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Section 1: 10-Q (10-Q)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

 

FORM 10-Q

 

x Quarterly Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

 

For the quarterly period ended

March 31, 2007

 

or

 

o Transition Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

 

Commission File No.

001-10253

 

 

TCF FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

 

 

Delaware

41-1591444

(State or other jurisdiction of

(I.R.S. Employer Identification No.)

incorporation or organization)

 

 

 

200 Lake Street East, Mail Code EX0-03-A,

Wayzata, Minnesota 55391-1693

(Address and Zip Code of principal executive offices)

 

 

Registrant’s telephone number, including area code:  (612) 661-6500

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

Yes x

 

No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of  “accelerated filer and large accelerated filer “ in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer x

Accelerated filer o

Non-accelerated filer o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

Yes o

 

No x

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

 

 

Outstanding at

Class

 

April 18, 2007

Common Stock, $.01 par value

 

129,322,154 shares

 

 

 

 



 

TCF FINANCIAL CORPORATION AND SUBSIDIARIES

 

INDEX

 

 

 

 

Part I.  Financial Information

Pages

 

 

Item 1.  Financial Statements

 

 

 

Consolidated Statements of Financial Condition at March 31, 2007 and December 31, 2006

3

 

 

Consolidated Statements of Income for the Three Months Ended March 31, 2007 and 2006

4

 

 

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2007 and 2006

5

 

 

Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2007 and 2006

6

 

 

Notes to Consolidated Financial Statements

7

 

 

Item 2.  Management’s Discussion and Analysis of Consolidated Financial Condition and Results of Operations for the Three Months Ended March 31, 2007 and 2006

16

 

 

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

31

 

 

Item 4.  Controls and Procedures

32

 

 

Supplementary Information

34

 

 

Part II.  Other Information

 

 

 

Items 1- 6

35

 

 

Signatures

36

 

 

Index to Exhibits

37

 

 

2



 

PART 1 - FINANCIAL INFORMATION

Item 1.  Financial Statements

TCF FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Financial Condition

 

 

 

 

At

 

At

 

 

 

March 31,

 

December 31,

 

(Dollars in thousands, except per-share data)

 

2007

 

2006

 

 

 

(Unaudited)

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

282,502

 

$

348,980

 

Investments

 

272,273

 

170,129

 

Securities available for sale

 

1,859,244

 

1,816,126

 

Education loans held for sale

 

208,107

 

144,574

 

Loans and leases:

 

 

 

 

 

Consumer home equity and other

 

6,041,881

 

5,945,077

 

Commercial real estate

 

2,362,023

 

2,390,653

 

Commercial business

 

561,434

 

551,995

 

Leasing and equipment finance

 

1,849,874

 

1,818,165

 

Subtotal

 

10,815,212

 

10,705,890

 

Residential real estate

 

602,748

 

627,790

 

Total loans and leases

 

11,417,960

 

11,333,680

 

Allowance for loan and lease losses

 

(60,483

)

(58,543

)

Net loans and leases

 

11,357,477

 

11,275,137

 

Premises and equipment, net

 

416,570

 

406,087

 

Goodwill

 

152,599

 

152,599

 

Other assets

 

349,603

 

356,102

 

Total assets

 

$

14,898,375

 

$

14,669,734

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

Checking

 

$

4,404,950

 

$

4,348,256

 

Savings

 

2,415,895

 

2,351,580

 

Money market

 

599,635

 

585,779

 

Certificates of deposit

 

2,477,230

 

2,483,635

 

Total deposits

 

9,897,710

 

9,769,250

 

Short-term borrowings

 

47,376

 

214,112

 

Long-term borrowings

 

3,571,930

 

3,374,428

 

Total borrowings

 

3,619,306

 

3,588,540

 

Accrued expenses and other liabilities

 

319,351

 

278,570

 

Total liabilities

 

13,836,367

 

13,636,360

 

Stockholders’ equity:

 

 

 

 

 

Preferred stock, par value $.01 per share, 30,000,000 shares authorized; none issued and outstanding

 

 

 

Common stock, par value $.01 per share, 280,000,000 shares authorized; 131,520,842 and 131,660,749 shares issued

 

1,315

 

1,317

 

Additional paid-in capital

 

350,739

 

343,744

 

Retained earnings, subject to certain restrictions

 

835,218

 

784,011

 

Accumulated other comprehensive loss

 

(32,238

)

(34,926

)

Treasury stock at cost, 2,214,530 and 1,242,413 shares, and other

 

(93,026

)

(60,772

)

Total stockholders’ equity

 

1,062,008

 

1,033,374

 

Total liabilities and stockholders’ equity

 

$

14,898,375

 

$

14,669,734

 

See accompanying notes to consolidated financial statements.

 

 

 

 

 

 

3



 

TCF FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Income

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

(In thousands, except per-share data)

 

2007

 

2006

 

 

 

 

 

 

 

Interest income:

 

 

 

 

 

Loans and leases

 

$

201,605

 

$

176,983

 

Securities available for sale

 

25,105

 

23,699

 

Education loans held for sale

 

4,146

 

4,347

 

Investments

 

2,806

 

677

 

Total interest income

 

233,662

 

205,706

 

Interest expense:

 

 

 

 

 

Deposits

 

57,155

 

39,847

 

Borrowings

 

41,030

 

34,691

 

Total interest expense

 

98,185

 

74,538

 

Net interest income

 

135,477

 

131,168

 

Provision for credit losses

 

4,656

 

1,151

 

Net interest income after provision for credit losses

 

130,821

 

130,017

 

Non-interest income:

 

 

 

 

 

Fees and service charges

 

62,022

 

61,555

 

Card revenue

 

23,261

 

21,262

 

ATM revenue

 

8,749

 

9,099

 

Investments and insurance revenue

 

2,178

 

2,488

 

Subtotal

 

96,210

 

94,404

 

Leasing and equipment finance

 

14,001

 

11,915

 

Other

 

1,953

 

8,252

 

Fees and other revenue

 

112,164

 

114,571

 

Gains on sales of branches and real estate

 

31,173

 

2,928

 

Total non-interest income

 

143,337

 

117,499

 

Non-interest expense:

 

 

 

 

 

Compensation and employee benefits

 

88,093

 

86,168

 

Occupancy and equipment

 

30,451

 

28,051

 

Advertising and promotions

 

5,981

 

5,716

 

Other

 

35,315

 

37,182

 

Subtotal

 

159,840

 

157,117

 

Operating lease depreciation

 

4,360

 

3,163

 

Total non-interest expense

 

164,200

 

160,280

 

Income before income tax expense

 

109,958

 

87,236

 

Income tax expense

 

27,234

 

29,014

 

Net income

 

$

82,724

 

$

58,222

 

 

 

 

 

 

 

Net income per common share:

 

 

 

 

 

Basic

 

$

.65

 

$

.45

 

Diluted

 

$

.65

 

$

.45

 

 

 

 

 

 

 

Dividends declared per common share

 

$

.2425

 

$

.23

 

See accompanying notes to consolidated financial statements.

 

 

 

 

 

 

4



 

TCF FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

(In thousands)

 

2007

 

2006

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

Net income

 

$

82,724

 

$

58,222

 

Adjustments to reconcile net income to net cash provided
(used) by operating activities:

 

 

 

 

 

Depreciation and amortization

 

15,953

 

14,222

 

Provision for credit losses

 

4,656

 

1,151

 

Proceeds from sales of education loans held for sale

 

24,776

 

87,454

 

Principal collected on education loans held for sale

 

1,468

 

2,305

 

Originations and purchases of education loans held for sale

 

(90,200

)

(94,485

)

Net increase (decrease) in other assets and accrued expenses
and other liabilities

 

44,227

 

(5,527

)

Gains on sales of assets, net

 

(31,173

)

(4,530

)

Other, net

 

801

 

(648

)

Total adjustments

 

(29,492

)

(58

)

Net cash provided by operating activities

 

53,232

 

58,164

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Principal collected on loans and leases

 

843,909

 

867,027

 

Originations and purchases of loans

 

(792,121

)

(1,069,523

)

Purchases of equipment for lease financing

 

(150,482

)

(176,036

)

Proceeds from maturities of and principal collected on
securities available for sale

 

60,293

 

52,178

 

Purchases of securities available for sale

 

(100,422

)

(245,476

)

Net purchases of federal funds sold

 

(94,000

)

 

Purchases of Federal Home Loan Bank stock

 

(17,800

)

(22,223

)

Proceeds from redemptions of Federal Home Loan Bank stock

 

8,914

 

33,390

 

Proceeds from sales of real estate owned

 

7,283

 

5,182

 

Purchases of premises and equipment

 

(21,459

)

(19,782

)

Proceeds from sales of premises and equipment

 

4,809

 

3,590

 

Proceeds from sale of mortgage servicing rights

 

 

15,161

 

Other, net

 

5,615

 

(617

)

Net cash used by investing activities

 

(245,461

)

(557,129

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Net increase in deposits

 

369,868

 

460,554

 

Sale of deposits

 

(213,294

)

 

Net decrease in short-term borrowings

 

(166,737

)

(125,598

)

Proceeds from long-term borrowings

 

394,910

 

385,140

 

Payments on long-term borrowings

 

(203,978

)

(197,003

)

Purchases of common stock

 

(28,022

)

(60,659

)

Dividends paid on common stock

 

(31,633

)

(30,754

)

Stock compensation tax benefits

 

2,157

 

19,965

 

Other, net

 

2,480

 

3,510

 

Net cash provided by financing activities

 

125,751

 

455,155

 

Net decrease in cash and due from banks

 

(66,478

)

(43,810

)

Cash and due from banks at beginning of period

 

348,980

 

374,701

 

Cash and due from banks at end of period

 

$

282,502

 

$

330,891

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

Cash paid for:

 

 

 

 

 

Interest on deposits and borrowings

 

$

92,601

 

$

69,820

 

Income taxes

 

$

244

 

$

325

 

Transfer of loans and leases to other assets

 

$

14,653

 

$

8,803

 

See accompanying notes to consolidated financial statements.

 

 

 

 

 

 

 

5



 

TCF FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity

(Unaudited)

 

 

(Dollars in thousands)

 

Number of
Common
Shares Issued

 

Common
Stock

 

Additional
Paid-in
Capital

 

Retained
Earnings

 

Accumulated
Other
Comprehensive
Loss

 

Treasury
Stock
and Other

 

Total

 

Balance, December 31, 2005

 

184,386,193

 

$

1,844

 

$

497,270

 

$

1,536,611

 

$

(21,215

)

$

(1,016,038

)

$

998,472

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

58,222

 

 

 

58,222

 

Other comprehensive loss

 

 

 

 

 

(16,906

)

 

(16,906

)

Comprehensive income (loss)

 

 

 

 

58,222

 

(16,906

)

 

41,316

 

Dividends on common stock

 

 

 

 

(30,754

)

 

 

(30,754

)

Repurchase of 2,400,000 shares

 

 

 

 

 

 

(60,659

)

(60,659

)

Issuance of 612,740 shares

 

 

 

(11,474

)

 

 

11,474

 

 

Cancellation of shares

 

(89,335

)

(1

)

(150

)

128

 

 

 

(23

)

Cancellation of shares for tax withholding

 

(76,483

)

(1

)

(2,071

)

 

 

 

(2,072

)

Elimination of unamortized stock compensation

 

 

 

(20,386

)

 

 

20,386

 

 

Amortization of stock compensation

 

 

 

2,055

 

 

 

 

2,055

 

Stock compensation tax benefits

 

 

 

19,965

 

 

 

 

19,965

 

Change in shares held in trust for deferred compensation plans, at cost

 

 

 

(16,241

)

 

 

16,241

 

 

Balance, March 31, 2006

 

184,220,375

 

$

1,842

 

$

468,968

 

$

1,564,207

 

$

(38,121

)

$

(1,028,596

)

$

968,300

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2006

 

131,660,749

 

$

1,317

 

$

343,744

 

$

784,011

 

$

(34,926

)

$

(60,772

)

$

1,033,374

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

82,724

 

 

 

82,724

 

Other comprehensive income

 

 

 

 

 

2,688

 

 

2,688

 

Comprehensive income

 

 

 

 

82,724

 

2,688

 

 

85,412

 

Dividends on common stock

 

 

 

 

(31,633

)

 

 

(31,633

)

Repurchase of 1,060,000 shares

 

 

 

 

 

 

(28,022

)

(28,022

)

Issuance of 80,550 shares

 

 

 

(1,804

)

 

 

1,804

 

 

Cancellation of shares

 

(93,075

)

(1

)

(168

)

116

 

 

 

(53

)

Cancellation of shares for tax withholding

 

(46,832

)

(1

)

(1,290

)

 

 

 

(1,291

)

Amortization of stock compensation

 

 

 

1,972

 

 

 

 

1,972

 

Exercise of stock options, 7,333 shares

 

 

 

(75

)

 

 

167

 

92

 

Stock compensation tax benefits

 

 

 

2,157

 

 

 

 

2,157

 

Change in shares held in trust for deferred compensation plans, at cost

 

 

 

6,203

 

 

 

(6,203

)

 

Balance, March 31, 2007

 

131,520,842

 

$

1,315

 

$

350,739

 

$

835,218

 

$

(32,238

)

$

(93,026

)

$

1,062,008

 

See accompanying notes to consolidated financial statements.

 

6



 

TCF FINANCIAL CORPORATION AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements

(Unaudited)

 

(1)   Basis of Presentation

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all the information and notes necessary for complete financial statements in conformity with generally accepted accounting principles. The information in this Quarterly Report on Form 10-Q is written with the presumption that the users of the interim financial statements have read or have access to the most recent Annual Report on Form 10-K of TCF Financial Corporation (“TCF” or the “Company”), which contains the latest audited financial statements and notes thereto, together with Management’s Discussion and Analysis of Financial Condition and Results of Operations as of December 31, 2006 and for the year then ended. All significant intercompany accounts and transactions have been eliminated in consolidation. Certain reclassifications have been made to prior period financial statements to conform to the current period presentation. For Consolidated Statements of Cash Flow purposes, cash and cash equivalents include cash and due from banks.

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. These estimates are based on information available to management at the time the estimates are made. Actual results could differ from those estimates. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments, consisting of normal recurring items, considered necessary for a fair presentation. The results of operations for interim periods are not necessarily indicative of the results to be expected for the entire year.

 

(2)   Investments

 

The carrying values of investments, which approximate their fair values, consist of the following.

 

 

 

At

 

At

 

 

 

March 31,

 

December 31,

 

(In thousands)

 

2007

 

2006

 

Federal Home Loan Bank stock, at cost:

 

 

 

 

 

Des Moines

 

$

82,516

 

$

73,630

 

Chicago

 

4,617

 

4,617

 

Subtotal

 

87,133

 

78,247

 

Federal Reserve Bank stock, at cost

 

20,025

 

20,023

 

Interest-bearing deposits with banks

 

115

 

859

 

Federal funds sold

 

165,000

 

71,000

 

Total investments

 

$

272,273

 

$

170,129

 

 

The investments in FHLB stock are required investments related to TCF’s borrowings from these banks. All new FHLB borrowing activity since 2000 is done with the FHLB of Des Moines. FHLBs obtain their funding primarily through issuance of consolidated obligations of the Federal Home Loan Bank System. The U.S. Government does not guarantee these obligations, and each of the 12 FHLBs are generally jointly and severally liable for repayment of each other’s debt. Therefore, TCF’s investments in these banks could be adversely impacted by the operations of the other FHLBs.

 

7



 

(3)   Securities Available for Sale

 

Securities available for sale consist of the following.

 

 

 

At March 31, 2007

 

At December 31, 2006

 

 

 

 

 

Gross

 

Gross

 

 

 

 

 

Gross

 

Gross

 

 

 

 

 

Amortized

 

Unrealized

 

Unrealized

 

Fair

 

Amortized

 

Unrealized

 

Unrealized

 

Fair

 

(Dollars in thousands)

 

Cost

 

Gains

 

Losses

 

Value

 

Cost

 

Gains

 

Losses

 

Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal agencies

 

$

1,883,831

 

$

1,556

 

$

(31,509

)

$

1,853,878

 

$

1,843,744

 

$

880

 

$

(34,046

)

$

1,810,578

 

Other

 

4,531

 

 

(165

)

4,366

 

4,719

 

 

(171

)

4,548

 

Other securities

 

1,000

 

 

 

1,000

 

1,000

 

 

 

1,000

 

Total

 

$

1,889,362

 

$

1,556

 

$

(31,674

)

$

1,859,244

 

$

1,849,463

 

$

880

 

$

(34,217

)

$

1,816,126

 

Weighted-average yield

 

5.40

%

 

 

 

 

 

 

5.37

%

 

 

 

 

 

 

 

The following table shows the securities available for sale portfolio’s gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at March 31, 2007. Unrealized losses on securities available for sale are due to changes in interest rates and not due to credit quality issues. TCF has the ability and intent to hold these securities until a recovery of fair value. Accordingly, TCF has concluded that the unrealized losses are temporary, and no other than temporary impairment has occurred at March 31, 2007.

 

 

 

At March 31, 2007

 

 

 

Less than 12 months

 

12 months or more

 

Total

 

 

 

 

 

Unrealized

 

 

 

Unrealized

 

 

 

Unrealized

 

(In thousands)

 

Fair Value

 

Losses

 

Fair Value

 

Losses

 

Fair Value

 

Losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal agencies

 

$

41,974

 

$

(20

)    

$

1,315,323

 

$

(31,489

)    

$

1,357,297

 

$

(31,509

)

Other

 

 

 

3,947

 

(165

)

3,947

 

(165

)

Total

 

$

41,974

 

$

(20

)

$

1,319,270

 

$

(31,654

)

$

1,361,244

 

$

(31,674

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2006

 

 

 

Less than 12 months

 

12 months or more

 

Total

 

 

 

 

 

Unrealized

 

 

 

Unrealized

 

 

 

Unrealized

 

(In thousands)

 

Fair Value

 

Losses

 

Fair Value

 

Losses

 

Fair Value

 

Losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal agencies

 

$

270,636

 

$

(570

)    

$

1,271,984

 

$

(33,476

)    

$

1,542,620

 

$

(34,046

)

Other

 

 

 

4,101

 

(171

)

4,101

 

(171

)

Total

 

$

270,636

 

$

(570

)

$

1,276,085

 

$

(33,647

)

$

1,546,721

 

$

(34,217

)

 

8



 

(4)   Loans and Leases

 

The following table sets forth information about loans and leases, excluding education loans held for sale.

 

 

 

At

 

At

 

 

 

 

 

March 31,

 

December 31,

 

Percentage

 

(Dollars in thousands)

 

2007

 

2006

 

Change

 

Consumer home equity and other:

 

 

 

 

 

 

 

Home Equity:

 

 

 

 

 

 

 

First mortgage lien

 

$

3,859,451

 

$

3,781,458

 

 

2.1

%

 

Junior lien

 

2,123,438

 

2,101,210

 

 

1.1

 

 

Total consumer home equity

 

5,982,889

 

5,882,668

 

 

1.7

 

 

Other

 

58,992

 

62,409

 

 

(5.5

)

 

Total consumer home equity and other

 

6,041,881

 

5,945,077

 

 

1.6

 

 

Commercial:

 

 

 

 

 

 

 

 

 

Commercial real estate:

 

 

 

 

 

 

 

 

 

Permanent

 

2,166,020

 

2,201,996

 

 

(1.6

)

 

Construction and development

 

196,003

 

188,657

 

 

3.9

 

 

Total commercial real estate

 

2,362,023

 

2,390,653

 

 

(1.2

)

 

Commercial business

 

561,434

 

551,995

 

 

1.7

 

 

Total commercial

 

2,923,457

 

2,942,648

 

 

(0.7

)

 

Leasing and equipment finance (1):

 

 

 

 

 

 

 

 

 

Equipment finance loans

 

512,248

 

492,062

 

 

4.1

 

 

Lease financings:

 

 

 

 

 

 

 

 

 

Direct financing leases

 

1,436,858

 

1,423,226

 

 

1.0

 

 

Sales-type leases

 

21,866

 

22,694

 

 

(3.6

)

 

Lease residuals

 

36,731

 

34,671

 

 

5.9

 

 

Unearned income and deferred lease costs

 

(157,829

)

(154,488

)

 

(2.2

)

 

Total lease financings

 

1,337,626

 

1,326,103

 

 

0.9

 

 

Total leasing and equipment finance

 

1,849,874

 

1,818,165

 

 

1.7

 

 

Total consumer, commercial and leasing and equipment finance

 

10,815,212

 

10,705,890

 

 

1.0

 

 

Residential real estate

 

602,748

 

627,790

 

 

(4.0

)

 

Total loans and leases

 

$

11,417,960

 

$

11,333,680

 

 

0.7

 

 

(1)   Operating leases of $75.9 million at March 31, 2007 and $80.4 million at December 31, 2006 are included in Other Assets on the Consolidated Statements of Financial Condition.

 

9



 

(5)   Long-term Borrowings

 

 

 

 

 

At March 31, 2007

 

At December 31, 2006

 

 

 

 

 

 

 

Weighted-

 

 

 

Weighted-

 

 

 

Year of

 

 

 

Average

 

 

 

Average

 

(Dollars in thousands)

 

Maturity

 

Amount

 

Rate

 

Amount

 

Rate

 

Federal Home Loan Bank advances and securities sold under repurchase agreements

 

2007

 

$

 

%    

$

200,000

 

3.65

%

 

 

2009

 

117,000

 

5.26

 

117,000

 

5.26

 

 

 

2010

 

100,000

 

6.02

 

100,000

 

6.02

 

 

 

2011

 

200,000

 

4.85

 

200,000

 

4.85

 

 

 

2015

 

1,400,000

 

4.16

 

1,400,000

 

4.16

 

 

 

2016

 

1,100,000

 

4.49

 

1,100,000

 

4.49

 

 

 

2017

 

400,000

 

4.50

 

 

 

Sub-total

 

 

 

3,317,000

 

4.44

 

3,117,000

 

4.58

 

Subordinated bank notes

 

2014

 

74,589

 

5.27

 

74,545

 

5.27

 

 

 

2015

 

49,498

 

5.37

 

49,458

 

5.37

 

 

 

2016

 

74,351

 

5.63

 

74,337

 

5.63

 

Sub-total

 

 

 

198,438

 

5.43

 

198,340

 

5.43

 

Discounted lease rentals

 

2007

 

21,397

 

7.22

 

27,566

 

7.13

 

 

 

2008

 

18,088

 

7.33

 

16,000

 

7.30

 

 

 

2009

 

8,585

 

7.30

 

7,390

 

7.27

 

 

 

2010

 

2,581

 

7.19

 

2,287

 

7.16

 

 

 

2011

 

431

 

7.25

 

431

 

7.25

 

Sub-total

 

 

 

51,082

 

7.27

 

53,674

 

7.20

 

Other borrowings

 

2007

 

2,218

 

4.50

 

2,222

 

4.50

 

 

 

2008

 

2,226

 

4.51

 

2,226

 

4.51

 

 

 

2009

 

966

 

5.00

 

966

 

5.00

 

Sub-total

 

 

 

5,410

 

4.59

 

5,414

 

4.59

 

Total long-term borrowings

 

 

 

$

3,571,930

 

4.54

 

$

3,374,428

 

4.49

 

 

Included in Federal Home Loan Bank (“FHLB”) advances and repurchase agreements at March 31, 2007 were $417 million of fixed-rate FHLB advances, which are callable quarterly by the counterparties at par until maturity. In addition, TCF has $1.6 billion of repurchase agreements and $1.3 billion of FHLB advances, which are callable during various years from 2008 through 2011. The probability that these advances and repurchase agreements will be called depends primarily on the level of related interest rates during the call period.

 

The next call year and stated maturity year for the callable FHLB advances and repurchase agreements outstanding at March 31, 2007 were as follows.

 

Year

 

Next
Call Date

 

Weighted-
Average Rate

 

Stated
Maturity Date

 

Weighted-
Average Rate

 

 

 

 

 

 

 

 

 

 

 

2007

 

$

417,000

 

5.24

%    

$

 

%

2008

 

1,200,000

 

4.13

 

 

 

2009

 

1,000,000

 

4.45

 

117,000

 

5.26

 

2010

 

600,000

 

4.43

 

100,000

 

6.02

 

2011

 

100,000

 

4.82

 

200,000

 

4.85

 

2015

 

 

 

1,400,000

 

4.16

 

2016

 

 

 

1,100,000

 

4.49

 

2017

 

 

 

400,000

 

4.50

 

Total

 

$

3,317,000

 

4.44

 

$

3,317,000

 

4.44

 

 

10



 

(6)   Stockholders’ Equity

Treasury stock and other consists of the following.

 

 

 

At

 

At

 

 

 

March 31,

 

December 31,

 

(In thousands)

 

2007

 

2006

 

 

 

 

 

 

 

Treasury stock, at cost

 

$

(53,878

)

$

(27,827

)

Shares held in trust for deferred compensation
plans, at cost

 

(39,148

)

(32,945

)

Total

 

$

(93,026

)

$

(60,772

)

 

(7)   Stock Compensation

 

The TCF Financial Incentive Stock Program (the “Program”) was adopted to enable TCF to attract and retain key personnel. Under the Program, no more than 5% of the shares of TCF common stock outstanding on the date of initial shareholder approval may be awarded. At March 31, 2007, there were 4,088,163 shares reserved for issuance under the Program, including 223,800 shares related to outstanding stock options that are fully vested.

 

At March 31, 2007, there were 1,455,166 shares of performance-based restricted stock that will vest only if certain earnings per share goals and service conditions are achieved. Failure to achieve the goals and service conditions will result in all or a portion of the shares being forfeited. Other restricted stock grants vest over periods from three to seven years. The weighted-average grant date fair value of restricted stock granted for the quarters ended March 31, 2007 and 2006 was $26.53 and $25.18, respectively. Compensation expense for restricted stock was $1.8 million for the quarter ended March 31, 2007, compared with $1.9 million for the quarter ended March 31, 2006. The recognized tax benefit for stock compensation expense was $623 thousand and $634 thousand, respectively, for the quarters ended March 31, 2007 and 2006, respectively. Unrecognized stock compensation for restricted stock awards was $18.5 million with a weighted-average remaining amortization period of two years at March 31, 2007, compared with $25.7 million with a weighted-average remaining amortization period of 2.7 years at March 31, 2006.

 

The following table reflects TCF’s restricted stock transactions under the Program since December 31, 2006.

 

 

 

Restricted Stock

 

 

 

Shares

 

Price Range

 

Outstanding at December 31, 2006

 

2,619,341

 

$9.87-$30.28

 

Granted

 

80,550

 

26.53

 

Forfeited

 

(93,075

)

9.87-28.71

 

Vested

 

(139,900

)

20.38-25.17

 

Outstanding at March 31, 2007

 

2,466,916

 

$9.87-$30.28

 

 

(8)   Regulatory Capital Requirements

 

TCF is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possible additional discretionary, actions by the federal banking agencies that could have a direct material effect on TCF’s financial statements. Also, in general, TCF Bank may not declare or pay a dividend to TCF 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 Office of the Comptroller of the Currency (“OCC”).

 

11



 

The following table sets forth TCF’s and TCF National Bank’s regulatory tier 1 leverage, tier 1 risk-based and total risk-based capital levels, and applicable percentages of adjusted assets, together with the minimum and well-capitalized capital requirements.

 

 

 

 

 

Minimum

 

Well-Capitalized

 

 

 

Actual

 

Capital Requirement

 

Capital Requirement

 

(Dollars in thousands)

 

Amount

 

Ratio

 

Amount

 

Ratio

 

Amount

 

Ratio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of March 31, 2007:

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 leverage capital

 

 

 

 

 

 

 

 

 

 

 

 

 

TCF

 

$

940,227

 

6.37

%    

$

442,801

 

3.00

%

N.A.

 

N.A.

 

TCF National Bank

 

864,490

 

5.87

 

441,814

 

3.00

 

$

736,357

 

5.00

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 risk-based capital

 

 

 

 

 

 

 

 

 

 

 

 

 

TCF

 

940,227

 

8.83

 

425,858

 

4.00

 

638,786

 

6.00

 

TCF National Bank

 

864,490

 

8.13

 

425,084

 

4.00

 

637,627

 

6.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total risk-based capital

 

 

 

 

 

 

 

 

 

 

 

 

 

TCF

 

1,201,061

 

11.28

 

851,715

 

8.00

 

1,064,644

 

10.00

 

TCF National Bank

 

1,125,323

 

10.59

 

850,169

 

8.00

 

1,062,711

 

10.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2006:

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 leverage capital

 

 

 

 

 

 

 

 

 

 

 

 

 

TCF

 

$

914,128

 

6.33

%

$

432,993

 

3.00

%

N.A.

 

N.A.

 

TCF National Bank

 

821,273

 

5.70

 

432,374

 

3.00

 

$

720,623

 

5.00

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 risk-based capital

 

 

 

 

 

 

 

 

 

 

 

 

 

TCF

 

914,128

 

8.65

 

422,678

 

4.00

 

634,016

 

6.00

 

TCF National Bank

 

821,273

 

7.79

 

421,941

 

4.00

 

632,911

 

6.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total risk-based capital

 

 

 

 

 

 

 

 

 

 

 

 

 

TCF

 

1,173,073

 

11.10

 

845,355

 

8.00

 

1,056,694

 

10.00

 

TCF National Bank

 

1,080,218

 

10.24

 

843,881

 

8.00

 

1,054,851

 

10.00

 

N.A. Not Applicable.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At March 31, 2007, TCF, TCF National Bank and TCF National Bank Arizona exceeded their regulatory capital requirements and are considered “well-capitalized” under guidelines established by the Federal Reserve Board (“FRB”) and the OCC pursuant to the Federal Deposit Insurance Corporation Improvement Act of 1991.

 

(9)   Employee Benefit Plans

 

The following table sets forth the net periodic benefit cost included in compensation and employee benefits expense for TCF’s Pension Plan and Postretirement Plan for the three months ended March 31, 2007 and 2006.

 

 

 

Pension Plan

 

Postretirement Plan

 

 

 

Three Months Ended March 31,

 

Three Months Ended March 31,

 

(In thousands)

 

2007

 

2006

 

2007

 

2006

 

Service cost

 

$

 

$

1,379

 

$

4

 

$

7

 

Interest cost

 

732

 

749

 

123

 

108

 

Expected return on plan assets

 

(1,234

)

(1,263

)

 

 

Amortization of transition obligation

 

 

 

25

 

25

 

Amortization of prior service cost

 

 

(21

)

 

 

Amortization of net actuarial loss

 

849

 

575

 

56

 

30

 

Plan amendment/curtailment gain

 

 

(400

)

 

 

Net periodic benefit cost

 

$

347

 

$

1,019

 

$

208

 

$

170

 

 

During the first quarters of 2007 and 2006, TCF made no contributions to the Pension Plan. TCF is not required, and does not anticipate making, any minimum contributions to the Pension Plan during 2007. During the first quarter of 2007, TCF paid $325 thousand for benefits of the Postretirement Plan, compared with $184 thousand for the same 2006 period.

 

12



 

(10) Business Segments

 

Banking and leasing and equipment finance have been identified as reportable operating segments. Banking includes the following operating units that provide financial services to customers: deposits and investments products, commercial banking, consumer lending and treasury services. Management of TCF’s banking operations are organized by state. The separate state operations have been aggregated for purposes of segment disclosures. Leasing and equipment finance provides a broad range of comprehensive leasing and equipment finance products addressing the financing needs of diverse businesses. In addition, TCF’s bank holding company (“Parent Company”) and corporate functions provide data processing, bank operations and other professional services to the operating segments.

 

TCF evaluates performance and allocates resources based on the segments’ net income. The business segments follow generally accepted accounting principles as described in the Summary of Significant Accounting Policies in the most recent Annual Report on Form 10-K. TCF generally accounts for inter-segment sales and transfers at cost.

 

The following table sets forth certain information for TCF’s reportable segments, including a reconciliation of TCF’s consolidated totals. The “other” category in the table below includes TCF’s parent company, corporate functions and mortgage banking.

 

 

 

 

 

Leasing and

 

 

 

Eliminations

 

 

 

 

 

 

 

Equipment

 

 

 

and

 

 

 

(In thousands)

 

Banking

 

Finance

 

Other

 

Reclassifications

 

Consolidated

 

At or For the Three Months Ended March 31, 2007:

 

 

 

 

 

 

 

 

 

 

 

Revenues from external customers:

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

$

199,415

 

$

34,247

 

$

 

$

 

$

233,662

 

Non-interest income

 

129,129

 

14,002

 

206

 

 

143,337

 

Total

 

$

328,544

 

$

48,249

 

$

206

 

$

 

$

376,999

 

Net interest income

 

$

120,780

 

$

14,875

 

$

(178

)

$

 

$

135,477

 

Provision for credit losses

 

5,514

 

(858

)

 

 

4,656

 

Non-interest income

 

129,129

 

14,002

 

38,948

 

(38,742

)

143,337

 

Non-interest expense

 

147,844

 

15,898

 

39,200

 

(38,742

)

164,200

 

Income tax expense

 

22,531

 

5,009

 

(306

)

 

27,234

 

Net income

 

$

74,020

 

$

8,828

 

$

(124

)

$

 

$

82,724

 

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill

 

$

141,245

 

$

11,354

 

$

 

$

 

$

152,599

 

Total assets

 

$

14,450,334

 

$

2,008,361

 

$

127,152

 

$

(1,687,472

)

$

14,898,375

 

 

 

 

 

 

 

 

 

 

 

 

 

At or For the Three Months Ended March 31, 2006:

 

 

 

 

 

 

 

 

 

 

 

Revenues from external customers:

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

$

178,420

 

$

27,286

 

$

 

$

 

$

205,706

 

Non-interest income

 

101,205

 

11,915

 

4,379

 

 

117,499

 

Total

 

$

279,625

 

$

39,201

 

$

4,379

 

$

 

$

323,205

 

Net interest income

 

$

116,000

 

$

14,089

 

$

575

 

$

504

 

$

131,168

 

Provision for credit losses

 

2,369

 

(1,218

)

 

 

1,151

 

Non-interest income

 

101,205

 

11,915

 

36,726

 

(32,347

)

117,499

 

Non-interest expense

 

144,824

 

12,944

 

34,355

 

(31,843

)

160,280

 

Income tax expense

 

23,053

 

5,149

 

812

 

 

29,014

 

Net income

 

$

46,959

 

$

9,129

 

$

2,134

 

$

 

$

58,222

 

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill

 

$

141,245

 

$

11,354

 

$

 

$

 

$

152,599

 

Total assets

 

$

13,397,239

 

$

1,711,923

 

$

161,356

 

$

(1,418,582

)

$

13,851,936

 

 

 

13



 

(11) Earnings Per Common Share

 

The computation of basic and diluted earnings per share is presented in the following table.

 

 

 

Three Months Ended
March 31,

 

(Dollars in thousands, except per-share data)

 

2007

 

2006

 

 

 

 

 

 

 

Basic Earnings Per Common Share