<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of
1934
For the quarterly period ended
September 30, 1999
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.
Class Outstanding at
- ---------------------------- October 31, 1999
Common Stock, $.01 par value 82,950,387 shares
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, 1999 and December 31, 1998.....................................................3
Consolidated Statements of Operations for the Three
and Nine Months Ended September 30, 1999 and 1998...............................................4
Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 1999 and 1998...................................................5
Consolidated Statements of Stockholders' Equity for
the Year Ended December 31, 1998 and for the Nine
Months Ended September 30, 1999.................................................................6
Notes to Consolidated Financial Statements..........................................................7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations for the Three
and Nine Months Ended September 30, 1999 and 1998.....................................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 1 - FINANCIAL STATEMENTS
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,
1999 1998
------------- -------------
ASSETS
<S> <C> <C>
Cash and due from banks $ 345,412 $ 420,477
Investments 127,701 277,715
Securities available for sale 1,599,438 1,677,919
Loans held for sale 203,508 213,073
Loans and leases:
Residential real estate 3,819,673 3,765,280
Commercial real estate 1,018,144 811,428
Commercial business 356,581 289,104
Consumer 1,986,416 1,876,554
Lease financing 421,316 398,812
------------- -------------
Total loans and leases 7,602,130 7,141,178
Allowance for loan and lease losses (55,663) (80,013)
------------- -------------
Net loans and leases 7,546,467 7,061,165
Goodwill 160,853 166,645
Deposit base intangibles 14,006 16,238
Other assets 344,863 331,362
------------- -------------
$ 10,342,248 $ 10,164,594
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Checking $ 1,873,477 $ 1,879,623
Passbook and statement 1,154,214 1,176,931
Money market 726,893 700,004
Certificates 2,879,154 2,958,588
------------- -------------
Total deposits 6,633,738 6,715,146
------------- -------------
Securities sold under repurchase agreements 535,000 367,280
Federal Home Loan Bank advances 1,767,201 1,804,208
Discounted lease rentals 163,597 183,684
Other borrowings 255,402 105,874
------------- -------------
Total borrowings 2,721,200 2,461,046
Accrued interest payable 25,543 27,601
Accrued expenses and other liabilities 146,463 115,299
------------- -------------
Total liabilities 9,526,944 9,319,092
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; 92,805,454 and 92,912,246 shares issued 928 929
Additional paid-in capital 500,780 507,534
Retained earnings, subject to certain restrictions 686,065 610,177
Unamortized deferred compensation (16,887) (24,217)
Loan to Executive Deferred Compensation Plan (5,182) (6,111)
Shares held in trust for deferred compensation
plans, at cost (45,725) (45,740)
Accumulated other comprehensive income (loss) (33,758) 7,591
Treasury stock, at cost, 9,969,467 and 7,343,117 shares (270,917) (204,661)
------------- -------------
Total stockholders' equity 815,304 845,502
------------- -------------
$ 10,342,248 $ 10,164,594
============= =============
</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,
-------------------------- --------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest income:
Loans and leases $ 155,361 $ 157,974 $ 457,779 $ 478,149
Securities available for sale 27,741 21,480 84,512 66,573
Loans held for sale 3,063 3,402 9,855 10,655
Investments 2,491 2,373 6,912 8,231
---------- ---------- ---------- ----------
Total interest income 188,656 185,229 559,058 563,608
---------- ---------- ---------- ----------
Interest expense:
Deposits 44,316 53,662 131,171 164,130
Borrowings 37,800 26,943 109,786 78,405
---------- ---------- ---------- ----------
Total interest expense 82,116 80,605 240,957 242,535
---------- ---------- ---------- ----------
Net interest income 106,540 104,624 318,101 321,073
Provision for credit losses 2,845 4,544 13,552 13,519
---------- ---------- ---------- ----------
Net interest income after provision for
credit losses 103,695 100,080 304,549 307,554
---------- ---------- ---------- ----------
Non-interest income:
Fee and service charge revenues 39,515 33,875 110,825 92,320
Electronic funds transfer revenues 18,016 13,509 49,303 36,239
Leasing revenues 7,106 9,688 20,089 23,949
Title insurance revenues 3,953 5,247 12,931 14,790
Commissions on sales of annuities 2,499 2,059 7,150 6,482
Commissions on sales of mutual funds 1,498 1,566 4,756 4,301
Gain on sale of loans held for sale 1,119 2,679 3,749 6,041
Other 2,384 2,640 8,569 8,482
---------- ---------- ---------- ----------
76,090 71,263 217,372 192,604
---------- ---------- ---------- ----------
Gain (loss) on sale of securities available for sale - (43) 3,194 2,246
Gain on sale of loan servicing - 2,414 3,076 2,414
Gain on sale of branches 6,429 226 8,811 6,534
Gain on sale of joint venture interest - - - 5,580
---------- ---------- ---------- ----------
6,429 2,597 15,081 16,774
---------- ---------- ---------- ----------
Total non-interest income 82,519 73,860 232,453 209,378
---------- ---------- ---------- ----------
Non-interest expense:
Compensation and employee benefits 60,989 56,446 179,193 164,395
Occupancy and equipment 18,781 18,299 55,021 53,246
Advertising and promotions 4,297 5,157 13,681 15,881
Amortization of goodwill and other intangibles 2,676 2,828 8,024 8,570
Other 29,994 29,152 81,922 76,683
---------- ---------- ---------- ----------
Total non-interest expense 116,737 111,882 337,841 318,775
---------- ---------- ---------- ----------
Income before income tax expense 69,477 62,058 199,161 198,157
Income tax expense 26,717 25,477 78,072 81,482
---------- ---------- ---------- ----------
Net income $ 42,760 $ 36,581 $ 121,089 $ 116,675
========== ========== ========== ==========
Net income per common share:
Basic $ .52 $ .42 $ 1.46 $ 1.31
========== ========== ========== ==========
Diluted $ .52 $ .42 $ 1.45 $ 1.30
========== ========== ========== ==========
Dividends declared per common share $ .1875 $ .1625 $ .5375 $ .45
========== ========== ========== ==========
</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,
-------------------------------
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 121,089 $ 116,675
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 21,731 21,290
Amortization of goodwill and other intangibles 8,024 8,570
Provision for credit losses 13,552 13,519
Proceeds from sales of loans held for sale 479,711 455,587
Principal collected on loans held for sale 8,066 6,927
Originations and purchases of loans held for sale (354,604) (459,819)
Net (increase) decrease in other assets and liabilities,
and accrued interest 41,425 (7,729)
Gains on sales of assets (15,081) (16,774)
Other, net 13,853 3,837
------------ ------------
Total adjustments 216,677 25,408
------------ ------------
Net cash provided by operating activities 337,766 142,083
------------ ------------
Cash flows from investing activities:
Principal collected on loans and leases 1,791,174 2,277,809
Originations and purchases of loans (2,343,780) (2,260,529)
Purchases of equipment for lease financing (165,366) (126,356)
Proceeds from sales of loans - 19,875
Net decrease in interest-bearing deposits with banks 115,360 19,639
Proceeds from sales of securities available for sale 288,718 231,438
Proceeds from maturities of and principal collected on
securities available for sale 521,482 472,216
Purchases of securities available for sale (791,495) (816,616)
Net (increase) decrease in federal funds sold 41,000 (23,000)
Sales of deposits, net of cash paid (74,580) (107,995)
Other, net (7,237) (6,237)
------------ ------------
Net cash used by investing activities (624,724) (319,756)
------------ ------------
Cash flows from financing activities:
Net increase (decrease) in deposits 1,671 (57,090)
Net increase in securities sold under repurchase
agreements and federal funds purchased 167,720 45,635
Proceeds from borrowings 3,127,641 1,691,346
Payments on borrowings (2,960,481) (1,222,955)
Purchases of common stock to be held in treasury (76,709) (165,960)
Payments of dividends on common stock (45,201) (40,875)
Other, net (2,748) (8,645)
------------ ------------
Net cash provided by financing activities 211,893 241,456
------------ ------------
Net increase (decrease) in cash and due from banks (75,065) 63,783
Cash and due from banks at beginning of period 420,477 297,010
------------ ------------
Cash and due from banks at end of period $ 345,412 $ 360,793
============ ============
Supplemental disclosures of cash flow information:
Cash paid for:
Interest on deposits and borrowings $ 233,344 $ 230,833
============ ============
Income taxes $ 44,239 $ 90,642
============ ============
Transfer of loans to other real estate owned
and other assets $ 29,139 $ 28,756
============ ============
</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>
Unamor-
Number of tized
Common Additional Deferred
Shares Common Paid-in Retained Compen-
Issued Stock Capital Earnings sation
---------------- ------------ --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1997 92,821,529 $ 928 $ 460,684 $ 508,969 $ (25,457)
Net income - - - 156,179 -
Unrealized loss on securities
available for sale, net of tax
and reclassification
adjustment - - - - -
Dividends on common stock - - - (54,971) -
Purchase of 7,549,300 shares
to be held in treasury - - - - -
Issuance of 108,200 shares,
of which 61,000 shares were
from treasury 47,200 1 2,518 - (4,815)
Cancellation of shares (18,170) - (375) - 192
Amortization of deferred
compensation - - - - 5,863
Exercise of stock options,
of which 145,183 shares
were from treasury 61,687 - (1,033) - -
Shares held in trust for
deferred compensation plans - - 45,740 - -
Loan to Executive Deferred
Compensation Plan, net - - - - -
---------------- ------------ --------------- -------------- ---------------
Balance, December 31, 1998 92,912,246 929 507,534 610,177 (24,217)
Net income - - - 121,089 -
Unrealized loss on securities
available for sale, net of tax
and reclassification
adjustment - - - - -
Dividends on common stock - - - (45,201) -
Purchase of 3,008,011 shares
to be held in treasury - - - - -
Issuance of 20,000 shares
from treasury - - (31) - (575)
Cancellation of shares (106,792) (1) (2,530) - 379
Amortization of deferred
compensation - - - - 7,526
Exercise of stock options,
of which 361,661 shares
were from treasury - - (4,178) - -
Shares held in trust for
deferred compensation plans - - (15) - -
Payments on Loan to
Executive Deferred
Compensation Plan - - - - -
---------------- ------------ --------------- -------------- ---------------
Balance, September 30, 1999 92,805,454 $ 928 $ 500,780 $ 686,065 $ (16,887)
================ ============ =============== ============== ===============
<CAPTION>
Accum-
ulated
Loan to Shares Held Other
Executive in Trust for Compre-
Deferred Deferred hensive
Compen- Compen- Income Treasury
sation Plan sation Plan (Loss) Stock Total
---------------- -------------- ------------ ---------------- --------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1997 $ - $ - $ 8,556 $ - $ 953,680
Net income - - - - 156,179
Unrealized loss on securities
available for sale, net of tax
and reclassification
adjustment - - (965) - (965)
Dividends on common stock - - - - (54,971)
Purchase of 7,549,300 shares
to be held in treasury - - - (210,939) (210,939)
Issuance of 108,200 shares,
of which 61,000 shares were
from treasury - - - 1,933 (363)
Cancellation of shares - - - - (183)
Amortization of deferred
compensation - - - - 5,863
Exercise of stock options,
of which 145,183 shares
were from treasury - - - 4,345 3,312
Shares held in trust for
deferred compensation plans - (45,740) - - -
Loan to Executive Deferred
Compensation Plan, net (6,111) - - - (6,111)
---------------- -------------- ------------ ---------------- --------------
Balance, December 31, 1998 (6,111) (45,740) 7,591 (204,661) 845,502
Net income - - - - 121,089
Unrealized loss on securities
available for sale, net of tax
and reclassification
adjustment - - (41,349) - (41,349)
Dividends on common stock - - - - (45,201)
Purchase of 3,008,011 shares
to be held in treasury - - - (76,709) (76,709)
Issuance of 20,000 shares
from treasury - - - 546 (60)
Cancellation of shares - - - - (2,152)
Amortization of deferred
compensation - - - - 7,526
Exercise of stock options,
of which 361,661 shares
were from treasury - - - 9,907 5,729
Shares held in trust for
deferred compensation plans - 15 - - -
Payments on Loan to
Executive Deferred
Compensation Plan 929 - - - 929
---------------- -------------- ------------ ---------------- --------------
Balance, September 30, 1999 $ (5,182) $(45,725) $ (33,758) $ (270,917) $ 815,304
================ ============== ============ ================ ==============
</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, 1998 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
The following table summarizes the components of comprehensive income
for the periods noted. 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. Such
unrealized gains or losses only pertain to a portion of TCF's balance
sheet and do not reflect the increased economic value of TCF's demand
deposit accounts.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
(In thousands) September 30, September 30,
------------------------ ------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income $ 42,760 $ 36,581 $ 121,089 $ 116,675
Other comprehensive income (loss) before tax:
Unrealized holding gains (losses) arising during
the period on securities available for sale (11,710) 12,129 (62,842) 11,688
Reclassification adjustment for (gains) losses
included in net income - 43 (3,194) (2,246)
---------- ---------- ---------- ----------
Other comprehensive income (loss), before tax (11,710) 12,172 (66,036) 9,442
Income tax expense (benefit) (4,069) 4,814 (24,687) 3,736
---------- ---------- ---------- ----------
Total other comprehensive income (loss),
net of tax (7,641) 7,358 (41,349) 5,706
---------- ---------- ---------- ----------
Comprehensive income $ 35,119 $ 43,939 $ 79,740 $ 122,381
---------- ---------- ---------- ----------
</TABLE>
7
<PAGE>
(3) EARNINGS PER COMMON SHARE
The weighted average number of common shares outstanding used to
compute basic earnings per common share were 82,069,575 and 87,133,594
for the three months ended September 30, 1999 and 1998, respectively,
and 82,766,220 and 89,157,432 for the nine months ended September 30,
1999 and 1998, respectively. The weighted average number of common and
common equivalent shares outstanding used to compute diluted earnings
per common share were 82,751,447 and 87,973,243 for the three months
ended September 30, 1999 and 1998, respectively, and 83,361,762 and
90,020,436 for the nine months ended September 30, 1999 and 1998,
respectively.
(4) SEGMENTS
Statement of Financial Accounting Standards ("SFAS") No. 131,
"Disclosure about Segments of an Enterprise and Related Information,"
requires disclosure of certain interim period information related to
TCF's reportable operating segments. TCF's wholly owned bank
subsidiaries, TCF National Bank Minnesota ("TCF Minnesota"), TCF
National Bank Illinois ("TCF Illinois"), TCF National Bank Wisconsin
("TCF Wisconsin") and Great Lakes National Bank Michigan ("Great Lakes
Michigan") have been identified as reportable operating segments in
accordance with the provisions of SFAS No. 131. The following table
sets forth certain information about the reported profit or loss and
assets for each of TCF's reportable segments, including reconciliations
to TCF's consolidated totals. The results of TCF's parent bank holding
company and TCF National Bank Colorado, a wholly owned bank subsidiary
of TCF, comprise the "other" category in the table below.
<TABLE>
<CAPTION>
TCF TCF TCF Great Lakes
(In thousands) Minnesota Illinois Wisconsin Michigan Other Eliminations Consolidated
----------- ------------ ----------- ----------- --------- ------------ ------------
At or For the Three Months Ended
September 30, 1999
- -----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues from External Customers:
Interest Income $ 74,359 $ 55,480 $ 12,608 $ 45,117 $ 1,092 $ - $ 188,656
Non-Interest Income 38,085 23,120 11,134 8,798 1,382 - 82,519
----------- ----------- ----------- ----------- ---------- ----------- -----------
Total $ 112,444 $ 78,600 $ 23,742 $ 53,915 $ 2,474 $ - $ 271,175
=========== =========== =========== =========== ========== =========== ===========
Intersegment Revenues:
Interest Income $ 517 $ - $ 26 $ 43 $ 18 $ (604) $ -
Non-Interest Income 1,198 62 10 79 20,472 (21,821) -
----------- ----------- ----------- ----------- ---------- ----------- -----------
Total $ 1,715 $ 62 $ 36 $ 122 $ 20,490 $ (22,425) $ -
=========== =========== =========== =========== ========== =========== ===========
Net Income (Loss) $ 20,107 $ 8,198 $ 6,030 $ 9,880 $ (1,618) $ 163 $ 42,760
=========== =========== =========== =========== ========== =========== ===========
Total Assets $ 3,759,853 $ 3,472,232 $ 693,801 $ 2,416,702 $ 947,185 $ (947,525) $10,342,248
=========== =========== =========== =========== ========== =========== ===========
At or For the Three Months Ended
September 30, 1998
- -----------------------------------
Revenues from External Customers:
Interest Income $ 79,908 $ 50,742 $ 11,265 $ 42,911 $ 403 $ - $ 185,229
Non-Interest Income 45,011 16,947 4,530 6,598 774 - 73,860
----------- ----------- ----------- ----------- ---------- ----------- -----------
Total $ 124,919 $ 67,689 $ 15,795 $ 49,509 $ 1,177 $ - $ 259,089
=========== =========== =========== =========== ========== =========== ===========
Intersegment Revenues:
Interest Income $ 746 $ (827) $ 30 $ 53 $ (236) $ 234 $ -
Non-Interest Income 1,187 24 11 19 16,565 (17,806) -
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total $ 1,933 $ (803) $ 41 $ 72 $ 16,329 $ (17,572) $ -
=========== =========== =========== =========== =========== =========== ===========
Net Income (Loss) $ 23,679 $ 4,313 $ 2,120 $ 8,126 $ (1,674) $ 17 $ 36,581
=========== =========== =========== =========== =========== =========== ===========
Total Assets $ 3,580,363 $ 3,394,843 $ 624,613 $ 2,281,644 $ 966,021 $ (947,045) $ 9,900,439
=========== =========== =========== =========== =========== =========== ===========
8
<PAGE>
<CAPTION>
TCF TCF TCF Great Lakes
(In thousands) Minnesota Illinois Wisconsin Michigan Other Eliminations Consolidated
----------- ---------- ----------- ----------- ------- ------------ ------------
For the Nine Months Ended
September 30, 1999
- ---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues from External Customers:
Interest Income $ 222,459 $ 163,570 $ 36,801 $ 133,485 $ 2,743 $ - $ 559,058
Non-Interest Income 118,427 63,966 19,869 26,805 3,386 - 232,453
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total $ 340,886 $ 227,536 $ 56,670 $ 160,290 $ 6,129 $ - $ 791,511
=========== =========== =========== =========== =========== =========== ===========
Intersegment Revenues:
Interest Income $ 802 $ 208 $ 26 $ (21) $ 64 $ (1,079) $ -
Non-Interest Income 3,581 183 32 241 60,699 (64,736) -
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total $ 4,383 $ 391 $ 58 $ 220 $ 60,763 $ (65,815) $ -
=========== =========== =========== =========== =========== =========== ===========
Net Income (Loss) $ 60,183 $ 23,301 $ 10,067 $ 30,471 $ (3,416) $ 483 $ 121,089
=========== =========== =========== =========== =========== =========== ===========
For the Nine Months Ended
September 30, 1998
- -----------------------------------
Revenues from External Customers:
Interest Income $ 246,369 $ 153,297 $ 33,719 $ 129,305 $ 918 $ - $ 563,608
Non-Interest Income 129,799 42,305 11,975 23,396 1,903 - 209,378
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total $ 376,168 $ 195,602 $ 45,694 $ 152,701 $ 2,821 $ - $ 772,986
=========== =========== =========== =========== =========== =========== ===========
Intersegment Revenues:
Interest Income $ 95 $ 1,161 $ 94 $ (61) $ 366 $ (1,655) $ -
Non-Interest Income 3,816 72 38 58 48,780 (52,764) -
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total $ 3,911 $ 1,233 $ 132 $ (3) $ 49,146 $ (54,419) $ -
=========== =========== =========== =========== =========== =========== ===========
Net Income (Loss) $ 73,205 $ 15,811 $ 5,919 $ 28,608 $ (7,009) $ 141 $ 116,675
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
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 $42.8 million and $121.1 million for the third
quarter and first nine months of 1999, respectively, compared with $36.6 million
and $116.7 million for the same 1998 periods. Diluted earnings per common share
were 52 cents and $1.45 for the third quarter and first nine months of 1999,
respectively, compared with 42 cents and $1.30 for the same 1998 periods.
Diluted cash earnings per common share, which excludes amortization and
reduction of goodwill, net of income tax benefits, were 54 cents and $1.52 for
the third quarter and first nine months of 1999, respectively, compared with 44
cents and $1.40 for the same 1998 periods. Return on average assets was 1.66%
and 1.58% for the third quarter and first nine months of 1999, compared with
1.54% and 1.63% for the same 1998 periods. Return on average realized common
equity was 20.37% and 19.42% for the third quarter and first nine months of
1999, compared with 16.75% and 17.13% for the same 1998 periods.
TCF has significantly expanded its retail banking franchise in recent periods
and had 334 retail banking branches at September 30, 1999. Since July 1, 1996,
TCF has opened 163 new branches, of which 146 were supermarket branches. This
expansion includes TCF's January 30, 1998 acquisition of 76 branches and 178
automated teller machines ("ATM") in Jewel-Osco stores in the Chicago area
previously operated by Bank of America. TCF continued to expand its supermarket
franchise by opening 14 new branches during the 1999 third quarter. TCF
anticipates opening approximately 10 more new branches in the remainder of 1999,
and additional branches in subsequent years, including approximately 25
Jewel-Osco supermarket branches per year in subsequent years until branches have
been installed in all targeted and newly constructed stores.
NET INTEREST INCOME
Net interest income for the third quarter of 1999 was $106.5 million, compared
with $104.6 million for the third quarter of 1998 and $106.7 million for the
1999 second quarter. The net interest margin for the third quarter of 1999 was
4.46%, compared with 4.82% for the same 1998 period and 4.52% for the second
quarter of 1999. Net interest income for the first nine months of 1999 was
$318.1 million, compared with $321.1 million for the same 1998 period. The net
interest margin for the first nine months of 1999 was 4.50%, compared with 4.90%
for the same period of 1998. TCF's 1999 net interest income and net interest
margin have been negatively impacted, as compared with last year, by increased
loan prepayments, purchases of lower-yielding mortgage-backed securities and the
discontinuation of TCF's high-margin indirect automobile lending operation.
Changes in net interest income are dependent upon the movement of interest
rates, the volume and 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. If variable index rates (e.g., prime) were to
decline, TCF may experience additional compression of its net interest margin
depending on the timing and amount of any reductions, as it is possible that
interest rates paid on retail deposits will not decline as quickly, or to the
same extent, as the decline in the yield on interest-rate-sensitive assets such
as home equity loans. Competition for checking, savings and money market
deposits, important sources of lower cost funds for TCF, is intense. TCF may
also experience compression in its net interest margin if the rates paid on
deposits increase. See "Market Risk - Interest-Rate Risk" and "Financial
Condition - Deposits."
10
<PAGE>
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 1999 as compared with 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, 1999 September 30, 1999
Versus Same Period in 1998 Versus Same Period in 1998
------------------------------------- -------------------------------------
Increase (Decrease) Due to Increase (Decrease) Due to
------------------------------------- -------------------------------------
(In thousands) Volume Rate Total Volume Rate Total
--------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investments $ 140 $ (22) $ 118 $ (1,483) $ 164 $ (1,319)
--------- --------- --------- --------- --------- ----------
Securities available for sale 7,107 (846) 6,261 21,649 (3,710) 17,939
--------- --------- --------- --------- --------- ----------
Loans held for sale (75) (264) (339) 4 (804) (800)
--------- --------- --------- --------- --------- ----------
Loans and leases:
Residential real estate 1,620 (2,217) (597) 6,176 (9,526) (3,350)
Commercial real estate 2,774 (1,148) 1,626 3,876 (3,648) 228
Commercial business 1,696 (277) 1,419 4,240 (1,278) 2,962
Consumer direct 6,887 (3,726) 3,161 11,319 (11,193) 126
Consumer finance automobile (6,417) (1,022) (7,439) (14,195) (3,541) (17,736)
Lease financing 821 (1,604) (783) 2,388 (4,988) (2,600)
--------- --------- --------- --------- --------- ----------
Total loans and leases 7,381 (9,994) (2,613) 13,804 (34,174) (20,370)
--------- --------- --------- --------- --------- ----------
Total interest income 14,553 (11,126) 3,427 33,974 (38,524) (4,550)
--------- --------- --------- --------- --------- ----------
Deposits:
Checking 121 (851) (730) 340 (2,468) (2,128)
Passbook and statement (82) (1,608) (1,690) (153) (5,238) (5,391)
Money market 260 (705) (445) 700 (2,097) (1,397)
Certificates (3,212) (3,269) (6,481) (15,521) (8,522) (24,043)
--------- --------- --------- --------- --------- ----------
Total deposits (2,913) (6,433) (9,346) (14,634) (18,325) (32,959)
--------- --------- --------- --------- --------- ----------
Borrowings:
Securities sold under repurchase
agreements and federal funds
purchased 3,730 (79) 3,651 11,783 (674) 11,109
FHLB advances 8,991 (1,288) 7,703 23,779 (4,164) 19,615
Discounted lease rentals (572) (147) (719) (2,348) (174) (2,522)
Other borrowings 435 (213) 222 4,493 (1,314) 3,179
--------- --------- --------- --------- --------- ---------
Total borrowings 12,584 (1,727) 10,857 37,707 (6,326) 31,381
--------- --------- --------- --------- --------- ---------
Total interest expense 9,671 (8,160) 1,511 23,073 (24,651) (1,578)
--------- --------- --------- --------- --------- ---------
Net interest income $ 4,882 $ (2,966) $ 1,916 $ 10,901 $(13,873) $ (2,972)
--------- --------- --------- --------- --------- ---------
</TABLE>
PROVISIONS FOR CREDIT LOSSES
TCF provided $2.8 million for credit losses in the third quarter of 1999,
compared with $4.5 million for the same prior-year period. During the first nine
months of 1999, TCF provided $13.6 million for credit losses, compared with
$13.5 million during the same 1998 period. At September 30, 1999, the allowance
for loan and lease losses totaled $55.7 million, compared with $80 million at
December 31, 1998. See "Financial Condition - Allowance for Loan and Lease
Losses."
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 (losses)
on sales of securities available for sale, loan servicing and branches,
non-interest income increased $4.8 million, or 6.8%, to $76.1 million for the
third quarter of 1999, compared with $71.3 million for the same period in 1998.
For the first nine months of 1999, non-interest income, excluding the items
noted above and a 1998 gain on sale of joint venture interest, totaled $217.4
million, up 12.9% from $192.6 million for the same period in 1998. The increases
were primarily due to increased deposit and electronic funds transfer revenues,
and reflect TCF's expanded retail banking activities from its de novo expansion.
Fee and service charge revenues totaled $39.5 million and $110.8 million for the
third quarter and first nine months of 1999, respectively, representing
increases of 16.6% and 20% from $33.9 million and $92.3 million for the same
1998 periods. These increases are primarily due to expanded retail banking
activities.
11
<PAGE>
Electronic funds transfer revenues totaled $18 million and $49.3 million for the
third quarter and first nine months of 1999, respectively, representing
increases of 33.4% and 36% from $13.5 million and $36.2 million for the same
1998 periods. These increases reflect TCF's efforts to provide banking services
through its ATM network. TCF expanded its network of ATMs to 1,464 machines at
September 30, 1999, an increase of 68 ATMs since September 30, 1998. The
significant increase in these fees also reflects an increase in the distribution
of debit cards, and an increase in their utilization by TCF's customers. TCF
initiated its debit card program at the end of 1996, and had 911,000 debit cards
outstanding at September 30, 1999, compared with 760,000 debit cards outstanding
at September 30, 1998.
Leasing revenues totaled $7.1 million and $20.1 million for the third quarter
and first nine months of 1999, respectively, compared with $9.7 million and
$23.9 million for the same 1998 periods. Leasing revenues can fluctuate as a
result of changes in the mix of leases classified at 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 $4 million and $12.9 million for the third
quarter and first nine months of 1999, respectively, compared with $5.2
million and $14.8 million for the same 1998 periods. Title insurance revenues
are cyclical in nature and are largely dependent on levels of residential
real estate loan originations and refinancings. On November 8, 1999, TCF
announced that it had reached a definitive agreement to sell its wholly owned
subsidiaries, North Star Title, Inc. and North Star Real Estate Services,
Inc., which provide title insurance, appraisals and related services. The
sale is expected to close in the 1999 fourth quarter.
Gains on sales of loans held for sale totaled $1.1 million and $3.7 million for
the third quarter and first nine months of 1999, respectively, a decrease of
$1.6 million and $2.3 million from the amounts recognized during the same
periods in 1998. During the 1999 third quarter, TCF sold $85.4 million of its
consumer finance automobile loan portfolio and closed its Florida consumer
finance loan collections facility. TCF's 1999 third quarter results include a
loss on sale of loans held for sale of $842,000 related to this portfolio.
During the first nine months of 1999, TCF recognized losses of $1.4 million on
sales of $137.6 million of its consumer finance automobile loan portfolio. See
"Financial Condition - Loans Held for Sale" and "Financial Condition - Loans and
Leases." Sales of securities available for sale produced a $3.2 million gain for
the first nine months of 1999, compared with a $43,000 loss for the third
quarter of 1998 and a $2.2 million gain for the first nine months of 1998. Gains
or losses on sales of loans held for sale and securities available for sale may
fluctuate significantly from period to period due to changes in interest rates
and volumes, and results in any period related to these transactions may not be
indicative of results which will be obtained in future periods.
Gains on the sale of third-party loan servicing rights totaled $3.1 million for
the first nine months of 1999, compared with gains of $2.4 million recognized
during the third quarter and first nine months of 1998. During the first nine
months of 1999, TCF sold the servicing rights on approximately $345 million of
third-party residential mortgage loans. TCF periodically sells and purchases
loan servicing rights depending on market conditions. TCF's third-party
residential loan servicing portfolio totaled $2.9 billion at September 30, 1999,
compared with $3.7 billion at December 31, 1998.
TCF recognized gains of $6.4 million on the sale of four underperforming
Wisconsin branches during the third quarter of 1999, compared with a gain of
$226,000 on the sale of one branch during the same 1998 period. Results for the
first nine months of 1999 include gains of $8.8 million on the sales of five
branches, compared with gains of $6.5 million on the sales of seven branches and
$5.6 million on the sale of TCF's joint venture interest in Burnet Home Loans
for the comparable 1998 period.
NON-INTEREST EXPENSE
Non-interest expense totaled $116.7 million for the third quarter of 1999, up
4.3% from $111.9 million for the same 1998 period. For the first nine months
of 1999, non-interest expense totaled $337.8 million, up 6% from $318.8
million for the same 1998 period. Compensation and employee benefits expense
totaled $61 million and $179.2 million for the 1999 third quarter and first
nine months, respectively, compared with $56.4 million and $164.4 million for
the comparable periods in 1998. Occupancy and equipment expenses totaled
$18.8 million and $55 million for the third quarter and first nine months of
1999, respectively, compared with $18.3 and $53.2 million for the same 1998
periods. The increased expenses in 1999 are primarily due to the costs
associated with expanded retail banking activities.
12
<PAGE>
Amortization of goodwill and other intangibles totaled $2.7 million and $8
million for the third quarter and first nine months of 1999, respectively,
compared with $2.8 million and $8.6 million for the same 1998 periods.
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. There were no such reductions during the first nine months of
1999.
Other non-interest expense totaled $28.7 million and $77.9 million for the third
quarter and first nine months of 1999, reflecting increases of 3.3% and 7.4%
from $27.8 million and $72.5 million for the same 1998 periods. Included in
other non-interest expense for the third quarter of 1999 are $1 million in other
expenses related to the previously mentioned closing of TCF's Florida consumer
finance loan collections facility. The increase in non-interest expense during
the first nine months of 1999 is also due to the costs associated with expanded
retail banking activities, and includes an increase of $2.7 million in deposit
account losses over amounts recorded in the first nine months of 1998. These
increased losses reflect the growth in the number of checking accounts to
1,033,000 at September 30, 1999, up from 913,000 at December 31, 1998 and
912,000 at September 30, 1998.
YEAR 2000
TCF continues 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 and
testing of all critical systems is substantially complete. Such testing includes
testing of individual application systems 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, and are closely monitoring the
progress made by these institutions in completing key steps required by their
individual Year 2000 plans.
TCF has incurred $9 million of internal and external costs for replacement,
renovation and testing of its critical internal computer hardware and software
and imbedded technologies through September 30, 1999, and expects such costs to
total $10.4 million over the three-year period ending December 31, 1999. Of the
$9 million of Year 2000 costs incurred through September 30, 1999, $3.6 million
have been capitalized. Approximately $100,000 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 government
agencies and instrumentalities such as 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,
depositors, vendors, service providers, counterparties, competitors, utilities,
government agencies and instrumentalities 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
13
<PAGE>
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, investment or other risks.
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. 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, counterparties and government agencies and instrumentalities to
effectively address the Year 2000 issue. Such material differences could result
in, among other things, business disruption, operational problems, financial
loss, legal liability and similar risks. See "Financial Condition -
Forward-Looking Information."
INCOME TAXES
TCF recorded income tax expense of $26.7 million and $78.1 million for the third
quarter and first nine months of 1999, or 38.5% and 39.2% of income before
income tax expense, respectively, compared with $25.5 million and $81.5 million,
or 41.1% of income before income tax expense, for the comparable 1998 periods.
The lower tax rates in 1999 reflect lower state taxes in 1999, and the impact of
relatively higher non-deductible expenses in 1998, including goodwill reductions
associated with branch sales.
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). Since TCF does not hold a
trading portfolio, the Company is not exposed to significant risk from trading
activities.
Like most financial institutions, TCF's interest income and cost of funds are
significantly affected by general economic conditions and by policies of
regulatory authorities. The mismatch between maturities and interest-rate
sensitivities of assets and liabilities results in interest-rate risk. Although
the measure is subject to a number of assumptions and is only one of a number of
measurements, management believes the interest-rate gap (difference between
interest-earnings assets and interest-bearing liabilities repricing within a
given period) is an important indication of TCF's exposure to interest-rate risk
and the related volatility of net interest income in a changing interest rate
environment. In addition to the interest-rate gap analysis, management also
utilizes a simulation model to measure and manage TCF's interest-rate risk.
For an institution with a negative interest-rate gap for a given period, the
amount of its interest-bearing liabilities maturing or otherwise repricing
within such period exceeds the amount of its interest-earning assets repricing
within the same period. In a rising interest-rate environment, institutions with
negative interest-rate gaps will generally experience more immediate
14
<PAGE>
increases in the cost of their liabilities than in the yield on their assets.
Conversely, the yield on assets of institutions with negative interest-rate gaps
will generally decrease more slowly than the cost of their funds in a falling
interest-rate environment.
TCF's Asset/Liability Management Committee manages TCF's interest-rate risk
based on interest rate expectations and other factors. 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 a general rise in interest rates. Decisions by
management to purchase or sell assets, or retire debt could change the
maturity/repricing and spread relationships. In addition, TCF's interest-rate
risk will increase during periods of rising interest rates due to resulting
slower prepayments on loans and mortgage-backed securities, and the increased
likelihood that the Federal Home Loan Bank ("FHLB") will exercise its option to
call certain of TCF's longer-term FHLB advances. See "Financial Condition -
Borrowings." TCF's one-year interest-rate gap was a negative $1.3 billion, or
(12)% of total assets, at September 30, 1999, compared with a negative $263.9
million, or (3)% of total assets, at December 31, 1998. The increase in TCF's
negative one-year interest-rate gap reflects the impact of projected slower
prepayments on residential loans and mortgage-backed securities. In addition,
due to recent increases in market interest rates, $400 million of TCF's callable
FHLB advances are included as repricing at their call dates rather than their
maturity dates. Management has entered into long-term callable FHLB advances to
extend the maturity of $350 million of TCF's short-term borrowings. The FHLB
advances settle during the fourth quarter of 1999 and will reduce TCF's negative
one-year interest rate gap by $350 million, or 3% of total assets at September
30, 1999. See "Financial Condition - Borrowings."
15
<PAGE>
FINANCIAL CONDITION
INVESTMENTS
Total investments decreased $150 million from year-end 1998 to $127.7 million at
September 30, 1999. The decrease is primarily due to a decrease of $115.4
million in interest-bearing deposits with banks. The following table summarizes
investments:
<TABLE>
<CAPTION>
At September 30, 1999 At December 31, 1998
--------------------------- ---------------------------
Carrying Fair Carrying Fair
(In thousands) Value Value Value Value
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Interest-bearing deposits with banks $ 534 $ 534 $ 115,894 $ 115,894
Federal funds sold - - 41,000 41,000
Federal Home Loan Bank stock, at cost 103,943 103,943 93,482 93,482
Federal Reserve Bank stock, at cost 23,224 23,224 23,112 23,112
Other - - 4,227 4,227
---------- ---------- ---------- ----------
$ 127,701 $ 127,701 $ 277,715 $ 277,715
========== ========== ========== ==========
</TABLE>
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 (loss), which is a separate component of stockholders'
equity. Securities available for sale decreased $78.5 million from year-end 1998
to $1.6 billion at September 30, 1999. The decrease reflects sales of $288.7
million and payment and prepayment activity, partially offset by purchases of
$791.5 million of securities available for sale. At September 30, 1999, TCF's
securities available-for-sale portfolio included $1.5 billion and $123.2 million
of fixed-rate and adjustable-rate mortgage-backed securities, respectively. The
following table summarizes securities available for sale:
<TABLE>
<CAPTION>
At September 30, 1999 At December 31, 1998
--------------------------- ---------------------------
Amortized Fair Amortized Fair
(In thousands) Cost Value Cost Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Mortgage-backed securities:
FHLMC $ 956,781 $ 922,391 $ 989,681 $ 998,687
FNMA 609,674 590,801 537,197 541,428
GNMA 28,134 28,346 33,721 34,118
Private issuer 57,874 57,237 104,099 102,813
Collateralized mortgage obligations 663 663 873 873
---------- ---------- ---------- ----------
$1,653,126 $1,599,438 $1,665,571 $1,677,919
========== ========== ========== ==========
</TABLE>
LOANS HELD FOR SALE
Loans held for sale are carried at the lower of cost or market. Education loans
held for sale increased $5.9 million and residential real estate loans held for
sale decreased $15.4 million from year-end 1998, and totaled $144.1 million and
$59.4 million at September 30, 1999, respectively.
As previously noted, during the first nine months of 1999, $137.6 million of
consumer finance automobile loans and $14.5 million of related allowances were
transferred to loans held for sale in connection with second and third quarter
sales of these loans. Losses of $1.4 million were recognized in connection with
these sales which are included in gain (loss) on sale of loans held for sale.
There were no consumer finance automobile loans classified as held for sale at
September 30, 1999. See "Loans and Leases."
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) 1999 1998
------------- -------------
<S> <C> <C>
Residential real estate $ 3,811,468 $ 3,757,416
Unearned premiums and deferred loan fees 8,205 7,864
------------- -------------
3,819,673 3,765,280
------------- -------------
Commercial real estate:
Apartments 278,189 257,195
Other permanent 599,748 464,817
Construction and development 143,297 92,399
Unearned discounts and deferred loan fees (3,090) (2,983)
------------- -------------
1,018,144 811,428
------------- -------------
Total real estate 4,837,817 4,576,708
------------- -------------
Commercial business 355,999 288,676
Deferred loan costs 582 428
------------- -------------
356,581 289,104
------------- -------------
Consumer:
Home equity 1,891,882 1,526,129
Automobile 65,231 337,893
Loans secured by deposits 6,402 7,581
Other secured 10,861 19,033
Unsecured 28,346 35,290
Unearned discounts and deferred loan fees (16,306) (49,372)
------------- -------------
1,986,416 1,876,554
------------- -------------
Lease financing:
Direct financing leases 406,867 377,157
Sales-type leases 31,674 35,695
Lease residuals 25,826 29,340
Unearned income and deferred lease costs (43,051) (43,380)
------------- -------------
421,316 398,812
------------- -------------
$ 7,602,130 $ 7,141,178
============= =============
</TABLE>
Loans and leases increased $461 million from year-end 1998 to $7.6 billion at
September 30, 1999, reflecting increases of $206.7 million in commercial real
estate loans, $109.9 million in consumer loans, $67.5 million in commercial
business loans, and $54.4 million in residential real estate loans. Unearned
discounts and deferred fees totaled $53.7 million at September 30, 1999 and
$87.4 million at December 31, 1998.
Consumer loans increased $109.9 million from year-end 1998 to $2 billion at
September 30, 1999, reflecting an increase of $365.8 million in home equity
loans, partially offset by a decrease of $272.7 million in automobile loans. In
December 1998, TCF restructured its consumer finance company operations,
including the discontinuation of indirect automobile lending, the consolidation
of offices and a renewed focus on home equity lending. At September 30, 1999,
consumer finance automobile loans, net of unearned discounts and deferred fees,
totaled $12.8 million, compared with $233.9 million at December 31, 1998.
Reflected in the decrease is the previously mentioned transfer of $137.6 million
of consumer finance automobile loans to loans held for sale.
17
<PAGE>
Prior to the restructuring, TCF purchased automobile loans from dealers, an
activity referred to as "indirect" automobile lending. The consumer finance
automobile loans at September 30, 1999 are substantially comprised of sub-prime
automobile loans which carry a higher level of credit risk and higher interest
rates. Loans classified as sub-prime are owed by borrowers who historically have
been 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.
The indirect loan portfolio also carries an increased risk of loss in the event
of adverse economic developments such as a recession. The risks posed by this
portfolio could also be exacerbated by TCF's discontinuation of this lending
activity, which has involved the closing of its indirect lending offices and the
centralization of its loan collection operations, among other changes.
TCF has changed its home equity loan origination programs in its subsidiary
banks in 1999. Under the new programs, TCF has implemented a tiered pricing
structure for its home equity loans. TCF has also experienced an increase in
the loan-to-value ratios on new home equity loans originated in 1999. Many of
these loans are secured by a first lien on the home, and have balances
exceeding $100,000. These loans may carry a higher level of credit risk than
loans with a lower loan-to-value ratio. At September 30, 1999, the average
outstanding loan balance and average loan-to-value ratio for TCF's home
equity loan portfolio was $35,000 and 67%, respectively. In addition, the
average loan balance and average loan-to-value ratio for this portfolio,
including unfunded commitments on existing lines of credit, was $48,000 and
78%, respectively.
Commercial real estate loans increased $206.7 million from year-end 1998 to
$1 billion at September 30, 1999. Commercial business loans increased $67.5
million in the first nine months of 1999 to $356.6 million at September 30,
1999. TCF is seeking to expand its commercial business lending activity and,
to a lesser extent, its commercial real estate lending activity to borrowers
located in its primary midwestern markets in an attempt to maintain the size
of these lending portfolios and, where feasible under local economic
conditions, achieve some growth in these lending categories over time. At
September 30, 1999, approximately 90% of TCF's commercial real estate loans
outstanding were secured by properties located in its primary markets.
Included in commercial real estate loans at September 30, 1999 are $101.9
million of loans secured by hotel or motel properties, up from $41.3 million
at December 31, 1998. At September 30, 1999 and December 31, 1998, there were
no commercial real estate loans with terms that have been modified in
troubled debt restructurings included in performing loans.
At September 30, 1999, the recorded investment in loans that are considered to
be impaired was $11.2 million for which the related allowance for credit losses
was $2.2 million. All of the impaired loans were on non-accrual status. The
average recorded investment in impaired loans during nine months ended September
30, 1999 was $8.9 million.
Lease financings increased $22.5 million from year-end 1998 to $421.3 million at
September 30, 1999, reflecting a $29.7 million increase in direct financing
leases. Total loan and lease originations for TCF's leasing business were $173.7
million for the first nine months of 1999, compared with $137.6 million during
the same 1998 period. At September 30, 1999, the backlog of approved lease
transactions related to TCF's leasing business totaled $112.2 million, compared
with $55.1 million at December 31, 1998.
Loan and lease originations for the first nine months of 1999 and 1998 were as
follows:
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
(In thousands) 1999 1998
----------- -----------
<S> <C> <C>
Consumer direct $1,078,013 $ 803,395
Consumer finance automobile - 86,098
----------- -----------
Total consumer 1,078,013 889,493
Commercial 573,334 389,121
Lease financing 168,532 137,574
Residential real estate 1,047,037 1,441,734
----------- -----------
Total $2,866,916 $2,857,922
=========== ===========
</TABLE>
18
<PAGE>
ALLOWANCE FOR LOAN AND LEASE LOSSES
A summary of the activity of the allowance for loan and lease losses and
selected statistics follows:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
------------------------------- -------------------------------
(Dollars in thousands) 1999 1998 1999 1998
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Balance at beginning of period $ 71,346 $ 80,138 $ 80,013 $ 82,583
Provision for credit losses 2,845 4,544 13,552 13,519
Charge-offs (9,643) (7,696) (29,885) (22,489)
Recoveries 2,289 1,969 6,507 5,342
---------- ---------- ---------- -----------
Net charge-offs (7,354) (5,727) (23,378) (17,147)
Transfers to loans held for sale (11,174) - (14,524) -
---------- ---------- ---------- -----------
Balance at end of period $ 55,663 $ 78,955 $ 55,663 $ 78,955
========== ========== ========== ===========
Ratio of annualized net loan and lease
charge-offs to average loans and
leases outstanding .39% .32% .42% .32%
Allowance for loan and lease losses as
a percentage of total loans and leases
at period end .73% 1.11% .73% 1.11%
</TABLE>
Additional information on the allowance for loan and lease losses follows:
<TABLE>
<CAPTION>
At September 30, 1999 At December 31, 1998
-------------------------------------- ---------------------------------------
Allowance Allowance
for Allowance Net for Allowance Net
Loan and Total Loans as a % of Charge Loan and Total Loans as a % of Charge
(Dollars in thousands) Lease Losses and Leases Portfolio Offs(1) Lease Losses and Leases Portfolio Offs(1)
------------ ----------- ----------- ---------- ------------ ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial real
estate $ 13,037 $1,018,144 1.28% (0.06)% $ 12,525 $ 811,428 1.54% 0.09%
Commercial business 7,464 356,581 2.09 (0.08) 5,756 289,104 1.99 (0.23)
Lease financing 3,611 421,316 0.86 0.29 2,955 398,812 0.74 0.17
Consumer direct 7,645 1,973,614 0.39 0.27 9,338 1,642,606 0.57 0.30
Consumer finance
automobile 2,559 12,802 19.99 14.76 22,673 233,948 9.69 7.26
Unallocated 18,341 - n/a n/a 23,295 - n/a n/a
------------ ----------- ------------ ----------
Subtotal 52,657 3,782,457 1.39 0.90 76,542 3,375,898 2.27 0.76
Residential real
estate 3,006 3,819,673 0.08 - 3,471 3,765,280 0.09 0.01
------------ ----------- ------------ ----------
Total $ 55,663 $7,602,130 0.73 0.44 $ 80,013 $7,141,178 1.12 0.36
============ =========== ============ ==========
</TABLE>
- -----------------------
(1) Net charge-offs during the preceding twelve months as a percentage of
related average loans and leases.
TCF has experienced an increase in the level of net loan charge-offs related to
its consumer finance automobile portfolio, a large portion of which has been
sold or liquidated during 1999. As a result, the ratio of annualized net loan
charge-offs to average loans outstanding for TCF's consumer portfolio were 1.42%
and 1.57% for the third quarter and nine months ended September 30, 1999,
respectively, compared with 1.16% and 1.12% for the same periods of 1998 and
1.47% for the three months ended June 30, 1999. Included in the net loan and
lease charge-offs for the third quarter and first nine months of 1999 were $6.1
million and $20 million, respectively, of net charge-offs related to the
consumer finance automobile loans.
19
<PAGE>
On an ongoing basis, TCF's loan and lease portfolios are reviewed and analyzed
as to credit risk, performance, collateral value and quality. The allowance for
loan and lease losses is maintained at a level believed to be adequate by
management to provide for estimated loan and lease losses. Management's judgment
as to the adequacy of the allowance, including the allocated and unallocated
elements, is a result of ongoing review of larger individual loans and leases,
the overall risk characteristics of the portfolios, changes in the character or
size of the portfolios, the level of non-performing assets, historical net
charge-off amounts, geographic location and prevailing economic conditions. The
allowance for loan and lease losses is established for probable losses inherent
in TCF's loan and lease portfolios as of the balance sheet date, including known
or anticipated problem loans and leases, as well as loans and leases which are
not currently known to require specific allowances. Loans and leases are charged
off to the extent they are deemed to be uncollectible.
The adequacy of the allowance for loan and lease losses is highly dependent upon
management's estimates of variables affecting valuation, appraisals of
collateral, evaluations of performance and status, and the amounts and timing of
future cash flows expected to be received on impaired loans. Such estimates,
appraisals, evaluations and cash flows may be subject to frequent adjustments
due to changing economic prospects of borrowers, lessees or properties. These
estimates are reviewed periodically and adjustments, if necessary, are reported
in the provision for credit losses in the periods in which they become known.
The decrease in the allowance for loan and lease losses since December 31, 1998,
including the unallocated portion, is primarily attributed to the $221.1 million
decrease in consumer finance automobile loans, partially offset by the impact of
a $682.1 million net increase in other loan and lease categories. Management
believes the allowance for loan and lease losses is adequate.
NON-PERFORMING ASSETS
Non-performing assets (principally non-accrual loans and leases and other real
estate owned) totaled $48.7 million at September 30, 1999, virtually unchanged
from the December 31, 1998 total. A decrease of $6 million in non-accrual
consumer loans was offset by increases of $3.7 million in non-accrual commercial
real estate loans and $2.5 million in non-accrual lease financings. Included in
non-accrual lease financings at September 30, 1999 are $1.6 million of leases
that have been funded on a non-recourse basis by third-party financial
institutions. Approximately 83% of non-performing assets at September 30, 1999
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) 1999 1998
--------------- --------------
<S> <C> <C>
Non-accrual loans and leases:
Consumer $11,742 $17,745
Residential real estate 8,422 8,078
Commercial real estate 8,058 4,352
Commercial business 3,157 2,797
Lease financing 3,249 725
---------- ----------
34,628 33,697
Other real estate owned and other assets 14,039 14,972
---------- ----------
Total non-performing assets $48,667 $48,669
========== ==========
Non-performing assets as a percentage
of net loans and leases .64% .69%
Non-performing assets as a percentage
of total assets .47% .48%
</TABLE>
20
<PAGE>
TCF had no accruing loans and leases 90 days or more past due at September 30,
1999. The over 30-day delinquency rate on TCF's loans and leases (excluding
loans held for sale and non-accrual loans and leases) was .39% of loans and
leases outstanding at September 30, 1999, compared with .94% at year-end 1998.
TCF's delinquency rates are determined using the contractual method. The
following table sets forth information regarding TCF's over 30-day delinquent
loan and lease portfolio, excluding loans held for sale and non-accrual loans
and leases:
<TABLE>
<CAPTION>
At September 30, 1999 At December 31, 1998
----------------------------- ------------------------------
Principal Percentage of Principal Percentage of
(Dollars in thousands) Balances Portfolio Balances Portfolio
----------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Consumer $ 13,959 .71% $ 52,588 2.83%
Residential real estate 9,315 .24 9,151 .24
Commercial real estate 3,538 .35 1,787 .22
Commercial business 1,694 .48 1,984 .69
Lease financing 1,000 .24 1,631 .41
----------- -----------
Total $ 29,506 .39 $ 67,141 .94
=========== ===========
</TABLE>
TCF's over 30-day delinquency rate on total consumer loans was .71% at September
30, 1999, down from 2.83% at year-end 1998. Management continues to monitor the
consumer loan portfolio, which will generally have higher delinquencies. The
decreased consumer loan delinquency rate at September 30, 1999 is due to the
significant reduction in TCF's consumer finance automobile loan portfolio and
the increase in the home equity loan portfolio during the first nine months of
1999.
In addition to the non-accrual loans and leases, there were commercial real
estate and commercial business loans with an aggregate principal balance of
$26.5 million outstanding at September 30, 1999 for which management has
concerns regarding the ability of the borrowers to meet existing repayment
terms. This amount consists of loans that were classified for regulatory
purposes as substandard, doubtful or loss, or were to borrowers that currently
are experiencing financial difficulties or that management believes may
experience financial difficulties in the future. This compares with $23.1
million of such loans at December 31, 1998. Although these loans are secured by
commercial real estate or other corporate assets, they may be subject to future
modifications of their terms or may become non-performing. Management is
monitoring the performance and classification of such loans and the financial
condition of these borrowers.
OTHER ASSETS
Other assets consist of the following:
<TABLE>
<CAPTION>
(In thousands) At September 30, 1999 At December 31, 1998
--------------------- --------------------
<S> <C> <C>
Premises and equipment $ 174,350 $ 173,688
Accrued interest receivable 53,672 52,197
Mortgage servicing rights 21,674 21,566
Other real estate owned 12,813 13,602
Other 82,354 70,309
----------- -----------
$ 344,863 $ 331,362
=========== ===========
</TABLE>
21
<PAGE>
DEPOSITS
Deposits totaled $6.6 billion at September 30, 1999, down $81.4 million from
December 31, 1998. The decrease in deposits includes the impact of the
previously noted sales of five underperforming branches during the first nine
months of 1999 with $83.1 million of deposits. Lower interest-cost checking,
savings and money market deposits totaled $3.8 billion and comprised 56.6% of
total deposits at September 30, 1999. Checking, savings and money market
deposits are an important source of lower cost funds and fee income for TCF. The
average annual fee revenue per retail checking account for the first nine months
of 1999 was $164, compared with $143 for 1998. Higher interest-cost certificates
of deposit decreased $79.4 million from December 31, 1998. The Company's
weighted-average rate for deposits, including non-interest bearing deposits,
decreased to 2.63% at September 30, 1999, from 2.73% at December 31, 1998.
As previously noted, TCF continued to expand its supermarket banking franchise
by opening 14 new branches during the 1999 third quarter, and 27 during the
first nine months of 1999. TCF now has 188 supermarket branches, up from 153
such branches a year ago. During the past year, the number of deposit accounts
in TCF's supermarket branches increased 41% to 536,000 accounts and the balances
increased 38.8% to $781.6 million. The average rate on these deposits decreased
from 2.44% at September 30, 1998 to 2.10% at September 30, 1999. Additional
information regarding TCF's supermarket branches is as follows:
<TABLE>
<CAPTION>
At or For the Nine Months
Ended September 30,
------------------------------ Increase
(Dollars in thousands) 1999 1998 (Decrease) % Change
----------- ------------ ----------- ---------
<S> <C> <C> <C> <C>
Supermarket Banking Summary:
Number of branches 188 153 35 22.9%
Number of deposit accounts 535,940 379,983 155,957 41.0
Deposits:
Checking $ 333,925 $ 227,935 $ 105,990 46.5
Savings 122,242 91,933 30,309 33.0
Money market 61,957 53,590 8,367 15.6
----------- ----------- -----------
518,124 373,458 144,666 38.7
Certificates 263,481 189,745 73,736 38.9
----------- ----------- -----------
Total deposits $ 781,605 $ 563,203 $ 218,402 38.8
=========== =========== ===========
Average rate on deposits 2.10% 2.44% (0.34)% (13.9)
=========== =========== ===========
Total fees and other revenues $ 62,090 $ 36,704 $ 25,386 69.2
=========== =========== ===========
</TABLE>
BORROWINGS
Borrowings totaled $2.7 billion as of September 30, 1999, up $260.2 million from
year-end 1998. The increase was primarily due to increases of $167.7 million in
securities sold under repurchase agreements and $160.9 million in treasury, tax
and loan notes, partially offset by a decrease of $37 million in FHLB advances.
The outstanding balances of TCF's bank line of credit and commercial paper were
$21 million and $43.5 million at September 30, 1999, respectively. Included in
FHLB advances at September 30, 1999 are $1.1 billion of fixed-rate advances
which are callable at par on certain anniversary dates and quarterly thereafter
until maturity. If called, the FHLB will provide replacement funding at the
then-prevailing market rate of interest for the remaining term-to-maturity of
the advances, subject to standard terms and conditions. The weighted-average
rate on borrowings decreased to 5.73% at September 30, 1999, from 6.00% at
December 31, 1998. At September 30, 1999, borrowings with a maturity of one year
or less totaled $1.1 billion.
22
<PAGE>
STOCKHOLDERS' EQUITY
Stockholders' equity at September 30, 1999 was $815.3 million, or 7.9% of total
assets, down from $845.5 million, or 8.3% of total assets, at December 31, 1998.
The decrease in stockholders' equity is primarily due to the repurchase of
3,008,011 shares of TCF's common stock at a cost of $76.7 million, the $41.3
million decrease in accumulated other comprehensive income and the payment of
$45.2 million in dividends on common stock, partially offset by net income of
$121.1 million for the first nine months of 1999.
On October 25, 1999, TCF declared a quarterly dividend of 18.75 cents per common
share, payable on November 30, 1999 to shareholders of record as of November 5,
1999.
At September 30, 1999, 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 Office of the Comptroller of
the Currency under 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 financial
statements will depend on its hedge designation and whether the hedge is highly
effective in offsetting changes in the fair value or cash flows of the
underlying hedged item. SFAS No. 133 is effective for all fiscal quarters of
fiscal years beginning after June 15, 2000. The impact of SFAS No. 133 on the
Company's financial position and results of operations has not yet been
determined.
FORWARD-LOOKING INFORMATION
TCF's future results may differ materially from historical performance and
forward-looking statements about TCF's financial results are subject to a number
of risks and uncertainties. These include but are not limited to possible
legislative changes and adverse economic, business and competitive developments
such as shrinking interest margins; deposit outflows; reduced demand for
financial services and loan and lease products; changes in accounting policies
and guidelines, or monetary and fiscal policies of the federal government;
changes in credit and other risks posed by TCF's loan, lease and investment
portfolios; 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, including the dependency of TCF's
operations on Year 2000 compliance achieved by outside vendors, borrowers and
government agencies or instrumentalities.
23
<PAGE>
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INFORMATION
<TABLE>
<CAPTION>
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------------
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) 1999 1999 1999 1998 1998 1998 1998
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED QUARTERLY FINANCIAL DATA
Total assets $ 10,342,248 $ 10,338,341 $ 10,200,744 $ 10,164,594 $ 9,900,439 $ 9,393,060 $ 9,664,849
Investments 127,701 194,781 158,222 277,715 135,491 122,888 246,364
Securities available for sale 1,599,438 1,701,063 1,569,406 1,677,919 1,673,722 1,122,490 1,306,853
Loans and leases 7,602,130 7,431,171 7,293,329 7,141,178 7,092,639 7,103,686 7,036,646
Deposits 6,633,738 6,648,283 6,632,481 6,715,146 6,733,368 6,741,288 6,925,024
Borrowings 2,721,200 2,734,652 2,579,789 2,461,046 2,159,948 1,617,240 1,631,021
Stockholders' equity 815,304 810,448 824,442 845,502 869,426 906,485 948,070
- -----------------------------------------------------------------------------------------------------------------------------------
Three Months Ended
- -----------------------------------------------------------------------------------------------------------------------------------
Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31,
1999 1999 1999 1998 1998 1998 1998
- -----------------------------------------------------------------------------------------------------------------------------------
SELECTED OPERATIONS DATA:
Interest income $ 188,656 $ 186,359 $ 184,043 $ 185,286 $ 185,229 $ 186,903 $ 191,476
Interest expense 82,116 79,637 79,204 80,625 80,605 79,606 82,324
------------ ------------ ------------ ------------ ------------ ------------ ------------
Net interest income 106,540 106,722 104,839 104,661 104,624 107,297 109,152
Provision for credit losses 2,845 2,947 7,760 9,761 4,544 2,991 5,984
------------ ------------ ------------ ------------ ------------ ------------ ------------
Net interest income after
provision for credit losses 103,695 103,775 97,079 94,900 100,080 104,306 103,168
------------ ------------ ------------ ------------ ------------ ------------ ------------
Non-interest income:
Gain (loss) on sale of securities
available for sale - (5) 3,199 - (43) 1,787 502
Gain on sale of loan servicing - 743 2,333 - 2,414 - -
Gain on sale of branches 6,429 2,382 - 12,051 226 4,260 2,048
Gain on sale of joint venture
interest - - - - - - 5,580
Other non-interest income 76,090 72,897 68,385 70,066 71,263 63,531 57,810
------------ ------------ ------------ ------------ ------------ ------------ ------------
Total non-interest income 82,519 76,017 73,917 82,117 73,860 69,578 65,940
------------ ------------ ------------ ------------ ------------ ------------ ------------
Non-interest expense:
Amortization of goodwill and
other intangibles 2,676 2,673 2,675 2,829 2,828 2,826 2,916
Other non-interest expense 114,061 110,106 105,650 107,096 109,054 102,748 98,403
------------ ------------ ------------ ------------ ------------ ------------ ------------
Total non-interest expense 116,737 112,779 108,325 109,925 111,882 105,574 101,319
------------ ------------ ------------ ------------ ------------ ------------ ------------
Income before income tax expense 69,477 67,013 62,671 67,092 62,058 68,310 67,789
Income tax expense 26,717 26,024 25,331 27,588 25,477 28,110 27,895
------------ ------------ ------------ ------------ ------------ ------------ ------------
Net income $ 42,760 $ 40,989 $ 37,340 $ 39,504 $ 36,581 $ 40,200 $ 39,894
============ ============ ============ ============ ============ ============ ============
Per common share:
Basic earnings $ 0.52 $ 0.50 $ 0.45 $ 0.47 $ 0.42 $ 0.45 $ 0.44
============ ============ ============ ============ ============ ============ ============
Diluted earnings $ 0.52 $ 0.49 $ 0.44 $ 0.46 $ 0.42 $ 0.45 $ 0.43
============ ============ ============ ============ ============ ============ ============
Diluted cash earnings(1) $ 0.54 $ 0.52 $ 0.47 $ 0.48 $ 0.44 $ 0.48 $ 0.48
============ ============ ============ ============ ============ ============ ============
Dividends declared $ 0.1875 $ 0.1875 $ 0.1625 $ 0.1625 $ 0.1625 $ 0.1625 $ 0.125
============ ============ ============ ============ ============ ============ ============
FINANCIAL RATIOS(2)
Return on average assets 1.66% 1.60% 1.48% 1.60% 1.54% 1.69% 1.66%
Cash return on average assets(1) 1.73 1.67 1.55 1.68 1.62 1.81 1.83
Return on average realized
common equity 20.37 19.81 18.06 18.77 16.75 17.52 16.99
Return on average common equity 21.29 20.11 17.99 18.56 16.58 17.37 16.83
Cash return on average tangible
equity(1) 28.48 26.94 24.18 24.83 23.13 23.42 23.48
Average total equity to average assets 7.79 7.95 8.22 8.63 9.28 9.75 9.83
Average realized tangible equity to
average assets 6.44 6.33 6.39 6.67 7.22 7.66 7.71
Net interest margin(3) 4.46 4.52 4.52 4.65 4.82 4.94 4.94
</TABLE>
- --------------------------
(1) Excludes amortization and reduction of goodwill, net of income tax benefit.
(2) Annualized.
(3) Net interest income divided by average interest-earning assets.
24
<PAGE>
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
Supplementary Information (Continued)
Consolidated Average Balance Sheets, Interest and Dividends
Earned or Paid, and Related Interest Yields and Rates
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------------------------------------------------------------
1999 1998
---------------------------------------- -----------------------------------------
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:
Investments $ 142,261 $ 6,912 6.48% $ 172,749 $ 8,231 6.35%
----------- ----------- ----------- -----------
Securities available for sale(3) 1,715,104 84,512 6.57 1,279,872 66,573 6.94
----------- ----------- ----------- -----------
Loans held for sale 199,362 9,855 6.59 199,286 10,655 7.13
----------- ----------- ----------- -----------
Loans and leases:
Residential real estate 3,785,587 198,450 6.99 3,671,236 201,800 7.33
Commercial real estate 899,809 56,294 8.34 839,638 56,066 8.90
Commercial business 330,661 19,549 7.88 260,196 16,587 8.50
Consumer 1,954,330 149,175 10.18 1,933,632 166,785 11.50
Lease financing 402,040 34,311 11.38 376,538 36,911 13.07
----------- ----------- ----------- -----------
Total loans and leases(4) 7,372,427 457,779 8.28 7,081,240 478,149 9.00
----------- ----------- ----------- -----------
Total interest-earning assets 9,429,154 559,058 7.91 8,733,147 563,608 8.60
----------- ------ ----------- -------
Other assets(5) 796,561 817,553
----------- -----------
Total assets $10,225,715 $ 9,550,700
=========== ===========
Liabilities and Stockholders'
Equity:
Noninterest-bearing deposits $ 1,169,600 $ 985,558
----------- -----------
Interest-bearing deposits:
Checking 710,476 3,047 0.57 664,491 5,175 1.04
Passbook and statement 1,122,881 9,378 1.11 1,134,941 14,769 1.74
Money market 731,527 14,279 2.60 699,517 15,676 2.99
Certificates 2,900,377 104,467 4.80 3,322,605 128,510 5.16
----------- ----------- ----------- -----------
Total interest-bearing deposits 5,465,261 131,171 3.20 5,821,554 164,130 3.76
----------- ----------- ----------- -----------
Total deposits 6,634,861 131,171 2.64 6,807,112 164,130 3.21
----------- ----------- ----------- -----------
Borrowings:
Securities sold under repurchase
agreements and federal funds
purchased 413,312 16,059 5.18 111,863 4,950 5.90
FHLB advances 1,851,435 75,808 5.46 1,275,914 56,193 5.87
Discounted lease rentals 173,622 10,451 8.03 212,390 12,973 8.14
Other borrowings 162,638 7,468 6.12 69,812 4,289 8.19
----------- ----------- ----------- -----------
Total borrowings 2,601,007 109,786 5.63 1,669,979 78,405 6.26
----------- ----------- ----------- -----------
Total interest-bearing
liabilities 8,066,268 240,957 3.98 7,491,533 242,535 4.32
----------- ------- ----------- -------
Other liabilities(5) 173,669 156,585
----------- -----------
Total liabilities 9,409,537 8,633,676
Stockholders' equity(5) 816,178 917,024
----------- -----------
Total liabilities and
stockholders' equity $10,225,715 $ 9,550,700
=========== ===========
Net interest income $ 318,101 $ 321,073
=========== ===========
Net interest-rate spread 3.93% 4.28%
======= =======
Net interest margin 4.50% 4.90%
======= =======
</TABLE>
(1) Tax-exempt income was not significant and thus has not been presented
on a tax equivalent basis. Tax-exempt income of $132,000 and $112,000
was recognized during the nine months ended September 30, 1999 and
1998, 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 arising out of its
general lending and operating activities. TCF is and expects to become engaged
in a number of foreclosure proceedings and other collection actions as part of
its loan collection activities. From time to time, borrowers have also brought
actions against TCF, in some cases claiming substantial amounts in damages. Some
financial services companies have recently been subjected to significant
exposure in connection with class actions and/or suits seeking punitive damages.
While the Company is not aware of any actions or allegations which should
reasonably give rise to any material adverse effect, it is possible that the
Company could be subjected to such a claim in an amount which could be material.
Management, after review with its legal counsel, believes that the ultimate
disposition of its litigation will not have a material effect on TCF's financial
condition.
On November 2, 1993, TCF Minnesota filed a complaint in the United States Court
of Federal Claims seeking monetary damages from the United States for breach of
contract, taking of property without just compensation and deprivation of
property without due process. TCF Minnesota's claim is based on the government's
breach of contract in connection with TCF Minnesota's acquisitions of certain
savings institutions prior to the enactment of the Financial Institutions
Reform, Recovery and Enforcement Act of 1989 ("FIRREA"), which contracts allowed
TCF Minnesota to treat the "supervisory goodwill" created by the acquisitions as
an asset that could be counted toward regulatory capital, and provided for other
favorable regulatory accounting treatment. The United States has not yet
answered TCF Minnesota's complaint. TCF Minnesota's complaint involves
approximately $80.3 million in supervisory goodwill.
In August 1995, Great Lakes Michigan filed with the United States Court of
Federal Claims a complaint seeking monetary damages from the United States for
breach of contract, taking of property without just compensation and deprivation
of property without due process. Great Lakes Michigan's claim is based on the
government's breach of contract in connection with Great Lakes Michigan's
acquisitions of certain savings institutions prior to the enactment of FIRREA in
1989, which contracts allowed Great Lakes Michigan to treat the "supervisory
goodwill" created by the acquisitions as an asset that could be counted toward
regulatory capital, and provided for other favorable regulatory accounting
treatment. The United States has not yet answered Great Lakes Michigan's
complaint. Great Lakes Michigan's complaint involves approximately $87.3 million
in supervisory goodwill.
On July 1, 1996, the United States Supreme Court issued a decision affirming the
August 30, 1995 decision of the United States Court of Appeals for the Federal
Circuit, which decision had affirmed the Court of Federal Claims' liability
determinations in three other "supervisory goodwill" cases, consolidated for
review under the title WINSTAR CORP. V. UNITED STATES, 116 S.Ct. 2432 (1996). In
rejecting the United States' consolidated appeal from the Court of Federal
Claims' decisions, the Supreme Court held in WINSTAR that the United States had
breached contracts it had entered into with the plaintiffs which provided for
the treatment of supervisory goodwill, created through the plaintiffs'
acquisitions of failed or failing savings institutions, as an asset that could
be counted toward regulatory capital. Two of the three cases consolidated in the
Supreme Court proceedings have since been tried before the Court of Federal
Claims on the issue of damages, and the third was settled without trial. In one
of the cases that proceeded to a damages trial, GLENDALE FEDERAL BANK, FSB V.
UNITED STATES, 43 Fed. Cl. 390 (1999), the Court of Federal Claims issued a
decision on April 9, 1999, awarding the plaintiff in that case $908,948,000 in
restitution and non-overlapping reliance damages. The GLENDALE damages decision
has been appealed to the United State Court of Appeals for the Federal Circuit.
The other case which went to trial was settled in June 1998.
On December 22, 1997, the Court of Federal Claims issued a decision finding the
existence of contracts and governmental breaches of those contracts in four
other "supervisory goodwill" cases, consolidated for purposes of that decision
only under the title CALIFORNIA FEDERAL BANK V. UNITED STATES, 39 Fed. Cl. 753
(1997). In reaching its decision, the Court of Federal Claims rejected a number
of "common issue" defenses that the government has raised in a number of
"supervisory goodwill" cases. In November 1998, the Court of Federal Claims
issued another decision in the CALIFORNIA FEDERAL case prohibiting the plaintiff
in that case from offering evidence as to a lost profits theory of damages. A
two-month trial
26
<PAGE>
regarding the plaintiff's other damages theories in that case was concluded in
early March 1999. On April 21, 1999, the Court of Federal Claims entered
judgment for the plaintiff in CALIFORNIA FEDERAL, and awarded the plaintiff
$22,966,523.42 in damages under a cost of replacement capital theory. CALIFORNIA
FEDERAL BANK V. UNITED STATES, 43 Fed Cl. 445 (1999). On May 6, 1999, the Court
denied plaintiff's motion for reconsideration of its damages decision in the
CALIFORNIA FEDERAL case. The CALIFORNIA FEDERAL decision has been appealed to
the United States Court of Appeals for the Federal Circuit.
On September 30, 1999, the Court of Federal Claims issued a damages decision in
another "supervisory goodwill" case, LASALLE TALMAN BANK VS. UNITED STATES,
awarding the plaintiff $5,008,700 in damages designed to reimburse the plaintiff
for certain "incidental" expenses caused by the government's breach. The Court
rejected all of the plaintiff's other damages claims. The LASALLE TALMAN opinion
has been appealed to the United States Court of Appeals for the Federal Circuit.
In addition, the Court of Federal Claims has issued favorable liability
decisions to the plaintiffs in several other "supervisory goodwill" cases, and a
number of such cases are currently engaged in or about to commence trials on
damage issues.
The government has indicated that it will have a number of affirmative defenses
against goodwill litigation filed against it. The TCF Minnesota and Great Lakes
Michigan actions involve a variety of different types of transactions, contracts
and contract provisions. There can be no assurance that the U.S. Supreme Court
decision in WINSTAR or the Court of Federal Claims' recent decisions in
GLENDALE, CALIFORNIA FEDERAL and other cases will mean that a similar result
would be obtained in the actions filed by TCF Minnesota and Great Lakes
Michigan. There also can be no assurance that the government will be determined
liable in connection with the loss of supervisory goodwill by either TCF
Minnesota or Great Lakes Michigan or, even if a determination favorable to TCF
Minnesota or Great Lakes Michigan is made on the issue of the government's
liability, that a measure of damages will be employed that will permit any
recovery on TCF Minnesota's or Great Lakes Michigan's claim. Because of the
complexity of the issues involved in both the liability and damages phases of
this litigation, and the usual risks associated with litigation, the Company
cannot predict the outcome of TCF Minnesota's or Great Lakes Michigan's cases,
and investors should not anticipate any recovery.
ITEM 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.
None.
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/ David M. Stautz
-----------------------------------------------------
David M. Stautz, Senior Vice President and Controller
(Principal Accounting Officer)
Dated: November 12, 1999
28
<PAGE>
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
INDEX TO EXHIBITS
FOR FORM 10-Q
<TABLE>
<CAPTION>
Exhibit Sequentially
Number Description Numbered Pages
------- ----------- --------------
<S> <C> <C>
4(a) Copies of instruments with respect to long-term debt N/A
will be furnished to the Securities and Exchange
Commission upon request.
10(b) TCF Financial 1995 Incentive Stock Program, as amended
October 1, 1995 [incorporated by reference to Exhibit 10(b)
to TCF Financial Corporation's Annual Report on Form 10-K
for the fiscal year ended December 31, 1995, No. 0-16431];
as amended October 22, 1996 [incorporated by reference to
Exhibit 10(a) to TCF Financial Corporation's Annual Report
on Form 10-K for the fiscal year ended December 31, 1996,
No. 0-16431]; and as further amended on May 11, 1999.
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 fiscal year ended December 31, 1997, No. 0-16431];
as amended effective September 30, 1998 [incorporated by reference to
Exhibit 10(m) to TCF Financial Corporation's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1998, No. 0-16431];
and as further amended on May 11, 1999.
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 [incorporated by
reference to Exhibit 10(v) to TCF Financial Corporation's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998, No. 0-16431]; and as further amended on
May 11, 1999.
11 Computation of Earnings Per Common Share
27 Financial Data Schedules (filed electronically)
99 Press Release dated November 8, 1999
</TABLE>
29
<PAGE>
Exhibit 10 (b)
AMENDMENT TO STOCK PROGRAM
Chairman May directed the Committee's attention to the next agenda item,
approval of an amendment to the 1995 Incentive Stock Program to allow only
minimum withholding. Mr. Brown explained that this is for accounting reasons.
After discussion, upon a motion duly made, seconded and unanimously carried,
the following Resolution was approved:
WHEREAS, the Independent Sub-Committee administers the TCF Financial 1995
Incentive Stock Program and has the authority to amend such Program; and
WHEREAS, the Financial Accounting Standards Board ("FASB") has determined
that any amounts withheld in excess of the mandatory withholding requirements
can result in adverse accounting treatment;
NOW, THEREFORE, IT IS HEREBY
RESOLVED, that section 15 of the TCF Financial 1995 Incentive Stock Program
is amended to add the following sentence at the end thereof, effective as of
the date the amendment is adopted:
In no event shall the Company withhold any amount for the payment of tax in
excess of the minimum statutory withholding rates for Federal and state tax
purposes.
<PAGE>
Exhibit 10 (m)
SERP AMENDMENT
WHEREAS, the Independent Sub-Committee has authority to amend the TCF
Financial Supplemental Employees Retirement Plan (the "SERP") under Section
II(a) and Article VIII of that Plan; and
WHEREAS, management has proposed allowing elections as to the form of
distribution to be made up to two years prior to termination of employment
and legal counsel and tax advisors for the company have advised that this
change is acceptable under the legal and tax rules that apply to the plan;
NOW, THEREFORE, IT IS HEREBY
RESOLVED, that Section III(c) of the SERP, second paragraph, first clause, is
amended to read as follows effective for distributions commencing on or after
the date this amendment is adopted:
An Eligible Employee may elect to have benefits from this Article III
distributed in one of the following forms, provided that such election is in
writing and is executed and delivered to the Committee or the Secretary, on
behalf of the Committee, and further provided that any such election which is
filed with the Secretary after the Employee has commenced participation in
the plan shall be filed no later than two years before such Employee's
termination of employment:
FURTHER RESOLVED, that a new paragraph is added at the end of Section III (c)
of the SERP reading as follows:
Notwithstanding the foregoing, if an Employee's balance in the Stockshare
SERP is less than $15,000 at the time of the Employee's termination of
employment, then such account shall be distributed to the Employee in a lump
sum payment (in the form of TCF Stock except for cash for a fractional share)
no later than 30 days after the Employee's termination of employment.
FURTHER RESOLVED, that a new paragraph is added at the end of Section IV (c)
of the SERP reading as follows:
Notwithstanding the foregoing, if an Employee's balance in the Supplemental
Benefits related to the TCF Cash Balance Pension Plan is less than $15,000 at
the time of the Employee's termination of employment, then such account shall
be distributed to the Employee in a lump sum payment no later than 30 days
after the Employee's termination of employment.
<PAGE>
Exhibit 10(v)
DIRECTOR'S DEFERRED PLAN AMENDMENTS
WHEREAS, the Board of Directors has authority to amend the TCF Directors
Deferred Compensation Plan (the "Plan") under Section 13 of the Plan and the
Independent Sub-Committee has authority to recommend amendments to the Board;
and
WHEREAS, management has proposed allowing elections as to the form of
distribution to be made up to two years prior to a director leaving the board
and legal counsel and tax advisors for the company have advised that this
change is acceptable under the legal and tax rules that apply to the plan,
and management has recommended certain other changes as set forth in the
following Resolutions;
NOW, THEREFORE, IT IS HEREBY
RESOLVED, that the following amendments are hereby recommended for approval
by the full Board of Directors;
1.
Section 5.a. of the Plan is amended to read as follows in full effective for
distributions commencing on or after the date this amendment is adopted:
On or about the 30th day following a Director's termination of service on all
boards of directors of the Companies, the balance credited to the Director's
Account shall be paid in one single distribution of TCF Stock or in annual
installment distributions of TCF Stock over the number of years directed by
the Director in an election made by the Director, provided that such election
is in writing and is executed and delivered to the Committee or the
Secretary, on behalf of the Committee, no later than two years before such
Director's termination of service.
2.
A new Section 5.g. is added to the Plan, reading as follows:
Notwithstanding the foregoing, if a Director's balance in the Plan is less
than $15,000 at the time of the Director's termination of service, then such
account shall be distributed to the Director in a lump sum payment (in the
form of TCF Stock except for cash for a fractional share) no later than 30
days after the Director's termination of service.
3.
Section 13 of the Plan is amended to add the following sentence at the end
thereof:
<PAGE>
Notwithstanding the foregoing, any action authorized by the Board of Directors
of TCF Financial may be taken by the Administrative Committee.
4.
Section 2 of the Plan is amended to provide that the composition of the
Administrative Committee shall consist of such members of the Personnel
Committee of the Board of Directors who qualify from time to time as
non-employee or independent directors under Rule 16b-3 of the Securities and
Exchange Commission.
<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,
- ------------------------------------------ ------------------------------ ------------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income $ 42,760 $ 36,581 $ 121,089 $ 116,675
=========== =========== =========== ===========
Weighted average common shares outstanding 82,069,575 87,133,594 82,766,220 89,157,432
=========== =========== =========== ===========
Basic earnings per common share $ .52 $ .42 $ 1.46 $ 1.31
=========== =========== =========== ===========
Computation of Diluted Earnings Per Common
Share for Statements of Operations:
- -------------------------------------------
Net income $ 42,760 $ 36,581 $ 121,089 $ 116,675
=========== =========== =========== ===========
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 82,069,575 87,133,594 82,766,220 89,157,432
Net dilutive effect of:
Stock option plans 167,493 329,634 179,961 359,546
Restricted stock plans 514,379 510,015 415,581 503,458
----------- ----------- ----------- -----------
82,751,447 87,973,243 83,361,762 90,020,436
=========== =========== =========== ===========
Diluted earnings per common share $ .52 $ .42 $ 1.45 $ 1.30
=========== =========== =========== ===========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE THIRD
QUARTER 1999 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 345,412
<INT-BEARING-DEPOSITS> 534
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,599,438
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 7,602,130
<ALLOWANCE> 55,663
<TOTAL-ASSETS> 10,342,248
<DEPOSITS> 6,633,738
<SHORT-TERM> 1,136,666
<LIABILITIES-OTHER> 172,006
<LONG-TERM> 1,584,534
0
0
<COMMON> 928
<OTHER-SE> 814,376
<TOTAL-LIABILITIES-AND-EQUITY> 10,342,248
<INTEREST-LOAN> 457,779
<INTEREST-INVEST> 91,424
<INTEREST-OTHER> 9,855
<INTEREST-TOTAL> 559,058
<INTEREST-DEPOSIT> 131,171
<INTEREST-EXPENSE> 240,957
<INTEREST-INCOME-NET> 318,101
<LOAN-LOSSES> 13,552
<SECURITIES-GAINS> 3,194
<EXPENSE-OTHER> 337,841
<INCOME-PRETAX> 199,161
<INCOME-PRE-EXTRAORDINARY> 199,161
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 121,089
<EPS-BASIC> 1.46
<EPS-DILUTED> 1.45
<YIELD-ACTUAL> 4.50
<LOANS-NON> 34,628
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 26,461
<ALLOWANCE-OPEN> 80,013
<CHARGE-OFFS> 29,885
<RECOVERIES> 6,507
<ALLOWANCE-CLOSE> 55,663
<ALLOWANCE-DOMESTIC> 37,322
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 18,341
</TABLE>
<PAGE>
Exhibit 99 Jason Korstange
(612)745-2755
Ann Storberg
(612)745-2758
www.tcfbank.com
FOR IMMEDIATE RELEASE
TCF SIGNS AGREEMENT TO SELL NORTH STAR TITLE, INC. AND NORTH STAR REAL
ESTATE SERVICES, INC. AND FORMS STRATEGIC ALLIANCE
MINNEAPOLIS, Nov. 8, 1999 -- TCF Financial Corporation (TCF) (NYSE:TCB)
today announced it has reached a definitive agreement to sell North Star Title,
Inc. and North Star Real Estate Services, Inc., wholly-owned subsidiaries of
TCF, to General American Corporation (GAC). TCF and GAC are also announcing a
strategic alliance in which GAC will provide various title and real estate
settlement services to TCF.
"I look forward to developing a strategic alliance with GAC," said TCF
Chairman and Chief Executive Officer William A. Cooper. "With this alliance GAC
will provide a broad array of title and real estate services to TCF's customers
in all of our banking states. GAC's technology platform and expanding national
presence ensure TCF's customers needs will continue to be met in an efficient
and effective manner."
"We are proud and honored that TCF has selected GAC as a strategic
partner for the delivery of settlement services," said Rich Snedden, GAC's Chief
Executive Officer. "Our technology-driven approach to delivering products,
combined with North Star's technical expertise, creates an exceptionally
powerful service approach to the market. The alliance enhances both companies,
but the real winner is the customer."
The terms of the sale and the agreement were not announced. The sale is
expected to close in the 1999 fourth quarter.
TCF is a $10.3 billion national bank holding company based in
Minneapolis. TCF's banks are based in Minnesota, Illinois, Michigan, Wisconsin,
and Colorado. Other TCF affiliates provide business-equipment and commercial
leasing, mortgage banking, and annuity and mutual fund sales.
-more-
<PAGE>
TCF'S FUTURE RESULTS MAY DIFFER MATERIALLY FROM HISTORICAL
PERFORMANCE AND FORWARD-LOOKING STATEMENTS ABOUT TCF'S FINANCIAL RESULTS ARE
SUBJECT TO A NUMBER OF RISKS AND UNCERTAINTIES. THESE INCLUDE BUT ARE NOT
LIMITED TO POSSIBLE LEGISLATIVE CHANGES AND ADVERSE ECONOMIC, BUSINESS AND
COMPETITIVE DEVELOPMENTS SUCH AS SHRINKING INTEREST MARGINS; DEPOSIT
OUTFLOWS; REDUCED DEMAND FOR FINANCIAL SERVICES AND LOAN AND LEASE PRODUCTS;
CHANGES IN ACCOUNTING POLICIES OR GUIDELINES, OR MONETARY AND FISCAL POLICIES
OF THE FEDERAL GOVERNMENT; CHANGES IN CREDIT AND OTHER RISKS POSED BY TCF'S
LOAN, LEASE AND INVESTMENT PORTFOLIOS; 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,
INCLUDING THE DEPENDENCY OF TCF'S OPERATIONS ON YEAR 2000 COMPLIANCE ACHIEVED
BY OUTSIDE VENDORS, BORROWERS AND GOVERNMENT AGENCIES OR INSTRUMENTALITIES
###
