<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
-----------------------
COMMISSION FILE
NO. 001-10253
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TCF FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 41-1591444
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
801 MARQUETTE AVENUE, MAIL CODE 100-01-A, MINNEAPOLIS, MINNESOTA 55402
(Address and Zip Code of principal executive offices)
Registrant's telephone number, including area code: 612-661-6500
------------------------
Securities registered pursuant to Section 12(b) of
the Act (all registered on the New York Stock Exchange):
COMMON STOCK (PAR VALUE $.01 PER SHARE)
PREFERRED SHARE PURCHASE RIGHTS
(Title of class)
Securities registered pursuant to Section 12(g) of the Act:
9.50% WINTHROP RESOURCES CORPORATION SENIOR NOTES DUE 2003
(Title of class)
------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 of 15(d) of the Securities and Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of March 17, 2000 the aggregate market value of the voting stock held
by nonaffiliates of the registrant, computed by reference to the average of
the high and low prices on such date as reported by the New York Stock
Exchange, was $1,598,586,759.
As of March 17, 2000, there were outstanding 81,178,603 shares of the
registrant's common stock, par value $.01 per share, its only outstanding
class of common stock.
DOCUMENTS INCORPORATED BY REFERENCE
Specific portions of the registrant's annual report to shareholders for the
year ended December 31, 1999 are incorporated by reference into Parts I, II and
IV hereof.
Specific portions of the registrant's definitive proxy statement dated
March 30, 2000 are incorporated by reference into Part III hereof.
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TABLE OF CONTENTS
<TABLE>
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PART I
PAGE
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<S> <C>
Item 1. Business.............................................................................................. 1
Forward-Looking Information.................................................................... 1
General........................................................................................ 1
Lending Activities............................................................................. 2
Investment Activities.......................................................................... 6
Sources of Funds............................................................................... 6
Other Information.............................................................................. 7
Activities of Subsidiaries of TCF Financial Corporation .................................... 7
Recent Accounting Developments.............................................................. 8
Competition................................................................................. 8
Employees................................................................................... 8
Regulation..................................................................................... 9
Taxation....................................................................................... 14
Item 2. Properties............................................................................................ 14
Item 3. Legal Proceedings..................................................................................... 15
Item 4. Submission of Matters to a Vote of Security Holders................................................... 16
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters.............................. 16
Item 6. Selected Financial Data............................................................................... 17
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................................................... 17
Item 7A. Quantitative and Qualitative Disclosures About Market Risk............................................ 17
Item 8. Financial Statements and Supplementary Data........................................................... 17
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure................................................................................ 17
PART III
Item 10. Directors and Executive Officers of the Registrant................................................... 17
Item 11. Executive Compensation............................................................................... 17
Item 12. Security Ownership of Certain Beneficial Owners and Management....................................... 18
Item 13. Certain Relationships and Related Transactions....................................................... 18
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K...................................... 18
Signatures..................................................................................................... 19
Index to Consolidated Financial Statements..................................................................... 20
Index to Exhibits.............................................................................................. 20
</TABLE>
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PART I
ITEM 1. BUSINESS
FORWARD-LOOKING INFORMATION
This Annual Report and other reports issued by TCF Financial Corporation
("TCF" or the "Company"), including reports filed with the Securities and
Exchange Commission, may contain "forward-looking" statements that deal with
future results, plans or performance. In addition, TCF's management may make
such statements orally to the media, or to securities analysts, investors or
others. Forward-looking statements deal with matters that do not relate strictly
to historical facts. TCF's future results may differ materially from historical
performance and forward-looking statements about TCF's expected financial
results or other plans are subject to a number of risks and uncertainties. These
include but are not limited to possible legislative changes and adverse
economic, business and competitive developments such as shrinking interest
margins; deposit outflows; reduced demand for financial services and loan and
lease products; changes in accounting policies and guidelines, or monetary and
fiscal policies of the federal government; changes in credit and other risks
posed by TCF's loan, lease and investment portfolios; technological,
computer-related or operational difficulties; adverse changes in securities
markets; results of litigation or other significant uncertainties.
GENERAL
TCF, a Delaware corporation based in Minneapolis, Minnesota, with $10.7
billion in assets, is the holding company of five federally chartered national
banks located in Minnesota, Illinois, Wisconsin, Michigan and Colorado. Unless
otherwise indicated, references herein to TCF include its direct and indirect
subsidiaries. TCF's subsidiary banks are collectively referred to herein as the
"TCF Banks." References herein to the "Holding Company" or "TCF Financial" refer
to TCF Financial Corporation on an unconsolidated basis. Where information is
incorporated in this report by reference to TCF's 1999 Annual Report, only those
portions specifically identified are so incorporated.
TCF's products include commercial, consumer and residential mortgage loan
products, leasing, insurance and mutual funds, and some of its products, such as
its commercial equipment and truck loans and leases, are offered in markets
outside areas served by its bank subsidiaries. TCF's primary focus, however, has
been on the delivery of retail banking products in markets served by its bank
subsidiaries. TCF's strategic emphasis on retail banking has allowed it to fund
its assets primarily with retail core deposits, minimize wholesale borrowings
and lower its interest-rate risk.
During the fourth quarter of 1999, TCF received approval of the Office of
the Comptroller of the Currency ("OCC") to merge four of its bank charters into
one national bank charter, based in Minnesota. The merger of the bank charters
located in Minnesota, Illinois, Wisconsin and Michigan (the "Charter Merger") is
expected to be completed in the second quarter of 2000. The merger of the bank
charters is not expected to significantly change the management approach or
operations within these geographic states. The resulting national bank will be
named TCF National Bank.
TCF has significantly expanded its retail banking franchise in recent
periods and had 338 retail banking branches at December 31, 1999. In the past
three years, TCF opened 164 new branches, of which 151 were supermarket
branches. This expansion includes TCF's January 1998 acquisition of 76 branches
and 178 automated teller machines ("ATMs") in Jewel-Osco stores in the Chicago,
Illinois area previously operated by Bank of America. Information concerning
this and other acquisitions is set forth in "Financial Review -- Results of
Operations - Performance Summary" on page 17 and in Note 2 of Notes to
Consolidated Financial Statements on page 41 of TCF's 1999 Annual Report,
incorporated herein by reference. TCF anticipates opening approximately 37 new
branches in 2000, and additional branches in subsequent years, including
approximately 25 Illinois Jewel-Osco supermarket branches per year in subsequent
years until branches have been installed in certain existing and all newly
constructed stores.
1
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TCF's marketing strategy emphasizes attracting deposits held in checking,
passbook and statement savings, and money market accounts. These deposit
products provide TCF with a significant source of fee income. TCF engages in
commercial, residential and consumer lending activities, lease financing and in
the insurance services business, including the sale of single premium
tax-deferred annuities. TCF also has a broker dealer selling non-proprietary
mutual funds.
Non-interest income is a significant source of revenues for TCF and an
important factor in TCF's results of operations. Providing a wide range of
retail banking services is an integral component of TCF's business philosophy
and a major strategy for generating additional non-interest income. TCF's
non-interest income in future periods may be negatively impacted by pending
legislative proposals which, if enacted and not judicially restrained, could
limit loan, deposit or other fees and service charges. See "Forward-Looking
Information" and "Legislative, Legal and Regulatory Developments" on pages 32
and 33 of TCF's 1999 Annual Report, incorporated herein by reference, for
additional information.
TCF operated 82 bank branches in Minnesota, 151 in Illinois, 31 in
Wisconsin, 64 in Michigan and 10 in Colorado at December 31, 1999. TCF strives
to develop innovative banking products and services. Of TCF's 338 bank branches,
195 were supermarket bank branches at December 31, 1999. These supermarket bank
branches provide TCF with the opportunity to sell its consumer products and
services, including deposits and loans, at a relatively low entry cost and
feature extended hours, including Saturdays and Sundays. TCF's "Totally Free"SM
checking accounts and other deposit products provide it with a significant
source of low-interest cost funds and fee income. TCF has expanded its ATM
network to 1,406 machines at December 31, 1999, generally located in areas
served by the TCF Banks, and offers its customers an automated telephone banking
system.
Federal legislation imposes numerous legal and regulatory requirements on
financial institutions. Among the most significant of these requirements are
minimum regulatory capital levels and enforcement actions that can be taken by
regulators when an institution's regulatory capital is deemed to be inadequate.
TCF and each of the TCF Banks currently exceed all of their current minimum
regulatory capital requirements and are considered "well-capitalized" under
guidelines established by the Federal Reserve Board ("FRB") and the OCC pursuant
to the Federal Deposit Insurance Corporation Improvement Act of 1991. See
"REGULATION."
As federally chartered national banks, the TCF Banks are subject to
regulation and examination by the OCC and, in certain cases, by the Federal
Deposit Insurance Corporation ("FDIC"). The TCF Banks' deposits are insured to
$100,000 by the FDIC, and as such these institutions are subject to regulations
promulgated by the FDIC. The TCF Banks are members of the Federal Home Loan Bank
("FHLB") of Des Moines, Chicago, Topeka and/or Indianapolis, and are also member
banks within their respective Federal Reserve districts. Following the Charter
Merger, TCF National Bank will continue to hold FHLB advances from the FHLB of
Chicago and Indianapolis until such advances mature or are prepaid. TCF National
Bank will be required to hold common stock of these FHLB districts in the amount
of 5% of the outstanding balances of such advances. However, following the
Charter Merger, TCF National Bank will no longer be a member of either the FHLB
of Chicago or Indianapolis. TCF Financial is a bank holding company and is
subject to regulation and examination by the FRB. See "SOURCES OF FUNDS -
Borrowings" and "REGULATION -- Regulation of TCF Financial and Affiliate and
Insider Transactions."
The following description includes detailed information regarding the business
of TCF and its subsidiaries.
LENDING ACTIVITIES
GENERAL
TCF's lending activities reflect its community banking philosophy,
emphasizing loans to individuals and small to medium-sized businesses in its
primary market areas in Minnesota, Illinois, Wisconsin, Michigan and Colorado.
TCF is also engaged in lease financing and has expanded its consumer lending
operations in recent years.
See "Financial Review -- Financial Condition - Loans and Leases" on pages
24 through 26, Note 7 of Notes to Consolidated Financial Statements on pages 43
and 44 and "Other Financial Data" on pages 63 through 67 of TCF's 1999 Annual
Report, incorporated herein by reference, for additional information regarding
TCF's loan and lease portfolios.
2
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RESIDENTIAL REAL ESTATE LENDING
TCF's residential mortgage loan originations (first mortgage loans for the
financing of one- to four-family homes) are predominantly secured by properties
in Minnesota, Illinois, Wisconsin and Michigan. TCF engages in both
adjustable-rate and fixed-rate residential real estate lending. Adjustable-rate
residential real estate loans held in TCF's portfolio totaled $2.2 billion at
December 31, 1999, compared with $2.1 billion at December 31, 1998. Loan
originations by TCF Mortgage Corporation ("TCF Mortgage"), a wholly owned
subsidiary, include loans purchased from loan correspondents.
TCF sells certain residential real estate loans in the secondary market,
primarily on a nonrecourse basis. TCF retains servicing rights for the majority
of the loans it sells into the secondary market. These sales provide additional
funds for loan originations and also generate fee income. TCF may also from time
to time purchase or sell servicing rights on residential real estate loans. At
December 31, 1999, 1998 and 1997, TCF serviced for others $2.9 billion, $3.7
billion and $4.4 billion, respectively, in residential real estate loans. During
1999, 1998 and 1997, TCF sold servicing rights on $344.6 million, $200.4 million
and $144.7 million of loans serviced for others at net gains of $3.1 million,
$2.4 million and $1.6 million, respectively.
Adjustable-rate residential real estate loans originated by TCF have
various adjustment periods and generally provide for limitations on the amount
the rate may adjust on each adjustment date, as well as the total amount of
adjustments over the lives of the loans. Accordingly, while this portfolio of
loans is rate sensitive, it may not be as rate sensitive as TCF's cost of funds.
In addition to such interest-rate risk, TCF faces credit risks resulting from
potential increased costs to borrowers as a result of rate adjustments on
adjustable-rate loans in its portfolio, which will depend upon the magnitude and
frequency of shifts in market interest rates. Some adjustable-rate residential
real estate loans originated by TCF in prior periods did not provide for
limitations on rate adjustments. Credit risk may also result from declines in
the values of underlying real estate collateral. See "-- Classified Assets, Loan
and Lease Delinquencies and Defaults."
TCF Mortgage and the TCF Banks generally adhere to Federal National
Mortgage Association ("FNMA"), Federal Home Loan Mortgage Corporation ("FHLMC"),
Veterans Administration ("VA") or Federal Housing Administration ("FHA")
guidelines in originating residential real estate loans. TCF generally requires
that all conventional first mortgage real estate loans with loan-to-value ratios
in excess of 80% carry private mortgage insurance.
CONSUMER LENDING
TCF makes consumer loans for personal, family or household purposes, such
as debt consolidation or the financing of home improvements, automobiles,
vacations and education. Consumer loans totaled $2.1 billion at December 31,
1999, with $1.1 billion, or 51%, having fixed interest rates and $1 billion, or
49%, having adjustable interest rates. The following discussion provides
additional information on TCF's consumer lending operations.
The consumer lending activities of the TCF Banks include a full range of
consumer-oriented products including real estate secured loans, loans secured by
personal property and unsecured personal loans. Each of these loan types can be
made on an open- or closed-end basis. Consumer loan borrowers generally have
higher debt-to-income ratios, and therefore consumer loans have a higher risk of
loss than residential loans. Consumer loans having adjustable interest rates
also present a credit risk similar to that posed by residential real estate
loans as a result of increased costs to borrowers in the event of a rise in
rates (see discussion above under "-- Residential Real Estate Lending").
Consumer loans secured by real estate may present additional credit risk in the
event of a decline in the value of real estate collateral.
In December 1998, TCF restructured its consumer finance company operations,
including the discontinuation of indirect automobile lending, the consolidation
of offices and a renewed focus on home equity lending. During 1999, $139.4
million of consumer finance automobile loans and $14.8 million of related
allowances were transferred to loans held for sale and were subsequently sold.
Losses of $1.4 million were recognized in connection with these sales, which are
included in gain on sales of loans held for sale. TCF closed its Pensacola,
Florida consumer finance loan collections facility during 1999. At December 31,
1999, consumer finance automobile loans totaled $7.7 million, compared with
$233.9 million at December 31, 1998.
3
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TCF changed its home equity loan origination programs in early 1999. Under
the new programs and in response to intensifying price competition, TCF
implemented a tiered pricing structure for its home equity loans. TCF also
experienced an increase in the loan-to-value ratios on new home equity loans
originated in 1999. Many of these loans are secured by a first lien on the home
and include an advance to pay off an existing first lien mortgage loan, and many
have balances exceeding $100,000. These loans may carry a higher level of credit
risk than loans with a lower loan-to-value ratio. For additional information on
consumer lending, including TCF's consumer finance company operations, see
"Financial Review -- Financial Condition - Loans and Leases" on pages 24 through
26 of TCF's 1999 Annual Report, incorporated herein by reference.
TCF originates student loans for resale. TCF had $143.9 million of
education loans held for sale at December 31, 1999, compared with $138.3 million
at December 31, 1998. TCF generally retains the student loans it originates
until they are fully disbursed. Under a forward commitment agreement with the
Student Loan Marketing Association ("SLMA"), TCF can sell the student loans to
SLMA once they are fully disbursed, but must sell the student loans to SLMA
before they go into repayment status. These loans are originated in accordance
with designated guarantor and U.S. Department of Education guidelines and do not
involve any independent credit underwriting by TCF. TCF's future student loan
origination activity will be dependent on continued support of guaranteed
student loan programs by the U.S. Government and TCF's ability to continue to
sell such loans to SLMA or other parties. Recent federal legislation has limited
the role of private lenders in originating student loans and has reduced the
profitability of this activity. This legislation may reduce the volume of TCF's
student loan originations in future periods.
COMMERCIAL REAL ESTATE LENDING
TCF currently originates longer-term loans on commercial real estate and,
to a lesser extent, shorter-term construction loans. TCF is endeavoring to
increase its originations of commercial real estate loans to creditworthy
borrowers based in its primary markets. TCF may also engage in commercial real
estate loan brokerage activity. At December 31, 1999, adjustable-rate loans
represented 81% of commercial real estate loans outstanding. See "Financial
Review -- Financial Condition - Loans and Leases" on pages 24 through 26 of
TCF's 1999 Annual Report, incorporated herein by reference, for additional
information regarding the types of properties securing TCF's commercial real
estate loans.
At December 31, 1999, TCF's commercial construction and development loan
portfolio totaled $162.6 million. Construction and permanent commercial real
estate lending is generally considered to involve a higher level of risk than
single-family residential lending due to the concentration of principal in a
limited number of loans and borrowers. In addition, the nature of these loans is
such that they are generally less predictable and more difficult to evaluate and
monitor.
COMMERCIAL BUSINESS LENDING
TCF engages in general commercial business lending. Commercial business
loans may be secured by various types of business assets, including commercial
real estate, and in some cases may be made on an unsecured basis. TCF is seeking
to expand its commercial business lending activity and in particular its lending
to small and medium-sized businesses. TCF's commercial business lending
activities encompass loans with a broad variety of purposes, including corporate
working capital loans and loans to finance the purchase of equipment or other
acquisitions. TCF also makes loans to individuals who use the funds for business
or personal purposes. As part of its commercial business and commercial real
estate lending activities, TCF also issues standby letters of credit. At
December 31, 1999, TCF had 79 such standby letters of credit outstanding in the
aggregate amount of $22 million.
Recognizing the generally increased risks associated with commercial
business lending, TCF originates commercial business loans in order to increase
its short-term, variable-rate asset base and to contribute to its profitability
through the higher rates earned on these loans and the marketing of other bank
products. TCF concentrates on originating commercial business loans primarily to
middle-market companies based in its primary markets with borrowing requirements
of less than $15 million. Substantially all of TCF's commercial business loans
outstanding at December 31, 1999 were to borrowers based in its primary markets.
4
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LEASE FINANCING
TCF provides a broad range of comprehensive lease and equipment finance
products addressing the financing needs of diverse companies including large
franchise organizations, small businesses, transportation owners and operators
and other equipment lessees. At December 31, 1999, TCF's lease and equipment
financing portfolio totaled $492.7 million, including $44.2 million of loans
classified as commercial business loans. TCF entered the leasing business in
June 1997 with the purchase of Winthrop Resources Corporation ("Winthrop"), a
financial services company that leases computers, telecommunications equipment,
point-of-sale systems and other business-essential equipment to companies
nationwide. In September 1999, TCF expanded its leasing operation with the
launch of TCF Leasing, Inc. ("TCF Leasing"), a general equipment finance company
with a focus on middle-market companies, truck finance, lease discounting and
trailer leasing.
TCF internally funds certain leases, and consequently retains the credit
risk on such leases. TCF also may arrange permanent financing of certain leases
through non-recourse discounting of lease rentals with various other financial
institutions at fixed interest rates. At December 31, 1999, 38.9% of TCF's lease
portfolio was funded on a non-recourse basis with other financial institutions,
compared with 45.9% at December 31, 1998. Proceeds from the assignment of the
lease rentals are equal to the present value of the remaining lease payments due
under the lease, discounted at the interest rate charged by the other financial
institutions. Interest rates for this type of financing are negotiated on a
transaction-by-transaction basis and reflect the financial strength of the lease
customer, the term of the lease and the prevailing interest rates. For a lease
discounted on a non-recourse basis, the other financial institution has no
recourse against TCF unless TCF is in default under the terms of the agreement
under which the lease and the leased equipment are assigned to the other
financial institution as collateral. The other financial institution may,
however, take title to the collateral in the event the customer fails to make
lease payments or certain other defaults by the lease customer occur under the
terms of the lease.
CLASSIFIED ASSETS, LOAN AND LEASE DELINQUENCIES AND DEFAULTS
TCF has established a classification system for individual commercial loans
or other assets based on OCC regulations under which all or part of a loan or
other asset may be classified as "substandard," "doubtful," "loss" or "special
mention." It has also established overall ratings for various credit portfolios.
A loan or other asset is placed in the substandard category when it is
considered to have a well-defined weakness. A loan or other asset is placed in
the doubtful category when some loss is likely but there is still sufficient
uncertainty to permit the asset to remain on the books at its full value. All or
a portion of a loan or other asset is classified as loss when it is considered
uncollectible, in which case it is generally charged off. In some cases, loans
or other assets for which there is perceived some possible exposure to credit
loss are classified as special mention. Loans and other assets that are
classified are subject to periodic review of their appropriate regulatory
classifications.
The following table summarizes information about TCF's non-accrual,
restructured and past due loans and leases:
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------------------------------------
1999 1998 1997 1996 1995
------- ------- ------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Non-accrual loans and leases $ 24.1 $ 33.7 $ 36.8 $ 26.4 $ 44.3
Restructured loans - - 1.3 3.0 1.6
------- ------- ------- ------- -------
Total non-accrual and restructured
loans and leases $ 24.1 $ 33.7 $ 38.1 $ 29.4 $ 45.9
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Accruing loans and leases 90 days
or more past due $ 5.8 $ - $ - $ - $ .7
------- ------- ------- ------- -------
------- ------- ------- ------- -------
</TABLE>
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The allowance for loan and lease losses is based upon management's periodic
analysis of TCF's loan and lease portfolios. Although appropriate levels of
reserves have been estimated based upon factors and trends identified by
management, there can be no assurance that the levels are adequate. Economic
stagnation or reversals in the economy could give rise to increasing risk of
credit losses and necessitate an increase in the required level of reserves. The
expansion of the Company's consumer lending and other lending and leasing
operations creates increased exposure to increases in delinquencies,
repossessions, foreclosures and losses that generally occur during economic
downturns or recessions.
Adverse economic developments are also likely to adversely affect
commercial lending operations and increase the risk of loan defaults and
credit losses on such loans. Carrying values of foreclosed commercial real
estate properties are generally based on appraisals prepared by certified or
licensed appraisers. TCF reviews each external commercial real estate
appraisal it receives for accuracy, completeness and reasonableness of
assumptions used. Weaknesses in real estate markets may result in declines in
property values and the sale of properties at less than previously estimated
values, resulting in additional charge-offs. TCF recognizes the effect of
such events in the periods in which they occur.
Additional information concerning TCF's allowance for loan and lease losses
is set forth in "Financial Review -- Financial Condition - Allowance for Loan
and Lease Losses" on pages 26 and 27, in Note 1 of Notes to Consolidated
Financial Statements on pages 39 through 41 and in Note 8 of Notes to
Consolidated Financial Statements on page 44 of TCF's 1999 Annual Report,
incorporated herein by reference.
INVESTMENT ACTIVITIES
The TCF Banks have authority to invest in various types of liquid assets,
including United States Treasury obligations and securities of various federal
agencies, deposits of insured banks, bankers' acceptances and federal funds, and
must meet minimum liquidity requirements prescribed by law. Liquidity may
increase or decrease depending upon the availability of funds and comparative
yields on investments in relation to the return on loans and leases. The TCF
Banks must also meet reserve requirements of the FRB, which are imposed based on
amounts on deposit in various types of deposit categories.
Information regarding the carrying values and fair values of TCF's
investments and securities available for sale is set forth in Notes 4 and 5 of
Notes to Consolidated Financial Statements on page 42 of TCF's 1999 Annual
Report, incorporated herein by reference. Additional information regarding
investments and securities available for sale is set forth in "Other Financial
Data" on pages 63 through 67 of TCF's 1999 Annual Report, incorporated herein by
reference.
SOURCES OF FUNDS
DEPOSITS
Deposits are the primary source of TCF's funds for use in lending and for
other general business purposes. Deposit inflows and outflows are significantly
influenced by economic and competitive conditions, interest rates, money market
conditions and other factors. Higher-cost borrowings may be used to compensate
for reductions in normal sources of funds, such as deposit inflows at less than
projected levels or net deposit outflows, or to support expanded activities.
Consumer and commercial deposits are attracted principally from within
TCF's primary market areas through the offering of a broad selection of deposit
instruments including consumer and commercial demand deposit accounts,
Negotiable Order of Withdrawal or "NOW" (interest-bearing checking) accounts,
money market accounts, regular savings accounts, certificates of deposit and
retirement savings plans.
The composition of TCF's deposits has a significant impact on its cost of
funds. TCF's marketing strategy emphasizes attracting deposits held in checking,
regular savings and money market accounts. These accounts provide significant
fee income and are a source of low-interest cost funds. Checking, savings and
money market accounts comprised 56% of total deposits at December 31, 1999. In
addition, there were approximately 1.6 million retail checking, savings and
money market accounts at December 31, 1999, compared with approximately 1.4
million and 1.3 million such accounts at December 31, 1998 and 1997,
respectively.
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<PAGE>
Information concerning TCF's deposits is set forth in "Financial Review --
Financial Condition - Deposits" on pages 29 and 30 and in Note 10 of Notes to
Consolidated Financial Statements on page 46 of TCF's 1999 Annual Report,
incorporated herein by reference.
BORROWINGS
The FHLB System functions as a central reserve bank providing credit for
financial institutions through a regional bank located within a particular
financial institution's assigned region. The TCF Banks are members of the FHLB
System, and are required to own a minimum level of FHLB capital stock and are
authorized to apply for advances on the security of such stock and certain of
their loans and other assets (principally securities which are obligations of,
or guaranteed by, the United States Government), provided certain standards
related to creditworthiness have been met. TCF's FHLB advances totaled $1.8
billion at December 31, 1999, down $44.4 million from the balance at December
31, 1998. FHLB advances are made pursuant to several different credit programs.
Each credit program has its own interest rates and range of maturities. The FHLB
prescribes the acceptable uses to which the advances pursuant to each program
may be made as well as limitations on the size of advances. Acceptable uses
prescribed by the FHLB have included expansion of residential mortgage lending
and meeting short-term liquidity needs. In addition to the program limitations,
the amounts of advances for which an institution may be eligible are generally
based on the FHLB's assessment of the institution's creditworthiness.
As an additional source of funds, TCF may sell securities subject to its
obligation to repurchase these securities under repurchase agreements ("reverse
repurchase agreements") with the FHLMC or major investment bankers utilizing
government securities or mortgage-backed securities as collateral. Reverse
repurchase agreements totaled $1 billion at December 31, 1999, compared with
$367.3 million at December 31, 1998. Generally, securities with a value in
excess of the amount borrowed are required to be deposited as collateral with
the counterparty to a reverse repurchase agreement. The creditworthiness of the
counterparty is important in establishing that the overcollateralized amount of
securities delivered by TCF is protected and it is TCF's policy to enter into
reverse repurchase agreements only with institutions with a satisfactory credit
history.
The use of reverse repurchase agreements may expose TCF to certain risks
not associated with other sources of funds, including possible requirements to
provide additional collateral and the possibility that such agreements may not
be renewed. If for some reason TCF were no longer able to obtain reverse
repurchase agreement financing, it would be necessary for TCF to obtain
alternative sources of short-term funds. Such alternative sources of funds, if
available, may be higher-cost substitutes for the reverse repurchase agreement
funds.
Information concerning TCF's FHLB advances, reverse repurchase agreements
and other borrowings is set forth in "Financial Review -- Financial Condition -
Borrowings" on page 30 and in Note 11 of Notes to Consolidated Financial
Statements on pages 47 through 49 of TCF's 1999 Annual Report, incorporated
herein by reference.
OTHER INFORMATION
ACTIVITIES OF SUBSIDIARIES OF TCF FINANCIAL CORPORATION
TCF's business operations include those conducted by direct and indirect
subsidiaries of TCF Financial. During the year ended December 31, 1999, TCF's
subsidiaries were principally engaged in the following activities:
Mortgage Banking
TCF Mortgage and Standard Financial Mortgage Corporation originate,
purchase, sell and service residential mortgage loans.
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Leasing
Winthrop and TCF Leasing provide a range of comprehensive lease finance
products. Winthrop leases high-technology and other business-essential equipment
to customers ranging from large corporations to small, growing businesses. TCF
Leasing, TCF's newly formed leasing and equipment finance subsidiary,
specializes in the leasing and financing of trucks and industrial equipment in
key markets in various regions of the United States.
Annuities and Investment Services
TCF Financial Insurance Agency, Inc., is an insurance agency engaging in
the sale of fixed-rate, single premium tax-deferred annuities. TCF Securities,
Inc. engages in the sale of non-proprietary mutual fund products, and in the
sale of variable-rate, single premium tax-deferred annuities.
Insurance, Title Insurance and Appraisal Services
Certain TCF subsidiaries provide various types of insurance, principally
credit-related, marketed primarily to TCF's customers. North Star Title, Inc.
("North Star") is a title insurance agent for several title insurance
underwriters, operating primarily in Minnesota, Illinois, Wisconsin and
Michigan, providing title insurance, real estate abstracting, and closing
services to affiliates and third parties. North Star Real Estate Services, Inc.
("North Star Real Estate") provides real estate appraisal services to its
affiliates and to third parties. In the 1999 fourth quarter, TCF sold North Star
and North Star Real Estate and recognized a gain of $5.5 million on the sale.
RECENT ACCOUNTING DEVELOPMENTS
There has been an ongoing review over many years of the accounting
principles and practices used by financial institutions. This review is expected
to continue by banking regulators, the Securities and Exchange Commission
("SEC"), the Financial Accounting Standards Board ("FASB"), the American
Institute of Certified Public Accountants ("AICPA") and other organizations. As
a result of this process, there have been new accounting pronouncements which
have had an impact on TCF. Further developments may be forthcoming in light of
this ongoing review process.
In June 1998, the FASB issued Statement of Financial Accounting Standards
("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging
Activities." Additional information on SFAS No. 133 is set forth in "Financial
Review -- Financial Condition - Recent Accounting Developments" on page 32 of
TCF's 1999 Annual Report, incorporated herein by reference.
COMPETITION
TCF National Bank Minnesota ("TCF Minnesota") is the third largest
depository institution in Minnesota. The other TCF Banks compete with a
number of larger depository institutions in their market areas. The TCF Banks
experience significant competition in attracting and retaining deposits and
in lending funds. TCF believes the primary factors in competing for deposits
are the ability to offer attractive rates and products, convenient office
locations and supporting data processing systems and services. Direct
competition for deposits comes primarily from other commercial banks, credit
unions and savings institutions. Additional significant competition for
deposits comes from institutions selling money market mutual funds and
corporate and government securities. The primary factors in competing for
loans are interest rates, loan origination fees and the range of services
offered. TCF competes for the origination of loans with commercial banks,
mortgage bankers, mortgage brokers, consumer finance companies, credit
unions, insurance companies and savings institutions. TCF also competes
nationwide with other leasing companies in the financing of high-technology
and business-essential equipment. Expanded use of the Internet has increased
the potential competition affecting TCF and its loan, lease and deposit
products.
EMPLOYEES
As of December 31, 1999, TCF had approximately 7,200 employees, including
2,400 part-time employees. TCF provides its employees with a comprehensive
program of benefits, some of which are on a contributory basis, including
comprehensive medical and dental plans, life insurance, accident insurance,
short- and long-term disability coverage, a pension plan and a shared
contribution stock ownership 401(k) plan.
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REGULATION
The banking industry is generally subject to extensive regulatory
oversight. TCF Financial, as a publicly held bank holding company, and the TCF
Banks, as national banks with deposits insured by the FDIC, are subject to a
number of laws and regulations. Many of these laws and regulations have
undergone significant change in recent years. These laws and regulations impose
restrictions on activities, minimum capital requirements, lending and deposit
restrictions and numerous other requirements. Future changes to these laws and
regulations are likely and cannot be predicted with certainty.
RECENT DEVELOPMENTS
- Financial Modernization Act
On November 12, 1999, the President signed into law the Gramm-Leach-Bliley
Act (the "Act" or the "Gramm-Leach-Bliley Act"). The Act significantly changes
the regulatory structure and oversight of the financial services industry and
expands financial affiliation opportunities for bank holding companies. The Act
permits "financial holding companies" to engage in a range of activities that
are "financial in nature" or "incidental" thereto, such as banking, insurance,
securities activities, and merchant banking. To qualify to engage in expanded
financial activities, a financial holding company must make certain required
regulatory filings, and subsidiary depository institutions must be
well-capitalized, well-managed and rated "satisfactory" or better under the
Community Reinvestment Act. The Act also permits national banks to engage in
certain expanded financial activities through a financial subsidiary, provided
the bank and its depository institution affiliates are deemed well-capitalized
and well-managed and meet certain other regulatory requirements.
The Act also reforms the regulatory framework of the financial services
industry. Financial holding companies will be subject to primary supervision
by the FRB. However, unless subsidiary activity adversely impacts the holding
company, appropriate federal and state agencies will continue to have
significant regulatory authority over the subsidiaries. The Act preempts
state laws restricting the establishment of financial affiliations authorized
or permitted under the Act, subject to certain limited exceptions, including
an exception that allows state insurance regulators to impose certain
requirements on financial institutions, so long as they are not substantially
more adverse than those applying to other persons.
The Act removes the current blanket exemption for banks from the
broker-dealer registration requirements under the Securities Exchange Act of
1934, amends the Investment Company Act of 1940 with respect to bank common
trust fund and mutual fund activities, and amends the Investment Advisors Act of
1940 to require registration of banks that act as investment advisers for mutual
funds.
The Act prohibits financial institutions from sharing non-public financial
information on their customers to non- affiliated third parties unless the
customer is provided the opportunity to opt-out or the customer consents.
However, the Act allows a financial institution to disclose confidential
information pursuant to a joint marketing agreement (after full disclosure to
the customer), to perform services on behalf of the institution, to market the
institution's own products, and to protect against fraud. The Act directs
federal banking agencies to prescribe regulations within six months after the
date of enactment designed to further clarify and enforce the privacy
provisions.
The provisions of the Act relating to financial holding companies became
effective on or about March 15, 2000. Federal preemption provisions became
effective on the date of enactment. The privacy provisions generally become
effective in November 2000.
- Other Developments
In 1999, TCF sought and obtained regulatory approval to merge the
charters of the TCF Banks located in Minnesota, Illinois, Wisconsin and
Michigan. The Charter Merger is anticipated to be completed in the second
quarter of 2000. The merger of the bank charters is not expected to
significantly change the management approach or operations within these
geographic states.
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REGULATORY CAPITAL REQUIREMENTS
TCF Financial and the TCF Banks are subject to both risk-based and
leverage capital requirements of the FRB and the OCC, respectively. These
requirements are described below. In addition, these regulatory agencies are
required by law to take prompt action when institutions do not meet certain
other minimum capital standards. The Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA") defines five levels of capital condition,
the highest of which is "well-capitalized," and requires that regulatory
authorities subject undercapitalized institutions to various restrictions
such as limitations on dividends or other capital distributions, limitations
on growth or activity restrictions. Undercapitalized banks must also develop
a capital restoration plan and the parent bank holding company is required to
guarantee compliance with the plan. TCF Financial and the TCF Banks believe
they would be considered "well-capitalized" under the FDICIA capital
standards.
The FRB's risk-based capital guidelines include among their objectives
making regulatory capital requirements more sensitive to differences in risk
profiles of banking organizations, factoring off-balance-sheet exposures into
the assessment of capital adequacy and minimizing disincentives to holding
liquid, low-risk assets. Under these guidelines, a bank holding company's assets
and certain off-balance sheet items are assigned to one of four risk categories,
each weighted differently in accordance with the perceived level of risk posed
by such assets or off-balance-sheet items.
FRB guidelines also prescribe two "tiers" of capital. "Tier 1" capital
includes common stockholders' equity; qualifying noncumulative perpetual
preferred stock (including related surplus); qualifying cumulative perpetual
preferred stock (including related surplus), subject to certain limitations; and
minority interests in the equity accounts of consolidated subsidiaries. Tier 1
capital excludes goodwill and certain other intangible and other assets.
"Supplementary" or "Tier 2" capital consists of the allowance for loan and
lease losses, subject to certain limitations; perpetual preferred stock and
related surplus, subject to certain conditions; hybrid capital instruments
(i.e., those with characteristics of both equity and debt), perpetual debt and
mandatory convertible debt securities; and term subordinated debt and
intermediate-term preferred stock (including related surplus), subject to
certain limitations. The maximum amount of Tier 2 capital that is allowed to be
included in an institution's qualifying total capital is 100% of Tier 1 capital,
net of goodwill and other intangible assets required to be deducted.
TCF Financial is currently required to maintain (i) Tier 1 capital equal to
at least four percent of its risk-weighted assets and (ii) total capital (the
sum of Tier 1 and Tier 2 capital) equal to eight percent of risk-weighted
assets. The FRB also requires bank holding companies to maintain a minimum Tier
1 "leverage ratio" (measuring Tier 1 capital as a percentage of adjusted total
assets) of at least three percent. Higher leverage ratio requirements (minimum
additional capital of 100 to 200 basis points) are imposed for institutions that
do not have the highest regulatory rating or that fail to meet certain other
criteria. At December 31, 1999, TCF believes it met all these requirements. See
Note 14 of Notes to Consolidated Financial Statements on page 51 of TCF's 1999
Annual Report, incorporated herein by reference. The FRB has not advised TCF of
any specific minimum Tier 1 leverage ratio applicable to it.
The FRB's guidelines indicate that the FRB expects that bank holding
companies experiencing internal growth or making acquisitions should maintain
stronger capital positions, substantially above the minimum supervisory levels,
without significant reliance on intangible assets. In addition, the guidelines
provide that the FRB will use Tier 1 leverage guidelines in its inspection and
supervisory process and as part of its analysis of applications to be approved
by the FRB (this would include applications relating to bank holding company
activities, acquisitions or other matters). The guidelines also indicate that
the FRB will review the Tier 1 leverage measure periodically and will consider
adjustments needed to reflect significant changes in the economy, financial
markets and banking practices.
The OCC also imposes on the TCF Banks regulatory capital requirements that
are substantially similar to those imposed by the FRB, and TCF believes each of
the TCF Banks complied with OCC regulatory capital requirements at December 31,
1999.
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The FRB and the OCC also have adopted rules that could permit them to
quantify and account for interest-rate risk exposure and market risk from
trading activity and reflect these risks in higher capital requirements. New
legislation, additional rulemaking, or changes in regulatory policies may affect
future regulatory capital requirements applicable to TCF Financial and the TCF
Banks. The ability of TCF Financial and the TCF Banks to comply with regulatory
capital requirements may be adversely affected by legislative changes or future
rulemaking or policies of their regulatory authorities, or by unanticipated
losses or lower levels of earnings.
RESTRICTIONS ON DISTRIBUTIONS
Dividends or other capital distributions from the TCF Banks to TCF
Financial are an important source of funds to enable TCF Financial to pay
dividends on its common stock, to make payments on TCF Financial's other
borrowings, or for its other cash needs. The TCF Banks' ability to pay dividends
is heavily dependent on regulatory policies and regulatory capital requirements.
The ability to pay such dividends in the future may be adversely affected by new
legislation or regulations, or by changes in regulatory policies. In general,
the TCF Banks may not declare or pay a dividend to TCF Financial in excess of
100% of their net profits during a year combined with their retained net profits
for the preceding two years without prior approval of the OCC. The TCF Banks'
ability to make any capital distributions in the future may require regulatory
approval and may be restricted by their regulatory authorities. The TCF Banks'
ability to make any such distributions may also depend on their earnings and
ability to meet minimum regulatory capital requirements in effect during future
periods. These capital adequacy standards may be higher than existing minimum
capital requirements. The OCC also has the authority to prohibit the payment of
dividends by a national bank when it determines such payments would constitute
an unsafe and unsound banking practice. In addition, tax considerations may
limit the ability of the TCF Banks to make dividend payments in excess of their
current and accumulated tax "earnings and profits" ("E&P"). Annual dividend
distributions in excess of E&P could result in a tax liability based on the
amount of excess earnings distributed and current tax rates. See "Financial
Review -- Financial Condition - Liquidity Management" on page 29 and Note 13 of
Notes to Consolidated Financial Statements on pages 50 and 51 of TCF's 1999
Annual Report, incorporated herein by reference.
REGULATION OF TCF FINANCIAL AND AFFILIATE AND INSIDER TRANSACTIONS
TCF Financial is subject to regulation as a bank holding company. It is
required to register with the FRB and is subject to FRB regulations,
examinations and reporting requirements relating to bank holding companies. As
subsidiaries of a bank holding company, the TCF Banks are subject to certain
restrictions in their dealings with TCF Financial and with other companies
affiliated with TCF Financial, and also with each other.
A bank holding company must serve as a source of strength for its
subsidiary banks, and TCF Financial may be required to make up certain capital
deficiencies of the TCF Banks. The FRB may require a holding company to
contribute additional capital to an undercapitalized subsidiary bank. In
addition, Section 55 of the National Bank Act may permit the OCC to order the
pro rata assessment of shareholders of a national bank where the capital of the
bank has become impaired. If a shareholder fails to pay such an assessment
within three months, the OCC may order the sale of the shareholder's stock to
cover a deficiency in the capital of a subsidiary bank. In the event of a bank
holding company's bankruptcy, any commitment by the bank holding company to a
federal bank regulatory agency to maintain the capital of a subsidiary bank
would be assumed by the bankruptcy trustee and may be entitled to priority over
other creditors.
Under the Bank Holding Company Act ("BHCA"), a bank holding company must
obtain FRB approval before acquiring more than 5% control, or substantially all
of the assets, of another bank or bank holding company, or merging or
consolidating with another bank holding company. The BHCA also generally
prohibits a bank holding company, with certain exceptions, from acquiring direct
or indirect ownership or control of more than 5% of the voting shares of any
company which is not a bank or bank holding company, or from engaging directly
or indirectly in activities other than those of banking, managing or controlling
banks, providing services for its subsidiaries, or conducting activities
permitted by the FRB as being closely related and proper incidents to the
business of banking. As discussed, the Act permits any bank holding company that
qualifies as a financial holding company to engage in an expanded list of
activities, subject to certain restrictions. See "--Recent Developments."
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RESTRICTIONS ON CHANGE IN CONTROL
Federal and state laws and regulations contain a number of provisions which
impose restrictions on changes in control of financial institutions such as the
TCF Banks, and which require regulatory approval prior to any such changes in
control. The Restated Certificate of Incorporation of TCF Financial and a
Shareholder Rights Plan adopted by TCF Financial in 1999, among other items,
contain features which may inhibit a change in control of TCF Financial.
ACQUISITIONS AND INTERSTATE OPERATIONS
Under federal law, interstate merger transactions may be approved by
federal bank regulators without regard to whether such transactions are
prohibited by the law of any state, unless the home state of one of the banks
opted out of the Riegle-Neal Interstate Banking and Branching Act of 1994 (the
"1994 Act") by adopting a law after the date of enactment of the 1994 Act and
prior to June 1, 1997 which applies equally to all out-of-state banks and
expressly prohibits merger transactions involving out-of-state banks. Interstate
acquisitions of branches by banks are permitted only if the law of the state in
which the branch is located permits such acquisitions. Interstate mergers and
branch acquisitions may also be subject to certain nationwide and statewide
insured deposit maximum concentration levels.
INSURANCE OF ACCOUNTS; DEPOSITOR PREFERENCE
The deposits of the TCF Banks are insured by the FDIC up to $100,000 per
insured depositor. Substantially all of TCF's deposits are Savings
Association Insurance Fund ("SAIF") insured, but TCF also has deposits
insured by the Bank Insurance Fund ("BIF"). The FDIC has established a
risk-based deposit insurance assessment under which deposit insurance
assessments are based upon an institution's capital strength and supervisory
condition, as determined by the institution's primary regulator. The annual
insurance premiums on bank deposits insured by the BIF and SAIF may vary
between $0 per $100 of deposits for banks classified in the highest capital
and supervisory evaluation categories to $.27 per $100 of deposits for banks
classified in the lowest capital and supervisory evaluation categories.
In addition to risk-based deposit insurance assessments, assessments may be
imposed on deposits insured by either the BIF or the SAIF to pay for the cost of
Financing Corporation ("FICO") funding. FICO assessment rates for 1999 ranged
from $.0116 to $.0122 per $100 of deposits annually for BIF-assessable deposits
and from $.0580 to $.0610 per $100 of deposits annually for SAIF-assessable
deposits.
An increase in deposit insurance rates could have a material adverse effect
on TCF, depending on the amount and duration of the increase. In addition, the
FDIC is authorized to terminate a depository institution's deposit insurance if
it finds that the institution is being operated in an unsafe and unsound manner
or has violated any rule, regulation, order or condition administered by the
institution's regulatory authorities. Any such termination of deposit insurance
is likely to have a material adverse effect on TCF, the severity of which would
depend on the amount of deposits affected by such a termination.
Under federal law, deposits and certain claims for administrative expenses
and employee compensation against an insured depository institution are afforded
a priority over other general unsecured claims against such an institution,
including federal funds and letters of credit, in the liquidation or other
resolution of such an institution by any receiver appointed by regulatory
authorities. Such priority creditors would include the FDIC.
EXAMINATIONS AND REGULATORY SANCTIONS
TCF is subject to periodic examination by the FRB, OCC and the FDIC. Bank
regulatory authorities may impose on institutions found to be operating in an
unsafe or unsound manner a number of restrictions or new requirements, including
but not limited to growth limitations, dividend restrictions, individual
increased regulatory capital requirements, increased loan and real estate loss
reserve requirements, increased supervisory assessments, activity limitations or
other restrictions that could have an adverse effect on such institutions, their
holding companies or holders of their debt and equity securities. Various
enforcement remedies, including civil money penalties, may be assessed against
an institution or an institution's directors, officers, employees, agents or
independent contractors.
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Subsidiaries of TCF are also subject to state and/or self-regulatory
organization licensing, regulation and examination requirements in connection
with certain insurance, mortgage banking and securities brokerage activities.
NATIONAL BANK INVESTMENT LIMITATIONS
Permissible investments by national banks are limited by the National Bank
Act, as amended, and by rules of the OCC. The OCC is in the process of
finalizing regulations under the Gramm-Leach-Bliley Act which will permit banks
to engage in expanded activities subject, in the case of certain non-traditional
bank activities, to certain supervisory requirements, including a required
regulatory capital deduction and application of transactions with affiliates
limitations. See "--Recent Developments."
FUTURE LEGISLATIVE AND REGULATORY CHANGE; LITIGATION AND ENFORCEMENT ACTIVITY
There are a number of respects in which future legislative or regulatory
change, or changes in enforcement practices or court rulings, could adversely
affect TCF, and it is generally not possible to predict when or if such changes
may have an impact on TCF. Legislative proposals for tax reform have sought the
elimination of certain tax benefits for single premium annuities which, if
adopted, could impair TCF's ability to market annuity products. Recent
legislation and administrative action has limited the role of private lenders in
education loans and has adversely affected the profitablilty of student lending
activity. TCF's non-interest income in future periods may be negatively impacted
by pending state and federal legislative proposals which, if enacted, could
limit loan, deposit or other fees and service charges. Among other proposals,
state legislation has been proposed which could eliminate ATM surcharge fees
imposed by TCF, and which could restrict the sharing of customer information
among TCF-affiliated entities. These proposals could adversely affect TCF's
revenues and product marketing strategies. Financial institutions have also
increasingly been the subject of private class action lawsuits challenging
escrow account practices, private mortgage insurance requirements, the use of
loan brokers and other practices. Pending litigation against Visa and
Mastercard, if successful, could have an adverse impact on the revenues of debit
card issuers such as TCF.
The Community Reinvestment Act ("CRA") and other fair lending laws and
regulations impose nondiscriminatory lending requirements on financial
institutions. In recent periods, federal regulatory agencies, including the FRB
and the Department of Justice ("DOJ"), have sought a more rigorous enforcement
of the CRA and other fair lending laws and regulations. The DOJ is authorized to
use the full range of its enforcement authority under the fair lending laws. The
DOJ has authority to commence pattern or practice investigations of possible
lending discrimination on its own initiative or through referrals from the
federal financial institutions regulatory agencies, and to file lawsuits in
federal court where there is reasonable cause to believe that such violations
have occurred. The DOJ is also authorized to bring suit based on individual
complaints filed with the Department of Housing and Urban Development where one
of the parties to the complaint elects to have the case heard in federal court.
A successful challenge to an institution's performance under the CRA and related
laws and regulations could result in a wide variety of sanctions, including the
required payment of damages and civil money penalties, prospective and
retrospective injunctive relief, imposition of restrictions on mergers and
acquisitions activity, and restrictions on expansion activity. Private parties
may also have the ability to challenge an institution's performance under fair
lending laws in private class action litigation. The ultimate effects of the
foregoing or other possible legal and regulatory developments cannot be
predicted but may have an adverse impact on TCF.
OTHER LAWS AND REGULATIONS
TCF is subject to a wide array of other laws and regulations, both federal
and state, including, but not limited to, usury laws, the CRA and related
regulations, the Equal Credit Opportunity Act and Regulation B, Regulation D
reserve requirements, Regulation E Electronic Funds transfer requirements, the
Truth-in-Lending Act and Regulation Z, the Real Estate Settlement Procedures Act
and Regulation X, and the Truth-in-Savings Act and Regulation DD. TCF is also
subject to laws and regulations that may impose liability on lenders and owners
for clean-up costs and other costs stemming from hazardous waste located on
property securing real estate loans made by lenders or on real estate that is
owned by lenders following a foreclosure or otherwise. Although TCF's lending
procedures include measures designed to limit lender liability for hazardous
waste clean-up or other related liability, TCF has engaged in significant
commercial lending activity, and lenders may be held liable for clean up costs
relating to hazardous wastes under certain circumstances.
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TAXATION
FEDERAL TAXATION
Bad Debt Reserves
TCF files consolidated federal income tax returns and is an accrual basis
taxpayer. The TCF Banks are subject to federal income tax under the Internal
Revenue Code of 1986, as amended (the "Code") in the same general manner as
other corporations. Prior to 1996, savings institutions were subject to special
bad debt reserve rules and certain other rules. During this period, a savings
institution that held 60% or more of its assets in "qualifying assets" (as
defined in the Code) was permitted to maintain reserves for bad debts and to
make annual additions to such reserves that qualified as deductions from taxable
income.
Beginning in 1996, the favorable bad debt method described above was
repealed, putting savings institutions on the same tax bad debt method as
commercial banks. This legislation requires recapture of the amount of the tax
bad debt reserves to the extent that they exceed the adjusted base year reserve
(the "applicable excess reserves"). The applicable excess reserves are
recaptured over a six-year period. This recapture period can be deferred for a
period of up to two years to the extent that a certain residential lending test
is met. TCF has previously provided taxes for the applicable excess reserves.
IRS Audit History
The statute of limitations on TCF's consolidated federal tax return is
closed through 1995, with the exception of certain filed refund claims.
See "Financial Review -- Results of Operations - Income Taxes" on page 23,
Note 1 of Notes to Consolidated Financial Statements on pages 39 through 41 and
Note 12 of Notes to Consolidated Financial Statements on pages 49 and 50 of
TCF's 1999 Annual Report, incorporated herein by reference, for additional
information regarding TCF's income taxes.
STATE TAXATION
TCF and/or its subsidiaries currently file tax returns in all 50 states and
local tax returns in certain cities and other taxing jurisdictions. TCF's
primary banking activities are in the states of Minnesota, Illinois, Wisconsin,
Michigan and Colorado. The tax rates in those jurisdictions are 9.8%, 7.3%,
7.9%, 2.3% and 5%, respectively. The methods of filing, and the methods for
calculating taxable and apportionable income, vary depending upon the laws of
the taxing jurisdiction.
ITEM 2. PROPERTIES
OFFICES
At December 31, 1999, TCF owned the buildings and land for 109 of its bank
branch offices, owned the buildings but leased the land for 5 of its bank branch
offices and leased the remaining 224 bank branch offices, all of which are well
maintained. The properties related to the bank branch offices owned by TCF had a
depreciated cost of approximately $59.7 million at December 31, 1999. At
December 31, 1999, the aggregate net book value of leasehold improvements
associated with leased bank branch office facilities was $17.3 million. In
addition to the above-referenced branch offices, TCF owned and leased other
facilities with an aggregate net book value of $12.6 million at December 31,
1999. See Note 9 of Notes to Consolidated Financial Statements on pages 45 and
46 of TCF's 1999 Annual Report, incorporated herein by reference.
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ITEM 3. LEGAL PROCEEDINGS
From time to time, TCF is a party to legal proceedings arising out of its
general lending and operating activities. TCF is and expects to become engaged
in a number of foreclosure proceedings and other collection actions as part of
its loan collection activities. From time to time, borrowers have also brought
actions against TCF, in some cases claiming substantial amounts of damages. Some
financial services companies have recently been subjected to significant
exposure in connection with class actions and/or suits seeking punitive damages.
Among other possible developments, adverse decisions in litigation dealing with
ATM surcharge legislation, privacy concerns or pending litigation against Visa
and Mastercard affecting debit card fees could have an adverse impact on TCF.
Management, after review with its legal counsel, believes that the ultimate
disposition of its litigation will not have a material effect on TCF's financial
condition.
On November 2, 1993, TCF Minnesota filed a complaint in the United States
Court of Federal Claims seeking monetary damages from the United States for
breach of contract, taking of property without just compensation and deprivation
of property without due process. TCF Minnesota's claim is based on the
government's breach of contract in connection with TCF Minnesota's acquisitions
of certain savings institutions prior to the enactment of the Financial
Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA"), which
contracts allowed TCF Minnesota to treat the "supervisory goodwill" created by
the acquisitions as an asset that could be counted toward regulatory capital,
and provided for other favorable regulatory accounting treatment. The United
States has not yet answered TCF Minnesota's complaint. TCF Minnesota's complaint
involves approximately $80.3 million in supervisory goodwill.
In August 1995, Great Lakes Michigan filed with the United States Court
of Federal Claims a complaint seeking monetary damages from the United States
for breach of contract, taking of property without just compensation and
deprivation of property without due process. Great Lakes Michigan's claim is
based on the government's breach of contract in connection with Great Lakes
Michigan's acquisitions of certain savings institutions prior to the
enactment of FIRREA in 1989, which contracts allowed Great Lakes Michigan to
treat the "supervisory goodwill" created by the acquisitions as an asset that
could be counted toward regulatory capital, and provided for other favorable
regulatory accounting treatment. The United States has not yet answered Great
Lakes Michigan's complaint. Great Lakes Michigan's complaint involves
approximately $87.3 million in supervisory goodwill.
On July 1, 1996, the United States Supreme Court issued a decision
affirming the August 30, 1995 decision of the United States Court of Appeals for
the Federal Circuit, which decision had affirmed the Court of Federal Claims'
liability determinations in three other "supervisory goodwill" cases,
consolidated for review under the title WINSTAR CORP. v. UNITED STATES, 116
S.Ct. 2432 (1996). In rejecting the United States' consolidated appeal from the
Court of Federal Claims' decisions, the Supreme Court held in WINSTAR that the
United States had breached contracts it had entered into with the plaintiffs
which provided for the treatment of supervisory goodwill, created through the
plaintiffs' acquisitions of failed or failing savings institutions, as an asset
that could be counted toward regulatory capital. Two of the three cases
consolidated in the Supreme Court proceedings have since been tried before the
Court of Federal Claims on the issue of damages, and the third was settled
without trial. In one of the cases that proceeded to a damages trial, GLENDALE
FEDERAL BANK, FSB v. UNITED STATES, 43 Fed. Cl. 390 (1999), the Court of Federal
Claims issued a decision on April 9, 1999, awarding the plaintiff in that case
$908,948,000 in restitution and non-overlapping reliance damages. The GLENDALE
damages decision has been appealed to the United States Court of Appeals for the
Federal Circuit. The other case which went to trial was settled in June 1998.
On December 22, 1997, the Court of Federal Claims issued a decision finding
the existence of contracts and governmental breaches of those contracts in four
other "supervisory goodwill" cases, consolidated for purposes of that decision
only under the title CALIFORNIA FEDERAL BANK v. UNITED STATES, 39 Fed. Cl. 753
(1997). In reaching its decision, the Court of Federal Claims rejected a number
of "common issue" defenses that the government has raised in a number of
"supervisory goodwill" cases. In November 1998, the Court of Federal Claims
issued another decision in the CALIFORNIA FEDERAL case prohibiting the plaintiff
in that case from offering evidence as to a lost profits theory of damages. A
two-month trial regarding the plaintiff's other damages theories in that case
was concluded in early March 1999. On April 21, 1999, the Court of Federal
Claims entered judgment for the plaintiff in CALIFORNIA FEDERAL, and awarded the
plaintiff $22,966,523.42 in damages under a cost of replacement capital theory.
CALIFORNIA FEDERAL BANK v. UNITED STATES, 43 Fed Cl. 445 (1999). On May 6, 1999,
the Court denied plaintiff's motion for reconsideration of its damages decision
in the CALIFORNIA FEDERAL case. The CALIFORNIA FEDERAL decision has been
appealed to the United States Court of Appeals for the Federal Circuit.
15
<PAGE>
On September 30, 1999, the Court of Federal Claims issued a damages
decision in another "supervisory goodwill" case, LASALLE TALMAN BANK vs. UNITED
STATES, awarding the plaintiff $5,008,700 in damages designed to reimburse the
plaintiff for certain "incidental" expenses caused by the government's breach.
The Court rejected all of the plaintiff's other damages claims. The LASALLE
TALMAN opinion has been appealed to the United States Court of Appeals for the
Federal Circuit. In addition, the Court of Federal Claims has issued favorable
liability decisions to the plaintiffs in several other "supervisory goodwill"
cases, and a number of such cases are currently engaged in or about to commence
trials on damage issues.
The government has indicated that it will have a number of affirmative
defenses against goodwill litigation filed against it. The TCF Minnesota and
Great Lakes Michigan actions involve a variety of different types of
transactions, contracts and contract provisions. There can be no assurance that
the U.S. Supreme Court decision in WINSTAR or the Court of Federal Claims'
recent decisions in GLENDALE, CALIFORNIA FEDERAL, LASALLE TALMAN and other cases
will mean that a similar result would be obtained in the actions filed by TCF
Minnesota and Great Lakes Michigan. There also can be no assurance that the
government will be determined liable in connection with the loss of supervisory
goodwill by either TCF Minnesota or Great Lakes Michigan or, even if a
determination favorable to TCF Minnesota or Great Lakes Michigan is made on the
issue of the government's liability, that a measure of damages will be employed
that will permit any recovery on TCF Minnesota's or Great Lakes Michigan's
claim. Because of the complexity of the issues involved in both the liability
and damages phases of this litigation, and the usual risks associated with
litigation, the Company cannot predict the outcome of TCF Minnesota's or Great
Lakes Michigan's cases, and investors should not anticipate any recovery.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
TCF's common stock trades on the New York Stock Exchange under the symbol
"TCB." The following table sets forth the high and low prices and dividends
declared for TCF's common stock. The stock prices represent the high and low
sale prices for the common stock on the New York Stock Exchange Composite Tape,
as reported by THE WALL STREET JOURNAL.
<TABLE>
<CAPTION>
Dividends
High Low Declared
------------ ------------ ---------
<S> <C> <C> <C>
1999:
First Quarter $27 1/4 $21 11/16 $.1625
Second Quarter 30 11/16 25 1/8 .1875
Third Quarter 29 3/8 26 5/8 .1875
Fourth Quarter 30 9/16 23 3/4 .1875
1998:
First Quarter $35 1/8 $29 1/4 $.125
Second Quarter 37 1/4 28 3/8 .1625
Third Quarter 32 7/16 19 7/8 .1625
Fourth Quarter 25 5/8 15 13/16 .1625
</TABLE>
As of March 17, 2000, there were approximately 10,800 record holders of
TCF's common stock.
The Board of Directors of TCF has not adopted a formal dividend policy. The
Board of Directors intends to continue its present practice of paying quarterly
cash dividends on TCF's common stock as justified by the financial condition of
TCF. The declaration and amount of future dividends will depend on circumstances
existing at the time, including TCF's earnings, financial condition and capital
requirements, the cash available to pay such dividends (derived mainly from
dividends and distributions from the TCF Banks), as well as regulatory and
contractual limitations and such other factors as the Board of Directors may
deem relevant. In general, the TCF Banks may not
16
<PAGE>
declare or pay a dividend to TCF in excess of 100% of their net profits for
that year combined with their retained net profits for the preceding two
calendar years without prior approval of the OCC. Restrictions on the ability
of the TCF Banks to pay cash dividends or possible diminished earnings of the
indirect subsidiaries of the Holding Company may limit the ability of the
Holding Company to pay dividends in the future to holders of its common
stock. See "REGULATION -- Regulatory Capital Requirements," "REGULATION --
Restrictions on Distributions" and Note 13 of Notes to Consolidated Financial
Statements on pages 50 and 51 of TCF's 1999 Annual Report, incorporated
herein by reference. Federal income tax rules may also limit dividend
payments under certain circumstances. See "TAXATION," and Note 12 of Notes to
Consolidated Financial Statements on pages 49 and 50 of TCF's 1999 Annual
Report, incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The Other Financial Data on pages 63 through 67 of TCF's 1999 Annual
Report, presenting selected financial data, is incorporated herein by reference
and should be read in conjunction with the Consolidated Financial Statements and
related notes appearing on pages 34 through 62 of TCF's 1999 Annual Report,
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Financial Review on pages 17 through 33 of TCF's 1999 Annual Report,
presenting management's discussion and analysis of TCF's financial condition and
results of operations, is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The quantitative and qualitative disclosures about market risk set forth
on pages 30 through 32 of TCF's 1999 Annual Report are incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements, Notes to Consolidated Financial
Statements, Independent Auditors' Report and Other Financial Data set forth on
pages 34 through 67 of TCF's 1999 Annual Report are incorporated herein by
reference. See Index to Consolidated Financial Statements on page 20 of this
report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding directors and executive officers of TCF is set forth
on pages 3 through 13 and pages 15 through 18 of TCF's definitive proxy
statement dated March 30, 2000 and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding compensation of directors and executive officers of
TCF is set forth on page 7, pages 11 through 13 and pages 15 through 18 of TCF's
definitive proxy statement dated March 30, 2000 and is incorporated herein by
reference.
17
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding ownership of TCF's common stock by TCF's directors,
executive officers, and certain other shareholders is set forth on pages 8 and 9
of TCF's definitive proxy statement dated March 30, 2000 and is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and transactions between TCF
and management is set forth on page 6 of TCF's definitive proxy statement dated
March 30, 2000 and is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND EXHIBITS
1. Financial Statements
See Index to Consolidated Financial Statements on page 20 of this
report.
2. Financial Statement Schedules
All schedules to the Consolidated Financial Statements normally
required by the applicable accounting regulations are omitted
since the required information is included in the Consolidated
Financial Statements or the Notes thereto or is not applicable.
3. Exhibits
See Index to Exhibits on page 20 of this report.
(b) REPORTS ON FORM 8-K
None.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or Section 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this Report to
be signed on its behalf by the undersigned, thereunto duly authorized.
TCF FINANCIAL CORPORATION
Registrant
By /s/ WILLIAM A. COOPER
--------------------------
William A. Cooper
Chairman of the Board and
Chief Executive Officer
Dated: March 24, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/s/ WILLIAM A. COOPER Chairman of the Board, Chief Executive March 24, 2000
- ----------------------- Officer and Director
William A. Cooper
/s/ THOMAS A. CUSICK Vice Chairman of the Board, Chief Operating March 24, 2000
- ------------------------------ Officer and Director
Thomas A. Cusick
/s/ LYNN A. NAGORSKE President and Director March 24, 2000
- ------------------------------
Lynn A. Nagorske
/s/ NEIL W. BROWN Executive Vice President, Chief Financial March 24, 2000
- ------------------------------ Officer and Treasurer (Principal
Neil W. Brown Financial Officer)
/s/ DAVID M. STAUTZ Senior Vice President and Controller March 24, 2000
- ------------------------------ (Principal Accounting Officer)
David M. Stautz
/s/ WILLIAM F. BIEBER Director March 24, 2000
- ------------------------------
William F. Bieber
/s/ RUDY BOSCHWITZ Director March 24, 2000
- ------------------------------
Rudy Boschwitz
/s/ JOHN M. EGGEMEYER III Director March 24, 2000
- ------------------------------
John M. Eggemeyer III
/s/ ROBERT E. EVANS Director March 24, 2000
- ------------------------------
Robert E. Evans
/s/ LUELLA G. GOLDBERG Director March 24, 2000
- ------------------------------
Luella G. Goldberg
/s/ GEORGE G. JOHNSON Director March 24, 2000
- ------------------------------
George G. Johnson
/s/ DANIEL F. MAY Director March 24, 2000
- ------------------------------
Daniel F. May
/s/ THOMAS J. MCGOUGH Director March 24, 2000
- ------------------------------
Thomas J. McGough
/s/ GERALD A. SCHWALBACH Director March 24, 2000
- ------------------------------
Gerald A. Schwalbach
/s/ RALPH STRANGIS Director March 24, 2000
- ------------------------------
Ralph Strangis
</TABLE>
19
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
The following consolidated financial statements of TCF and its subsidiaries,
included in TCF's 1999 Annual Report, are incorporated herein by reference in
this report:
<TABLE>
<CAPTION>
PAGE
IN 1999
DESCRIPTION ANNUAL REPORT
----------- -------------
<S> <C>
Independent Auditors' Report 62
Consolidated Statements of Financial Condition at
December 31, 1999 and 1998 34
Consolidated Statements of Operations for each of
the years in the three-year period ended
December 31, 1999 35
Consolidated Statements of Stockholders' Equity
for each of the years in the three-year period
ended December 31, 1999 36
Consolidated Statements of Cash Flows for each of
the years in the three-year period ended
December 31, 1999 38
Notes to Consolidated Financial Statements 39
Other Financial Data 63
</TABLE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NO.
--- ----------- ---
<S> <C> <C>
3(a) Restated Certificate of Incorporation of TCF Financial Corporation, as amended and restated
through April 29, 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3(b) Restated Bylaws of TCF Financial Corporation, as amended and restated through October 25,
1999. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4(a) Rights Agreement, dated as of May 12, 1999, between TCF Financial Corporation and BankBoston,
N.A. [incorporated by reference to Exhibit 1 to TCF Financial Corporation's Registration
Statement on Form 8-A, No. 001-10253 (filed May 24, 1999)]
20
<PAGE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NO.
--- ----------- ---
<S> <C> <C>
4(b) Indenture dated July 1, 1996 relating to 9.50% Senior Notes due 2003 between Winthrop
Resources Corporation ("Winthrop") and Norwest Bank Minnesota, National Association, as
Trustee [incorporated by reference to Exhibit 4.5 to Winthrop's Registration Statement on
Form S-2, File No. 333-04539 (filed May 24, 1996)]; as amended by First Supplemental
Indenture dated as of June 20, 1997 by and among Winthrop, TCF Financial Corporation and
Norwest Bank Minnesota, National Association, as Trustee [incorporated by reference to
Exhibit 4(d) to TCF Financial Corporation's Amendment No. 1 to Registration Statement on
Form S-4, File No. 333-25905 (filed May 21, 1997)]
4(c) Copies of instruments with respect to long-term debt will be furnished to the Securities
and Exchange Commission upon request.
10(a) Stock Option and Incentive Plan of TCF Financial Corporation, as amended [incorporated
by reference to Exhibit 10.1 to TCF Financial Corporation's Registration Statement on
Form S-4, No. 33-14203 (filed May 12, 1987)]; Second Amendment, Third Amendment and
Fourth Amendment to the Plan [incorporated by reference to Exhibit 10(a) to TCF Financial
Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1987,
No. 0-16431]; Fifth Amendment to the Plan [incorporated by reference to Exhibit 10(a) to
TCF Financial Corporation's Annual Report on Form 10-K for the fiscal year ended
December 31, 1989, No. 001-10253]; amendment dated January 21, 1991 [incorporated by
reference to Exhibit 10(a) to TCF Financial Corporation's Annual Report on Form 10-K
for the fiscal year ended December 31, 1990, No. 001-10253]; and as further amended by
amendment dated January 28, 1992 and amendment dated March 23, 1992 (effective April 15,
1992) [incorporated by reference to Exhibit 10(a) to TCF Financial Corporation's Annual
Report on Form 10-K for the fiscal year ended December 31, 1991, No. 001-10253]
10(b) TCF Financial 1995 Incentive Stock Program, as amended October 1, 1995 [incorporated by
reference to Exhibit 10(b) to TCF Financial Corporation's Annual Report on Form 10-K for
the fiscal year ended December 31, 1995, No. 001-10253]; as amended October 22, 1996
[incorporated by reference to Exhibit 10(a) to TCF Financial Corporation's Annual Report
on Form 10-K for the fiscal year ended December 31, 1996, No. 001-10253]; and as further
amended on May 11, 1999 [incorporated by reference to Exhibit 10(b) to TCF Financial
Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999, No.
001-10253]
10(c) Amended and Restated TCF Financial Corporation Executive Deferred Compensation Plan as
amended and restated effective as of January 1, 2000. . . . . . . . . . . . . . . . . . . .
10(d) Amended and Restated Trust Agreement for TCF Financial Corporation Executive Deferred
Compensation Plan effective September 1, 1998; amendment adopted effective November 1,
1998 [incorporated by reference to Exhibit 10(d) to TCF Financial Corporation's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1998, No. 001-10253]
10(e)* Employment Agreement of William A. Cooper, dated July 1, 1996 [incorporated by reference
to Exhibit 10(a) to TCF Financial Corporation's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1996, No. 001-10253]; as amended March 1, 1997 [incorporated by
reference to Exhibit 10(e) to TCF Financial Corporation's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996, No. 001-10253]
10(f)* Change in Control Agreement of William A. Cooper, dated July 1, 1996 [incorporated by
reference to Exhibit 10(b) to TCF Financial Corporation's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1996, No. 001-10253]
21
<PAGE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NO.
--- ----------- ---
<S> <C> <C>
10(g)* Severance Agreement of Thomas A. Cusick, dated August 22, 1988 [incorporated by reference
to Exhibit 19(c) to TCF Financial Corporation's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1988, No. 0-16431]; amendment thereto dated December 4, 1990
[incorporated by reference to Exhibit 10(f) to TCF Financial Corporation's Annual Report
on Form 10-K for the fiscal year ended December 31, 1990, No. 001-10253]; and amendment
dated October 24, 1995 [incorporated by reference to Exhibit 10(f) to TCF Financial
Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1995,
No. 001-10253]
10(h)* Severance Agreement of William E. Dove, dated August 22, 1988 [incorporated by reference
to Exhibit 19(d) to TCF Financial Corporation's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1988, No. 0-16431]; amendment thereto dated December 4, 1990
[incorporated by reference to Exhibit 10(g) to TCF Financial Corporation's Annual Report
on Form 10-K for the fiscal year ended December 31, 1990, No. 001-10253]; and amendment
thereto dated October 24, 1995 [incorporated by reference to Exhibit 10(g) to TCF Financial
Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, No.
001-10253]
10(i)* Severance Agreement of Lynn A. Nagorske, dated August 22, 1988 [incorporated by reference to
Exhibit 19(f) to TCF Financial Corporation's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1988, No. 0-16431]; amendment thereto dated December 4, 1990
[incorporated by reference to Exhibit 10(i) to TCF Financial Corporation's Annual Report on
Form 10-K for the fiscal year ended December 31, 1990, No. 001-10253]; and amendment thereto
dated October 24, 1995 [incorporated by reference to Exhibit 10(i) to TCF Financial
Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, No.
001-10253]
10(j)* Severance Agreement of Gregory J. Pulles, dated August 23, 1988 [incorporated by reference to
Exhibit 19(g) to TCF Financial Corporation's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1988, No. 0-16431]; amendment thereto dated December 4, 1990 [incorporated by
reference to Exhibit 10(j) to TCF Financial Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1990, No. 001-10253]; and amendment thereto dated October 24, 1995
[incorporated by reference to Exhibit 10(j) to TCF Financial Corporation's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995, No. 001-10253]
10(k)* Severance Agreement of Barry N. Winslow, dated December 30, 1988 and amendment thereto dated
December 4, 1990 [incorporated by reference to Exhibit 10(n) to TCF Financial Corporation's
Annual Report on Form 10-K for the fiscal year ended December 31, 1990, No. 001-10253]; and
amendment thereto dated October 24, 1995 [incorporated by reference to Exhibit 10(m) to TCF
Financial Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1995,
No. 001-10253]
10(l) Supplemental Employee Retirement Plan, as amended and restated effective July 21, 1997
[incorporated by reference to Exhibit 10(m) to TCF Financial Corporation's Annual Report on
Form 10-K for the fiscal year ended December 31, 1997, No. 001-10253]; as amended effective
September 30, 1998 [incorporated by reference to Exhibit 10(m) to TCF Financial Corporation's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1998, No. 001-10253]; and
as further amended on May 11, 1999 [incorporated by reference to Exhibit 10(m) to TCF Financial
Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999,
No. 001-10253]
22
<PAGE>
EXHIBIT PAGE
NO. DESCRIPTION NO.
--- ----------- ---
<S> <C> <C>
10(m) Trust Agreement for TCF Financial Corporation Supplemental Employee Retirement Plan, dated
August 21, 1991 [incorporated by reference to Exhibit 10.16 to TCF Financial Corporation's
Registration Statement on Form S-2, filed November 15, 1991, No. 33-43988]; as amended on
October 20, 1997 [incorporated by reference to Exhibit 10(n) to TCF Financial Corporation's
Annual Report on Form 10-K for the fiscal year ended December 31, 1997, No. 001-10253]
10(n) TCF Financial Corporation Senior Officer Deferred Compensation Plan as amended and restated
effective as of January 1, 2000. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10(o) Amended and Restated Trust Agreement for TCF Financial Corporation Senior Officer Deferred
Compensation Plan effective September 1, 1998; amendment adopted effective November 1, 1998
[incorporated by reference to Exhibit 10(p) to TCF Financial Corporation's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1998, No. 001-10253]
10(p) Directors Stock Program [incorporated by reference to Program filed with registrant's
definitive proxy statement dated March 22, 1996, No. 001-10253]; amendment adopted June 20,
1998 [incorporated by reference to Exhibit 10(q) to TCF Financial Corporation's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1998, No. 001-10253]
10(q) Management Incentive Plan-Executive [incorporated by reference to Plan filed with registrant's
definitive proxy statement dated March 16, 1994, No. 001-10253]; and 1995 Plan Acknowledgment
[incorporated by reference to Exhibit 10(s) to TCF Financial Corporation's Annual Report
on Form 10-K for the fiscal year ended December 31, 1995, No. 001-10253]; 1996 Management
Incentive Plan-Executive [incorporated by reference to Exhibit 10(t) to TCF Financial
Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, No.
001-10253]; 1997 Management Incentive Plan-Executive [incorporated by reference to Exhibit
10(t) to TCF Financial Corporation's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, No. 001-10253]; and 1998 Management Incentive Plan-Executive [incorporated
by reference to Exhibit 10(s) to TCF Financial Corporation's Annual Report on Form 10-K for
the fiscal year ended December 31, 1997, No. 001-10253]; and 1999 Management Incentive
Plan-Executive [incorporated by reference to Exhibit 10(r) to TCF Financial Corporation's
Annual Report on Form 10-K for the fiscal year ended December 31, 1998, No. 001-10253]
10(r) 1996 Performance-Based Incentive Policy [incorporated by reference to Policy filed with
registrant's definitive proxy statement dated March 22, 1996, No. 001-10253]; Incentive
Compensation 1997 Plan [incorporated by reference to Plan filed with registrant's definitive
proxy statement dated March 17, 1997, No. 001-10253]; and 1999 Performance-Based Incentive
Policy (approved by shareholders at the Annual Meeting on May 11, 1999) [incorporated by
reference to Exhibit 10(s) to TCF Financial Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998, No. 001-10253]
10(s) Supplemental Pension Agreement with Robert E. Evans, dated July 9, 1991 [incorporated by
reference to Exhibit 10.22 to TCF Financial Corporation's Registration Statement on Form S-4,
No. 33-57290 (filed January 22, 1993)]
10(t)* Employment Agreement of Robert J. Delonis, dated February 9, 1995 [incorporated by reference
to Exhibit 10(v) to TCF Financial Corporation's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994, No. 001-10253];, as amended December 18, 1995 [incorporated by
reference to Exhibit 10(w) to TCF Financial Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995, No. 001-10253]; as amended January 23, 1998 [incorporated
by reference to Exhibit 10(u) to TCF Financial Corporation's Annual Report on Form 10-K for
the fiscal year ended December 31, 1997, No. 001-10253]
23
<PAGE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NO.
--- ----------- ---
<S> <C> <C>
10(u) TCF Directors Deferred Compensation Plan [incorporated by reference to Plan filed with registrant's
definitive proxy statement dated March 15, 1995, No. 001-10253]; as amended October 22, 1996
[incorporated by reference to Exhibit 10(x) to TCF Financial Corporation's Annual Report on Form 10-K
for the year ended December 31, 1996, No. 001-10253]; amendment adopted effective September 30, 1998
[incorporated by reference to Exhibit 10(v) to TCF Financial Corporation's Quarterly Report on Form
10-Q for the quarter ended September 30, 1998, No. 001-10253]; and as further amended on May 11, 1999
[incorporated by reference to Exhibit 10(v) to TCF Financial Corporation's Quarterly Report on Form
10-Q for the quarter ended September 30, 1999, No. 001-10253]
10(v) TCF Directors Retirement Plan dated October 24, 1995 [incorporated by reference to Exhibit 10(y) to
TCF Financial Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1995,
No. 001-10253]
10(w)* Employment Agreement of David Mackiewich dated September 5, 1997 [incorporated by reference to Exhibit
10(y) to TCF Financial Corporation's Annual Report on Form 10-K for the fiscal year ended December 31,
1997, No. 001-10253]; as amended on August 18, 1998 [incorporated by reference to Exhibit 10(y) to TCF
Financial Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1998,
No. 001-10253]; and as amended effective March 31, 1999. . . . . . . . . . . . . . . . . . . . . . . .
11 Computation of earnings per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13 TCF Financial Corporation 1999 Annual Report (portions incorporated by reference) . . . . . . . . . .
21 Subsidiaries of TCF Financial Corporation (as of March 15, 2000) . . . . . . . . . . . . . . . . . . .
23 Consent of KPMG LLP dated March 24, 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . .
27 Financial Data Schedules . . . . . . . . . . . . . . . . . . . . . . . . . (filed electronically)
</TABLE>
* Executive Contract
24
<PAGE>
Exhibit 3(a)
RESTATED CERTIFICATE OF INCORPORATION
OF
TCF FINANCIAL CORPORATION
As amended through April 29, 1998.
<PAGE>
RESTATED CERTIFICATE OF INCORPORATION
OF
TCF FINANCIAL CORPORATION
(INCORPORATED APRIL 28, 1987)
Pursuant to Section 245
of the General Corporation Law
of Delaware
TCF Financial Corporation, a corporation organized and existing under the laws
of the State of Delaware, hereby certifies as follows:
ARTICLE 1. CORPORATE TITLE; RESTATEMENT
The name of the Corporation is TCF Financial Corporation. The date of
filing of its original Certificate of Incorporation with the Secretary of State
was April 28, 1987 with Restated Certificates of Incorporation filed on June 29,
1987 and August 11, 1987. This Restatement was duly adopted by the Board of
Directors of TCF Financial Corporation pursuant to Section 245 of the General
Corporation Law of Delaware (the `Delaware Corporation Law"). This restatement
only restates and integrates and does not further amend the provisions of the
corporation's certificate of incorporation as heretofore amended or
supplemented, and there is no discrepancy between those provisions and the
provisions of this Restated Certificate.
ARTICLE 2. ADDRESS
The address of the Corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at such
address is The Corporation Trust Company.
ARTICLE 3. PURPOSE
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the Delaware Corporation
Law.
-1-
<PAGE>
ARTICLE 4. CAPITAL STOCK
A. AUTHORIZED SHARES
The total number of shares of all classes of stock which the
Corporation shall have the authority to issue is three hundred ten million
(310,000,000) shares, $.01 par value, divided into two classes of which two
hundred eighty million (280,000,000) shares shall be Common Stock (hereinafter
the "Common Stock") and thirty million (30,000,000) shares shall be Preferred
Stock (hereinafter the "Preferred Stock"). The number of authorized shares of
Preferred Stock may be increased or decreased (but not below the number of
shares thereof then outstanding) by the affirmative vote of the holders of a
majority of the stock of the Corporation entitled to vote without a separate
vote of the holders of Preferred Stock as a class.
B. COMMON STOCK
Subject to the rights of the holders of shares of any series of the
Preferred Stock, and except as may be expressly provided with respect to the
Preferred Stock or any series thereof herein or in a resolution of the Board of
Directors establishing such series or by law:
(1) the holders of shares of Common Stock shall be entitled to
receive, when and if declared by the Board of Directors, out of the assets of
the Corporation which are by law available therefor, dividends payable either in
cash, in property, or in shares of the Corporation's capital stock.
(2) Each share of Common stock shall be entitled to one vote
for the election of directors and on all other matters requiring stockholder
action.
C. PREFERRED STOCK
The designations and the powers, preferences and rights, and the
qualifications, limitations or restrictions thereof, of the Preferred Stock
shall be as follows:
(1) The Board of Directors is expressly authorized at any
time, and from time to time, to provide for the issuance of shares of Preferred
Stock in one or more series, with such voting powers, full or limited
(including, without limitation, more than one vote, less than one vote or one
vote per share and the ability to vote separately as a class or together with
all or some of the other classes or series of capital stock on all or certain of
the matters to be voted on by the stockholders of the Corporation), or no voting
powers, and with such designations, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof, as shall be stated and expressed in the resolution or
resolutions providing for the issuance thereof adopted by the Board of
Directors, including, but not limited to, the following:
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(a) the designation and number of shares constituting
such series;
(b) the dividend rate or rates of such series, if
any, or the manner of determining such rate or rates, if any, the conditions and
dates upon which such dividends shall be payable, the preference or relation
which such dividends shall bear to the dividends payable on any other class or
classes or of any other series of capital stock and whether such dividends shall
be cumulative or non-cumulative, and, if cumulative, from which date or dates;
(c) whether the shares of such series shall be
subject to redemption by the Corporation, and, if made subject to such
redemption, the times, prices and other terms and conditions of such redemption;
(d) the terms and amount of any sinking fund provided
for the purchase or redemption of the shares of such series;
(e) whether the shares of such series shall be
convertible into or exchangeable for shares of any other class or classes or of
any other series of any class or classes of capital stock of the Corporation,
and, if provision be made for conversion or exchange, the time, prices, rates,
adjustments and other terms and conditions of such conversion or exchange;
(f) the extent, if any, to which the holders of the
shares of such series shall be entitled to vote as a class or otherwise, and if
so entitled, the number of votes to which such holder is entitled, with respect
to the election of directors or otherwise;
(g) the restrictions, if any, on the issue or reissue
of any additional series of Preferred Stock; and
(h) the rights, if any, of the holders of the shares
of such series in the event of voluntary or involuntary liquidation, dissolution
or winding up.
(2) Subject to any limitations or restrictions stated in the
resolution or resolutions of the Board of Directors originally fixing the number
of shares constituting a series, the Board of Directors may by resolution or
resolutions likewise adopted increase or decrease (but not below the number of
shares of the series then outstanding) the number of shares of the series
subsequent to the issue of that series, and in case the number of shares of any
series shall be so decreased the shares constituting the decrease shall resume
that status which they had prior to the adoption of the resolution originally
fixing the number of shares.
ARTICLE 5. ACQUISITION OF STOCK
[Omitted]
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ARTICLE 6. INCORPORATOR
[Omitted]
ARTICLE 7. BOARD OF DIRECTORS
A. NUMBER OF DIRECTORS
The business and affairs of the Corporation shall be managed by or
under the direction of a board of directors (the "Board of Directors"). The
authorized number of directors shall consist of not fewer than seven nor more
than twenty-five directors. Within such limits, the exact number of directors
shall be fixed from time to time pursuant to a resolution adopted by a majority
of the Continuing Directors (as defined hereinafter in Article 8).
B. ELECTION OF DIRECTORS
Except as otherwise designated pursuant to the provisions of Article 4
relating to the rights of the holders of any class or series of Preferred Stock,
the directors of the Corporation shall be divided into three classes, as nearly
equal in number as possible: the first class, the second class and the third
class. Each director shall serve for a term ending on the third annual meeting
following the annual meeting at which such director was elected; PROVIDED,
HOWEVER, that the directors first elected to the first class shall serve for a
term ending upon the election of directors at the annual meeting next following
the end of the calendar year 1987, the directors first elected to the second
class shall serve for a term ending upon the election of directors at the second
annual meeting next following the end of the calendar year 1987, and the
directors first elected to the third class shall serve for a term ending upon
the election of directors at the third annual meeting next following the end of
the calendar year 1987.
At each annual election, the successors to the class of directors whose
term expires at that time shall be elected by the stockholders to hold office
for a term of three years (or until their successors are elected and qualified)
to succeed those directors whose term expires, so that the term of one class of
directors shall expire each year, unless, by reason of any intervening changes
in the authorized number of directors, the Board of Directors shall have
designated one or more directorships whose term then expires as directorships of
another class in order more nearly to achieve equality of number of directors
among the classes of directors.
Notwithstanding the requirement that the three classes of directors
shall be as nearly equal in number of directors as possible, in the event of any
change in the authorized number of directors, each director then continuing to
serve as such shall nevertheless continue as a director of the class of which he
or she is a member until the expiration of his or her current term, or his or
her prior resignation, disqualification, or removal from office.
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C. NEWLY CREATED DIRECTORSHIPS AND VACANCIES
Except as otherwise designated pursuant to the provisions of Article 4
relating to the rights of the holders of any class or series of Preferred Stock,
any vacancies on the Board of Directors resulting from death, resignation,
retirement, disqualification, removal from office or other cause shall be filled
by the affirmative vote of a majority of the Continuing Directors (as defined
hereinafter in Article 8), or if there be no Continuing Directors, by the
affirmative vote of a majority of directors then in office, although less than a
quorum, or by the sole remaining director, or, in the event of the failure of
the Continuing Directors, the directors, or the sole remaining director so to
act, by the stockholders at the next election of directors; PROVIDED THAT, if
the holders of any class or classes of stock or series thereof of the
Corporation, voting separately, are entitled to elect one or more directors,
vacancies and newly created directorships of such class or classes or series may
be filled by a majority of the directors elected by such class or classes or
series thereof then in office, or by a sole remaining director so elected.
Directors so chosen shall hold office for a term expiring at the annual meeting
of stockholders at which the term of the class to which they have been elected
expires. A director elected to fill a vacancy by reason of an increase in the
number of directorships shall be elected by a majority vote of the directors
then in office, although less than a quorum of the Board of Directors, to serve
until the next election of the class for which such director shall have been
chosen. If the number of directors is changed, any increase or decrease shall be
apportioned among the three classes so as to make all classes as nearly equal in
number as possible. If, consistent with the preceding requirement, the increase
or decrease may be allocated to more than one class, the increase or decrease
may be allocated to any such class the Board of Directors selects in its
discretion. No decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director.
D. REMOVAL
A director may be removed only for cause, as determined by the
affirmative vote of the holders of at least a majority of the shares then
entitled to vote in an election of directors, which vote may only be taken at a
meeting of stockholders (and not by written consent), the notice of which
meeting expressly states such purpose. Cause for removal shall be deemed to
exist only if the director whose removal is proposed has been convicted of a
felony by a court of competent jurisdiction or has been adjudged by a court of
competent jurisdiction to be liable for gross negligence or misconduct in the
performance of such director's duty to the Corporation and such adjudication is
no longer subject to direct appeal.
ARTICLE 8. CERTAIN BUSINESS COMBINATIONS
A. HIGHER VOTE REQUIRED FOR CERTAIN BUSINESS COMBINATIONS
In addition to any affirmative vote of holders of a class or series of
capital stock of the Corporation required by law or the provisions of this
Certificate of Incorporation, and except as otherwise expressly provided in
Paragraph B of this Article 8, a Business Combination (as hereinafter defined)
with, or upon a proposal by, a Related Person (as hereinafter defined)
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shall be approved only upon the affirmative vote of the holders of at least
eighty percent (80%) of the Voting Stock (as hereinafter defined) of the
Corporation voting together as a single class, excluding all shares of Voting
Stock beneficially owned or controlled by a Related Person. Such affirmative
vote shall be required notwithstanding the fact that no vote may be required by
law or regulation, or that a lesser percentage may be specified, by law or
regulation.
B. WHEN HIGHER VOTE IS NOT REQUIRED
The provisions of Paragraph A of this Article 8 shall not be applicable
to any particular Business Combination and such Business Combination shall
require only such affirmative vote as is required by law, regulation or any
other provision of this Certificate of Incorporation, if all of the conditions
specified in any one of the following Subparagraphs (1), (2), or (3) are met:
(1) Approval by directors. The Business Combination has been
approved by a vote of a majority of the Continuing Directors (as hereinafter
defined); or
(2) Combination with subsidiary. The Business Combination is
solely between the Corporation and a direct or indirect subsidiary of the
Corporation and such Business Combination does not have the direct or indirect
effect set forth in Paragraph C(2)(e) of this Article 8; or
(3) Price and procedural conditions. The proposed Business
Combination will be consummated within three years after the date the Related
Person became a Related Person (the "Determination Date") and all of the
following conditions have been met:
(a) The aggregate amount of cash and fair market
value (as of the date of the consummation of the Business Combination) of
consideration other than cash, to be received per share of Common Stock in such
Business Combination by holders thereof shall be at least equal to the highest
of the following: (i) the highest per share price (with appropriate adjustments
for recapitalizations, reclassifications (including stock splits and reverse
stock splits), and stock dividends), including any brokerage commissions,
transfer taxes and soliciting dealers' fees, paid by the Related Person for any
shares of Common Stock acquired by it, including those shares acquired by the
Related Person before the Determination Date, or (ii) the fair market value of
the common stock of the Corporation (as determined by the Continuing Directors)
on the date the Business Combination is first proposed (the "Announcement
Date").
(b) The aggregate amount of cash and fair market
value (as of the date of the consummation of the Business Combination) of
consideration other than cash, to be received per share of any class or series
of Preferred Stock in such Business Combination by holders thereof shall be at
least equal to the higher of the following: (i) the highest per share price
(with appropriate adjustments for recapitalizations, reclassifications
(including stock splits and reverse stock splits), and stock dividends),
including any brokerage commissions,
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transfer taxes and soliciting dealers' fees, paid by the Related Person for any
shares of such class or series of Preferred Stock acquired by it, including
those shares acquired by the Related Person before the Determination Date;
(ii) the fair market value of such class or series of Preferred Stock of the
Corporation (as determined by a majority of the Continuing Directors) on the
Announcement Date; and (iii) the highest preferential amount per share of such
class or series of Preferred Stock to which the holders thereof would be
entitled in the event of voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Corporation (regardless of whether the Business
Combination to be consummated constitutes such an event).
(c) The consideration to be received by holders of a
particular class or series of outstanding Common or Preferred Stock shall be in
cash or in the same form as the Related Person has previously paid for shares of
such class or series of stock. If the Related Person has paid for shares of any
class or series of stock with varying forms of consideration, the form of
consideration given for such class of series of stock in the Business
Combination shall be either cash or the form used to acquire the largest number
of shares of such class or series of stock previously acquired by it.
(d) No Extraordinary Event (as hereinafter defined)
occurs after the Related Person has become a Related Person and prior to the
consummation of the Business Combination.
(e) A proxy or information statement describing the
proposed Business Combination and complying with the requirements of the
Securities Exchange Act of 1934 and the rules and regulations thereunder (or any
subsequent provisions replacing such Act, rules or regulations) is mailed to
stockholders of the Corporation at least 30 days prior to the consummation of
such Business Combination (whether or not such proxy or information statement is
required pursuant to such Act or subsequent provisions, although such proxy or
information statement need be filed with the Securities and Exchange Commission
only if a filing is required by such Act or subsequent provisions) and shall
contain at the front thereof in a prominent place the recommendations, if any,
of a majority of the Continuing Directors as to the advisability or
inadvisability of the Business Combination and of any investment banking firm
selected by a majority of the Continuing Directors as to the fairness of the
Business Combination from the point of view of the stockholders of the
Corporation other than the Related Person.
C. CERTAIN DEFINITIONS
For purposes of this Article 8, and such other Articles of this
Certificate of Incorporation that specifically incorporate by reference the
definitions contained in this Article 8:
(1) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 under the Securities Exchange Act
of 1934 is in effect on January 1, 1987.
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(2) "Business Combination" shall mean any of the following
transactions, when entered into by the Corporation or a direct or indirect
subsidiary of the Corporation with, or upon a proposal by, a Related Person:
(a) the acquisition, merger or consolidation of the
Corporation or any direct or indirect subsidiary of the Corporation; or
(b) the sale, lease, exchange, mortgage, pledge,
transfer or other disposition (in one or a series of transactions) of any assets
of the Corporation or any direct or indirect subsidiary of the Corporation
having an aggregate fair market value of $10,000,000 or more; or
(c) the issuance or transfer by the Corporation or
any direct or indirect subsidiary of the Corporation (in one or a series of
transactions) of securities of this Corporation or that subsidiary having an
aggregate fair market value of $10,000,000 or more; or
(d) the adoption of a plan or proposal for the
liquidation or dissolution of the Corporation or any direct or indirect
subsidiary of the Corporation; or
(e) any reclassification of securities (including a
stock split or reverse stock split), recapitalization, consolidation or any
other transaction (whether or not involving a Related Person) which has the
direct or indirect effect of increasing the voting power, whether or not then
exercisable, of, a Related Person in any class or series of capital stock of the
Corporation or any direct or indirect subsidiary of the Corporation; or
(f) any agreement, contract or other arrangement
providing directly or indirectly for any of the foregoing or any amendment or
repeal of this Article 8.
(3) "Continuing Director" shall mean (a) if a Related Person
exists, any member of the Board of Directors of the Corporation who is not a
Related Person or an Affiliate or Associate of a Related Person and who was a
member of the Board of Directors immediately prior to the time that a Related
Person became a Related Person, and any successor to a Continuing Director who
is not a Related Person or an Affiliate or Associate of a Related Person and is
recommended to succeed a Continuing Director by a majority of the Continuing
Directors who are then members of the Board of Directors; and (b) if a Related
Person does not exist, any member of the Board of Directors.
(4) "Extraordinary Event" shall mean, as to any Business
Combination and Related Person, any of the following events that is not approved
by a majority of the Continuing Directors:
(a) any failure to declare and pay at the regular
date therefor any full
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quarterly dividend (whether or not cumulative) on outstanding Preferred Stock;
or
(b) any reduction in the annual rate of dividends
paid on the Common Stock (except as necessary to reflect any subdivision of the
Common Stock); or
(c) any failure to increase the annual rate of
dividends paid on the Common Stock as necessary to reflect any reclassification
(including a stock split or reverse stock split), recapitalization,
reorganization or any similar transaction that has the effect of reducing the
number of outstanding shares of the Common Stock; or
(d) the receipt by the Related Person, after the
Determination Date, of a direct or indirect benefit (except proportionately as a
stockholder) from any loans, advances, guarantees, pledges or other financial
assistance or any tax credits or other tax advantages provided by the
Corporation or any direct or indirect subsidiary of the Corporation, whether in
anticipation of or in connection with the Business Combination or otherwise.
(5) The term "person" shall mean any individual, corporation,
partnership, bank, association, joint stock company, trust, syndicate,
unincorporated organization or similar company, or a group of "persons" acting
or agreeing to act together for the purpose of acquiring, holding, voting or
disposing of securities of the Corporation, including any group of "persons"
seeking to combine or pool their voting or other interests in the equity
securities of the Corporation for a common purpose, pursuant to any contract,
understanding, relationship, agreement or other arrangement whether written or
otherwise.
(6) "Related Person" shall mean any person (other than the
Corporation, a direct or indirect subsidiary of the Corporation, or any profit
sharing, employee stock ownership or other employee benefit plan of the
Corporation or a direct or indirect subsidiary of the Corporation or any trustee
of or fiduciary with respect to any such plan acting in such capacity) that is
the direct or indirect beneficial owner (as defined in Rule 13d-3 and Rule 13d-5
under the Securities Exchange Act of 1934 as in effect on January 1, 1987) of
more than ten percent (10%) of the outstanding Voting Stock of the Corporation,
and any Affiliate or Associate of any such person.
(7) "Voting Stock" shall mean all outstanding shares of the
Common or Preferred Stock of the Corporation entitled to vote generally in the
election of directors.
(8) In the event of any Business Combination in which the
Corporation survives, the phrase "consideration other than cash" as used in
Paragraphs B(3)(a) and B(3)(b) of this Article 8 shall include the shares of
Common Stock and/or the shares of any other class of Preferred Stock retained by
the holders of such shares.
(9) A majority of the Continuing Directors shall have the
power to make all determinations with respect to this Article 8, including,
without limitation, the transactions that
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are Business Combinations, the persons who are Related Persons, the time at
which a Related Person became a Related Person, and the fair market value of any
assets, securities or other property, and any such determinations of such
Continuing Directors shall be conclusive and binding.
D. NO EFFECT ON FIDUCIARY OBLIGATIONS OF RELATED PERSONS
Nothing contained in this Article 8 shall be construed to relieve any
Related Person from any fiduciary obligation imposed by law.
ARTICLE 9. ACTION BY WRITTEN CONSENT
Except for the removal of a director pursuant to Article 7 hereof, any
action required to be taken or which may be taken at any annual or special
meeting of the stockholders of the Corporation may be taken by written consent
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all of the stockholders of the Corporation entitled to vote
thereon.
ARTICLE 10. SPECIAL MEETINGS
Special meetings of the stockholders may only be called by a majority
of the Continuing Directors (as defined in Article 8).
ARTICLE 11. BYLAWS
Bylaws may be adopted, amended or repealed by (i) the affirmative vote
of the holders of at least eighty percent (80%) of the total votes eligible to
be cast at a stockholders' meeting duly called and held or (ii) a resolution
adopted by the Board of Directors, including a majority of the Continuing
Directors (as defined in Article 8).
ARTICLE 12. LIMITATION OF DIRECTORS' LIABILITY
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except: (i) for any breach of the director's duty of loyalty
to the Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the Delaware Corporation Law, or (iv) for any
transaction from which the director derives any improper personal benefit. If
the Delaware Corporation Law is amended after the formation of this Corporation
to permit the further elimination or
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limitation of the personal liability of directors, then the liability of a
director of the Corporation shall be eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law, as so amended. Any repeal or
modification of this Article 12 by the stockholders of the Corporation shall not
adversely affect any right or protection of a director of the Corporation in
respect of any act or omission occurring prior to the time of such repeal or
modification.
ARTICLE 13. INDEMNIFICATION
A. Each person who was or is made a party or is threatened to be made a
party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he or she, or a person of whom he or she is the legal
representative, is or was a director or officer of the Corporation or a
subsidiary thereof or is or was serving at the request of the Corporation, as a
director, officer, partner, member or trustee of another corporation or of a
partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans, whether the basis of such proceeding is
alleged action in an official capacity as a director, officer, partner, member
or trustee or in any other capacity while so serving, shall be indemnified and
held harmless by the Corporation to the fullest extent authorized by the
Delaware Corporation Law, as the same exists or may hereinafter be amended (but,
in the case of any such amendment to the Delaware Corporation Law, the right to
indemnification shall be retroactive only to the extent that such amendment
permits the Corporation to provide broader indemnification rights than such law
prior to such amendment permitted the Corporation to provide), against all
expense, liability, and loss (including, without limitation, attorneys' fees and
related disbursements, judgments, fines, ERISA excise taxes or penalties, and
amounts paid or to be paid in settlement thereof) reasonably incurred or
suffered by such person in connection therewith, and such indemnification shall
continue as to a person who has ceased to be a director, officer, partner,
member or trustee and shall inure to the benefit of his or her heirs, executors
and administrators; PROVIDED, HOWEVER, that, except as provided in Paragraph B
hereof with respect to proceedings seeking to enforce rights to indemnification,
the Corporation shall indemnify any such person seeking indemnification in
connection with a proceeding (or part thereof) initiated by such person only if
such proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation. The right to indemnification conferred in this Paragraph A
shall be a contract right and shall include the right to be paid the expenses
incurred in defending any such proceeding in advance of its final disposition;
PROVIDED, HOWEVER, that, if the Delaware Corporation Law so requires, the
payment of such expenses incurred by a director or officer in his or her
capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such person while a director or officer,
including, without limitation, service to an employee benefit plan) in advance
of the final disposition of a proceeding shall be made only upon delivery to the
Corporation of an undertaking, by or on behalf of such director or officer, to
repay all amounts so advanced if it shall ultimately be determined that such
director or officer is not entitled to be indemnified under this Paragraph A or
otherwise. Such right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of the final disposition may be
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conferred upon any person who is or was an employee or agent of the Corporation
or a subsidiary thereof or is or was serving at the request of the Corporation
as an employee or agent of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, if, and to the extent, authorized by the Bylaws or the Board of
Directors, and shall inure to the benefit or his or her heirs, executors and
administrators.
B. If a claim under Paragraph A of this Article 13 is not paid in full
by the Corporation within thirty (30) days after a written claim has been
received by the Corporation, the claimant may at any time thereinafter bring
suit against the Corporation to recover the unpaid amount of the claim and, if
successful in whole or in part, the claimant shall also be entitled to be paid
the expense of prosecuting such claim. It shall be a defense to any such action
(other than an action brought to enforce a claim for expenses incurred in
defending any proceeding in advance of its final disposition where the required
undertaking, if any is required, has been tendered to the Corporation) that the
claimant has not met the standards of conduct which make it permissible under
the Delaware Corporation Law for the Corporation to indemnify the claimant for
the amount claimed, but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation (including, without
limitation, its Board of Directors, independent legal counsel, or stockholders)
to have made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he or she
has met the applicable standard of conduct set forth in the Delaware Corporation
Law, nor an actual determination by the Corporation (including without
limitation, its Board of Directors, independent legal counsel, or stockholders)
that the claimant has not met such applicable standard of conduct, shall be a
defense to the action or create a presumption that the claimant has not met the
applicable standard of conduct.
C. The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this
Article 13 shall not be exclusive of any other right to which any person may
have or hereinafter acquire under any statute, provision of this Certificate of
Incorporation or by the Bylaws of the Corporation, agreement, vote of
stockholders or disinterested directors, or otherwise.
D. The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability, or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or loss
under the Delaware Corporation Law.
E. Any repeal or modification of the foregoing provisions of this
Article 13 shall not adversely affect any right or protection hereunder of any
person in respect of any act or omission occurring prior to the time of such
repeal or modification.
F. If this Article 13 or any portion hereof shall be invalidated on any
ground by any court of competent jurisdiction, then the Corporation shall
nevertheless indemnify each director or officer of the Corporation as to any
expense (including attorneys' fees), judgment,
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fine and amount paid in settlement with respect to any action, suit or
proceeding, whether civil, criminal, administrative or investigative, including
an action by or in the right of the Corporation, to the full extent permitted by
any applicable portion of this Article 13 that shall not have been invalidated
and to the full extent permitted by applicable law.
ARTICLE 14. AMENDMENT OF CERTIFICATE OF INCORPORATION
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation in the manner now
or hereinafter prescribed by law. Notwithstanding the foregoing and in addition
to any separate requirements contained in this Certificate of Incorporation, the
affirmative vote of the holders of at least eighty percent (80%) of the total
votes eligible to be cast at a legal meeting shall be required to amend, repeal
or adopt any provisions inconsistent with, Articles 5, 7, 8, 9, 10, 11, 12, 13,
and this Article 14.
THE UNDERSIGNED, being the Chief Executive Officer and Chairman of the
Board of the Corporation, does hereby certify that this Restated Certificate of
Incorporation merely restates and integrates and does not further amend the
Corporation's previous Restated Certificate of Incorporation, as amended, and
that this Restated Certificate of Incorporation has been duly adopted in
accordance with section 245 of the Delaware Corporation Law, and does hereby
make and file this Restated Certificate of Incorporation.
Dated: April 29, 1998.
/s/ William A. Cooper
-------------------------------
William A. Cooper
Chief Executive Officer and
Chairman of the Board of Directors
Attest: /s/ Gregory J. Pulles
-----------------------
Gregory J. Pulles
Secretary
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Exhibit 3(b)
RESTATED BYLAWS
OF
TCF FINANCIAL CORPORATION
As amended through October 25, 1999
<PAGE>
BYLAWS OF
TCF FINANCIAL CORPORATION
(A DELAWARE CORPORATION)
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the Corporation
within the State of Delaware shall be in the City of Wilmington, County of New
Castle.
SECTION 2. OTHER OFFICES. The Corporation may also have an office or
offices other than said registered office at such place or places, either within
or without the State of Delaware, as the Board of Directors shall from time to
time determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. PLACE OF MEETINGS. All meetings of the stockholders for the
election of directors or for any other purpose shall be held at any such place,
either within or without the State of Delaware, as shall be designated from time
to time by the Board of Directors and stated in the notice of meeting or in a
duly executed waiver thereof.
SECTION 2. ANNUAL MEETING. The annual meeting of stockholders,
commencing with the year 1988, shall be held at 10:00o'clock A.M on the fourth
Wednesday of April, if not a legal holiday, and if a legal holiday, then on the
next succeeding day not a legal holiday at 10:00 o'clock A.M, or at such other
date and time as shall be designated from time to time by the Board of Directors
and stated in the notice of meeting or in a duly executed waiver thereof. At
such annual meeting, the stockholders shall elect by a plurality vote a class of
directors of the Board of Directors from among those nominated in conformance
with the procedures set forth in these Bylaws and transact such other business
as may properly be brought before the meeting.
SECTION 3. SPECIAL MEETINGS. Special meetings of stockholders may be
called as provided in Article 10 of the Certificate of Incorporation.
SECTION 4. NOTICE OF MEETINGS. Except as otherwise expressly required
by statute, written notice of each annual and special meeting of stockholders
stating the date, place and hour of the meeting, and, in the case of a special
meeting, the purpose or purposes for which the meeting is called, shall be given
to each stockholder of record entitled to vote thereat not
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less than ten nor more than fifty days before the date of the meeting. Business
transacted at any special meeting of stockholders shall be limited to the
purposes stated in the notice. Notice shall be given personally or by mail and,
if by mail, shall be sent in a postage prepaid envelope, addressed to the
stockholder at his or her address as it appears on the records of the
Corporation. Notice by mail shall be deemed given at the time when the same
shall be deposited in the United States mail, postage prepaid. Whenever notice
is required to be given under any provision of statute or the Certificate of
Incorporation of the Corporation or these Bylaws, a written waiver, signed by
the person entitled to notice, whether before or after the time stated therein,
shall be deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting at the beginning of the meeting, to
the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, an
annual or special meeting of stockholders need be specified in any written
waiver of notice.
SECTION 5. LIST OF STOCKHOLDERS. The officer who has charge of the
stock ledger of the Corporation shall prepare and make, at least ten days before
each meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order, showing the address of and
the number of shares registered in the name of each stockholder. Such list shall
be open to the examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least ten days prior
to the meeting, either at a place within the city, town or village where the
meeting is to be held, which place shall be specified in the notice of meeting,
or, if not specified, at the place where the meeting is to be held. The list
shall be produced and kept at the time and place of the meeting during the whole
time thereof, and may be inspected by any stockholder who is present.
SECTION 6. QUORUM, ADJOURNMENTS. The holders of a majority of the
voting power of the issued and outstanding stock of the Corporation entitled to
vote thereat, present in person or represented by proxy, shall constitute a
quorum for the transaction of business at all meetings of stockholders, except
as otherwise provided by statute or by the Certificate of Incorporation. If,
however, such quorum shall not be present or represented by proxy at any meeting
of stockholders, the stockholders entitled to vote thereat, present in person or
represented by proxy, shall have the power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present or represented by proxy. At such adjourned meeting at which a
quorum shall be present or represented by proxy, any business may be transacted
which might have been transacted at the meeting as originally called. If the
adjournment is for more than thirty days, or, if after adjournment a new record
date is set, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
SECTION 7. ORGANIZATION. At each meeting of stockholders, the Chairman
of the Board, if one shall have been elected, or, in his or her absence or if
one shall not have been elected, the President or any person designated by the
Chairman of the Board or President, shall act as chairman of the meeting. The
Secretary or, in his or her absence or inability to
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act, the person whom the chairman of the meeting shall appoint as secretary of
the meeting shall act as secretary of the meeting and keep the minutes thereof.
SECTION 8. ORDER OF BUSINESS. All meetings of stockholders shall be
conducted in accordance with such rules as are prescribed by the chairman of the
meeting. The order of business at all meetings of the stockholders shall be as
determined by the chairman of the meeting.
SECTION 9. VOTING. Except as otherwise provided by statute, the
Certificate of Incorporation or any resolution of the Board of Directors
establishing any class or series of Preferred Stock, each stockholder of the
Corporation shall be entitled at each meeting of stockholders to one vote for
each share of capital stock of the Corporation standing in such person's name on
the record of stockholders of the Corporation:
(a) on the date fixed pursuant to the provisions of Section 7
of Article V of these Bylaws as the record date for the determination
of the stockholders who shall be entitled to notice of and to vote at
such meeting; or
(b) if no such record date shall have been so fixed, then at
the close of business on the day next preceding the day on which notice
thereof shall be given, or, if notice is waived, at the close of
business on the date next preceding the day on which the meeting is
held.
Each stockholder entitled to vote at any meeting of stockholders may authorize
another person or persons to act for him or her by a proxy signed by such
stockholder or his or her attorney-in-fact, but no proxy shall be voted after
eleven months from its date. Any such proxy shall be delivered to the secretary
of the meeting at or prior to the time designated in the order of business for
so delivering such proxies. When a quorum is present at any meeting, the
affirmative vote of a majority of shares present in person or represented by
proxy at the meeting and entitled to vote on the subject shall decide any
question brought before such meeting, unless the question is one upon which by
express provision of statute or of the Certificate of Incorporation or of these
Bylaws, a different vote is required, in which case such express provision shall
govern and control the decision of such question. Unless required by statute, or
determined by the chairman of the meeting to be advisable, the vote on any
question need not be by ballot. On a vote by ballot, each ballot shall be signed
by the stockholder voting, or by such person's proxy, if there be such proxy,
and shall state the number of shares voted.
SECTION 10. VOTING BY THE CORPORATION. Shares of its own capital stock
belonging to the Corporation or to another corporation, if a majority of the
shares entitled to vote in the election of directors of such other corporation
is held, directly or indirectly, by the Corporation, shall neither be entitled
to vote nor be counted for quorum purposes. Nothing in this section shall be
construed as limiting the right of the Corporation to vote stock, including but
not limited to its own stock, held by it or by any of its subsidiaries in a
fiduciary capacity.
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SECTION 11. INSPECTORS. The Board of Directors may, in advance of any
meeting of stockholders, appoint one or more inspectors to act at such meeting
or any adjournment thereof. If any of the inspectors so appointed shall fail to
appear or act, the chairman of the meeting shall, or if inspectors shall not
have been appointed, the chairman of the meeting may, appoint one or more
inspectors. Each inspector, before entering upon the discharge of his or her
duties, shall take and sign an oath faithfully to execute the duties of
inspector at such meeting with strict impartiality and according to the best of
his or her ability. The inspectors shall determine the number of shares of
capital stock of the Corporation outstanding and the voting power of each, the
number of shares represented at the meeting, the existence of a quorum, the
validity and effect of proxies, and shall receive votes, ballots or consents,
hear and determine all challenges and questions arising in connection with the
right to vote, count and tabulate all votes, ballots or consents, determine the
results, and do such acts as are proper to conduct the election or vote with
fairness to all stockholders. On request of the chairman of the meeting, the
inspectors shall make a report in writing of any challenge, request or matter
determined by them and shall execute a certificate of any fact found by them. No
director or candidate for the office of director shall act as an inspector of an
election of directors. Inspectors need not be stockholders.
SECTION 12. ACTION BY CONSENT. The stockholders of the Corporation may
take action by written consent only in accordance with the provisions of the
Certificate of Incorporation of the Corporation.
SECTION 13. STOCKHOLDER NOMINATIONS; BUSINESS TO BE BROUGHT BEFORE THE
MEETING.
(a) STOCKHOLDER NOMINATIONS. Nominations of candidates for
election as directors at any annual meeting of stockholders may be made
(i) by, or at the direction of, a majority of the Directorsor (ii) by
any stockholder of record entitled to vote at such annual meeting. Only
persons nominated in accordance with procedures set forth in this
Section 13(a) shall be eligible for election as directors at an annual
meeting.
Nominations, other than those made by, or at the direction of,
a majority of the Directors, shall be made pursuant to timely notice in
writing to the Secretary of the Corporation as set forth in this
Section 13(a). To be timely, a stockholder's notice shall be delivered
to, or mailed and received at, the principal executive offices of the
Corporation not less than sixty (60) days nor more than ninety (90)
days prior to the date of the scheduled annual meeting, regardless of
postponements, deferrals, or adjournments of that meeting to a later
date; PROVIDED, HOWEVER, that if less than seventy (70) days' notice or
prior public disclosure of the date of the scheduled annual meeting is
given or made, notice by the stockholder to be timely must be so
delivered or received not later than the close of business on the tenth
(10th) day following the earlier of the day on which such notice of the
date of the scheduled annual meeting was mailed or the day on which
such public disclosure was made. Such stockholder's notice shall set
forth (i) as to each person whom the stockholder proposes to nominate
for election as a director (a) the name, age, business address and
residence address of such person, (b) the principal occupation or
employment of such person, (c) the class
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and number of shares of the Corporation's equity securities which are
beneficially owned (as such term is defined in Rule 13d-3 or 13d-5
under the Securities Exchange Act of 1934 as in effect on January 1,
1987 (the "Exchange Act")) by such person on the date of such
stockholder notice and (d) any other information relating to such
person that would be required to be disclosed pursuant to Schedule 13D
under the Exchange Act in connection with the acquisition of shares,
and pursuant to Regulation 14A under the Exchange Act, in connection
with the solicitation of proxies with respect to nominees for election
as directors, regardless of whether such person is subject to the
provisions of such regulations, including, but not limited to,
information required to be disclosed by Items 4(b) and 6 of Schedule
14A under the Exchange Act and information which would be required to
be filed on Schedule 14B under the Exchange Act with the Securities and
Exchange Commission; and (ii) as to the stockholder giving the notice
(a) the name and address, as they appear on the Corporation's books, of
such stockholder and any other stockholder who is a record or
beneficial owner of any equity securities of the Corporation and who is
known by such stockholder to be supporting such nominee(s) and (b) the
class and number of shares of the Corporation's equity securities which
are beneficially owned, as defined above, and owned of record by such
stockholder on the date of such stockholder notice and the number of
shares of the Corporation's equity securities beneficially owned and
owned of record by any person known by such stockholder to be
supporting such nominee(s) on the date of such stockholder notice. At
the request of a majority of the Directors, any person nominated by, or
at the direction of, the Board of Directors for election as a director
at an annual meeting shall furnish to the Secretary of the Corporation
that information required to be set forth in a stockholder's notice of
nomination which pertains to the nominee.
No person shall be elected as a director of the Corporation
unless nominated in accordance with the procedures set forth in this
Section 13(a). Ballots bearing the names of all the persons who have
been nominated for election as directors at an annual meeting in
accordance with the procedures set forth in this Section 13(a) shall be
provided for use at the annual meeting.
A majority of the Directors may reject any nomination by a
stockholder not timely made in accordance with the requirements of this
Section 13(a). If a majority of the Directors determines that the
information provided in a stockholder's notice does not satisfy the
informational requirements of this Section 13(a) in any material
respect, the Secretary of the Corporation shall promptly notify such
stockholder of the deficiency in the notice. The stockholder shall have
an opportunity to cure the deficiency by providing additional
information to the Secretary within five (5) days from the date such
deficiency notice is given to the stockholder, or such shorter time as
may be reasonably deemed appropriate by a majority of the Directors,
taking into consideration the date of the meeting, the matters to be
brought before the meeting, time constraints for the printing and
mailing of proxies and other materials to stockholders, and such other
considerations as may be deemed appropriate by the Directors. If the
deficiency is not cured within such period, or if a majority of the
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Directors reasonably determines that the additional information
provided by the stockholder, together with the information previously
provided, does not satisfy the requirements of this Section 13(a) in
any material respect, then the Board of Directors may reject such
stockholder's nomination. The Secretary of the Corporation shall notify
a stockholder in writing whether his or her nomination has been made in
accordance with the time and informational requirements of this Section
13(a). Notwithstanding the procedure set forth in this Section 13(a),
if the majority of the Directors does not make a determination as to
the validity of any nominations by a stockholder, the chairman of the
annual meeting shall determine and declare at the annual meeting
whether a nomination was not made in accordance with the terms of this
Section 13(a). If the chairman of such meeting determines that a
nomination was not made in accordance with the terms of this Section
13(a), he or she shall so declare at the annual meeting and the
defective nomination shall be disregarded.
(b) BUSINESS TO BE BROUGHT BEFORE THE MEETING. At an annual
meeting of stockholders, only such business shall be conducted, and
only such proposals shall be acted upon as shall have been brought
before the annual meeting (i) by, or at the direction of, the majority
of the Directors, or (ii) by any stockholder of the Corporation who
complies with the notice procedures set forth in this Section 13(b).
For a proposal to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in
writing to the Secretary of the Corporation. To be timely, a
stockholder's notice must be delivered to, or mailed and received at,
the principal executive offices of the Corporation not less than sixty
(60) days nor more than ninety (90) days prior to the scheduled annual
meeting, regardless of any postponements, deferrals or adjournments of
that meeting to a later date; PROVIDED, HOWEVER, that if less than
seventy (70) days' notice or prior public disclosure of the date of the
scheduled annual meeting is given or made, notice by the stockholder,
to be timely, must be so delivered or received not later than the close
of business on the tenth (10th) day following the earlier of the day on
which such notice of the date of the scheduled annual meeting was
mailed or the day on which such public disclosure was made. A
stockholder's notice to the Secretary shall set forth as to each matter
the stockholder proposes to bring before the annual meeting (i) a brief
description of the proposal desired to be brought before the annual
meeting and the reasons for conducting such business at the annual
meeting, (ii) the name and address, as they appear on the Corporation's
books, of the stockholder proposing such business and any other
stockholder who is the record or Beneficial Owner (as defined in
Section 13(a) of these Bylaws) of any equity security of the
Corporation known by such stockholder to be supporting such proposal,
(iii) the class and number of shares of the Corporation's equity
securities which are beneficially owned (as defined in Section 13(a) of
these Bylaws) and owned of record by the stockholder giving the notice
on the date of such stockholder notice and by any other record or
Beneficial Owners of the Corporation's equity securities known by such
stockholder to be supporting such proposal on the date of such
stockholder notice, and (iv) any financial or other interest of the
stockholder in such proposal.
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A majority of the Directors may reject any stockholder
proposal not timely made in accordance with the terms of this Section
13(b). If a majority of the Directors determines that the information
provided in a stockholder's notice does not satisfy the informational
requirements of this Section 13(b) in any material respect, the
Secretary of the Corporation shall promptly notify such stockholder of
the deficiency in the notice. The stockholder shall have an opportunity
to cure the deficiency by providing additional information to the
Secretary within such period of time, not to exceed five days from the
date such deficiency notice is given to the stockholder, as the
majority of the Directors shall reasonably determine. If the deficiency
is not cured within such period, or if the majority of the Directors
determines that the additional information provided by the stockholder,
together with information previously provided, does not satisfy the
requirements of this Section 13(b) in any material respect, then a
majority of the Directors may reject such stockholder's proposal. The
Secretary of the Corporation shall notify a stockholder in writing
whether such person's proposal has been made in accordance with the
time and information requirements of this Section 13(b).
Notwithstanding the procedures set forth in this paragraph, if the
majority of the Directors does not make a determination as to the
validity of any stockholder proposal, the chairman of the annual
meeting shall determine and declare at the annual meeting whether the
stockholder proposal was made in accordance with the terms of this
Section 13(b). If the chairman of such meeting determines that a
stockholder proposal was not made in accordance with the terms of this
Section 13(b), he or she shall so declare at the annual meeting and any
such proposal shall not be acted upon at the annual meeting.
This provision shall not prevent the consideration and
approval or disapproval at the annual meeting of reports of officers,
directors and committees of the Board of Directors, but, in connection
with such reports, no new business shall be acted upon at such annual
meeting unless stated, filed and received as herein provided.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS. The business and affairs of the Corporation
shall be managed by or under the direction of the Board of Directors. The Board
of Directors may exercise all such authority and powers of the Corporation and
do all such lawful acts and things as are not by statute or the Certificate of
Incorporation directed or required to be exercised or done by the stockholders.
The Board of Directors shall designate, when present, either the Chairman of the
Board, if one has been elected, the Vice Chairman, or any other member of the
Board of Directors, to preside at its meetings.
SECTION 2. NUMBER, QUALIFICATIONS, ELECTION AND TERM OF OFFICE. As
provided in Article 7.A of the Articles of Incorporation the number of directors
of the Corporation shall be set from time to time by the then serving Continuing
Directors of the Corporation, as defined in Article 8 of the Certificate of
Incorporation of the Corporation. Directors need not be
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stockholders. Nominations of candidates for election as directors shall be made
pursuant to the procedures set forth in Article II, Section 13(a) of these
Bylaws.
SECTION 3. PLACE OF MEETINGS. Meetings of the Board of Directors shall
be held at such place or places, within or without the State of Delaware, as the
Board of Directors may from time to time determine or as shall be specified in
the notice of any such meeting.
SECTION 4. ANNUAL MEETING. The Board of Directors shall meet for the
purpose of organization, the election of officers and the transaction of other
business, as soon as practicable after each annual meeting of stockholders, on
the same day and at the same place where such annual meeting shall be held.
Notice of such meeting need not be given. In the event such annual meeting is
not so held, the annual meeting of the Board of Directors may be held at such
other time or place (within or without the State of Delaware) as shall be
specified in a notice thereof given as hereinafter provided in Section 7 of this
Article III.
SECTION 5. REGULAR MEETINGS. Regular meetings of the Board of Directors
shall be held at such time and place as the Board of Directors may fix. If any
day fixed for a regular meeting shall be a legal holiday at the place where the
meeting is to be held, then the meeting which would otherwise be held on that
day shall be held at the same time and place on the next succeeding business
day. Notice of regular meetings of the Board of Directors need not be given
except as otherwise required by statute or these Bylaws.
SECTION 6. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by the Chairman of the Board, if one shall have been elected, the
Vice Chairman or by a majority of both the directors and the Continuing
Directors of the Corporation as such term is defined in Article 8 of the
Certificate of Incorporation of the Corporation. Except as otherwise limited by
statute, the Certificate of Incorporation of the Corporation or these Bylaws,
the persons authorized to call special meetings of the Board of Directors may
fix any place as the place for holding any special meeting of the Board of
Directors called by such person or persons.
SECTION 7. NOTICE OF MEETINGS. Notice of each special meeting of the
Board of Directors (and of each regular meeting for which notice shall be
required) shall be given by the Secretary as hereinafter provided in this
Section 7, in which notice shall be stated the time and place of the meeting.
Except as otherwise required by these Bylaws, such notice need not state the
purposes of such meeting. Notice of each such meeting shall be mailed, postage
prepaid, to each director, addressed to him or her at his or her residence or
usual place of business, by first class mail, at least two days before the day
on which such meeting is to be held, or shall be sent addressed to him or her at
such place by telegraph, cable, telex, telecopier or other similar means, or be
delivered to him personally or be given to him or her by telephone or other
similar means, at least twenty-four hours before the time at which such meeting
is to be held. Notice of any such meeting need not be given to any director who
shall, either before or after the meeting, submit a signed waiver of notice or
who shall attend such meeting, except when he or she shall attend for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not
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lawfully called or convened.
SECTION 8. QUORUM AND MANNER OF ACTING. A majority of the entire Board
of Directors shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors, and, except as otherwise expressly required
by statute or the Certificate of Incorporation or these Bylaws, the act of a
majority of the directors present at any meeting at which a quorum is present
shall be the act of the Board of Directors. In the absence of a quorum at any
meeting of the Board of Directors, a majority of the directors present thereat
may adjourn such meeting to another time and place. Notice of the time and place
of any such adjourned meeting shall be given to all of the directors unless such
time and place were announced at the meeting at which the adjournment was taken,
in which case such notice shall only be given to the directors who were not
present thereat. At any adjourned meeting at which a quorum is present, any
business may be transacted which might have been transacted at the meeting as
originally called. The directors shall act only as a Board and the individual
directors shall have no power as such, other than acting as a member of the
Board of Directors or a committee thereof.
SECTION 9. ORGANIZATION. At each meeting of the Board of Directors, the
Chairman of the Board, if one shall have been elected, or, in the absence of the
Chairman of the Board or if one shall not have been elected, the Vice Chairman,
if present, and if not present, another director chosen by a majority of the
directors present, shall act as chairman of the meeting and preside thereat.
Each meeting of the Board of Directors shall be conducted in accordance with
such rules as are prescribed by the presiding officer of the meeting. The
Secretary or, in his or her absence, any person appointed by the chairman of the
meeting shall act as secretary of the meeting and keep the minutes thereof.
SECTION 10. RESIGNATIONS. Any director of the Corporation may resign at
any time by giving written notice of his or her resignation to the Chairman of
the Board or the Vice Chairman, and to the Secretary of the Corporation. Any
such resignation shall take effect at the time specified therein or, if the time
when it shall become effective shall not be specified therein, immediately upon
its receipt. Unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
SECTION 11. VACANCIES. Vacancies on the Board of Directors shall be
filled in accordance with the procedures described in the Certificate of
Incorporation.
SECTION 12. AGE LIMITATION. No person shall be nominated or renominated
for director if that person has attained the age of 70.
SECTION 13. COMPENSATION. The Board of Directors shall have authority
to fix the compensation, including fees and reimbursement of expenses, of
directors and any advisory directors for services to the Corporation in any
capacity.
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SECTION 14. COMMITTEES.
(a) APPOINTMENT. The Board of Directors, by resolution duly
adopted by a majority of the Board, may designate one or more directors
to constitute an Executive Committee, provided that at least one-third
of the members of the Executive Committee shall not be full time
employees of the Corporation. The designation of any Executive
Committee pursuant to this Article III, Section 14 and the delegation
of authority thereto shall not operate to relieve the Board of
Directors, or any director, of any responsibility imposed by law or
regulation. The Board of Directors, by resolution duly adopted by a
majority of the Board, may designate not fewer than three directors who
are not employees of the Corporation or any of its subsidiaries to
constitute an Audit Committee.
(b) OTHER COMMITTEES. The Board of Directors may by resolution
establish any other committees composed of directors as they may
determine necessary or appropriate for the conduct of the business of
the Corporation and may prescribe the duties, constitution and
procedures thereof. Any committee so established shall have and may
exercise all of the authority granted to it by the resolution
establishing such committee.
(c) AUTHORITY. The Executive Committee, when the Board of
Directors is not in session, shall have and may exercise all of the
authority of the Board of Directors. The Audit Committee shall
recommend selection of and approve services to be provided by the
independent auditors for the Corporation, and shall review matters
pertaining to the audit, systems of internal control, and accounting
policies and procedures, and shall direct and supervise investigations
into matters within the scope of its duties.
(d) LIMITATIONS ON AUTHORITY. Notwithstanding any other
provision of these bylaws, neither the Executive Committee nor the
Audit Committee or any other committee established by the Board of
Directors shall have the power (i) to amend the Certificate of
Incorporation of the Corporation (except, to the extent authorized in
the resolution or resolutions providing for the issuance of shares of
stock adopted by the Board of Directors of the Corporation, that a
committee may fix the designations and any of the preferences or rights
of such shares relating to dividends, redemption, dissolution, any
distribution of assets of the Corporation or the conversion into, or
the exchange or such shares for, shares of any other class or classes
or any other series of the same or any other class or classes of stock
of the Corporation or fix the number of shares of any series of stock
or authorize the increase or decrease of the shares of any series);
(ii) to adopt an agreement of merger or consolidation; (iii) to
recommend to the stockholders of the Corporation the sale, lease or
exchange of all or substantially all of the Corporation's property and
assets, or to recommend to the stockholders a dissolution of the
Corporation or a revocation of a dissolution; (iv) to amend these
bylaws; and (v) in the absence of specific authorization in these
Bylaws, the Certificate of Incorporation of the Corporation or
resolution of the Board of Directors establishing
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such committee, to declare a dividend, authorize the issuance of stock
or adopt a certificate of ownership and merger; and that such
committee's powers shall be further limited to the extent, if any, that
such authority shall be limited by the resolution appointing such
committee, by statute, by the Certificate of Incorporation of the
Corporation, or by these Bylaws.
(e) TENURE. Subject to the provisions of these Bylaws, each
member of the Executive Committee and Audit Committee shall hold office
until the next regular annual meeting of the Board of Directors
following his or her designation and until a successor is designated as
a member of such Committee.
(f) MEETINGS. Regular meetings of the Executive Committee and
the Audit Committee may be held without notice at such times and places
as such Committees may fix from time to time. Special meetings of such
Committees may be called by any member thereof upon notice given not
less than twenty-four hours prior to the meeting stating the place,
date, and hour of the meeting, which notice may be written or oral. Any
member of the Executive or Audit Committee may waive notice of any
meeting and no notice of any meeting need be given to any member
thereof who attends in person. The notice of a meeting of the Executive
or Audit Committee need not state the business proposed to be
transacted at the meeting.
(g) QUORUM. A majority of the members of the Executive or
Audit Committee shall constitute a quorum for the transaction of
business at any meeting thereof, and action of the Executive or Audit
Committees must be authorized by the affirmative vote of a majority of
the members present at a meeting at which a quorum is present.
(h) VACANCIES. Any vacancy in the Executive or Audit Committee
may be filled by resolution duly adopted by a majority of the Board of
Directors.
(i) RESIGNATIONS AND REMOVAL. Any member of the Executive
Committee or Audit Committee may be removed at any time with or without
cause by resolution duly adopted by a majority of the Board of
Directors. Any member of either Committee may resign from such
Committee at any time by giving written notice to the Chairman of the
Board, the Vice Chairman or the Secretary of the Corporation. Unless
otherwise specified therein, such resignation shall take effect upon
its receipt. The acceptance of such resignation shall not be necessary
to make it effective.
(j) PROCEDURE. The Executive Committee, Audit Committee and
any other committee established by the Board of Directors shall elect a
presiding officer from its members and may fix its own rules of
procedure which shall not be inconsistent with these Bylaws or the
resolution adopted by the Board of Directors establishing such
committee. It shall keep regular minutes of its proceedings and report
the same to the Board of Directors for its information at the meeting
thereof held next after the proceedings shall have occurred.
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SECTION 15. ACTION BY CONSENT. Unless restricted by the Certificate of
Incorporation, any action required or permitted to be taken by the Board of
Directors or any committee thereof may be taken without a meeting if all members
of the Board of Directors or such committee, as the case may be, consent thereto
in writing, and the writing or writings are filed with the minutes of the
proceedings of the Board of Directors or such committee, as the case may be.
SECTION 16. TELEPHONIC MEETING. Unless restricted by the Certificate of
Incorporation, any one or more members of the Board of Directors or any
committee thereof may participate in a meeting of the Board of Directors or such
committee by means of a conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other.
Participation by such means shall constitute presence in person at a meeting.
SECTION 17. PRESUMPTION OF ASSENT. A director of the Corporation who is
present at a meeting of the Board of Directors at which action on any matter is
taken shall be presumed to have assented to the action taken unless his or her
dissent or abstention shall be entered in the minutes of the meeting or unless
he or she shall file a written dissent to such action with the person acting as
the secretary of the meeting before the adjournment thereof or shall forward
such dissent by registered mail to the secretary of the Corporation within ten
days after the date a copy of the minutes of the meeting is received. Such right
to dissent shall not apply to a director who voted in favor of such action.
ARTICLE IV
OFFICERS
SECTION 1. NUMBER AND QUALIFICATIONS. The officers of the Corporation
shall be elected by the Board of Directors and shall include the Chairman of the
Board and Chief Executive Officer, the Vice Chairman of the Board, the
President, the Secretary and the Treasurer. If the Board of Directors wishes, it
may also elect other officers (including, without limitation, a Chief Operating
Officer, a Controller, a General Counsel, one or more Vice Presidents, one or
more Assistant Treasurers and one or more Assistant Secretaries) as may be
necessary or desirable for the business of the Corporation. The Board of
Directors may designate one or more Vice Presidents as Executive Vice President,
First Vice President, Senior Vice President or Assistant Vice President. Any two
or more offices may be held by the same person, and no officer except the
Chairman of the Board need be a director. Each officer shall hold office until
his or her successor shall have been duly elected and shall have qualified, or
until his or her death, or until he or she shall have resigned or have been
removed, as hereinafter provided in these Bylaws.
SECTION 2. RESIGNATIONS. Any officer of the Corporation may resign at
any time by giving written notice of his or her resignation to the Corporation.
Any such resignation shall take effect at the time specified therein or, if the
time when it shall become effective shall not be specified therein, immediately
upon receipt. Unless otherwise specified therein, the
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acceptance of any such resignation shall not be necessary to make it effective.
SECTION 3. REMOVAL. Any officer of the Corporation may be removed,
either with or without cause, at any time, by the Board of Directors at any
meeting thereof. Any removal, other than for cause, shall be without prejudice
to the contractual rights, if any, of the person so removed.
SECTION 4. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification, or other cause may be filled by a vote
of the majority of the Board of Directors.
SECTION 5. OFFICERS' BONDS OR OTHER SECURITY. If required by the Board
of Directors, any officer of the Corporation shall give a bond or other security
for the faithful performance of his or her duties, in such amount and with such
surety as the Board of Directors may require.
SECTION 6. COMPENSATION. The compensation of the officers of the
Corporation for their services as such officers shall be fixed from time to time
by the Board of Directors. An officer of the Corporation shall not be prevented
from receiving compensation by reason of the fact that he or she is also a
director of the Corporation.
ARTICLE V
STOCK CERTIFICATES AND THEIR TRANSFER
SECTION 1. STOCK CERTIFICATES. Every holder of stock in the Corporation
shall be entitled to have a certificate, signed by, or in the name of the
Corporation by, the Chairman or Vice Chairman of the Board or the President or a
Vice President and by the Treasurer or an Assistant Treasurer or the Secretary
or an Assistant Secretary of the Corporation, certifying the number of shares
owned by him or her in the Corporation. If the Corporation shall be authorized
to issue more than one class of stock or more than one series of any class, the
designations, preferences, and relative, participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restriction of such preferences and/or rights shall be set forth
in full or summarized on the face or back of the certificate which the
Corporation shall issue to represent such class or series of stock, provided
that, except as otherwise provided in Section 202 of the General Corporation Law
of the State of Delaware, in lieu of the foregoing requirements, there may be
set forth on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock, a statement that the
Corporation will furnish without charge to each stockholder who so requests the
designations, preferences and relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
SECTION 2. FACSIMILE SIGNATURES. Any or all of the signatures on a
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose
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facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may be issued by the Corporation with the same effect as if he or she were such
officer, transfer agent or registrar at the date of issue.
SECTION 3. LOST CERTIFICATES. The Corporation may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen, or destroyed. When authorizing such issue of a new certificate or
certificates, the Corporation may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen, or
destroyed certificate or certificates, or his or her legal representative, to
give the Corporation a bond in such sum as it may direct sufficient to indemnify
it against any claim that may be made against the Corporation on account of the
alleged loss, theft or destruction of any such certificate or the issuance of
such new certificate.
SECTION 4. TRANSFERS OF STOCK. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its records; provided, however, that the Corporation shall be
entitled to recognize and enforce any lawful restriction on transfer. Whenever
any transfer of stock shall be made for collateral security, and not absolutely,
it shall be so expressed in the entry of transfer if, when the certificates are
presented to the Corporation for transfer, both the transferor and the
transferee request the Corporation to do so.
SECTION 5. TRANSFER AGENTS AND REGISTRARS. The Board of Directors may
appoint, or authorize any officer or officers to appoint, one or more transfer
agents and one or more registrars.
SECTION 6. REGULATIONS. The Board of Directors may make such additional
rules and regulations, not inconsistent with these Bylaws, as it may deem
expedient concerning the issue, transfer and registration of certificates for
shares of stock of the Corporation.
SECTION 7. FIXING THE RECORD DATE. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty nor less than ten
days before the date of such meeting, nor more than sixty days prior to any
other action. A determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
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ARTICLE VI
GENERAL PROVISIONS
SECTION 1. DIVIDENDS. Subject to the provisions of statute and the
Certificate of Incorporation, dividends upon the shares of capital stock of the
Corporation may be declared by the Board of Directors at any regular or special
meeting. Dividends may be paid in cash, in property or in shares of capital
stock of the Corporation (Common or Preferred), unless otherwise provided by
statute or the Certificate of Incorporation.
SECTION 2. RESERVES. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the Board of Directors may, from time to time, in its absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
Corporation or for such other purpose as the Board of Directors may think
conducive to the interests of the Corporation. The Board of Directors may modify
or abolish any such reserves in the manner in which it was created.
SECTION 3. SEAL. The seal of the Corporation shall be in such form as
shall be approved by the Board of Directors.
SECTION 4. FISCAL YEAR. The fiscal year of the Corporation shall be
fixed, and once fixed, may thereafter be changed, by resolution of the Board of
Directors.
SECTION 5. CHECKS, NOTES, DRAFTS, ETC. All checks, notes, drafts or
other orders for the payment of money of the Corporation shall be signed,
endorsed or accepted in the name of the Corporation by such officer, officers,
person or persons as from time to time may be designated by the Board of
Directors or by an officer or officers authorized by the Board of Directors to
make such designation.
SECTION 6. EXECUTION OF CONTRACTS, DEEDS, ETC. The Board of Directors
may authorize any officer or officers, agent or agents, in the name and on
behalf of the Corporation to enter into or execute and deliver any and all
deeds, bonds, mortgages, contracts and other obligations or instruments, and
such authority may be general or confined to specific instances.
SECTION 7. VOTING OF STOCK IN OTHER CORPORATIONS. Unless otherwise
provided by resolution of the Board of Directors, the Chairman or Vice Chairman
of the Board or the President, from time to time, may (or may appoint one or
more attorneys or agents to) cast the votes which the Corporation may be
entitled to cast as a stockholder or otherwise in any other corporation, any of
whose shares or securities may be held by the Corporation, at meetings of the
holders of the shares or other securities of such other corporation. If one or
more attorneys or agents are appointed, the Chairman or Vice Chairman of the
Board or the President may instruct the person or persons so appointed as to the
manner of casting such votes or giving such consent. The Chairman or Vice
Chairman of the Board or the President
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may, or may instruct the attorneys or agents appointed to, execute or cause to
be executed in the name and on behalf of the Corporation and under its seal or
otherwise, such written proxies, consents, waivers or other instruments as may
be necessary or proper in the circumstances.
ARTICLE VII
INDEMNIFICATION
SECTION 1. INDEMNIFICATION. Each person who was or is made a party or
is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she is or was an
employee or agent of the Corporation or a subsidiary thereof, or is or was
serving at the request of the Corporation as an employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, whether the basis of
such proceeding is alleged action in an official capacity as an employee or
agent or in any other capacity while so serving, may be indemnified and held
harmless by the Corporation to the fullest extent authorized by the General
Corporation Law of Delaware, as the same exists or may hereafter be amended
(but, in the case of any such amendment, the right to indemnification shall be
retroactive only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than such law prior to such amendment
permitted the Corporation to provide), against all expense, liability and loss
(including, without limitation, attorneys' fees and related disbursements,
judgments, fines, ERISA excise taxes or penalties, and amounts paid or to be
paid in settlement) reasonably incurred or suffered by such person in connection
therewith, and such indemnification may continue as to a person who has ceased
to be an employee or agent and may inure to the benefit of his or her heirs,
executors and administrators; PROVIDED, HOWEVER, that the Corporation may
indemnify any such person seeking indemnification in connection with a
proceeding (or part thereof) initiated by such person only if such proceeding
(or part thereof) was authorized by the Board of Directors of the Corporation.
The right to indemnification conferred in this Section 1 shall be a contract
right and may include the right to be paid the expenses incurred in defending
any such proceeding in advance of its final disposition; PROVIDED, HOWEVER, that
the payment of such expenses incurred by an employee or agent in his or her
capacity as an employee or agent (and not in any other capacity in which service
was or is rendered by such person while an employee or agent, including, without
limitation, service to an employee benefit plan) in advance of the final
disposition of a proceeding may be made, if required by the Board of Directors,
upon delivery to the Corporation of an undertaking, by or on behalf of such
employee or agent, to repay all amounts so advanced if it shall ultimately be
determined that such employee or agent is not entitled to be indemnified under
this Section 1 or otherwise.
SECTION 2. INDEMNIFICATION NOT EXCLUSIVE. The right to indemnification
and the payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Article VII shall not be exclusive of any
other right which any person may have or hereafter acquire under any statute,
provision of the Certificate of Incorporation or
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these Bylaws of the Corporation, agreement, vote of stockholders or
disinterested directors, or otherwise.
SECTION 3. INSURANCE. The Corporation may maintain insurance, at its
expense, to protect itself and any employee or agent of the Corporation or a
subsidiary thereof, another corporation, partnership, joint venture, trust or
other enterprise against any expense, liability, or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the General Corporation Law of Delaware.
ARTICLE VIII
AMENDMENTS
These Bylaws may be amended or repealed or new bylaws adopted
as provided in the Certificate of Incorporation of the Corporation.
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Exhibit 10(c)
TCF FINANCIAL EXECUTIVE DEFERRED COMPENSATION PLAN
(Amended and Restated effective as of January 1, 2000)
1. DEFERRAL OF INCENTIVE COMPENSATION, SALARIES AND STOCK AWARDS.
a. From time to time eligible employees ("Employees") of TCF
Financial Corporation ("TCF Financial") or any of its direct or indirect
subsidiaries (each such corporation being referred to hereinafter as the
"Company") may, by written notice, elect to have payment of a portion of their
salary for the next succeeding calendar year, all or a portion of their
incentive compensation payable for the next succeeding calendar year, and/or all
or a portion of a stock award of TCF Financial Common Stock ("TCF Stock")
deferred as hereinafter provided. Each such deferral of compensation or a TCF
Stock award shall be (and is hereinafter referred to as) a "Deferred Amount."
Notwithstanding the foregoing, however, an Employee may not elect to defer any
portion of salary or incentive compensation with respect to any calendar year,
unless such Employee's deferrals with respect to such year are at least $1,000
in the aggregate, and no deferral may be made of any salary or incentive
compensation payable within 12 months after such Employee has received a
distribution of pre-tax contributions from the TCF Employees Stock Ownership
Plan - 401(k) pursuant to the financial hardship withdrawal provisions of such
plan.
b. Any elections with respect to Deferred Amounts of salary shall be
exercised in writing by the Employee prior to the latest to occur of the
following: (i) the beginning of the calendar year for which the salary is to be
earned; (ii) such Employee's first day of employment service in that year; or
(iii) the first day of the calendar month next following the date the Employee
first becomes eligible to participate in the Plan. Any election with respect to
Deferred Amounts of incentive compensation shall be made no later than December
31 of the calendar year preceding the calendar year in which the periods of
service are rendered for which the incentive compensation is to be paid. Any
election with respect to Deferred Amounts of TCF Stock awards shall be exercised
in writing by the Employee on or before the effective date of the award, and may
be exercised separately with respect to the shares of the stock award and any
cash or stock dividends (other than stock dividends in the nature of stock
splits) declared and paid with respect to such shares. An election of Deferred
Amounts, once made, is irrevocable, except as provided in paragraph 6 hereof.
c. Deferred Amounts shall be subject to the rules set forth in this
document, and each Employee shall have the right to receive cash payments on
account of previously Deferred Amounts only in the amounts and under the
circumstances hereinafter set forth. Effective for compensation earned on or
after January 1, 2000, and for awards of TCF Stock made on or after that date,
an Employee's election of Deferred Amounts for a calendar year shall also
include an election of the timing and
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form of distribution of the Deferred Amounts elected for that year, from among
the alternatives set forth in section 5.a. of this Plan.
d. Employees eligible to participate in this Plan are Employees of a
Company who have been designated by TCF Financial as subject to the reporting
requirements of Section 16(a) under the Securities Exchange Act of 1934.
Eligibility shall be determined annually as of the latest practicable date prior
to the commencement of each new calendar year. In the event an Employee ceases
to be eligible for this Plan during the course of a calendar year, the
Employee's eligibility shall nevertheless continue through the end of that
calendar year. Notwithstanding the foregoing, individuals who become employees
of a Company as a result of a merger or acquisition shall not be eligible
Employees under this Plan unless and until TCF Financial has adopted a
resolution identifying them as eligible Employees.
2. PERSONNEL COMMITTEE. The Committee (the "Committee") shall consist
of such members of the Personnel Committee of the Board of Directors of TCF
Financial Corporation who qualify as non-employee directors from time to time
under Rule 16b-3 of the Securities and Exchange Commission. Full power and
authority to construe, interpret, and administer this Plan document shall be
vested in the Committee. The Committee shall have full power and authority to
make each determination provided for in this Plan document, and in this
connection, to promulgate such rules and regulations as the Committee considers
necessary or appropriate for the implementation and management of this Plan. The
Committee shall have sole and absolute discretion in the performance of its
powers and duties under this Plan. All determinations made by the Committee
shall be final, conclusive and binding upon the Companies, each Employee and
former Employee and their designees, unless found by a court of competent
jurisdiction to have been arbitrary and capricious. The Committee shall have
authority to designate officers of TCF Financial and to delegate authority to
such officers to receive documents which are required to be filed with the
Committee, to execute and provide directions to the Trustee and other
administrators, and to do such other actions as the Committee may specify on its
behalf, and any such actions undertaken by such officers shall be deemed to have
the same authority and effect as if done by the Committee itself.
3. DEFERRED COMPENSATION ACCOUNTS. Each Company shall establish on its
books a separate account ("Account"), including sub-accounts pursuant to Exhibit
A hereto and Section 10 hereof, for each of its Employees who becomes a
participant in this Plan, and each such Account shall be maintained as follows:
a. Each Account shall be credited with the Deferred Amounts elected
by the Employee for whom such Account is established as of the date on which
such Deferred Amount would otherwise have been paid to the Employee. Separate
Accounts will be maintained for any Deferred Amounts that are payable at
different times or in different forms than other Deferred Amounts.
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<PAGE>
b. To the extent that a Company has made contributions to the Trust
described in paragraph 4 with respect to an Employee's Deferred Amounts, the
Employee's Account shall thereafter be adjusted as described in paragraph 4. To
the extent such contributions have not been made with respect to an Employee's
Deferred Amounts, and within 30 days after the date on which such Deferred
Amounts are credited to an Employee's Account, they shall have been deemed to
have been invested in such investments as shall be permitted by the Committee
and as the Employee shall direct, except that Deferred Amounts pertaining to TCF
Stock awards shall always be deemed to be invested in TCF Stock unless they are
sold pursuant to a Change in Control Diversification Election. Any investment
direction by an Employee shall be consistent with Section 10 and Exhibit A and
shall be irrevocable with respect to the calendar year to which it applies,
unless the Committee allows additional elections. While an Employee's Account is
deemed to be so invested, it shall be credited with all interest, dividends
(whether in stock, cash, or other property), stock splits, or other property
that would have been received if the Deferred Amounts had actually been so
invested, except if an Employee has elected not to defer dividends. All cash
deemed to have been received with respect to investments deemed to have been
made for an Employee's Account shall be deemed to be reinvested in such
investments as the Employee shall direct as of a date selected by the Committee,
which date shall be not less than 30 days after receipt of such direction, and
the balance credited to an Employee's Account as of any date shall be equal to
the fair market value of the investments deemed to have been made for such
Account as of such date. Starting with Deferred Amounts elected for the year
2000 and after Accounts for each Employee shall be separately maintained on a
calendar year basis, with each year's account (the "Class Year Account")
reflecting only the Deferred Amounts of compensation earned in that year and the
investments in which the Deferred Amounts are deemed to be invested. All
Deferred Amounts elected before the year 2000, including deferrals of TCF Stock
awards made before that date, and the investments in which they are deemed to be
invested from time to time, shall be aggregated and maintained as a "Pre-2000
Account".
c. Although the value of an Employee's Account is to be measured by
the value of and income from certain investments, the value of and income from
such investments are merely a measuring device to determine the payments to be
made to each Employee hereunder. Each Employee, and each other recipient of an
Employee's Deferred Amounts pursuant to paragraph 7, shall be and remain an
unsecured general creditor of the Company by which he is employed with respect
to any payments due and owing to such Employee hereunder. If a Company should
from time to time, in its discretion, actually purchase the investments deemed
to have been made for an Employee's Account, either directly or through the
trust described in paragraph 4, such investments shall be solely for the
Company's or such trust's own account, and the Employees shall have no right,
title or interest therein.
d. Sub-accounts shall be maintained as provided in Exhibit A hereto
and in Section 10 hereof.
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e. Notwithstanding the provisions of Exhibit A and Section 10, in
the event of a Change in Control in which TCF Stock is exchanged for shares of a
successor company, or for cash, securities or other property, such that TCF
Stock is no longer outstanding, each Employee may make a one-time
diversification election prior to the closing of the Change in Control to sell
the assets in the Employee's TCF Stock Account in an orderly liquidation after
the closing and to reinvest the assets in such investments as the Employee shall
elect. Any assets thus acquired for the Employee's Account other than securities
of a successor company shall be credited to the Employee's Diversified Account.
If the Employee does not make such a diversification election, the shares of TCF
Stock allocated to the Employee's account upon the closing shall be exchanged
for the same consideration in the Change in Control as shares of TCF Stock
generally receive in the Change in Control. Any portion of such consideration
consisting of securities of a successor company will be allocated to the TCF
Stock Account and thereafter will be subject to the same sale restrictions as
applied to TCF Stock prior to the Change in Control. Any portion of such
consideration consisting of assets other than securities of a successor company
will be allocated to the Employee's Diversified Account.
4. TRUST. TCF Financial may establish a trust (of the type commonly
known as a "rabbi trust") to aid in the accumulation of assets for payment of
Deferred Amounts. In the event that such a Trust is established, the amounts
credited to the Employee's Accounts shall be adjusted as follows:
a. Each Company may, in its discretion, contribute to the trust an
amount equal to the balance credited to the Account of each Employee employed by
such Company on the date of such contribution. Thereafter, each Company may, in
its discretion, contribute to the trust an amount equal to the Deferred Amounts
of the Employees employed by such Company within five business days after the
Deferred Amount is earned by the Employee or, in the case of Deferred Amounts of
TCF Stock awards, the Company may contribute the deferred shares of TCF Stock
within five days after the award is made. The assets of the trust shall be
invested in such investments as may be permitted by the Committee and directed
by an Employee for his own Account. Any investment direction of an Employee
shall be made consistent with Section 10 and shall be irrevocable with respect
to the calendar year to which it applies, unless the Committee allows additional
elections. Insofar as the trustee of the Trust ("Trustee") has acquired an
investment for an Employee's Account pursuant to such directions, the Employee
shall have the right to determine confidentially whether such investment will be
tendered in a tender or exchange offer, and to direct the Trustee accordingly.
The terms of the trust shall be consistent with the terms of this Plan. The
Trustee shall be a corporate trustee independent of the Company or, if
individual(s), shall not include at any time any person who is or has been
eligible for participation in this Plan. Nothing herein shall be construed as
requiring the Company to make any contributions to the trust. To the extent such
contributions are actually made, the trust assets shall remain subject to the
claims of the Company's general creditors in the event of its insolvency.
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b. Unless separate accounts are maintained by another record-keeper,
the trust shall provide for separate accounts in the name of each Employee who
has elected a Deferred Amount and for each Class Year Account and Pre-2000
Account. Except as provided in paragraph 4.d., from and after the date as of
which such accounts are established, the balances in the Accounts established
for Employees pursuant to this Plan shall be equal to the balances credited to
such separate accounts. Starting with Deferred Amounts elected for the year 2000
and after Accounts for each Employee shall be separately maintained on a
calendar year basis, with each year's account (the "Class Year Account")
reflecting only the Deferred Amounts of compensation earned in that year and the
investments in which the Deferred Amounts are deemed to be invested. All
Deferred Amounts elected before the year 2000, including deferrals of TCF Stock
awards made before that date, and the investments in which they are deemed to be
invested from time to time, shall be aggregated and maintained as a "Pre-2000
Account". Each of the foregoing types of Accounts shall be adjusted as follows:
(i) Contributions (if any) made by the Companies to the trust on
behalf of such Employee for such Account, and all dividends or other
distributions made with respect to property allocated to such separate
Account (except for dividends on TCF Stock awards which the Employee
elected not to defer), shall be credited to such separate Account and
invested as the Employee shall direct.
(ii) Each Employee's separate Account shall be increased by the
amount of any increase in the fair market value, as determined by the
Trustee, of any assets allocated to such separate Account, and shall be
decreased by any decrease in the fair market value of such assets, as
determined by the Trustee.
(iii) Each Employee's separate Account shall be reduced by any
distributions made to the Employee from the trust which are chargeable to
such separate Account.
c. An Employee's right to direct the investment of the Employee's
separate account shall continue during any period of distribution subsequent to
the Employee's termination of employment in the same manner as if the Employee
had continued as an active Employee, although the Committee may, in its
discretion, add additional registered mutual funds or collective or common
trustee funds which are available only for the accounts of terminated Employees
if the Committee deems such funds to be particularly appropriate or suitable for
such Accounts.
d. The adjustments described in this paragraph 4 shall only be made
to an Employee's Account to the extent that a Company has made contributions to
the trust pursuant to this paragraph 4. If for any reason such contributions
have not been made then, and only to that extent, the Employee's Account shall
be adjusted as provided in paragraph 3.b.
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e. Sub-Accounts shall be maintained as provided in Exhibit A hereto
and in Section 10 hereof.
f. Notwithstanding the provisions of Exhibit A and Section 10, in
the event of a Change in Control in which TCF Stock is exchanged for shares of a
successor company, or for cash, securities or other property, such that TCF
Stock is no longer outstanding, each Employee may make a one-time
diversification election prior to the closing of the Change in Control to sell
the assets in the Employee's TCF Stock Account in an orderly liquidation after
the closing and to reinvest the assets in such investments as the Employee shall
elect. Any assets thus acquired for the Employee's Account other than securities
of a successor company shall be credited to the Employee's Diversified Account.
If the Employee does not make such a diversification election, the shares of TCF
Stock allocated to the Employee's account upon the closing shall be exchanged
for the same consideration in the Change in Control as shares of TCF Stock
generally receive in the Change in Control. Any portion of such consideration
consisting of securities of a successor company will be allocated to the TCF
Stock Account and thereafter will be subject to the same sale restrictions as
applied to TCF Stock prior to the Change in Control. Any portion of such
consideration consisting of assets other than securities of a successor company
will be allocated to the Employee's Diversified Account.
5. PAYMENT OF DEFERRED AMOUNTS.
a. DEFERRALS ON OR AFTER JANUARY 1, 2000 ("CLASS YEAR ACCOUNTS"). For
Deferred Amounts of compensation earned on or after January 1, 2000 and of TCF
Stock awards made on or after that date, at the same time as the Employee elects
the Deferred Amounts for a calendar year, or for a TCF Stock Award, the Employee
shall also elect the timing and form of distribution of such Deferred Amounts
for that year, or for the TCF Stock award, from among the following options:
(I) UPON A DATE CERTAIN. As to Deferred Amounts other
than TCF Stock awards, the Employee may designate the distribution to
be either a lump sum or annual installments (but no fewer than two and
no more than 15) to be paid or to commence on a date in a year
designated by the Employee ("Date Certain") either before or after
employment termination but in no event sooner than two calendar years
after the calendar year when the Deferred Amount was earned, subject to
the Personnel Committee's designation of a uniform month and day for
each year. For all Deferred Amounts, the Employee may designate the
distribution to be either a lump sum or annual installments (but no
fewer than two and no more than 15) to be paid on or to commence on
such Date Certain. Any distribution in annual installments shall
commence 30 days after the Date Certain with succeeding installments
paid thereafter on the date designated by the Committee in each
subsequent year. Each installment shall consist of the balance of the
Employee's account at the end of the previous calendar year, multiplied
by a fraction, the numerator of which is 1 and the denominator of which
is the number of installments remaining to be paid. Distributions from
the TCF Stock account shall be made in
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whole shares of TCF Stock (disregarding any shares in suspense or
unvested as of the end of the calendar year). Distributions from the
Diversified Account shall be made in cash. Distributions shall be made
first from any available cash in the Employee's Account and, to the
extent such cash is not sufficient to cover the distribution, pro rata
from the TCF Stock Account and the Diversified Account (by liquidating
pro rata portions of each investment in the Diversified Account).
(II) UPON DISABILITY. The Employee may designate an
alternative distribution in the event of Disability, as defined in this
Plan, in the form of either a lump sum or annual installments (but no
fewer than two and no more than 15) to be paid or to commence 30 days
after such Disability occurs. The determination of payments and
installments, including the distribution of only whole shares of TCF
Stock from the TCF Stock account, shall be the same as under the
preceding paragraph (I).
(III) UPON OTHER TERMINATION OF EMPLOYMENT, INCLUDING
RETIREMENT AND DEATH. The Employee may designate an alternative
distribution in the event of a termination of employment, including
retirement, in the form of either a lump sum or annual installments
(but no fewer than two and no more than 15) to be paid or to commence
30 days after such termination of employment occurs. The determination
of payments and installments, including the distribution of only whole
shares of TCF Stock from the TCF Stock account, shall be the same as
under the preceding paragraph (I).
(IV) UPON A CHANGE IN CONTROL. The Employee may
designate an alternative distribution in the event of a Change in
Control (as defined in section 5.j.) in the form of either a lump sum
or annual installments (but no fewer than two and no more than 15) to
be paid or, in the case of annual installments, to commence 30 days
after the one year anniversary of the closing of such Change in
Control. The determination of payments and installments, including the
distribution of only whole shares of TCF Stock from the TCF Stock
account, shall be the same as under the preceding paragraph (I).
b. PRE-2000 ACCOUNT. Not later than 30 days after an Employee's
"Distribution Event" (as defined herein), the Trustee shall commence
distribution of the amounts credited to such Employee's Pre-2000 Account.
Notwithstanding the foregoing sentence, if an Employee's distribution requires
Committee action then the commencement of distributions shall occur not later
than 30 days after such Committee action or, if later, after the Employee's
Distribution Event. Provided, that the Committee shall take any action required
of it no later than its next regularly scheduled meeting after the Employee's
Distribution Event. An Employee's "Distribution Event" is the first to occur of
the following: (i) termination of employment; (ii) disability or (iii) the date
one year after a "Change in Control: (as defined herein). Commencing within such
30 day period, the balance credited to the Employee's Account shall be paid as
follows.
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15-YEAR PAYMENT SCHEDULE SUBJECT TO ACCELERATION BY COMMITTEE. For
distributions not subject to paragraph 5.c., d., or k., payment of the
Employee's Pre-2000 Account shall be in fifteen annual installments unless the
Committee approves a different schedule or the Employee's account is subject to
the last paragraph of this section 5.b. The Committee may determine on a case by
case basis to approve a different payment schedule for an Employee after taking
into account whether the Employee has executed or will execute a non-competition
agreement in form and scope reasonably acceptable to the Committee. The
Committee may also consider such other factors as the Committee considers
appropriate in each case. Any alternative payment schedule the Committee
approves under this paragraph 5.b. may be in the form of installments over such
period as the Committee selects, in the form of a lump sum, or any combination
of installments and lump sum payments. For distributions from the Accounts of
Employees who did not consent to the terms of this paragraph 5.b., the balance
in the Account shall be paid as provided at the end of this section.
(I) The first payment under paragraph 5.b. shall be paid on a date
the Committee selects which is no later than 30 days after the Committee's
direction as to the form and timing of distributions is made or, if later,
30 days after the Employee's Distribution Event. If no date is selected,
the first payment shall be on the date that is the later of 30 days after
the Committee's action or 30 days after the Employee's Distribution Event.
Succeeding installments (if any) shall be paid on January 31 of each
calendar year following the calendar year in which the first payment was
made.
(II) Each payment shall be made in cash or in kind as the Committee,
in its discretion, shall determine except that all assets of an Employee's
Account invested in TCF Stock shall be distributed in the form of TCF
Stock. If the Committee makes no instruction, any assets of the Employee's
Account invested in assets other than TCF Stock shall be distributed in the
form of cash. Annual installments are intended to be substantially equal in
value. To that end, each annual distribution shall be determined as
follows. The amount credited to Employee's Account, as reported on the
latest available account statement, shall be multiplied by a fraction, the
numerator of which is one and the denominator of which is the number if
installments remaining to be paid, including the current installment. The
value of any portion of the account distributed in cash shall be equal to
the cash received upon its liquidation by the Trustee, provided that such
liquidation occurs on the latest practicable date prior to the distribution
date.
(III) Notwithstanding the foregoing subparagraph (I), an Employee
who has terminated employment and commenced receiving payments may elect
each year to have the payment otherwise due on January 31 of the next
succeeding year paid as monthly installments instead, with each payment
made on the last day of each month. Any such election shall be made in
writing and delivered to the Committee on or before December 1 prior to any
year for which it is to be effective. Such election may also indicate the
assets to be liquidated in connection with each
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<PAGE>
monthly payment (subject to the requirement that any assets invested in TCF
Stock must be distributed in kind). The amount of each monthly payment
shall be equal to the amount that would otherwise be paid in one payment in
January, divided by 12. Any assets to be liquidated in order to pay monthly
benefits shall be liquidated on the last practicable date prior to the
installment's payment date. In no event shall this subparagraph be
construed as allowing the executive to lengthen or shorten the number of
years over which his or her benefits will be paid; the election herein
pertains only to timing of payments within a year.
PRE-2000 ACCOUNT: LUMP SUM PAYMENT. For an Employee's Pre-2000 Account,
distributions to Employees who did not consent to the foregoing terms of
paragraph 5.b. at the time such provisions were added to the Plan in 1996, shall
occur on or about the 30th day after the Employee's Distribution Event.
Distribution shall consist of a single lump sum equal to the total value of the
Employee's Pre-2000 Account, unless the termination of employment was due to
retirement or disability (as defined herein), in which case the distribution
shall be in five annual installments. However, the Committee shall reduce the
number of the installments if necessary to provide for annual payments of at
least $15,000. In addition, if the value of the Employee's Account is less than
$15,000 as of any annual installment payment date, the Account shall be paid in
full as of such installment payment date. Distributions shall be in the form of
cash, except that any portion of the Account invested in TCF Stock shall be
distributed in kind. The value of any portion of the account distributed in cash
shall be equal to the cash received upon its liquidation by the Trustee,
provided that such liquidation occurs on the latest practicable date prior to
the distribution date.
c. OVERRIDING LUMP SUM DISTRIBUTION IN EXCHANGE FOR
NON-COMPETITION COVENANT OR REDUCTION IN ACCOUNT BALANCE. Effective on and after
September 30, 1998, each Employee who so elects in accordance with this
paragraph c and who has had a Distribution Event shall be entitled to elect to
receive a lump sum form of distribution of either the Pre-2000 Account or any
Class Year Account. A lump sum distribution shall consist of a single
distribution of the entire value of the Employee's Pre-2000 or Class Year
Account (unless the Employee elects to apply the election to only the portion of
the Account invested in TCF Stock or to only the portion of the Account invested
in assets other than TCF Stock) on or about 30 days after the later of the
Employee's Distribution Event or the date on which the Employee's election is
filed with TCF Financial. The distribution shall be in the form of cash, except
that any portion of the Employee's Account invested in TCF Stock shall be
distributed in kind. The value of any portion of the Account distributed in cash
shall be equal to the cash received upon its liquidation by the Trustee,
provided that such liquidation occurs on the latest practicable date prior to
the distribution date. An Employee's election under this paragraph c may occur
at any time prior to or after the commencement of distributions to such
Employee. If distributions have already commenced, such election shall apply
only to the balance of the Employee's Account at the time of the election. The
election shall be made on such form as TCF Financial reasonably requires and
shall be accompanied by either: (a) a noncompetition agreement reasonably
acceptable to the Committee (see paragraph (i )
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<PAGE>
below); or (b) the Employee's written acceptance of a reduction by 5% in the
Employee's Account, whichever the Employee elects to provide. If the Employee
elects the reduction in his or her Account, such reduction shall be accomplished
by TCF Financial and the Trustee on or about 30 days after such election is
made.
d. CHANGE IN CONTROL DISTRIBUTION. In the event of a Change in Control
(as defined in this Plan) all Pre-2000 Accounts in the Plan will be distributed
to all Employees. If the Employee's Pre-2000 Account is subject to paragraph
5.b., distribution will be in the form required by paragraph 5.b. If the
Employee elects to have paragraph 5.c. apply to the Pre-2000 Account, however,
then distribution will be in the form of a lump sum. Any election to apply
paragraph 5.c. to an Account in connection with a Change in Control shall meet
the requirements of paragraph 5.c. The first payment, or the lump sum payment,
whichever applies, of a Pre-2000 Account shall occur on or about 30 days after
the earlier of (i) the date one year after the Change in Control, or (ii) the
date of the Employee's termination of employment or disability. Any shares of
TCF Stock (or securities of a successor company exchanged for TCF Stock) in the
TCF Stock Account shall be distributed in kind. The value of any distribution
from the Diversified Account distributed in cash shall be equal to the cash
received upon its liquidation by the Trustee, provided that such liquidation
occurs on the latest practicable date prior to the distribution date. In the
event of a Change in Control, all Class Year Accounts of an Employee shall be
distributed to the Employee if he or she so elected, at the time and in the
manner elected under paragraph 5.a. at the time the Class Year Account was
deferred. If the Employee subsequently elects to have paragraph 5.c. apply to
the Class Year Account, however, then distribution shall be in the form of a
lump sum.
e. For purposes of this section, an Employee's employment is considered
to terminate as of the date which is the later of (i) Employee's last date of
service for the Company, or (ii) the last date on which there is an employment
relationship between the Employee and a Company.
f. For purposes of this section, an Employee is disabled as of the date
the Employee is eligible for payments under the long term disability plan of a
Company.
g. In the event installment payments commence and any installments are
unpaid at the time of Employee's death, the payments shall be made at the times
and in such amounts as if Employee were living to the persons specified in
paragraph 7.a.
h. For purposes of this section, an Employee's termination of
employment is a retirement if so determined by the Committee under all the facts
and circumstances.
i. A non-competition agreement shall be reasonably acceptable to the
Committee for purposes of this Section 5 if it has a value as of the Committee's
action date, equal to at least five percent of the then-current value of the
Employee's Account. Valuation shall be determined in all cases on the basis of
an independent appraisal, unless such an appraisal is deemed unnecessary by both
the Committee and the Employee.
j. For purposes of this Plan, a Change in Control shall be deemed to
have occurred if (i) any "person" as defined in sections 13(d) and 14(d) of the
Securities Exchange Act of 1934 (the "Exchange Act") is or becomes the
"beneficial owner" as defined in Rule 13d-3 under the Exchange Act, directly or
indirectly, of securities of TCF Financial representing fifty percent (50%) or
more of the combined voting power of TCF Financial's then outstanding
securities. (For purposes of this clause (i), the term
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<PAGE>
"beneficial owner" does not include any employee benefit plan maintained by TCF
Financial that invests in TCF Financial's voting securities.); or (ii) during
any period of two (2) consecutive years there shall cease to be a majority of
the Board comprised as follows: individuals who at the beginning of such period
constitute the Board or new directors whose nomination for election by the
company's shareholders was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors at the beginning of
the period or whose election or nomination for election was previously so
approved; or (iii) the shareholders of TCF Financial approve a merger or
consolidation of TCF Financial with any other corporation, other than a merger
or consolidation which would result in the voting securities of TCF Financial
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least fifty percent (50%) of the combined voting power of
the voting securities of TCF Financial or such surviving entity outstanding
immediately after such merger or consolidation, or the shareholders of TCF
Financial approve a plan of complete liquidation of TCF Financial or an
agreement for the sale or disposition by TCF Financial of all or substantially
all TCF Financial's assets; provided, however, that no Change in Control will be
deemed to have occurred if such merger, consolidation, sale or disposition of
assets, or liquidation is not subsequently consummated. The date of a Change in
Control, for purposes of this Plan, is the date on which the Change in Control
is consummated.
k. Notwithstanding any other provision of this Section 5 or any payment
schedule approved by the Committee pursuant to this Section 5 and regardless of
whether payments have commenced under this Section 5, in the event that the
Internal Revenue Service should finally determine with respect to an Employee
who has terminated employment with the Company that part or all of the value of
the Employee's Deferred Amounts or Plan Account which have not actually been
distributed to the Employee, or that part or all of a related Trust Account
which has not actually been distributed to the Employee, is nevertheless
required to be included in the Employee's gross income for federal and/or State
income tax purposes, then the Deferred Amounts or the Account or the part
thereof that was determined to be includible in gross income shall be
distributed to the Employee in a lump sum as soon as practicable after such
determination without any action or approval by the Committee. A "final
determination" of the Internal Revenue Service for purposes of this paragraph
5.i. is a determination in writing by said Service ordering the payment of
additional tax, reporting of additional gross income or otherwise requiring Plan
amounts to be included in gross income, which is not appealable or which the
Employee does not appeal within the time prescribed for appeals.
6. EMERGENCY PAYMENTS. In the event of an "unforeseeable emergency" as
determined hereafter, the Committee may determine the amounts payable under
paragraph 5 hereof and pay all or a part of such amounts without regard to the
payment dates provided in paragraph 5 to the extent the Committee determines
that such action is necessary in light of immediate and heavy needs of the
Employee (or his beneficiary) occasioned by severe financial hardship. For the
purposes of this paragraph 6, an "unforeseeable emergency" is a severe financial
hardship to the Employee resulting from a sudden and unexpected illness or
accident of the Employee or beneficiary, or of a
11
<PAGE>
dependent (as defined in Section 152(a) of the Internal Revenue Code of 1986, as
amended) of the Employee or beneficiary, loss of the Employee's or beneficiary's
property due to casualty, or other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of the Employee
or beneficiary. Payments shall not be made pursuant to this paragraph 6 to the
extent that such hardship is or may be relieved: (a) through reimbursement or
compensation by insurance or otherwise, (b) by liquidation of the Employee's or
beneficiary's assets, to the extent the liquidation of such assets would not
itself cause severe financial hardship, or (c) by cessation of the Employee's
deferrals under the Plan. Such action shall be taken only if Employee (or
Employee's legal representatives or successors) signs an application describing
fully the circumstances which are deemed to justify the payment, together with
an estimate of the amounts necessary to prevent such hardship, which application
shall be approved by the Committee after making such inquiries as the Committee
deems necessary or appropriate.
7. METHOD OF PAYMENTS.
a. In the event of Employee's death, payments shall be made to the
persons (including a trustee or trustees) named in the last written instrument
signed by Employee and received by the Committee prior to Employee's death, or
if Employee fails to so name any person, the amounts shall be paid to Employee's
estate or the appropriate distributee thereof. The Committee, the Company, and
the Trustee shall be fully protected in making any payments due hereunder in
accordance with what the Committee believes to be such last written instrument
received by it.
b. Payments due to a legally incompetent person may be made in such
of the following ways as the Committee shall determine:
(i) directly to such incompetent person,
(ii) to the legal representative of such incompetent person, or
(iii) to some near relative of the incompetent person to be used for
the latter's benefit.
c. Except as otherwise provided in paragraphs 7.a. and b., all
payments to persons entitled to benefits hereunder shall be made to such persons
in person or upon their personal receipt or endorsement, and shall not be
grantable, transferable, or otherwise assignable in anticipation of payment
thereof, in whole or in part, by the voluntary or involuntary acts of any such
persons, or by operation of law, and shall not be pledged, encumbered, or
otherwise liable or taken for any obligation of such person.
d. All payments to persons entitled to benefits hereunder shall be
made out of the general assets, and shall be the sole obligations, of the
Employer(s) by which the Eligible Employee was employed, except to the extent
that such payments are made out of the trust described in paragraph 4.
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<PAGE>
8. CLAIMS PROCEDURES.
a. If a claim for benefits made by any person (the "Applicant") is
denied, the Committee shall furnish to the Applicant within 90 days after its
receipt of such claim (or within 180 days after such receipt if special
circumstances require an extension of time) a written notice which: (i)
specifies the reasons for the denial, (ii) refers to the pertinent provisions of
the Plan on which the denial is based, (iii) describes any additional material
or information necessary for the perfection of the claim and explains why such
material or information is necessary, and (iv) explains the claim review
procedures.
b. Upon the written request of the Applicant submitted within 60
days after his receipt of such written notice, the Committee shall afford the
Applicant a full and fair review of the decision denying the claim and, if so
requested: (i) permit the Applicant to review any documents which are pertinent
to the claim, (ii) permit the Applicant to submit to the Committee issues and
comments in writing, and (iii) afford the Applicant an opportunity to meet with
a quorum of the Committee as a part of the review procedure.
c. Within 60 days after its receipt of a request for review (or
within 120 days after such receipt if special circumstances, such as the need to
hold a hearing, require an extension of time) the Committee shall notify the
Applicant in writing of its decision and the reasons for its decision and shall
refer the Applicant to the provisions of the Plan which form the basis for its
decision.
9. MISCELLANEOUS.
a. Except as limited by paragraph 7.c. and except that an Employee
shall have a continuing power to designate a new recipient in the event of
Employee's death at any time prior to such death without the consent or approval
of any person theretofore named as Employee's recipient by an instrument meeting
the requirements of paragraph 7.a., this document shall be binding upon and
inure to the benefit of each Company, the Employees, their legal
representatives, successors and assigns, and all persons entitled to benefits
hereunder.
b. Any notice given in connection with this document shall be in
writing and shall be delivered in person or by registered mail or overnight
delivery service, return receipt requested. Any notice given by registered mail
or overnight delivery service shall be deemed to have been given upon the date
of delivery indicated on the return receipt, if correctly addressed.
c. Nothing in this document shall interfere with the rights of any
Employee to participate or share in any profit sharing or pension plan which is
now in force or which may at some future time become a recognized plan of any
Company.
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d. Nothing in this document shall be construed as an employment
agreement nor as in any way impairing the right of any Company to terminate an
Employee's employment at will.
e.This Plan constitutes a mere promise by the Company to make
benefit payments in the future, and it is intended to be unfunded for tax
purposes and for the purposes of Title I of ERISA. The rights of an Employee or
beneficiary to receive benefit payments hereunder are solely those of an
unsecured general creditor of the Company.
10. INVESTMENT ELECTIONS BY EMPLOYEES; LEVERAGING; DEFERRED TCF STOCK
AWARDS; PURCHASE PROCEDURES FOR PURPOSES OF RULE 16b-3.
a. Employees may elect to liquidate funds in their Deferred
Compensation Accounts under Section 3 or 4 and reinvest them as directed,
PROVIDED that any investment election shall be exercised in writing by the
Employee and approved by the Committee or its approved representative under such
terms and conditions as the Committee deems appropriate (Exhibit A to this
Plan), and FURTHER PROVIDED, that on and after September 30, 1998 any
investments in TCF Stock shall be subject to paragraph b of this section 10.
b. If an Employee directs or retains any investment in shares of
TCF Stock on or after September 30, 1998, or defers an award of TCF Stock, the
Employee's Account shall include a TCF Stock Account which shall operate as
follows:
(i) All shares of TCF Stock allocated to the Employee's
Account on September 30, 1998 (excluding any shares held in suspense or
unvested pursuant to paragraph c of this section) shall be allocated on
that date to the Employee's TCF Stock Account and the fixed number of
shares so allocated shall be the beginning balance of the TCF Stock
Account.
(ii) Thereafter, the TCF Stock Account shall be increased by
the number of shares, if any, of TCF Stock purchased (or deemed to be
purchased) from Deferred Amounts or from dividends (other than
nondeferred dividends) and/or interest pursuant to the Employee's
directions under Section 3 of this Plan and by any shares of TCF Stock
released from pledge or becoming vested, as provided in paragraph c of
this section.
(iii) The balance of shares of the TCF Stock Account shall in
no event be decreased.
(iv) Shares allocated to the Employee's TCF Stock Account
shall be subject to all of the restrictions and other provisions of
this Committee's action dated 8-24-98 establishing separate accounts
for TCF Stock as compared to non-TCF Stock assets.
c. (I) In the event the Trustee engages in borrowing on behalf
of an Employee's account pursuant to directions of the Committee under section
5.1(f) of the Trust, all shares of TCF Stock acquired with the proceeds of such
borrowing shall be pledged by the Trustee to secure the repayment of such loan
and any shares of TCF Stock so pledged shall be held in suspense (unallocated)
in the Employee's TCF Stock Account pursuant to this paragraph c. Shares held in
suspense (unallocated) under this paragraph c shall be
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treated as follows: (i) they shall not be credited to the balance of the
Employee's TCF Stock Account under paragraph a of this section and shall not be
distributed or distributable to the Employee, whether as part of a distribution
pursuant to section 5 of this Plan or otherwise, during any time when they are
pledged; (ii) they shall not be used for any other purpose than the repayment of
principal and/or interest payments as they come due on the loan entered into by
the Trustee in connection with the purchase of such shares; and (iii) they shall
not in any event be credited to or inure to the benefit of any other Employee's
Account in the Plan and/or Trust. Dividends paid on shares held in suspense
shall be credited to the Employee's Account in TCF Stock or in other assets as
the Employee shall direct, to the extent such dividends exceed then-current
amounts of principal and interest due on the loan. In the event the Employee has
a distribution of his or her entire Account balance or entire remaining Account
balance in the Plan, the Trustee shall be directed to liquidate a sufficient
number of the shares of TCF Stock held in suspense in order to repay the balance
due on the loan in full and the remainder of the shares held in suspense, if
any, shall be released from the pledge, allocated to the Employee's TCF Stock
Account and included in the distribution. Notwithstanding the foregoing, the
lender may elect to release from pledge any shares of TCF Stock held in suspense
under this paragraph c prior to complete repayment of the loan and in such event
the Trustee and the administrator of the Plan shall thereafter immediately
allocate such shares to the Employee's TCF Stock Account and shall increase the
balance thereof as provided in paragraph a of this section.
c (II) Deferred Amounts consisting of TCF Stock awards shall be
held unallocated until such time as the shares vest in accordance with the terms
of the award agreement. As of the date any such shares become vested, the number
of shares vesting shall be allocated to the Employee's Account and shall
thereafter become subject to distribution the same as any other shares of TCF
Stock in the TCF Stock account. Any cash dividends paid on unvested shares of
TCF Stock, if such dividends have been deferred by the Employee, shall be
allocated to the Employee's account and invested as directed by the Employee.
Any stock dividends paid on unvested shares of TCF Stock, if such dividends have
been deferred by the Employee, shall be allocated to the Employees' TCF Stock
account and increase the TCF Stock account balance unless such dividends are in
the nature of a stock split, in which case they shall be held unallocated until
such time as the award vests.
d. Any election of Deferred Amounts of salary or incentive
compensation under paragraph 1.b. shall be exercised in writing by the Employee
and filed with the Committee no later than the date prior to the date the first
salary or incentive compensation, part or all of which is to become a Deferred
Amount, is earned.
e. Any investment election under paragraph 3 or 4 relating to
initial or periodic investment of Deferred Amounts in TCF Stock, whether as a
result of an initial or yearly election to participate in the Plan or a change
in the level of participation in the Plan, shall be exercised in writing by the
Employee and filed with the Committee no later than the date prior to the date
the first salary or incentive compensation, part or all of which is to become a
Deferred Amount, is earned. Deferred Amounts of salary or incentive
compensation, to the extent they are forwarded to the trustee, shall be so
forwarded on or immediately after the payroll date of the salary or incentive
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compensation which is being deferred and shall be deemed to be invested on the
same date on which the Trustee purchases the designated investments. The Trustee
shall purchase such investments as soon as practicable after the payroll date
for which the Deferred Amount is received, and in the case of investments
consisting of TCF Stock, no later than two weeks after such payroll date, with
the exact date and purchase terms to be determined by a stock broker or other
investment professional on the basis of such person's judgment as to the best
available purchase price for the Plan and Trust. If Deferred Amounts are not
forwarded to the Trustee, investments in equity securities of TCF Financial
shall be deemed to occur at the average of the high and low trading price for
such securities on the payroll date.
f. Any investment election under paragraph 3 or 4 relating to
liquidation of existing investments and reinvestment or reapplication of
proceeds within the Plan or Trust shall be consistent with Exhibit A hereto,
shall be exercised in writing and filed with the Committee by the Employee on
any date, provided that any such election which is a discretionary purchase of
TCF Stock is at least six months after the date of the Employee's last such
discretionary election (as defined in Rule 16b-3) of a sale of TCF Stock under
any other benefit plan of the Company. Liquidation and/or reinvestment of funds
within the Plan or Trust under Section 3 or 4 shall occur as soon as practicable
after the Employee's election is filed with the Committee, provided that the
Committee determines it is a valid election and, in the case of investment or
reinvestment in TCF Stock, such election is implemented by the Trustee no later
than two weeks after the date such election is filed with the Committee and
determined to be valid, with the exact date(s) and terms of any such transaction
involving TCF Stock to be determined by a stock broker or other investment
professional on the basis of such person's judgment as to the then best
available purchase price for the Plan and Trust. If Deferred Amounts have not
been forwarded to the Trustee, to the extent there are no actual funds to
implement the Employee's election, such election shall be deemed to be
implemented at the average of the high and low sales prices for TCF Stock on the
date the election was filed with the Committee and determined to be valid and,
for other investments, on such basis as the Trustee reasonably determines.
g. For purposes of this Section 10, filing with the corporate
secretary of TCF Financial shall be deemed to be a filing with the Committee.
11 . TERMINATION OR AMENDMENT. This Plan may be amended at any time and
from time to time, upon the approval of the Board of Directors of TCF Financial;
PROVIDED, that, if the amendment is adopted prior to a change in control (as
defined in section 5(j) hereof), no such amendment shall (without the consent of
all participants, including any terminated participants and beneficiaries then
receiving distributions) alter any participant's or beneficiary's right to
payments of amounts previously credited to such participant's or beneficiary's
Account or delay the time or times at which a participant or beneficiary is
entitled to receive payments with respect to the participant's Deferred Amounts
under the Plan. If the amendment is adopted after a change in control, as
defined in section 5(j) hereof, the approval of the Board of Directors and the
consent of all participants, terminated participants and beneficiaries shall be
required for the
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amendment. In the event that all of the Plan's participants and beneficiaries do
not consent to a proposed amendment, such amendment shall not take effect but
the Plan Accounts of the consenting participants shall be transferred to a
separate plan that is identical to this Plan in all respects, except that it may
include the proposed amendment. The Board of Directors may terminate this Plan
in its discretion, except that any such termination shall require the consent of
all participants (including any terminated participants and beneficiaries then
receiving distributions), unless it is an automatic termination of the Plan
under section 5(k) hereof.
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EXHIBIT A
(Action of 16b-3 Sub-Committee of the Personnel Committee Establishing TCF Stock
Accounts and Diversified Accounts effective as of September 30, 1998 and as
amended effective as of January 1, 2000)
1. Effective as of September 30, 1998 (the "Effective Date"), each
participant's Account in the Plan and Trust (if the Trustee is maintaining
separate accounts) shall be divided into two sub-accounts: a "TCF Stock
Account" and a "Diversified Account". All shares of common stock of TCF
Financial ("TCF Stock") in a participant's Account on the Effective Date
shall be allocated as of that Date to the Participant's TCF Stock Account.
All other investments in a participant's Account on the Effective Date
shall be allocated as of that Date to the participant's Diversified
Account. Thereafter, the Sub-Accounts shall operate as follows:
a. The TCF Stock Account shall consist solely of shares of TCF Stock (and
cash or cash equivalent money market funds for fractional shares or for
funds held temporarily prior to investment). The Diversified Account
shall not at any time include any shares of TCF Stock. Except as
permitted by paragraph e, below, no transfer of assets will be
permitted from the TCF Stock Account to the Diversified Account or from
the Diversified Account to the TCF Stock Account.
b. A participant's TCF Stock Account shall hold all shares of TCF Stock
allocated to it on or after the Effective Date and such shares shall
not be subject to sale, transfer, assignment, pledge or other
hypothecation in any manner. Upon the occurrence of a Distribution
Event (as defined in the Plans) the shares will be distributed from the
Plan and Trust to the participant in an in-kind distribution pursuant
to the terms of the Plan.
c. The Diversified Account shall not at any time purchase or invest in any
shares of TCF Stock, but shall invest in such investments as the
participant directs and as the Committee permits from time to time.
d. Any new Deferred Amounts for a participant after the Effective Date
shall be allocated to either the participant's TCF Stock Account or to
such participant's Diversified Account, as the participant shall direct
in an irrevocable election filed before the beginning of each calendar
year and applicable throughout the calendar year. The Deferred Amounts
shall be credited to the applicable sub-Account as of the same date
that they are otherwise credited to the participant's Account under
Section 3.a. of the Plans and Section 4.2 of the Trusts.
e. Dividends generated by a participant's TCF Stock Account and which are
deferred shall be reinvested in the TCF Stock Account, or in the
Diversified Account, as the participant directs in an irrevocable
election filed before the beginning of each calendar year and
applicable throughout the calendar year. Any interest or dividends
generated by a participant's Diversified Account shall be reinvested in
the Diversified Account, or in the participant's TCF Stock Account, as
the participant directs in an irrevocable election filed before the
beginning of each calendar year and applicable throughout the calendar
year, unless
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management determines that the reinvestment of interest and dividends
within or from the Diversified Account is not administratively
feasible. If the participant does not file an election with respect to
the investment of interest and/or dividends, all interest and dividends
shall be reinvested in the asset that generated them.
f. Notwithstanding the election provisions of paragraphs 1.d and 1.e., any
participant may make a one-time only investment election for the fourth
quarter of 1998 with respect to new Deferred Amounts and dividends and
interest generated during that calendar quarter, provided that the
election is filed prior to the beginning of the calendar quarter, is
irrevocable and applies to the entire calendar quarter.
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Exhibit 10(n)
TCF FINANCIAL SENIOR OFFICER DEFERRED COMPENSATION PLAN
(Amended and Restated effective as of January 1, 2000)
1. DEFERRAL OF INCENTIVE COMPENSATION, SALARIES AND STOCK AWARDS.
a. From time to time eligible employees ("Employees") of TCF
Financial Corporation ("TCF Financial") or any of its direct or indirect
subsidiaries (each such corporation being referred to hereinafter as the
"Company") may, by written notice, elect to have payment of a portion of their
salary for the next succeeding calendar year, all or a portion of their
incentive compensation payable for the next succeeding calendar year, and/or all
or a portion of a stock award of TCF Financial Common Stock ("TCF Stock")
deferred as hereinafter provided. Each such deferral of compensation or a TCF
Stock award shall be (and is hereinafter referred to as) a "Deferred Amount."
Notwithstanding the foregoing, however, an Employee may not elect to defer any
portion of salary or incentive compensation with respect to any calendar year,
unless such Employee's deferrals with respect to such year are at least $1,000
in the aggregate, and no deferral may be made of any salary or incentive
compensation payable within 12 months after such Employee has received a
distribution of pre-tax contributions from the TCF Employees Stock Ownership
Plan - 401(k) pursuant to the financial hardship withdrawal provisions of such
plan.
b. Any elections with respect to Deferred Amounts of salary shall be
exercised in writing by the Employee prior to the latest to occur of the
following: (i) the beginning of the calendar year for which the salary is to be
earned; (ii) such Employee's first day of employment service in that year; or
(iii) the first day of the calendar month next following the date the Employee
first becomes eligible to participate in the Plan. Any election with respect to
Deferred Amounts of incentive compensation shall be made no later than December
31 of the calendar year preceding the calendar year in which the periods of
service are rendered for which the incentive compensation is to be paid. Any
election with respect to Deferred Amounts of TCF Stock awards shall be exercised
in writing by the Employee on or before the effective date of the award, and may
be exercised separately with respect to the shares of the stock award and any
cash or stock dividends (other than stock dividends in the nature of stock
splits) declared and paid with respect to such shares. An election of Deferred
Amounts, once made, is irrevocable, except as provided in paragraph 6 hereof.
c.Deferred Amounts shall be subject to the rules set forth in this
document, and each Employee shall have the right to receive cash payments on
account of previously Deferred Amounts only in the amounts and under the
circumstances hereinafter set forth. Effective for compensation earned on or
after January 1, 2000, and for awards of TCF Stock made on or after that date,
an Employee's election of Deferred Amounts for a calendar year shall also
include an election of the timing and
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form of distribution of the Deferred Amounts elected for that year, from among
the alternatives set forth in section 5.a.of this Plan.
d. Employees eligible to participate in this Plan are Employees of a
Company who hold the office of Senior Vice President of TCF Financial
Corporation or TCF National Bank Minnesota or President or Executive Vice
President of an insured institution subsidiary of TCF Financial or President of
a direct or indirect subsidiary of TCF Financial. Effective on and after
February 9, 1995, employees of Great Lakes National Bank Michigan ("Great
Lakes") are eligible for this plan if they hold the officer position of Senior
Vice President or above and are selected for eligibility in the plan by the
Chairman and President of Great Lakes. Effective upon the merger of bank
charters in the year 2000, any Senior Vice President of TCF National Bank is an
eligible employee. Effective on and after November 1, 1998, Employees of a
Company who hold the office of General Counsel of an insured institution
subsidiary of TCF Financial or of a finance company subsidiary, direct or
indirect, of TCF Financial are also eligible to participate in this Plan.
Notwithstanding the foregoing, an employee who is eligible to participate in the
TCF Financial Executive Deferred Compensation Plan or the Winthrop Resources
Corporation Deferred Compensation Plan shall not be eligible to participate in
this Plan. Eligibility shall be determined annually as of the latest practicable
date prior to the commencement of each new calendar year. In the event an
Employee ceases to be eligible for this Plan during the course of a calendar
year, the Employee's eligibility shall nevertheless continue through the end of
that calendar year. Notwithstanding the foregoing, individuals who become
employees of a Company as a result of a merger or acquisition shall not be
eligible Employees under this Plan unless and until TCF Financial has adopted a
resolution identifying them as eligible Employees.
2. PERSONNEL COMMITTEE. The Committee (the "Committee") shall consist
of such members of the Personnel Committee of the Board of Directors of TCF
Financial Corporation who qualify as non-employee directors from time to time
under Rule 16b-3 of the Securities and Exchange Commission. Full power and
authority to construe, interpret, and administer this Plan document shall be
vested in the Committee. The Committee shall have full power and authority to
make each determination provided for in this Plan document, and in this
connection, to promulgate such rules and regulations as the Committee considers
necessary or appropriate for the implementation and management of this Plan. The
Committee shall have sole and absolute discretion in the performance of its
powers and duties under this Plan. All determinations made by the Committee
shall be final, conclusive and binding upon the Companies, each Employee and
former Employee and their designees, unless found by a court of competent
jurisdiction to have been arbitrary and capricious. The Committee shall have
authority to designate officers of TCF Financial and to delegate authority to
such officers to receive documents which are required to be filed with the
Committee, to execute and provide directions to the Trustee and other
administrators, and to do such other actions as the Committee may specify on its
behalf, and any such actions undertaken by such
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officers shall be deemed to have the same authority and effect as if done by the
Committee itself.
3. DEFERRED COMPENSATION ACCOUNTS. Each Company shall establish on its
books a separate account ("Account"), including sub-accounts pursuant to Exhibit
A hereto and Section 10 hereof, for each of its Employees who becomes a
participant in this Plan, and each such Account shall be maintained as follows:
a. Each Account shall be credited with the Deferred Amounts elected
by the Employee for whom such Account is established as of the date on which
such Deferred Amount would otherwise have been paid to the Employee. Separate
Accounts will be maintained for any Deferred Amounts that are payable at
different times or in different forms than other Deferred Amounts.
b. To the extent that a Company has made contributions to the Trust
described in paragraph 4 with respect to an Employee's Deferred Amounts, the
Employee's Account shall thereafter be adjusted as described in paragraph 4. To
the extent such contributions have not been made with respect to an Employee's
Deferred Amounts, and within 30 days after the date on which such Deferred
Amounts are credited to an Employee's Account, they shall have been deemed to
have been invested in such investments as shall be permitted by the Committee
and as the Employee shall direct, except that Deferred Amounts pertaining to TCF
Stock awards shall always be deemed to be invested in TCF Stock unless they are
sold pursuant to a Change in Control Diversification Election. Any investment
direction by an Employee shall be consistent with Section 10 and Exhibit A and
shall be irrevocable with respect to the calendar year to which it applies,
unless the Committee allows additional elections. While an Employee's Account is
deemed to be so invested, it shall be credited with all interest, dividends
(whether in stock, cash, or other property), stock splits, or other property
that would have been received if the Deferred Amounts had actually been so
invested, except if an Employee has elected not to defer dividends. All cash
deemed to have been received with respect to investments deemed to have been
made for an Employee's Account shall be deemed to be reinvested in such
investments as the Employee shall direct as of a date selected by the Committee,
which date shall be not less than 30 days after receipt of such direction, and
the balance credited to an Employee's Account as of any date shall be equal to
the fair market value of the investments deemed to have been made for such
Account as of such date. Starting with Deferred Amounts elected for the year
2000 and after Accounts for each Employee shall be separately maintained on a
calendar year basis, with each year's account (the "Class Year Account")
reflecting only the Deferred Amounts of compensation earned in that year and the
investments in which the Deferred Amounts are deemed to be invested. All
Deferred Amounts elected before the year 2000, including deferrals of TCF Stock
awards made before that date, and the investments in which they are deemed to be
invested from time to time, shall be aggregated and maintained as a "Pre-2000
Account".
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<PAGE>
c. Although the value of an Employee's Account is to be measured by
the value of and income from certain investments, the value of and income from
such investments are merely a measuring device to determine the payments to be
made to each Employee hereunder. Each Employee, and each other recipient of an
Employee's Deferred Amounts pursuant to paragraph 7, shall be and remain an
unsecured general creditor of the Company by which he is employed with respect
to any payments due and owing to such Employee hereunder. If a Company should
from time to time, in its discretion, actually purchase the investments deemed
to have been made for an Employee's Account, either directly or through the
trust described in paragraph 4, such investments shall be solely for the
Company's or such trust's own account, and the Employees shall have no right,
title or interest therein.
d. Sub-accounts shall be maintained as provided in Exhibit A hereto
and in Section 10 hereof.
e. Notwithstanding the provisions of Exhibit A and Section 10, in
the event of a Change in Control in which TCF Stock is exchanged for shares of a
successor company, or for cash, securities or other property, such that TCF
Stock is no longer outstanding, each Employee may make a one-time
diversification election prior to the closing of the Change in Control to sell
the assets in the Employee's TCF Stock Account in an orderly liquidation after
the closing and to reinvest the assets in such investments as the Employee shall
elect. Any assets thus acquired for the Employee's Account other than securities
of a successor company shall be credited to the Employee's Diversified Account.
If the Employee does not make such a diversification election, the shares of TCF
Stock allocated to the Employee's account upon the closing shall be exchanged
for the same consideration in the Change in Control as shares of TCF Stock
generally receive in the Change in Control. Any portion of such consideration
consisting of securities of a successor company will be allocated to the TCF
Stock Account and thereafter will be subject to the same sale restrictions as
applied to TCF Stock prior to the Change in Control. Any portion of such
consideration consisting of assets other than securities of a successor company
will be allocated to the Employee's Diversified Account.
4. TRUST. TCF Financial may establish a trust (of the type commonly
known as a "rabbi trust") to aid in the accumulation of assets for payment of
Deferred Amounts. In the event that such a Trust is established, the amounts
credited to the Employee's Accounts shall be adjusted as follows:
a. Each Company may, in its discretion, contribute to the trust an
amount equal to the balance credited to the Account of each Employee employed by
such Company on the date of such contribution. Thereafter, each Company may, in
its discretion, contribute to the trust an amount equal to the Deferred Amounts
of the Employees employed by such Company within five business days after the
Deferred Amount is earned by the Employee or, in the case of Deferred Amounts of
TCF Stock awards, the Company may contribute the deferred shares of TCF Stock
within five days
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<PAGE>
after the award is made. The assets of the trust shall be invested in such
investments as may be permitted by the Committee and directed by an Employee for
his own Account. Any investment direction of an Employee shall be made
consistent with Section 10 and shall be irrevocable with respect to the calendar
year to which it applies, unless the Committee allows additional elections.
Insofar as the trustee of the Trust ("Trustee") has acquired an investment for
an Employee's Account pursuant to such directions, the Employee shall have the
right to determine confidentially whether such investment will be tendered in a
tender or exchange offer, and to direct the Trustee accordingly. The terms of
the trust shall be consistent with the terms of this Plan. The Trustee shall be
a corporate trustee independent of the Company or, if individual(s), shall not
include at any time any person who is or has been eligible for participation in
this Plan. Nothing herein shall be construed as requiring the Company to make
any contributions to the trust. To the extent such contributions are actually
made, the trust assets shall remain subject to the claims of the Company's
general creditors in the event of its insolvency.
b. Unless separate accounts are maintained by another record-keeper,
the trust shall provide for separate accounts in the name of each Employee who
has elected a Deferred Amount and for each Class Year Account and Pre-2000
Account. Except as provided in paragraph 4.d., from and after the date as of
which such accounts are established, the balances in the Accounts established
for Employees pursuant to this Plan shall be equal to the balances credited to
such separate accounts. Starting with Deferred Amounts elected for the year 2000
and after Accounts for each Employee shall be separately maintained on a
calendar year basis, with each year's account (the "Class Year Account")
reflecting only the Deferred Amounts of compensation earned in that year and the
investments in which the Deferred Amounts are deemed to be invested. All
Deferred Amounts elected before the year 2000, including deferrals of TCF Stock
awards made before that date, and the investments in which they are deemed to be
invested from time to time, shall be aggregated and maintained as a "Pre-2000
Account". Each of the foregoing types of Accounts shall be adjusted as follows:
(i) Contributions (if any) made by the Companies to the trust on
behalf of such Employee for such Account, and all dividends or other
distributions made with respect to property allocated to such separate
Account (except for dividends on TCF Stock awards which the Employee
elected not to defer), shall be credited to such separate Account and
invested as the Employee shall direct.
(ii) Each Employee's separate Account shall be increased by the
amount of any increase in the fair market value, as determined by the
Trustee, of any assets allocated to such separate Account, and shall be
decreased by any decrease in the fair market value of such assets, as
determined by the Trustee.
(iii) Each Employee's separate Account shall be reduced by any
distributions made to the Employee from the trust which are chargeable
to such separate Account.
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<PAGE>
c. An Employee's right to direct the investment of the Employee's
separate account shall continue during any period of distribution subsequent to
the Employee's termination of employment in the same manner as if the Employee
had continued as an active Employee, although the Committee may, in its
discretion, add additional registered mutual funds or collective or common
trustee funds which are available only for the accounts of terminated Employees
if the Committee deems such funds to be particularly appropriate or suitable for
such Accounts.
d. The adjustments described in this paragraph 4 shall only be made
to an Employee's Account to the extent that a Company has made contributions to
the trust pursuant to this paragraph 4. If for any reason such contributions
have not been made then, and only to that extent, the Employee's Account shall
be adjusted as provided in paragraph 3.b.
e. Sub-Accounts shall be maintained as provided in Exhibit A hereto
and in Section 10 hereof.
f. Notwithstanding the provisions of Exhibit A and Section 10, in
the event of a Change in Control in which TCF Stock is exchanged for shares of a
successor company, or for cash, securities or other property, such that TCF
Stock is no longer outstanding, each Employee may make a one-time
diversification election prior to the closing of the Change in Control to sell
the assets in the Employee's TCF Stock Account in an orderly liquidation after
the closing and to reinvest the assets in such investments as the Employee shall
elect. Any assets thus acquired for the Employee's Account other than securities
of a successor company shall be credited to the Employee's Diversified Account.
If the Employee does not make such a diversification election, the shares of TCF
Stock allocated to the Employee's account upon the closing shall be exchanged
for the same consideration in the Change in Control as shares of TCF Stock
generally receive in the Change in Control. Any portion of such consideration
consisting of securities of a successor company will be allocated to the TCF
Stock Account and thereafter will be subject to the same sale restrictions as
applied to TCF Stock prior to the Change in Control. Any portion of such
consideration consisting of assets other than securities of a successor company
will be allocated to the Employee's Diversified Account.
5. PAYMENT OF DEFERRED AMOUNTS.
a. DEFERRALS ON OR AFTER JANUARY 1, 2000 ("CLASS YEAR ACCOUNTS"). For
Deferred Amounts of compensation earned on or after January 1, 2000 and of TCF
Stock awards made on or after that date, at the same time as the Employee elects
the Deferred Amounts for a calendar year, or for a TCF Stock Award, the Employee
shall also elect the timing and form of distribution of such Deferred Amounts
for that year, or for the TCF Stock award, from among the following options:
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(I) UPON A DATE CERTAIN. As to Deferred Amounts other than TCF
Stock awards, the Employee may designate the distribution to be
either a lump sum or annual installments (but no fewer than two and
no more than 15) to be paid or to commence on a date in a year
designated by the Employee ("Date Certain") either before or after
employment termination but in no event sooner than two calendar
years after the calendar year when the Deferred Amount was earned,
subject to the Personnel Committee's designation of a uniform month
and day for each year. For all Deferred Amounts, the Employee may
designate the distribution to be either a lump sum or annual
installments (but no fewer than two and no more than 15) to be paid
on or to commence on such Date Certain. Any distribution in annual
installments shall commence 30 days after the Date Certain with
succeeding installments paid thereafter on the date designated by
the Committee in each subsequent year. Each installment shall
consist of the balance of the Employee's account at the end of the
previous calendar year, multiplied by a fraction, the numerator of
which is 1 and the denominator of which is the number of
installments remaining to be paid. Distributions from the TCF Stock
account shall be made in whole shares of TCF Stock (disregarding any
shares in suspense or unvested as of the end of the calendar year).
Distributions from the Diversified Account shall be made in cash.
Distributions shall be made first from any available cash in the
Employee's Account and, to the extent such cash is not sufficient to
cover the distribution, pro rata from the TCF Stock Account and the
Diversified Account (by liquidating pro rata portions of each
investment in the Diversified Account).
(II) UPON DISABILITY. The Employee may designate an alternative
distribution in the event of Disability, as defined in this Plan, in
the form of either a lump sum or annual installments (but no fewer
than two and no more than 15) to be paid or to commence 30 days
after such Disability occurs. The determination of payments and
installments, including the distribution of only whole shares of TCF
Stock from the TCF Stock account, shall be the same as under the
preceding paragraph (I).
(III) UPON OTHER TERMINATION OF EMPLOYMENT, INCLUDING
RETIREMENT AND DEATH. The Employee may designate an alternative
distribution in the event of a termination of employment, including
retirement, in the form of either a lump sum or annual installments
(but no fewer than two and no more than 15) to be paid or to
commence 30 days after such termination of employment occurs. The
determination of payments and installments, including the
distribution of only whole shares of TCF Stock from the TCF Stock
account, shall be the same as under the preceding paragraph (I).
(IV) UPON A CHANGE IN CONTROL. The Employee may designate an
alternative distribution in the event of a Change in Control (as
defined in section 5.j.) in the form of either a lump sum or annual
installments (but no fewer than two and no more than 15) to be paid
or, in the case of annual installments, to
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<PAGE>
commence 30 days after the one year anniversary of the closing of
such Change in Control. The determination of payments and
installments, including the distribution of only whole shares of TCF
Stock from the TCF Stock account, shall be the same as under the
preceding paragraph (I).
b. PRE-2000 ACCOUNT. Not later than 30 days after an Employee's
"Distribution Event" (as defined herein), the Trustee shall commence
distribution of the amounts credited to such Employee's Pre-2000 Account.
Notwithstanding the foregoing sentence, if an Employee's distribution requires
Committee action then the commencement of distributions shall occur not later
than 30 days after such Committee action or, if later, after the Employee's
Distribution Event. Provided, that the Committee shall take any action required
of it no later than its next regularly scheduled meeting after the Employee's
Distribution Event. An Employee's "Distribution Event" is the first to occur of
the following: (i) termination of employment; (ii) disability or (iii) the date
one year after a "Change in Control: (as defined herein). Commencing within such
30 day period, the balance credited to the Employee's Account shall be paid as
follows.
15-YEAR PAYMENT SCHEDULE SUBJECT TO ACCELERATION BY COMMITTEE. For
distributions not subject to paragraph 5.c., d., or k., payment of the
Employee's Pre-2000 Account shall be in fifteen annual installments unless the
Committee approves a different schedule or the Employee's account is subject to
the last paragraph of this section 5.b. The Committee may determine on a case by
case basis to approve a different payment schedule for an Employee after taking
into account whether the Employee has executed or will execute a non-competition
agreement in form and scope reasonably acceptable to the Committee. The
Committee may also consider such other factors as the Committee considers
appropriate in each case. Any alternative payment schedule the Committee
approves under this paragraph 5.b. may be in the form of installments over such
period as the Committee selects, in the form of a lump sum, or any combination
of installments and lump sum payments. For distributions from the Accounts of
Employees who did not consent to the terms of this paragraph 5.b., the balance
in the Account shall be paid as provided at the end of this section.
(I) The first payment under paragraph 5.b. shall be paid on a date
the Committee selects which is no later than 30 days after the
Committee's direction as to the form and timing of distributions is
made or, if later, 30 days after the Employee's Distribution Event. If
no date is selected, the first payment shall be on the date that is the
later of 30 days after the Committee's action or 30 days after the
Employee's Distribution Event. Succeeding installments (if any) shall
be paid on January 31 of each calendar year following the calendar year
in which the first payment was made.
(II) Each payment shall be made in cash or in kind as the
Committee, in its discretion, shall determine except that all assets of
an Employee's Account invested in TCF Stock shall be distributed in the
form of TCF Stock. If the Committee
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<PAGE>
makes no instruction, any assets of the Employee's Account invested in
assets other than TCF Stock shall be distributed in the form of cash.
Annual installments are intended to be substantially equal in value. To
that end, each annual distribution shall be determined as follows. The
amount credited to Employee's Account, as reported on the latest
available account statement, shall be multiplied by a fraction, the
numerator of which is one and the denominator of which is the number if
installments remaining to be paid, including the current installment.
The value of any portion of the account distributed in cash shall be
equal to the cash received upon its liquidation by the Trustee,
provided that such liquidation occurs on the latest practicable date
prior to the distribution date.
(III) Notwithstanding the foregoing subparagraph (I), an Employee
who has terminated employment and commenced receiving payments may
elect each year to have the payment otherwise due on January 31 of the
next succeeding year paid as monthly installments instead, with each
payment made on the last day of each month. Any such election shall be
made in writing and delivered to the Committee on or before December 1
prior to any year for which it is to be effective. Such election may
also indicate the assets to be liquidated in connection with each
monthly payment (subject to the requirement that any assets invested in
TCF Stock must be distributed in kind). The amount of each monthly
payment shall be equal to the amount that would otherwise be paid in
one payment in January, divided by 12. Any assets to be liquidated in
order to pay monthly benefits shall be liquidated on the last
practicable date prior to the installment's payment date. In no event
shall this subparagraph be construed as allowing the executive to
lengthen or shorten the number of years over which his or her benefits
will be paid; the election herein pertains only to timing of payments
within a year.
PRE-2000 ACCOUNT: LUMP SUM PAYMENT. For an Employee's Pre-2000 Account,
distributions to Employees who did not consent to the foregoing terms of
paragraph 5.b. at the time such provisions were added to the Plan in 1996, shall
occur on or about the 30th day after the Employee's Distribution Event.
Distribution shall consist of a single lump sum equal to the total value of the
Employee's Pre-2000 Account, unless the termination of employment was due to
retirement or disability (as defined herein), in which case the distribution
shall be in five annual installments. However, the Committee shall reduce the
number of the installments if necessary to provide for annual payments of at
least $15,000. In addition, if the value of the Employee's Account is less than
$15,000 as of any annual installment payment date, the Account shall be paid in
full as of such installment payment date. Distributions shall be in the form of
cash, except that any portion of the Account invested in TCF Stock shall be
distributed in kind. The value of any portion of the account distributed in cash
shall be equal to the cash received upon its liquidation by the Trustee,
provided that such liquidation occurs on the latest practicable date prior to
the distribution date.
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c. OVERRIDING LUMP SUM DISTRIBUTION IN EXCHANGE FOR NON-COMPETITION
COVENANT OR REDUCTION IN ACCOUNT BALANCE. Effective on and after September 30,
1998, each Employee who so elects in accordance with this paragraph c and who
has had a Distribution Event shall be entitled to elect to receive a lump sum
form of distribution of either the Pre-2000 Account or any Class Year Account. A
lump sum distribution shall consist of a single distribution of the entire value
of the Employee's Pre-2000 or Class Year Account (unless the Employee elects to
apply the election to only the portion of the Account invested in TCF Stock or
to only the portion of the Account invested in assets other than TCF Stock) on
or about 30 days after the later of the Employee's Distribution Event or the
date on which the Employee's election is filed with TCF Financial. The
distribution shall be in the form of cash, except that any portion of the
Employee's Account invested in TCF Stock shall be distributed in kind. The value
of any portion of the Account distributed in cash shall be equal to the cash
received upon its liquidation by the Trustee, provided that such liquidation
occurs on the latest practicable date prior to the distribution date. An
Employee's election under this paragraph c may occur at any time prior to or
after the commencement of distributions to such Employee. If distributions have
already commenced, such election shall apply only to the balance of the
Employee's Account at the time of the election. The election shall be made on
such form as TCF Financial reasonably requires and shall be accompanied by
either: (a) a noncompetition agreement reasonably acceptable to the Committee
(see paragraph (i ) below); or (b) the Employee's written acceptance of a
reduction by 5% in the Employee's Account, whichever the Employee elects to
provide. If the Employee elects the reduction in his or her Account, such
reduction shall be accomplished by TCF Financial and the Trustee on or about 30
days after such election is made.
d. CHANGE IN CONTROL DISTRIBUTION. In the event of a Change in
Control (as defined in this Plan) all Pre-2000 Accounts in the Plan will be
distributed to all Employees. If the Employee's Pre-2000 Account is subject to
paragraph 5.b., distribution will be in the form required by paragraph 5.b. If
the Employee elects to have paragraph 5.c. apply to the Pre-2000 Account,
however, then distribution will be in the form of a lump sum. Any election to
apply paragraph 5.c. to an Account in connection with a Change in Control shall
meet the requirements of paragraph 5.c. The first payment, or the lump sum
payment, whichever applies, of a Pre-2000 Account shall occur on or about 30
days after the earlier of (i) the date one year after the Change in Control, or
(ii) the date of the Employee's termination of employment or disability. Any
shares of TCF Stock (or securities of a successor company exchanged for TCF
Stock) in the TCF Stock Account shall be distributed in kind. The value of any
distribution from the Diversified Account distributed in cash shall be equal to
the cash received upon its liquidation by the Trustee, provided that such
liquidation occurs on the latest practicable date prior to the distribution
date. In the event of a Change in Control, all Class Year Accounts of an
Employee shall be distributed to the Employee if he or she so elected, at the
time and in the manner elected under paragraph 5.a. at the time the Class Year
Account was deferred. If the Employee subsequently elects to have paragraph 5.c.
apply to the Class Year Account, however, then distribution shall be in the form
of a lump sum.
10
<PAGE>
e. For purposes of this section, an Employee's employment is
considered to terminate as of the date which is the later of (i) Employee's last
date of service for the Company, or (ii) the last date on which there is an
employment relationship between the Employee and a Company.
f. For purposes of this section, an Employee is disabled as of the
date the Employee is eligible for payments under the long term disability plan
of a Company.
g. In the event installment payments commence and any installments
are unpaid at the time of Employee's death, the payments shall be made at the
times and in such amounts as if Employee were living to the persons specified in
paragraph 7.a.
h. For purposes of this section, an Employee's termination of
employment is a retirement if so determined by the Committee under all the facts
and circumstances.
i. A non-competition agreement shall be reasonably acceptable to the
Committee for purposes of this Section 5 if it has a value as of the Committee's
action date, equal to at least five percent of the then-current value of the
Employee's Account. Valuation shall be determined in all cases on the basis of
an independent appraisal, unless such an appraisal is deemed unnecessary by both
the Committee and the Employee.
j. For purposes of this Plan, a Change in Control shall be deemed to
have occurred if (i) any "person" as defined in sections 13(d) and 14(d) of the
Securities Exchange Act of 1934 (the "Exchange Act") is or becomes the
"beneficial owner" as defined in Rule 13d-3 under the Exchange Act, directly or
indirectly, of securities of TCF Financial representing fifty percent (50%) or
more of the combined voting power of TCF Financial's then outstanding
securities. (For purposes of this clause (i), the term "beneficial owner" does
not include any employee benefit plan maintained by TCF Financial that invests
in TCF Financial's voting securities.); or (ii) during any period of two (2)
consecutive years there shall cease to be a majority of the Board comprised as
follows: individuals who at the beginning of such period constitute the Board or
new directors whose nomination for election by the company's shareholders was
approved by a vote of at least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved; or (iii) the
shareholders of TCF Financial approve a merger or consolidation of TCF Financial
with any other corporation, other than a merger or consolidation which would
result in the voting securities of TCF Financial outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least fifty percent
(50%) of the combined voting power of the voting securities of TCF Financial or
such surviving entity outstanding immediately after such merger or
consolidation, or the shareholders of TCF Financial approve a plan of complete
liquidation of TCF Financial or an agreement for the sale or disposition by TCF
Financial of all or substantially all TCF Financial's assets; provided, however,
that no Change in Control will be deemed to have occurred if such merger,
consolidation, sale or disposition of assets, or liquidation is not subsequently
consummated. The date of a Change in Control, for purposes of this Plan, is the
date on which the Change in Control is consummated.
k. Notwithstanding any other provision of this Section 5 or any
payment schedule approved by the Committee pursuant to this Section 5 and
regardless of
11
<PAGE>
whether payments have commenced under this Section 5, in the event that the
Internal Revenue Service should finally determine with respect to an Employee
who has terminated employment with the Company that part or all of the value of
the Employee's Deferred Amounts or Plan Account which have not actually been
distributed to the Employee, or that part or all of a related Trust Account
which has not actually been distributed to the Employee, is nevertheless
required to be included in the Employee's gross income for federal and/or State
income tax purposes, then the Deferred Amounts or the Account or the part
thereof that was determined to be includible in gross income shall be
distributed to the Employee in a lump sum as soon as practicable after such
determination without any action or approval by the Committee. A "final
determination" of the Internal Revenue Service for purposes of this paragraph
5.i. is a determination in writing by said Service ordering the payment of
additional tax, reporting of additional gross income or otherwise requiring Plan
amounts to be included in gross income, which is not appealable or which the
Employee does not appeal within the time prescribed for appeals.
6. EMERGENCY PAYMENTS. In the event of an "unforeseeable emergency" as
determined hereafter, the Committee may determine the amounts payable under
paragraph 5 hereof and pay all or a part of such amounts without regard to the
payment dates provided in paragraph 5 to the extent the Committee determines
that such action is necessary in light of immediate and heavy needs of the
Employee (or his beneficiary) occasioned by severe financial hardship. For the
purposes of this paragraph 6, an "unforeseeable emergency" is a severe financial
hardship to the Employee resulting from a sudden and unexpected illness or
accident of the Employee or beneficiary, or of a dependent (as defined in
Section 152(a) of the Internal Revenue Code of 1986, as amended) of the Employee
or beneficiary, loss of the Employee's or beneficiary's property due to
casualty, or other similar extraordinary and unforeseeable circumstances arising
as a result of events beyond the control of the Employee or beneficiary.
Payments shall not be made pursuant to this paragraph 6 to the extent that such
hardship is or may be relieved: (a) through reimbursement or compensation by
insurance or otherwise, (b) by liquidation of the Employee's or beneficiary's
assets, to the extent the liquidation of such assets would not itself cause
severe financial hardship, or (c) by cessation of the Employee's deferrals under
the Plan. Such action shall be taken only if Employee (or Employee's legal
representatives or successors) signs an application describing fully the
circumstances which are deemed to justify the payment, together with an estimate
of the amounts necessary to prevent such hardship, which application shall be
approved by the Committee after making such inquiries as the Committee deems
necessary or appropriate.
7. METHOD OF PAYMENTS.
a. In the event of Employee's death, payments shall be made to the
persons (including a trustee or trustees) named in the last written instrument
signed by Employee and received by the Committee prior to Employee's death, or
if Employee fails to so name any person, the amounts shall be paid to Employee's
estate or the
12
<PAGE>
appropriate distributee thereof. The Committee, the Company, and the Trustee
shall be fully protected in making any payments due hereunder in accordance with
what the Committee believes to be such last written instrument received by it.
b. Payments due to a legally incompetent person may be made in such
of the following ways as the Committee shall determine:
(i) directly to such incompetent person,
(ii) to the legal representative of such incompetent person, or
(iii) to some near relative of the incompetent person to be used for
the latter's benefit.
c. Except as otherwise provided in paragraphs 7.a. and b., all
payments to persons entitled to benefits hereunder shall be made to such persons
in person or upon their personal receipt or endorsement, and shall not be
grantable, transferable, or otherwise assignable in anticipation of payment
thereof, in whole or in part, by the voluntary or involuntary acts of any such
persons, or by operation of law, and shall not be pledged, encumbered, or
otherwise liable or taken for any obligation of such person.
d. All payments to persons entitled to benefits hereunder shall be
made out of the general assets, and shall be the sole obligations, of the
Employer(s) by which the Eligible Employee was employed, except to the extent
that such payments are made out of the trust described in paragraph 4.
8. CLAIMS PROCEDURES.
a. If a claim for benefits made by any person (the "Applicant") is
denied, the Committee shall furnish to the Applicant within 90 days after its
receipt of such claim (or within 180 days after such receipt if special
circumstances require an extension of time) a written notice which: (i)
specifies the reasons for the denial, (ii) refers to the pertinent provisions of
the Plan on which the denial is based, (iii) describes any additional material
or information necessary for the perfection of the claim and explains why such
material or information is necessary, and (iv) explains the claim review
procedures.
b. Upon the written request of the Applicant submitted within 60
days after his receipt of such written notice, the Committee shall afford the
Applicant a full and fair review of the decision denying the claim and, if so
requested: (i) permit the Applicant to review any documents which are pertinent
to the claim, (ii) permit the Applicant to submit to the Committee issues and
comments in writing, and (iii) afford the Applicant an opportunity to meet with
a quorum of the Committee as a part of the review procedure.
13
<PAGE>
c. Within 60 days after its receipt of a request for review (or
within 120 days after such receipt if special circumstances, such as the need to
hold a hearing, require an extension of time) the Committee shall notify the
Applicant in writing of its decision and the reasons for its decision and shall
refer the Applicant to the provisions of the Plan which form the basis for its
decision.
9. MISCELLANEOUS.
a. Except as limited by paragraph 7.c. and except that an Employee
shall have a continuing power to designate a new recipient in the event of
Employee's death at any time prior to such death without the consent or approval
of any person theretofore named as Employee's recipient by an instrument meeting
the requirements of paragraph 7.a., this document shall be binding upon and
inure to the benefit of each Company, the Employees, their legal
representatives, successors and assigns, and all persons entitled to benefits
hereunder.
b. Any notice given in connection with this document shall be in
writing and shall be delivered in person or by registered mail or overnight
delivery service, return receipt requested. Any notice given by registered mail
or overnight delivery service shall be deemed to have been given upon the date
of delivery indicated on the return receipt, if correctly addressed.
c. Nothing in this document shall interfere with the rights of any
Employee to participate or share in any profit sharing or pension plan which is
now in force or which may at some future time become a recognized plan of any
Company.
d. Nothing in this document shall be construed as an employment
agreement nor as in any way impairing the right of any Company to terminate an
Employee's employment at will.
e.This Plan constitutes a mere promise by the Company to make
benefit payments in the future, and it is intended to be unfunded for tax
purposes and for the purposes of Title I of ERISA. The rights of an Employee or
beneficiary to receive benefit payments hereunder are solely those of an
unsecured general creditor of the Company.
10. INVESTMENT ELECTIONS BY EMPLOYEES; DEFERRED TCF STOCK AWARDS.
a. Employees may elect to liquidate funds in their Deferred
Compensation Accounts under Section 3 or 4 and reinvest them as directed,
PROVIDED that any investment election shall be exercised in writing by the
Employee and approved by the Committee or its approved representative under such
terms and conditions as the Committee deems appropriate (Exhibit A to this
Plan), and FURTHER PROVIDED, that on and after September 30, 1998 any
investments in TCF Stock shall be subject to paragraph b of this section 10.
14
<PAGE>
b. If an Employee directs or retains any investment in shares of
TCF Stock on or after September 30, 1998, or defers an award of TCF Stock, the
Employee's Account shall include a TCF Stock Account which shall operate as
follows:
(i) All shares of TCF Stock allocated to the Employee's
Account on September 30, 1998 (excluding any shares held unvested
pursuant to paragraph c of this section) shall be allocated on that
date to the Employee's TCF Stock Account and the fixed number of shares
so allocated shall be the beginning balance of the TCF Stock Account.
(ii) Thereafter, the TCF Stock Account shall be increased by
the number of shares, if any, of TCF Stock purchased (or deemed to be
purchased) from Deferred Amounts or from dividends (other than
nondeferred dividends) and/or interest pursuant to the Employee's
directions under Section 3 of this Plan and by any shares of TCF Stock
becoming vested, as provided in paragraph c of this section.
(iii) The balance of shares of the TCF Stock Account shall in
no event be decreased.
(iv) Shares allocated to the Employee's TCF Stock Account
shall be subject to all of the restrictions and other provisions of
this Committee's action dated 8-24-98 establishing separate accounts
for TCF Stock as compared to non-TCF Stock assets.
c. Deferred Amounts consisting of TCF Stock awards shall be held
unallocated until such time as the shares vest in accordance with the terms of
the award agreement. As of the date any such shares become vested, the number of
shares vesting shall be allocated to the Employee's Account and shall thereafter
become subject to distribution the same as any other shares of TCF Stock in the
TCF Stock account. Any cash dividends paid on unvested shares of TCF Stock, if
such dividends have been deferred by the Employee, shall be allocated to the
Employee's account and invested as directed by the Employee. Any stock dividends
paid on unvested shares of TCF Stock, if such dividends have been deferred by
the Employee, shall be allocated to the Employees' TCF Stock account and
increase the TCF Stock account balance unless such dividends are in the nature
of a stock split, in which case they shall be held unallocated until such time
as the award vests.
11 . TERMINATION OR AMENDMENT. This Plan may be amended at any time and
from time to time, upon the approval of the Board of Directors of TCF Financial;
PROVIDED, that, if the amendment is adopted prior to a change in control (as
defined in section 5(j) hereof), no such amendment shall (without the consent of
all participants, including any terminated participants and beneficiaries then
receiving distributions) alter any participant's or beneficiary's right to
payments of amounts previously credited to such participant's or beneficiary's
Account or delay the time or times at which a participant or beneficiary is
entitled to receive payments with respect to the participant's Deferred Amounts
under the Plan. If the amendment is adopted after a change in control, as
defined in section 5(j) hereof, the approval of the Board of Directors and the
consent of all participants, terminated participants and beneficiaries shall be
required for the
15
<PAGE>
amendment. In the event that all of the Plan's participants and beneficiaries do
not consent to a proposed amendment, such amendment shall not take effect but
the Plan Accounts of the consenting participants shall be transferred to a
separate plan that is identical to this Plan in all respects, except that it may
include the proposed amendment. The Board of Directors may terminate this Plan
in its discretion, except that any such termination shall require the consent of
all participants (including any terminated participants and beneficiaries then
receiving distributions), unless it is an automatic termination of the Plan
under section 5(k) hereof.
16
<PAGE>
EXHIBIT A
(Action of 16b-3 Sub-Committee of the Personnel Committee Establishing TCF Stock
Accounts and Diversified Accounts effective as of September 30, 1998 and as
amended effective as of January 1, 2000)
1. Effective as of September 30, 1998 (the "Effective Date"), each
participant's Account in the Plan and Trust (if the Trustee is maintaining
separate accounts) shall be divided into two sub-accounts: a "TCF Stock
Account" and a "Diversified Account". All shares of common stock of TCF
Financial ("TCF Stock") in a participant's Account on the Effective Date
shall be allocated as of that Date to the Participant's TCF Stock Account.
All other investments in a participant's Account on the Effective Date
shall be allocated as of that Date to the participant's Diversified
Account. Thereafter, the Sub-Accounts shall operate as follows:
a. The TCF Stock Account shall consist solely of shares of TCF Stock (and
cash or cash equivalent money market funds for fractional shares or for
funds held temporarily prior to investment). The Diversified Account
shall not at any time include any shares of TCF Stock. Except as
permitted by paragraph e, below, no transfer of assets will be
permitted from the TCF Stock Account to the Diversified Account or from
the Diversified Account to the TCF Stock Account.
b. A participant's TCF Stock Account shall hold all shares of TCF Stock
allocated to it on or after the Effective Date and such shares shall
not be subject to sale, transfer, assignment, pledge or other
hypothecation in any manner. Upon the occurrence of a Distribution
Event (as defined in the Plans) the shares will be distributed from the
Plan and Trust to the participant in an in-kind distribution pursuant
to the terms of the Plan.
c. The Diversified Account shall not at any time purchase or invest in any
shares of TCF Stock, but shall invest in such investments as the
participant directs and as the Committee permits from time to time.
d. Any new Deferred Amounts for a participant after the Effective Date
shall be allocated to either the participant's TCF Stock Account or to
such participant's Diversified Account, as the participant shall direct
in an irrevocable election filed before the beginning of each calendar
year and applicable throughout the calendar year. The Deferred Amounts
shall be credited to the applicable sub-Account as of the same date
that they are otherwise credited to the participant's Account under
Section 3.a. of the Plans and Section 4.2 of the Trusts.
e. Dividends generated by a participant's TCF Stock Account and which are
deferred shall be reinvested in the TCF Stock Account, or in the
Diversified Account, as the participant directs in an irrevocable
election filed before the beginning of each calendar year and
applicable throughout the calendar year. Any interest or dividends
generated by a participant's Diversified Account shall be reinvested in
the Diversified Account, or in the participant's TCF Stock
17
<PAGE>
Account, as the participant directs in an irrevocable election filed
before the beginning of each calendar year and applicable throughout
the calendar year, unless management determines that the reinvestment
of interest and dividends within or from the Diversified Account is not
administratively feasible. If the participant does not file an election
with respect to the investment of interest and/or dividends, all
interest and dividends shall be reinvested in the asset that generated
them.
18
<PAGE>
Exhibit 10 (w)
AMENDMENT TO EMPLOYMENT AGREEMENT AND
RESTRICTED STOCK AWARD AGREEMENTS
This Amendment is made and entered into effective as of the 31st day of March,
1999, by and between David H. Mackiewich ("Executive") and TCF National Bank
Illinois ("TCF Illinois") and TCF Financial Corporation ("TCF Financial") (TCF
Illinois and TCF Financial are jointly referred to herein as "TCF").
WHEREAS, Executive and TCF are parties to an Employment Agreement dated
September 3, 1997 and amended as of August 18, 1998 (the "Employment Agreement")
providing in general for Executive's employment as Executive Chairman of TCF
Illinois through January 2, 2002; and
WHEREAS, Executive and TCF Financial are parties to Restricted Stock Agreement
No. 44, as amended effective January 19, 1998 ("RS No. 44") under which 6,667
shares were earned through December 31, 1997 and to Restricted Stock Agreement
No. 91, as amended July 1, 1998 ("RS No. 91") under which 22,500 shares have
been earned through December 31, 1998; and
WHEREAS, TCF Financial has requested that Executive resign as a member of the
board of directors of TCF Financial and Executive is willing to do so and is
tendering his resignation in connection with the signing of this Amendment; and
WHEREAS, Executive wishes to resign from the board of directors of TCF Illinois;
and
WHEREAS, the parties wish to amend the Employment Agreement, RS No. 44 and RS
No. 91 to provide for full vesting and distribution on May 13, 1999 to Executive
of 44,583 shares (the 6,667 shares already earned under RS No. 44 plus 22,500
shares already earned under RS No. 91 plus 50% of the 30,833 remaining unearned
shares under RS No. 91) and for vesting on January 1, 2000 of the remaining
15,417 shares, with such shares being held in escrow until such date.
NOW THEREFORE, the parties hereby amend their prior agreements as follows:
AMENDMENT TO EMPLOYMENT AGREEMENT
Notwithstanding anything to the contrary in the Employment Agreement,
such Agreement is hereby amended to eliminate any references to restricted stock
vesting on January 1, 2002 , it being the intention that the parties' agreement
herein as to Executive's stock awards supersedes in all respects such previous
provisions relating to that stock award. Executive hereby affirms that upon
receiving the shares provided for in this Amendment he will have received all
shares due to him from TCF under his restricted stock awards.
Sec. 3.1 (Time Devoted, Duties) is amended at the request of Executive
to provide that effective March 31, 1999 Executive resigns from the board of TCF
Illinois and he shall no longer be required to serve on such board or to preside
over or attend board meetings of TCF Illinois.
<PAGE>
Sec 4.3 (Additional Compensation) is amended to provide that TCF will
immediately transfer to Executive and release all of its interest in the
Alexander Hamilton split dollar insurance policy.
Sec. 5.2, the last sentence, is amended to read as follows:
Executive also has a grant of restricted stock in the amount of 60,000
shares (the "Restricted Stock Grant"), of which 44,583 shares will vest on May
13, 1999 and the remaining 15,416 shares will vest on January 1, 2000 pursuant
to the terms of RS No. 44 and RS No. 91 as amended herein and the vesting of the
15,416 shares will be subject only to one of the following conditions being met:
(1) That Executive is still employed by TCF on that date; (2) That Executive
terminated his employment with TCF for good reason (as defined in this
Agreement); (3) That TCF terminated Executive's employment; or (4) That
Executive's employment was terminated by reason of Executive's death or
disability. In the case of conditions (2), (3) or (4), the vesting date shall be
the date of termination of employment rather than January 1, 2000.
In all other respects, including but not limited to Executive's title
as Executive Chairman, the Employment Agreement remains in full force and
effect.
Executive by his signature below affirms and acknowledges that the
changes to his Employment Agreement being made at this time do not constitute
"good reason" for him to terminate his employment under the Agreement.
AMENDMENT TO RS NO. 44
Notwithstanding anything to the contrary in RS No. 44, the 6,667 shares
subject to RS No. 44 shall be fully vested, shall not be subject to any
restrictions and shall be distributed to Executive (net of withholding, unless
Executive pays withholding separately) on or before May 13, 1999 and upon
Executive's receipt of such shares RS No. 44 shall terminate and shall be of no
further effect.
AMENDMENT TO RS NO. 91
Notwithstanding anything to the contrary in RS No. 91, 37,916 of the
shares subject to RS No. 91 shall be fully vested, shall not be subject to any
restrictions, and shall be distributed to Executive (net of withholding, unless
Executive pays withholding separately) on or before May 13th, 1999. Subject only
to one of the following conditions being met: (1) That Executive is still
employed by TCF on that date; (2) That Executive terminated his employment with
TCF for good reason (as defined in this Agreement); (3) That TCF terminated
Executive's employment; or (4) That Executive's employment was terminated by
reason of Executive's death or disability, the remaining 15,417 shares under RS
No. 91 shall be delivered to Executive on January 2, 2000 (net of withholding,
unless Executive pays withholding separately) or, if earlier, on the date of
such termination of employment. Upon Executive's receipt of all such shares, RS
No. 91 shall terminate and shall be of no further effect.
<PAGE>
RESIGNATION FROM TCF FINANCIAL BOARD
Executive, by his signature below, hereby resigns from the board of
directors of TCF Financial effective February 1st, 1999.
WHEREFORE the parties have caused this Agreement to be executed effective as of
the 31st day of March, 1999.
By:/s/ David H. Mackiewich
--------------------------------
David H. Mackiewich
TCF NATIONAL BANK ILLINOIS TCF FINANCIAL CORPORATION
By:/s/ C. H. Westbrook By:/s/ Gregory J. Pulles
--------------------------------- ---------------------------------
Title: Executive Vice President Title: Vice Chairman
------------------------------ ------------------------------
<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)
<TABLE>
<CAPTION>
Computation of Basic Earnings Per Common
Share for Statements of Operations: Year Ended December 31,
- ----------------------------------------------------------------------- -------------------------------------------
1999 1998 1997
----------- ----------- ------------
<S> <C> <C> <C>
Net income $ 166,039 $ 156,179 $ 145,061
=========== =========== ============
Weighted average common shares outstanding 82,445,288 88,092,895 84,477,536
=========== =========== ============
Basic earnings per common share $ 2.01 $ 1.77 $ 1.72
=========== =========== ============
Computation of Diluted Earnings Per Common
Share for Statements of Operations:
- -------------------------------------------------------------------------
Net income $ 166,039 $ 156,179 $ 145,061
Add: Interest expense on 7 1/4% convertible
subordinated debentures, net of tax - - 132
------------ ------------ ------------
Income applicable to common shareholders
including effect of dilutive securities $ 166,039 $ 156,179 $ 145,193
============ ============ ============
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 82,445,288 88,092,895 84,477,536
Net dilutive effect of:
Stock option plans 172,486 346,434 468,275
Restricted stock plans 452,944 476,486 838,189
Assumed conversion of 7 1/4% convertible
subordinated debentures - - 349,936
------------ ------------ -------------
83,070,718 88,915,815 86,133,936
============ ============ =============
Diluted earnings per common share $ 2.00 $ 1.76 $ 1.69
============ ============ =============
</TABLE>
<PAGE>
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
FINANCIAL REVIEW
FINANCIAL REVIEW
The financial review presents management's discussion and analysis of the
consolidated financial condition and results of operations of TCF Financial
Corporation ("TCF" or the "Company"). This review should be read in conjunction
with the consolidated financial statements and other financial data beginning on
page 34.
RESULTS OF OPERATIONS
PERFORMANCE SUMMARY - TCF reported net income of $166 million for 1999, up from
$156.2 million for 1998 and $145.1 million for 1997. Diluted earnings per common
share was $2.00 for 1999, compared with $1.76 for 1998 and $1.69 for 1997.
Return on average assets was 1.61% in 1999, compared with 1.62% in 1998 and
1.77% in 1997. Return on average realized common equity was 19.83% in 1999,
compared with 17.51% in 1998 and 19.57% in 1997. Diluted cash earnings per
common share, which excludes amortization and reduction of goodwill net of
income tax benefits, was $2.10 for 1999, compared with $1.88 for 1998 and $1.73
for 1997. On the same basis, cash return on average assets was 1.69% for 1999,
compared with 1.74% for 1998 and 1.82% for 1997, and cash return on average
realized equity was 20.79% for 1999, compared with 18.74% for 1998 and 20.10%
for 1997. As TCF's September 4, 1997 acquisition of Standard Financial, Inc.
("Standard") was accounted for as a purchase transaction, TCF's results for
periods prior to the acquisition have not been restated. Since Standard's
performance ratios were lower than TCF's, the Company's performance ratios since
1997 have been negatively impacted by the acquisition of Standard.
TCF has significantly expanded its retail banking franchise in recent
periods and had 338 retail banking branches at December 31, 1999. In the past
three years, TCF opened 164 new branches, of which 151 were supermarket
branches. This expansion includes TCF's January 1998 acquisition of 76 branches
and 178 automated teller machines ("ATMs") in Jewel-Osco stores in the Chicago
area previously operated by Bank of America. TCF anticipates opening
approximately 37 new branches in 2000, and additional branches in subsequent
years, including approximately 25 Illinois Jewel-Osco supermarket branches per
year in subsequent years until branches have been installed in certain existing
and all newly constructed stores.
Further detail on acquisitions is provided in Note 2 of Notes to
Consolidated Financial Statements.
In December 1998, TCF restructured its consumer finance company operations,
including the discontinuation of indirect automobile lending, the consolidation
of offices and a renewed focus on home equity lending. During 1999, $139.4
million of consumer finance automobile loans and $14.8 million of related
allowances were transferred to loans held for sale in connection with the sales
of these loans. Losses of $1.4 million were recognized in connection with these
sales, which are included in gain on sales of loans held for sale. TCF also
closed its Florida consumer finance loan collections facility during 1999.
In the 1998 fourth quarter, TCF recorded a pretax charge of $1.8 million
for the reorganization of its consumer finance company operations, and increased
the provision for credit losses by $3.9 million from the 1997 fourth quarter
primarily in connection with the finance company automobile loan portfolio.
TCF's 1997 results reflect a branch reorganization at Great Lakes National
Bank Michigan ("Great Lakes Michigan"), including the sale of all eight Ohio
branches and related deposits for a net gain of $10.6 million, the accelerated
amortization of Great Lakes Michigan's remaining $8.7 million of deposit base
intangibles, and the write-off of $1.5 million of Great Lakes Michigan's teller
equipment.
NET INTEREST INCOME - A significant component of TCF's earnings is net interest
income, which is the difference between interest earned on loans and leases,
securities available for sale, investments and other interest-earning assets
(interest income), and interest paid on deposits and borrowings (interest
expense). This amount, when divided by average interest-earning assets, is
referred to as the net interest margin, expressed as a percentage. Net interest
income and net interest margin are affected by changes in interest rates, loan
pricing strategies and competitive conditions, the volume and the mix of
interest-earning assets and interest-bearing liabilities, and the level of
non-performing assets.
Net interest income was $424.2 million for the year ended December 31,
1999, compared with $425.7 million in 1998 and $393.6 million in 1997. This
represents a decrease of .4% in 1999, compared with increases of 8.2% in 1998
and 11% in 1997. Total average interest-earning assets increased 7.9% in 1999,
following increases of 16.2% in 1998 and 12.5% in 1997. The net interest margin
for 1999 was 4.47%, compared with 4.84% in 1998 and 5.20% in 1997. TCF's 1999
net interest income and net interest margin were negatively impacted, as
compared with 1998, by $17.4 million or 11 basis points due to the
discontinuation and sale of TCF's higher-yielding consumer finance automobile
business.
17
<PAGE>
The following table presents TCF's average balance sheets, interest and
dividends earned or paid, and the related yields and rates on major categories
of TCF's interest-earning assets and interest-bearing liabilities:
<TABLE>
<CAPTION>
Year ended December 31, 1999 Year ended December 31, 1998
- -------------------------------------------------------------------------------------------------------------------------
INTEREST
AVERAGE YIELDS Average
(Dollars in thousands) BALANCE INTEREST(1) AND RATES Balance Interest(1)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments .............................................. $ 142,494 $ 9,411 6.60% $ 161,239 $ 10,356
------------------------------------------------------------
Securities available for sale(2) ......................... 1,689,257 111,032 6.57 1,359,698 93,124
---------------------- -----------------------
Loans held for sale ...................................... 199,073 13,367 6.71 197,969 14,072
---------------------- -----------------------
Loans and leases:
Residential real estate .......................... 3,808,062 266,653 7.00 3,687,579 267,916
Commercial real estate ........................... 933,227 78,033 8.36 831,287 73,546
Commercial business .............................. 341,378 27,425 8.03 263,257 22,169
Consumer ......................................... 1,971,069 199,103 10.10 1,922,943 218,837
Lease financing .................................. 410,245 47,077 11.48 378,824 48,874
---------------------- -----------------------
Total loans and leases(3) ................ 7,463,981 618,291 8.28 7,083,890 631,342
---------------------- -----------------------
Total interest-earning assets .... 9,494,805 752,101 7.92 8,802,796 748,894
----------------- -------
Other assets(4) .......................................... 798,494 826,741
---------- ----------
Total assets ..................................... $10,293,299 $ 9,629,537
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Non-interest bearing deposits ............................ $ 1,177,723 $ 1,017,245
---------- ----------
Interest-bearing deposits:
Checking ......................................... 711,440 4,043 .57 666,956 6,207
Passbook and statement ........................... 1,111,104 12,435 1.12 1,130,067 18,305
Money market ..................................... 728,522 19,074 2.62 700,400 20,496
Certificates ..................................... 2,888,968 139,943 4.84 3,249,742 167,484
----------------------- ------------------------
Total interest-bearing deposits ......... 5,440,034 175,495 3.23 5,747,165 212,492
----------------------- ------------------------
Total deposits ................... 6,617,757 175,495 2.65 6,764,410 212,492
----------------------- ------------------------
Borrowings:
Securities sold under
repurchase agreements and
federal funds purchased .................. 529,359 28,610 5.40 140,414 7,863
FHLB advances .................................... 1,821,172 100,454 5.52 1,367,104 79,237
Discounted lease rentals ......................... 171,997 13,830 8.04 205,393 16,744
Other borrowings ................................. 151,430 9,499 6.27 92,467 6,824
----------------------- ------------------------
Total borrowings ......................... 2,673,958 152,393 5.70 1,805,378 110,668
----------------------- ------------------------
Total interest-bearing
liabilities .............. 8,113,992 327,888 4.04 7,552,543 323,160
----------------- ---------
Other liabilities(4) ..................................... 185,393 159,292
---------- ----------
Total liabilities ................................ 9,477,108 8,729,080
Stockholders' equity(4) .................................. 816,191 900,457
---------- ----------
Total liabilities and
stockholders' equity ..................... $10,293,299 $9,629,537
---------- ----------
Net interest income ...................................... $ 424,213 $ 425,734
------- -------
Net interest-rate spread ................................. 3.88%
-----
Net interest margin ...................................... 4.47%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, 1997
- ------------------------------------------------------------------------------------------------------------------
Interest Interest
Yields Average Yields
(Dollars in thousands) and Rates Balance Interest(1) and Rates
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Investments .............................................. 6.42% $ 96,146 $ 7,192 7.48%
-------------------------------------------------------
Securities available for sale(2) ......................... 6.85 1,338,295 95,701 7.15
-------------------------
Loans held for sale ...................................... 7.11 211,192 15,755 7.46
-------------------------
Loans and leases:
Residential real estate .......................... 7.27 2,674,107 206,853 7.74
Commercial real estate ........................... 8.85 856,712 77,829 9.08
Commercial business .............................. 8.42 205,402 18,068 8.80
Consumer ......................................... 11.38 1,856,299 221,758 11.95
Lease financing .................................. 12.90 335,534 39,458 11.76
-------------------------
Total loans and leases(3) ................ 8.91 5,928,054 563,966 9.51
-------------------------
Total interest-earning assets .... 8.51 7,573,687 682,614 9.01
------ ----------------------
Other assets(4) .......................................... 600,083
---------
Total assets ..................................... $ 8,173,770
---------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Non-interest bearing deposits ............................ $ 782,836
---------
Interest-bearing deposits:
Checking ......................................... .93 551,501 6,133 1.11
Passbook and statement ........................... 1.62 901,576 17,653 1.96
Money market ..................................... 2.93 658,894 20,533 3.12
Certificates ..................................... 5.15 2,868,833 150,863 5.26
--------------------------
Total interest-bearing deposits ......... 3.70 4,980,804 195,182 3.92
--------------------------
Total deposits ................... 3.14 5,763,640 195,182 3.39
--------------------------
Borrowings:
Securities sold under
repurchase agreements and
federal funds purchased .................. 5.60 346,339 19,892 5.74
FHLB advances .................................... 5.80 817,464 48,142 5.89
Discounted lease rentals ......................... 8.15 222,558 18,430 8.28
Other borrowings ................................. 7.38 97,547 7,372 7.56
--------------------------
Total borrowings ......................... 6.13 1,483,908 93,836 6.32
--------------------------
Total interest-bearing
liabilities .............. 4.28 6,464,712 289,018 4.47
------ ----------------------
Other liabilities(4) ..................................... 180,585
---------
Total liabilities ................................ 7,428,133
Stockholders' equity(4) .................................. 745,637
---------
Total liabilities and
stockholders' equity ..................... $ 8,173,770
---------
Net interest income ...................................... $ 393,596
-------
Net interest-rate spread ................................. 4.23% 4.54%
----- -----
Net interest margin ...................................... 4.84% 5.20%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Tax-exempt income was not significant and thus has not been presented on a
tax equivalent basis. Tax-exempt income of $189,000, $147,000 and $201,000 was
recognized during the years ended December 31, 1999, 1998 and 1997,
respectively.
(2) Average balance and yield of securities available for sale is based upon the
historical amortized cost.
(3) Average balance of loans and leases includes non-accrual loans and leases,
and is presented net of unearned income.
(4) Average balance is based upon month-end balances.
18
<PAGE>
The following table presents the components of the changes in net interest
income by volume and rate:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999 Year Ended December 31, 1998
VERSUS SAME PERIOD In 1998 Versus Same Period in 1997
- -----------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) DUE TO Increase (Decrease) Due to
- -----------------------------------------------------------------------------------------------------------------------------------
(In thousands) VOLUME(1) RATE(1) TOTAL Volume(1) Rate(1) Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investments ..................................... $ (1,229) $ 284 $ (945) $ 4,302 $ (1,138) $ 3,164
-----------------------------------------------------------------------------
Securities available for sale ................... 21,839 (3,931) 17,908 1,505 (4,082) (2,577)
-----------------------------------------------------------------------------
Loans held for sale ............................. 79 (784) (705) (962) (721) (1,683)
-----------------------------------------------------------------------------
Loans and leases:
Residential real estate ................. 8,728 (9,991) (1,263) 74,296 (13,233) 61,063
Commercial real estate .................. 8,704 (4,217) 4,487 (2,311) (1,972) (4,283)
Commercial business ..................... 6,323 (1,067) 5,256 4,910 (809) 4,101
Consumer direct ......................... 20,619 (13,067) 7,552 10,482 (4,885) 5,597
Consumer finance automobile ............. (23,019) (4,267) (27,286) (5,228) (3,290) (8,518)
Lease financing ......................... 3,851 (5,648) (1,797) 5,376 4,040 9,416
-----------------------------------------------------------------------------
Total loans and leases .......... 25,206 (38,257) (13,051) 87,525 (20,149) 67,376
-----------------------------------------------------------------------------
Total interest income ... 45,895 (42,688) 3,207 92,370 (26,090) 66,280
-----------------------------------------------------------------------------
Deposits:
Checking ................................ 388 (2,552) (2,164) 1,161 (1,087) 74
Passbook and statement .................. (303) (5,567) (5,870) 4,026 (3,374) 652
Money market ............................ 803 (2,225) (1,422) 1,254 (1,291) (37)
Certificates ............................ (17,858) (9,683) (27,541) 19,812 (3,191) 16,621
-----------------------------------------------------------------------------
Total deposits .................. (16,970) (20,027) (36,997) 26,253 (8,943) 17,310
-----------------------------------------------------------------------------
Borrowings:
Securities sold under repurchase
agreements and federal
funds purchased ................. 21,038 (291) 20,747 (11,555) (474) (12,029)
FHLB advances ........................... 25,209 (3,992) 21,217 31,843 (748) 31,095
Discounted lease rentals ................ (2,691) (223) (2,914) (1,401) (285) (1,686)
Other borrowings ........................ 3,825 (1,150) 2,675 (376) (172) (548)
-----------------------------------------------------------------------------
Total borrowings ................ 47,381 (5,656) 41,725 18,511 (1,679) 16,832
-----------------------------------------------------------------------------
Total interest expense .. 30,411 (25,683) 4,728 44,764 (10,622) 34,142
-----------------------------------------------------------------------------
Net interest income ............................. $ 15,484 $(17,005) $ (1,521) $ 47,606 $ (15,468) $ 32,138
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) 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.
In 1999, TCF's net interest income decreased $1.5 million, or .4%, and
total average interest-earning assets increased by $692 million, or 7.9%,
compared with 1998 levels. TCF's net interest income improved by $15.5 million
due to volume changes and decreased $17 million due to rate changes. The
unfavorable impact of the discontinuation of TCF's consumer finance automobile
business, decreased yields on loans and leases resulting, in part, from the
implementation of new tiered pricing for home equity loans in early 1999, and
increased borrowing volumes was partially offset by increased securities
available for sale and loan and lease volumes, decreased rates paid on
interest-bearing liabilities and decreased certificate of deposit volumes. TCF's
net interest margin for the fourth quarter of 1999 was 4.38%, compared with
4.46% for the third quarter of 1999 and 4.65% for the fourth quarter of 1998. As
previously noted, TCF's net interest margin for 1999 was negatively impacted by
the discontinuation of TCF's higher-yielding consumer finance automobile
business. Interest income increased $3.2 million in 1999, reflecting an increase
of $45.9 million due to volume, partially offset by a decrease of $42.7 million
due to rate changes. Interest expense increased $4.7 million in 1999, reflecting
an increase of $30.4 million due to volume, partially offset by a decrease of
$25.7 million due to a lower cost of funds. The increase in net interest income
due to volume reflects the increase in total average interest-earning assets.
The decrease in net interest income due to rate changes reflects loan
prepayments and the discontinuation of TCF's higher-yielding consumer finance
business.
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.
19
<PAGE>
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, or as a result of new pricing strategies and lower rates offered on
loan products in order to respond to competitive conditions. See "Financial
Condition - Market Risk - Interest-Rate Risk" and "Financial Condition -
Deposits."
In 1998, TCF's net interest income increased primarily due to the
acquisition of Standard and the growth of lower interest-cost retail deposits.
Net interest income increased $32.1 million, or 8.2%, and total average
interest-earning assets increased by $1.2 billion, or 16.2%, from 1997 levels.
TCF's net interest income improved by $47.6 million due to volume changes and
decreased $15.5 million due to rate changes. The favorable impact of the growth
in residential real estate, consumer and commercial business loan and lease
financing volumes, decreased volumes of securities sold under repurchase
agreements and federal funds purchased and decreased rates paid on
interest-bearing liabilities was partially offset by decreased yields on
securities available for sale and consumer and residential real estate loans,
and increased certificate of deposit and Federal Home Loan Bank ("FHLB") advance
volumes. TCF's net interest margin for 1998 was negatively impacted by
Standard's lower net interest margin, loan prepayments and purchases of
mortgage-backed securities. Interest income increased $66.3 million in 1998,
reflecting an increase of $92.4 million due to volume, partially offset by a
decrease of $26.1 million due to rate changes. Interest expense increased $34.1
million in 1998, reflecting an increase of $44.8 million due to volume,
partially offset by a decrease of $10.6 million due to a lower cost of funds.
The increase in net interest income due to volume was primarily due to the
acquisition of Standard. The decrease in net interest income due to rate changes
reflects the impact of Standard's lower net interest margin, and loan
prepayments, partially offset by TCF's changing asset/liability mix, with
greater emphasis on higher-yielding consumer loans and lease financings.
In 1997, TCF's net interest income increased primarily due to the
acquisition of Standard, the growth of higher-yielding consumer loans,
commercial business loans, lease financings and lower interest-cost retail
deposits, and increased capital. Net interest income increased $39 million, or
11%, and total average interest-earning assets increased by $839.9 million, or
12.5%, from 1996 levels. TCF's net interest income improved by $47.2 million due
to volume changes and decreased $8.2 million due to rate changes. The favorable
impact of the growth in consumer loan, securities available for sale,
residential real estate loan and lease financing volumes was partially offset by
decreased yields on consumer and residential real estate loans, decreased
volumes in commercial real estate loans, and increased certificate of deposit
volumes. Interest income increased $69.7 million in 1997, reflecting an increase
of $75.5 million due to volume, partially offset by a decrease of $5.7 million
due to rate changes. Interest expense increased $30.7 million in 1997, primarily
due to the acquisition of Standard, reflecting increases of $28.3 million due to
volume and $2.4 million due to a higher cost of funds. The decrease in net
interest income due to rate changes reflects the acquisition of Standard,
partially offset by TCF's changing asset/liability mix.
PROVISION FOR CREDIT LOSSES - TCF provided $16.9 million for credit losses in
1999, compared with $23.3 million in 1998 and $18 million in 1997. The decreased
provision in 1999 reflects the significant provisions recognized in 1998 related
to TCF's discontinued consumer finance automobile loan portfolio. The allowance
for loan and lease losses totaled $55.8 million at December 31, 1999, compared
with $80 million at December 31, 1998, and was 232% of non-accrual loans and
leases. 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 on sales of securities available for sale, loan servicing,
branches, subsidiaries and a joint venture interest, non-interest income
increased $32 million, or 12.2%, during 1999 to $294.6 million. The increase was
primarily due to increased fee and service charge revenues and electronic funds
transfer revenues, partially offset by decreases in leasing and title insurance
revenues, and reflects TCF's expanded retail banking activities. The increases
in fee and service charge revenues and electronic funds transfer revenues
reflect the increase in the number of retail checking accounts, which totaled
1,044,000 accounts at December 31, 1999, up from 913,000 at December 31, 1998.
The average annual fee revenue per retail checking account was $168 for 1999,
compared with $143 for 1998.
20
<PAGE>
The following table presents the components of non-interest income:
<TABLE>
<CAPTION>
Percentage
Year Ended December 31, Increase (Decrease)
- -----------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands) 1999 1998 1997 1999/98 1998/97
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fee and service charge revenues .................. $ 151,988 $ 127,952 $ 101,329 18.8% 26.3%
Electronic funds transfer revenues ............... 67,129 50,556 30,808 32.8 64.1
Leasing revenues ................................. 28,505 31,344 32,025 (9.1) (2.1)
Title insurance revenues ......................... 15,421 20,161 13,730 (23.5) 46.8
Commissions on sales of annuities ................ 8,797 8,413 7,894 4.6 6.6
Commissions on sales of mutual funds ............. 6,052 5,513 3,998 9.8 37.9
Gain on sales of loans held for sale ............. 4,747 7,575 4,777 (37.3) 58.6
Other ............................................ 12,008 11,156 7,789 7.6 43.2
--------------------------------------
294,647 262,670 202,350 12.2 29.8
--------------------------------------
Gain on sales of securities available for sale ... 3,194 2,246 8,509 42.2 (73.6)
Gain on sales of loan servicing .................. 3,076 2,414 1,622 27.4 48.8
Gain on sales of branches ........................ 12,160 18,585 14,187 (34.6) 31.0
Gain on sale of subsidiaries ..................... 5,522 - - 100.0 -
Gain on sale of joint venture interest ........... - 5,580 - (100.0) 100.0
--------------------------------------
23,952 28,825 24,318 (16.9) 18.5
--------------------------------------
Total non-interest income ........ $ 318,599 $ 291,495 $ 226,668 9.3 28.6
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Fee and service charge revenues increased $24 million in 1999, or 18.8%,
and $26.6 million in 1998, or 26.3%, primarily as a result of expanded retail
banking activities. These increases reflect the increase in the number of retail
checking accounts and per account revenues noted above. Included in fee and
service charge revenues are fees of $10.3 million, $13.7 million and $14.6
million received for the servicing of loans owned by others during 1999, 1998
and 1997, respectively. At December 31, 1999, 1998 and 1997, TCF was servicing
real estate loans for others with aggregate unpaid principal balances of $2.9
billion, $3.7 billion and $4.4 billion, respectively.
Electronic funds transfer revenues increased $16.6 million, or 32.8%, in
1999 and $19.7 million, or 64.1%, in 1998. These increases reflect TCF's efforts
to provide banking services through its ATM network. TCF had 1,406 ATMs at
December 31, 1999. As previously noted, in January 1998, TCF acquired 178 ATMs
in connection with its acquisition of 76 branches in Jewel-Osco stores.
Electronic funds transfer revenues in future periods may be negatively impacted
by pending city and state legislative proposals which, if enacted and not
judicially restrained, could limit ATM fees. Included in electronic funds
transfer revenues are debit card interchange fees of $19.5 million, $11.1
million and $3.7 million for 1999, 1998 and 1997, respectively. The significant
increase in these fees reflects an increase in the distribution of debit cards,
and a significant increase in their utilization by TCF's customers. TCF
initiated its debit card program at the end of 1996. TCF had 929,000 debit cards
outstanding at December 31, 1999, up from 774,000 at December 31, 1998.
Leasing revenues decreased $2.8 million in 1999 to $28.5 million, following
a decrease of $681,000 in 1998 to $31.3 million. The year-to-year fluctuations
in leasing revenues and the allocation between types of leasing revenues result
primarily from the manner and timing in which leasing revenues are recognized
over the term of each particular lease. The allocation of revenues is a function
of the lease classification as determined in accordance with generally accepted
accounting principles. In addition, the volume and type of new lease
transactions and the resulting revenues may fluctuate from period to period
based upon factors not within the control of TCF, such as economic conditions.
TCF's ability to grow its lease portfolio is dependent upon its ability to place
new equipment in service. In an adverse economic environment, there may be a
decline in the demand for some types of equipment which TCF leases, resulting in
a decline in the amount of new equipment being placed into service.
Title insurance revenues decreased $4.7 million in 1999, to $15.4 million,
following an increase of $6.4 million in 1998 to $20.2 million. Title insurance
revenues are cyclical in nature and are largely dependent on the levels of
residential real estate loan originations and refinancings. During the 1999
fourth quarter, TCF sold its title insurance and appraisal operations and
recognized a gain of $5.5 million on the sale, and will recognize an additional
gain of up to $15 million over the next five years. The amount of the deferred
gain to be recognized in each year will be dependent upon these operations
continuing to realize a specified level of use by TCF customers, and will be
21
<PAGE>
in direct proportion to the actual level of use realized when compared to the
specified level. Title insurance revenues will no longer be recognized by TCF
as a result of its sale of these operations.
Commissions on sales of annuities increased $384,000 to $8.8 million in
1999, following an increase of $519,000 to $8.4 million in 1998. Commissions on
sales of mutual funds increased $539,000 to $6.1 million in 1999, following an
increase of $1.5 million to $5.5 million in 1998. Sales of annuities and mutual
funds may fluctuate from period to period, and future sales levels will depend
upon general economic conditions and investor preferences. Sales of annuities
will also depend upon continued favorable tax treatment and may be negatively
impacted by the interest rate environment.
Gains on sales of loans held for sale decreased $2.8 million in 1999,
following an increase of $2.8 million in 1998. During 1999, TCF recognized
losses of $1.4 million on sales of $139.4 million of its consumer finance
automobile loan portfolio. See "Financial Condition - Loans Held for Sale" and
"Financial Condition - Loans and Leases." Gains or losses on sales of loans held
for sale may fluctuate significantly from period to period due to changes in
interest rates and volumes, and results in any period related to these
transactions may not be indicative of results which will be obtained in future
periods.
Gains on sales of securities available for sale totaled $3.2 million in
1999, an increase of $948,000 from the $2.2 million recognized in 1998. Gains on
sales of third-party loan servicing rights totaled $3.1 million in 1999 on the
sale of $344.6 million of third-party loan servicing rights. Gains of $2.4
million and $1.6 million were recognized on the sales of $200.4 million and
$144.7 million of third-party loan servicing rights in 1998 and 1997,
respectively. TCF periodically sells securities available for sale and loan
servicing rights depending on market conditions.
During 1999, TCF recognized gains of $12.2 million on the sales of eight
underperforming branches with $116.7 million in deposits, compared with gains of
$18.6 million on the sales of 14 underperforming branches with $234 million in
deposits and $5.6 million on the sale of its joint venture interest in Burnet
Home Loans during 1998. TCF recognized gains of $14.2 million on the sales of 11
underperforming branches with $183.6 million in deposits during 1997. TCF
periodically sells branches that it considers to be underperforming, or have
limited growth potential, and may continue to do so in the future.
NON-INTEREST EXPENSE - Non-interest expense increased $24.1 million, or 5.6%,
in 1999, and $67.3 million, or 18.6%, in 1998, compared with the respective
prior years. The following table presents the components of non-interest
expense:
<TABLE>
<CAPTION>
Percentage
Year Ended December 31, Increase (Decrease)
- ---------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands) 1999 1998 1997 1999/98 1998/97
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Compensation and employee benefits ............... $ 239,053 $ 217,401 $ 180,482 10.0% 20.5%
Occupancy and equipment .......................... 73,613 71,323 58,352 3.2 22.2
Advertising and promotions ....................... 16,981 19,544 19,157 (13.1) 2.0
Amortization of goodwill and other intangibles ... 10,689 11,399 15,757 (6.2) (27.7)
Other ............................................ 112,462 109,033 87,614 3.1 24.4
---------------------------------------
Total non-interest expense ....... $ 452,798 $ 428,700 $ 361,362 5.6 18.6
===========================================================================================================================
</TABLE>
Compensation and employee benefits, representing 52.8% and 50.7% of total
non-interest expense in 1999 and 1998, respectively, increased $21.7 million, or
10%, in 1999, and $36.9 million, or 20.5%, in 1998. The increases were primarily
due to costs associated with expanded retail banking activities, including the
opening of a total of 140 new branches in 1999 and 1998 and the acquisition of
Standard.
Occupancy and equipment expenses increased $2.3 million in 1999 and $13
million in 1998. The 1998 increase reflects the costs associated with expanded
retail banking activities, including the acquisitions of the Jewel-Osco
supermarket branches and Standard.
Advertising and promotion expenses decreased $2.6 million in 1999 following
an increase of $387,000 in 1998. The 1999 decrease reflects a decrease in direct
mail expenses relating to the promotion of consumer and consumer finance loan
products.
Amortization of goodwill and other intangibles decreased $710,000 in 1999
and $4.4 million in 1998. The decrease in 1998 was primarily due to the
previously mentioned 1997 accelerated amortization of $8.7 million of deposit
base intangibles, partially offset by an increase in the amortization of
goodwill and deposit base intangibles resulting from the acquisition of
Standard. Reductions of goodwill associated with branch sales, which are
reported as a component of gain on sales of branches, totaled $464,000 in 1999
and $3.3 million in 1998. No such reductions occurred in 1997.
22
<PAGE>
Other non-interest expense increased $3.4 million, or 3.1%, in 1999 and
$21.4 million, or 24.4%, in 1998. The increases primarily reflect costs
associated with expanded retail banking activities and increases in deposit
account losses. A summary of other expense is presented in Note 21 of Notes to
Consolidated Financial Statements. Included in other non-interest expense for
1999 are $1 million in non-recurring expenses related to the previously
mentioned closing of TCF's Florida consumer finance loan collections facility.
The increase for 1998 also reflects the recognition of $1.8 million of
non-recurring costs in connection with TCF's reorganization of its consumer
finance company operations.
YEAR 2000 - TCF devoted significant resources to address the "Year 2000"
computer issue, which results from the use of two digits rather than four by
computer systems to define the applicable year and the need to make certain that
such systems will continue to properly process information as a result of the
calendar change to the Year 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 evaluated its data processing and other systems with imbedded
technologies, such as ATMs, vaults and security systems, to determine whether
they were Year 2000 compliant. Remediation and testing of all critical systems
was completed in 1999. Many of TCF's data processing applications are supplied
by third-party vendors. TCF evaluated whether such vendor-supplied applications
were Year 2000 compliant. TCF also developed 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.
TCF incurred $10.2 million of internal and external costs for replacement,
renovation and testing of its critical internal computer hardware and software
and imbedded technologies through December 31, 1999. Of the $10.2 million of
Year 2000 costs, $3.7 million has been capitalized. Of the $6.5 million in
internal and external costs that were expensed, $3.7 million and $2.8 million
was recognized by TCF in 1999 and 1998, respectively. Since a significant
portion of the costs incurred on the Year 2000 issue resulted from the
redeployment of internal resources from other projects, TCF does not anticipate
significant operating cost reductions in 2000 and beyond. TCF does not
anticipate significant additional expenditures to be incurred.
The effect of the Year 2000 issue on TCF is in part dependent on the way
the Year 2000 issue was 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 whether they have experienced any
significant Year 2000 issues since the start of the new year. The Year 2000
efforts of third parties are ultimately not within TCF's control, and their
failure to address Year 2000 issues successfully during the Year 2000 transition
period 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.
Based on management's assessment of operations through February 29, 2000,
TCF has not experienced any significant operating difficulties resulting from
the change to the Year 2000, either directly or indirectly through significant
vendors or customers. TCF will continue to monitor this issue and will modify
its Year 2000 contingency plans as additional information becomes available.
INCOME TAXES - TCF recorded income tax expense of $107.1 million in 1999,
compared with $109.1 million in 1998 and $95.8 million in 1997. Income tax
expense represented 39.2% of income before income tax expense during 1999,
compared with 41.1% and 39.8% in 1998 and 1997, respectively. The lower tax
rates in 1999 reflect lower state taxes, and the impact of relatively higher
non-deductible expenses in 1998, including goodwill reductions associated with
branch sales.
Further detail on income taxes is provided in Note 12 of Notes to
Consolidated Financial Statements.
FINANCIAL CONDITION
INVESTMENTS - Total investments, which includes interest-bearing deposits with
banks, federal funds sold, FHLB stock, Federal Reserve Bank stock and other
investments, decreased $129.6 million in 1999 to $148.2 million at December 31,
1999. The decrease primarily reflects decreases of $95.6 million in
interest-bearing deposits with banks and $41 million in federal funds sold. TCF
had no non-investment grade debt securities (junk bonds) and there were no open
trading account or investment option positions as of December 31, 1999.
23
<PAGE>
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
$156.3 million during 1999 to $1.5 billion at December 31, 1999. The decrease
reflects sales of $288.7 million and payment and prepayment activity, partially
offset by purchases of $582.6 million of securities available for sale. At
December 31, 1999, TCF's securities available-for-sale portfolio included $1.4
billion and $112 million of fixed-rate and adjustable-rate mortgage-backed
securities, respectively. Securities available for sale totaled $1.7 billion at
December 31, 1998. Gross unrealized losses on securities available for sale
totaled $75.3 million at December 31, 1999, compared with gross unrealized gains
of $12.3 million at December 31, 1998. TCF has no plans to sell these securities
and it is not anticipated that these unrealized losses will be realized.
LOANS HELD FOR SALE - Residential real estate and education loans held for
sale are carried at the lower of cost or market. Education loans held for sale
increased $5.7 million and residential real estate loans held for sale decreased
$19.8 million from year-end 1998, and totaled $143.9 million and $55 million,
respectively, at December 31, 1999.
As previously noted, $139.4 million of consumer finance automobile loans
and $14.8 million of related allowances were transferred to loans held for sale
and were subsequently sold during 1999. Losses of $1.4 million were recognized
in connection with these sales which are included in gain on sales of loans held
for sale. There were no consumer finance automobile loans classified as held for
sale at December 31, 1999. See "Loans and Leases."
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 December 31,
- ----------------------------------------------------------------------------------------------------------------------------------
(In thousands) 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Residential real estate ................ $3,919,678 $3,765,280 $3,623,845 $2,252,312 $2,607,202
Consumer ............................... 2,058,584 1,876,554 1,976,699 1,728,368 1,534,213
Commercial real estate ................. 1,073,472 811,428 859,916 858,225 967,766
Commercial business .................... 395,513 289,104 240,207 157,057 167,920
Lease financing ........................ 448,496 398,812 368,521 296,958 239,247
----------------------------------------------------------------------------------
Total loans and leases ......... $7,895,743 $7,141,178 $7,069,188 $5,292,920 $5,516,348
==================================================================================================================================
</TABLE>
Loans and leases increased $754.6 million from year-end 1998 to $7.9
billion at December 31, 1999, reflecting increases of $408.3 million, $262
million and $154.4 million in consumer direct, commercial real estate and
residential real estate loans, respectively, partially offset by a decrease of
$226.2 million in consumer finance automobile loans. At December 31, 1999, TCF's
residential real estate loan portfolio was comprised of $1.7 billion of
fixed-rate loans and $2.2 billion of adjustable-rate loans.
Consumer loans increased $182 million from year-end 1998 to $2.1 billion at
December 31, 1999, reflecting an increase of $448.8 million in home equity
loans, partially offset by the decrease of $226.2 million in consumer finance
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
using a new tiered pricing strategy. At December 31, 1999, consumer finance
automobile loans, net of unearned discounts and deferred fees, totaled $7.7
million, compared with $233.9 million at December 31, 1998. Reflected in the
decrease is the previously mentioned sale of $139.4 million of consumer finance
automobile loans. The consumer finance automobile loans at December 31, 1999 are
substantially comprised of lower quality (sub-prime) loans which carry a higher
level of credit risk. 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.
24
<PAGE>
TCF changed its home equity loan origination programs in early 1999. Under
the new programs and in response to intensifying price competition, TCF
implemented a tiered pricing structure for its home equity loans. TCF also
experienced an increase in the loan-to-value ratios on new home equity loans
originated in 1999. Many of these loans are secured by a first lien on the home
and include an advance to pay off an existing first lien mortgage loan, and many
have balances exceeding $100,000. These loans may carry a higher level of credit
risk than loans with a lower loan-to-value ratio. The following table sets forth
additional information about the loan-to-value ratios for TCF's home equity loan
portfolio:
<TABLE>
<CAPTION>
At December 31,
- ------------------------------------------------------------------------------------------------------------
1999 1998
- ------------------------------------------------------------------------------------------------------------
PERCENT Percent
(Dollars in thousands) BALANCE OF TOTAL Balance of Total
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Loan-to-Value Ratios(1)
Over 100%(2) ........................ $ 56,530 2.9% $ 53,972 3.5%
Over 90% to 100% .................... 398,871 20.2 48,469 3.2
Over 80% to 90% ..................... 570,567 28.9 453,502 29.7
80% or less ......................... 948,956 48.0 970,186 63.6
-----------------------------------------------------
Total ....................... $1,974,924 100.0% $1,526,129 100.0%
============================================================================================================
</TABLE>
(1) Loan-to-value is based on the loan amount (current outstanding balance on
closed-end loans and the total commitment on lines of credit) plus deferred
loan origination costs net of fees and refundable insurance premiums, if
any, plus the original amount of senior liens, if any. Property values
represent the most recent appraised value or property tax assessment value
known to TCF. In most cases this value was obtained at the loan origination
date and does not reflect subsequent appreciation or depreciation in
property values, if any.
(2) Amount reflects the total outstanding loan balance. The portion of the loan
balance in excess of 100% of the property value is substantially less.
The following table summarizes TCF's commercial real estate loan
portfolio by property type:
<TABLE>
<CAPTION>
At December 31,
- --------------------------------------------------------------------------------------------------------------------
1999 1998
- --------------------------------------------------------------------------------------------------------------------
NUMBER Number
(Dollars in thousands) BALANCE(1) OF LOANS Balance(1) of Loans
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Apartments ............................................ $ 276,312 537 $ 269,791 608
Office buildings ...................................... 233,184 257 155,780 243
Retail services ....................................... 161,032 228 130,790 236
Hospitality facilities ................................ 112,652 27 41,338 19
Warehouse/industrial buildings ........................ 107,076 136 86,902 135
Health care facilities ................................ 20,858 17 24,280 14
Other ................................................. 165,481 437 105,530 317
Unearned discounts and deferred loan fees ............. (3,123) N.A. (2,983) N.A.
-----------------------------------------------------
$ 1,073,472 1,639 $ 811,428 1,572
====================================================================================================================
</TABLE>
(1) Includes construction and development loans.
N.A. Not applicable.
Commercial real estate loans increased $262 million from year-end 1998 to
$1.1 billion at December 31, 1999. Commercial business loans increased $106.4
million in 1999 to $395.5 million at December 31, 1999. TCF is seeking to expand
its commercial business and commercial real estate lending activity to borrowers
located in its primary midwestern markets. At December 31, 1999, approximately
91% of TCF's commercial real estate loans outstanding were secured by properties
located in its primary markets. At December 31, 1999, 72% of total commercial
business and commercial real estate loans outstanding involved lending
relationships of less than $5 million. Outstandings on lending relationships of
$5 million or more averaged $9 million at December 31, 1999, with the largest
relationship of $38 million. At December 31, 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.
Lease financings increased $49.7 million from year-end 1998 to $448.5
million at December 31, 1999, primarily as a result of increased lease
originations from both TCF's established leasing subsidiary,
25
<PAGE>
Winthrop Resources Corporation, and its newly formed leasing and equipment
finance subsidiary, TCF Leasing, Inc. A significant expansion of equipment
leasing and financing activity is currently underway at TCF Leasing, Inc.,
which specializes in the leasing and financing of industrial and
transportation equipment, and discounting leases in key markets in various
regions of the United States. At December 31, 1999, 38.9% of TCF's lease
portfolio was funded on a non-recourse basis with other banks and
consequently TCF retained no credit risk on such leases, compared with 45.9%
at December 31, 1998. Total loan and lease originations for TCF's leasing and
equipment finance businesses were $327.3 million in 1999, compared with
$199.6 million in 1998 and $204.7 million in 1997. At December 31, 1999, the
backlog of approved transactions related to TCF's leasing and equipment
finance businesses totaled $125.2 million, compared with $55.1 million at
December 31, 1998.
Loan and lease originations were as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
- ---------------------------------------------------------------------------------------------------------
(In thousands) 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Consumer direct .......................... $1,371,712 $1,078,641 $1,087,235
Consumer finance automobile .............. - 102,386 99,114
-----------------------------------------------------
Total consumer ................... 1,371,712 1,181,027 1,186,349
Commercial ............................... 792,469(1) 519,386 446,355
Lease financing .......................... 281,565 199,639 204,674
Residential real estate .................. 1,362,742 2,023,078 1,119,355
-----------------------------------------------------
Total ............................ $3,808,488 $3,923,130 $2,956,733
=========================================================================================================
</TABLE>
(1) Includes $45.7 million in loans originated in TCF's leasing and equipment
finance businesses.
ALLOWANCE FOR LOAN AND LEASE LOSSES - Credit risk is the risk of loss from a
customer default. TCF has in place a process to identify and manage its credit
risks. The process includes initial credit review and approval, periodic
monitoring to measure compliance with credit agreements and internal credit
policies, monitoring changes in the risk ratings of loans, identification of
problem loans and leases and special procedures for collection of problem loans
and leases. The risk of loss is difficult to quantify and is subject to
fluctuations in values and general economic conditions and other factors. See
Note 1 of Notes to Consolidated Financial Statements for additional information
concerning TCF's allowance for loan and lease losses.
At December 31, 1999, the allowance for loan and lease losses totaled $55.8
million, compared with $80 million at December 31, 1998. The allocation of TCF's
allowance for loan and lease losses, including general and specific loss
allocations, is as follows:
<TABLE>
<CAPTION>
Allocations as a Percentage of
Total Loans and Leases
Outstanding by Type
At December 31, At December 31,
- ------------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands) 1999 1998 1997 1996 1995 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Residential real estate ................ $ 3,014 $ 3,471 $ 3,501 $ 2,379 $ 3,238 .08% .09% .10% .11% .12%
Commercial real estate ................. 12,708 12,525 15,065 16,213 20,701 1.18 1.54 1.75 1.89 2.14
Commercial business .................... 8,587 5,756 4,520 3,072 7,261 2.17 1.99 1.88 1.96 4.32
Consumer direct ........................ 8,482 9,338 12,109 11,907 11,241 .41 .57 .72 .84 .86
Consumer finance automobile ............ 2,219 22,673 16,020 14,793 5,426 28.72 9.69 5.37 4.84 2.57
Lease financing ........................ 3,906 2,955 2,004 1,116 595 .87 .74 .54 .38 .25
Unallocated ............................ 16,839 23,295 29,364 22,385 17,828 N.A. N.A. N.A. N.A. N.A.
-----------------------------------------------
Total allowance balance ................ $55,755 $80,013 $82,583 $71,865 $66,290 .71 1.12 1.17 1.36 1.20
====================================================================================================================================
</TABLE>
N.A. Not applicable.
26
<PAGE>
Additional information on the allowance for loan and lease losses follows:
<TABLE>
<CAPTION>
AT DECEMBER 31, 1999
- --------------------------------------------------------------------------------------------------
ALLOWANCE FOR ALLOWANCE NET
LOAN AND TOTAL LOANS AS A % OF CHARGE
(Dollars in thousands) LEASE LOSSES AND LEASES PORTFOLIO OFFS(1)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial real estate ................... $ 12,708 $1,073,472 1.18% (.08)%
Commercial business ...................... 8,587 395,513 2.17 (.08)
Consumer direct .......................... 8,482 2,050,858 .41 .24
Lease financing .......................... 3,906 448,496 .87 .39
Unallocated .............................. 16,839 - N.A. N.A.
-------------------------
Subtotal ......................... 50,522 3,968,339 1.27 .14
Residential real estate .................. 3,014 3,919,678 .08 -
-------------------------
Subtotal ......................... 53,536 7,888,017 .68 .07
Consumer finance automobile .............. 2,219 7,726 28.72 17.52
-------------------------
Total ............................ $ 55,755 $7,895,743 .71 .35
==================================================================================================
</TABLE>
<TABLE>
<CAPTION>
At December 31, 1998
- --------------------------------------------------------------------------------------------------
Allowance for Allowance Net
Loan and Total Loans as a % of Charge
(Dollars in thousands) Lease Losses and Leases Portfolio Offs(1)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial real estate ................... $ 12,525 $ 811,428 1.54% .09%
Commercial business ...................... 5,756 289,104 1.99 (.23)
Consumer direct .......................... 9,338 1,642,606 .57 .30
Lease financing .......................... 2,955 398,812 .74 .17
Unallocated .............................. 23,295 - N.A. N.A.
-------------------------
Subtotal ......................... 53,869 3,141,950 1.71 .18
Residential real estate .................. 3,471 3,765,280 .09 .01
-------------------------
Subtotal ......................... 57,340 6,907,230 .83 .09
Consumer finance automobile .............. 22,673 233,948 9.69 7.26
-------------------------
Total ............................ $ 80,013 $7,141,178 1.12 .36
==================================================================================================
</TABLE>
(1) Net charge-offs (recoveries) during the year then ended as a percentage of
related average loans and leases.
N.A. Not applicable.
The allocated allowance balances for TCF's residential, commercial real
estate and commercial business loan portfolios at December 31, 1999 reflect the
Company's continued strengthening of its credit quality and related low level of
net loan charge-offs for these portfolios. The increase in the allocated
allowance for lease losses reflects the previously mentioned increase in the
percentage of leases that are internally funded. The allocated allowances for
these portfolios do not reflect any material changes in estimation methods or
assumptions.
TCF experienced an increase in the level of net loan charge-offs related to
its consumer finance automobile portfolio, a large portion of which was sold or
liquidated during 1999. Included in the net loan and lease charge-offs was $21.2
million of net charge-offs related to the consumer finance automobile loans. As
a result, the ratio of annualized net loan charge-offs to average loans
outstanding for TCF's consumer finance automobile portfolio was 17.52% for the
year ended December 31, 1999, compared with 7.26% for 1998. The unallocated
portion of TCF's allowance for loan and lease losses totaled $16.8 million at
December 31, 1999, compared with $23.3 million at December 31, 1998. The
decrease in the unallocated allowance for loan and lease losses reflects the
reduction in non-accrual loans and leases, and a decrease in the balance of
higher risk consumer finance automobile loans outstanding.
Net loan and lease charge-offs were $26.4 million in 1999, compared with
$25.9 million in 1998 and $17.9 million in 1997. Excluding consumer finance
automobile loans, TCF's 1999 net charge-offs were $5.2 million, or .07% of
average loans and leases outstanding, compared with $6 million, or .09%, for
1998. The allowance for loan and lease losses as a percentage of net loan and
lease charge-offs was 211% at December 31, 1999, compared with 310% at December
31, 1998 and 462% at December 31, 1997. The decrease in TCF's allowance for loan
and lease losses as a percentage of total loans and leases at December 31, 1999
reflects the impact of the significant consumer finance automobile loan
charge-off activity during 1999, and the significant decrease in consumer
finance automobile loans outstanding.
A summary of the allowance for loan and lease losses and selected
statistics is presented in Note 8 of Notes to Consolidated Financial Statements.
NON-PERFORMING ASSETS - Non-performing assets (principally non-accrual loans and
leases and other real estate owned) totaled $35.4 million at December 31, 1999,
down $13.2 million from the December 31, 1998 total of $48.7 million. The
decrease in total non-performing assets reflects decreases of $5.6 million in
consumer non-accrual loans and $3.6 million in other real estate owned and other
assets. Approximately 75% of non-performing assets consist of, or are secured
by, residential 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 (150 days for loans secured by residential real
estate) unless such loans and leases are adequately secured and in the process
of collection.
27
<PAGE>
Non-performing assets are summarized in the following table:
<TABLE>
<CAPTION>
At December 31,
- ---------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands) 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Non-accrual loans and leases:
Consumer .................................................... $12,178 $17,745 $21,037 $13,472 $ 7,487
Residential real estate ..................................... 5,431 8,078 8,451 3,996 7,045
Commercial real estate ...................................... 1,576 4,352 3,818 7,604 22,255
Commercial business ......................................... 2,960 2,797 3,370 1,149 7,541
Lease financing ............................................. 1,929 725 117 176 -
---------------------------------------------------------
24,074 33,697 36,793 26,397 44,328
Other real estate owned and other assets ............................ 11,348 14,972 21,953 19,937 26,402
---------------------------------------------------------
Total non-performing assets ......................... $35,422 $48,669 $58,746 $46,334 $70,730
---------------------------------------------------------
Non-performing assets as a percentage of net loans and leases ....... .45% .69% .84% .89% 1.30%
Non-performing assets as a percentage of total assets ............... .33 .48 .60 .62 .94
=================================================================================================================================
</TABLE>
The following table sets forth information regarding TCF's delinquent loan
and lease portfolio, excluding loans held for sale and non-accrual loans and
leases:
<TABLE>
<CAPTION>
At December 31,
- ------------------------------------------------------------------------------------------
1999 1998
- ------------------------------------------------------------------------------------------
Percentage of Percentage of
Principal Loans and Principal Loans and
(Dollars in thousands) Balances Leases Balances Leases
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Loans and leases delinquent for:
30-59 days ..................... $20,368 .26% $51,768 .72%
60-89 days ..................... 6,945 .09 15,373 .22
90 days or more ................ 5,789 .07 - -
-----------------------------------------------------
Total .................. $33,102 .42% $67,141 .94%
===========================================================================================
</TABLE>
The over 30-day delinquency rate on TCF's loans and leases (excluding loans
held for sale and non-accrual loans and leases) was .42% of loans and leases
outstanding at December 31, 1999, compared with .94% at year-end 1998. TCF had
$5.8 million of accruing loans and leases 90 days or more past due at December
31, 1999. 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 December 31,
- -----------------------------------------------------------------------------------------------------
1999 1998
- -----------------------------------------------------------------------------------------------------
Principal Percentage of Principal Percentage of
(Dollars in thousands) Balances Portfolio Balances Portfolio
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Consumer ........................... $19,076 .93% $52,588 2.83%
Residential real estate ............ 11,552 .30 9,151 .24
Commercial real estate ............. 493 .05 1,787 .22
Commercial business ................ 1,595 .41 1,984 .69
Lease financing .................... 386 .09 1,631 .41
------- -------
Total ...................... $33,102 .42 $67,141 .94
=====================================================================================================
</TABLE>
28
<PAGE>
TCF's over 30-day delinquency rate on total consumer loans was .93% at
December 31, 1999, down from 2.83% at year-end 1998. Management continues to
monitor the consumer loan portfolio, which will generally have higher
delinquencies than other loan categories. The decreased consumer loan
delinquency rate at December 31, 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 1999. See "Loans and Leases."
In addition to the non-accrual loans and leases, there were commercial real
estate and commercial business loans and lease financings with an aggregate
principal balance of $33 million outstanding at December 31, 1999 for which
management has concerns regarding the ability of the borrowers to meet existing
repayment terms. This amount consists of loans and leases that were classified
for regulatory purposes as substandard, doubtful or loss, or were to borrowers
that currently are experiencing financial difficulties or that management
believes may experience financial difficulties in the future. This compares with
$23.1 million of such loans and leases at December 31, 1998. Although these
loans and leases are secured by commercial real estate or other corporate
assets, they may be subject to future modifications of their terms or may become
non-performing. Management monitors the performance and classification of such
loans and leases and the financial condition of these borrowers.
LIQUIDITY MANAGEMENT - TCF manages its liquidity position to ensure that the
funding needs of depositors and borrowers are met promptly and in a
cost-effective manner. Asset liquidity arises from the ability to convert assets
to cash as well as from the maturity of assets. Liability liquidity results from
the ability of TCF to attract a diversity of funding sources to meet funding
requirements promptly.
Deposits are the primary source of TCF's funds for use in lending and for
other general business purposes. In addition to deposits, TCF derives funds
primarily from loan and lease repayments, proceeds from the discounting of
leases, advances from the FHLB and proceeds from reverse repurchase borrowing
agreements. Deposit inflows and outflows are significantly influenced by general
interest rates, money market conditions, competition for funds and other
factors. TCF's deposit inflows and outflows have been and will continue to be
affected by these factors. See "FORWARD-LOOKING INFORMATION." Borrowings may be
used to compensate for reductions in normal sources of funds, such as deposit
inflows at less than projected levels, net deposit outflows or to support
expanded activities. Historically, TCF has borrowed primarily from the FHLB,
from institutional sources under reverse repurchase agreements and, to a lesser
extent, from other sources. See "Borrowings."
Potential sources of liquidity for TCF Financial Corporation (parent
company only) include cash dividends from TCF's wholly owned bank subsidiaries,
issuance of equity securities, borrowings under the Company's $135 million bank
line of credit and commercial paper program, and interest income. TCF's
subsidiary banks' ability to pay dividends or make other capital distributions
to TCF is restricted by regulation and may require regulatory approval.
Undistributed earnings and profits at December 31, 1999 includes approximately
$134.4 million for which no provision for federal income tax has been made. This
amount represents earnings appropriated to bad debt reserves and deducted for
federal income tax purposes and is generally not available for payment of cash
dividends or other distributions to shareholders. Payments or distributions of
these appropriated earnings could invoke a tax liability for TCF based on the
amount of earnings removed and current tax rates.
DEPOSITS - Deposits totaled $6.6 billion at December 31, 1999, down $130.3
million from December 31, 1998. The decrease reflects the previously noted sales
of eight underperforming branches with $116.7 million of deposits. Lower
interest-cost checking, savings and money market deposits totaled $3.7 billion,
down $43.6 million from December 31, 1998, and comprised 56.4% of total deposits
at December 31, 1999. The average balance of these deposits for 1999 was $3.7
billion, an increase of $214.1 million over the $3.5 billion average balance for
1998. Checking, savings and money market deposits are an important source of
lower cost funds and fee income for TCF. Higher interest-cost certificates of
deposit decreased $86.7 million from December 31, 1998. The Company's
weighted-average rate for deposits, including non-interest bearing deposits,
decreased to 2.71% at December 31, 1999, from 2.73% at December 31, 1998. This
decrease reflects the lower proportion of higher-rate certificates at December
31, 1999 than at December 31, 1998.
As previously noted, TCF continued to expand its supermarket banking
franchise during 1999, opening 34 new branches during the year. TCF now has 195
supermarket branches, up from 161 such branches a year ago. During the past
year, the number of deposit accounts in TCF's supermarket branches increased
38.1% to over
29
<PAGE>
561,000 accounts and the balances increased 33.6% to $825.7 million. The average
rate on these deposits increased from 2.16% at December 31, 1998 to 2.24% at
December 31, 1999. Additional information regarding TCF's supermarket branches
follows:
<TABLE>
<CAPTION>
Supermarket Banking Summary At December 31,
- --------------------------------------------------------------------------------------------------------------------------------
Increase Percentage
(Dollars in thousands) 1999 1998 (Decrease) Change
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Number of branches .................................... 195 161 34 21.1%
Number of deposit accounts ............................ 561,032 406,146 154,886 38.1
Deposits:
Checking ...................................... $354,074 $272,194 $ 81,880 30.1
Passbook and statement ........................ 120,876 96,496 24,380 25.3
Money market .................................. 60,169 55,070 5,099 9.3
Certificates .................................. 290,579 194,456 96,123 49.4
----------------------------------------------
Total deposits ........................ $825,698 $618,216 $207,482 33.6
==============================================
Average rate on deposits .............................. 2.24% 2.16% .08% 3.7
==============================================
Total fees and other revenues for the year ............ $ 86,665 $ 53,482 $ 33,183 62.0
==============================================
Consumer loans outstanding ............................ $192,931 $108,213 $ 84,718 78.3
===============================================================================================================
</TABLE>
BORROWINGS - Borrowings totaled $3.1 billion at December 31, 1999, up $622.8
million from year-end 1998. The increase was primarily due to an increase of
$642.7 million in reverse repurchase agreements, partially offset by a decrease
of $44.4 million in FHLB advances. Included in FHLB advances at December 31,
1999 are $1 billion of fixed-rate advances which are callable at par on certain
dates. 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. Due to recent increases
in interest rates, the market rates exceeded the contract rates for TCF's entire
portfolio of callable FHLB advances at December 31, 1999. The weighted-average
rate on borrowings decreased to 5.91% at December 31, 1999, from 6.00% at
December 31, 1998. Management has entered into additional long-term callable
FHLB advances to extend the maturity of $189 million of TCF's short-term
borrowings. The FHLB advances settle during the first quarter of 2000.
STOCKHOLDERS' EQUITY - Stockholders' equity at December 31, 1999 was $809
million, or 7.6% 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 4,091,611 shares of TCF's common stock at a cost of
$106.1 million, the payment of $60.8 million in dividends on common stock and
the increase of $55 million in accumulated other comprehensive loss, partially
offset by net income of $166 million for the year ended December 31, 1999.
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 market 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. 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.
Although the measure is subject to a number of assumptions and is only one
of a number of measurements, management believes the interest-rate gap
(difference between interest-earning assets and interest-bearing liabilities
repricing within a given period) is an important indication of TCF's exposure to
interest-rate risk and the related volatility of net interest income in a
changing interest rate environment. In addition to the interest-rate gap
analysis, management also utilizes a simulation model to measure and manage
TCF's interest-rate risk. For an institution with a negative interest-rate gap
for a given period, the amount of its interest-bearing liabilities maturing or
otherwise repricing within such period exceeds the amount of 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 increases in the cost of their liabilities
than
30
<PAGE>
in the yield on their assets. Conversely, the yield on assets for
institutions with negative interest-rate gaps will generally decrease more
slowly than the cost of their funds in a falling interest-rate environment.
The amounts in the maturity/rate sensitivity table below represent
management's estimates and assumptions. The amounts 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, a general rise or decline in interest
rates, and the possibility that the FHLB will exercise its option to call
certain of TCF's longer-term FHLB advances. See Note 11 of Notes to Consolidated
Financial Statements for additional information on FHLB advances. 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. TCF's one-year
adjusted interest-rate gap was a negative $1 billion, or (10)% of total assets,
at December 31, 1999, compared with a negative $203.1 million, or (2)% 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.
The following table summarizes TCF's interest-rate gap position at December
31, 1999:
<TABLE>
<CAPTION>
Maturity/Rate Sensitivity
- ----------------------------------------------------------------------------------------------------------------------------------
Within 30 Days to 6 Months to
(Dollars in thousands) 30 Days 6 Months 1 Year 1 to 3 Years 3+ Years Total
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans held for sale ................. $ 155,055 $ 36,678 $ 7,195 $ - $ - $ 198,928
Securities available for sale(1) .... 29,041 129,285 119,493 267,674 976,168 1,521,661
Real estate loans(1) ................ 385,652 444,717 625,340 1,405,647 2,131,794 4,993,150
Lease financings(1) ................. 17,192 80,135 85,220 188,725 77,224 448,496
Other loans(1) ...................... 1,312,139 136,835 139,975 397,878 467,270 2,454,097
Investments ......................... 124,930 - - - 23,224 148,154
------------------------------------------------------------------------------------
2,024,009 827,650 977,223 2,259,924 3,675,680 9,764,486
------------------------------------------------------------------------------------
Interest-bearing liabilities:
Checking deposits(2) ................ 102,325 - - - 1,810,954 1,913,279
Passbook and statement deposits(2) .. 67,957 110,752 116,516 329,404 466,663 1,091,292
Money market deposits ............... 708,417 - - - - 708,417
Certificate deposits ................ 186,332 1,322,588 871,736 461,313 29,878 2,871,847
FHLB advances(3) .................... 102,700 207,118 189,898 1,093,071 167,000 1,759,787
Discounted lease rentals ............ 5,729 28,858 35,109 108,673 - 178,369
Other borrowings .................... 256,982 810,000 - 50,000 28,750 1,145,732
------------------------------------------------------------------------------------
1,430,442 2,479,316 1,213,259 2,042,461 2,503,245 9,668,723
------------------------------------------------------------------------------------
Interest-earning assets over (under)
interest-bearing liabilities
(Primary gap) ....................... 593,567 (1,651,666) (236,036) 217,463 1,172,435 95,763
Impact of unsettled borrowings(4) ........... 85,000 104,000 - (189,000) - -
Impact of short-term funding of additional
liquidity for millennium change(5) .. 83,850 - - - - 83,850
====================================================================================
Adjusted gap ................................ $ 762,417 $(1,547,666) $ (236,036) $ 28,463 $ 1,172,435 $ 179,613
====================================================================================
Adjusted cumulative gap ..................... $ 762,417 $ (785,249) $(1,021,285) $ (992,822) $ 179,613 $ 179,613
====================================================================================
Adjusted cumulative gap as a percentage
of total assets:
At December 31, 1999 ........ 7% (7)% (10)% (9)% 2% 2%
------------------------------------------------------------------------------------
At December 31, 1998 ........ -% (2)% (2)% 1% 1% 1%
===================================================================================================================================
</TABLE>
(1) Based upon contractual maturity, repricing date, if applicable, scheduled
repayments of principal and projected prepayments of principal based upon
experience.
(2) Includes non-interest bearing deposits. Money market accounts and 5% of
checking accounts are included in amounts repricing within one year. In
addition, 27% and 30% of passbook and statement accounts are included in the
less than 1 year and "1 to 3 Years" categories, respectively. All remaining
passbook and statement and checking accounts are assumed to mature in the
"3+ Years" category. While management believes these assumptions are well
based, no assurance can be given that amounts on deposit in checking and
passbook and statement accounts will not significantly change or be
repriced in the event of a general change in interest rates. At December 31,
1998, 10% of checking accounts were included in amounts repricing within
one year, and 27% and 30% of passbook and statement accounts were included
in the less than 1 year and "1 to 3 Years" categories, respectively.
(3) Includes $1 billion of callable FHLB advances, all of which have a call date
beyond one year. Due to recent increases in market rates, $911.5 million of
these FHLB advances are included as repricing in the "1 to 3 Years" category
which corresponds to their next call date, instead of in the "3+ Years"
category, which corresponds to their maturity date.
(4) Represents unsettled callable FHLB advances, $85 million that settle within
30 days and $104 million that settle within six months. The call dates for
these FHLB advances are beyond one year.
(5) Impact on TCF's interest-rate gap of short-term funding of additional
liquidity position in preparation for the millennium change. These
short-term borrowings were paid off within 30 days.
31
<PAGE>
As previously noted, TCF also utilizes simulation models to estimate the
near-term effects (next 12 months) of changing interest rates on its net
interest income. Net interest income simulation involves forecasting net
interest income under a variety of scenarios, including the level of interest
rates, the shape of the yield curve, and spreads between market interest rates.
At December 31, 1999, net interest income is estimated to increase by 1.2% over
the next twelve months if interest rates were to sustain an immediate increase
of 200 basis points. At December 31, 1998, net interest income was estimated to
increase by 2.2% assuming a similar change in interest rates. If interest rates
were to decline by 200 basis points, net interest income is estimated to
decrease by .3% over the next twelve months. Simulations at December 31, 1998
projected a decrease in net interest income of 5% assuming a similar change in
interest rates.
Management exercises its best judgment in making assumptions regarding loan
prepayments, early deposit withdrawals, and other non-controllable events in
estimating TCF's exposure to changes in interest rates. These assumptions are
inherently uncertain and, as a result, the simulation models cannot precisely
estimate net interest income or precisely predict the impact of a change in
interest rates on net interest income. Actual results will differ from simulated
results due to the timing, magnitude and frequency of interest rate changes and
changes in market conditions and management strategies, among other factors.
RECENT ACCOUNTING DEVELOPMENTS - In June 1998, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards
("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. The statement is effective for all fiscal quarters of
fiscal years beginning after June 15, 2000. TCF has not used derivatives to
hedge exposures other than the use of forward contracts in its mortgage banking
secondary marketing operations. The impact of SFAS No. 133 on the Company's
financial position and results of operations is not expected to be material.
LEGISLATIVE, LEGAL AND REGULATORY DEVELOPMENTS
Federal and state legislation imposes numerous legal and regulatory requirements
on financial institutions. Future legislative or regulatory change, or changes
in enforcement practices or court rulings, may have a dramatic and potentially
adverse impact on TCF and its bank and other subsidiaries. Among other possible
developments, pending legislation which would impose limitations on ATM
surcharges or restrict the sharing of customer information, or adverse decisions
in litigation dealing with such legislation, or in litigation against Visa and
Mastercard affecting debit card fees, could have an adverse impact on TCF.
Federal legislation was enacted in 1996 that repealed the reserve method of
accounting for thrift bad debt reserves. This legislation eliminated the
recapture of a thrift institution's bad debt reserve under certain
circumstances, including the institution's conversion to a bank or as a result
of similar charter changes. After the repeal of the reserve method of accounting
for bad debts, TCF completed the conversion of its savings bank subsidiaries to
national banks and TCF became a national bank holding company on April 7, 1997.
TCF now operates five national bank subsidiaries: TCF National Bank Minnesota,
TCF National Bank Illinois, TCF National Bank Wisconsin, TCF National Bank
Colorado and Great Lakes Michigan.
During the fourth quarter of 1999, TCF received the approval of the Office
of the Comptroller of the Currency to merge four of its existing bank charters
into one national bank charter based in Minnesota. The merger of the bank
charters located in Minnesota, Illinois, Wisconsin and Michigan is expected to
be completed in the second quarter of 2000. The merger of the bank charters is
not expected to significantly change the management approach or operations
within these geographic states.
On November 12, 1999, the President signed into law the Gramm-Leach-Bliley
Act (the "Act"). The Act significantly changes the regulatory structure and
oversight of the financial services industry and expands financial affiliation
opportunities for bank holding companies. The Act permits "financial holding
companies" to engage in a range of activities that are "financial in nature" or
"incidental" thereto, such as banking, insurance, securities activities, and
merchant banking. To qualify to engage in expanded financial activities, a
financial holding company must make certain required regulatory filings, and
subsidiary depository institutions must be well-capitalized, well-managed and
rated "satisfactory" or better under the Community Reinvestment Act.
32
<PAGE>
The Act also permits national banks to engage in certain expanded financial
activities through a financial subsidiary, provided the bank and its depository
institution affiliates are deemed well-capitalized and well-managed and meet
certain other regulatory requirements.
The Act preempts state laws restricting the establishment of financial
affiliations authorized or permitted under the Act, subject to certain limited
exceptions, including an exception that allows state insurance regulators to
impose certain requirements on financial institutions, so long as they are not
substantially more adverse than those applying to other persons. The provisions
of the Act relating to financial holding companies become effective on or about
March 15, 2000. Federal preemption provisions became effective on the date of
enactment.
FORWARD-LOOKING INFORMATION
This Annual Report and other reports issued by the Company, including reports
filed with the Securities and Exchange Commission, may contain "forward-looking"
statements that deal with future results, plans or performance. In addition,
TCF's management may make such statements orally to the media, or to securities
analysts, investors or others. Forward-looking statements deal with matters that
do not relate strictly to historical facts. TCF's future results may differ
materially from historical performance and forward-looking statements about
TCF's expected financial results or other plans are subject to a number of risks
and uncertainties. These include but are not limited to possible legislative
changes and adverse economic, business and competitive developments such as
shrinking interest margins; deposit outflows; reduced demand for financial
services and loan and lease products; changes in accounting policies 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;
technological, computer-related or operational difficulties; adverse changes in
securities markets; results of litigation or other significant uncertainties.
33
<PAGE>
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
At December 31,
- -----------------------------------------------------------------------------------------------------
(Dollars in thousands, except per-share data) 1999 1998
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks............................................. $ 429,262 $ 420,477
Investments......................................................... 148,154 277,715
Securities available for sale....................................... 1,521,661 1,677,919
Loans held for sale................................................. 198,928 213,073
Loans and leases:
Residential real estate.......................................... 3,919,678 3,765,280
Consumer......................................................... 2,058,584 1,876,554
Commercial real estate........................................... 1,073,472 811,428
Commercial business.............................................. 395,513 289,104
Lease financing.................................................. 448,496 398,812
----------------------------
Total loans and leases........................................ 7,895,743 7,141,178
Allowance for loan and lease losses........................... (55,755) (80,013)
----------------------------
Net loans and leases....................................... 7,839,988 7,061,165
Goodwill............................................................ 158,468 166,645
Deposit base intangibles............................................ 13,262 16,238
Other assets........................................................ 351,993 331,362
----------------------------
$10,661,716 $10,164,594
============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Checking......................................................... $ 1,913,279 $1,879,623
Passbook and statement........................................... 1,091,292 1,176,931
Money market..................................................... 708,417 700,004
Certificates..................................................... 2,871,847 2,958,588
----------------------------
Total deposits................................................ 6,584,835 6,715,146
----------------------------
Securities sold under repurchase agreements......................... 1,010,000 367,280
Federal Home Loan Bank advances..................................... 1,759,787 1,804,208
Discounted lease rentals............................................ 178,369 183,684
Other borrowings.................................................... 135,732 105,874
----------------------------
Total borrowings.............................................. 3,083,888 2,461,046
Accrued interest payable............................................ 40,352 27,601
Accrued expenses and other liabilities.............................. 143,659 115,299
----------------------------
Total liabilities............................................. 9,852,734 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; 92,804,205 and 92,912,246 shares issued........... 928 929
Additional paid-in capital....................................... 500,797 507,534
Retained earnings, subject to certain restrictions............... 715,461 610,177
Unamortized deferred compensation................................ (14,887) (24,217)
Loan to Executive Deferred Compensation Plan..................... (4,721) (6,111)
Shares held in trust for deferred compensation plans, at cost.... (46,066) (45,740)
Accumulated other comprehensive income (loss).................... (47,382) 7,591
Treasury stock, at cost, 10,863,017 and 7,343,117 shares......... (295,148) (204,661)
----------------------------
Total stockholders' equity................................. 808,982 845,502
----------------------------
$ 10,661,716 $10,164,594
====================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
34
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31,
- ------------------------------------------------------------------------------------------------------------------
(In thousands, except per-share data) 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST INCOME:
Loans and leases.............................................. $618,291 $631,342 $563,966
Securities available for sale................................. 111,032 93,124 95,701
Loans held for sale........................................... 13,367 14,072 15,755
Investments................................................... 9,411 10,356 7,192
--------------------------------------------
Total interest income...................................... 752,101 748,894 682,614
--------------------------------------------
INTEREST EXPENSE:
Deposits...................................................... 175,495 212,492 195,182
Borrowings.................................................... 152,393 110,668 93,836
--------------------------------------------
Total interest expense..................................... 327,888 323,160 289,018
--------------------------------------------
Net interest income..................................... 424,213 425,734 393,596
Provision for credit losses...................................... 16,923 23,280 17,995
--------------------------------------------
Net interest income after provision for credit losses...... 407,290 402,454 375,601
--------------------------------------------
NON-INTEREST INCOME:
Fee and service charge revenues............................... 151,988 127,952 101,329
Electronic funds transfer revenues............................ 67,129 50,556 30,808
Leasing revenues.............................................. 28,505 31,344 32,025
Title insurance revenues...................................... 15,421 20,161 13,730
Commissions on sales of annuities............................. 8,797 8,413 7,894
Commissions on sales of mutual funds.......................... 6,052 5,513 3,998
Gain on sales of loans held for sale.......................... 4,747 7,575 4,777
Other......................................................... 12,008 11,156 7,789
--------------------------------------------
294,647 262,670 202,350
--------------------------------------------
Gain on sales of securities available for sale................ 3,194 2,246 8,509
Gain on sales of loan servicing............................... 3,076 2,414 1,622
Gain on sales of branches..................................... 12,160 18,585 14,187
Gain on sale of subsidiaries.................................. 5,522 - -
Gain on sale of joint venture interest........................ - 5,580 -
--------------------------------------------
23,952 28,825 24,318
--------------------------------------------
Total non-interest income.................................. 318,599 291,495 226,668
--------------------------------------------
NON-INTEREST EXPENSE:
Compensation and employee benefits............................ 239,053 217,401 180,482
Occupancy and equipment....................................... 73,613 71,323 58,352
Advertising and promotions.................................... 16,981 19,544 19,157
Amortization of goodwill and other intangibles................ 10,689 11,399 15,757
Other......................................................... 112,462 109,033 87,614
--------------------------------------------
Total non-interest expense................................. 452,798 428,700 361,362
--------------------------------------------
Income before income tax expense........................ 273,091 265,249 240,907
Income tax expense............................................... 107,052 109,070 95,846
--------------------------------------------
Net income.............................................. $166,039 $156,179 $145,061
============================================
NET INCOME PER COMMON SHARE:
Basic......................................................... $ 2.01 $ 1.77 $ 1.72
============================================
Diluted....................................................... $ 2.00 $ 1.76 $ 1.69
============================================
DIVIDENDS DECLARED PER COMMON SHARE.............................. $ .725 $ .6125 $ .46875
==================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
35
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Number of Common Common
(Dollars in thousands) Shares Issued Stock
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
BALANCE, DECEMBER 31, 1996 .................................. 85,242,232 $ 852
Comprehensive income:
Net income ............................................... -- --
Other comprehensive income ............................... -- --
----------------------------
Comprehensive income .................................. -- --
Dividends on common stock ................................... -- --
Issuance of 7,700,000 shares to effect purchase acquisition,
of which 1,194,268 shares were from treasury............. 6,505,732 65
Purchase of 1,295,800 shares to be held in treasury ......... -- --
Issuance of 3,326,034 shares, of which
2,426,968 shares were from treasury ..................... 899,066 9
Repurchase and cancellation of shares ....................... (2,086) --
Amortization of deferred compensation ....................... -- --
Exercise of stock options, of which 44,600 shares
were from treasury ...................................... 176,585 2
Loan payments ............................................... -- --
----------------------------
BALANCE, DECEMBER 31, 1997 .................................. 92,821,529 928
Comprehensive income:
Net income ............................................... -- --
Other comprehensive loss ................................. -- --
----------------------------
Comprehensive income .................................. -- --
Dividends on common stock ................................... -- --
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
Cancellation of shares ...................................... (18,170) --
Amortization of deferred compensation ....................... -- --
Exercise of stock options, of which 145,183 shares
were from treasury ..................................... 61,687 --
Shares held in trust for deferred compensation plans ........ -- --
Loan to Executive Deferred Compensation Plan, net ........... -- --
----------------------------
BALANCE, DECEMBER 31, 1998 .................................. 92,912,246 929
Comprehensive income:
Net income ............................................... -- --
Other comprehensive loss ................................. -- --
----------------------------
Comprehensive income .................................. -- --
Dividends on common stock ................................... -- --
Purchase of 4,091,611 shares to be held in treasury ......... -- --
Issuance of 21,050 shares from treasury ..................... -- --
Cancellation of shares ...................................... (108,041) (1)
Amortization of deferred compensation ....................... -- --
Exercise of stock options, 550,661 shares from treasury ..... -- --
Shares held in trust for deferred compensation plans ........ -- --
Loan payments ............................................... -- --
----------------------------
BALANCE, DECEMBER 31, 1999 .................................. 92,804,205 $ 928
===============================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
36
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CONTINUED) Loan to
Executive
Additional Unamortized Deferred
Paid-in Retained Deferred Compensation
(Dollars in thousands) Capital Earnings Compensation Plan
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1996 .................................. $ 274,320 $ 402,109 $ (7,693) $ (68)
Comprehensive income:
Net income ............................................... -- 145,061 -- --
Other comprehensive income ............................... -- -- -- --
------------------------------------------------------------------
Comprehensive income .................................. -- 145,061 -- --
Dividends on common stock ................................... -- (38,201) -- --
Issuance of 7,700,000 shares to effect purchase
acquisition, of which 1,194,268 shares were from treasury 162,937 -- -- --
Purchase of 1,295,800 shares to be held in treasury ......... -- -- -- --
Issuance of 3,326,034 shares, of which
2,426,968 shares were from treasury ..................... 20,570 -- (26,110) --
Repurchase and cancellation of shares ....................... (60) -- 15 --
Amortization of deferred compensation ....................... -- -- 8,331 --
Exercise of stock options, of which 44,600 shares
were from treasury ...................................... 2,917 -- -- --
Loan payments ............................................... -- -- -- 68
------------------------------------------------------------------
BALANCE, DECEMBER 31, 1997 .................................. 460,684 508,969 (25,457) --
Comprehensive income:
Net income ............................................... -- 156,179 -- --
Other comprehensive loss ................................. -- -- -- --
------------------------------------------------------------------
Comprehensive income .................................. -- 156,179 -- --
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 ..................................... 2,518 -- (4,815) --
Cancellation of shares ...................................... (375) -- 192 --
Amortization of deferred compensation ....................... -- -- 5,863 --
Exercise of stock options, of which 145,183 shares
were from treasury ..................................... (1,033) -- -- --
Shares held in trust for deferred compensation plans ........ 45,740 -- -- --
Loan to Executive Deferred Compensation Plan, net ........... -- -- -- (6,111)
------------------------------------------------------------------
BALANCE, DECEMBER 31, 1998 .................................. 507,534 610,177 (24,217) (6,111)
Comprehensive income:
Net income ............................................... -- 166,039 -- --
Other comprehensive loss ................................. -- -- -- --
------------------------------------------------------------------
Comprehensive income .................................. -- 166,039 -- --
Dividends on common stock ................................... -- (60,755) -- --
Purchase of 4,091,611 shares to be held in treasury ......... -- -- -- --
Issuance of 21,050 shares from treasury ..................... (30) -- (605) --
Cancellation of shares ...................................... (2,569) -- 392 --
Amortization of deferred compensation ....................... -- -- 9,543 --
Exercise of stock options, 550,661 shares from treasury ..... (4,464) -- -- --
Shares held in trust for deferred compensation plans ........ 326 -- -- --
Loan payments ............................................... -- -- -- 1,390
------------------------------------------------------------------
BALANCE, DECEMBER 31, 1999 .................................. $ 500,797 $ 715,461 $ (14,887) $ (4,721)
================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CONTINUED)
Shares Held
in Trust for Accumulated
Deferred Other
Compensation Comprehensive
(Dollars in thousands) Plan Income (Loss) Treasury Stock Total
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1996 .................................. $ -- $ 2,376 $ (41,209) $ 630,687
Comprehensive income:
Net income ............................................... -- -- -- 145,061
Other comprehensive income ............................... -- 6,180 -- 6,180
------------------------------------------------------------------
Comprehensive income .................................. -- 6,180 -- 151,241
Dividends on common stock ................................... -- -- -- (38,201)
Issuance of 7,700,000 shares to effect purchase
acquisition, of which 1,194,268 shares were from treasury -- -- 22,805 185,807
Purchase of 1,295,800 shares to be held in treasury ......... -- -- (27,316) (27,316)
Issuance of 3,326,034 shares, of which
2,426,968 shares were from treasury ..................... -- -- 44,876 39,345
Repurchase and cancellation of shares ....................... -- -- -- (45)
Amortization of deferred compensation ....................... -- -- -- 8,331
Exercise of stock options, of which 44,600 shares
were from treasury ...................................... -- -- 844 3,763
Loan payments ............................................... -- -- -- 68
------------------------------------------------------------------
BALANCE, DECEMBER 31, 1997 .................................. -- 8,556 -- 953,680
Comprehensive income:
Net income ............................................... -- -- -- 156,179
Other comprehensive loss ................................. -- (965) -- (965)
------------------------------------------------------------------
Comprehensive income .................................. -- (965) -- 155,214
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)
------------------------------------------------------------------
BALANCE, DECEMBER 31, 1998 .................................. (45,740) 7,591 (204,661) 845,502
Comprehensive income:
Net income ............................................... -- -- -- 166,039
Other comprehensive loss ................................. -- (54,973) -- (54,973)
------------------------------------------------------------------
Comprehensive income .................................. -- (54,973) -- 111,066
Dividends on common stock ................................... -- -- -- (60,755)
Purchase of 4,091,611 shares to be held in treasury ......... -- -- (106,106) (106,106)
Issuance of 21,050 shares from treasury ..................... -- -- 575 (60)
Cancellation of shares ...................................... -- -- -- (2,178)
Amortization of deferred compensation ....................... -- -- -- 9,543
Exercise of stock options, 550,661 shares from treasury ..... -- -- 15,044 10,580
Shares held in trust for deferred compensation plans ........ (326) -- -- --
Loan payments ............................................... -- -- -- 1,390
------------------------------------------------------------------
BALANCE, DECEMBER 31, 1999 .................................. $ (46,066) $ (47,382) $ (295,148) $ 808,982
=================================================================================================================================
</TABLE>
37
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
- ------------------------------------------------------------------------------------------------------------------------------
(In thousands) 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................................... $ 166,039 $ 156,179 $ 145,061
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization.......................................... 29,031 27,914 23,185
Amortization of goodwill and other intangibles......................... 10,689 11,399 15,757
Provision for credit losses............................................ 16,923 23,280 17,995
Proceeds from sales of loans held for sale............................. 586,859 577,808 624,192
Principal collected on loans held for sale............................. 10,144 9,083 9,174
Originations and purchases of loans held for sale...................... (457,515) (603,567) (799,319)
Net (increase) decrease in other assets and liabilities,
and accrued interest................................................ 47,088 14,339 (15,067)
Gains on sales of assets............................................... (23,952) (28,825) (24,318)
Other, net............................................................. 14,988 8,395 (4,707)
----------------------------------------------
Total adjustments................................................... 234,255 39,826 (153,108)
----------------------------------------------
Net cash provided (used) by operating activities................. 400,294 196,005 (8,047)
----------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Principal collected on loans and leases...................................... 2,315,173 3,111,218 1,952,057
Originations and purchases of loans.......................................... (3,069,408) (3,119,924) (1,952,261)
Purchases of equipment for lease financing................................... (289,156) (186,009) (179,165)
Proceeds from sales of loans................................................. - 20,330 15,910
Net (increase) decrease in interest-bearing deposits with banks.............. 95,575 (95,322) 453,895
Proceeds from sales of securities available for sale......................... 288,718 231,438 476,218
Proceeds from maturities of and principal collected on
securities available for sale............................................. 577,844 606,603 445,145
Purchases of securities available for sale................................... (791,995) (967,585) (506,970)
Net (increase) decrease in federal funds sold................................ 41,000 (41,000) 45,000
Acquisitions, net of cash acquired........................................... - - (218,896)
Sales of deposits, net of cash paid.......................................... (104,404) (213,159) (170,171)
Other, net................................................................... 7,723 (19,956) (12,971)
-----------------------------------------------
Net cash provided (used) by investing activities.......................... (928,930) (673,366) 347,791
-----------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits.......................................... (13,649) 41,816 65,073
Net increase (decrease) in securities sold under repurchase agreements and
federal funds purchased................................................... 642,720 254,836 (181,288)
Proceeds from borrowings..................................................... 4,679,462 3,502,311 1,835,104
Payments on borrowings....................................................... (4,598,365) (2,911,853) (1,960,675)
Proceeds from issuance of common stock....................................... - - 29,266
Purchases of common stock to be held in treasury............................. (106,106) (210,939) (27,316)
Payments of dividends on common stock........................................ (60,755) (54,971) (38,201)
Other, net................................................................... (5,886) (20,372) (1,143)
----------------------------------------------
Net cash provided (used) by financing activities.......................... 537,421 600,828 (279,180)
----------------------------------------------
Net increase in cash and due from banks...................................... 8,785 123,467 60,564
Cash and due from banks at beginning of year................................. 420,477 297,010 236,446
----------------------------------------------
Cash and due from banks at end of year....................................... $ 429,262 $ 420,477 $ 297,010
==============================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for:
Interest on deposits and borrowings.................................... $ 302,268 $ 306,299 $285,722
==============================================
Income taxes........................................................... $ 78,125 $ 105,207 $ 97,319
==============================================
Transfer of loans to other real estate owned and other assets............. $ 32,074 $ 36,750 $ 40,837
==============================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
38
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION - The consolidated financial statements include the
accounts of TCF Financial Corporation and its wholly owned subsidiaries. TCF
Financial Corporation ("TCF" or the "Company") is a national bank holding
company engaged primarily in community banking and lease financing through its
wholly owned subsidiaries, TCF National Bank Minnesota ("TCF Minnesota"), TCF
National Bank Illinois ("TCF Illinois"), TCF National Bank Wisconsin ("TCF
Wisconsin"), TCF National Bank Colorado ("TCF Colorado"), and Great Lakes
National Bank Michigan ("Great Lakes Michigan"). The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. All significant intercompany accounts and transactions have been
eliminated in consolidation. Certain reclassifications have been made to prior
years' financial statements to conform to the current year presentation. For
Consolidated Statements of Cash Flows purposes, cash and cash equivalents
include cash and due from banks.
COMPREHENSIVE INCOME - Comprehensive income is the total of net income and other
comprehensive income (loss), which for TCF is comprised entirely of unrealized
gains and losses on securities available for sale. The following table
summarizes the components of other comprehensive income (loss):
<TABLE>
<CAPTION>
Year Ended December 31,
- ------------------------------------------------------------------------------------------------------------------------------------
(In thousands) 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Unrealized holding gains (losses) on securities available for sale
(net of tax expense (benefit) of ($31,532), $206 and $6,994, respectively) ............ $(52,971) $ 236 $ 11,465
Reclassification adjustment for gains included in net income
(net of tax expense of $1,192, $1,045 and $3,224, respectively) ....................... (2,002) (1,201) (5,285)
---------------------------------------
Total other comprehensive income (loss), net of tax ............................... $(54,973) $ (965) $ 6,180
====================================================================================================================================
</TABLE>
INVESTMENTS - Investments are carried at cost, adjusted for amortization of
premiums or accretion of discounts using methods which approximate a level
yield.
SECURITIES AVAILABLE FOR SALE - Securities available for sale are carried at
fair value with the unrealized holding gains or losses, net of deferred income
taxes, reported as accumulated other comprehensive income (loss), which is a
separate component of stockholders' equity. Cost of securities sold is
determined on a specific identification basis and gains or losses on sales of
securities available for sale are recognized at trade dates.
LOANS HELD FOR SALE - Loans held for sale are carried at the lower of cost or
market determined on an aggregate basis, including related forward mortgage loan
sales commitments. Cost of loans sold is determined on a specific identification
basis and gains or losses on sales of loans held for sale are recognized at
settlement dates. Net fees and costs associated with originating and acquiring
loans held for sale are deferred and are included in the basis for determining
the gain or loss on sales of loans held for sale.
LOANS AND LEASES - Net fees and costs associated with originating and acquiring
loans and leases are deferred and amortized over the lives of the assets. Net
fees and costs associated with loan commitments are deferred in other assets or
other liabilities until the loan is advanced. Discounts and premiums on loans
purchased, net deferred fees and costs, unearned discounts and finance charges,
and unearned lease income are amortized using methods which approximate a level
yield over the estimated remaining lives of the loans and leases.
Leases that transfer substantially all of the benefits and risks of
equipment ownership to the lessee are classified as direct financing or
sales-type leases and are included in loans and leases. Direct financing and
sales-type leases are carried at the combined present value of the future
minimum lease payments and the lease residual value, which represents the
estimated fair value of the leased equipment at the termination of the lease
based on management's experience and judgment. Lease residual values are
reviewed on an ongoing basis and any downward revisions are recorded in the
periods in which they become known. Interest income on direct financing and
sales-type leases is recognized using methods which approximate a level yield
over the term of the leases. Sales-type leases generate dealer profit which is
recognized at lease inception by recording lease revenue net of the lease cost.
Lease revenue consists of the present value of the future minimum lease payments
discounted at the rate implicit in the lease. Lease cost consists of the leased
equipment's book value, less the present value of its residual.
Impaired loans include all non-accrual and restructured commercial real
estate and commercial business loans. Consumer and residential real estate loans
and lease financings are excluded from the
39
<PAGE>
definition of an impaired loan. Loan impairment is measured as the present value
of expected future cash flows discounted at the loan's initial effective
interest rate, the fair value of the collateral of an impaired
collateral-dependent loan or an observable market price.
The allowance for loan and lease losses is maintained at a level believed
to be adequate by management to provide for probable loan and lease losses
inherent in the portfolio. 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. Residential
loans, consumer loans, and smaller-balance commercial loans and lease financings
are segregated by loan type and sub-type, and are evaluated on a group basis.
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 for 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 recorded
in the provision for credit losses in the periods in which they become known.
Interest income is accrued on loan and lease balances outstanding. Loans
and leases, including loans that are considered to be impaired, are reviewed
regularly by management and are placed on non-accrual status when the collection
of interest or principal is 90 days or more past due (150 days or more past due
for loans secured by residential real estate), unless the loan or lease is
adequately secured and in the process of collection. When a loan or lease is
placed on non-accrual status, unless collection of all principal and interest is
considered to be assured, uncollected interest accrued in prior years is charged
off against the allowance for loan and lease losses. Interest accrued in the
current year is reversed. Interest payments received on non-accrual loans and
leases are generally applied to principal unless the remaining principal balance
has been determined to be fully collectible.
Cost of loans sold is determined on a specific identification basis and
gains or losses on sales of loans are recognized at trade dates.
PREMISES AND EQUIPMENT - Premises and equipment are carried at cost and are
depreciated or amortized on a straight-line basis over their estimated useful
lives.
OTHER REAL ESTATE OWNED - Other real estate owned is recorded at the lower of
cost or fair value minus estimated costs to sell at the date of transfer to
other real estate owned. If the fair value of an asset minus the estimated costs
to sell should decline to less than the carrying amount of the asset, the
deficiency is recognized in the period in which it becomes known and is included
in other non-interest expense.
MORTGAGE SERVICING RIGHTS - Mortgage servicing rights are capitalized and
amortized in proportion to, and over the period of, estimated net servicing
income. TCF periodically evaluates its capitalized mortgage servicing rights for
impairment. Loan type and note rate are the predominant risk characteristics of
the underlying loans used to stratify capitalized mortgage servicing rights for
purposes of measuring impairment. Any impairment is recognized through a
valuation allowance.
INTANGIBLE ASSETS - Goodwill resulting from acquisitions is amortized over 25
years on a straight-line basis. Deposit base intangibles are amortized over 10
years on an accelerated basis. The Company periodically reviews the
recoverability of the carrying values of these assets.
DERIVATIVE FINANCIAL INSTRUMENTS - TCF utilizes derivative financial instruments
in the course of asset and liability management to meet the ongoing credit needs
of its customers and in order to manage the market exposure of its residential
loans held for sale portfolio and its commitments to extend credit for
residential loans. Derivative financial instruments include commitments to
extend credit, forward settlements of Federal Home Loan Bank ("FHLB") advances,
and forward mortgage loan sales commitments. See Note 15 for additional
information concerning these derivative financial instruments.
ADVERTISING AND PROMOTIONS - Expenditures for advertising and promotions are
expensed as incurred.
INCOME TAXES - Income taxes are accounted for using the asset and liability
method. Under this method, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
40
<PAGE>
EARNINGS PER COMMON SHARE - The following table reconciles the weighted average
shares outstanding and the income applicable to common shareholders used for
basic and diluted earnings per share:
<TABLE>
<CAPTION>
Year Ended December 31,
- ------------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands, except per-share data) 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Weighted average number of common shares outstanding
used in basic earnings per common share calculation ....................................... 82,445,288 88,092,895 84,477,536
Net dilutive effect of:
Stock option plans ...................................................................... 172,486 346,434 468,275
Restricted stock plans .................................................................. 452,944 476,486 838,189
Assumed conversion of 7 1/4% convertible subordinated debentures ........................ - - 349,936
--------------------------------------
Weighted average number of shares outstanding adjusted for effect of dilutive securities .... 83,070,718 88,915,815 86,133,936
======================================
Net income .................................................................................. $ 166,039 $ 156,179 $ 145,061
Add: Interest expense on 7 1/4% convertible subordinated debentures, net of tax ............. - - 132
--------------------------------------
Income applicable to common shareholders including effect of dilutive securities ............ $ 166,039 $ 156,179 $ 145,193
======================================
Basic earnings per common share ............................................................. $ 2.01 $ 1.77 $ 1.72
======================================
Diluted earnings per common share ........................................................... $ 2.00 $ 1.76 $ 1.69
====================================================================================================================================
</TABLE>
2. BUSINESS COMBINATIONS AND ACQUISITIONS
JEWEL-OSCO BRANCHES - On January 30, 1998, TCF Illinois completed its
acquisition of the fixed assets and automated teller machines ("ATMs") for 76
branches in Jewel-Osco stores in the Chicago area previously operated by Bank of
America. TCF accounted for the acquisition using the purchase method of
accounting.
STANDARD FINANCIAL, INC. - On September 4, 1997, TCF acquired all of the
outstanding common stock of Standard Financial, Inc. ("Standard"), a
community-oriented thrift institution with $2.6 billion in assets, $1.9 billion
in deposits, and 14 full-service offices in Chicago, Illinois, for a purchase
price of $423.7 million, which consisted of $237.9 million in cash and 7.7
million shares of TCF common stock. The acquisition has been accounted for by
the purchase method of accounting and, accordingly, the results of operations of
Standard have been included in TCF's consolidated financial statements since
September 4, 1997.
WINTHROP RESOURCES CORPORATION - On June 24, 1997, TCF completed its acquisition
of Winthrop Resources Corporation ("Winthrop"), a leasing company with $363
million in assets. Winthrop leases computers, telecommunications equipment,
point-of-sale systems and other business-essential equipment to companies
nationwide. In connection with the acquisition, TCF issued approximately 13.4
million shares of its common stock for all of the outstanding common shares of
Winthrop.
The acquisition of Winthrop was accounted for as a pooling-of-interests
combination. Accordingly, TCF's consolidated financial statements for periods
prior to the combination have been restated to include the accounts and the
results of operations of Winthrop for all periods presented, except for
dividends declared per share. There were no material intercompany transactions
prior to the acquisition and no material differences in the accounting and
reporting policies of TCF and Winthrop.
BOC FINANCIAL CORPORATION - On January 16, 1997, TCF completed its purchase of
BOC Financial Corporation, an Illinois-based holding company with $183.1 million
in assets and $168 million in deposits. TCF accounted for the acquisition using
the purchase method of accounting.
3. CASH AND DUE FROM BANKS
At December 31, 1999, TCF was required by Federal Reserve Board regulations to
maintain reserve balances of $180 million in cash on hand or at various Federal
Reserve Banks.
41
<PAGE>
4. INVESTMENTS
The carrying values of investments, which approximate their fair values,
consist of the following:
<TABLE>
<CAPTION>
At December 31,
- --------------------------------------------------------------------------------------------------------
(In thousands) 1999 1998
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest-bearing deposits with banks ...................................... $ 20,319 $115,894
Federal funds sold ........................................................ - 41,000
Federal Home Loan Bank stock, at cost ..................................... 104,611 93,482
Federal Reserve Bank stock, at cost ....................................... 23,224 23,112
Other ..................................................................... - 4,227
-------------------------
$ 148,154 $277,715
========================================================================================================
</TABLE>
The carrying value and yield of investments at December 31, 1999, by
contractual maturity, are shown below:
<TABLE>
<CAPTION>
Carrying
(Dollars in thousands) Value(1) Yield
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Due in one year or less .................................................. $ 20,319 3.88%
No stated maturity(2) .................................................... 127,835 7.09
---------
$ 148,154 6.65
========================================================================================================
</TABLE>
(1) Carrying value is equal to fair value.
(2) Balance represents FRB and FHLB stock, required regulatory investments.
5. SECURITIES AVAILABLE FOR SALE
Securities available for sale consist of the following:
<TABLE>
<CAPTION>
At December 31,
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Gross Gross Gross Gross
Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair
(Dollars in thousands) Cost Gains Losses Value Cost Gains Losses Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government and other
marketable securities ......... $ 500 $ - $ - $ 500 $ - $ - $ - $ -
Mortgage-backed securities:
FHLMC ......................... 928,034 326 (47,491) 880,869 989,681 9,966 (960) 998,687
FNMA .......................... 589,206 378 (27,633) 561,951 537,197 5,567 (1,336) 541,428
GNMA .......................... 26,850 179 (174) 26,855 33,721 510 (113) 34,118
Private issuer ................ 51,796 139 (1,073) 50,862 104,099 311 (1,597) 102,813
Collateralized mortgage
obligations ................. 624 - - 624 873 - - 873
----------------------------------------------------------------------------------------------
$1,597,010 $1,022 $(76,371) $1,521,661 $1,665,571 $16,354 $(4,006) $1,677,919
==============================================================================================
Weighted-average yield ........... 6.58% 6.63%
====================================================================================================================================
</TABLE>
Gross gains of $4.7 million, $2.3 million and $9.1 million and gross losses
of $1.5 million, $57,000 and $602,000 were recognized on sales of securities
available for sale during 1999, 1998 and 1997, respectively.
Mortgage-backed securities aggregating $3.6 million were pledged as
collateral to secure certain deposits at December 31, 1999.
42
<PAGE>
6. LOANS HELD FOR SALE
Loans held for sale consist of the following:
<TABLE>
<CAPTION>
At December 31,
- --------------------------------------------------------------------------------------------------
(In thousands) 1999 1998
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Residential real estate ........................................ $ 55,016 $ 74,814
Education ...................................................... 143,912 138,259
-------------------------------
$198,928 $213,073
==================================================================================================
</TABLE>
7. LOANS AND LEASES
Loans and leases consist of the following:
<TABLE>
<CAPTION>
At December 31,
- --------------------------------------------------------------------------------------------------
(In thousands) 1999 1998
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Residential real estate ............................... $ 3,911,184 $ 3,757,416
Unearned premiums and deferred loan fees .............. 8,494 7,864
---------------------------------
3,919,678 3,765,280
---------------------------------
Commercial real estate:
Apartments .................................... 276,045 257,195
Other permanent ............................... 637,980 464,817
Construction and development .................. 162,570 92,399
Unearned discounts and deferred loan fees ..... (3,123) (2,983)
---------------------------------
1,073,472 811,428
---------------------------------
Commercial business ................................... 394,463 288,676
Deferred loan costs ................................... 1,050 428
---------------------------------
395,513 289,104
---------------------------------
Consumer:
Home equity ................................... 1,974,924 1,526,129
Automobile .................................... 55,271 337,893
Loans secured by deposits ..................... 6,859 7,581
Other secured ................................. 11,148 19,033
Unsecured ..................................... 26,634 35,290
Unearned discounts and deferred loan fees ..... (16,252) (49,372)
---------------------------------
2,058,584 1,876,554
---------------------------------
Lease financing:
Direct financing leases ....................... 446,351 377,157
Sales-type leases ............................. 30,387 35,695
Lease residuals ............................... 24,384 29,340
Unearned income and deferred lease costs ...... (52,626) (43,380)
---------------------------------
448,496 398,812
---------------------------------
$ 7,895,743 $ 7,141,178
==================================================================================================
</TABLE>
43
<PAGE>
At December 31, 1999 and 1998, the recorded investment in loans that
were considered to be impaired was $4.5 million and $7.1 million,
respectively. The related allowance for loan losses at those dates was $1
million and $1.7 million, respectively. All of the impaired loans were on
non-accrual status. The average recorded investment in impaired loans during
the year ended December 31, 1999 and 1998 was $8.1 million and $8.7 million,
respectively. For the year ended December 31, 1999 and 1998, TCF recognized
interest income on impaired loans of $519,000 and $90,000, all of which was
recognized using the cash basis method of income recognition.
At December 31, 1999, 1998 and 1997, loans and leases on non-accrual
status totaled $24.1 million, $33.7 million and $36.8 million, respectively.
Had the loans and leases performed in accordance with their original terms
throughout 1999, TCF would have recorded gross interest income of $3.6
million for these loans and leases. Interest income of $1.4 million has been
recorded on these loans and leases for the year ended December 31, 1999.
At December 31, 1999 and 1998, TCF had no loans and leases outstanding
with terms that had been modified in troubled debt restructurings. There were
no material commitments to lend additional funds to customers whose loans or
leases were classified as non-accrual at December 31, 1999.
The aggregate amount of loans to directors and executive officers of TCF
was not significant at December 31, 1999 or 1998. All loans to TCF's
directors and executive officers were made in the ordinary course of business
on normal credit terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with unrelated persons,
and in the opinion of management do not represent more than a normal credit
risk of collection.
Future minimum lease payments for direct financing and sales-type leases
as of December 31, 1999 are as follows:
<TABLE>
<CAPTION>
Payments to Payments to be
be Received Received by Other
(In thousands) by TCF Financial Institutions Total
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2000....................................... $104,007 $ 93,230 $197,237
2001....................................... 69,252 62,030 131,282
2002....................................... 39,933 25,325 65,258
2003....................................... 22,571 9,646 32,217
2004....................................... 11,542 5,395 16,937
Thereafter................................. 3,706 - 3,706
-----------------------------------------------------
$251,011 $195,626 $446,637
==================================================================================================
</TABLE>
8. ALLOWANCE FOR LOAN AND LEASE LOSSES
Following is a summary of the allowance for loan and lease losses and selected
statistics:
<TABLE>
<CAPTION>
Year Ended December 31,
- ----------------------------------------------------------------------------------------------------------------------
(Dollars in thousands) 1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year ..................................... $ 80,013 $ 82,583 $ 71,865
Acquired balance ............................................... - - 10,592
Transfers to loans held for sale ............................... (14,793) - -
Provision for credit losses .................................... 16,923 23,280 17,995
Charge-offs .................................................... (34,398) (32,714) (26,813)
Recoveries ..................................................... 8,010 6,864 8,944
--------------------------------------------------
Net charge-offs .............................................. (26,388) (25,850) (17,869)
--------------------------------------------------
Balance at end of year ........................................... $ 55,755 $ 80,013 $ 82,583
==================================================
Ratio of net loan and lease charge-offs to
average loans and leases outstanding ............................ .35% .36% .30%
Allowance for loan and lease losses as a
percentage of total loan and lease balances at year-end ......... .71 1.12 1.17
======================================================================================================================
</TABLE>
44
<PAGE>
9. OTHER ASSETS
Other assets consist of the following:
<TABLE>
<CAPTION>
At December 31,
- ------------------------------------------------------------------------------
(In thousands) 1999 1998
- ------------------------------------------------------------------------------
<S> <C> <C>
Premises and equipment ................. $176,108 $173,688
Accrued interest receivable ............ 54,550 52,197
Mortgage servicing rights .............. 22,614 21,566
Other real estate owned ................ 10,912 13,602
Other .................................. 87,809 70,309
-----------------------------------
$351,993 $331,362
==============================================================================
</TABLE>
Premises and equipment are summarized as follows:
<TABLE>
<CAPTION>
At December 31,
- --------------------------------------------------------------------------------------------
(In thousands) 1999 1998
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Land .................................................. $ 35,590 $ 33,619
Office buildings ...................................... 127,622 130,932
Leasehold improvements ................................ 32,709 27,084
Furniture and equipment ............................... 158,368 145,835
--------------------------------
354,289 337,470
Less accumulated depreciation and amortization ........ 178,181 163,782
--------------------------------
$176,108 $173,688
============================================================================================
</TABLE>
TCF leases certain premises and equipment under operating leases. Net
lease expense was $19.6 million, $19.6 million and $15 million in 1999, 1998
and 1997, respectively.
At December 31, 1999, the total annual minimum lease commitments for
operating leases were as follows:
<TABLE>
<CAPTION>
(In thousands)
- -------------------------------------------------------
<S> <C>
2000............................. $ 17,061
2001............................. 15,366
2002............................. 13,344
2003............................. 13,646
2004............................. 12,797
Thereafter....................... 69,240
-----------------
$141,454
=======================================================
</TABLE>
Mortgage servicing rights, net of valuation allowance, are summarized as
follows:
<TABLE>
<CAPTION>
Year Ended December 31,
- -----------------------------------------------------------------------------------------------------------------
(In thousands) 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year, net ..................... $ 21,566 $ 19,512 $ 17,360
Acquired balance .............................. - - 2,177
Mortgage servicing rights capitalized ......... 6,991 8,966 5,229
Amortization .................................. (4,737) (5,268) (4,753)
Sales of servicing ............................ (1,037) (97) (401)
Valuation adjustments ......................... (169) (1,547) (100)
---------------------------------------------------
Balance at end of year, net ........................... $ 22,614 $ 21,566 $ 19,512
=================================================================================================================
</TABLE>
45
<PAGE>
The valuation allowance for mortgage servicing rights is summarized as
follows:
<TABLE>
<CAPTION>
Year Ended December 31,
- ----------------------------------------------------------------------------
(In thousands) 1999 1998 1997
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year, net.. $ 2,738 $1,594 $1,494
Provisions................. 169 1,547 100
Charge-offs................ (1,961) (403) -
-----------------------------------
Balance at end of year, net........ $ 946 $2,738 $1,594
============================================================================
</TABLE>
At December 31, 1999, 1998 and 1997, TCF was servicing real estate loans
for others with aggregate unpaid principal balances of approximately $2.9
billion, $3.7 billion and $4.4 billion, respectively. During 1999, 1998 and
1997, TCF sold servicing rights on $344.6 million, $200.4 million and $144.7
million of loans serviced for others at net gains of $3.1 million, $2.4
million and $1.6 million, respectively.
10. DEPOSITS
Deposits are summarized as follows:
<TABLE>
<CAPTION>
At December 31,
- -----------------------------------------------------------------------------------------------------------------
1999 1998
- -----------------------------------------------------------------------------------------------------------------
WEIGHTED- Weighted-
(Dollars in thousands) AVERAGE RATE AMOUNT TOTAL Average Rate Amount Total
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Checking:
Non-interest bearing...... 0.00% $ 1,185,330 18.0% 0.00% $ 1,158,685 17.3%
Interest bearing.......... .55 727,949 11.0 .57 720,938 10.7
----------------------- ----------------------------
.21 1,913,279 29.0 .22 1,879,623 28.0
----------------------- ----------------------------
Passbook and statement:
Non-interest bearing...... 0.00 42,838 .7 0.00 63,024 .9
Interest bearing.......... 1.12 1,048,454 15.9 1.13 1,113,907 16.6
----------------------- ----------------------------
1.08 1,091,292 16.6 1.07 1,176,931 17.5
----------------------- ----------------------------
Money market................ 2.67 708,417 10.8 2.64 700,004 10.4
----------------------- ----------------------------
.93 3,712,988 56.4 .94 3,756,558 55.9
Certificates................ 5.00 2,871,847 43.6 5.01 2,958,588 44.1
----------------------- ----------------------------
2.71 $ 6,584,835 100.0% 2.73 $ 6,715,146 100.0%
=================================================================================================================
</TABLE>
Certificates had the following remaining maturities at December 31, 1999:
<TABLE>
<CAPTION>
(In millions) $100,000
Maturity Minimum Other Total(1)
- --------------------------------------------------------------------------
<S> <C> <C> <C>
0-3 months................ $ 294.2 $ 520.8 $ 815.0
4-6 months................ 70.5 651.8 722.3
7-12 months............... 74.6 768.7 843.3
13-24 months.............. 37.0 344.7 381.7
25-36 months.............. 7.9 71.7 79.6
37-48 months.............. 2.2 14.4 16.6
49-60 months.............. .5 9.5 10.0
Over 60 months............ .1 3.2 3.3
----------------------------------------------
$ 487.0 $ 2,384.8 $ 2,871.8
==========================================================================
</TABLE>
(1) Includes $246.3 million of negotiated rate certificates and no brokered
deposits.
46
<PAGE>
11. BORROWINGS
Borrowings consist of the following:
<TABLE>
<CAPTION>
At December 31,
- ------------------------------------------------------------------------------------------------------------------------------
1999 1998
- ------------------------------------------------------------------------------------------------------------------------------
Year of WEIGHTED- Weighted-
(Dollars in thousands) Maturity AMOUNT AVERAGE RATE Amount Average Rate
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Securities sold under repurchase agreements.. 1999 $ - -% $ 317,280 6.81%
2000 960,000 5.75 - -
2001 50,000 5.71 50,000 5.71
----------- ------------
1,010,000 5.74 367,280 6.66
----------- ------------
Federal Home Loan Bank advances ............. 1999 - - 570,207 5.85
2000 499,716 6.00 297,399 6.16
2001 181,571 5.79 886,602 5.19
2003 50,000 5.78 50,000 5.78
2004 903,000 5.55 - -
2006 3,000 5.46 - -
2009 122,500 5.24 - -
----------- ------------
1,759,787 5.69 1,804,208 5.58
----------- ------------
Discounted lease rentals..................... 1999 - - 87,791 8.28
2000 83,785 8.43 58,917 8.18
2001 57,285 8.50 29,009 8.21
2002 23,284 8.67 6,772 7.99
2003 8,816 8.84 1,195 7.65
2004 5,199 8.92 - -
----------- ------------
178,369 8.52 183,684 8.22
----------- ------------
Other borrowings:
Senior subordinated debentures............. 2003 28,750 9.50 28,750 9.50
Collateralized mortgage obligations........ 2008 - - 44 6.50
2010 - - 1,809 5.95
----------- ------------
- - 1,853 5.95
----------- ------------
Bank line of credit........................ 1999 - - 74,000 6.19
2000 42,000 6.92 - -
Commercial paper........................... 2000 22,357 6.21 - -
Treasury, tax and loan note................ 1999 - - 1,271 4.11
2000 42,625 4.53 - -
----------- ------------
135,732 6.60 105,874 7.06
----------- ------------
$ 3,083,888 5.91 $ 2,461,046 6.00
==============================================================================================================================
</TABLE>
47
<PAGE>
At December 31, 1999, borrowings with a remaining contractual maturity of one
year or less consisted of the following:
<TABLE>
<CAPTION>
Weighted-
(Dollars in thousands) Amount Average Rate
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Securities sold under repurchase agreements........... $ 960,000 5.75%
Federal Home Loan Bank advances....................... 499,716 6.00
Discounted lease rentals.............................. 83,785 8.43
Bank line of credit................................... 42,000 6.92
Commercial paper...................................... 22,357 6.21
Treasury, tax and loan note........................... 42,625 4.53
--------------
$ 1,650,483 5.97
=========================================================================================
</TABLE>
The securities underlying the repurchase agreements are book entry
securities. During the period, book entry securities were delivered by
appropriate entry into the counterparties' accounts through the Federal
Reserve System. The dealers may sell, loan or otherwise dispose of such
securities to other parties in the normal course of their operations, but
have agreed to resell to TCF identical or substantially the same securities
upon the maturities of the agreements. At December 31, 1999, all of the
securities sold under repurchase agreements provided for the repurchase of
identical securities.
At December 31, 1999, securities sold under repurchase agreements were
collateralized by mortgage-backed securities and had the following maturities:
<TABLE>
<CAPTION>
Repurchase Borrowing Collateral Securities
- --------------------------------------------------------------------------------------------------------
(Dollars in thousands) Amount Interest Rate Carrying Amount Market Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maturity:
January 2000................. $ 200,000 5.62% $ 220,586 $ 208,621
February 2000................ 660,000 5.77 741,624 700,808
March 2000................... 100,000 5.83 111,022 104,732
November 2001................ 50,000 5.71 54,010 52,916
-------------- --------------------------------------
$ 1,010,000 5.74 $ 1,127,242 $ 1,067,077
========================================================================================================
</TABLE>
Included in FHLB advances at December 31, 1999 are $1 billion of fixed-rate
advances which are callable at par on certain dates. 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 stated maturity dates and the next call dates for the
callable FHLB advances outstanding at December 31, 1999 were as follows (in
thousands):
<TABLE>
<CAPTION>
Year Stated Maturity Next Call Date
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
2000.............................................. $ - $ -
2001.............................................. - 703,000
2002.............................................. - 208,500
2003.............................................. - -
2004.............................................. 903,000 117,000
2006.............................................. 3,000 -
2009.............................................. 122,500 -
------------------------------------------
$ 1,028,500 $ 1,028,500
===============================================================================================
</TABLE>
TCF has a $135 million bank line of credit expiring in April 2000 which
is unsecured and contains certain covenants common to such agreements with
which TCF is in compliance. The interest rate on the line of credit is based
on either the prime rate or LIBOR. TCF has the option to select the interest
rate index and term for advances on the line of credit. The line of credit
may be used for appropriate corporate purposes, including serving as a
back-up line of credit to support the redemption of TCF's commercial paper.
TCF has a $50 million commercial paper program which is unsecured and
contains certain covenants common to such programs with which TCF is in
compliance. Any usage under the commercial paper program requires an equal
amount of back-up support by the bank line of credit. Commercial paper
generally matures within 90 days, although it may have a term of up to 270
days.
The $28.8 million of senior subordinated debentures mature in July 2003.
These debentures will be redeemable at par plus accrued interest to the date
of redemption beginning July 1, 2001.
48
<PAGE>
During 1997, TCF redeemed $7.1 million of convertible subordinated
debentures (the "Debentures") at par plus accrued and unpaid interest to the
date of redemption. The Debentures were convertible into TCF common stock at a
conversion price of $8.52 per common share. TCF issued approximately 839,000
shares of common stock in connection with the conversion of the Debentures.
FHLB advances are collateralized by residential real estate loans, FHLB
stock and mortgage-backed securities with an aggregate carrying value of $2.8
billion at December 31, 1999.
The following table sets forth TCF's maximum and average borrowing levels
for each of the years in the three-year period ending December 31, 1999:
<TABLE>
<CAPTION>
Securities Sold Under
Repurchase Agreements and Discounted
(Dollars in thousands) Federal Funds Purchased FHLB Advances Lease Rentals Other Borrowings
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999:
AVERAGE BALANCE............................ $ 529,359 $1,821,172 $171,997 $151,430
MAXIMUM MONTH-END BALANCE.................. 1,010,000 1,997,346 182,456 367,177
AVERAGE RATE FOR PERIOD.................... 5.40% 5.52% 8.04% 6.27%
Year ended December 31, 1998:
Average balance............................ $ 140,414 $1,367,104 $205,393 $ 92,467
Maximum month-end balance.................. 367,280 1,804,208 222,018 214,087
Average rate for period.................... 5.60% 5.80% 8.15% 7.38%
Year ended December 31, 1997:
Average balance............................ $ 346,339 $ 817,464 $222,558 $ 97,547
Maximum month-end balance.................. 482,231 1,339,578 241,895 136,259
Average rate for period.................... 5.74% 5.89% 8.28% 7.56%
=======================================================================================================================
</TABLE>
12. INCOME TAXES
Income tax expense (benefit) consists of:
<TABLE>
<CAPTION>
(In thousands) Current Deferred Total
- -----------------------------------------------------------------------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999:
FEDERAL...................... $ 91,647 $2,981 $ 94,628
STATE........................ 11,747 677 12,424
-------------------------------
$103,394 $3,658 $107,052
===============================
Year ended December 31, 1998:
Federal...................... $ 91,102 $ (994) $ 90,108
State........................ 19,325 (363) 18,962
-------------------------------
$110,427 $(1,357) $109,070
===============================
Year ended December 31, 1997:
Federal...................... $ 77,465 $ 1,395 $ 78,860
State........................ 16,464 522 16,986
-------------------------------
$ 93,929 $ 1,917 $ 95,846
=======================================================================
</TABLE>
Total income tax expense of $107.1 million, $109.1 million and $95.8
million for the years ended December 31, 1999, 1998 and 1997, respectively, did
not include tax benefits specifically allocated to stockholders' equity. The tax
benefit allocated to additional paid-in capital for compensation expense for tax
purposes in excess of amounts recognized for financial reporting purposes
totaled $4.1 million, $2.4 million and $2.3 million for the years ended December
31, 1999, 1998 and 1997, respectively.
At December 31, 1999, TCF has net operating loss ("NOL") carryforwards for
federal income tax purposes of $2.7 million, which are available to offset
future federal taxable income through 2008. The realization of the NOLs is
subject to certain Internal Revenue Code ("IRC") limitations. In addition, at
December 31, 1999, TCF has NOL carryforwards for state income tax purposes of
$13 million, which are available to offset future state taxable income through
2004. TCF has, in its judgment, made certain reasonable assumptions relating to
the realizability of the deferred tax assets. Based upon these assumptions, the
Company has determined that no valuation allowance is required with respect to
the deferred tax assets.
49
<PAGE>
Income tax expense differs from the amounts computed by applying the
federal income tax rate of 35% to income before income tax expense as a
result of the following:
<TABLE>
<CAPTION>
Year Ended December 31,
- ---------------------------------------------------------------------------------------------------------------
(In thousands) 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Computed income tax expense................................... $ 95,582 $ 92,837 $84,317
Increase (reduction) in income tax expense resulting from:....
Amortization of goodwill.................................... 2,724 3,741 1,287
State income tax, net of federal income tax benefit......... 8,076 12,325 11,041
Other, net.................................................. 670 167 (799)
------------------------------------------
$107,052 $109,070 $95,846
===============================================================================================================
</TABLE>
The significant components of the Company's deferred tax assets and
deferred tax liabilities are as follows:
<TABLE>
<CAPTION>
At December 31,
- ------------------------------------------------------------------------------------------------
(In thousands) 1999 1998
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Securities available for sale............................... $27,967 $ -
Allowance for loan and lease losses......................... 15,437 22,011
Pension and other compensation plans........................ 12,032 11,058
------------------------
Total deferred tax assets................................ 55,436 33,069
------------------------
Deferred tax liabilities:
Lease financing............................................. 27,292 28,883
Loan fees and discounts..................................... 9,738 8,697
Securities available for sale............................... - 4,757
Other, net.................................................. 3,216 4,609
------------------------
Total deferred tax liabilities.......................... 40,246 46,946
------------------------
Net deferred tax assets (liabilities) $15,190 $(13,877)
================================================================================================
</TABLE>
13. STOCKHOLDERS' EQUITY
RESTRICTED RETAINED EARNINGS - In general, TCF's subsidiary banks may not
declare or pay a dividend to TCF in excess of 100% of their net profits for that
year combined with their retained net profits for the preceding two calendar
years without prior approval of the Office of the Comptroller of the Currency
("OCC"). Additional limitations on dividends declared or paid on, or repurchases
of, TCF's subsidiary banks' capital stock are tied to the national banks'
regulatory capital levels.
Undistributed earnings and profits at December 31, 1999 includes
approximately $134.4 million for which no provision for federal income tax has
been made. This amount represents earnings appropriated to bad debt reserves and
deducted for federal income tax purposes and is generally not available for
payment of cash dividends or other distributions to shareholders. Payments or
distributions of these appropriated earnings could invoke a tax liability for
TCF based on the amount of earnings removed and current tax rates.
SHAREHOLDER RIGHTS PLAN - TCF's preferred share purchase rights will become
exercisable only if a person or group acquires or announces an offer to acquire
15% or more of TCF's common stock. When exercisable, each right will entitle the
holder to buy one one-hundredth of a share of a new series of junior
participating preferred stock at a price of $100. In addition, upon the
occurrence of certain events, holders of the rights will be entitled to purchase
either TCF's common stock or shares in an "acquiring entity" at half of the
market value. TCF's Board of Directors (the "Board") is generally entitled to
redeem the rights at 1 cent per right at any time before they become
exercisable. The rights will expire on June 9, 2009, if not previously redeemed
or exercised.
SHARES HELD IN TRUST FOR DEFERRED COMPENSATION PLANS - The cost of TCF common
stock held by TCF's deferred compensation plans is reported separately in a
manner similar to treasury stock (that is, changes in fair value are not
recognized) with a corresponding deferred compensation obligation reflected in
additional paid-in capital.
50
<PAGE>
LOAN TO EXECUTIVE DEFERRED COMPENSATION PLAN - During 1998, loans totaling $6.4
million were made by TCF to the Executive Deferred Compensation Plan trustee on
a nonrecourse basis to purchase shares of TCF common stock for the accounts of
participants. The loans are repayable over five years, bear interest of 7.41%
and are secured by the shares of TCF common stock purchased with the loan
proceeds. These loans have a remaining principal balance of $4.7 million at
December 31, 1999 and are reflected as a reduction of stockholders' equity as
required by generally accepted accounting principles.
STOCK OFFERING - On June 3, 1997, TCF completed a public offering of 1.4 million
shares of its common stock at a price of $21.6875 per share. The purpose of the
offering was to meet one of the criteria for TCF's merger with Winthrop to be
accounted for as a pooling of interests. The net proceeds of $29.3 million were
used as a portion of the cash consideration paid in connection with the
acquisition of Standard.
TREASURY STOCK - On January 20, 1997, the Board authorized the repurchase of up
to 5% of TCF common stock, or 3.5 million shares. On February 25, 1997, the
Board formally rescinded TCF's common stock repurchase program in connection
with the Company's merger with Winthrop. On January 19, 1998, the Board
authorized the repurchase of up to 5% of TCF common stock, or 4.6 million
shares. On June 22, 1998, the Board authorized the repurchase of up to an
additional 5% of TCF common stock, or 4.5 million shares. On December 15, 1998,
the Board authorized the repurchase of up to an additional 5% of TCF common
stock, or 4.3 million shares. TCF purchased 4,091,611, 7,549,300 and 1,295,800
shares of common stock during the years ended December 31, 1999, 1998 and 1997,
respectively. At December 31, 1999, TCF has remaining authorization of 1.8
million shares under its December 15, 1998 5% stock repurchase program.
14. REGULATORY CAPITAL REQUIREMENTS
TCF is subject to various regulatory capital requirements administered by the
federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory, and possibly additional discretionary, actions by
the federal banking agencies that could have a direct material effect on
TCF's financial statements. Under capital adequacy guidelines and the
regulatory framework for "prompt corrective action," TCF must meet specific
capital guidelines that involve quantitative measures of the Company's
assets, stockholders' equity, and certain off-balance-sheet items as
calculated under regulatory accounting practices.
The following table sets forth TCF's tier 1 leverage, tier 1 risk-based and
total risk-based capital levels, and applicable percentages of adjusted
assets, together with the excess over the minimum capital requirements:
<TABLE>
<CAPTION>
At December 31,
- ---------------------------------------------------------------------------------------------------
1999 1998
- ---------------------------------------------------------------------------------------------------
(Dollars in thousands) Amount Percentage Amount Percentage
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tier 1 leverage capital........................ $688,357 6.56% $659,661 6.75%
Tier 1 leverage capital requirement............ 314,582 3.00 293,024 3.00
--------------------------------------------------
Excess....................................... $373,775 3.56% $366,637 3.75%
==================================================
Tier 1 risk-based capital...................... $688,357 10.22% $659,661 10.45%
Tier 1 risk-based capital requirement.......... 269,448 4.00 252,458 4.00
--------------------------------------------------
Excess....................................... $418,909 6.22% $407,203 6.45%
==================================================
Total risk-based capital....................... $745,171 11.06% $738,239 11.70%
Total risk-based capital requirement........... 538,897 8.00 504,916 8.00
--------------------------------------------------
Excess...................................... $206,274 3.06% $233,323 3.70%
===================================================================================================
</TABLE>
At December 31, 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 OCC pursuant to the
Federal Deposit Insurance Corporation Improvement Act of 1991.
15. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
TCF is a party to financial instruments with off-balance-sheet risk,
primarily to meet the financing needs of its customers. These financial
instruments, which are issued or held by TCF for purposes other than trading,
involve elements of credit and interest-rate risk in excess of the amount
recognized in the Consolidated Statements of Financial Condition.
51
<PAGE>
TCF's exposure to credit loss in the event of non-performance by the
counterparty to the financial instrument for commitments to extend credit and
standby letters of credit is represented by the contractual amount of the
commitments. TCF uses the same credit policies in making these commitments as it
does for on-balance-sheet instruments. TCF evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained is
based on management's credit evaluation of the customer. For Veterans
Administration ("VA") loans serviced with partial recourse and forward mortgage
loan sales commitments, the contract or notional amount exceeds TCF's exposure
to credit loss. TCF controls the credit risk of forward mortgage loan sales
commitments through credit approvals, credit limits and monitoring procedures.
COMMITMENTS TO EXTEND CREDIT - Commitments to extend credit are agreements to
lend to a customer provided there is no violation of any condition in the
contract. These commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. These commitments totaled
$1.2 billion and $1.1 billion at December 31, 1999 and 1998, respectively. Since
certain of the commitments are expected to expire without being drawn upon, the
total commitment amounts do not necessarily represent future cash requirements.
Collateral predominantly consists of residential and commercial real estate and
personal property. Included in the total commitments to extend credit at
December 31, 1999 were fixed-rate mortgage loan commitments and loans in process
aggregating $87.4 million.
STANDBY LETTERS OF CREDIT - Standby letters of credit are conditional
commitments issued by TCF guaranteeing the performance of a customer to a third
party. The standby letters of credit expire in various years through the year
2005 and totaled $22 million and $45.3 million at December 31, 1999 and 1998,
respectively. Collateral held primarily consists of commercial real estate
mortgages. Since the conditions under which TCF is required to fund standby
letters of credit may not materialize, the cash requirements are expected to be
less than the total outstanding commitments.
VA LOANS SERVICED WITH PARTIAL RECOURSE - TCF services VA loans on which it must
cover any principal loss in excess of the VA's guarantee if the VA elects its
"no-bid" option upon the foreclosure of a loan. The serviced loans are
collateralized by residential real estate and totaled $184.5 million and $273.2
million at December 31, 1999 and 1998, respectively.
FORWARD MORTGAGE LOAN SALES COMMITMENTS - TCF enters into forward mortgage loan
sales commitments in order to manage the market exposure on its residential
loans held for sale and its commitments to extend credit for residential loans.
Forward mortgage loan sales commitments are contracts for the delivery of
mortgage loans or pools of loans in which TCF agrees to make delivery at a
specified future date of a specified instrument, at a specified price or yield.
Risks arise from the possible inability of the counterparties to meet the terms
of their contracts and from movements in mortgage loan values and interest
rates. Forward mortgage loan sales commitments totaled $46.3 million and $106.7
million at December 31, 1999 and 1998, respectively.
FEDERAL HOME LOAN BANK ADVANCES - FORWARD SETTLEMENTS - TCF enters into forward
settlements of FHLB advances in the course of asset and liability management and
to manage interest rate risk. Forward settlements of FHLB advances totaled $189
million and $150 million at December 31, 1999 and 1998, respectively.
16. FAIR VALUES OF FINANCIAL INSTRUMENTS
TCF is required to disclose the estimated fair value of financial instruments,
both assets and liabilities on and off the balance sheet, for which it is
practicable to estimate fair value. Fair value estimates are made at a specific
point in time, based on relevant market information and information about the
financial instruments. Fair value estimates are subjective in nature, involving
uncertainties and matters of significant judgment, and therefore cannot be
determined with precision. Changes in assumptions could significantly affect the
estimates.
The carrying amounts of cash and due from banks, investments and accrued
interest payable and receivable approximate their fair values due to the short
period of time until their expected realization. Securities available for sale
are carried at fair value, which is based on quoted market prices. Certain
financial instruments, including lease financings and discounted lease rentals,
and all non-financial instruments are excluded from fair value of financial
instrument disclosure requirements.
The following methods and assumptions are used by the Company in estimating
its fair value disclosures for its remaining financial instruments, all of which
are issued or held for purposes other than trading.
LOANS HELD FOR SALE - The fair value of loans held for sale is estimated based
on quoted market prices.
The estimated fair value of capitalized mortgage servicing rights totaled
$36 million at December 31, 1999, compared with a carrying amount of $22.6
million. The estimated fair value of capitalized mortgage servicing rights is
based on estimated cash flows discounted using rates commensurate with the risks
involved. Assumptions regarding prepayments, defaults and interest rates are
determined using available market information.
LOANS - The fair values of residential and consumer loans are estimated using
quoted market prices. For certain variable-rate loans that reprice frequently
and that have experienced no significant change in credit risk, fair values are
based on carrying values. The fair values of other loans
52
<PAGE>
are estimated by discounting contractual cash flows adjusted for prepayment
estimates, using interest rates currently being offered for loans with similar
terms to borrowers with similar credit risk characteristics.
DEPOSITS - The fair value of checking, passbook and statement and money market
deposits is deemed equal to the amount payable on demand. The fair value of
certificates is estimated based on discounted cash flow analyses using interest
rates offered by TCF for certificates with similar remaining maturities.
BORROWINGS - The carrying amounts of short-term borrowings approximate their
fair values. The fair values of TCF's long-term borrowings are estimated based
on quoted market prices or discounted cash flow analyses using interest rates
for borrowings of similar remaining maturities.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK - The fair values of
residential commitments to extend credit and forward mortgage loan sales
commitments associated with residential loans held for sale are based upon
quoted market prices. The fair values of TCF's remaining commitments to extend
credit and standby letters of credit are estimated using fees currently charged
to enter into similar agreements. For fixed-rate loan commitments and standby
letters of credit issued in conjunction with fixed-rate loan agreements, fair
value also considers the difference between current levels of interest rates and
the committed rates. The fair values of forward settlements of FHLB advances are
based on the difference between current levels of interest rates and the
committed rates.
TCF has not incurred, and does not anticipate, significant losses as a
result of the recourse provisions associated with its balance of VA loans
serviced with partial recourse. As a result, the carrying amounts and related
estimated fair values of these financial instruments were not material at
December 31, 1999 and 1998.
As discussed above, the carrying amounts of certain of the Company's
financial instruments approximate their fair value. The carrying amounts
disclosed below are included in the Consolidated Statements of Financial
Condition under the indicated captions, except where noted otherwise. The
carrying amounts and fair values of the Company's remaining financial
instruments are set forth in the following table:
<TABLE>
<CAPTION>
At December 31,
- ------------------------------------------------------------------------------------------------------------------
1999 1998
- -------------------------------------------------------------------------------------------------------------------
CARRYING ESTIMATED Carrying Estimated
(In thousands) AMOUNT FAIR VALUE Amount Fair Value
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial instrument assets:
Loans held for sale......................................... $ 198,928 $ 200,617 $ 213,073 $ 215,909
Loans:
Residential real estate................................... 3,919,678 3,825,981 3,765,280 3,813,684
Commercial real estate.................................... 1,073,472 1,061,374 811,428 824,358
Commercial business....................................... 395,513 391,268 289,104 288,443
Consumer.................................................. 2,058,584 2,116,554 1,876,554 1,993,242
Allowance for loan losses(1).............................. (51,847) - (76,024) -
----------------------------------------------------
$7,594,328 $7,595,794 $6,879,415 $7,135,636
====================================================
Financial instrument liabilities:
Certificates................................................ $2,871,847 $2,901,177 $2,958,588 $2,994,231
Federal Home Loan Bank advances............................. 1,759,787 1,733,859 1,804,208 1,817,563
Other borrowings............................................ 135,732 135,301 105,874 106,471
-----------------------------------------------------
$4,767,366 $4,770,337 $4,868,670 $4,918,265
====================================================
Financial instruments with off-balance-sheet risk:(2)
Commitments to extend credit(3)............................. $ 8,572 $ (916) $ 3,085 $ (264)
Standby letters of credit(4)................................ (1) (2) - (21)
Forward mortgage loan sales commitments(3).................. 39 427 87 113
Federal Home Loan Bank advance forward settlements.......... - 1,509 - -
-----------------------------------------------------------------------------
$ 8,610 $ 1,018 $ 3,172 $ (172)
====================================================================================================================
</TABLE>
(1) Excludes the allowance for lease losses.
(2) Positive amounts represent assets, negative amounts represent liabilities.
(3) Carrying amounts are included in other assets.
(4) Carrying amounts are included in accrued expenses and other liabilities.
53
<PAGE>
17. STOCK OPTION AND INCENTIVE PLAN
The TCF Financial 1995 Incentive Stock Program (the "Program") was adopted to
enable TCF to attract and retain key personnel. Under the Program, no more than
5% of the shares of TCF common stock outstanding on the date of initial
shareholder approval may be awarded. Options generally become exercisable over a
period of one to 10 years from the date of the grant and expire after 10 years.
All outstanding options have a fixed exercise price equal to the market
price of TCF common stock on the date of grant. Restricted stock granted in
1998 generally vests within five years, but may be subject to a delayed
vesting schedule if certain return on equity goals are not met.
Other restricted stock grants generally vest over periods from three to eight
years. TCF also has prior programs with options that remain outstanding.
Those options are included in the following tables.
ACCOUNTING FOR STOCK-BASED COMPENSATION - TCF has elected to retain the
intrinsic value based method of accounting prescribed by Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees," for its stock-based employee compensation plans through 1999. See
discussion of subsequent accounting change below. Accordingly, no
compensation expense has been recognized for TCF's stock option grants.
Compensation expense for restricted stock under APB Opinion No. 25 is
recorded over the vesting periods, and totaled $9.5 million, $5.9 million and
$8.3 million in 1999, 1998 and 1997, respectively.
Had compensation expense been determined based on the fair value at the
grant dates for awards under the Program consistent with the method of
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation," TCF's pro forma net income and earnings per common
share would have been as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
- ------------------------------------------------------------------------------
(In thousands, except per-share data) 1999 1998 1997
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income:
As reported.................. $166,039 $156,179 $145,061
=======================================
Pro forma.................... $164,607 $156,271 $146,155
=======================================
Basic earnings per common share:
As reported.................. $ 2.01 $ 1.77 $ 1.72
=======================================
Pro forma.................... $ 2.00 $ 1.77 $ 1.73
=======================================
Diluted earnings per common share:
As reported.................. $ 2.00 $ 1.76 $ 1.69
=======================================
Pro forma.................... $ 1.98 $ 1.76 $ 1.70
==============================================================================
</TABLE>
Since the pro forma disclosures of results under SFAS No. 123 are only
required to consider grants awarded since 1995, the pro forma effects of
applying SFAS No. 123 during this period may not be representative of the
effects on reported results for future years.
The fair value of each option grant is estimated on the grant date using
the Black-Scholes option pricing model, with the following weighted-average
assumptions used for 1999, 1998 and 1997, respectively: risk-free interest
rates of 5.03%, 4.78% and 5.95%; dividend yield of 2.7%, 2.6% and 1.7%;
expected lives of 7, 5.25 and 10 years; and volatility of 27.0%, 27.2% and
26.4%.
The weighted-average grant-date fair value of options granted was $7.02,
$6.49 and $11.98 in 1999, 1998 and 1997, respectively. The weighted-average
grant-date fair value of restricted stock was $25.94, $31.19 and $22.23 in
1999, 1998 and 1997, respectively.
54
<PAGE>
The following table reflects TCF's stock option and restricted stock
transactions under the program since December 31, 1996:
<TABLE>
<CAPTION>
Stock Options Restricted Stock
----------------------------------------------------------------------------------
Exercise Price
--------------------------------
Shares Range Weighted-Average Shares Price Range
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Outstanding at December 31, 1996.......... 942,968 $ 2.22-17.54 $ 6.12 1,191,866 $ 7.66-18.91
Granted........................... 123,032 20.40-33.28 31.66 929,200 20.88-27.34
Exercised......................... (224,955) 2.22-17.54 7.06 - -
Forfeited......................... (4,000) 7.74 7.74 - -
Vested............................ - - - (172,138) 8.10 - 9.89
--------- ---------
Outstanding at December 31, 1997.......... 837,045 2.22-33.28 9.61 1,948,928 7.66-27.34
Granted........................... 551,500 23.69-32.19 25.04 108,200 28.97-34.00
Exercised......................... (208,388) 2.44-17.54 4.69 - -
Forfeited......................... (1,500) 32.19 32.19 (5,400) 16.56-34.00
Vested............................ - - - (607,994) 7.66-21.91
--------- ---------
Outstanding at December 31, 1998.......... 1,178,657 2.22-33.28 17.67 1,443,734 7.66-34.00
Granted........................... 247,550 23.56-29.03 25.25 21,050 22.53-28.59
Exercised......................... (551,107) 2.22-23.69 11.73 - -
Forfeited......................... (112,000) 23.56-33.28 32.36 (11,760) 8.11-34.00
Vested............................ - - - (331,889) 7.66-27.34
--------- ---------
Outstanding at December 31, 1999.......... 763,100 2.63-33.28 22.27 1,121,135 8.11-34.00
========= =========
EXERCISABLE AT DECEMBER 31, 1999.......... 430,400 2.63-33.28 18.70
===============================================================================================================================
</TABLE>
The following table summarizes information about stock options
outstanding at December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------------------------------------------------------------
Weighted-Average
Weighted-Average Remaining Contractual Weighted-Average
Exercise Price Range Shares Exercise Price Life in Years Shares Exercise Price
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 2.63 to $10.00............. 93,922 $ 5.12 2.0 93,922 $ 5.12
$10.01 to $20.00............. 45,596 13.38 6.1 45,596 13.38
$20.01 to $30.00............. 523,082 24.33 9.0 276,782 23.50
$30.01 to $33.28............. 100,500 31.59 8.1 14,100 32.24
------- -------
Total Options........ 763,100 22.27 7.8 430,400 18.70
========================================================================================================================
</TABLE>
At December 31, 1999, there were 1,666,066 shares reserved for issuance
under the Program, including 763,100 shares for which options had been
granted but had not yet been exercised.
Effective January 1, 2000, TCF adopted SFAS No. 123 for stock-based
compensation transactions beginning in 2000. Also during January 2000, TCF
granted 1,095,000 shares of restricted stock to certain officers. Vesting of
these performance-based shares is dependent on TCF achieving certain earnings
per share growth goals. The shares will be forfeited after eight years if not
earned by that time. The total grant-date fair value of these shares was
$21.6 million, which will be recognized as compensation expense ratably
during the expected vesting period.
55
<PAGE>
18. EMPLOYEE BENEFIT PLANS
The TCF Cash Balance Pension Plan (the "Pension Plan") is a defined benefit
qualified plan covering all "regular stated salary" employees and certain
part-time employees who are at least 21 years old and have completed a year
of eligibility service with TCF. TCF makes a monthly allocation to the
participant's account based on a percentage of the participant's
compensation. The percentage is based on the sum of the participant's age and
years of employment with TCF. Participants are fully vested after five years
of vesting service.
In addition to providing retirement income benefits, TCF provides health
care benefits for eligible retired employees, and in some cases life
insurance benefits (the "Postretirement Plan"). Substantially all full-time
employees may become eligible for health care benefits if they reach
retirement age and have completed 10 years of service with the Company, with
certain exceptions. These and similar benefits for active employees are
provided through insurance companies or through self-funded programs. The
Postretirement Plan is an unfunded plan.
The following table sets forth the status of the Pension Plan and the
Postretirement Plan at the dates indicated:
<TABLE>
<CAPTION>
Pension Plan Postretirement Plan
----------------------------------------------------
Year Ended December 31, Year Ended December 31,
- --------------------------------------------------------------------------------------------------------------------
(In thousands) 1999 1998 1999 1998
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year................... $ 28,967 $17,027 $ 9,214 $ 8,603
Service cost - benefits earned during the year............ 3,297 2,967 426 299
Interest cost on benefit obligation....................... 2,059 1,454 630 641
Acquisition/merger........................................ - 5,006 - -
Actuarial (gain) loss..................................... (1,205) 3,647 69 358
Benefits paid............................................. (2,390) (1,134) (618) (687)
---------------------------------------------------
Benefit obligation at end of year..................... 30,728 28,967 9,721 9,214
---------------------------------------------------
Change in fair value of plan assets:
Fair value of plan assets at beginning of year............ 57,338 53,374 - -
Actual return on plan assets.............................. 18,151 916 - -
Benefits paid............................................. (2,390) (1,134) (618) (687)
Acquisition/merger........................................ 1,768 4,182 - -
Employer contributions.................................... - - 618 687
---------------------------------------------------
Fair value of plan assets at end of year.............. 74,867 57,338 - -
---------------------------------------------------
Funded status of plans:
Funded status at end of year.............................. 44,139 28,371 (9,721) (9,214)
Unrecognized transition obligation........................ - - 4,433 4,775
Unrecognized prior service cost........................... (3,983) (5,040) 770 879
Unrecognized net gain..................................... (23,870) (7,901) (998) (1,079)
---------------------------------------------------
Prepaid (accrued) benefit cost at end of year......... $ 16,286 $15,430 $(5,516) $(4,639)
====================================================================================================================
</TABLE>
56
<PAGE>
Net periodic benefit cost (credit) included the following components:
<TABLE>
<CAPTION>
Pension Plan Postretirement Plan
----------------------------------------------------------------------
Year Ended December 31, Year Ended December 31,
- ----------------------------------------------------------------------------------------------------------------------
(In thousands) 1999 1998 1997 1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost.................................. $ 3,297 $ 2,967 $ 2,091 $ 426 $ 299 $ 236
Interest cost................................. 2,059 1,454 1,207 630 641 604
Expected return on plan assets................ (5,155) (3,745) (2,841) - - -
Amortization of transition obligation......... - - - 342 342 342
Amortization of prior service cost............ (1,057) (876) (742) 109 109 109
Recognized actuarial gain..................... - (728) - (12) (58) (116)
----------------------------------------------------------------------
Net periodic benefit cost (credit)......... $ (856) $ (928) $ (285) $1,495 $1,333 $1,175
======================================================================================================================
</TABLE>
The discount rate and rate of increase in future compensation used to
measure the benefit obligation and the expected long-term rate of return on
plan assets were as follows:
<TABLE>
<CAPTION>
Pension Plan Postretirement Plan
------------------------------------------------------------------
Year Ended December 31, Year Ended December 31,
- -----------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Discount rate........................................... 7.50% 6.75% 7.75% 7.50% 6.75% 7.75%
Rate of increase in future compensation................. 5.00 5.00 5.00 - - -
Expected long-term rate of return on plan assets........ 10.00 9.50 9.50 - - -
=============================================================================================================================
</TABLE>
The Pension Plan's assets consist primarily of listed stocks and
government bonds. At December 31, 1999 and 1998, the Pension Plan's assets
included TCF common stock with a market value of $6.3 million and $7.3
million, respectively.
For active participants of the Postretirement Plan, a 7.6% annual rate
of increase in the per capita cost of covered health care benefits was
assumed for 2000. This rate is assumed to decrease gradually to 6% for the
year 2004 and remain at that level thereafter. For most retired participants,
the annual rate of increase is assumed to be 4% for all future years, which
represents the Plan's annual limit on increases in TCF's contributions for
retirees.
Assumed health care cost trend rates have an effect on the amounts
reported for the Postretirement Plan. A one-percentage-point change in
assumed health care cost trend rates would have the following effects:
<TABLE>
<CAPTION>
1-Percentage- 1-Percentage-
(In thousands) Point Increase Point Decrease
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Effect on total of service and interest cost components......................... $ 93 $ (79)
Effect on postretirement benefit obligation..................................... 490 (423)
====================================================================================================================
</TABLE>
EMPLOYEE STOCK PURCHASE PLAN - The TCF Employees Stock Purchase Plan
generally allows participants to make contributions by salary deduction of up
to 12% of their salary on a tax-deferred basis pursuant to section 401(k) of
the IRC. TCF matches the contributions of all employees at the rate of 50
cents per dollar, with a maximum employer contribution of 3% of the
employee's salary. Employee contributions vest immediately while the
Company's matching contributions are subject to a graduated vesting schedule
based on an employee's years of vesting service. The Company's matching
contributions are expensed when made. TCF's contribution to the plan was $2.8
million, $2.7 million and $2.2 million in 1999, 1998 and 1997, respectively.
57
<PAGE>
19. PARENT COMPANY FINANCIAL INFORMATION
TCF Financial Corporation's (parent company only) condensed statements of
financial condition as of December 31, 1999 and 1998, and the condensed
statements of operations and cash flows for the years ended December 31,
1999, 1998 and 1997 are as follows:
CONDENSED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
At December 31,
- ---------------------------------------------------------------------------------------------------------------------------------
(In thousands) 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Cash................................................................................................... $ 673 $ 178
Interest-bearing deposits with banks................................................................... 2,639 2,401
Investment in subsidiaries:
Bank subsidiaries.................................................................................. 835,997 879,887
Other subsidiaries................................................................................. 586 586
Premises and equipment................................................................................. 11,566 8,009
Other assets........................................................................................... 39,693 41,656
---------------------
$891,154 $932,717
=====================
Liabilities and Stockholders' Equity:
Bank line of credit.................................................................................... $ 42,000 $ 74,000
Commercial paper....................................................................................... 22,357 -
Other liabilities...................................................................................... 17,815 13,215
---------------------
Total liabilities.................................................................................. 82,172 87,215
Stockholders' equity................................................................................... 808,982 845,502
---------------------
$891,154 $932,717
=================================================================================================================================
</TABLE>
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31,
- ---------------------------------------------------------------------------------------------------------------------------------
(In thousands) 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income............................................................................... $ 576 $ 581 $ 1,099
Interest expense.............................................................................. 4,000 2,219 758
----------------------------------
Net interest income (expense)............................................................. (3,424) (1,638) 341
Provision for credit losses................................................................... - (49) 679
----------------------------------
Net interest expense after provision for credit losses.................................... (3,424) (1,589) (338)
----------------------------------
Cash dividends received from consolidated subsidiaries:
Bank subsidiaries......................................................................... 164,791 184,569 109,791
Other subsidiaries........................................................................ - - 1,549
----------------------------------
Total cash dividends received from consolidated subsidiaries........................... 164,791 184,569 111,340
----------------------------------
Other non-interest income:
Affiliate service fees.................................................................... 82,567 72,483 53,671
Other..................................................................................... (3) 35 (4)
----------------------------------
Total other non-interest income........................................................ 82,564 72,518 53,667
----------------------------------
Non-interest expense:
Compensation and employee benefits........................................................ 49,171 41,379 42,828
Occupancy and equipment................................................................... 14,982 14,672 12,217
Other..................................................................................... 20,622 19,294 17,813
----------------------------------
Total non-interest expense............................................................. 84,775 75,345 72,858
----------------------------------
Income before income tax benefit and equity in undistributed earnings of subsidiaries..... 159,156 180,153 91,811
Income tax benefit............................................................................ 1,852 1,588 7,518
----------------------------------
Income before equity in undistributed earnings of subsidiaries............................ 161,008 181,741 99,329
Equity in undistributed earnings of subsidiaries.............................................. 5,031 (25,562) 45,732
----------------------------------
Net income.................................................................................... $166,039 $156,179 $145,061
=================================================================================================================================
</TABLE>
58
<PAGE>
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
- ------------------------------------------------------------------------------------------------------------
(In thousands) 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................................. $ 166,039 $ 156,179 $ 145,061
Adjustments to reconcile net income to
net cash provided by operating activities:
Equity in undistributed earnings of subsidiaries..... (5,031) 25,562 (45,732)
Other, net 15,554 1,802 8,625
-------------------------------------------------
Total adjustments.................................. 10,523 27,364 (37,107)
-------------------------------------------------
Net cash provided by operating activities............ 176,562 183,543 107,954
-------------------------------------------------
Cash flows from investing activities:
Net (increase) decrease in interest-bearing deposits
with banks............................................ (238) 17,420 (14,383)
Investments in and advances to subsidiaries, net....... (1,000) - (66,265)
Loan to Executive Deferred Compensation Plan, net...... 1,390 (6,111) 68
Purchases of premises and equipment, net............... (6,624) (4,174) (3,913)
Other, net............................................. 579 765 1,201
-------------------------------------------------
Net cash provided (used) by investing activities..... (5,893) 7,900 (83,292)
-------------------------------------------------
Cash flows from financing activities:
Dividends paid on common stock......................... (60,755) (54,971) (37,341)
Proceeds from issuance of common stock, net............ - - 29,266
Proceeds from conversion of convertible debentures..... - - 7,149
Purchases of common stock to be held in treasury....... (106,106) (210,939) (27,318)
Net increase in commercial paper....................... 22,357 - -
Net increase (decrease) in bank line of credit......... (32,000) 74,000 -
Other, net............................................. 6,330 629 3,481
-------------------------------------------------
Net cash used by financing activities................ (170,174) (191,281) (24,763)
-------------------------------------------------
Net increase (decrease) in cash.......................... 495 162 (101)
Cash at beginning of year................................ 178 16 117
-------------------------------------------------
Cash at end of year...................................... $ 673 $ 178 $ 16
============================================================================================================
</TABLE>
20. BUSINESS SEGMENTS
TCF's wholly owned bank subsidiaries, TCF Minnesota, TCF Illinois, TCF
Wisconsin, and Great Lakes Michigan (collectively "the banks"), have been
identified as reportable operating segments. The banks have the following
operating units that provide financial services to customers: deposits and
investment products, commercial lending, consumer lending, lease financing,
mortgage banking and residential lending, and investments and mortgage-backed
securities. In addition, TCF operates a bank holding company ("parent
company") that provides data processing, bank operations and other
professional services to the banks. The results of the parent company and TCF
Colorado, a wholly owned bank subsidiary of TCF, comprise the "other"
category in the tables below.
TCF evaluates performance and allocates resources based on the banks'
net income, net interest margin, return on average assets and return on
average realized common equity. The banks follow generally accepted
accounting principles as described in the Summary of Significant Accounting
Policies. TCF generally accounts for intersegment sales and transfers at
cost. Certain asset sales between the banks were accounted for at current
market prices, resulting in intercompany profit.
Each bank is managed separately with its own president, who reports
directly to TCF's chief operating decision maker, and board of directors.
59
<PAGE>
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:
<TABLE>
<CAPTION>
Great Total
TCF TCF TCF Lakes Reportable Consolidated
(Dollars in thousands) Minnesota Illinois Wisconsin Michigan Segments Other Eliminations Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AT OR FOR THE YEAR ENDED
DECEMBER 31, 1999:
INTEREST INCOME -
EXTERNAL CUSTOMERS...... $ 297,990 $ 220,705 $ 49,851 $ 179,699 $ 748,245 $ 3,856 $ - $ 752,101
NON-INTEREST INCOME -
EXTERNAL CUSTOMERS...... 165,740 87,577 24,292 35,509 313,118 5,481 - 318,599
INTEREST EXPENSE ........ 109,854 107,575 20,763 88,440 326,632 5,403 (4,147) 327,888
AMORTIZATION OF GOODWILL
AND OTHER INTANGIBLES... 1,062 9,597 30 - 10,689 - - 10,689
INCOME TAX EXPENSE
(BENEFIT)................ 56,897 24,358 6,379 21,494 109,128 (2,076) - 107,052
NET INCOME (LOSS) ........ 86,819 30,689 11,807 40,181 169,496 (4,104) 647 166,039
TOTAL ASSETS.............. 4,003,542 3,539,364 700,763 2,459,669 10,703,338 118,652 (160,274) 10,661,716
NET INTEREST MARGIN....... 5.45% 3.67% 4.63% 3.97% N.M. N.M. N.M. 4.47%
RETURN ON AVERAGE ASSETS.. 2.29 .90 1.73 1.68 N.M. N.M. N.M. 1.61
RETURN ON AVERAGE
REALIZED COMMON EQUITY... 32.24 8.13 25.31 22.95 N.M. N.M. N.M. 19.83
======================================================================================================
At or For the Year Ended
December 31, 1998:
Interest income -
external customers...... $ 323,056 $ 206,139 $ 45,094 $ 173,045 $ 747,334 $ 1,560 $ - $ 748,894
Non-interest income -
external customers...... 169,431 69,589 17,794 31,954 288,768 2,727 - 291,495
Interest expense ........ 114,736 103,795 18,525 87,532 324,588 2,870 (4,298) 323,160
Amortization of goodwill
and other intangibles... 1,165 10,204 30 - 11,399 - - 11,399
Income tax expense
(benefit)................ 63,988 22,418 4,934 20,245 111,585 (2,515) - 109,070
Net income (loss) ........ 89,977 25,512 8,289 37,681 161,459 (4,173) (1,107) 156,179
Total assets.............. 3,798,433 3,400,172 619,201 2,350,532 10,168,338 86,769 (90,513) 10,164,594
Net interest margin....... 6.37% 3.61% 4.92% 4.01% N.M. N.M. N.M. 4.84%
Return on average assets.. 2.50 .79 1.39 1.70 N.M. N.M. N.M. 1.62
Return on average
realized common equity... 32.72 6.54 17.52 21.13 N.M. N.M. N.M. 17.51
======================================================================================================
At or For the Year Ended
December 31, 1997:
Interest income -
external customers...... $ 341,337 $ 121,332 $ 46,536 $ 173,058 $ 682,263 $ 351 $ - $ 682,614
Non-interest income -
external customers...... 151,410 26,834 13,124 34,690 226,058 610 - 226,668
Interest expense ........ 127,576 55,523 20,751 87,344 291,194 834 (3,010) 289,018
Amortization of goodwill
and other intangibles.. 1,435 4,484 30 9,808 15,757 - - 15,757
Income tax expense
(benefit)................ 64,476 16,360 4,667 17,449 102,952 (7,106) - 95,846
Net income (loss) ........ 93,475 22,630 7,216 32,967 156,288 (11,633) 406 145,061
Total assets.............. 3,687,023 3,334,399 613,485 2,214,651 9,849,558 84,079 (188,977) 9,744,660
Net interest margin....... 6.32% 4.29% 4.51% 4.03% N.M. N.M. N.M. 5.20%
Return on average assets.. 2.54 1.30 1.18 1.51 N.M. N.M. N.M. 1.77
Return on average
realized common equity... 32.50 12.08 15.22 17.65 N.M. N.M. N.M. 19.57
===================================================================================================================================
</TABLE>
N.M. Not meaningful.
60
<PAGE>
Revenues from external customers for TCF's operating units, comprised of total
interest income and non-interest income, are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
- -------------------------------------------------------------------------------------------------
(In thousands) 1999 1998 1997
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Deposits and investment products................ $ 232,603 $ 194,948 $ 143,714
Commercial lending.............................. 108,817 99,383 98,090
Consumer lending................................ 215,671 236,538 241,390
Lease financing................................. 76,052 80,201 72,610
Mortgage banking and residential lending........ 311,635 322,014 244,078
Investments and mortgage-backed securities...... 125,922 107,305 109,400
-----------------------------------------------
$ 1,070,700 $ 1,040,389 $ 909,282
=================================================================================================
</TABLE>
21. OTHER EXPENSE
Other expense consists of the following:
<TABLE>
<CAPTION>
Year Ended December 31,
- -------------------------------------------------------------------------------------------------
(In thousands) 1999 1998 1997
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Deposit account losses........................ $ 17,172 $ 14,335 $ 4,738
Telecommunication............................. 13,386 13,049 9,398
ATM interchange............................... 11,156 9,107 7,005
Postage and courier........................... 10,876 9,926 9,012
Office supplies............................... 8,879 10,006 8,349
Loan and lease................................ 5,469 6,917 5,751
Federal deposit insurance premiums and
assessments.................................. 5,307 5,439 4,689
Mortgage servicing amortization and
valuation adjustments........................ 4,906 6,815 4,853
Other......................................... 35,311 33,439 33,819
-------------------------------------------------
$ 112,462 $ 109,033 $ 87,614
=================================================================================================
</TABLE>
22. LITIGATION AND CONTINGENT LIABILITIES
From time to time, TCF is a party to legal proceedings arising out of its
general lending and operating activities. TCF is and expects to become
engaged in a number of foreclosure proceedings and other collection actions
as part of its loan collection activities. From time to time, borrowers have
also brought actions against TCF, in some cases claiming substantial amounts
of damages. Some financial services companies have recently been subjected to
significant exposure in connection with class actions and/or suits seeking
punitive damages. 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.
61
<PAGE>
INDEPENDENT AUDITORS' REPORT
[LOGO]
The Board of Directors and Stockholders of TCF Financial Corporation:
We have audited the accompanying consolidated statements of financial
condition of TCF Financial Corporation and subsidiaries as of December 31,
1999 and 1998, and the related consolidated statements of operations,
stockholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1999. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of TCF
Financial Corporation and subsidiaries at December 31, 1999 and 1998, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1999, in conformity with generally
accepted accounting principles.
/s/ KPMG LLP
Minneapolis, Minnesota
January 18, 2000
62
<PAGE>
OTHER FINANCIAL DATA
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
At At At At At At At At
(Dollars in thousands, Dec. 31, Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31,
except per-share data) 1999 1999 1999 1999 1998 1998 1998 1998
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SELECTED FINANCIAL
CONDITION DATA:
Total assets............ $10,661,716 $10,342,248 $10,338,341 $10,200,744 $10,164,594 $9,900,439 $9,393,060 $9,664,849
Investments............. 148,154 127,701 194,781 158,222 277,715 135,491 122,888 246,364
Securities available
for sale............... 1,521,661 1,599,438 1,701,063 1,569,406 1,677,919 1,673,722 1,122,490 1,306,853
Loans and leases........ 7,895,743 7,602,130 7,431,171 7,293,329 7,141,178 7,092,639 7,103,686 7,036,646
Deposits................ 6,584,835 6,633,738 6,648,283 6,632,481 6,715,146 6,733,368 6,741,288 6,925,024
Borrowings.............. 3,083,888 2,721,200 2,734,652 2,579,789 2,461,046 2,159,948 1,617,240 1,631,021
Stockholders' equity.... 808,982 815,304 810,448 824,442 845,502 869,426 906,485 948,070
==============================================================================================================================
<CAPTION>
Three Months Ended
- ------------------------------------------------------------------------------------------------------------------------------
Dec. 31, Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31,
1999 1999 1999 1999 1998 1998 1998 1998
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SELECTED OPERATIONS
DATA:
Interest income......... $ 193,043 $ 188,656 $ 186,359 $ 184,043 $ 185,286 $ 185,229 $ 186,903 $ 191,476
Interest expense........ 86,931 82,116 79,637 79,204 80,625 80,605 79,606 82,324
-----------------------------------------------------------------------------------------------------
Net interest income... 106,112 106,540 106,722 104,839 104,661 104,624 107,297 109,152
Provision for credit
losses .............. 3,371 2,845 2,947 7,760 9,761 4,544 2,991 5,984
-----------------------------------------------------------------------------------------------------
Net interest income
after provision for
credit losses........ 102,741 103,695 103,775 97,079 94,900 100,080 104,306 103,168
-----------------------------------------------------------------------------------------------------
Non-interest income:
Gain (loss) on sales
of securities
available for sale... - - (5) 3,199 - (43) 1,787 502
Gain on sales of
loan servicing....... - - 743 2,333 - 2,414 - -
Gain on sales of
branches............. 3,349 6,429 2,382 - 12,051 226 4,260 2,048
Gain on sale of
subsidiaries......... 5,522 - - - - - - -
Gain on sale of
joint venture
interest............. - - - - - - - 5,580
Other non-interest
income .............. 77,275 76,090 72,897 68,385 70,066 71,263 63,531 57,810
-----------------------------------------------------------------------------------------------------
Total non-interest
income............ 86,146 82,519 76,017 73,917 82,117 73,860 69,578 65,940
-----------------------------------------------------------------------------------------------------
Non-interest expense:
Amortization of
goodwill and
other intangibles.... 2,665 2,676 2,673 2,675 2,829 2,828 2,826 2,916
Other non-interest
expense.............. 112,292 114,061 110,106 105,650 107,096 109,054 102,748 98,403
-----------------------------------------------------------------------------------------------------
Total non-interest
expense............ 114,957 116,737 112,779 108,325 109,925 111,882 105,574 101,319
-----------------------------------------------------------------------------------------------------
Income before income
tax expense.......... 73,930 69,477 67,013 62,671 67,092 62,058 68,310 67,789
Income tax expense...... 28,980 26,717 26,024 25,331 27,588 25,477 28,110 27,895
-----------------------------------------------------------------------------------------------------
Net income............ $ 44,950 $ 42,760 $ 40,989 $ 37,340 $ 39,504 $ 36,581 $ 40,200 $ 39,894
=====================================================================================================
Per common share:
Basic earnings........ $ .55 $ .52 $ .50 $ .45 $ .47 $ .42 $ .45 $ .44
=====================================================================================================
Diluted earnings...... $ .55 $ .52 $ .49 $ .44 $ .46 $ .42 $ .45 $ .43
=====================================================================================================
Diluted cash
earnings(1).......... $ .58 $ .54 $ .52 $ .47 $ .48 $ .44 $ .48 $ .48
=====================================================================================================
Dividends declared.... $ .1875 $ .1875 $ .1875 $ .1625 $ .1625 $ .1625 $ .1625 $ .125
=====================================================================================================
FINANCIAL RATIOS:(2)
Return on average
assets .............. 1.72% 1.66% 1.60% 1.48% 1.60% 1.54% 1.69% 1.66%
Cash return on average
assets(1).............. 1.80 1.73 1.67 1.55 1.68 1.62 1.81 1.83
Return on average
realized common
equity .............. 21.04 20.37 19.81 18.06 18.77 16.75 17.52 16.99
Return on average
common equity.......... 22.03 21.29 20.11 17.99 18.56 16.58 17.37 16.83
Cash return on
average realized
common equity(1)....... 22.14 21.27 20.73 18.97 19.67 17.62 18.77 18.82
Average total equity
to average assets...... 7.78 7.79 7.95 8.22 8.63 9.28 9.75 9.83
Average realized
tangible equity to
average assets......... 6.50 6.44 6.33 6.39 6.67 7.22 7.66 7.71
Net interest margin(3).. 4.38 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.
63
<PAGE>
OTHER FINANCIAL DATA
FIVE-YEAR CONSOLIDATED FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended December 31,
- -------------------------------------------------------------------------------------------------------------------------------
(In thousands, except per-share data) 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED SUMMARY OF OPERATIONS:
Interest income $752,101 $748,894 $682,614 $612,884 $631,198
Interest expense 327,888 323,160 289,018 258,316 302,106
----------------------------------------------------------------------------
Net interest income 424,213 425,734 393,596 354,568 329,092
Provision for credit losses 16,923 23,280 17,995 21,446 16,973(1)
----------------------------------------------------------------------------
Net interest income after
provision for credit losses 407,290 402,454 375,601 333,122 312,119
Loss on sale of mortgage-backed securities - - - - (21,037)
Gain (loss) on sales of securities
available for sale 3,194 2,246 8,509 86 (152)
Gain on sales of loan servicing 3,076 2,414 1,622 - 1,535
Gain on sales of branches 12,160 18,585 14,187 2,747 1,103
Gain on sale of subsidiaries 5,522 - - - -
Gain on sale of joint venture interest - 5,580 - - -
Gain on sales of loans - - - 5,443 -
Other non-interest income 294,647 262,670 202,350 173,336 151,104
----------------------------------------------------------------------------
Total non-interest income 318,599 291,495 226,668 181,612 132,553
----------------------------------------------------------------------------
Amortization of goodwill and other intangibles 10,689 11,399 15,757 3,540 3,163
FDIC special assessment - - - 34,803 -
Merger-related expenses - - - - 21,733
Cancellation cost on early termination
of interest-rate exchange contracts - - - - 4,423
Other non-interest expense 442,109 417,301 345,605 314,983 296,664
----------------------------------------------------------------------------
Total non-interest expense 452,798 428,700 361,362 353,326 325,983
----------------------------------------------------------------------------
Income before income tax expense
and extraordinary item 273,091 265,249 240,907 161,408 118,689
Income tax expense 107,052 109,070 95,846 61,031 45,482
----------------------------------------------------------------------------
Income before extraordinary item 166,039 156,179 145,061 100,377 73,207
Extraordinary item, net - - - - (963)
----------------------------------------------------------------------------
Net income 166,039 156,179 145,061 100,377 72,244
Dividends on preferred stock - - - - 678
----------------------------------------------------------------------------
Net income available to
common shareholders $166,039 $156,179 $145,061 $100,377 $ 71,566
============================================================================
Basic earnings per common share:
Income before extraordinary item $ 2.01 $ 1.77 $ 1.72 $ 1.23 $ .89
Extraordinary item - - - - (.01)
----------------------------------------------------------------------------
Net income $ 2.01 $ 1.77 $ 1.72 $ 1.23 $ .88
============================================================================
Diluted earnings per common share:
Income before extraordinary item $ 2.00 $ 1.76 $ 1.69 $ 1.20 $ .87
Extraordinary item - - - - (.01)
----------------------------------------------------------------------------
Net income $ 2.00 $ 1.76 $ 1.69 $ 1.20 $ .86
============================================================================
Dividends declared per common share $ .725 $ .6125 $ .46875 $.359375 $.296875
============================================================================
Average common and common equivalent
shares outstanding:
Basic 82,445 88,093 84,478 81,904 81,115
============================================================================
Diluted 83,071 88,916 86,134 83,939 83,560
===================================================================================================================================
</TABLE>
(1) Includes $5,000 in merger-related provisions.
64
<PAGE>
FIVE-YEAR CONSOLIDATED FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
At December 31,
- ---------------------------------------------------------------------------------------------------------------------------------
(In thousands, except per-share data) 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED SUMMARY OF FINANCIAL CONDITION:
Total assets $ 10,661,716 $ 10,164,594 $ 9,744,660 $ 7,430,487 $ 7,507,856
Interest-bearing deposits with banks 20,319 115,894 20,572 386,244 11,594
Federal funds sold - 41,000 - - -
Other investments - 4,227 4,061 3,910 3,716
Federal Reserve Bank stock, at cost 23,224 23,112 22,977 - -
Federal Home Loan Bank stock, at cost 104,611 93,482 82,002 66,061 60,096
Securities available for sale 1,521,661 1,677,919 1,426,131 999,586 1,201,525
Loans held for sale 198,928 213,073 244,612 203,869 242,413
Loans and leases 7,895,743 7,141,178 7,069,188 5,292,920 5,516,348
Goodwill 158,468 166,645 177,700 15,431 11,569
Deposit base intangibles 13,262 16,238 19,821 10,843 12,918
Deposits 6,584,835 6,715,146 6,907,310 4,977,630 5,191,552
Federal Home Loan Bank advances 1,759,787 1,804,208 1,339,578 1,141,040 893,587
Other borrowings 1,324,101 656,838 387,574 567,132 726,314
Stockholders' equity 808,982 845,502 953,680 630,687 582,399
Tangible net worth 637,252 662,619 756,159 604,413 557,912
Book value per common share 9.87 9.88 10.27 7.61 6.98
Tangible book value per common share 7.78 7.74 8.15 7.29 6.69
=================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
At or For the Year Ended December 31,
- ---------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
KEY RATIOS AND OTHER DATA:
Net interest margin 4.47% 4.84% 5.20% 5.27% 4.61%
Return on average assets 1.61 1.62 1.77 1.39 .95
Return on average realized common equity 19.83 17.51 19.57 16.77 13.69
Average total equity to average assets 7.93 9.35 9.12 8.31 7.04
Average interest-earning assets to average
interest-bearing liabilities 117.02 116.55 117.15 115.29 111.30
Common dividend payout ratio 36.25% 34.80% 27.74% 29.95% 34.52%
Number of full service bank offices 338 311 221 196 185
=================================================================================================================================
</TABLE>
65
<PAGE>
OTHER FINANCIAL DATA
<TABLE>
<CAPTION>
ALLOWANCE FOR LOAN AND LEASE LOSS INFORMATION Year Ended December 31,
- --------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands) 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at beginning of year $ 80,013 $ 82,583 $ 71,865 $ 66,290 $ 56,343
Acquired balance - - 10,592 - -
Transfers to loans held for sale (14,793) - - - -
Charge-offs:
Residential real estate (155) (291) (444) (333) (472)
Commercial real estate (674) (1,294) (927) (1,944) (4,189)
Commercial business (52) (42) (1,485) (2,786) (1,695)
Consumer (31,509) (30,108) (21,660) (18,317) (8,414)
Lease financing (2,008) (979) (2,297) (914) (247)
-------------------------------------------------------------------------
(34,398) (32,714) (26,813) (24,294) (15,017)
-------------------------------------------------------------------------
Recoveries:
Residential real estate 71 103 167 131 157
Commercial real estate 1,381 559 2,530 3,690 1,080
Commercial business 329 635 2,488 2,675 4,862
Consumer 5,831 5,222 3,141 1,918 1,892
Lease financing 398 345 618 9 -
-------------------------------------------------------------------------
8,010 6,864 8,944 8,423 7,991
-------------------------------------------------------------------------
Net charge-offs (26,388) (25,850) (17,869) (15,871) (7,026)
Provision charged to operations 16,923 23,280 17,995 21,446 16,973
-------------------------------------------------------------------------
Balance at end of year $ 55,755 $ 80,013 $ 82,583 $ 71,865 $ 66,290
=========================================================================
Ratio of net loan and lease charge-offs
to average loans and leases outstanding .35% .36% .30% .29% .13%
Year-end allowance as a percentage of
year-end total loan and lease balances .71 1.12 1.17 1.36 1.20
================================================================================================================================
</TABLE>
66
<PAGE>
<TABLE>
<CAPTION>
CONTRACTUAL AMORTIZATION OF
LOAN AND LEASE PORTFOLIOS At December 31, 1999(1)
- -------------------------------------------------------------------------------------------------------------------------------
Residential Commercial Commercial Lease Total Loans
(In thousands) Real Estate Real Estate Business Consumer Financing and Leases
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Amounts due:
Within 1 year $ 136,919 $ 177,013 $223,582 $ 102,964 $220,920 $ 861,398
After 1 year:
1 to 2 years 131,408 93,437 46,219 88,756 147,352 507,172
2 to 3 years 128,873 83,395 46,150 90,461 73,512 422,391
3 to 5 years 273,262 218,182 57,113 218,548 55,180 822,285
5 to 10 years 683,659 351,877 20,597 523,161 4,158 1,583,452
10 to 15 years 624,379 135,834 802 823,271 - 1,584,286
Over 15 years 1,932,684 16,857 - 227,675 - 2,177,216
---------------------------------------------------------------------------------------------
Total after 1 year 3,774,265 899,582 170,881 1,971,872 280,202 7,096,802
---------------------------------------------------------------------------------------------
Total $ 3,911,184 $ 1,076,595 $394,463 $2,074,836 $501,122 $7,958,200
=============================================================================================
Amounts due after 1 year on:
Fixed-rate loans and leases $ 1,643,675 $ 184,720 $ 98,325 $ 999,956 $280,202 $3,206,878
Adjustable-rate loans 2,130,590 714,862 72,556 971,916 - 3,889,924
---------------------------------------------------------------------------------------------
Total after 1 year $ 3,774,265 $ 899,582 $170,881 $1,971,872 $280,202 $7,096,802
===============================================================================================================================
</TABLE>
(1) Gross of unearned discounts and deferred fees. This table does not include
the effect of prepayments, which is an important consideration in
management's interest-rate risk analysis. Industry experience indicates
that the loans remain outstanding for significantly shorter periods than
their contractual terms.
67
<PAGE>
TCF FINANCIAL CORPORATION
EXHIBIT 21
Subsidiaries of Registrant
(As of March 15, 2000)
<TABLE>
<CAPTION>
NAMES UNDER WHICH SUBSIDIARY
SUBSIDIARY STATE OF INCORPORATION DOES BUSINESS
<S> <C> <C>
TCF Financial Insurance Illinois TCF Financial Insurance Agency
Agency Illinois, Inc. Illinois, Inc.
TCF Insurance
TCF Financial Insurance Minnesota TCF Financial Insurance Agency
Agency Wisconsin, Inc. Wisconsin, Inc.
TCF Insurance
TCF Financial Insurance Agency Minnesota TCF Financial Insurance Agency
Michigan, Inc. Michigan, Inc.
TCF Insurance
GLB Agency
TCF Financial Insurance Agency Minnesota TCF Financial Insurance Agency
Colorado, Inc. Colorado, Inc.
TCF Financial Insurance Agency, Inc. Minnesota TCF Financial Insurance
Agency, Inc.
TCF Insurance
TCF Securities, Inc. Minnesota TCF Securities, Inc.
GLB Securities (MI)
TCF Foundation Minnesota TCF Foundation
TCF Minnesota Financial Services, Inc. Minnesota TCF Minnesota Financial Services, Inc.
TCB Air, Inc. Minnesota TCB Air, Inc.
TCF National Bank Minnesota United States TCF National Bank Minnesota
TCF Consumer Financial Services, Inc. Minnesota TCF Consumer Financial Services, Inc.
TCF Financial Services
TCF Mortgage Corporation Minnesota TCF Mortgage Corporation
TCFMC Holding Co. Minnesota TCFMC Holding Co.
TCF Financial Services, Inc. Minnesota TCF Financial Services, Inc.
TCF Management Corporation Minnesota TCF Management Corporation
<PAGE>
NAMES UNDER WHICH SUBSIDIARY
SUBSIDIARY STATE OF INCORPORATION DOES BUSINESS
TCF Agency Minnesota, Inc. Minnesota TCF Agency Minnesota, Inc.
TCF Agency Minnesota
TCF Insurance Agency Minnesota, Inc. (UT)
TCF Agency Mississippi, Inc. Mississippi TCF Agency Mississippi, Inc.
TCF Agency Mississippi
TCF Agency Insurance Services, Inc. Minnesota TCF Agency Insurance Services, Inc.
TCF National Properties, Inc. Minnesota TCF National Properties, Inc.
TCF Real Estate Financial Services, Inc. Minnesota TCF Real Estate Financial Services, Inc.
Winthrop Resources Corporation Minnesota Winthrop Resources Corporation
TCF Small Business Leasing
TCF Leasing, Inc. TCF Leasing, Inc.
WINR Business Credit
TCF National Bank Wisconsin United States TCF National Bank Wisconsin
TCF Agency Wisconsin, Inc. Wisconsin TCF Agency Wisconsin, Inc.
TCF Portfolio Strategies, Inc. Minnesota TCF Portfolio Strategies, Inc.
TCF National Bank Illinois United States TCF National Bank Illinois
Capitol Equities Corporation Illinois Capitol Equities Corporation
SFB Insurance Agency, Inc. Illinois SFB Insurance Agency, Inc.
Standard Financial Mortgage Illinois Standard Financial Mortgage
Corporation Corporation
TCF Agency Illinois, Inc. Illinois TCF Agency Illinois, Inc.
TCF National Bank United States Great Lakes National Bank Michigan
TCF National Bank
GLB Service Corporation II Michigan GLB Service Corporation II
GLB Properties, Inc. Michigan GLB Properties, Inc.
Lakeland Group Insurance Agency, Inc. Michigan Lakeland Group Insurance Agency, Inc.
401 Service Corporation Michigan 401 Service Corporation
<PAGE>
NAMES UNDER WHICH SUBSIDIARY
SUBSIDIARY STATE OF INCORPORATION DOES BUSINESS
TCF Colorado Corporation Colorado TCF Colorado Corporation
TCF National Bank Colorado United States TCF National Bank Colorado
TCF Agency Colorado, Inc. Colorado TCF Agency Colorado, Inc.
Great Lakes Mortgage LLC Michigan Great Lakes Mortgage LLC
TCF Investment Holdings I, Inc. Minnesota TCF Investment Holdings I, Inc.
TCF Investment Holdings II, Inc. Minnesota TCF Investment Holdings II, Inc.
TCF Investment Holdings III, Inc. Minnesota TCF Investment Holdings III, Inc.
GLB Investment Holdings IV, Inc. Minnesota GLB Investment Holdings IV, Inc.
TCF Investment Holdings V, Inc. Minnesota TCF Investment Holdings V, Inc.
TCF Real Estate Investments, Inc. Minnesota TCF Real Estate Investments, Inc.
TCF Illinois Realty Investments, LLC Minnesota TCF Illinois Realty Investments, LLC
TCF Wisconsin Real Estate Minnesota TCF Wisconsin Real Estate
Investments, Inc. Investments, Inc.
GLB Real Estate Investments, Inc. Minnesota GLB Real Estate Investments, Inc.
</TABLE>
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors
TCF Financial Corporation:
We consent to incorporation by reference of our report dated January 18,
2000, relating to the consolidated statements of financial condition of TCF
Financial Corporation and subsidiaries as of December 31, 1999 and 1998,
and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the years in the three-year period ended
December 31, 1999, which report appears in the December 31, 1999 Form 10-K
of TCF Financial Corporation, in the following Registration Statements of
TCF Financial Corporation: Nos. 33-43030, 33-57633, 33-53986, and 33-63767
on Form S-8.
/s/ KPMG LLP
Minneapolis, Minnesota
March 24, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 1999 10-K
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 429,262
<INT-BEARING-DEPOSITS> 20,319
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,521,661
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 7,895,743
<ALLOWANCE> 55,755
<TOTAL-ASSETS> 10,661,716
<DEPOSITS> 6,584,835
<SHORT-TERM> 1,650,483
<LIABILITIES-OTHER> 184,011
<LONG-TERM> 1,433,405
0
0
<COMMON> 928
<OTHER-SE> 808,054
<TOTAL-LIABILITIES-AND-EQUITY> 10,661,716
<INTEREST-LOAN> 618,291
<INTEREST-INVEST> 120,443
<INTEREST-OTHER> 13,367
<INTEREST-TOTAL> 752,101
<INTEREST-DEPOSIT> 175,495
<INTEREST-EXPENSE> 327,888
<INTEREST-INCOME-NET> 424,213
<LOAN-LOSSES> 16,923
<SECURITIES-GAINS> 3,194
<EXPENSE-OTHER> 452,798
<INCOME-PRETAX> 273,091
<INCOME-PRE-EXTRAORDINARY> 166,039
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 166,039
<EPS-BASIC> 2.01
<EPS-DILUTED> 2.00
<YIELD-ACTUAL> 4.47
<LOANS-NON> 24,074
<LOANS-PAST> 5,789
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 32,981
<ALLOWANCE-OPEN> 80,013
<CHARGE-OFFS> 34,398
<RECOVERIES> 8,010
<ALLOWANCE-CLOSE> 55,755
<ALLOWANCE-DOMESTIC> 38,916
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 16,839
</TABLE>
