, and each other
recipient of an Employee's Deferred Amounts pursuant to paragraph 7, shall be
and remain an unsecured general creditor of the Company by which he is
employed with respect to any payments due and owing to such Employee
hereunder. If a Company should from time to time, in its discretion,
actually purchase the investments deemed to have been made for an Employee's
Account, either directly or through the trust described in paragraph 4, such
investments shall be solely for the Company's or such trust's own account,
and the Employees shall have no right, title or interest therein.
d. Sub-accounts shall be maintained as provided in Exhibit A hereto.
4. TRUST. TCF Financial may establish a trust (of the type commonly
known as a "rabbi trust") to aid in the accumulation of assets for payment of
Deferred Amounts. Upon the establishment of such a Trust, the amounts
credited to the Employee's Accounts shall thereafter be adjusted as follows:
a. Each Company may, in its discretion, contribute to the trust an
amount equal to the Deferred Amounts of the Employees employed by such
Company within five business days after the Deferred Amount is earned by the
Employee. The assets of the trust shall be invested in such investments as
may be permitted by the Committee
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and directed by an Employee for his own Account. Any investment direction of
an Employee shall be made consistent with Section 10 and shall be irrevocable
with respect to the calendar year to which it applies, unless the Committee
allows additional elections. Insofar as the trustee of the Trust ("Trustee")
has acquired an investment for an Employee's Account pursuant to such
directions, the Employee shall have the right to determine confidentially
whether such investment will be tendered in a tender or exchange offer, and
to direct the Trustee accordingly. The terms of the trust shall be
consistent with the terms of this Plan. The Trustee shall be a corporate
trustee independent of the Company or, if individual(s), shall not include at
any time any person who is or has been eligible for participation in this
Plan. Nothing herein shall be construed as requiring the Company to make any
contributions to the trust. To the extent such contributions are actually
made, the trust assets shall remain subject to the claims of the Company's
general creditors in the event of it insolvency.
b. The trust shall provide for separate accounts in the name of
each Employee who has elected a Deferred Amount. Except as provided in
paragraph 4.d., from and after the date as of which such accounts are
established, the balances in the Accounts established for Employees pursuant
to this Plan shall be equal to the balances credited to such separate
accounts. Each such separate account shall then be adjusted as follows:
(i) Contributions made by the Companies to the trust on behalf
of such Employee, and all dividends or other distributions made
with respect to property allocated to such separate account, shall
be credited to such separate account and invested as the Employee
shall direct.
(ii) Each Employee's separate account shall be increased by
the amount of any increase in the fair market value, as determined
by the Trustee, of any assets allocated to such separate account,
and shall be decreased by any decrease in the fair market value of
such assets, as determined by the Trustee.
(iii) Each Employee's separate account shall be reduced by any
distributions made to the Employee from the trust which are
chargeable to such separate account.
c. An Employee's right to direct the investment of the Employee's
separate account shall continue during any period of distribution subsequent
to the Employee's termination of employment in the same manner as if the
Employee had continued as an active Employee, although the Committee may, in
its discretion, add additional registered mutual funds or collective or
common trustee funds which are available only for the accounts of terminated
Employees if the Committee deems such funds to be particularly appropriate or
suitable for such accounts.
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<PAGE>
d. The adjustments described in this paragraph 4 shall only be made
to an Employee's Account to the extent that a Company has made contributions
to the trust pursuant to this paragraph 4. If for any reason such
contributions have not been made then, and only to that extent, the
Employee's Account shall be adjusted as provided in paragraph 3.b.
e. Sub-accounts shall be maintained as provided in Exhibit A hereto.
5. PAYMENT OF DEFERRED AMOUNTS. Not later than 30 days after an
Employee's "Distribution Event" (as defined herein), the Trustee shall
commence distribution of the amounts credited to such Employee's Account.
Notwithstanding the foregoing sentence, if an Employee's distribution
requires Committee action then the commencement of distributions shall occur
not later than 30 days after such Committee action or, if later, after the
Employee's Distribution Event. Provided, that the Committee shall take any
action required of it no later than its next regularly scheduled meeting
after the Employee's Distribution Event. An Employee's "Distribution Event"
is the first to occur of the following: (i) termination of employment; (ii)
disability or (iii) the date one year after a "Change in Control": (as
defined herein). Commencing within such 30 day period, the balance credited
to the Employee's Account shall be paid as follows:
a. 15-YEAR PAYMENT SCHEDULE SUBJECT TO ACCELERATION BY COMMITTEE.
For distributions not subject to paragraph 5.b, c, d or k, payment shall be
in fifteen annual installments unless the Committee approves a different
schedule. The Committee may determine on a case by case basis to approve a
different payment schedule for an Employee after taking into account whether
the Employee has executed or will execute a non-competition agreement in form
and scope reasonably acceptable to the Committee. The Committee may also
consider such other factors as the Committee considers appropriate in each
case. Any alternative payment schedule the Committee approves under this
paragraph 5.a. may be in the form of installments over such period as the
Committee selects, in the form of a lump sum, or any combination of
installments and lump sum payments. For distributions from the Accounts of
Employees who did not consent to the terms of this paragraph 5.a., the
balance in the Account shall be paid as provided in paragraph b of this
section.
(I) The first payment under paragraph 5.a. shall be paid on a date the
Committee selects which is no later than 30 days after the Committee's
direction as to the form and timing of distributions is made or, if
later, 30 days after the Employee's Distribution Event. If no date is
selected, the first payment shall be on the date that is the later of
30 days after the Committee's action or 30 days after the Employee's
Distribution Event. Succeeding installments (if any) shall be paid on
January 31 of each calendar year following the calendar year in which
the first payment was made.
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(II) Each payment shall be made in cash or in kind as the Committee, in its
discretion, shall determine except that all assets of an Employee's
Account invested in common stock of TCF Financial (" TCF Stock") shall
be distributed in the form of TCF Stock. If the Committee makes no
instruction, any assets of the Employee's Account invested in assets
other than TCF Stock shall be distributed in the form of cash. Annual
installments are intended to be substantially equal in value. To that
end, each annual distribution shall be determined as follows. The
amount credited to Employee's Account, as reported on the latest
available account statement, shall be multiplied by a fraction, the
numerator of which is one and the denominator of which is the number
if installments remaining to be paid, including the current
installment. The value of any portion of the account distributed in
cash shall be equal to the cash received upon its liquidation by the
Trustee, provided that such liquidation occurs on the latest
practicable date prior to the distribution date.
(III) Notwithstanding the foregoing subparagraph (I), an Employee who has
terminated employment and commenced receiving payments may elect each
year to have the payment otherwise due on January 31 of the next
succeeding year paid as monthly installments instead, with each
payment made on the last day of each month. Any such election shall
be made in writing and delivered to the Committee on or before
December 1 prior to any year for which it is to be effective. Such
election may also indicate the assets to be liquidated in connection
with each monthly payment (subject to the requirement that any assets
invested in TCF Stock must be distributed in kind). The amount of
each monthly payment shall be equal to the amount that would otherwise
be paid in one payment in January, divided by 12. Any asses to be
liquidated in order to pay monthly benefits shall be liquidated on the
last practicable date prior to the installment's payment date. In no
event shall this subparagraph be construed as allowing the executive
to lengthen or shorten the number of years over which his or her
benefits will be paid; the election herein pertains only to timing of
payments within a year.
b. PRE-1996 LUMP SUM PAYMENT. For distributions to Employees who
did not consent to the terms of paragraph 5.a. at the time it was added to
the Plan, distribution shall occur on or about the 30th day after the
Employee's Distribution Event. Distribution shall consist of a single lump
sum equal to the total value of the Employee's Account unless the termination
of employment was due to retirement or disability (as defined herein), in
which case the distribution shall be in five annual installments. However,
the Committee shall reduce the number of the installments if necessary to
provide for annual payments of at least $15,000. In addition, if the value of
the Employee's Account is less than $15,000 as of any annual installment
payment date, the Account shall be paid in full as of such installment
payment date. Distributions shall be in the form of cash, except
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that any portion of the Account invested in TCF Stock shall be distributed in
kind. The value of any portion of the account distributed in cash shall be
equal to the cash received upon its liquidation by the Trustee, provided that
such liquidation occurs on the latest practicable date prior to the
distribution date.
c. AUTOMATIC LUMP SUM DISTRIBUTION IN EXCHANGE FOR NON-COMPETITION
COVENANT OR REDUCTION IN ACCOUNT BALANCE. Effective on and after September
30, 1998, each Employee who so elects in accordance with this paragraph c
shall be entitled to receive a lump sum form of distribution. A lump sum
distribution shall consist of a single distribution of the entire value of
the Employee's Account (unless the Employee elects to apply the election to
only the portion of the Account invested in TCF Stock or to only the portion
of the Account invested in assets other than TCF Stock) on or about 30 days
after the later of the Employee's Distribution Event or the date on which the
Employee's election is filed with TCF Financial. The distribution shall be
in the form of cash, except that any portion of the Employee's Account
invested in TCF Stock shall be distributed in kind. The value of any portion
of the Account distributed in cash shall be equal to the cash received upon
its liquidation by the Trustee, provided that such liquidation occurs on the
latest practicable date prior to the distribution date. An Employee's
election under this paragraph c may occur at any time prior to or after the
commencement of distributions to such Employee. If distributions have
already commenced, such election shall apply only to the balance of the
Employee's Account at the time of the election. The election shall be made
on such form as TCF Financial reasonably requires and shall be accompanied by
either: (a) a noncompetition agreement reasonably acceptable to the Committee
(see paragraph (i ) below); or (b) the Employee's written acceptance of a
reduction by 5% in the Employee's Account, whichever the Employee elects to
provide. If the Employee elects the reduction in his or her Account, such
reduction shall be accomplished by TCF Financial and the Trustee on or about
30 days after such election is made.
d. CHANGE IN CONTROL DISTRIBUTION. In the event of a Change in
control (as defined herein) all Accounts in the Plan will be distributed to
all Employees. If the Employee's Account is subject to paragraph 5.a.,
distribution will be subject to the provisions of paragraph 5.a. If the
Employee's Account is subject to paragraphs 5.b or c. distribution will be in
the form of a lump sum. The first payment shall occur on or about 30 days
after the earlier of (i) the date one year after the Change in Control, or
(ii) the date of the Employee's termination of employment or disability. Any
portion of the Account invested in TCF Stock (or common stock of a successor
company) shall be distributed in kind. The value of any portion of the
account distributed in cash shall be equal to the cash received upon its
liquidation by the Trustee, provided that such liquidation occurs on the
latest practicable date prior to the distribution date.
e. For purposes of this section, an Employee's employment is
considered to terminate as of the date which is the later of (i) Employee's
last date of service for the Company, or (ii) the last date on which there is
an employment relationship between the Employee and a Company.
f. For purposes of this section, an Employee is disabled as of the
date the Employee is eligible for payments under the long term disability
plan of a Company.
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g. In the event installment payments commence and any installments
are unpaid at the time of Employee's death, the payments shall be made at the
times and in such amounts as if Employee were living to the persons specified
in paragraph 7.a.
h. For purposes of this section, an Employee's termination of
employment is a retirement if so determined by the Committee under all the
facts and circumstances.
i. A non-competition agreement shall be reasonably acceptable to
the Committee for purposes of this Section 5 if it has a value as of the
Committee's action date, equal to at least five percent of the then-current
value of the Employee's Account. Valuation shall be determined in all cases
on the basis of an independent appraisal, unless such an appraisal is deemed
unnecessary by both the Committee and the Employee.
j. For purposes of this Plan, a Change in Control shall be deemed
to have occurred if (i) any "person" as defined in sections 13(d) and 14(d)
of the Securities Exchange Act of 1934 (the "Exchange Act") is or becomes the
"beneficial owner" as defined in Rule 13d-3 under the Exchange Act, directly
or indirectly, of securities of TCF financial representing more than fifty
percent (50%) or more of the combined voting power of TCF Financial's then
outstanding securities. (For purposes of this clause (i), the term
"beneficial owner" does not include any employee benefit plan maintained by
TCF Financial that invests in TCF Financial's voting securities.); or (ii)
during any period of two (2) consecutive years there shall cease to be a
majority of the Board comprised as follows: individuals who at the beginning
of such period constitute the Board or new directors whose nomination for
election by the company's shareholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved; or (iii) the shareholders of TCF
Financial approve a merger or consolidation of TCF Financial with any other
corporation, other than a merger or consolidation which would result in the
voting securities of TCF Financial outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least fifty
percent (50%) of the combined voting power of the voting securities of TCF
Financial or such surviving entity outstanding immediately after such merger
or consolidation, or the shareholders of TCF Financial approve a plan of
complete liquidation of TCF Financial or an agreement for the sale or
disposition by TCF Financial of all or substantially all TCF Financial's
assets; provided, however, that no Change in Control will be deemed to have
occurred if such merger, consolidation, sale or disposition of assets, or
liquidation is not subsequently consummated. The date of a Change in
Control, for purposes of this Plan, is the date on which the Change in
Control is consummated.
k. Notwithstanding any other provision of this Section 5 or any
payment schedule approved by the Committee pursuant to this Section 5 and
regardless of whether payments have commenced under this Section 5, in the
event that the Internal Revenue Service should finally determine with respect
to an Employee who has terminated employment with the Company that part or
all of the value of the Employee's Deferred Amounts or Plan Account which
have not actually been distributed to the Employee, or that part or all of a
related Trust Account which has not actually been distributed to the
Employee, is nevertheless required to be included in the Employee's gross
income for
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federal and/or State income tax purposes, then the Deferred Amounts or the
Account or the part thereof that was determined to be includible in gross
income shall be distributed to the Employee in a lump sum as soon as
practicable after such determination without any action or approval by the
Committee. A "final determination" of the Internal Revenue Service for
purposes of this paragraph 5.i. is a determination in writing by said Service
ordering the payment of additional tax, reporting of additional gross income
or otherwise requiring Plan amounts to be included in gross income, which is
not appealable or which the Employee does not appeal within the time
prescribed for appeals.
6. EMERGENCY PAYMENTS. In the event of an "unforeseeable emergency" as
determined hereafter, the Committee may determine the amounts payable under
paragraph 5 hereof and pay all or a part of such amounts without regard to
the payment dates provided in paragraph 5 to the extent the Committee
determines that such action is necessary in light of immediate and heavy
needs of the Employee (or his beneficiary) occasioned by severe financial
hardship. For the purposes of this paragraph 6, an "unforeseeable emergency"
is a severe financial hardship to the Employee resulting from a sudden and
unexpected illness or accident of the Employee or beneficiary, or of a
dependent (as defined in Section 152(a) of the Internal Revenue Code of 1986,
as amended) of the Employee or beneficiary, loss of the Employee's or
beneficiary's property due to casualty, or other similar extraordinary and
unforeseeable circumstances arising as a result of events beyond the control
of the Employee or beneficiary. Payments shall not be made pursuant to this
paragraph 6 to the extent that such hardship is or may be relieved: (a)
through reimbursement or compensation by insurance or otherwise, (b) by
liquidation of the Employee's or beneficiary's assets, to the extent the
liquidation of such assets would not itself cause severe financial hardship,
or (c) by cessation of the Employee's deferrals under the Plan. Such action
shall be taken only if the Employee (or the Employee's legal representatives
or successors) signs an application describing fully the circumstances which
are deemed to justify the payment, together with an estimate of the amounts
necessary to prevent such hardship, which application shall be approved by
the Committee after making such inquiries as the Committee deems necessary or
appropriate.
7. METHOD OF PAYMENTS.
a. In the event of an Employee's death, payments shall be made to
the persons (including a trustee or trustees) named in the last written
instrument signed by the Employee and received by the Committee prior to the
Employee's death, or if the Employee fails to so name any person, the amounts
shall be paid to the Employee's estate or the appropriate distributee
thereof. The Committee, the Company, and the Trustee shall be fully
protected in making any payments due hereunder in accordance with what the
Committee believes to be such last written instrument received by it.
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b. Payments due to a legally incompetent person may be made in
such of the following ways as the Committee shall determine:
(i) directly to such incompetent person,
(ii) to the legal representative of such incompetent person, or
(iii) to some near relative of the incompetent person to be
used for the latter's benefit.
c. Except as otherwise provided in paragraphs 7.a. and b., all
payments to persons entitled to benefits hereunder shall be made to such
persons in person or upon their personal receipt or endorsement, and shall
not be grantable, transferable, or otherwise assignable in anticipation of
payment thereof, in whole or in part, by the voluntary or involuntary acts of
any such persons, or by operation of law, and shall not be pledged,
encumbered, or otherwise liable or taken for any obligation of such person.
d. All payments to persons entitled to benefits hereunder shall be
made out of the general assets, and shall be the sole obligations, of the
Employer by which the Eligible Employee was employed, except to the extent
that such payments are made out of the trust described in paragraph 4.
8. CLAIMS PROCEDURE.
a. If a claim for benefits made by any person (the "Applicant") is
denied, the Committee shall furnish to the Applicant within 90 days after its
receipt of such claim (or within 180 days after such receipt if special
circumstances require an extension of time ) a written notice which: (i)
specifies the reason for the denial, (ii) refers to the pertinent provisions
of the Plan on which the denial is based, (iii) describes any additional
material or information necessary for the perfection of the claim and
explains why such material or information is necessary, and (iv) explains the
claim review procedures.
b. Upon the written request of the Applicant submitted within 60
days after his receipt of such written notice, the Committee shall afford the
Applicant a full and fair review of the decision denying the claim and, if so
requested: (i) permit the Applicant to review any documents which are
pertinent to the claim, (ii) permit the Applicant to submit to the Committee
issues and comments in writing, and (iii) afford the Applicant an opportunity
to meet with a quorum of the Committee as a part of the review procedure.
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c. Within 60 days after its receipt of a request for review (or
within 120 days after such receipt if special circumstances, such as the need
to hold a hearing, require an extension of time) the Committee shall notify
the Applicant in writing of its decision and the reasons for its decision and
shall refer the Applicant to the provisions of the Plan which form the basis
for its decision.
9. MISCELLANEOUS.
a. Except as limited by paragraph 7.c. and except that an Employee
shall have a continuing power to designate a new recipient in the event of
the Employee's death at any time prior to such death without the consent or
approval of any person theretofore named as the Employee's recipient by an
instrument meeting the requirements of paragraph 7.a., this document shall be
binding upon the inure to the benefit of each Company, the Employees, their
legal representatives, successors and assigns, and all persons entitled to
benefits hereunder.
b. Any notice given in connection with this document shall be in
writing and shall be delivered in person or by registered mail or overnight
delivery service, return receipt requested. Any notice given by registered
mail or overnight delivery service shall be deemed to have been given upon
the date of delivery indicated on the return receipt, if correctly addressed.
c. Nothing in this document shall interfere with the rights of any
Employee to participate or share in any profit sharing or pension plan which
is now in force or which may at some future time become a recognized plan of
any Company.
d. Nothing in this document shall be construed as an employment
agreement nor as in any way impairing the right of any Company to terminate
an Employee's employment at will.
e. This Plan constitutes a mere promise by the Company to make
benefit payments in the future, and it is intended to be unfunded for tax
purposes and for the purposes of Title I of ERISA. The rights of an Employee
or beneficiary to receive benefit payments hereunder are solely those of an
unsecured general creditor of the Company.
10. ELECTIONS BY EMPLOYEES TO TRANSFER BETWEEN FUNDS. Employees may
elect to liquidate funds in their Deferred Compensation Accounts under
Section 3 or 4 and reinvest them as directed provided that any investment
election shall be consistent with Exhibit A and exercised in writing by the
Employee and approved by the Committee or its approved representative under
such terms and conditions as the Committee deems appropriate.
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11. SPECIAL PROVISIONS REGARDING OSPIP AND DEFERRED STOCK. Effective
for deferrals of incentive compensation with respect to the 1992 calendar
year and thereafter, Employees' deferrals of incentive compensation payable
in the form of common stock of TCF Financial pursuant to the Officer's Stock
Performance Incentive Plan ("OSPIP") or otherwise subject to issuance as
Deferred Stock under the Stock Option and Incentive Plan of TCF Financial ,
the TCF Financial 1995 Stock Incentive Plan, or any successor stock option
plan or restricted stock plan of TCF Financial shall be credited to the
Employee's account as "Deferred Stock" and the Employee shall be prohibited
from making any investment election with respect to such Deferred Stock until
the date or dates specified in an award agreement entered into pursuant to
the Stock Option and Incentive Plan by TCF Financial, subject to acceleration
upon the occurrence of events as specified in such agreement. Upon and after
such date or dates, the Deferred Stock credits to the Employee's account
shall be subject to investment elections the same as any other credits in the
Employee's accounts. In the event TCF Financial so notifies the Trustee,
dividend credits on Deferred Stock shall be withheld until such time as the
Deferred Stock becomes subject to investment elections. In the event the
Employee's employment terminates or in the event of the Employee's
disability, any Deferred Stock credits not yet subject to investment election
by the Employee shall be reduced to zero and no benefits shall be payable
with respect to them. Deferred Stock credits shall not be distributable
pursuant to paragraph 6 (Emergency Payments) until they are subject to
investment election by the Employee.
12. TERMINATION OR AMENDMENT. This Plan may be amended at any time and
from time to time, upon the approval of the Board of Directors of TCF
Financial; PROVIDED, that, if the amendment is adopted prior to a change in
control (as defined in section 5(j) hereof), no such amendment shall (without
the consent of all participants, including any terminated participants and
beneficiaries then receiving distributions) alter any participant's or
beneficiary's right to payments of amounts previously credited to such
participant's or beneficiary's Account or delay the time or times at which a
participant or beneficiary is entitled to receive payments with respect to
the participant's Deferred Amounts under the Plan. If the amendment is
adopted after a change in control, as defined in section 5(j) hereof, the
approval of the Board of Directors and the consent of all participants,
terminated participants and beneficiaries shall be required for the
amendment. In the event that all of the Plan's participants and
beneficiaries do not consent to a proposed amendment, such amendment shall
not take effect but the Plan Accounts of the consenting participants shall be
transferred to a separate plan that is identical to this Plan in all
respects, except that it may include the proposed amendment. The Board of
Directors may terminate this Plan in its discretion, except that any such
termination shall require the consent of all participants (including any
terminated participants and beneficiaries then receiving distributions),
unless it is an automatic termination of the Plan under section 5(k) hereof.
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EXHIBIT A
(Action of 16b-3 Sub-Committee of the Personnel Committee Establishing TCF
Stock Accounts and Diversified Accounts effective as of September 30, 1998)
1. Effective as of September 30, 1998 (the "Effective Date"), each
participant's Account in the Plan and Trust shall be divided into two
sub-accounts: a "TCF Stock Account" and a "Diversified Account". All
shares of common stock of TCF Financial ("TCF Stock") in a participant's
Account on the Effective Date shall be allocated as of that Date to the
Participant's TCF Stock Account. All other investments in a participant's
Account on the Effective Date shall be allocated as of that Date to the
participant's Diversified Account. Thereafter, the Sub-Accounts shall
operate as follows:
a. The TCF Stock Account shall consist solely of shares of TCF Stock (and
cash or cash equivalent money market funds for fractional shares or
for funds held temporarily prior to investment). The Diversified
Account shall not at any time include any shares of TCF Stock. Except
as permitted by paragraph e, below, no transfer of assets will be
permitted from the TCF Stock Account to the Diversified Account or
from the Diversified Account to the TCF Stock Account.
b. A participant's TCF Stock Account shall hold all shares of TCF Stock
allocated to it on or after the Effective Date and such shares shall
not be subject to sale, transfer, assignment, pledge or other
hypothecation in any manner. Upon the occurrence of a Distribution
Event (as defined in the Plans) the shares will be distributed from
the Plan and Trust to the participant in an in-kind distribution
pursuant to the terms of the Plan.
c. The Diversified Account shall not at any time purchase or invest in
any shares of TCF Stock, but shall invest in such investments as the
participant directs and as the Committee permits from time to time.
d. Any new Deferred Amounts for a participant after the Effective Date
shall be allocated to either the participant's TCF Stock Account or to
such participant's Diversified Account, as the participant shall
direct in an irrevocable election filed before the beginning of each
calendar year and applicable throughout the calendar year. The
Deferred Amounts shall be credited to the applicable sub-Account as of
the same date that they are otherwise credited to the participant's
Account under Section 3.a. of the Plans and Section 4.2 of the Trusts.
e. Dividends generated by a participant's TCF Stock Account shall be
reinvested in the TCF Stock Account, or in the Diversified Account, as
the participant directs in an irrevocable election filed before the
beginning of each calendar year and applicable throughout the calendar
year. Any interest or dividends generated by a participant's
Diversified Account shall be reinvested in the Diversified Account, or
in the participant's TCF Stock Account, as the participant directs in
an irrevocable election filed before the beginning of each calendar
year and applicable throughout the calendar year, unless management
determines that the
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reinvestment of interest and dividends within or from the Diversified
Account is not administratively feasible. If the participant does
not file an election with respect to the investment of interest
and/or dividends, all interest and dividends shall be reinvested
in the asset that generated them.
f. Notwithstanding the election provisions of paragraphs 1.d and 1.e.,
any participant may make a one-time only investment election for the
fourth quarter of 1998 with respect to new Deferred Amounts and
dividends and interest generated during that calendar quarter,
provided that the election is filed prior to the beginning of the
calendar quarter, is irrevocable and applies to the entire calendar
quarter.
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9/28/98
TRUST AGREEMENT FOR
TCF FINANCIAL SENIOR OFFICER DEFERRED COMPENSATION PLAN
THIS TRUST AGREEMENT, made effective as of the 1st day of September,
1998, by and between TCF Financial Corporation, a Delaware corporation ("TCF
Financial") and U.S. Bank National Association (the "Trustee"),
W I T N E S S E T H:
WHEREAS, TCF Financial has established the TCF Financial Senior Officer
Deferred Compensation Plan (the "Plan"), which plan is now in full force and
effect; and
WHEREAS, the Plan is a nonqualified deferred compensation plan for
select management of TCF Financial and its subsidiaries (the "Companies" or,
individually, the "Company"), and TCF Financial wishes to establish a
convenient method for discharging its obligations to pay deferred
compensation under said Plan;
NOW, THEREFORE, the parties to this Agreement do hereby agree as follows:
ARTICLE 1
ESTABLISHMENT AND ACCEPTANCE OF TRUST
SECTION 1.1. This Trust shall be known as the "TRUST FOR TCF FINANCIAL
SENIOR OFFICER DEFERRED COMPENSATION PLAN." The Trustee hereby accepts the
Trust subject to all of the terms and conditions of this Agreement, and
agrees to hold and administer the assets of the Trust and to execute the
Trust in accordance with the provisions hereof. The assets deposited with
the Trustee and held pursuant to this Trust are referred to herein
collectively as the "Trust Fund."
SECTION 1.2. Amounts credited to the accounts of Plan participants
pursuant to Article 4 are not included in their gross income for federal
income tax purposes until such time as they are actually paid or otherwise
made available to such participants.
ARTICLE 2
CONTRIBUTIONS TO THE TRUST
SECTION 2.1. The Trustee shall receive from time to time such amounts
in cash or other property acceptable to the Trustee as the Companies shall
contribute pursuant to the terms of the Plan. Each such contribution shall
be accompanied by a statement designating the Plan
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participant on behalf of whom such contribution is being made and, if more
than one account has been established for such participant pursuant to
Section 4, the account to which such contribution will be credited. The
Trustee shall be under no obligation to collect any such contributions, and
all responsibility for determining the amount, timing, and types of
contributions made to the Trustee shall be upon the Companies or their
designees. Nothing in this Agreement shall be construed as requiring the
Companies, or any of them, to make any contributions to the Trust.
SECTION 2.2. All contributions so received and all proceeds,
investments, reinvestments, and income thereof in the Trustee's possession
shall be held, invested, and, with all disbursements therefrom, accounted for
by the Trustee as provided in this Agreement.
SECTION 2.3. No portion of the Trust Fund shall be diverted to or used
for any purpose other than the payment of benefits pursuant to the Plan, or
for the payment of expenses of administering the Plan and the Trust, or for
the payment of expenses incurred in the making and administering of Trust
investments pursuant to Sections 4 and 5, until such time as the Companies'
obligations to make payments pursuant to the Plan have been fully discharged;
PROVIDED, and notwithstanding anything in this Agreement to the contrary, at
all times during the continuance of this Trust, the principal and income of
the Trust Fund shall be subject to the claims of the general creditors of the
Companies. At any time that the Trustee has actual knowledge, or has
determined, that a Company is "Insolvent," it shall deliver any undistributed
principal and income credited to the accounts established for participants
employed by such Company to satisfy such claims as a court of competent
jurisdiction may direct. The Board of Directors and the Chief Executive
Officer of each Company shall have the duty to inform the Trustee of that
Company's Insolvency. If a Company or any person claiming to be a creditor
of a Company alleges in writing to the Trustee that such Company has become
Insolvent, and if the Trustee determines such allegation is made in good
faith and upon reasonable grounds, the Trustee shall immediately suspend
payments from the accounts established for participants employed by such
Company and shall hold all assets of such accounts subject to claims of such
Company's creditors. The Trustee shall then request, within 10 days, from
such Company sufficient information to determine if the Company is Insolvent.
If the Company shall fail or refuse to supply sufficient information from
which the Trustee may determine if the Company is Insolvent within 30 days of
the Trustee's request, the Trustee shall promptly request such information
from the party which alleged that the Company is Insolvent. If, on the basis
of the information so provided, the Trustee determines that the Company is
not Insolvent, it shall immediately resume payments from the accounts
established for participants employed by such Company, together with payment
of any amounts held back by the Trustee while making a determination as to
Insolvency. If the Trustee determines the Company is Insolvent, or if it has
not received sufficient information to make a determination as to the
Company's solvency, it shall resume such payments only after the Trustee has
determined that the Company is no longer Insolvent. Unless the Trustee has
actual knowledge of a Company's Insolvency, it shall have no duty to inquire
whether any Company is Insolvent. The Trustee may in all events rely on such
evidence concerning the Companies' solvency as may be furnished to the
Trustee which will give it a reasonable basis for making a determination
concerning the Companies' solvency, and nothing in this Agreement shall in
any way diminish any right of the Plan's participants or their
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beneficiaries to pursue their rights as general creditors of the Companies
with respect to benefits payable to them pursuant to the Plan. To assist the
Trustee with its determinations required hereunder, the Trustee may rely upon
the advice of legal counsel and/or other professional counsel retained by the
Trustee and such counsel's reasonable fees and expenses shall be payable from
the assets of the Trust or, at TCF Financial's election, may be directly paid
by TCF Financial and/or one or more of the Companies, PROVIDED that TCF
Financial is notified in advance of the Trustee's retention of legal counsel
and TCF Financial or the Committee consents thereto, which consent shall not
be unreasonably withheld. A Company shall be considered "Insolvent" for the
purposes of this Agreement if it is unable to pay its debts as they mature,
or if it is a party as a debtor to a proceeding pending under the U.S.
Bankruptcy Code, or under any other applicable state or federal bankruptcy
law.
ARTICLE 3
PAYMENTS FROM THE TRUST FUND
SECTION 3.1.
a. When a Plan participant or beneficiary becomes entitled to
benefits pursuant to the Plan, the committee appointed to administer the Plan
(the "Committee") shall notify and direct the Trustees in writing of:
i. the name, social security number, and mailing address of
such participant or beneficiary;
ii. the amount and form of the distributions to be made to
such participant or beneficiary under the Plan;
iii. the period for which such distributions are to be made;
and
iv. the date on which such distributions are to commence.
Upon receipt of such notice and direction, the Trustee shall commence
payments due to such participant or beneficiary out of the Trust assets.
Such payments shall be debited to the account or accounts established for
such participant as provided in Section 4 and shall continue until the
earliest of: (A) the date on which the last payment due to such participant
or beneficiary has been made; (B) the balance credited to the account or
accounts from which such payments are to be made has been reduced to zero;
or (C) the Trustee receives written notice and direction from the Committee
to cease distributions because a Company will continue such payments out of
its general assets.
b. If the Trustee receives written notice and direction from the
Committee that a Company will continue any payments due pursuant to this
section 3.1 out of its general assets, the Trustee shall discontinue the
making of such distributions out of the Trust Fund; PROVIDED, that the
Trustee shall resume such distributions (and shall make any payments then in
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arrears) if it receives written notice and direction from the Committee that
the Company will no longer make such payments from its general assets.
c. Distributions due pursuant to this section 3.1 shall be made at
such times, and in such form, as may be provided for under the Plan.
d. A "Directing Party" for purposes of this Agreement shall
include TCF Financial, the Committee, or any participant or beneficiary
authorized by this Agreement to direct the Trustee, as applicable
(collectively referred to for purposes of this Agreement as the "Directing
Party").
e. Notwithstanding paragraphs a, and b of this Section, the
following shall apply on and after a Change in Control (as defined in Section
5(j) of the Plan). If the Trustee receives notification from any source that
a distribution may be due to a participant or beneficiary, the Trustee shall
promptly request from the Committee all relevant information and directions
relative to such distribution(s) and if the Committee shall fail to provide
such information and/or directions within 30 days, the Trustee shall accept
and act upon any information and/or directions received from the participant
or beneficiary with respect to commencement or re-commencement of the payment
of distributions to such participant or beneficiary. In connection with
providing such information and/or directions, the participant or beneficiary
shall be deemed a "Directing Party" for purposes of this Agreement.
f. The Trustee shall be held harmless and shall not be liable for
its acts with respect to distributions from the Trust Fund when following the
directions of the Committee, or for failure to act in the absence of such
directions, nor shall the Trustee be liable or responsible for any payment
made by it in good faith and in the exercise of reasonable care without
knowledge of the changed condition or status of any payee.
SECTION 3.2. Except to the extent that such amounts are promptly paid
by the Companies, the Trustee shall also pay out of the Trust Fund: (a) all
broker fees and other expenses incurred in connection with the sale or
purchase of investments; (b) all personal property taxes, income taxes, and
other taxes of any kind (including taxes payable by the Companies, net of any
related tax savings to the Companies) at any time levied or assessed under
any present or future law upon, or with respect to, the Trust Fund or any
property included in the trust Fund; and (c) its own compensation and all
other reasonable expenses of administering the Plan and the Trust, including
legal and/or other professional fees reasonably incurred by the Trustee
and/or the Trust pursuant to Section 2.3 of this Agreement. Expenses shall
be charged to the Trust Fund without allocation among the accounts
established pursuant to Section 4, unless an expense is directly attributable
to one or more of such accounts, in which case such expense shall be charged
directly to such accounts. The Trustee may dispose of Trust investments, if
necessary to provide cash assets for the payment of expenses.
SECTION 3.3. As directed by the Committee, the Trustee shall withhold
all or any part of any distribution required to be made hereunder as the
Committee reasonably deems necessary and proper to protect the Trustee or the
Trust Fund against any liability or claim on account of
4
<PAGE>
any estate, inheritance, income, or other tax, and the Trustee may discharge
any such liability with any part or all of any such payment so withheld.
SECTION 3.4. Distributions pursuant to Section 3.1 shall be deemed to
have been sufficiently made if they are sent by first class mail to the
participant at the address provided to the Trustee by the Committee. If any
such distribution is returned to the Trustee unclaimed, the Trustee shall
notify the Committee and shall not make any further distributions to such
payee until it receives further directions from the Committee.
ARTICLE 4
INVESTMENTS OF THE TRUST FUND; PARTICIPANTS' ACCOUNTS
SECTION 4.1. Except as otherwise specifically provided herein, the
Trustee shall invest, reinvest, and hold the assets of the Trust Fund in such
investments as may be permitted by the Committee and as each Plan participant
shall direct in writing for his own account. Insofar as the Trustee has
acquired an investment for a Plan participant's Account pursuant to such
directions, the participant shall have the right to determine confidentially
whether such investment will be tendered in a tender or exchange offer, and
to direct the Trustee accordingly. The Trustee shall not be restricted to
those investments which are authorized by the laws of any State for the
investment of trust funds. In addition, the Trustee may, for reasonable
periods of time, hold in its banking department any part or all of the Trust
Fund uninvested or in cash without liability for interest thereon, pending
the investment of such funds or the payment of costs, expenses, or benefits
payable under the Plan in the banking department of any corporate Trustee
serving hereunder or of any other bank, trust company or other financial
institution including those affiliated in ownership with the Trustee. The
Trustee shall not be liable for any action taken or omitted by it pursuant to
such written directions which shall be deemed to be authorized by the
Committee and to be directions of the Committee. Notwithstanding the
foregoing provisions of this Section 4.1, the rights of each Plan participant
to direct the investment of his account shall be subject to the claims of the
general creditors of the Company by which such participant is employed. Any
investment direction of a participant shall be made by each December 31 as
applicable to the next succeeding calendar year and shall be irrevocable with
respect to such calendar year, unless the Committee shall direct otherwise.
SECTION 4.2. The Trustee shall establish one or more separate accounts
for each Plan participant, and each such account shall be designated by the
name of the participant for whom it has been established. The assets of the
Trust Fund initially deposited with the Trustee shall be allocated among
these accounts in accordance with the instructions of the Committee. All
contributions received by the Trustee on behalf of a participant, and all
dividends or distributions made with respect to property allocated to such
participant's account, shall then be credited to such account and invested as
the participant shall direct. Distributions made by the Trustee to a Plan
participant shall only be made from such Participant's account to the extent
of the balance thereof.
5
<PAGE>
SECTION 4.3. Notwithstanding the foregoing, a Plan participant's right
to direct the investment of his account during any period of distribution
subsequent to his retirement or disability shall be the same as an active
participant's unless the Committee directs otherwise. Notwithstanding the
foregoing provisions of this Section 4.3, the rights of each Plan participant
to direct the investment of his Account (which directions shall be deemed to
be directions of the Committee) shall be subject to the claims of the general
creditors of the Company by which such participant is employed.
ARTICLE 5
POWERS AND DUTIES OF THE TRUSTEE
SECTION 5.1. In addition to the powers and discretions conferred upon
the Trustee by any other provision of this Agreement, but subject to the
provisions of Article 4 hereof, the Trustee shall have all the usual powers
conferred by law on trustees and shall also have the following express powers
with respect to the Trust Fund:
a. To retain, to exchange for any other property, to sell in any
manner and at any time, to divide, subdivide, partition, mortgage, improve,
alter, remodel, repair, and develop in any manner any property, real or
personal, to lease such property for any period of time, and to grant options to
sell or lease any such property, without regard to restrictions and without the
approval of any court.
b. As directed by the Committee, to vote stock held by the Trust
Fund personally or by proxy, and to delegate the Trustee's voting powers with
respect to such stock to such proxy.
c. To exercise subscription, conversion, and other rights and
options as directed by the Committee, and to make payments form the Trust
Fund in connection therewith.
d. At the direction of the Committee, to take any action and to
abstain from taking any action with respect to any reorganization,
consolidation, merger, dissolution, recapitalization, refinancing, and any
other plan or change affecting any property constituting a part of the Trust
Fund, and in connection therewith to delegate its discretionary powers and to
pay assessments, subscriptions, and other charges from the Trust Fund.
e. In any manner, and to any extent, to waive, modify, reduce,
compromise, release, settle, and extend the time of payment of any claim of
whatsoever nature in favor of or against the Trustee or all or any part of
the Trust Fund.
f. At the direction of the Committee, to borrow money from any
person and to pledge assets of the Trust Fund as security for repayment of
any such loan.
g. Notwithstanding any language in the Trust instrument, neither
the Committee nor the Trustee on behalf of the Trust shall have power to
start, to enter into or
6
<PAGE>
otherwise engage in any business enterprise, or to continue to operate any
business enterprise, that becomes part of the Trust estate, if such activity
constitutes "carrying on business" as referred to in Section 301.7701-2 of
the procedure and administration regulations.
h. The Trustee is expressly authorized to the fullest extent
permitted by law to (i) retain the services of U.S. Bancorp Piper Jaffray
Inc. and/or U.S. Bancorp Investments, Inc., each being affiliates of U.S.
Bank National Association, and/or any other registered broker-dealer
organization hereafter affiliated with U.S. Bank National Association, and
any future successors in interest thereto (collectively for the purposes of
this paragraph referred to as the "Affiliated Entities"), to provide services
to assist in or facilitate the purchase or sale of investment securities in
the Trust, (ii) acquire as assets of the Trust shares of mutual funds to
which Affiliated Entities provides, for a fee, services in any capacity and
(iii) acquire in the Trust any other services or products of any kind or
nature from the Affiliated Entities regardless of whether the same or similar
services or products are available from other institutions. The Trust may
directly or indirectly (through mutual funds fees and charges for example)
pay management fees, transaction fees and other commissions to the Affiliated
Entities for the services or products provided to the Trust and/or such
mutual funds at such Affiliated Entities' standard or published rates without
offset (unless required by law) from any fees charged by the Trustee for its
services as Trustee. The Trustee may also deal directly with the Affiliated
Entities regardless of the capacity in which it is then acting, to purchase,
sell, exchange or transfer assets of the Trust even though the Affiliated
Entities are receiving compensation or otherwise profiting from such
transaction or are acting as a principal in such transaction. Each of the
Affiliated Entities is authorized to (i) effect transactions on national
securities exchanges for the Trust as directed by the Trustee, and (ii)
retain any transactional fees related thereto, consistent with Section
11(a)(1) of the Securities Exchange Act of 1934, as amended, and related Rule
11a2-2(T). Included specifically, but not by way of limitation, in the
transactions authorized by this provision are transactions in which any of
the Affiliated Entities are serving as an underwriter or member of an
underwriting syndicate for a security being purchased or are purchasing or
selling a security for its own account. In the event the Trustee is directed
by a Directing Party (as defined in Section 3.1(d) of this Agreement), the
Directing Party shall be authorized, and expressly retains the right
hereunder, to direct the Trustee to retain the services of, and conduct
transactions with, Affiliated Entities fully in the manner described above.
SECTION 5.2. The Trustee shall have no duties whatsoever except as are
specifically set forth as such in this Agreement, and no implied covenant or
obligation will be read into this Agreement against the Trustee.
SECTION 5.3. If there is more than one Trustee, the action of all of
the Trustees at the time acting hereunder, and any instrument executed by all
of the Trustees, shall be considered the action or instrument of the Trustee.
Such action may be taken at a meeting or in writing without a meeting, and
the Trustees may authorize any one or more of them to perform routine
functions, to sign routine papers, and to perform established or customary
administrative and ministerial functions.
7
<PAGE>
ARTICLE 6
ACCOUNTS OF THE TRUSTEE; VALUATION OF TRUST FUND
SECTION 6.1. The Trustee shall keep accurate and detailed accounts of
all investments, receipts, disbursements, distributions, and other
transactions. Such accounts will be open to inspection and audit by the
Companies or the Committee, or by any authorized representative thereof, at
all reasonable times during business days.
SECTION 6.2. As of each December 31st, and at such other times as the
Committee may reasonably require, the Trustee shall determine the fair market
value of the Trust Fund, and of each participant's Account, and shall notify
the Committee in writing of the fair market value as so determined within 30
days thereof. In addition, for purposes of determining the amount of any
lump sum distribution payable pursuant to the Plan, the Trustee shall
determine the fair market value of a Plan participant's Accounts as of the
last day of the calendar month coincident with or following such
participant's termination of employment. The fair market value of the Trust
Fund, and of each participant's Account, shall be the fair market value of
all securities and other assets then held in the Trust Fund or in such
Account, including all income received since the last valuation and income
accrued and unpaid at the close of the valuation period. In determining fair
market value, the Trustee may rely upon any information that it believes to
be reliable, including reports of sales and of bid and asked prices of issues
listed on an exchange as disclosed in newspapers of general circulation or in
generally recognized financial services, quotations with respect to unlisted
issues as supplied by any reputable broker or investment bank, or from any
other source that the Trustee believes to be reliable, or the Trustee may
make any such determination based upon its own analysis of such records or
reports of any company issuing such stock or other securities as are made
available to them.
ARTICLE 7
ADMINISTRATIVE PROVISIONS
SECTION 7.1. Except as otherwise specifically provided herein, the
Trustee may rely upon the authenticity, truth, and accuracy of, and will be
fully protected in acting upon:
a. Any copy of a resolution of the Board of Directors of TCF
Financial or any of the Companies, if certified by the Secretary or an
Assistant Secretary of the appropriate Company under its corporate seal.
b. Any notice, direction, certification, approval, or other
writing of the Committee, if evidenced by an instrument signed in the name of
the Committee by one or more of its members or by the Secretary of TCF
Financial.
8
<PAGE>
c. Any notice, direction, certification, or other writing, given
by a Plan participant pursuant to Section 4.1 which is believed by the
Trustee to be genuine and to have been sent by such participant.
SECTION 7.2. The Trustee shall receive such reasonable compensation as
may from time to time be agreed upon by TCF Financial and the Trustee. The
Trustee shall be held harmless and shall be fully indemnified by TCF
Financial, its successors and assigns from any liability, including
reasonable legal and professional services expenses, for any actions directed
by a Directing Party (as that term is defined in paragraph d. of Section 3.1).
SECTION 7.3. No person dealing with the Trustee shall be obligated to
see to the application of any property paid or delivered to the Trustee or to
inquire into the expediency or propriety of any transaction or the Trustee's
authority to consummate the same.
SECTION 7.4. Ownership of the assets comprising the Trust Fund shall be
in the Trustee, in its capacity as Trustee, and participants in the Plan and
their beneficiaries shall have no right or interest in or to such assets,
except as specifically provided herein. The rights of any participant or his
beneficiaries to any benefits or future payments hereunder or under the
provisions of the Plan shall be solely those of unsecured, general creditors
of the Companies, and such rights shall not be subject to attachment,
garnishment or other legal process by any creditor of any such participant or
beneficiary. Except to the extent that a Plan participant shall have a
continuing right to designate a beneficiary of any amount payable in the
event of his death, no such participant or beneficiary shall have any right
to alienate, anticipate, commute, pledge, encumber, transfer, or assign any
of the benefits or payments which he may expect to receive, contingently or
otherwise, under the Plan or this Agreement.
SECTION 7.5 Communications to the Trustee shall be deemed sufficiently
made if sent by mail addressed to the Trustee at its address on file with the
Committee. Communications to the Companies or the Committee will be deemed
sufficiently made if sent by mail addressed to the Committee, in care of TCF
Financial, at its principal place of business.
ARTICLE 8
SUCCESSION OF TRUSTEES
SECTION 8.1. The Trustee acting hereunder shall be one or more
individuals, or one or more qualified corporations, or any combination of
individuals and qualified corporations, appointed by TCF Financial to serve
in such capacity; PROVIDED, that an individual who is or has been eligible
to participate in the Plan shall not be eligible to serve as a Trustee. The
number of Trustees shall not be increased or decreased except with the
written consent of all of the Plan's participants (excluding any terminated
participants and beneficiaries then receiving distributions pursuant to the
Plan, other than terminated participants entitled to a lump sum
distribution). Upon any determination to increase the number of Trustees, or
upon the death, disability, removal, or resignation of any Trustee, the
vacancy or vacancies so created shall be filled by such individuals or
qualified corporations as may be appointed by the Board of Directors of TCF
9
<PAGE>
Financial and approved in writing by all of the Plan's participants
(excluding any terminated participants and beneficiaries then receiving
distributions pursuant to the Plan, other than terminated participants
entitled to a lump sum distribution). If the Board of Directors of TCF
Financial and all of the Plan's participants (excluding any terminated
participants and beneficiaries then receiving distributions pursuant to the
Plan, other than terminated participants entitled to a lump sum distribution)
shall fail to agree upon such appointment, and if there is no other Trustee
then acting, a successor Trustee or Trustees shall be appointed by a court of
competent jurisdiction. Any such appointment shall be effective upon the
acceptance thereof in writing by the person so appointed and the delivery of
a signed copy of such acceptance to the Trustee then in office.
SECTION 8.2. The Trustee, and any successor to any Trustee, may be
removed by the Board of Directors of TCF Financial at any time upon the
receipt by Board of Directors of TCF Financial of the consent of all of the
Plan's participants (excluding any terminated participants and beneficiaries
then receiving distributions pursuant to the Plan, other than terminated
participants entitled to a lump sum distribution) to such removal and upon
the giving of 30 days' prior written notice to such Trustee and to any other
Trustees then acting. Such removal shall be effective on the date specified
in such written notice; PROVIDED, that notice shall theretofore have been
given to the Trustee of the appointment of a successor Trustee or Trustees in
the manner hereinafter set forth. Notwithstanding the foregoing, a Trustee
who dies or who becomes eligible to be a participant in the Plan shall
automatically cease to be a Trustee, effective as of the date of death of the
date such eligibility commences, whichever is applicable.
SECTION 8.3. The Trustee, and any successor to any Trustee, may resign
as Trustee hereunder by filing with the Committee a written resignation which
shall take effect 30 days after the date of such filing, unless prior thereto
a successor Trustee or Trustees shall have been appointed.
SECTION 8.4. All of the provisions set forth herein with respect to the
Trustee shall relate to each successor Trustee so appointed with the same
force and effect as if such successor Trustee originally had been named
herein as a Trustee.
SECTION 8.5. Upon the appointment of a successor Trustee, the removed or
resigning Trustee shall transfer and deliver those assets of the Trust Fund
in its possession or under its control to the remaining Trustee or Trustees,
if any, or otherwise to the successor Trustee or Trustees, together with all
such instruments of transfer, conveyance, assignment, and further assurance
as the remaining or successor Trustee may reasonably require. Any removed or
resigning Trustee shall, at the request of the Committee, or may, in its own
discretion, file with the Committee an account of its actions as Trustee.
The receipt and approval by the Committee of the final account of the removed
or resigning Trustee shall be a full and complete acquittal and discharge
from liability of such removed or resigning Trustee, and any successor
Trustee shall have no liability whatsoever for the acts or omissions of any
prior Trustee in which it did not participate. If the Committee shall fail
to express in writing its objections to any account delivered by any removed
or resigning Trustee within six months from the date of receipt by the
Committee of such account, such account shall be considered as approved by
the Committee
10
<PAGE>
ARTICLE 9
AMENDMENT AND TERMINATION OF THE TRUST
SECTION 9.1. This Agreement may be amended at any time and from time to
time, upon the approval of the Board of Directors of TCF Financial;
PROVIDED, that no such amendment shall take effect unless and until it has
been consented to in writing by all of the Plan's participants (excluding any
terminated participants and beneficiaries then receiving distributions
pursuant to the Plan, other than terminated participants entitled to a lump
sum distribution.). In the event that all of the Plan's participants do not
consent to a proposed amendment, such amendment shall not take effect but the
Trust assets credited to the accounts of the consenting participants
(together with the accounts of any participants or beneficiaries whose
consent is not required) shall be transferred to a separate trust established
pursuant to an agreement that is identical to this Agreement in all respects,
except that it may include the proposed amendment.
SECTION 9.2. This Trust shall not be terminated until such time as all
of the Companies' obligations to make distributions pursuant to the Plan have
been fully discharged unless all of the Plan's participants (excluding any
terminated participants and beneficiaries then receiving distributions
pursuant to the Plan other than terminated participants entitled to a lump
sum distribution) shall consent in writing to an earlier termination. If all
of the Plan's participants, terminated participants and beneficiaries do not
consent to an early termination, the Trust shall terminate with respect to
such consenting participants (and with respect to participants or
beneficiaries whose consent is not required) but shall continue in effect
with respect to the nonconsenting participants. Upon a termination or
partial termination of the Trust, the Trust assets, if any, that remain in
the accounts established for participants in the Plan (or for the consenting
participants (and participants or beneficiaries whose consent is not
required), if fewer than all of the Plan's participants have consented to a
termination for which the participants' consent is required) shall be paid or
distributed to TCF Financial or its successor in interest.
ARTICLE 10
MISCELLANEOUS
SECTION 10.1. Each Company making a contribution to the Trust Fund
pursuant to the provisions of the Plan shall, by virtue of its making such
contribution, become a party to this Agreement and shall have the same rights
and obligations as if it had executed this Agreement as one of the original
parties thereto.
SECTION 10.2. Nothing contained in this Agreement shall be deemed to
constitute a contract of employment between the Companies and any employee of
any of them.
SECTION 10.3. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be the original, and all of
such counterparts shall together constitute one and the same document.
11
<PAGE>
SECTION 10.4. Except when otherwise indicated by the context, any
masculine terminology used in this Agreement shall also include the feminine
and neuter, and the definition of any term herein in the singular shall also
include the plural (and vice versa). The headings of Articles of this
Agreement are for convenience of reference only and shall have no substantive
effect on the provisions of this Agreement.
SECTION 10.5. Any notice required hereunder may be waived by the person
entitled thereto.
SECTION 10.6. This Agreement shall be construed and interpreted in
accordance with the laws of the State of Minnesota, except to the extent
superseded by applicable federal laws.
SECTION 10.7. This Agreement shall constitute the entire agreement
among the parties hereto with respect to the subject matter hereof, and shall
supersede and replace all previous agreements relating to the same subject
matter, both written and oral.
SECTION 10.8. The effective date of this restated Agreement shall be
September 1, 1998.
ARTICLE 11
SPECIAL PROVISIONS REGARDING OSPIP AND DEFERRED STOCK
SECTION 11.1. Effective for deferrals of incentive compensation earned
in 1992 and thereafter the Trustee shall accept as directed by the Committee
contributions of common stock of TCF Financial Corporation issued in the name
of the Trustee pursuant to the Deferred Stock award provisions of the Stock
Option and Incentive Plan of TCF Financial or any successor plan thereto.
Each such contribution of Deferred Stock shall be accompanied by a
designation of the date or dates on which such Stock shall become
transferable by the Trustee as well as any events which may cause
acceleration of such dates. Deferred Stock shall not be transferable by the
Trustee prior to such date or dates. If a Plan participant or beneficiary
becomes entitled to benefits from the Plan, any Deferred Stock which is not
yet transferable shall be returned to TCF Financial and canceled. In all
other respects, Deferred Stock held by the Trustee shall be subject to the
same terms and conditions as apply to other stock held by the Trustee.
IN WITNESS WHEREOF, TCF Financial and the Trustee have caused this
Agreement to be executed effective as of the day and year first above written.
TCF Financial Corporation
[NO SEAL]
By:__________________________
Title:_______________________
Attest:
By___________________________
As its_______________________
12
<PAGE>
U.S. Bank National Association
[NO SEAL]
By:__________________________
Title:_______________________
As Trustee as aforesaid.
Attest:
By___________________________
As its_______________________
13
<PAGE>
10-12-98
AMENDMENT TO TRUST AGREEMENT FOR
TCF FINANCIAL CORPORATION SENIOR OFFICER DEFERRED COMPENSATION PLAN
Section 9.1 is amended to read as follows in full:
SECTION 9.1. This Agreement may be amended at any time and from time to
time, upon the approval of the Board of Directors of TCF Financial;
PROVIDED, that, if the amendment is adopted prior to a change in control (as
defined in section 5(j) of the Plan), no such amendment shall (without the
consent of the participant, including any terminated participants and
beneficiaries then receiving distributions) alter any participant's or
beneficiary's right to payments of amounts previously credited to such
participant's or beneficiary's Account or delay the time or times at which a
participant or beneficiary is entitled to receive payments with respect to
the participant's Deferred Amounts under the Plan). If the amendment is
adopted after a change in control, as defined in section 5(j) of the Plan,
the approval of the Board of Directors and the consent of all participants,
terminated participants and beneficiaries shall be required for the
amendment. In the event that all of the Plan's participants and
beneficiaries do not consent to a proposed amendment, such amendment shall
not take effect but the Trust assets credited to the accounts of the
consenting participants shall be transferred to a separate trust established
pursuant to an agreement that is identical to this Agreement in all respects,
except that it may include the proposed amendment.
1
<PAGE>
RESOLUTION OF THE
PERSONNEL COMMITTEE AND BOARD OF DIRECTORS
OF TCF FINANCIAL CORPORATION
Re: Composition of Administrative Committee
AMENDMENT TO DIRECTORS STOCK PROGRAM
RESOLVED, that the Administrative Committee for the Directors' Stock
Program shall consist of the members of the Personnel/Affirmative Action
Committee who qualify from time to time as "Non-employee Directors" under
Rule 16b-3 of the Securities and Exchange Commission.
1
<PAGE>
8-24-98
WRITTEN ACTION OF THE 16B-3 SUBCOMMITTEE OFTHE
PERSONNEL COMMITTEE OF
TCF FINANCIAL CORPORATION
AND PLAN AMENDMENT FOR
APPROVAL BY BOARD OF DIRECTORS
Re: Require All distributions to be in the Form of TCF Stock
AMENDMENT TO DIRECTORS PLAN
FURTHER RESOLVED, that effective as of September 30, 1998, the TCF
Directors Deferred Compensation Plan is amended to require all distributions
to be in the form of common stock of TCF Financial ("TCF Stock").
1
<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 Basic Earnings Per Common Three Months Ended Nine Months Ended
Share for Statements of Operations: September 30, September 30,
- ---------------------------------------- ---------------------------- -------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income applicable to common shareholders $ 36,581 $ 37,210 $ 116,675 $ 105,172
------------ ----------- ----------- -----------
------------ ----------- ----------- -----------
Weighted average common shares outstanding 87,133,594 85,124,188 89,157,432 82,398,577
------------ ----------- ----------- -----------
------------ ----------- ----------- -----------
Basic earnings per common share $ .42 $ .44 $ 1.31 $ 1.28
------------ ----------- ----------- -----------
------------ ----------- ----------- -----------
Computation of Diluted Earnings Per Common
Share for Statements of Operations:
- ------------------------------------------
Net income $ 36,581 $ 37,210 $ 116,675 $ 105,172
Add: Interest expense on 7 1/4% convertible
subordinated debentures, net of tax - - - 132
------------ ----------- ----------- -----------
Income applicable to common shareholders
including effect of dilutive securities $ 36,581 $ 37,210 $ 116,675 $ 105,304
------------ ----------- ----------- -----------
------------ ----------- ----------- -----------
Weighted average number of common shares outstanding
adjusted for effect of dilutive securities:
Weighted average common shares outstanding used in
basic earnings per common share calculation 87,133,594 85,124,188 89,157,432 82,398,577
Net dilutive effect of:
Stock option plans 329,634 461,848 359,546 469,607
Restricted stock plans 510,015 852,244 503,458 838,903
Assumed conversion of 7 1/4% convertible
subordinated debentures - - - 466,581
----------- ----------- ----------- -----------
87,973,243 86,438,280 90,020,436 84,173,668
------------ ----------- ----------- -----------
------------ ----------- ----------- -----------
Diluted earnings per common share $ .42 $ .43 $ 1.30 $ 1.25
------------ ----------- ----------- -----------
------------ ----------- ----------- -----------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE THIRD
QUARTER 1998 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 360,793
<INT-BEARING-DEPOSITS> 933
<FED-FUNDS-SOLD> 23,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,673,722
<INVESTMENTS-CARRYING> 4,208
<INVESTMENTS-MARKET> 4,208
<LOANS> 7,092,639
<ALLOWANCE> 78,955
<TOTAL-ASSETS> 9,900,439
<DEPOSITS> 6,733,368
<SHORT-TERM> 1,008,363
<LIABILITIES-OTHER> 137,697
<LONG-TERM> 1,151,585
0
0
<COMMON> 929
<OTHER-SE> 868,497
<TOTAL-LIABILITIES-AND-EQUITY> 9,900,439
<INTEREST-LOAN> 478,149
<INTEREST-INVEST> 74,804
<INTEREST-OTHER> 10,655
<INTEREST-TOTAL> 563,608
<INTEREST-DEPOSIT> 164,130
<INTEREST-EXPENSE> 242,535
<INTEREST-INCOME-NET> 321,073
<LOAN-LOSSES> 13,360
<SECURITIES-GAINS> 2,246
<EXPENSE-OTHER> 318,934
<INCOME-PRETAX> 198,157
<INCOME-PRE-EXTRAORDINARY> 116,675
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 116,675
<EPS-PRIMARY> 1.31
<EPS-DILUTED> 1.30
<YIELD-ACTUAL> 4.90
<LOANS-NON> 37,605
<LOANS-PAST> 66
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 13,820
<ALLOWANCE-OPEN> 82,583
<CHARGE-OFFS> 22,489
<RECOVERIES> 5,342
<ALLOWANCE-CLOSE> 78,955
<ALLOWANCE-DOMESTIC> 54,598
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 24,357
</TABLE>
