Toggle SGML Header (+)


Section 1: 10-K (10-K)


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K

ý Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2013

or

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                          to                           

Commission File No. 001-10253

TCF Financial Corporation
(Exact name of registrant as specified in its charter)

DELAWARE
(State or other jurisdiction of incorporation or organization)
  41-1591444
(I.R.S. Employer Identification No.)
200 Lake Street East, Mail Code EX0-03-A,
Wayzata, Minnesota 55391-1693
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: 952-745-2760
Securities registered pursuant to Section 12(b) of the Act:
(Title of each class)   (Name of each exchange on which registered)
Common Stock (par value $.01 per share)   New York Stock Exchange
Depositary Shares, each representing a 1/1000th interest in a share of 7.50%    
Series A Non-Cumulative Perpetual Preferred Stock   New York Stock Exchange
6.45% Series B Non-Cumulative Perpetual Preferred Stock   New York Stock Exchange
Warrants (expiring November 14, 2018)   New York Stock Exchange

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.        Yes ý        No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.        Yes o        No ý

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the regist rant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.        Yes ý        No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).        Yes ý        No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) 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. ý

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer   ý   Accelerated filer   o
Non-accelerated filer   o (Do not check if a smaller reporting company)   Smaller reporting company   o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).       Yes o       No ý

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the average bid and asked price of such common equity, as of the last business day of the registrant's most recently completed second fiscal quarter as reported by the New York Stock Exchange, was $2,108,926,689.

As of February 18, 2014, there were 165,468,669 shares outstanding 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 definitive Proxy Statement for the 2014 Annual Meeting of Stockholders to be held on April 23, 2014 are incorporated by reference into Part III hereof.

Table of Contents

 
  Description
  Page
 

Part I

 

 

 

 
Item 1.   Business   2
Item 1A.   Risk Factors   7
Item 1B.   Unresolved Staff Comments   15
Item 2.   Properties   15
Item 3.   Legal Proceedings   15
Item 4.   Mine Safety Disclosures   15

Part II

 

 

 

 
Item 5.   Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities   16
Item 6.   Selected Financial Data   19
Item 7.   Management's Discussion and Analysis of Financial Condition and Results of Operations   20
Item 7A.   Quantitative and Qualitative Disclosures About Market Risk   50
Item 8.   Financial Statements and Supplementary Data   54
   

Report of Independent Registered Public Accounting Firm

  54
   

Consolidated Financial Statements

  55
   

Notes to Consolidated Financial Statements

  60
   

Other Financial Data

  102
Item 9.   Changes in and Disagreements With Accountants on Accounting and Financial Disclosure   104
Item 9A.   Controls and Procedures   104
   

Management's Report on Internal Control Over Financial Reporting

  105
   

Report of Independent Registered Public Accounting Firm

  106
Item 9B.   Other Information   107

Part III

 

 

 

 
Item 10.   Directors, Executive Officers and Corporate Governance   107
Item 11.   Executive Compensation   107
Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters   108
Item 13.   Certain Relationships and Related Transactions, and Director Independence   108
Item 14.   Principal Accountant Fees and Services   108

Part IV

 

 

 

 
Item 15.   Exhibits and Financial Statement Schedules   109
Signatures   110
Index to Exhibits   111


Part I

Item 1. Business

General

TCF Financial Corporation ("TCF" or the "Company"), a Delaware corporation incorporated on April 28, 1987, is a national bank holding company based in Wayzata, Minnesota. Its principal subsidiary is TCF National Bank ("TCF Bank"), which is headquartered in Sioux Falls, South Dakota. TCF Bank operates bank branches in Minnesota, Illinois, Michigan, Colorado, Wisconsin, Indiana, Arizona and South Dakota (TCF's primary banking markets). TCF delivers retail banking products in over 40 states and commercial banking products mainly in TCF's primary banking markets. TCF also conducts commercial leasing and equipment finance business in all 50 states and, to a limited extent, in foreign countries, commercial inventory finance in the U.S. and Canada and, to a limited extent, in other foreign countries and indirect auto finance business in 45 states. TCF generated total revenue, defined as net interest income plus total non-interest income, of $1.2 billion, $1.2 billion and $1.1 billion in the U.S. during 2013, 2012 and 2011, respectively. International revenue was $25.3 million, $21.3 million and $10.4 million during 2013, 2012, and 2011, respectively.

At December 31, 2013, TCF had total assets of $18.4 billion and was the 41st largest publicly traded bank holding company in the United States based on total assets at September 30, 2013. References herein to the "Holding Company" or "TCF Financial" refer to TCF Financial Corporation on an unconsolidated basis.

TCF provides convenient financial services through multiple channels in its primary banking markets. TCF has developed products and services designed to meet specific needs of the largest consumer segments in the market. The Company focuses on attracting and retaining customers through service and convenience, including branches that are open seven days a week and on most holidays, extensive full-service supermarket branches, automated teller machine ("ATM") networks, internet, mobile and telephone banking. TCF's philosophy is to generate interest income, fees and other revenue growth through business lines that emphasize higher yielding assets and low interest-cost deposits. TCF's growth strategies have included organic growth in existing businesses, development of new products and services, and new branch expansion and acquisitions. New products and services are designed to build on existing businesses and expand into complementary products and services through strategic initiatives. TCF continues to focus on asset growth in its leasing and equipment finance, inventory finance and auto finance businesses and on making these businesses a more substantial part of its loan and lease portfolio.

TCF's reportable segments are comprised of Lending, Funding and Support Services. Lending includes retail lending, commercial banking, leasing and equipment finance, inventory finance and auto finance. Funding includes branch banking and treasury services, which includes the Company's investment and borrowing portfolios and management of capital, debt and market risks, including interest rate and liquidity risks. Support Services includes holding company and corporate functions that provide data processing, bank operations and other professional services to the operating segments. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations ("Management's Discussion and Analysis") – Results of Operations – Reportable Segment Results" and Note 23 of Notes to Consolidated Financial Statements for information regarding revenue, income and assets for each of TCF's reportable segments.


Lending

TCF's lending strategy is to originate diversified portfolios of high credit quality, primarily secured, loans and leases.

Retail Lending    TCF makes consumer loans for personal, family or household purposes, such as home purchases, debt consolidation, financing of home improvements, autos and education. TCF's retail lending origination activity primarily consists of consumer real estate secured lending. It also includes originating loans secured by personal property and, to a limited extent, unsecured personal loans. Consumer loans are made on a fixed-term basis or a revolving line of credit. TCF does not have any consumer real estate subprime lending programs nor did it ever originate or purchase from brokers, 2/28 adjustable-rate mortgages ("ARM") or option ARM loans. Beginning in 2012, TCF expanded its junior lien lending business through the development of a national lending platform focused on junior lien loans to high credit quality customers.

Commercial Real Estate and Business Lending    Commercial real estate loans are loans originated by TCF that are secured by commercial real estate, including retail services, multi-family housing, office buildings and, to a lesser extent, commercial real estate construction loans, mainly to borrowers based in its primary banking markets.

Commercial business loans are loans originated by TCF that are generally secured by various types of business assets including inventory, receivables, equipment or financial instruments. In limited cases, loans may be originated on an unsecured basis. Commercial business loans are used for a variety of purposes, including working capital and financing the purchase of

2

equipment. In 2012, TCF developed a capital funding business specializing in secured, asset-backed and cash flow lending to smaller middle-market companies in the United States. Approximately 88% of TCF's commercial business loans outstanding at December 31, 2013, were to borrowers based in its primary banking markets.

Leasing and Equipment Finance    TCF provides a broad range of comprehensive lease and equipment finance products addressing the diverse financing needs of small to large companies in a growing number of select market segments including specialty vehicle, manufacturing, medical, construction, and technology. TCF's leasing and equipment finance businesses, TCF Equipment Finance, Inc. ("TCF Equipment Finance") and Winthrop Resources Corporation ("Winthrop"), finance equipment in all 50 states and, to a limited extent, in foreign countries. TCF Equipment Finance delivers equipment finance solutions primarily to small and mid-size companies in various industries with significant diversity in the types of underlying equipment. Winthrop focuses on providing customized lease financing to meet the special needs of mid-size and large companies and health care facilities that procure high-tech business essential equipment such as computers, servers, telecommunication and other technology equipment.

Inventory Finance    TCF Inventory Finance, Inc. ("TCF Inventory Finance") originates commercial variable-rate loans which are secured by the underlying floorplan equipment and supported by repurchase agreements from original equipment manufacturers. The operation focuses on establishing relationships with distributors, dealer buying groups and manufacturers, giving TCF access to thousands of independent retailers in the areas of powersports, lawn and garden, electronics and appliance, recreational vehicles, marine, and specialty vehicles. TCF Inventory Finance operates in the United States and Canada and, to a limited extent, in other foreign countries. TCF Inventory Finance's portfolio outstandings are impacted by seasonal shipment and sales activities as dealers receive inventory shipments in anticipation of the upcoming selling season while carrying current season product. In 2009, TCF Inventory Finance formed a joint venture with The Toro Company ("Toro") called Red Iron Acceptance, LLC ("Red Iron"). Red Iron provides U.S. distributors and dealers and select Canadian distributors of the Toro® and Exmark® brands with reliable, cost-effective sources of financing. TCF and Toro maintain a 55% and 45% ownership interest, respectively, in Red Iron.

Auto Finance    On November 30, 2011, TCF entered the indirect auto lending market through the acquisition of Gateway One Lending & Finance, LLC ("Gateway One"). Headquartered in Anaheim, California, Gateway One originates and services loans on new and used autos to customers through relationships established with nearly 8,500 franchised and independent dealers in 45 states. Gateway One's business strategy is to maintain strong relationships with key personnel at the dealerships. These relationships are a significant driver in generating volume and executing a high-touch underwriting approach to minimize credit losses.


Funding

Branch Banking    Deposits from consumers and small businesses are a 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, market conditions and other factors. Consumer, small business and commercial deposits are attracted from within TCF's primary banking markets through the offering of a broad selection of deposit products, including free checking accounts, money market accounts, regular savings accounts, certificates of deposit and retirement savings plan accounts. TCF's marketing strategy emphasizes attracting deposits, primarily in checking accounts, savings accounts and certificates of deposit. Such deposit accounts are a source of low cost funds and provide fee income, including banking fees and service charges.

At December 31, 2013, TCF had 427 branches, consisting of 194 traditional branches, 225 supermarket branches and 8 campus branches. TCF operates 192 branches in Illinois, 108 in Minnesota, 53 in Michigan, 36 in Colorado, 25 in Wisconsin, 7 in Arizona, 4 in Indiana and 2 in South Dakota. Of its 225 supermarket branches, TCF had 155 branches in Jewel-Osco® stores at December 31, 2013. In December 2013, TCF executed a realignment of its retail banking system to support its strategic initiatives, which resulted in a pre-tax charge of $8.9 million in the fourth quarter of 2013. The consolidation of 37 in-store branches in Illinois and nine in Minnesota (eight in-store branches and one traditional branch) is expected to occur in March 2014. The ongoing benefit of this branch realignment is expected to exceed the pre-tax charges, together with the estimated financial impact of related ongoing account attrition, in less than 12 months. See Item 1A. Risk Factors for additional information regarding the risks related to TCF's supermarket branch relationships.

Campus banking represents an important part of TCF's branch banking business. TCF has alliances with the University of Minnesota, the University of Michigan, the University of Illinois and two other universities. These alliances include exclusive marketing, naming rights and other agreements. Branches have been opened on many of the college campuses of these universities. TCF provides multi-purpose campus cards for many of these universities. These cards serve as a school identification card, ATM card, library card, security card, health care card, phone card and stored value card for vending machines or similar uses. As of May 2013, TCF was ranked the 6th largest in number of campus card banking relationships in the United

3

States. At December 31, 2013, there were $292.3 million in campus deposits. TCF has a 25-year naming rights agreement with the University of Minnesota to sponsor its on-campus football stadium, "TCF Bank Stadium®", which opened in 2009.

Non-interest income is a significant source of revenue for TCF and an important factor in TCF's results of operations. Maintaining fee and service charge revenue has been challenging as a result of economic conditions, changing customer behavior and the impact of regulations. Providing a wide range of branch banking services is an integral component of TCF's business philosophy and a major strategy for generating additional non-interest income. TCF offers retail checking account customers low-cost, convenient access to funds at local merchants and ATMs through its debit card programs. TCF's debit card programs are supported by interchange fees charged to retailers. Key drivers of banking fees and service charges are the number of deposit accounts and related transaction activity.

Treasury Services    Treasury Services' primary responsibility is management of liquidity, capital, interest rate risk, and portfolio investments and borrowings. Treasury Services has authority to invest in various types of liquid assets including, but not limited to, United States Department of the Treasury ("U.S. Treasury") obligations and securities of various federal agencies and U.S. Government sponsored enterprises, deposits of insured banks, bankers' acceptances and federal funds. Treasury Services also has the authority to enter into wholesale borrowing transactions which may be used to compensate for reductions in deposit inflows or net deposit outflows, or to support lending, leasing and other expansion activities. These borrowings may include Federal Home Loan Bank ("FHLB") advances, brokered deposits, repurchase agreements, federal funds, and other permitted borrowings from credit worthy counterparties.

Information concerning TCF's FHLB advances, repurchase agreements, federal funds and other borrowings is set forth in "Item 7. Management's Discussion and Analysis – Consolidated Financial Condition Analysis – Borrowings" and in Notes 10 and 11 of Notes to Consolidated Financial Statements.


Support Services

TCF's support services business segment consists of the holding company and corporate functions that provide data processing, bank operations and other professional services to the operating segments.


Other Information

Activities of Subsidiaries of TCF    TCF's business operations include those conducted by direct and indirect subsidiaries of TCF Financial, all of which are consolidated for purposes of preparing TCF's consolidated financial statements. TCF Bank's subsidiaries principally engage in leasing and equipment finance, inventory finance and auto finance activities. See "Item 1. Business – Lending" for more information.

Competition    TCF competes with a number of depository institutions and financial service providers experiencing significant competition in attracting and retaining deposits and in lending activities. Direct competition for deposits comes primarily from banks, savings institutions, credit unions and investment banks. Additional significant competition for deposits comes from institutions selling money market mutual funds and corporate and government securities. TCF competes for the origination of loans with banks, mortgage bankers, mortgage brokers, consumer, and commercial finance companies, credit unions, insurance companies and savings institutions. TCF also competes nationwide with other companies and banks in the financing of equipment, inventory and automobiles, leasing of equipment and consumer real estate junior loans. Expanded use of the Internet has increased competition affecting TCF and its loan, lease and deposit products.

Employees    As of December 31, 2013, TCF had 7,449 employees, including 2,008 part-time employees. TCF provides its employees with comprehensive benefits, some of which are provided on a contributory basis, including medical and dental plans, a 401(k) savings plan with a company matching contribution, life insurance and short- and long-term disability coverage.


Regulation

TCF Financial, as a publicly held bank holding company, and TCF Bank, which has deposits insured by the Federal Deposit Insurance Corporation ("FDIC"), are subject to extensive regulation. Among other things, TCF Financial and TCF Bank are subject to minimum capital requirements, lending and deposit restrictions and numerous other requirements. TCF Financial's primary regulator is the Federal Reserve and TCF Bank's primary regulator is the Office of the Comptroller of the Currency ("OCC").

Regulatory Capital Requirements    TCF Financial and TCF Bank are subject to regulatory capital requirements of the Federal Reserve and the OCC, respectively, as described below. These regulatory agencies are required by law to take prompt action when institutions are viewed as engaging in unsafe or unsound practices or do not meet certain minimum capital standards. The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") defines five levels of capital condition, the highest

4

of which is "well-capitalized." It requires that undercapitalized institutions be subjected to various restrictions such as limitations on dividends or other capital distributions, limitations on growth or restrictions on activities. Undercapitalized banks must develop a capital restoration plan and the parent bank holding company is required to guarantee compliance with the plan. TCF and TCF Bank are "well-capitalized" under the FDICIA capital standards as of December 31, 2013.

In July 2013, the Board of Governors of the Federal Reserve System, the OCC and FDIC approved final rules (the "Final Capital Rules") implementing revised capital requirements to reflect the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act") and the Basel III international capital standards. Among other things, the Final Capital Rules establish a new capital ratio of common equity Tier 1 capital of 4.5% and a common equity Tier 1 capital conservation buffer of 2.5% of risk-weighted assets; increase the minimum ratio of Tier 1 capital ratio from 4% to 6% and include a minimum leverage ratio of 4%; place an emphasis on common equity Tier 1 capital and implement the Dodd-Frank Act phase-out of certain instruments from Tier 1 capital; and change the risk weights assigned to certain instruments. Failure to meet these standards would result in limitations on capital distributions as well as executive bonuses. The Final Capital Rules will be applicable to TCF on January 1, 2015 with conservation buffers phasing in over the subsequent 5 years.

Restrictions on Distributions    TCF Financial's ability to pay dividends is subject to limitations imposed by the Federal Reserve. In general, Federal Reserve regulatory guidelines require the board of directors of a bank holding company to consider a number of factors when considering the payment of dividends, including the quality and level of current and future earnings.

Dividends or other capital distributions from TCF Bank to TCF Financial are an important source of funds to enable TCF Financial to pay dividends on its preferred and common stock, to pay TCF Financial's obligations, or to meet other cash needs. The ability of TCF Financial and TCF Bank to pay dividends depends on regulatory policies and regulatory capital requirements and may be subject to regulatory approval.

In general, TCF Bank may not declare or pay a dividend to TCF Financial in excess of 100% of its net retained profits for the current year combined with its net retained profits for the preceding two calendar years without prior approval of the OCC. TCF Bank's ability to make future capital distributions will depend on its earnings and ability to meet minimum regulatory capital requirements in effect during current and future periods. These capital adequacy requirements may be higher in the future than existing minimum regulatory 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, income tax considerations may limit the ability of TCF Bank to make dividend payments in excess of its current and accumulated tax earnings and profits. Annual dividend distributions in excess of earnings and profits could result in a tax liability based on the amount of excess earnings distributed and current tax rates.

Regulation of TCF and Affiliates and Insider Transactions    TCF Financial is subject to Federal Reserve regulations, examinations and reporting requirements applicable to bank holding companies. Subsidiaries of bank holding companies like TCF Bank are subject to certain restrictions in their dealings with holding company affiliates.

A holding company must serve as a source of strength for its subsidiary banks, and the Federal Reserve may require a holding company to contribute additional capital to an under-capitalized subsidiary bank. In addition, the OCC may assess TCF Financial if it believes the capital of TCF Bank has become impaired. If TCF Financial were to fail to pay such an assessment within three months, the Board of Directors must cause the sale of TCF Bank's stock to cover a deficiency in the capital. 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 of 1956 ("BHCA"), Federal Reserve approval is required before acquiring more than 5% control, or substantially all of the assets, of another bank, or bank holding company, or merging or consolidating with such a bank or 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 Federal Reserve as being closely related to the business of banking. Further restrictions or limitations on acquisitions or establishing financial subsidiaries may also be imposed by TCF's regulators or examiners.

Restrictions on Acquisitions and Changes in Control    Under federal and state law, merger and branch acquisition transactions may be subject to certain restrictions, including certain nationwide and statewide insured deposit maximum concentration levels or other limitations. In addition, federal and state laws and regulations contain a number of provisions which impose restrictions on changes in control of financial institutions such as TCF Bank, and which require regulatory approval prior to any such changes in control.

5

Insurance of Accounts    As of January 1, 2013, non-interest bearing transaction accounts are added to any of a depositor's other deposit accounts and the aggregate balance insured up to at least the standard maximum deposit insurance amount of $250 thousand per depositor, at each separately chartered FDIC-insured institution.

Under Section 331 of the Dodd-Frank Act, the FDIC insurance assessment base is defined as average total assets minus tangible equity, which includes liabilities that did not previously enter into the calculation. In addition to risk-based deposit insurance premiums, additional assessments may be imposed by the Financing Corporation, a separate U.S. government agency affiliated with the FDIC, on certain insured deposits to pay for the interest cost of Financing Corporation bonds. The Financing Corporation assessment rate for 2013 was 64 cents for each $100 of deposits. Financing Corporation assessments of $1.1 million, $1.1 million and $1.2 million were paid by TCF Bank in 2013, 2012 and 2011, respectively.

The Dodd-Frank Act also gave the FDIC much greater discretion to manage the Deposit Insurance Fund ("DIF"). Among other things, the Dodd-Frank Act: (1) raised the minimum designated reserve ratio ("DRR") from 1.15% to 1.35% and removed the upper limit on the DRR; (2) requires the DIF to reach 1.35% by September 30, 2020; (3) requires that in setting assessments the FDIC offset the effect of the DRR reaching 1.35% by September 30, 2020, rather than 1.15% by the end of 2016, on insured depository institutions with total consolidated assets of less than $10 billion; (4) eliminated the requirement that the FDIC pay dividends from the fund when the DRR is between 1.35% and 1.5%; and (5) continued the FDIC's authority to declare dividends when the DRR at the end of a calendar year is at least 1.5%. On December 15, 2010, the FDIC set the DRR at 2.0% and it has not changed since that time.

The Dodd-Frank Act requires that, for at least five years, the FDIC must make available to the public the reserve ratio using both estimated insured deposits and the new assessment base. As of September 30, 2013, the DIF ratio calculated by the FDIC using estimated insured deposits was .68%. The DIF reserve ratio would have been .33% using the new assessment base. In 2013, for banks with at least $10 billion in total assets, the annual insurance premiums on bank deposits insured by the DIF ranged from 2.5 cents to 45 cents per $100 of deposits.

Examinations and Regulatory Sanctions    TCF is subject to periodic examination by the Federal Reserve, the OCC, the Consumer Financial Protection Bureau (the "CFPB") and the FDIC. Bank regulatory authorities may impose a number of restrictions or new requirements on institutions, including, but not limited to, growth limitations, dividend restrictions, increased regulatory capital requirements, increased loan, lease 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. Certain enforcement actions may not be publicly disclosed by TCF or its regulatory authorities. Various enforcement remedies, including civil money penalties, may be assessed against an institution or an institution's directors, officers, employees, agents or independent contractors. Under the Bank Secrecy Act of 1970 (the "BSA" or "Bank Secrecy Act"), the OCC is obligated to take enforcement action where it finds a statutory or regulatory violation that would constitute a program violation.

In its 2009 examinations of TCF's compliance with the BSA, the OCC identified instances of non-compliance that constituted a program violation. On July 20, 2010, TCF Bank agreed to the issuance of a Consent Order (the "Order") by the OCC, TCF Bank's primary banking regulator, addressing certain matters related to the BSA. The Order required TCF Bank to address deficiencies in TCF Bank's BSA program identified by the OCC, including review and revision of TCF Bank's BSA risk assessment, BSA Compliance Program, and Suspicious Activity Report filing procedures and processes. The OCC did not identify any systemic undetected criminal activity or money laundering. TCF Bank was also required to address the performance of appropriate due diligence when an account is opened, and to review transactions since November 2008 for compliance. On January 25, 2013, TCF entered into a settlement agreement with the OCC related to this review. Pursuant to this agreement, TCF agreed to pay a $10 million civil money penalty. In December 2013, the OCC terminated the Order.

Subsidiaries of TCF Bank may also be subject to state and/or self-regulatory organization licensing, regulation and examination requirements in connection with certain activities.

National Bank Investment Limitations    Permissible investments by national banks are limited by the National Bank Act of 1864 and by rules of the OCC. Non-traditional bank activities permitted by the Gramm-Leach-Bliley Act of 1999 will subject a bank to additional regulatory limitations or requirements, including a required regulatory capital deduction and application of transactions with affiliates limitations in connection with such activities.

Dodd-Frank Wall Street Reform and Consumer Protection Act    Congress enacted the Dodd-Frank Act in July 2010. The Dodd-Frank Act created the CFPB and gave it broad rulemaking authority to administer and carry out the purposes and objectives of the federal consumer financial laws, with respect to all financial institutions that offer financial products and services to consumers. The CFPB is authorized to make rules identifying and prohibiting acts or practices that are unfair, deceptive or

6

abusive in connection with any consumer financial product or service. The CFPB has examination and enforcement authority over all banks and savings institutions with more than $10 billion in assets, including TCF Bank.

Additionally, the Dodd-Frank Act:


Taxation

Federal Taxation    TCF's federal income tax returns are open and subject to examination for 2012 and later tax return years.

State Taxation    TCF and/or its subsidiaries currently file tax returns in all states which impose corporate income and franchise taxes and local tax returns in certain cities and other taxing jurisdictions. The methods of filing, and the methods for calculating taxable and apportionable income, vary depending upon the laws of the taxing jurisdiction. See "Item 1A. Risk Factors".

See "Item 7. Management's Discussion and Analysis – Consolidated Income Statement Analysis – Income Taxes" and Notes 1 and 12 of Notes to Consolidated Financial Statements for additional information regarding TCF's income taxes.


Available Information

TCF's website, http://ir.tcfbank.com, includes free access to Company news releases, investor presentations, conference calls to discuss published financial results, TCF's Annual Report and periodic filings required by the United States Securities and Exchange Commission ("SEC"), including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports, as soon as reasonably practicable after electronic filing of such material with, or furnishing it to, the SEC. TCF's Compensation, Nominating, and Corporate Governance Committee and Audit Committee charters, Corporate Governance Guidelines, Codes of Ethics and changes to Codes of Ethics and information on all of TCF's securities are also available on this website. Stockholders may request these documents in print free of charge by contacting the Corporate Secretary at TCF Financial Corporation, 200 Lake Street East, Mail Code EX0-01-G, Wayzata, MN 55391-1693.


Item 1A. Risk Factors

Various risks and uncertainties may affect TCF's business. Any of the risks described below or elsewhere in this Annual Report on Form 10-K or TCF's other SEC filings may have a material impact on TCF's financial condition or results of operations.

TCF's earnings are significantly affected by general economic and political conditions.

TCF's operations and profitability are impacted by general business and economic conditions in the local markets in which TCF operates, the U.S. generally and abroad. Economic conditions have a significant impact on the demand for TCF's products and services, as well as the ability of its customers to repay loans, the value of the collateral securing loans, the ability of TCF to sell loans, the stability of its deposit funding sources and sales revenue at the end of contractual lease terms. A significant decline in general economic conditions caused by inflation, recession, unemployment, changes in securities markets, changes in housing market prices or other factors could impact economic conditions and, in turn, could have a material adverse effect on TCF's financial condition and results of operations.

7

Additionally, adverse economic conditions may result in a decline in demand for automobiles or equipment that TCF leases or finances, which could result in a decline in the amount of new equipment being placed in service, as well as declines in automobile and equipment values for automobiles and equipment already in service. Adverse economic conditions may also hinder TCF from expanding the inventory or auto finance businesses by limiting its ability to attract and retain manufacturers and dealers as expected. Any such difficulties in TCF's leasing and equipment, inventory and auto finance businesses could have a material adverse effect on its financial condition and results of operations.

TCF is subject to interest rate risk.

TCF's earnings and cash flows largely depend upon its net interest income. Interest rates are highly sensitive to many factors that are beyond TCF's control, including general economic conditions and policies of various governmental and regulatory agencies, including the Federal Reserve. Changes in monetary policy, including changes in interest rates, could influence not only the interest TCF receives on loans and other investments and the amount of interest TCF pays on deposits and other borrowings, but such changes could also affect: (i) TCF's ability to originate loans and obtain deposits; (ii) the fair value of TCF's financial assets and liabilities; and (iii) the average duration of TCF's interest-earning assets. If the interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates received on loans and other investments, then TCF's net interest income and earnings could be adversely affected. Earnings could also be adversely affected if the interest rates received on loans and other investments fall more quickly than the interest rates paid on deposits and other borrowings. Although management believes it has implemented effective asset and liability management strategies, any substantial, unexpected and prolonged change in market interest rates could have a material adverse effect on its financial condition and results of operations.

An inability to obtain needed liquidity could have a material adverse effect on TCF's financial condition and results of operations.

TCF's liquidity could be limited by an inability to access the capital markets or unforeseen outflows of cash, which could arise due to circumstances outside of its control, such as a general market disruption or an operational problem that affects TCF or third parties. TCF's credit rating is important to its liquidity. A further reduction or anticipated reduction in TCF's credit ratings could adversely affect the ability of TCF Bank and its subsidiaries to lend and its liquidity and competitive position, increase its borrowing costs, limit its access to the capital markets or trigger unfavorable contractual obligations. An inability to meet its funding needs on a timely basis could have a material adverse effect on TCF's financial condition and results of operations.

TCF Financial relies on dividends from TCF Bank for most of its liquidity.

TCF Financial is a separate and distinct legal entity from its banking and other subsidiaries. TCF Financial's liquidity comes principally from dividends from TCF Bank. These dividends, which are limited by various federal and state regulations, are the principal source of funds to pay dividends on its preferred and common stock and to meet its other cash needs. In the event TCF Bank is unable to pay dividends to it, TCF Financial may not be able to pay dividends or other obligations, which would have a material adverse effect on TCF's financial condition and results of operations.

Loss of customer deposits could increase TCF's funding costs.

TCF relies on bank deposits to be a low cost and stable source of funding. TCF competes with banks and other financial institutions for deposits. If TCF's competitors raise the rates they pay on deposits, TCF's funding costs may increase through either a loss of deposits or an increase in rates paid by TCF to avoid losing deposits. Increased funding costs could reduce TCF's net interest margin and net interest income, which could have a material adverse effect on TCF's financial condition and results of operations.

The soundness of other financial institutions could adversely affect TCF.

TCF's ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions. TCF routinely executes transactions with counterparties in the financial industry, including brokers and dealers, commercial banks and other institutional clients. As a result, defaults by, or even rumors regarding, any financial institutions, or the financial services industry generally, could lead to losses or defaults by TCF or a counterparty. Many of these transactions expose TCF to credit risk in the event of default of the counterparty or client. In addition, TCF's credit risk may be exacerbated when the collateral held by TCF cannot be realized or is liquidated at prices not sufficient to recover the full amount of the financial exposure. Any such losses could have a material adverse effect on TCF's financial condition and results of operations.

8

TCF relies on its systems and counterparties, and any failures could have a material adverse effect on its financial condition and results of operations.

TCF settles funds on behalf of financial institutions, other businesses and consumers and receives funds from payment networks, consumers and other paying agents. TCF's businesses depend on their ability to process, record and monitor a large number of complex transactions. If any of TCF's financial, accounting or other data processing systems fail or if personal information of TCF's customers or clients were mishandled or misused (whether by employees or counterparties), TCF could suffer regulatory consequences, reputational damage and financial losses, any of which could have a material adverse effect on its financial condition and results of operations.

Additionally, TCF may be subject to disruptions of its operating systems arising from events that are wholly or partially beyond its control, which may include, for example, computer viruses, electrical or telecommunications outages, natural disasters, terrorist acts or other damage to property or physical assets. Such disruptions may give rise to loss of services to customers and loss or liability to TCF. Any system failure could have a material adverse effect on TCF's financial condition and results of operations.

TCF faces cyber-security and other external risks, including "denial of service," "hacking" and "identity theft," that could adversely affect TCF's reputation and could have a material adverse effect on TCF's financial condition and results of operations.

TCF's computer systems and network infrastructure present security risks, and could be susceptible to cyber-attacks, such as denial of service attacks, hacking, terrorist activities or identity theft. Hacking and identity theft risks, in particular, could cause serious reputational harm. Cyber threats are rapidly evolving and TCF may not be able to anticipate or prevent all such attacks. While TCF has not experienced a material cyber-security breach, TCF experiences periodic threats to its data and systems, including malware and computer virus attacks, attempted unauthorized access of accounts, and attempts to disrupt its systems. TCF may incur increasing costs in an effort to minimize these risks, could be held liable for, and could suffer reputational damage as a result of, any security breach or loss.

In addition, there have been increasingly sophisticated and large-scale efforts on the part of third parties to breach data security with respect to financial transactions, including by intercepting account information at locations where customers make purchases, as well as through the use of social engineering schemes such as "phishing." For example, large retailers such as Target Corporation and Neiman Marcus Group LTD LLC have recently reported data breaches resulting in the loss of customer information. In the event that third parties are able to misappropriate financial information of TCF's customers, even if such breaches take place due to weaknesses in other parties' internal data security procedures, TCF could suffer reputational or financial losses which could have a material adverse effect on its financial condition and results of operations.

The success of TCF's supermarket branches depends on the continued long-term success and viability of TCF's supermarket partners, TCF's ability to maintain licenses or lease agreements for its supermarket locations and customer preferences.

A significant financial decline or change in ownership involving one of TCF's supermarket partners, including SUPERVALU Inc. or Jewel-Osco, could result in the loss of supermarket branches or could increase costs to operate the supermarket branches. At December 31, 2013, TCF had 225 supermarket branches. Supermarket banking continues to play an important role in TCF's deposit account strategy. TCF is subject to the risk, among others, that its license or lease for a location or locations will terminate upon the sale or closure of that location or locations by the supermarket partner. Also, continued difficult economic conditions, financial or labor difficulties in the supermarket industry, or a decrease in customer utilization of traditional bank branches may reduce activity in TCF's supermarket branches. Any of these could have a material adverse effect on TCF's financial condition and results of operations.

New lines of business or new products and services may subject TCF to additional risk.

From time to time, TCF may implement new lines of business or offer new products and services within existing lines of business. There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed. In developing and marketing new lines of business and new products or services, TCF may invest significant time and resources. Initial timetables for the introduction and development of new lines of business and new products or services may not be achieved and price and profitability targets may not prove feasible. External factors, such as compliance with regulations, competitive alternatives and shifting market preferences may also impact the successful implementation of a new line of business or a new product or service. Furthermore, any new line of business or new product or service could have a significant impact on the effectiveness of TCF's system of internal controls. Failure to successfully manage these risks in the

9

development and implementation of new lines of business and new products or services could have a material adverse effect on TCF's financial condition and results of operations.

Increased competition in the already highly competitive financial services industry could have a material adverse effect on TCF's financial condition and results of operations.

The financial services industry is highly competitive and could become even more competitive as a result of legislative, regulatory and technological changes, as well as continued industry consolidation, which may increase in connection with current economic and market conditions. TCF competes with other commercial banks, savings and loan associations, mutual savings banks, finance companies, mortgage banking companies, credit unions and investment companies. In addition, technology has lowered barriers to entry and made it possible for non-banks to offer products and services traditionally only provided by banks. Some of TCF's competitors have fewer regulatory constraints or lower cost structures. Also, the potential need to adapt to industry changes in information technology systems, on which TCF and the financial services industry generally highly depend, could present operational issues and require considerable capital spending. As a result, any increased competition in the already highly competitive financial services industry could have a material adverse effect on TCF's financial condition and results of operations.

The allowance for loan and lease losses maintained by TCF may not be sufficient.

All borrowers have the potential to default, and TCF's remedies may not fully satisfy the obligations owed to TCF. TCF maintains an allowance for loan and lease losses, which is a reserve established through a provision for loan and lease losses charged to expense, which represents management's best estimate of probable credit losses that have been incurred within the existing portfolio of loans and leases. The level of the allowance for loan and lease losses reflects management's continuing evaluation of industry concentrations, specific credit risks, loan loss experience, current loan portfolio quality, present economic, political and regulatory conditions and unidentified losses in the current loan portfolio. The determination of the appropriate level of the allowance for loan and lease losses involves a high degree of subjectivity and requires management to make significant estimates of current credit risks using qualitative and quantitative factors, each of which is subject to significant change. Changes in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors may require an increase in the allowance for loan and lease losses. In addition, bank regulatory agencies periodically review TCF's allowance for loan and lease losses and may require an increase in the provision for loan and lease losses or the recognition of additional loan charge-offs, based on judgments different than those of management. An increase in the allowance for loan and lease losses would result in a decrease in net income, and possibly risk-based capital, and could have a material adverse effect on TCF's financial condition and results of operations.

TCF is subject to extensive government regulation and supervision.

TCF Financial, its subsidiary TCF Bank and certain indirect subsidiaries are subject to extensive federal and state regulation and supervision. Banking regulations are primarily intended to protect bank customers, depositors' funds, federal deposit insurance funds and the banking system as a whole, not stockholders. These regulations affect TCF's revenues, lending practices, capital structure, investment practices, dividend policy and growth, among other things. Congress and federal regulatory agencies continually review banking laws, regulations and policies for possible changes. A number of new banking rules have been issued in recent years, in many cases with limited interpretive guidance. Changes to statutes, regulations or regulatory policies, including changes in interpretation or enforcement of such statutes, regulations or policies, could affect TCF in substantial and unpredictable ways. For example, in recent years there has also been an increase in the frequency of enforcement actions brought by regulatory agencies, such as the CFPB, dealing with matters such as indirect auto lending, fair lending, account fees, loan servicing and other products and services provided to customers. Changes in regulations, regulatory policies and enforcement activity could subject TCF to reduced revenues, additional costs, limits on the types of financial services and products it may offer or increased competition from non-banks offering competing financial services and products, among other things. While TCF has policies and procedures designed to prevent violations of the extensive federal and state regulations it is subject to, there can be no assurance that such violations will not occur, and failure to comply with these statutes, regulations or policies could result in sanctions against TCF by regulatory agencies, civil money penalties and reputational damage, any of which could have a material adverse effect on its financial condition and results of operations.

Further, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the "Patriot Act"), the Bank Secrecy Act and similar laws require financial institutions to develop programs to prevent them from being used for money laundering and terrorist activities. If such activities are detected, financial institutions are obligated to file suspicious activity reports with the U.S. Treasury's Office of Financial Crimes Enforcement Network. These rules require financial institutions to establish procedures for identifying and verifying the identity of customers seeking to open new accounts. Failure to comply with these regulations could result in sanctions and possibly fines. In the past, several financial

10

institutions have received sanctions and some have incurred large fines for non-compliance. On January 25, 2013, TCF entered into a settlement agreement with the OCC related to TCF's past compliance with the Bank Secrecy Act, pursuant to which TCF agreed to pay a $10 million civil money penalty. Violations of these regulations could have a material adverse effect on TCF's financial condition and results of operations.

TCF's earnings are significantly affected by the fiscal and monetary policies of the federal government and its agencies.

The policies of the Federal Reserve impact TCF significantly. The Federal Reserve regulates the supply of money and credit in the U.S. Its policies directly and indirectly influence the rate of interest earned on loans and paid on borrowings and interest-bearing deposits, and also affect the value of financial instruments that TCF holds. Those policies determine to a significant extent the cost of funds for lending and investing. Changes in those policies are beyond TCF's control and are difficult to predict. Federal Reserve policies can also affect TCF's borrowers, potentially increasing the risk that they may fail to repay their loans. For example, a tightening of the money supply by the Federal Reserve could increase unemployment or reduce the demand for a borrower's products and services. This could adversely affect the borrower's earnings and ability to repay its loan. As a result, changes to the fiscal and monetary policies by the Federal Reserve could have a material adverse effect on TCF's financial condition and results of operations.

Proposed and future legislative and regulatory initiatives may substantially increase compliance burdens, which could have a material adverse effect on TCF's financial condition and results of operations.

Future legislative and regulatory initiatives cannot be fully or accurately predicted. Such proposals may impose more stringent standards than currently applicable or anticipated with respect to capital and liquidity requirements for depository institutions. For example, Congress enacted the Dodd-Frank Act in July 2010. Uncertainty remains as to many aspects of its ultimate impact, which could have a material adverse effect on the financial services industry as a whole and, specifically, on TCF's financial condition and results of operations.

In addition, the Dodd-Frank Act created the CFPB, which has examination and enforcement authority over TCF Bank and its subsidiaries, and gave it broad rulemaking authority to administer and carry out the purposes and objectives of the federal consumer financial laws with respect to all financial institutions that offer financial products and services to consumers. The CFPB is authorized to make rules identifying and prohibiting acts or practices that are unfair, deceptive or abusive in connection with any transaction with a consumer for a consumer financial product or service, or the offering of a consumer financial product or service. The term "abusive" is new and untested, and uncertainties remain concerning how it will be enforced.

Based on the provisions of the Dodd-Frank Act and anticipated implementing regulations, it is highly likely that banks and bank holding companies will be subject to significantly increased regulation and compliance obligations that expose TCF to noncompliance risk and consequences, which could have a material adverse effect on TCF's financial condition and results of operations.

TCF's framework for managing risks may not be effective in mitigating risk and any resulting loss.

TCF's risk management framework seeks to mitigate risk and any resulting loss. TCF has established processes intended to identify, measure, monitor, report and analyze the types of risk to which TCF is subject, including liquidity, credit, market, interest rate, operational, foreign currency, legal and compliance and reputational risk. However, as with any risk management framework, there are inherent limitations to TCF's risk management strategies. There may exist, or develop in the future, risks that TCF has not appropriately anticipated or identified. Any future breakdowns in TCF's risk management framework could have a material adverse effect on its financial condition and results of operations.

Failure to keep pace with technological change could adversely affect TCF's business.

The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services. TCF's future success depends, in part, upon its ability to address the needs of its customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in its operations. Many of TCF's competitors have substantially greater resources to invest in technological improvements. TCF may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to its customers. Failure to successfully keep pace with technological change affecting the financial services industry could have a material adverse effect on TCF's financial condition and results of operations.

11

The Company may be subject to certain risks related to originating and selling loans.

When loans are sold or securitized, it is customary to make representations and warranties to the purchaser or investors about the loans and the manner in which they were originated. These agreements generally require the repurchase or substitution of loans in the event TCF breaches any of these representations or warranties. In addition, there may be a requirement to repurchase loans as a result of borrower fraud or in the event of early payment default of the borrower on a loan. TCF has not received a significant number of repurchase and indemnity demands from purchasers, and such demands have typically resulted from borrower fraud and early payment default of the borrower on loans. A material increase in repurchase and indemnity demands could have a material adverse effect on TCF's financial condition and results of operations.

TCF retains interest-only strips in connection with certain of its loan sales. The interest-only strip is recorded at fair value at the time of sale, which represents the present value of future cash flows generated by the loans to be retained by TCF. The value of these interest-only strips may be affected by factors such as changes in the behavior patterns of customers (including defaults and prepayments), changes in the strength of the economy and developments in the interest rate markets; therefore, actual performance may differ from TCF's expectations. The impact of such factors could have a material adverse effect on the value of these interest-only strips and on TCF's financial condition and results of operations.

In addition, TCF relies on the sale of loans to generate earnings and manage its liquidity and capital levels, as well as geographical and product diversity in its loan portfolio. For example, TCF sold $1.6 billion of loans from its auto and consumer real estate businesses for a pre-tax gain of $51.4 million in 2013. Disruptions in the financial markets, changes to regulations that reduce the attractiveness of such loans to purchasers of the loans, or a decrease in the willingness of purchasers to purchase loans in general, or from TCF, could require TCF to decrease its lending activities or retain a greater portion of the loans it originates. Although retaining, rather than selling, loans would generate additional interest income, it would result in a decrease in the gains recognized on the sale of loans, could result in decreased liquidity, and could result in increased credit risk as TCF's loan portfolio increased in size from loans it originated but had otherwise planned to sell. As a result, any of these developments could have a material adverse effect on TCF's financial condition and results of operations.

Financial institutions depend on the accuracy and completeness of information about customers and counterparties.

In deciding whether to extend credit or enter into other transactions, TCF may rely on information furnished by or on behalf of customers and counterparties, including financial statements, credit reports and other financial information. TCF may also rely on representations of those customers, counterparties or other third parties, such as independent auditors, as to the accuracy and completeness of that information. Reliance on inaccurate or misleading financial statements, credit reports or other financial information could cause TCF to enter into unfavorable transactions, which could have a material adverse effect on TCF's financial condition and results of operations.

Failure to attract and retain key personnel could have a material adverse effect on TCF's financial condition and results of operations.

TCF's success depends to a large extent upon its ability to attract and retain key personnel. The loss of key personnel could have a material adverse impact on TCF's business because of their skills, market knowledge, industry experience and the difficulty of promptly finding a qualified replacement. Additionally, portions of TCF's business are relationship driven, and many of its key personnel have extensive customer relationships. Loss of such key personnel to a competitor could result in the loss of some of TCF's customers. As a result, a failure to attract and retain key personnel could have a material adverse effect on TCF's financial condition and results of operations.

TCF relies on other companies to provide key components of its business infrastructure.

Third party vendors provide key components of TCF's business infrastructure, such as internet connections, network access and transaction and other processing services. While TCF has selected these third party vendors carefully, it does not control their actions. Any problems caused by these third parties, including as a result of inadequate or interrupted service, could adversely affect TCF's ability to deliver products and services to its customers and otherwise to conduct its business. Replacing these third party vendors could also entail significant delay and expense.

TCF's internal controls may be ineffective.

Management regularly reviews and updates TCF's internal controls, disclosure controls and procedures and corporate governance policies and procedures. Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met. Any failure or

12

circumvention of TCF's controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on its financial condition and results of operations.

Negative publicity could damage TCF's reputation.

Reputation risk, or the risk to earnings and capital from negative public opinion, is inherent in TCF's business. Negative public opinion could adversely affect TCF's ability to keep and attract employees and customers and expose it to adverse legal and regulatory consequences. Negative public opinion could result from TCF's actual or alleged conduct in any number of activities, including lending practices, corporate governance, regulatory compliance, mergers and acquisitions, disclosure, sharing or inadequate protection of customer information or from actions taken by government regulators and community organizations in response to such conduct. Because TCF conducts most of its businesses under the "TCF" brand, negative public opinion about one business could affect its other businesses.

Acquisitions may disrupt TCF's business and dilute stockholder value.

TCF regularly evaluates merger and acquisition opportunities and conducts due diligence activities related to possible transactions with banks or other financial institutions. As a result, negotiations may take place and future mergers or acquisitions involving cash, debt or equity securities may occur at any time. TCF seeks merger or acquisition partners that are culturally similar, have experienced management and possess either significant market presence or have potential for improved profitability through financial management, economies of scale or expanded services. Acquiring other banks, businesses or branches involves potential adverse impact to TCF's results of operations and various other risks commonly associated with acquisitions, such as: difficulty in estimating the value of the target company; payment of a premium over book and market values that may dilute TCF's tangible book value and earnings per share in the short- and long-term; potential exposure to unknown or contingent liabilities of the target company; exposure to potential asset quality issues of the target company; volatility in reported income as goodwill impairment losses could occur irregularly and in varying amounts; difficulty and expense of integrating the operations and personnel of the target company; inability to realize the expected revenue increases, cost savings, increases in geographic or product presence or other projected benefits; potential disruption to TCF's business; potential diversion of TCF management's time and attention; potential loss of key employees and customers of TCF or the target company; and potential changes in banking or tax laws or regulations that may affect the target company.

Consumers may decide not to use banks to complete their financial transactions.

Technology and other changes are allowing consumers to complete financial transactions through alternative methods that historically have involved banks. For example, consumers can now maintain funds that would have previously been held as bank deposits in brokerage accounts, mutual funds or general-purpose reloadable prepaid cards. Consumers can also complete transactions such as paying bills and transferring funds directly without the assistance of banks. The process of eliminating banks as intermediaries could result in the loss of fee income, as well as the loss of customer deposits and the related income generated from those deposits. The loss of these revenue streams and the loss of lower-cost deposits as a source of funds could have a material adverse effect on TCF's financial condition and results of operations.

Changes in accounting policies or in accounting standards could materially affect how TCF reports its financial condition and results of operations.

TCF's accounting policies are fundamental to the understanding of its financial condition and results of operations. Some of these policies require the use of estimates and assumptions that may affect the value of TCF's assets or liabilities and results of operations. Some of TCF's accounting policies are critical because they require management to make difficult, subjective and complex judgments about matters that are inherently uncertain and because materially different amounts would be reported if different estimates or assumptions were used. If such estimates or assumptions underlying the financial statements are incorrect, TCF could experience material losses. From time to time the Financial Accounting Standards Board ("FASB") and the SEC change the financial accounting and reporting standards or the interpretation of those standards that govern the preparation of TCF's financial statements. These changes are beyond TCF's control, can be difficult to predict and could materially impact how TCF reports its financial condition and results of operations. Additionally, TCF could be required to apply a new or revised standard retrospectively, resulting in it restating prior period financial statements in material amounts.

TCF is subject to examinations and challenges by tax authorities.

TCF is subject to federal, state, and foreign income tax regulations, which often require interpretation due to their complexity. Changes in income tax regulations or in how the regulations are interpreted could have a material adverse effect on TCF's results

13

of operations. In the normal course of business, TCF is routinely subject to examinations and challenges from taxing authorities, regarding its tax positions. Recently, taxing authorities have become increasingly aggressive in challenging tax positions taken by financial institutions. These tax positions may relate to tax compliance, sales and use, franchise, gross receipts, payroll, property and income tax issues, including tax base, apportionment and tax credit planning. These challenges may result in adjustments to the timing or amount of taxable income or deductions, or the allocation of income among tax jurisdictions. If any such challenges are made and are not resolved in TCF's favor, they could have a material adverse effect on TCF's financial condition and results of operations.

Additionally, if TCF's Real Estate Investment Trust ("REIT") affiliate fails to qualify as a REIT, or if states enact legislation taxing REITs or related entities, TCF's tax expense would increase. TCF's REIT and related companies must meet specific provisions of the Internal Revenue Code of 1986, as amended, and state tax laws. Use of REITs is and has been the subject of federal and state audits, litigation with state taxing authorities and tax policy debates by various state legislatures.

Significant legal actions could subject TCF to substantial uninsured liabilities.

TCF is subject to various claims related to its operations. These claims and legal actions, including supervisory actions by its regulators and other government authorities, could involve large monetary claims or penalties, as well as significant defense costs. To protect itself from the cost of certain kinds of claims, TCF maintains insurance coverage in amounts and with deductibles that it believes are appropriate for its operations. However, TCF's insurance coverage only covers certain types of liability, and such insurance may not continue to be available to TCF at a reasonable cost, or at all. As a result, TCF may be exposed to substantial uninsured liabilities, which could have a material adverse effect on TCF's financial condition and results of operations.

In addition, customers may make claims and take legal action pertaining to TCF's sale or servicing of various types of loan, lease and deposit products. Whether customer claims and legal action related to TCF are founded or unfounded, such claims and legal actions may result in significant financial liability and could adversely affect the market perception of TCF and its products and services, as well as impact customer demand for those products and services. Any financial liability or reputational damage could have a material adverse effect on TCF's financial condition and results of operations.

In particular, the financial services industry has increasingly been targeted by lawsuits alleging infringement of patent rights, often from patent holding companies seeking to monetize patents they have purchased or otherwise obtained. Regardless of the scope or validity of such patents or other intellectual property rights, or the merits of any claims by potential or actual litigants, the Company may have to engage in protracted and costly litigation. If the Company is found to infringe one or more patents or other intellectual property rights, it may be required to pay substantial damages or royalties to a third-party, or it may be subject to a temporary or permanent injunction prohibiting the Company from utilizing certain technologies. Regardless of the merit of particular claims, litigation may be expensive, time-consuming, disruptive to the Company's operations, and distracting to management.

TCF is subject to environmental liability risk associated with lending activities.

A significant portion of TCF's loan portfolio is secured by real property. In the ordinary course of business, TCF may foreclose on and take title to properties securing certain loans. In doing so, there is a risk that hazardous or toxic substances could be found on these properties. If hazardous or toxic substances are found, TCF may be liable for remediation costs, as well as for personal injury and property damage. Environmental laws may require TCF to incur substantial expenses and may materially reduce the affected property's value or limit TCF's ability to use or sell the affected property. In addition, future laws or more stringent interpretations or enforcement policies with respect to existing laws may increase TCF's exposure to environmental liability. The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on TCF's financial condition and results of operations.

14



Item 1B. Unresolved Staff Comments

None.


Item 2. Properties

Offices    TCF owns its headquarters offices in Wayzata, Minnesota. Other operations facilities, located in Minnesota, Illinois, California, Michigan, Colorado, South Dakota, Georgia and Ontario, Canada, are either owned or leased. At December 31, 2013, TCF owned the buildings and land for 145 of its bank branch offices, owned the buildings but leased the land for 23 of its bank branch offices and leased or licensed the remaining 259 bank branch offices, all of which are functional and appropriately maintained and are utilized by both the Lending and Funding reportable segments. These branch offices are located in Illinois, Minnesota, Michigan, Colorado, Wisconsin, Indiana, Arizona and South Dakota. For more information on premises and equipment, see Note 7 of Notes to Consolidated Financial Statements.


Item 3. Legal Proceedings

From time to time, TCF is a party to legal proceedings arising out of its lending, leasing and deposit operations, including foreclosure proceedings and other collection actions as part of its lending and leasing collections activities. TCF may also be subject to enforcement actions brought by federal regulators, including the SEC, the Federal Reserve, the OCC and the CFPB. From time to time, borrowers and other customers, and employees and former employees, have also brought actions against TCF, in some cases claiming substantial damages. TCF and other financial services companies are subject to the risk of class action litigation. Litigation is often unpredictable and the actual results of litigation cannot be determined, and therefore the ultimate resolution of a matter and the possible range of loss associated with certain potential outcomes cannot be established. Based on our current understanding of these pending legal proceedings, management does not believe that judgments or settlements arising from pending or threatened legal matters, individually or in the aggregate, would have a material adverse effect on the consolidated financial position, operating results or cash flows of TCF. TCF is also subject to regulatory examinations, and TCF's regulatory authorities may impose sanctions on TCF for failures related to regulatory compliance. In December 2013, the OCC terminated the regulatory order related to previously disclosed deficiencies in its BSA compliance program. TCF Bank has made comprehensive changes to its BSA compliance program and has satisfied the legal and regulatory requirements of the order.


Item 4. Mine Safety Disclosures

Not applicable.

15


Part II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

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 TCF common stock on the New York Stock Exchange Composite Tape, as reported by Bloomberg.

As of February 18, 2014, there were 6,209 holders of record of TCF's common stock.

    High     Low     Dividends
Declared
   
 

2013

                     

Fourth Quarter

  $ 16.46   $ 14.29   $ .05    

Third Quarter

    16.68     13.69     .05    

Second Quarter

    15.32     13.49     .05    

First Quarter

    15.04     12.39     .05    
 

2012

                     

Fourth Quarter

  $ 12.49   $ 10.45   $ .05    

Third Quarter

    12.43     9.59     .05    

Second Quarter

    12.53     10.43     .05    

First Quarter

    12.58     10.04     .05    
 

The Board of Directors of TCF Financial and TCF Bank have each adopted a Capital Plan and Dividend Policy. The policies define how enterprise risk related to capital will be managed, how the adequacy of capital will be measured and the process by which capital strategy, capital management and preferred and common stock dividend recommendations will be presented to TCF's Board of Directors. TCF's management is charged with ensuring that capital strategy actions, including the declaration of preferred and common stock dividends, are prudent, efficient and provide value to TCF's stockholders, while ensuring that past and prospective earnings retention is consistent with TCF's capital needs, asset quality, risk profile and overall financial condition. The Board of Directors intends to continue its 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, level of internally generated common capital excluding earnings, financial condition and capital requirements, the cash available to pay such dividends (derived mainly from dividends and distributions from TCF Bank), as well as regulatory and contractual limitations and such other factors as the Board of Directors may deem relevant. Also, dividends for the current dividend period on all outstanding shares of preferred stock must be declared and paid or declared and a sum sufficient for the payment thereof must be set aside before any dividend may be declared or paid on TCF's common stock. In general, TCF Bank may not declare or pay a dividend to TCF Financial in excess of 100% of its net retained profits for that year combined with its net retained profits for the preceding two calendar years without prior approval of the OCC. Restrictions on the ability of TCF Bank to pay cash dividends or possible diminished earnings of TCF may limit the ability of TCF Financial to pay dividends in the future to holders of its preferred and common stock. In addition, the ability of TCF Financial and TCF Bank to pay dividends depends on regulatory policies and capital requirements and may be subject to regulatory approval. See "Item 1. Business – Regulation – Regulatory Capital Requirements", "Item 1. Business – Regulation – Restrictions on Distributions" and Note 14 of Notes to Consolidated Financial Statements.

16


Total Return Performance

The following graph compares the cumulative total stockholder return on TCF common stock over the last five fiscal years with the cumulative total return of the Standard and Poor's 500 Stock Index, the SNL All Bank and Thrift Index, and a TCF-selected group of peer institutions over the same period (assuming the investment of $100 in each index on December 31, 2008 and reinvestment of all dividends). The TCF Peer Group consists of the publicly-traded banks and thrifts with total assets ranging from $10 billion to $50 billion as of September 30, 2012. The TCF Peer Group is shown below for comparison purposes.


TCF Stock Performance Chart

Total Return Performance

GRAPHIC

 
  Year Ending
Index
  12/31/08
  12/31/09
  12/31/10
  12/31/11
  12/31/12
  12/31/13
   
 

TCF Financial Corporation

  100.00   102.65   113.08   79.98   95.92   130.05    

SNL Bank and Thrift(1)

  100.00   98.66   110.14   85.64   115.00   157.46    

S&P 500 Index

  100.00   126.46   145.51   148.59   172.37   228.19    

TCF Peer Group(2)

  100.00   91.92   102.09   86.34   98.09   138.17    
 
(1)
Includes all major exchange (NYSE, NYSE MKT, NASDAQ) banks and thrifts in SNL's coverage universe (446 companies as of December 31, 2013).
(2)
The TCF Peer Group consists of the publicly-traded banks and thrifts with total assets ranging from $10 billion to $50 billion as of September 30, 2012. The TCF Peer Group includes: New York Community Bancorp, Inc.; Hudson City Bancorp, Inc.; Popular, Inc.; First Niagara Financial Group, Inc.; First Republic Bank, People's United Financial, Inc.; BOK Financial Corporation; City National Corporation; Synovus Financial Corp.; First Horizon National Corporation; Associated Banc-Corp; Cullen/Frost Bankers, Inc.; East West Bancorp, Inc.; SVB Financial Group; First Citizens BancShares, Inc.; Commerce Bancshares, Inc.; Webster Financial Corporation; Hancock Holding Company; Susquehanna Bancshares, Inc.; Astoria Financial Corporation; Wintrust Financial Corporation; EverBank Financial Corp; Signature Bank; Fulton Financial Corporation; Valley National Bancorp; First National of Nebraska, Inc.; Flagstar Bancorp, Inc.; FirstMerit Corporation; Prosperity Bancshares, Inc.; Bank of Hawaii Corporation; UMB Financial Corporation; PrivateBancorp, Inc.; BancorpSouth, Inc.; First BanCorp.; BankUnited, Inc.; IBERIABANK Corporation; Washington Federal, Inc.; International Bancshares Corporation; F.N.B. Corporation; Umpqua Holdings Corporation; TFS Financial Corporation; Investors Bancorp, Inc.; Cathay General Bancorp; and Central Bancompany, Inc.

17


Repurchases of TCF Stock

The following table summarizes common stock share repurchase activity for the quarter ended December 31, 2013.

Period

    Total
Number of Shares
Purchased
    Average
Price Paid
Per Share
    Total
Number of Shares
Purchased as
Part of Publicly
Announced Plan
    Maximum
Number of Shares
that May Yet
be Purchased
Under the Plan
   
 

October 1 to October 31, 2013

Share repurchase program(1)

      $         5,384,130    

Employee transactions(2)

    2,405   $ 14.48     N.A.     N.A.    

November 1 to November 30, 2013

                           

Share repurchase program(1)

      $         5,384,130    

Employee transactions(2)

      $     N.A.     N.A.    

December 1 to December 31, 2013

                           

Share repurchase program(1)

      $         5,384,130    

Employee transactions(2)

    3,024   $ 16.20     N.A.     N.A.    
 

Total

                           

Share repurchase program(1)

      $         5,384,130    

Employee transactions(2)

    5,429   $ 15.44     N.A.     N.A.    
 

N.A. Not Applicable

   
(1)
The current share repurchase authorization was approved by the Board of Directors on April 14, 2007, and was announced in a press release dated April 16, 2007. The authorization was for a repurchase of up to an additional 5% of TCF's common stock outstanding at the time of the authorization, or 6.5 million shares. TCF has not repurchased shares since October 2007. Future repurchases will be based upon capital levels, growth expectations and market opportunities and may be subject to regulatory approval. The ability to repurchase shares in the future may be adversely affected by new legislation or regulations, or by changes in regulatory policies. This authorization does not have an expiration date.
(2)
Represents restricted stock withheld pursuant to the terms of awards under the TCF Financial Incentive Stock Program to offset tax withholding obligations that occur upon vesting and release of restricted stock. The TCF Financial Incentive Stock Program provides that the value of shares withheld shall be the average of the high and low prices of common stock of TCF Financial Corporation on the date the relevant transaction occurs.

18


Item 6. Selected Financial Data

The selected five-year financial summary presented below should be read in conjunction with the Consolidated Financial Statements and related notes. Historical data is not necessarily indicative of TCF's future results of operations or financial condition. See "Item 1A. Risk Factors."

Five Year Financial Summary

Consolidated Income:

    Year Ended December 31,     Compound Annual
Growth Rate
   
     

(Dollars in thousands, except per-share data)

    2013     2012     2011     2010     2009     1-Year
2013/2012
    5-Year
2013/2008
   
 

Net interest income

  $ 802,624   $ 780,019   $ 699,688   $ 699,202   $ 633,006     2.9 %   6.2 %  

Fees and other revenue

    403,094     388,191     437,171     508,862     496,468     3.8     (3.2 )  

Gains on securities, net

    964     102,232     7,263     29,123     29,387     (99.1 )   (43.0 )  
                 

Total revenue

    1,206,682     1,270,442     1,144,122     1,237,187     1,158,861     (5.0 )   2.0    

Provision for credit losses

    118,368     247,443     200,843     236,437     258,536     (52.2 )   (9.2 )  

Non-interest expense

    845,269     811,819     764,451     756,335     756,655     4.1     3.3    

Loss on termination of debt

        550,735                 (100.0 )   N.M.    
                 

Income (loss) before income tax expense (benefit)

    243,045     (339,555 )   178,828     244,415     143,670     N.M.     6.0    

Income tax expense (benefit)

    84,345     (132,858 )   64,441     90,171     49,811     N.M.     4.4    

Income (loss) attributable to non-controlling interest

    7,032     6,187     4,993     3,297     (410 )   13.7     N.M.    
                 

Net income (loss) attributable to

                                             

TCF Financial Corporation

    151,668     (212,884 )   109,394     150,947     94,269     N.M.     6.0    

Preferred stock dividends

    19,065     5,606             18,403     N.M.     49.7    
                 

Net income (loss) attributable to

                                             

common stockholders

  $ 132,603   $ (218,490 ) $ 109,394   $ 150,947   $ 75,866     N.M.     3.7    
                 

Per common share:

                                             

Basic earnings (loss)

  $ .82   $ (1.37 ) $ .71   $ 1.08   $ .60     N.M.     (1.4 )  
                 

Diluted earnings (loss)

  $ .82   $ (1.37 ) $ .71   $ 1.08   $ .60     N.M.     (1.4 )  
                 

Dividends declared

  $ .20   $ .20   $ .20   $ .20   $ .40         (27.5 )  
 

N.M. Not Meaningful.

               

 

Consolidated Financial Condition:

    At December 31,     Compound Annual
Growth Rate
   
     

(Dollars in thousands, except per-share data)

    2013     2012     2011     2010     2009     1-Year
2013/2012
    5-Year
2013/2008
   
 

Loans and leases

  $ 15,846,939   $ 15,425,724   $ 14,150,255   $ 14,788,304   $ 14,590,744     2.7 %   3.5 %  

Securities available for sale

    551,064     712,091     2,324,038     1,931,174     1,910,476     (22.6 )   (22.5 )  

Total assets

    18,379,840     18,225,917     18,979,388     18,465,025     17,885,175     .8     1.9    

Checking, savings and money market deposits

    12,006,364     11,759,289     11,136,389     10,556,788     10,380,814     2.1     9.4    

Certificates of deposit

    2,426,412     2,291,497     1,065,615     1,028,327     1,187,505     5.9     (1.3 )  
                 

Total deposits

    14,432,776     14,050,786     12,202,004     11,585,115     11,568,319     2.7     7.1    

Borrowings

    1,488,243     1,933,815     4,388,080     4,985,611     4,755,499     (23.0 )   (20.4 )  

Total Equity

    1,964,759     1,876,643     1,878,627     1,471,663     1,175,362     4.7     5.6    

Book value per common share

    10.23     9.79     11.65     10.30     9.10     4.5     2.6    
 

 

Financial Ratios:

    At or For the Year Ended December 31,
     

    2013     2012     2011     2010     2009    
 

Return on average assets

    .87 %   (1.14 )%   .61 %   .85 %   .54 %  

Return on average common equity

    8.12     (13.33 )   6.32     10.67     6.57    

Net interest margin(1)

    4.68     4.65     3.99     4.15     3.87    

Average total equity to average assets

    10.46     9.66     9.24     7.83     7.20    

Dividend payout ratio

    24.30     (14.60 )   28.10     18.52     66.67    
 
(1)
Net interest income divided by average interest-earning assets.

Credit Quality Ratios:

    At or For the Year Ended December 31,
     

    2013     2012     2011     2010     2009    
 

Non-accrual loans and leases to total loans and leases

    1.75 %   2.46 %   2.11 %   2.33 %   2.03 %  

Non-accrual loans and leases and other real estate owned to total loans and leases and other real estate owned

    2.17     3.07     3.03     3.26     2.74    

Allowance for loan and lease losses to total loans and leases

    1.59     1.73     1.81     1.80     1.68    

Net charge-offs as a percentage of average loans and leases

    .81     1.54     1.45     1.47     1.34    
 

19


Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Table of Contents

 
  Page
 

Overview

  21

Results of Operations

  21

Performance Summary

  21

Reportable Segment Results

  21

Consolidated Income Statement Analysis

  22

Net Interest Income

  22

Provision for Credit Losses

  26

Non-Interest Income

  27

Non-Interest Expense

  28

Income Taxes

  29

Consolidated Financial Condition Analysis

  29

Securities Available for Sale

  29

Loans and Leases

  30

Credit Quality

  33

Other Real Estate Owned and Repossessed and Returned Assets

  42

Liquidity Management

  42

Deposits

  43

Borrowings

  43

Contractual Obligations and Commitments

  44

Capital Management

  44

Critical Accounting Policies

  46

Recent Accounting Pronouncements

  46

Legislative and Regulatory Developments

  47

Forward-Looking Information

  48

20

Management's discussion and analysis of the consolidated financial condition and results of operations of TCF Financial Corporation should be read in conjunction with "Item 1A. Risk Factors", "Item 6. Selected Financial Data", and "Item 8. Consolidated Financial Statements".


Overview

TCF Financial Corporation, a Delaware corporation ("TCF" or the "Company"), is a national bank holding company based in Wayzata, Minnesota. Unless otherwise indicated, references herein to "TCF" include its direct and indirect subsidiaries. Its principal subsidiary, TCF National Bank ("TCF Bank"), is headquartered in South Dakota. References herein to "TCF Financial" refer to TCF Financial Corporation on an unconsolidated basis. At December 31, 2013, TCF had 427 branches in Illinois, Minnesota, Michigan, Colorado, Wisconsin, Arizona, Indiana and South Dakota (TCF's primary banking markets).

Net interest income, the difference between interest income earned on loans and leases, securities available for sale, investments and other interest-earning assets and interest paid on deposits and borrowings, represented 66.5%, 61.4% and 61.2% of TCF's total revenue in 2013, 2012 and 2011, respectively. Net interest income can change significantly from period to period based on general levels of interest rates, customer prepayment patterns, the mix of interest-earning assets and the mix of interest-bearing and non-interest bearing deposits and borrowings. TCF manages the risk of changes in interest rates on its net interest income through an Asset/Liability Management Committee and through related interest-rate risk monitoring and management policies. See "Part I, Item 1A. Risk Factors" and "Part II, Item 7A. Quantitative and Qualitative Disclosures about Market Risk" for further discussion.

Non-interest income is a significant source of revenue for TCF and an important component of TCF's results of operations. Increasing fee and service charge revenue has been challenging as a result of changing customer behavior and the impact of recent changes in regulations. Providing a wide range of retail banking services is an integral component of TCF's business philosophy and a major strategy for generating non-interest income. Key drivers of bank fees and service charges are the number of deposit accounts and related transaction activity.

The following portions of this Management's Discussion and Analysis of Financial Condition and Results of Operations ("Management's Discussion and Analysis") focus in more detail on the results of operations for 2013, 2012 and 2011, and on information about TCF's balance sheet, loan and lease portfolio, liquidity, funding resources, capital and other matters.


Results of Operations

Performance Summary    TCF reported diluted earnings per common share of 82 cents for 2013, compared with diluted loss per common share of $1.37 for 2012 and diluted earnings per common share of 71 cents for 2011. TCF reported net income of $132.6 million for the year ended December 31, 2013, compared with a net loss of $218.5 million and net income of $109.4 million for the years ended December 31, 2012 and 2011, respectively. TCF's 2012 net loss included a non-recurring net after-tax charge of $295.8 million, or $1.87 per common share, related to the repositioning of TCF's balance sheet completed in the first quarter of 2012.

On March 13, 2012, TCF announced it had repositioned its balance sheet by prepaying $3.6 billion of long-term debt and selling $1.9 billion of mortgage-backed securities. TCF's long-term, fixed-rate debt was originated at market rates that prevailed prior to the 2008 economic crisis and was significantly above market rates at the time of repositioning. In addition, in late January 2012 the Federal Reserve forecasted interest rates to remain at historically low levels through at least 2014. As a result, this action better positioned TCF for the current interest rate outlook and reduced TCF's interest rate risk.

Return on average assets was a positive .87% in 2013, compared with a negative return of 1.14% in 2012 and a positive return of .61% in 2011. Return on average common equity was a positive 8.12% in 2013, compared with a negative return of 13.33% in 2012 and a positive return of 6.32% in 2011. The negative returns on average assets and average common equity for 2012 were due to the balance sheet repositioning discussed above.

Reportable Segment Results

Lending    TCF's lending strategy is primarily to originate high credit quality secured loans and leases. The lending portfolio consists of retail lending, commercial real estate and business lending, leasing and equipment finance, inventory finance and auto finance. Lending's disciplined portfolio growth generates earning assets and, along with its fee generating capabilities, produces a significant portion of the Company's revenue. Lending generated net income available to common stockholders of $136.2 million in 2013, compared with net income of $30.9 million and $31.5 million in 2012 and 2011, respectively.

21

Lending net interest income for 2013 was $568.3 million, up 8.4% from $524.4 million in 2012, which was up 11.5% from $470.2 million in 2011. These increases were primarily due to higher average balances driven by continued growth in the auto finance and inventory finance businesses, partially offset by downward pressure on yields across the lending businesses in the current low-interest rate environment.

Lending provision for credit losses totaled $115.4 million in 2013, down 53% from $245.4 million for 2012, which was up 23.8% from $198.1 million in 2011. The decrease in 2013 was primarily due to decreased net charge-offs in the consumer real estate portfolio resulting from improved home values and a reduction in incidents of default, as well as decreased net charge-offs in the commercial portfolio due to improved credit quality and continued efforts to actively work out problem loans. The increase in 2012 was primarily due to the implementation of clarifying regulatory guidance on consumer loans and increased provision in the commercial portfolio as TCF aggressively addressed credit issues. See "Consolidated Income Statement Analysis – Provision for Credit Losses" in this Management's Discussion and Analysis for further discussion.

Lending non-interest income totaled $168.4 million in 2013, up 21.6% from $138.5 million for 2012, which was up 36.8% from $101.2 million in 2011. The increases were primarily due to gains on sales of auto finance and consumer real estate loans. See "Consolidated Income Statement Analysis – Non-Interest Income" in this Management's Discussion and Analysis for further discussion.

Lending non-interest expense totaled $401.3 million in 2013, up 9.3% from $367.2 million for 2012, which was up 15.3% from $318.4 million in 2011. The increase in 2013 was primarily due to increased staff levels to support the continued growth of the auto finance business and expenses related to higher commissions based on production results and performance incentives, partially offset by reduced expenses related to fewer foreclosed consumer properties and a reduction in write-downs in balances of existing foreclosed real estate properties as a result of improved real estate property values. The increase in 2012 was primarily due to the full year impact of the acquisition of the auto finance business acquired in late 2011 as well as increased staffing levels to support the Bombardier Recreational Products, Inc. program in inventory finance.

Funding    TCF's funding is primarily derived from branch banking and treasury borrowings, with a focus on building and maintaining quality customer relationships through free checking. Deposits are generated from consumers and small businesses providing a source of low-cost funds and fee income. Borrowings may be used to offset reductions in deposits or to support lending activities. Funding reported net income available to common stockholders of $17.3 million in 2013, compared with a net loss available to common stockholders of $239.3 million and net income available to common stockholders of $77.8 million in 2012 and 2011, respectively. The changes from 2011 to 2012 and 2012 to 2013 were primarily due to the balance sheet repositioning completed in the first quarter of 2012.

Funding net interest income for 2013 was $237.3 million, down 8.1% from $258.3 million for 2012, which was up 11.5% from $231.6 million in 2011. The decrease in 2013 was primarily due to a reduction of interest income as a result of lower levels of mortgage-backed securities. The increase in 2012 was primarily related to the reduced costs of borrowings resulting from the balance sheet repositioning, partially offset by a reduction of interest income as a result of lower levels of mortgage-backed securities.

Funding non-interest income totaled $235.2 million in 2013, down 30.6% from $338.9 million for 2012, which was down 6.0% from $360.6 million in 2011. The decrease in 2013 was primarily due to higher gains on sales of securities during 2012 related to the balance sheet repositioning, lower transaction activity and higher average checking account balances per customer, partially offset by a larger account base. The decrease in 2012 was primarily due to lower banking fees and revenues related to changes in our deposit product fee structure and the full year effect of the new regulations limiting interchange fees associated with our debit card transactions.

Funding non-interest expense totaled $442.6 million in 2013, down 54.4% from $969.8 million for 2012, which was up 109.3% from $463.4 million in 2011. The changes from 2011 to 2012 and 2012 to 2013 were primarily due to the loss on termination of debt in connection with the balance sheet repositioning.


Consolidated Income Statement Analysis

Net Interest Income    Net interest income, the difference between interest earned on loans and leases, investments and other interest-earning assets (interest income), and interest paid on deposits and borrowings (interest expense), represented 66.5% of TCF's total revenue in 2013, 61.4% in 2012 and 61.2% in 2011. Net interest income 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 prevailing short- and long-term interest rates, loan and deposit pricing strategies and competitive conditions, the volume and the mix of interest-earning assets and interest-bearing liabilities, the level of non-accrual loans and leases and other real estate owned, and the impact of modified loans and leases.

22

The following tables summarize TCF's average balances, interest, dividends, and yields and rates on major categories of TCF's interest-earning assets and interest-bearing liabilities on a fully tax-equivalent basis.

    Year Ended
December 31, 2013
    Year Ended
December 31, 2012
    Change    
         

(Dollars in thousands)

    Average
Balance
    Interest     Yields
and
Rates
    Average
Balance
    Interest     Yields
and
Rates
    Average
Balance
    Interest     Yields and
Rates
(bps)
   
 

Assets:

                                                         

Investments and other

  $ 774,917   $ 15,318     1.98 % $ 574,422   $ 10,404     1.81 % $ 200,495   $ 4,914     17    

U.S. Government sponsored entities:

                                                         

Mortgage-backed securities, fixed rate

    648,187     18,072     2.79     1,055,868     35,143     3.33     (407,681 )   (17,071 )   (54 )  

U.S. Treasury securities

    345         .07                 345         7    

Other securities

    98     2     2.38     180     7     3.70     (82 )   (5 )   (132 )  
                               

Total securities available for sale(1)

    648,630     18,074     2.79     1,056,048     35,150     3.33     (407,418 )   (17,076 )   (54 )  
                               

Loans and leases held for sale

    155,337     11,647     7.50     46,201     3,689     7.98     109,136     7,958     (48 )  

Loans and leases:

                                                         

Consumer real estate:

                                                         

Fixed-rate

    3,746,029     217,891     5.82     4,254,039     252,233     5.93     (508,010 )   (34,342 )   (11 )  

Variable-rate

    2,703,921     138,192     5.11     2,503,473     126,158     5.04     200,448     12,034     7    
                               

Total consumer real estate

    6,449,950     356,083     5.52     6,757,512     378,391     5.60     (307,562 )   (22,308 )   (8 )  
                               

Commercial:

                                                         

Fixed- and adjustable-rate

    2,302,594     120,948     5.25     2,691,004     149,793     5.57     (388,410 )   (28,845 )   (32 )  

Variable-rate

    960,152     34,564     3.60     794,214     30,653     3.86     165,938     3,911     (26 )  
                               

Total commercial

    3,262,746     155,512     4.77     3,485,218     180,446     5.18     (222,472 )   (24,934 )   (41 )  
                               

Leasing and equipment finance

    3,260,425     162,035     4.97     3,155,946     170,991     5.42     104,479     (8,956 )   (45 )  

Inventory finance

    1,723,253     103,844     6.03     1,434,643     88,934     6.20     288,610     14,910     (17 )  

Auto finance

    907,571     43,921     4.84     296,083     17,949     6.06     611,488     25,972     (122 )  

Other

    13,088     1,060     8.10     16,549     1,332     8.05     (3,461 )   (272 )   5    
                               

Total loans and leases(2)

    15,617,033     822,455     5.27     15,145,951     838,043     5.53     471,082     (15,588 )   (26 )  
                               

Total interest-earning assets

    17,195,917     867,494     5.04     16,822,622     887,286     5.27     373,295     (19,792 )   (23 )  
                               

Other assets(3)

    1,092,681                 1,233,042                 (140,361 )              
                                                 

Total assets

  $ 18,288,598               $ 18,055,664               $ 232,934                
                                                 

Liabilities and Equity:

                                                         

Non-interest bearing deposits:

                                                         

Retail

  $ 1,442,356               $ 1,311,561               $ 130,795                

Small business

    771,827                 738,949                 32,878                

Commercial and custodial

    345,713                 317,432                 28,281                
                                                 

Total non-interest bearing deposits

    2,559,896                 2,367,942                 191,954                
                                                 

Interest-bearing deposits:

                                                         

Checking

    2,313,794     1,485     .06     2,256,237     3,105     .14     57,557     (1,620 )   (8 )  

Savings

    6,147,030     12,437     .20     6,037,939     19,834     .33     109,091     (7,397 )   (13 )  

Money market

    818,814     2,391     .29     770,104     2,859     .37     48,710     (468 )   (8 )  
                               

Subtotal

    9,279,638     16,313     .18     9,064,280     25,798     .28     215,358     (9,485 )   (10 )  

Certificates of deposit

    2,369,992     20,291     .86     1,727,859     15,189     .88     642,133     5,102     (2 )  
                               

Total interest-bearing deposits

    11,649,630     36,604     .31     10,792,139     40,987     .38     857,491     (4,383 )   (7 )  
                               

Total deposits

    14,209,526     36,604     .26     13,160,081     40,987     .31     1,049,445     (4,383 )   (5 )  
                               

Borrowings:

                                                         

Short-term borrowings

    7,685     46     .60     312,417     937     .30     (304,732 )   (891 )   30    

Long-term borrowings

    1,724,002     25,266     1.46     2,426,655     62,680     2.58     (702,653 )   (37,414 )   (112 )  
                               

Total borrowings

    1,731,687     25,312     1.46     2,739,072     63,617     2.32     (1,007,385 )   (38,305 )   (86 )  
                               

Total interest-bearing liabilities

    13,381,317     61,916     .46     13,531,211     104,604     .77     (149,894 )   (42,688 )   (31 )  
                               

Total deposits and borrowings

    15,941,213     61,916     .39     15,899,153     104,604     .66     42,060     (42,688 )   (27 )  
                               

Other liabilities

    434,763                 412,170                 22,593                
                                                 

Total liabilities

    16,375,976                 16,311,323                 64,653                
                                                 

Total TCF Financial Corp. stockholders' equity

    1,896,131                 1,729,537                 166,594                

Non-controlling interest in subsidiaries

    16,491                 14,804                 1,687                
                                                 

Total equity

    1,912,622                 1,744,341                 168,281                
                                                 

Total liabilities and equity

  $ 18,288,598               $ 18,055,664               $ 232,934                
                                                 

Net interest income and margin

        $ 805,578     4.68 %       $ 782,682     4.65 %       $ 22,896     3    
 
(1)
Average balances and yields of securities available for sale are based upon the historical amortized cost and exclude equity securities.
(2)
Average balances of loans and leases include non-accrual loans and leases, and are presented net of unearned income.
(3)
Includes operating leases.

23

    Year Ended
December 31, 2012
    Year Ended
December 31, 2011
    Change    
         

(Dollars in thousands)

    Average
Balance
    Interest     Yields
and
Rates
    Average
Balance
    Interest     Yields
and
Rates
    Average
Balance
    Interest     Yields and
Rates
(bps)
   
 

Assets:

                                                         

Investments and other

  $ 574,422   $ 10,404     1.81 % $ 820,981   $ 7,836     .95 % $ (246,559 ) $ 2,568     86    

U.S. Government sponsored entities:

                                                         

Mortgage-backed securities, fixed rate

    1,055,868     35,143     3.33     2,198,188     85,138     3.87     (1,142,320 )   (49,995 )   (54 )  

U.S. Treasury securities

                48,178     34     .07     (48,178 )   (34 )   (7 )  

Other securities

    180     7     3.70     329     16     4.86     (149 )   (9 )   (116 )  
                               

Total securities available for sale(1)

    1,056,048     35,150     3.33     2,246,695     85,188     3.79     (1,190,647 )   (50,038 )   (46 )  
                               

Loans and leases held for sale

    46,201     3,689     7.98     1,215     131     10.78     44,986     3,558     (280 )  

Loans and leases:

                                                         

Consumer real estate:

                                                         

Fixed-rate

    4,254,039     252,233     5.93     4,627,047     281,427     6.08     (373,008 )   (29,194 )   (15 )  

Variable-rate

    2,503,473     126,158     5.04     2,386,234     122,532     5.13     117,239     3,626     (9 )  
                               

Total consumer real estate

    6,757,512     378,391     5.60     7,013,281     403,959     5.76     (255,769 )   (25,568 )   (16 )  
                               

Commercial:

                                                         

Fixed- and adjustable-rate

    2,691,004     149,793     5.57     2,854,327     164,368     5.76     (163,323 )   (14,575 )   (19 )  

Variable-rate

    794,214     30,653     3.86     710,758     30,742     4.33     83,456     (89 )   (47 )  
                               

Total commercial

    3,485,218     180,446     5.18     3,565,085     195,110     5.47     (79,867 )   (14,664 )   (29 )  
                               

Leasing and equipment finance

    3,155,946     170,991     5.42     3,074,207     184,575     6.00     81,739     (13,584 )   (58 )  

Inventory finance

    1,434,643     88,934     6.20     856,271     61,583     7.19     578,372     27,351     (99 )  

Auto finance

    296,083     17,949     6.06     363     13     3.31     295,720     17,936     275    

Other

    16,549     1,332     8.05     19,324     1,702     8.81     (2,775 )   (370 )   (76 )  
                               

Total loans and leases(2)

    15,145,951     838,043     5.53     14,528,531     846,942     5.83     617,420     (8,899 )   (30 )  
                               

Total interest-earning assets

    16,822,622     887,286     5.27     17,597,422     940,097     5.34     (774,800 )   (52,811 )   (7 )  
                               

Other assets(3)

    1,233,042                 1,194,550                 38,492                
                                                 

Total assets

  $ 18,055,664               $ 18,791,972               $ (736,308 )              
                                                 

Liabilities and Equity:

                                                         

Non-interest bearing deposits:

                                                         

Retail

  $ 1,311,561               $ 1,414,659               $ (103,098 )              

Small business

    738,949                 698,903                 40,046                

Commercial and custodial

    317,432                 291,986                 25,446                
                                                 

Total non-interest bearing deposits

    2,367,942                 2,405,548                 (37,606 )              
                                                 

Interest-bearing deposits:

                                                         

Checking

    2,256,237     3,105     .14     2,114,098     4,451     .21     142,139     (1,346 )   (7 )  

Savings

    6,037,939     19,834     .33     5,671,889     28,942     .51     366,050     (9,108 )   (18 )  

Money market

    770,104     2,859     .37     658,693     2,951     .45     111,411     (92 )   (8 )  
                               

Subtotal

    9,064,280     25,798     .28     8,444,680     36,344     .43     619,600     (10,546 )   (15 )  

Certificates of deposit

    1,727,859     15,189     .88     1,103,231     8,764     .79     624,628     6,425     9    
                               

Total interest-bearing deposits

    10,792,139     40,987     .38     9,547,911     45,108     .47     1,244,228     (4,121 )   (9 )  
                               

Total deposits

    13,160,081     40,987     .31     11,953,459     45,108     .38     1,206,622     (4,121 )   (7 )  
                               

Borrowings:

                                                         

Short-term borrowings

    312,417     937     .30     49,442     171     .35     262,975     766     (5 )  

Long-term borrowings

    2,426,655     62,680     2.58     4,500,564     192,984     4.29     (2,073,909 )   (130,304 )   (171 )  
                               

Total borrowings

    2,739,072     63,617     2.32     4,550,006     193,155     4.24     (1,810,934 )   (129,538 )   (192 )  
                               

Total interest-bearing liabilities

    13,531,211     104,604     .77     14,097,917     238,263     1.69     (566,706 )   (133,659 )   (92 )  
                               

Total deposits and borrowings

    15,899,153     104,604     .66     16,503,465     238,263     1.44     (604,312 )   (133,659 )   (78 )  
                               

Other liabilities

    412,170                 551,206                 (139,036 )              
                                                 

Total liabilities

    16,311,323                 17,054,671                 (743,348 )              
                                                 

Total TCF Financial Corp. stockholders' equity

    1,729,537                 1,729,660                 (123 )              

Non-controlling interest in subsidiaries

    14,804                 7,641                 7,163                
                                                 

Total equity

    1,744,341                 1,737,301                 7,040                
                                                 

Total liabilities and equity

  $ 18,055,664               $ 18,791,972               $ (736,308 )              
                                                 

Net interest income and margin

        $ 782,682     4.65 %       $ 701,834     3.99 %       $ 80,848     66    
 
(1)
Average balances and yields of securities available for sale are based upon the historical amortized cost and exclude equity securities.
(2)
Average balances of loans and leases include non-accrual loans and leases, and are presented net of unearned income.
(3)
Includes operating leases.

24

The following table presents the components of the changes in net interest income by volume and rate.

    Year Ended
December 31, 2013
Versus Same Period in 2012
    Year Ended
December 31, 2012
Versus Same Period in 2011
   
         

    Increase (Decrease) Due to     Increase (Decrease) Due to    
         

(In thousands)

    Volume(1)     Rate(1)     Total     Volume(1)     Rate(1)     Total    
     

Interest income:

                                       

Investments and other

  $ 3,903   $ 1,011   $ 4,914   $ (2,883 ) $ 5,451   $ 2,568    

U.S. Government sponsored entities:

                                       

Mortgage-backed securities, fixed rate

    (12,018 )   (5,053 )   (17,071 )   (39,388 )   (10,607 )   (49,995 )  

U.S. Treasury Securities

                (34 )       (34 )  

Other securities

    (2 )   (3 )   (5 )   (6 )   (3 )   (9 )  

Total securities available for sale

    (12,008 )   (5,068 )   (17,076 )   (40,689 )   (9,349 )   (50,038 )  

Loans and leases held for sale

    8,227     (269 )   7,958     3,591     (33 )   3,558    

Loans and leases:

                                       

Consumer home equity:

                                       

Fixed-rate

    (29,117 )   (5,225 )   (34,342 )   (22,841 )   (6,353 )   (29,194 )  

Variable-rate

    10,545     1,489     12,034     5,596     (1,970 )   3,626    

Total consumer real estate

    (16,296 )   (6,012 )   (22,308 )   (15,072 )   (10,496 )   (25,568 )  

Commercial:

                                       

Fixed- and adjustable-rate

    (20,506 )   (8,339 )   (28,845 )   (9,439 )   (5,136 )   (14,575 )  

Variable-rate

    6,150     (2,239 )   3,911     3,383     (3,472 )   (89 )  

Total commercial

    (10,921 )   (14,013 )   (24,934 )   (4,475 )   (10,189 )   (14,664 )  

Leasing and equipment finance

    5,527     (14,483 )   (8,956 )   4,776     (18,360 )   (13,584 )  

Inventory finance

    17,703     (2,793 )   14,910     36,609     (9,258 )   27,351    

Auto finance

    30,367     (4,395 )   25,972     17,869     67     17,936    

Other

    (277 )   5     (272 )   (233 )   (137 )   (370 )  

Total loans and leases

    26,280     (41,868 )   (15,588 )   34,374     (43,273 )   (8,899 )  

Total interest income

    20,023     (39,815 )   (19,792 )   (42,714 )   (10,097 )   (52,811 )  

Interest expense:

                                       

Checking

    78     (1,698 )   (1,620 )   279     (1,625 )   (1,346 )  

Savings

    354     (7,751 )   (7,397 )   1,754     (10,862 )   (9,108 )  

Money market

    174     (642 )   (468 )   460     (552 )   (92 )  

Certificates of deposit

    5,538     (436 )   5,102     5,341     1,084     6,425    

Borrowings:

                                       

Short-term borrowings

    (1,368 )   477     (891 )   792     (26 )   766    

Long-term borrowings

    (14,988 )   (22,426 )   (37,414 )   (69,951 )   (60,353 )   (130,304 )  

Total borrowings

    (19,062 )   (19,243 )   (38,305 )   (60,665 )   (68,873 )   (129,538 )  

Total interest expense

    (1,143 )   (41,545 )   (42,688 )   (9,230 )   (124,429 )   (133,659 )  

Net interest income

  $ 18,806   $ 4,090   $ 22,896   $ (32,277 ) $ 113,125   $ 80,848    
 
(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. Changes due to volume and rate are calculated independently for each line item presented.

Net interest income, including the impact of tax-equivalent adjustments of $3 million, was $805.6 million for 2013, an increase of 2.9% from $782.7 million in 2012, which was up 11.5% from $701.8 million in 2011. The increase in net interest income in 2013 was primarily driven by higher average loan and lease balances in the auto finance and inventory finance businesses as well as the balance sheet repositioning which resulted in a reduction to the cost of borrowings, partially offset by a reduction of interest income on lower levels of mortgage-backed securities. This increase was partially offset by downward pressure on yields across the lending businesses in this low interest rate environment as well as lower average balances of commercial fixed-rate loans due to run-off exceeding originations and lower average balances of consumer real estate loans driven by run-off in the first mortgage real estate business and ongoing loan sales. The increase in net interest income in 2012 was primarily due to the balance sheet repositioning completed in the first quarter of 2012. Additionally, net interest income increased due to higher average loan balances in the auto finance, inventory finance, and leasing and equipment finance businesses, partially offset by reduced interest income due to both lower yields and lower average balances of consumer real estate and commercial loans.

25

Net interest margin was 4.68%, 4.65% and 3.99% for 2013, 2012 and 2011, respectively. The increase in 2013 was primarily due to the balance sheet repositioning, partially offset by downward pressure on origination yields in the lending businesses due to the low interest rate environment as well as a shift in commercial real estate from higher yielding fixed-rate loans to lower yielding variable-rate loans due to marketplace demand. The increase in 2012 was primarily due to lower average cost of borrowings due to the effects of the balance sheet repositioning, partially offset by a reduction in interest income on mortgage-backed securities and rate compression as the leasing and equipment finance and inventory finance portfolios re-priced in the low rate environment.

Provision for Credit Losses    The provision for credit losses is calculated as part of the determination of the allowance for loan and lease losses which is a critical accounting estimate. TCF's methodologies for determining and allocating the allowance for loan and lease losses and the related provision for credit losses focus on historical trends in net charge-offs, delinquencies in the loan and lease portfolio, value of collateral, general economic conditions and management's assessment of credit risk in the current loan and lease portfolio.

The following table summarizes the composition of TCF's provision for credit losses for the years ended December 31, 2013, 2012 and 2011.

    Year Ended December 31,     Change    
         

(Dollars in thousands)

    2013           2012           2011           2013/2012     2012/2011    
     

Consumer real estate

  $ 87,100     73.6 % $ 178,496     72.1 % $ 163,696     81.5 % $ (91,396 )   (51.2 )% $ 14,800     9.0 %  

Commercial

    12,515     10.6     43,498     17.6     25,555     12.7     (30,983 )   (71.2 )   17,943     70.2    

Leasing and equipment finance

    1,005     .8     10,054     4.1     7,395     3.7     (9,049 )   (90.0 )   2,659     36.0    

Inventory finance

    1,949     1.6     6,060     2.4     1,318     .7     (4,111 )   (67.8 )   4,742     N.M .  

Auto finance

    13,215     11.2     6,726     2.7             6,489     96.5     6,726     N.M .  

Other

    2,584     2.2     2,609     1.1     2,879     1.4     (25 )   (1.0 )   (270 )   (9.4 )  
                     

Total

  $ 118,368     100.0 % $ 247,443     100.0 % $ 200,843     100.0 % $ (129,075 )   (52.2 ) $ 46,600     23.2    
 

N.M. Not Meaningful

   

TCF provided $118.4 million for credit losses in 2013, compared with $247.4 million in 2012 and $200.8 million in 2011. The decrease in provision expense during 2013 was primarily due to decreased net charge-offs in the consumer real estate portfolio due to improved home values and a reduction in incidents of default, the decreased net charge-offs in the commercial portfolio due to improved credit quality and continued efforts to actively work out problem loans, and the impact of the clarifying bankruptcy-related regulatory guidance related to consumer loans adopted in 2012. The increase in provision expense during 2012 was primarily due to $36.9 million related to the impact of clarifying bankruptcy-related regulatory guidance adopted in 2012 (see Consolidated Financial Condition Analysis – Credit Quality for a discussion about the bankruptcy-related guidance), and increased provision in the commercial portfolio as TCF aggressively addressed non-accrual loans and leases and classified loans.

Net loan and lease charge-offs were $126.4 million, or .81% of average loans and leases, in 2013, compared with $233.8 million, or 1.54% of average loans and leases, in 2012 and $211 million, or 1.45% of average loans and leases, in 2011. The 2013 decrease was primarily due to improved credit quality in the consumer real estate portfolio as home values increased and incidents of default decreased, as well as improved credit quality in the commercial portfolio and continued efforts to actively work out problem loans. The decrease was further driven by the impact of the clarifying bankruptcy-related regulatory guidance adopted in 2012. The 2012 increase from 2011 was primarily driven by net charge-offs of $49.3 million in the consumer real estate portfolio related to the impact of clarifying bankruptcy-related regulatory guidance previously discussed.

Also see "Consolidated Financial Condition Analysis – Credit Quality – Allowance for Loan and Lease Losses" in this Management's Discussion and Analysis.

26

Non-Interest Income    Non-interest income is a significant source of revenue for TCF, representing 33.5%, 38.6% and 38.8% of total revenues in 2013, 2012 and 2011, respectively, and is an important factor in TCF's results of operations. Fees and other revenue were $403.1 million for 2013, compared with $388.2 million and $437.2 million in 2012 and 2011, respectively. The following table summarizes the components of non-interest income.

    Year Ended December 31,     Compound Annual
Growth Rate
   
     

(Dollars in thousands)

    2013     2012     2011     2010     2009     1-Year
2013/2012
    5-Year
2013/2008
   
 

Fees and service charges

  $ 166,606   $ 177,953   $ 219,363   $ 273,181   $ 286,908     (6.4 )%   (9.3 )%  

Card revenue

    51,920     52,638     96,147     111,067     104,770     (1.4 )   (12.8 )  

ATM revenue

    22,656     24,181     27,927     29,836     30,438     (6.3 )   (7.0 )  
                 

Subtotal

    241,182     254,772     343,437     414,084     422,116     (5.3 )   (9.9 )  

Leasing and equipment finance

    92,037     92,721     89,167     89,194     69,113     (.7 )   10.7    

Gains on sales of auto loans

    29,699     22,101     1,133             34.4     N.M .  

Gains on sales of consumer real estate loans

    21,692     5,413                 N.M .   N.M .  

Other

    18,484     13,184     3,434     5,584     5,239     40.2     8.8    
                 

Fees and other revenue

    403,094     388,191     437,171     508,862     496,468     3.8     (3.2 )  
                 

Gains on securities, net

    964     102,232     7,263     29,123     29,387     (99.1 )   (43.0 )  
                 

Total non-interest income

  $ 404,058   $ 490,423   $ 444,434   $ 537,985   $ 525,855     (17.6 )   (4.1 )  
                 

Fees and other revenue as a percentage of total revenue

    33.4 %   30.6 %   38.2 %   41.1 %   42.8 %              
 

N.M. Not Meaningful

   

Fees and Service Charges    Banking and service fees totaled $166.6 million in 2013, compared with $178 million and $219.4 million for 2012 and 2011, respectively. The decrease in 2013 was primarily due to lower transaction activity and higher average checking account balances per customer, partially offset by a larger account base. The decrease in 2012 was primarily due to the elimination of the monthly maintenance fee with the reintroduction of free checking in the second quarter of 2012 and a lower number of accounts.

Card Revenue    Card revenue, primarily interchange fees, totaled $51.9 million in 2013, compared with $52.6 million and $96.1 million in 2012 and 2011, respectively. The decrease in 2013 was primarily due to lower card transaction volume. The decrease in 2012 was primarily due to a decrease in the average interchange rate per transaction as a result of the Durbin Amendment to the Dodd-Frank Act, which took effect during the fourth quarter of 2011.

TCF is the 14th largest issuer of Visa consumer debit cards and the 13th largest issuer of Visa small business debit cards in the United States, based on payment volume for the three months ended September 30, 2013, as provided by Visa. TCF earns interchange revenue from customer card transactions paid primarily by merchants, not TCF's customers. Card revenue represented 21.5%, 20.7% and 28% of banking fee revenue for the years ended December 31, 2013, 2012 and 2011, respectively.

Gains on Sales of Auto Loans    TCF sold $795.3 million of auto loans and recognized $29.7 million in associated gains during 2013, compared to sales of $536.7 million and $37.4 million of auto loans with recognized associated gains of $22.1 million and $1.1 million during 2012 and 2011, respectively. The increases in sales were primarily due to the continued growth of the auto finance business as TCF continues to sell a percentage of its originations each quarter.

Gains on Sales of Consumer Real Estate Loans    TCF sold $763.1 million and $161.8 million of consumer real estate loans and recognized gains of $21.7 million and $5.4 million for the years ended December 31, 2013 and 2012, respectively. There were no sales of consumer real estate loans during the year ended December 31, 2011.

27

The following table presents the components of other non-interest income.

    At December 31,     Compound Annual
Growth Rate
   
     

(Dollars in thousands)

    2013     2012     2011     2010     2009     1-Year
2013/2012
    5-Year
2013/2008
   
 

Servicing fee income

  $ 11,316   $ 6,235   $ 484   $   $     81.5 %   N.M .%  

Investments and insurance

    1,025     920     1,105     1,111     643     11.4     (35.8 )  

Other

    6,143     6,029     1,845     4,473     4,596     1.9     37.6    
                 

Total other non-interest income

  $ 18,484   $ 13,184   $ 3,434   $ 5,584   $ 5,239     40.2     8.8    
 

N.M. Not meaningful.

   

Other Non-Interest Income    Total other non-interest income totaled $18.5 million in 2013, compared with $13.2 million and $3.4 million in 2012 and 2011, respectively. The increase in 2013 was primarily due to higher servicing fee income related to the continued growth of the auto finance managed loans portfolio. The increase in 2012 was primarily driven by servicing fee income related to the full year impact of the acquisition of the auto finance business acquired in late 2011 and growth in the auto finance managed loans portfolio.

Gains on Securities, Net    During the years ended December 31, 2013, 2012 and 2011, TCF recognized $964 thousand, $102.2 million and $7.3 million, respectively, in gains related to sales of securities primarily driven by the sales of mortgage-backed securities. The gains in 2012 include $90.2 million related to sales of mortgage-backed securities (including a pre-tax net gain of $77 million as a result of the balance sheet repositioning) and a pre-tax net gain of $13.1 million as a result of the sale of Visa Class B stock.

Non-Interest Expense    Non-interest expense decreased $517.3 million, or 38%, in 2013, increased $598.1 million, or 78.2%, in 2012, and increased $8.1 million, or 1.1%, in 2011. The changes from 2011 to 2012 and 2012 to 2013 were primarily due to the loss on termination of debt in connection with the balance sheet repositioning. The following table presents the components of non-interest expense.

    Year Ended December 31,     Compound Annual
Growth Rate
   
     

(Dollars in thousands)

    2013     2012     2011     2010     2009     1-Year
2013/2012
    5-Year
2013/2008
   
 

Compensation and employee benefits

  $ 429,188   $ 393,841   $ 348,792   $ 346,072   $ 345,868     9.0 %   3.3 %  

Occupancy and equipment

    134,694     130,792     126,437     126,551     126,292     3.0     1.0    

FDIC insurance

    32,066     30,425     28,747     23,584     19,109     5.4     60.7    

Operating lease depreciation

    24,500     25,378     30,007     37,106     22,368     (3.5 )   7.0    

Advertising and marketing

    19,132     16,572     10,034     13,062     17,134     15.4     (.0 )  

Deposit account premiums

    2,345     8,669     22,891     17,304     30,682     (72.9 )   (32.6 )  

Other

    167,777     163,897     145,489     146,253     142,817     2.4     2.8    
                 

Subtotal

    809,702     769,574     712,397     709,932     704,270     5.2     3.1    

Loss on termination of debt

        550,735                 (100.0 )   N.M .  

Branch realignment

    8,869                     N.M .   N.M .  

Foreclosed real estate and repossessed assets, net

    27,950     41,358     49,238     40,385     31,886     (32.4 )   7.8    

FDIC special assessment

                    8,362     N.M .   N.M .  

Other credit costs, net

    (1,252 )   887     2,816     6,018     12,137     N.M .   N.M .  
                 

Total non-interest expense

  $ 845,269   $ 1,362,554   $ 764,451   $ 756,335   $ 756,655     (38.0 )   3.3    
 

N.M. Not meaningful.

   

Compensation and Employee Benefits    Compensation and employee benefits expense totaled $429.2 million, $393.8 million and $348.8 million during 2013, 2012 and 2011, respectively. The increase in 2013 was primarily due to increased staff levels to support the growth of auto finance and expenses related to higher commissions based on production results and performance incentives. The increase in 2012 was primarily due to the impact of the acquisition of the auto finance business acquired in late 2011 and increased staffing levels to support growth in the inventory finance business.

28

FDIC Insurance    Federal Deposit Insurance Corporation ("FDIC") premium expense totaled $32.1 million, $30.4 million and $28.7 million in 2013, 2012 and 2011, respectively. The increase in 2013 was primarily due to a higher overall assessment base. The increase in 2012 was primarily the result of changes in the FDIC insurance rate calculations for banks with over $10 billion in total assets, implemented in April 2011.

Advertising, Marketing and Deposit Account Premiums    Advertising and marketing expenses increased to $19.1 million in 2013, compared with $16.6 million in 2012 and $10 million in 2011. Deposit account premiums expense decreased to $2.3 million in 2013, compared with $8.7 million in 2012 and $22.9 million in 2011. The increases in advertising and marketing expenses and the decreases in deposit account premiums for 2013 and 2012 are attributable to TCF's shift in checking account acquisition strategy with the reintroduction of free checking, which replaced the use of deposit account premiums and focused on advertising the free checking product.

Other Non-Interest Expense    Other non-interest expense totaled $167.8 million in 2013, compared to $163.9 million and $145.5 million in 2012 and 2011, respectively. The increase in 2013 was primarily due to an increase in regulatory compliance costs and increased loan and lease processing expense in the consumer real estate and auto finance businesses. The 2012 increase was primarily due to a $10 million accrual for the civil money penalty assessed pursuant to previously disclosed deficiencies in TCF's Bank Secrecy Act compliance program.

Loss on Termination of Debt    In connection with the balance sheet repositioning, TCF restructured $3.6 billion of long-term borrowings that had a 4.3% weighted average rate, at a pre-tax loss of $550.7 million. As part of the debt restructuring, TCF replaced $2.1 billion of 4.4% weighted average fixed rate, FHLB advances with a mix of floating and fixed-rate, long-and short-term borrowings with a current weighted average rate of .5%, terminated $1.5 billion of 4.2% weighted average fixed-rate borrowings under repurchase agreements, and sold $1.9 billion of mortgage-backed securities at a pre-tax gain of $77 million.

Branch Realignment    TCF executed a realignment of its retail banking system to support its strategic initiatives, which resulted in a pre-tax charge of $8.9 million in the fourth quarter of 2013. The consolidation of 37 branches in Illinois and nine branches in Minnesota (eight in-store branches and one traditional branch) is expected to occur in March 2014. The ongoing benefit of this branch realignment is expected to exceed the pre-tax charges, together with the estimated financial impact of related ongoing account attrition, in less than 12 months.

Foreclosed Real Estate and Repossessed Assets, Net    Foreclosed real estate and repossessed assets expense, net totaled $28 million in 2013, compared to $41.4 million in 2012 and $49.2 million in 2011. The decrease in 2013 was primarily due to reduced expenses related to fewer foreclosed consumer properties primarily driven by a portfolio sale during the first quarter of 2013, a decrease in additions to foreclosed consumer properties, and lower write-downs to existing foreclosed real estate properties as a result of improved real estate property values. The decrease in 2012 was primarily due to lower write-downs on consumer real estate properties as a result of a decrease in the number of properties owned and the associated expenses.

Income Taxes    Income tax expense represented 34.7% of income before income tax expense in 2013, compared with income tax benefit of 39.1% of loss before income tax benefit in 2012 and income tax expense of 36% of income before income tax expense in 2011. The lower effective income tax rate for 2013 compared with 2011 is primarily due to the 2013 decision to indefinitely reinvest foreign earnings. The higher effective income tax rate for 2012 was primarily due to the 2012 pre-tax loss compared with pre-tax income in 2011 and 2013.


Consolidated Financial Condition Analysis

Securities Available for Sale    Securities available for sale were $551.1 million, or 3% of total assets, at December 31, 2013, as compared to $712.1 million, or 3.9% of total assets, at December 31, 2012. TCF's securities available for sale portfolio primarily consists of fixed-rate mortgage-backed securities issued by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. Net unrealized pre-tax losses on securities available for sale totaled $43 million at December 31, 2013, compared with net unrealized pre-tax gains of $18.8 million at December 31, 2012. During 2013, TCF transferred $9.3 million in available for sale mortgage-backed securities to held to maturity, reflecting TCF's intent to hold those securities to maturity. During March 2012, as part of TCF's balance sheet repositioning, the Company sold $1.9 billion of U.S. government-sponsored mortgage-backed securities at a gain of $77 million. TCF may, from time to time, sell treasury and agency securities and utilize the proceeds to reduce borrowings, fund growth in loans and leases or for other corporate purposes.

29

Loans and Leases    The following tables set forth information about loans and leases held in TCF's portfolio.

    At December 31,     Compound Annual
Growth Rate
   
     

(Dollars in thousands)

    2013     2012     2011     2010     2009     1-Year
2013/2012
    5-Year
2013/2008
   
 

Consumer real estate:

                                             

First mortgage lien

  $ 3,766,421   $ 4,239,524   $ 4,742,423   $ 4,893,887   $ 4,961,347     (11.2 )%   (5.1 )%  

Junior lien

    2,572,905     2,434,977     2,152,868     2,262,194     2,319,222     5.7     1.2    
                 

Total consumer real estate

    6,339,326     6,674,501     6,895,291     7,156,081     7,280,569     (5.0 )   (2.8 )  

Commercial:

                                             

Commercial real estate

    2,743,697     3,080,942     3,198,698     3,328,216     3,269,003     (10.9 )   (1.7 )  

Commercial business

    404,655     324,293     250,794     317,987     449,516     24.8     (4.4 )  
                 

Total commercial

    3,148,352     3,405,235     3,449,492     3,646,203     3,718,519     (7.5 )   (2.0 )  

Leasing and equipment finance(1)

    3,428,755     3,198,017     3,142,259     3,154,478     3,071,429     7.2     6.6    

Inventory finance

    1,664,377     1,567,214     624,700     792,354     468,805     6.2     N.M    

Auto finance

    1,239,386     552,833     3,628             124.2     N.M    

Other

    26,743     27,924     34,885     39,188     51,422     (4.2 )   (15.6 )  
                 

Total loans and leases

  $ 15,846,939   $ 15,425,724   $ 14,150,255   $ 14,788,304   $ 14,590,744     2.7     3.5    
 

N.M. Not Meaningful.

(1)
Operating leases of $77.7 million, $82.9 million, $69.6 million, $77.4 million, and $105.9 million at December 31, 2013, 2012, 2011, 2010 and 2009, respectively, are included in other assets in the Consolidated Statements of Financial Condition.


(In thousands)

    At December 31, 2013    
 

Geographic Distribution:

    Consumer
Real Estate
    Commercial     Leasing and
Equipment
Finance(1)
    Inventory
Finance
    Auto
Finance
    Other     Total    
 

Minnesota

  $ 2,234,964   $ 793,223   $ 99,102   $ 46,618   $ 25,273   $ 11,853   $ 3,211,033    

Illinois

    1,797,317     600,685     112,731     41,240     71,838     6,636     2,630,447    

Michigan

    638,736     545,508     140,945     52,002     21,881     2,615     1,401,687    

California

    435,893     37,023     487,849     49,898     240,284     28     1,250,975    

Wisconsin

    359,900     598,353     65,789     47,502     10,211     1,432     1,083,187    

Colorado

    483,230     165,011     54,763     18,979     25,610     4,093     751,686    

Texas

    220     15,945     292,187     126,263     77,483     5     512,103    

Canada

            1,445     498,538             499,983    

Florida

    1,139     42,451     147,906     61,025     59,983     41     312,545    

New York

    2,000         170,741     54,913     45,101     36     272,791    

Ohio

    4,093     53,292     138,150     37,516     21,917         254,968    

Pennsylvania

    15,879         142,729     46,759     40,146     10     245,523    

North Carolina

    220     8,087     127,306     32,903     48,824         217,340    

Arizona

    50,810     35,269     74,420     10,066     39,243     303     210,111    

New Jersey

    11,261     4,383     119,861     18,094     45,382         198,981    

Washington

    91,668     8,488     53,139     20,417     23,972     9     197,693    

Georgia

    969     11,569     87,607     29,525     63,751         193,421    

Other

    211,027     229,065     1,112,085     472,119     378,487     (318 )   2,402,465    
 

Total

  $ 6,339,326   $ 3,148,352   $ 3,428,755   $ 1,664,377   $ 1,239,386   $ 26,743   $ 15,846,939    
 
(1)
Excludes operating leases included in other assets.

30

Loans and leases outstanding at December 31, 2013, are shown by contractual maturity in the following table.

    At December 31, 2013(1)    
     

(In thousands)

    Consumer
Real Estate
    Commercial     Leasing and
Equipment
Finance(2)
    Inventory
Finance
    Auto
Finance
    Other     Total    
 

Amounts due:

                                             

Within 1 year

  $ 194,989   $ 495,220   $ 1,184,978   $ 1,664,377   $ 232,159   $ 6,181   $ 3,777,904    

1 to 2 years

    167,468     437,091     868,422         243,509     2,490     1,718,980    

2 to 3 years

    187,989     423,873     641,794         249,952     1,857     1,505,465    

3 to 5 years

    396,466     1,192,043     627,989         427,592     2,624     2,646,714    

5 to 10 years

    1,038,733     587,582     105,572         86,174     4,025     1,822,086    

10 to 15 years

    1,063,618     10,778                 2,220     1,076,616    

Over 15 years

    3,290,063     1,765                 7,346     3,299,174    
 

Total after 1 year

    6,144,337     2,653,132     2,243,777         1,007,227     20,562     12,069,035    
 

Total

  $ 6,339,326   $ 3,148,352   $ 3,428,755   $ 1,664,377   $ 1,239,386   $ 26,743   $ 15,846,939    
 

Amounts due after 1 year on:

                                             

Fixed-rate loans and leases

  $ 3,370,974   $ 1,711,065   $ 2,231,892   $   $ 1,007,227   $ 20,220   $ 8,341,378    

Variable- and adjustable-rate loans(3)

    2,773,363     942,067     11,885             342     3,727,657    
 

Total after 1 year

  $ 6,144,337   $ 2,653,132   $ 2,243,777   $   $ 1,007,227   $ 20,562   $ 12,069,035    
 
(1)
Gross of deferred fees and costs. This table does not include the effect of prepayments, which is an important consideration in management's interest-rate risk analysis. Company experience indicates that loans and leases remain outstanding for significantly shorter periods than their contractual terms.
(2)
Excludes operating leases included in other assets.
(3)
Excludes fixed-term amounts under lines of credit which are included in the line item Fixed-rate loans and leases.

Consumer Real Estate    TCF's consumer real estate loan portfolio represented 40% of its total loan and lease portfolio at December 31, 2013, down 3.3% from 43.3% at December 31, 2012. TCF's consumer real estate portfolio is secured by mortgages on residential real estate. At December 31, 2013, 59.4% of loan balances were secured by first mortgages and 40.6% were secured by second mortgages with an average loan size of $111 thousand secured by first mortgages and $43 thousand secured by second mortgages. At December 31, 2013, 44.2% of the consumer real estate portfolio carried a variable interest rate tied to the prime rate, compared with 40.7% at December 31, 2012.

At December 31, 2013, 63.7% of TCF's consumer real estate loan balance consisted of closed-end loans, compared with 68.1% at December 31, 2012. TCF's closed-end consumer real estate loans require payments of principal and interest over a fixed term. The average home value, which is based on original appraisal value, was $319 thousand as of December 31, 2013. At December 31, 2013 and 2012, 87% and 93.3% of TCF's consumer real estate loans were in TCF's primary banking markets. TCF's consumer real estate lines of credit require regular payments of interest and do not currently require regular payments of principal. The average Fair Isaac Corporation ("FICO®") credit score at loan origination for the retail lending portfolio was 723 as of December 31, 2013, and 729 as of December 31, 2012. As part of TCF's credit risk monitoring, TCF obtains updated FICO score information quarterly. The average updated FICO score for the retail lending portfolio was 717 at December 31, 2013 and 727 December 31, 2012.

TCF's consumer real estate underwriting standards are intended to produce adequately secured loans to customers with good credit scores at the origination date. Beginning in 2008, TCF generally has not made new loans in excess of 90% loan-to-value ("LTV") at origination. TCF did not originate or purchase from brokers 2/28 adjustable-rate mortgages ("ARM") or Option ARM loans. TCF also has not originated consumer real estate loans with multiple payment options or loans with "teaser" interest rates. However, loans at lower LTV ratios have been originated to borrowers with FICO scores below 620 in the normal course of lending to customers. At December 31, 2013, 43.1% of the consumer real estate loan balance had been originated since January 1, 2009 with net charge-offs of .2%. TCF's consumer real estate portfolio is subject to the risk of falling home values and to the general economic environment, particularly unemployment.

At December 31, 2013, total consumer real estate lines of credit outstanding were $2.5 billion, up from $2.4 billion at December 31, 2012. Outstanding balances on consumer real estate lines of credit were 66.5% of total lines of credit in 2013 compared to 65.6% in 2012. Home equity lines of credit were $2.3 billion at December 31, 2013, of which 10.2% will reach maturity or draw period end prior to 2021.

31

Commercial Lending    Commercial real estate loans decreased $337.2 million from December 31, 2012 to $2.7 billion at December 31, 2013. Variable and adjustable-rate loans represented 45.7% of commercial real estate loans outstanding at December 31, 2013, compared with 40% at December 31, 2012. Commercial business loans increased $80.4 million to $404.7 million at December 31, 2013. The overall decrease in commercial lending was due to run-off exceeding new originations as well as continued efforts to actively work out problem loans. With an emphasis on secured lending, 99% of TCF's commercial real estate and commercial business loans were secured either by properties or other business assets at both December 31, 2013 and 2012. As of December 31, 2013, 88.7% of TCF's commercial real estate loans outstanding were secured by properties located in its primary banking markets, compared with 90.8% as of December 31, 2012.

The following table summarizes TCF's commercial real estate loan portfolio by property and loan type.

    At December 31,    
     

    2013     2012    
     

(Dollars in thousands)

    Number
of Loans
    Permanent     Construction and
Development
    Total     Number
of Loans
    Permanent     Construction and
Development
    Total    
 

Multi-family housing

    644   $ 899,604   $ 48,395   $ 947,999     819   $ 958,892   $ 65,735   $ 1,024,627    

Retail services(1)

    299     558,739     10,804     569,543     385     724,408     3,670     728,078    

Office buildings

    162     349,534     2,034     351,568     204     438,460     14,630     453,090    

Warehouse/industrial buildings

    164     306,322         306,322     204     317,673     21,033     338,706    

Health care facilities

    54     193,384     33,516     226,900     46     163,289     3,735     167,024    

Hotels and motels

    32     165,537     2,710     168,247     35     183,138         183,138    

Residential home builders

    15     13,196     8,245     21,441     18     21,419     9,212     30,631    

Other

    75     118,357     33,320     151,677     88     127,570     28,078     155,648    
 

Total

    1,445   $ 2,604,673   $ 139,024   $ 2,743,697     1,799   $ 2,934,849   $ 146,093   $ 3,080,942    
 
(1)
Primarily retail shopping centers and stores, convenience stores, gas stations, restaurants and automobile dealerships.

Leasing and Equipment Finance    The following table summarizes TCF's leasing and equipment finance portfolio by equipment type, excluding operating leases.

    At December 31,    
     

(Dollars in thousands)

    2013     2012    
 

Equipment Type

    Balance     Percent
of Total
    Balance     Percent
of Total
   
 

Specialty vehicles

  $ 849,150     24.8 % $ 765,705     23.9 %  

Manufacturing

    407,478     11.9     439,752     13.8    

Construction

    400,425     11.7     334,940     10.5    

Medical

    393,337     11.5     418,958     13.1    

Golf cart and turf

    327,141     9.5     303,551     9.5    

Technology and data processing

    260,849     7.6     260,829     8.2    

Furniture and fixtures

    212,857     6.2     163,934     5.1    

Trucks and trailers

    150,266     4.4     97,497     3.0