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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

June 30, 2008

 

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:  (952) 745-2760

 

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, a non-accelerated filer or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer  x

Accelerated filer  o

Non-accelerated filer  o

Smaller reporting company  o

 

 

(Do not check if a smaller

 

 

 

reporting company)

 

 

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

 

July 16, 2008

Common Stock, $.01 par value

 

131,055,794 shares

 

 



 

TCF FINANCIAL CORPORATION AND SUBSIDIARIES
 
INDEX

 

Part I.

 

Financial Information

 

Pages

 

 

 

 

 

 

 

Item 1. Financial Statements

 

 

 

 

 

 

 

 

 

Consolidated Statements of Financial Condition
at June 30, 2008 and December 31, 2007

 

3

 

 

 

 

 

 

 

Consolidated Statements of Income for the Three and
Six Months Ended June 30, 2008 and 2007

 

4

 

 

 

 

 

 

 

Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 2008 and 2007

 

5

 

 

 

 

 

 

 

Consolidated Statements of Stockholders’ Equity for the
Six Months Ended June 30, 2008 and 2007

 

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 and
Six Months Ended June 30, 2008 and 2007

 

19

 

 

 

 

 

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

37

 

 

 

 

 

 

 

Item 4. Controls and Procedures

 

38

 

 

 

 

 

 

 

Supplementary Information

 

39

 

 

 

 

 

Part II.

 

Other Information

 

 

 

 

 

 

 

 

 

Items 1-6

 

40

 

 

 

 

 

 

 

Signatures

 

42

 

 

 

 

 

 

 

Index to Exhibits

 

43

 

2



 

PART 1 - FINANCIAL INFORMATION

Item 1. Financial Statements

TCF FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Financial Condition

 

 

 

At

 

At

 

 

 

June 30,

 

December 31,

 

(Dollars in thousands, except per-share data)

 

2008

 

2007

 

 

 

(Unaudited)

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

349,817

 

$

358,188

 

Investments

 

153,550

 

148,253

 

Securities available for sale

 

2,120,664

 

1,963,681

 

Education loans held for sale

 

24,385

 

156,135

 

Loans and leases:

 

 

 

 

 

Consumer home equity and other

 

6,919,576

 

6,590,631

 

Commercial real estate

 

2,727,568

 

2,557,330

 

Commercial business

 

556,176

 

558,325

 

Leasing and equipment finance

 

2,263,431

 

2,104,343

 

Subtotal

 

12,466,751

 

11,810,629

 

Residential real estate

 

485,795

 

527,607

 

Total loans and leases

 

12,952,546

 

12,338,236

 

Allowance for loan and lease losses

 

(133,637

)

(80,942

)

Net loans and leases

 

12,818,909

 

12,257,294

 

Premises and equipment, net

 

441,402

 

438,452

 

Goodwill

 

152,599

 

152,599

 

Other assets

 

398,797

 

502,452

 

Total assets

 

$

16,460,123

 

$

15,977,054

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

Checking

 

$

4,208,531

 

$

4,108,527

 

Savings

 

2,917,288

 

2,636,820

 

Money market

 

609,915

 

576,667

 

Certificates of deposit

 

2,410,388

 

2,254,535

 

Total deposits

 

10,146,122

 

9,576,549

 

Short-term borrowings

 

411,802

 

556,070

 

Long-term borrowings

 

4,515,997

 

4,417,378

 

Total borrowings

 

4,927,799

 

4,973,448

 

Accrued expenses and other liabilities

 

297,901

 

328,045

 

Total liabilities

 

15,371,822

 

14,878,042

 

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; 131,057,353 and 131,468,699 shares issued

 

1,310

 

1,315

 

Additional paid-in capital

 

345,668

 

354,563

 

Retained earnings, subject to certain restrictions

 

935,378

 

926,875

 

Accumulated other comprehensive loss

 

(36,986

)

(18,055

)

Treasury stock at cost, 4,576,330 and 4,866,480 shares, and other

 

(157,069

)

(165,686

)

Total stockholders’ equity

 

1,088,301

 

1,099,012

 

Total liabilities and stockholders’ equity

 

$

16,460,123

 

$

15,977,054

 

See accompanying notes to consolidated financial statements.

 

 

 

 

 

 

3



 

TCF FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Income

(Unaudited)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

 

 

June 30,

 

(In thousands, except per-share data)

 

2008

 

2007

 

2008

 

2007

 

 

 

 

 

 

 

 

 

 

 

Interest income:

 

 

 

 

 

 

 

 

 

Loans and leases

 

$

208,407

 

$

206,738

 

$

420,184

 

$

408,343

 

Securities available for sale

 

28,858

 

26,665

 

57,137

 

51,770

 

Education loans held for sale

 

1,756

 

3,365

 

5,208

 

7,511

 

Investments and other

 

1,427

 

1,557

 

3,069

 

4,363

 

Total interest income

 

240,448

 

238,325

 

485,598

 

471,987

 

Interest expense:

 

 

 

 

 

 

 

 

 

Deposits

 

36,954

 

58,242

 

85,682

 

115,397

 

Borrowings

 

51,932

 

42,658

 

105,525

 

83,688

 

Total interest expense

 

88,886

 

100,900

 

191,207

 

199,085

 

Net interest income

 

151,562

 

137,425

 

294,391

 

272,902

 

Provision for credit losses

 

62,895

 

13,329

 

92,890

 

17,985

 

Net interest income after provision for
credit losses

 

88,667

 

124,096

 

201,501

 

254,917

 

Non-interest income:

 

 

 

 

 

 

 

 

 

Fees and service charges

 

67,961

 

71,728

 

131,508

 

133,750

 

Card revenue

 

26,828

 

24,876

 

51,599

 

48,137

 

ATM revenue

 

8,267

 

9,314

 

16,237

 

18,063

 

Investments and insurance revenue

 

2,977

 

2,772

 

6,212

 

4,950

 

Subtotal

 

106,033

 

108,690

 

205,556

 

204,900

 

Leasing and equipment finance

 

14,050

 

15,199

 

26,184

 

29,200

 

Other

 

1,421

 

2,993

 

2,469

 

4,946

 

Fees and other revenue

 

121,504

 

126,882

 

234,209

 

239,046

 

Visa share redemption

 

 

 

8,308

 

 

Gains on sales of securities available for sale

 

1,115

 

 

7,401

 

 

Gains on sales of branches and real estate

 

 

2,723

 

 

33,896

 

Total non-interest income

 

122,619

 

129,605

 

249,918

 

272,942

 

Non-interest expense:

 

 

 

 

 

 

 

 

 

Compensation and employee benefits

 

84,267

 

86,707

 

172,985

 

174,800

 

Occupancy and equipment

 

31,205

 

29,329

 

63,618

 

59,780

 

Advertising and promotions

 

7,130

 

5,586

 

13,426

 

11,567

 

Other

 

41,667

 

36,531

 

78,002

 

71,846

 

Subtotal

 

164,269

 

158,153

 

328,031

 

317,993

 

Operating lease depreciation

 

4,460

 

4,381

 

8,974

 

8,741

 

Total non-interest expense

 

168,729

 

162,534

 

337,005

 

326,734

 

Income before income tax expense

 

42,557

 

91,167

 

114,414

 

201,125

 

Income tax expense

 

18,855

 

29,038

 

43,286

 

56,272

 

Net income

 

$

23,702

 

$

62,129

 

$

71,128

 

$

144,853

 

 

 

 

 

 

 

 

 

 

 

Net income per common share:

 

 

 

 

 

 

 

 

 

Basic

 

$

.19

 

$

.49

 

$

.57

 

$

1.14

 

Diluted

 

$

.19

 

$

.49

 

$

.57

 

$

1.14

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per common share

 

$

.25

 

$

.2425

 

$

.50

 

$

.4850

 

See accompanying notes to consolidated financial statements.

 

 

 

 

 

 

 

 

4



 

TCF FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

Six Months Ended

 

 

 

June 30,

 

(In thousands)

 

2008

 

2007

 

Cash flows from operating activities:

 

 

 

 

 

Net income

 

$

71,128

 

$

144,853

 

Adjustments to reconcile net income to net cash
provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

32,815

 

31,994

 

Provision for credit losses

 

92,890

 

17,985

 

Proceeds from sales of education loans held for sale

 

221,628

 

134,361

 

Principal collected on education loans held for sale

 

1,495

 

2,961

 

Originations of education loans held for sale

 

(94,131

)

(107,035

)

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

 

(19,271

)

16,517

 

Gains on sales of assets and deposits, net

 

(7,401

)

(33,896

)

Other, net

 

5,063

 

4,465

 

Total adjustments

 

233,088

 

67,352

 

Net cash provided by operating activities

 

304,216

 

212,205

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Principal collected on loans and leases

 

1,607,296

 

1,772,113

 

Originations of loans

 

(1,913,411

)

(1,762,423

)

Purchases of equipment for lease financing

 

(398,804

)

(335,012

)

Proceeds from sales of securities available for sale

 

1,206,236

 

 

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

 

133,751

 

128,910

 

Purchases of securities available for sale

 

(1,418,925

)

(301,385

)

Net decrease in federal funds sold

 

 

71,000

 

Purchases of Federal Home Loan Bank stock

 

(51,167

)

(21,137

)

Proceeds from redemptions of Federal Home Loan Bank stock

 

46,746

 

8,926

 

Proceeds from sales of real estate owned

 

15,429

 

16,325

 

Purchases of premises and equipment

 

(22,776

)

(38,626

)

Proceeds from sales of premises and equipment

 

671

 

10,539

 

Other, net

 

9,917

 

11,328

 

Net cash used by investing activities

 

(785,037

)

(439,442

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Net increase in deposits

 

569,573

 

314,853

 

Sale of deposits, net

 

 

(213,294

)

Net (decrease) increase in short-term borrowings

 

(144,268

)

71,716

 

Proceeds from long-term borrowings

 

113,056

 

387,768

 

Payments on long-term borrowings

 

(10,951

)

(210,504

)

Purchases of common stock

 

 

(94,221

)

Dividends paid on common stock

 

(63,175

)

(62,992

)

Stock compensation tax benefits

 

3,988

 

4,519

 

Other, net

 

4,227

 

3,974

 

Net cash provided by financing activities

 

472,450

 

201,819

 

Net decrease in cash and due from banks

 

(8,371

)

(25,418

)

Cash and due from banks at beginning of period

 

358,188

 

349,839

 

Cash and due from banks at end of period

 

$

349,817

 

$

324,421

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

Cash paid for:

 

 

 

 

 

Interest on deposits and borrowings

 

$

192,570

 

$

189,752

 

Income taxes

 

$

37,550

 

$

40,680

 

Transfer of loans and leases to other assets

 

$

39,825

 

$

44,758

 

See accompanying notes to consolidated financial statements.

 

 

 

 

 

 

5



 

TCF FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

Number of

 

 

 

Additional

 

 

 

Other

 

Treasury

 

 

 

 

 

Common

 

Common

 

Paid-in

 

Retained

 

Comprehensive

 

Stock

 

 

 

(Dollars in thousands)

 

Shares Issued

 

Stock

 

Capital

 

Earnings

 

Loss

 

and Other

 

Total

 

Balance, December 31, 2006

 

131,660,749

 

$

1,317

 

$

343,744

 

$

784,011

 

$

(34,926

)

$

(60,772

$

1,033,374

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

144,853

 

 

 

144,853

 

Other comprehensive loss

 

 

 

 

 

(27,705

)

 

(27,705

)

Comprehensive income (loss)

 

 

 

 

144,853

 

(27,705

)

 

117,148

 

Dividends on common stock

 

 

 

 

(62,992

)

 

 

(62,992

)

Repurchase of 1,060,000 shares

 

 

 

 

 

 

(94,221

)  

(94,221

)

Issuance of 80,550 shares

 

 

 

(2,268

)

 

 

2,268

 

 

Cancellation of shares

 

(111,025

)

(1

)

(339

)

232

 

 

 

(108

)

Cancellation of shares for
tax withholding

 

(48,990

)

(1

)

(1,347

)

 

 

 

(1,348

)

Amortization of stock compensation

 

 

 

3,928

 

 

 

 

3,928

 

Exercise of stock options,
7,333 shares

 

 

 

(698

)

 

 

1,430

 

732

 

Stock compensation tax benefits

 

 

 

4,519

 

 

 

 

4,519

 

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

 

 

 

5,135

 

 

 

(5,135

)

 

Balance, June 30, 2007

 

131,500,734

 

$

1,315

 

$

352,674

 

$

866,104

 

$

(62,631

)

$

(156,430

)

$

1,001,032

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2007

 

131,468,699

 

$

1,315

 

$

354,563

 

$

926,875

 

$

(18,055

)

$

(165,686

)

$

1,099,012

 

Pension and postretirement measurement
date change

 

 

 

 

65

 

 

 

65

 

Subtotal

 

131,468,699

 

1,315

 

354,563

 

926,940

 

(18,055

)

(165,686

)

1,099,077

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

71,128

 

 

 

71,128

 

Other comprehensive loss

 

 

 

 

 

(18,931

)

 

(18,931

)

Comprehensive income (loss)

 

 

 

 

71,128

 

(18,931

)

 

52,197

 

Dividends on common stock

 

 

 

 

(63,175

)

 

 

(63,175

)

Issuance of 277,150 shares

 

 

 

(7,177

)

 

 

7,177

 

 

Cancellation of shares

 

(19,600

)

(1

)

(2,654

)

485

 

 

 

(2,170

)

Cancellation of shares for
tax withholding

 

(391,746

)

(4

)

(6,223

)

 

 

 

(6,227

)

Amortization of stock compensation

 

 

 

4,448

 

 

 

 

4,448

 

Exercise of stock options, 13,000 shares

 

 

 

(173

)

 

 

336

 

163

 

Stock compensation tax benefits

 

 

 

3,988

 

 

 

 

3,988

 

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

 

 

 

(1,104

)

 

 

1,104

 

 

Balance, June 30, 2008

 

131,057,353

 

$

1,310

 

$

345,668

 

$

935,378

 

$

(36,986

)

$

(157,069

)

$

1,088,301

 

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, 2007 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 consist of the following.

 

 

 

At

 

At

 

 

 

June 30,

 

December 31,

 

(In thousands)

 

2008

 

2007

 

Federal Home Loan Bank stock, at cost:

 

 

 

 

 

Des Moines

 

$

120,269

 

$

115,848

 

Chicago

 

4,617

 

4,617

 

Subtotal

 

124,886

 

120,465

 

Federal Reserve Bank stock, at cost

 

20,529

 

20,423

 

Other

 

8,135

 

7,365

 

Total investments

 

$

153,550

 

$

148,253

 

 

The investments in Federal Home Loan Bank (“FHLB”) stock are required investments related to TCF’s borrowings from these banks.  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 financial operations of the FHLBs and actions by the Federal Housing Finance Board’s Office of Supervision.

 

7



 

(3)          Securities Available for Sale

 

Securities available for sale consist of the following.

 

 

 

At June 30, 2008

 

At December 31, 2007

 

 

 

 

 

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:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government sponsored
enterprises and federal agencies

 

$

2,163,894

 

$

208

 

$

(47,149

)    

$

2,116,953

 

$

1,975,817

 

$

2,493

 

$

(18,681

)    

$

1,959,629

 

Other

 

3,635

 

 

(174

)

3,461

 

3,992

 

 

(190

)

3,802

 

Other securities

 

250

 

 

 

250

 

250

 

 

 

250

 

Total

 

$

2,167,779

 

$

208

 

$

(47,323

)

$

2,120,664

 

$

1,980,059

 

$

2,493

 

$

(18,871

)

$

1,963,681

 

Weighted-average yield

 

5.28

%

 

 

 

 

 

 

5.27

%

 

 

 

 

 

 

 

The following tables show 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.  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 investments until a recovery of fair value.  Accordingly, TCF has concluded that no other-than-temporary impairment has occurred at June 30, 2008.

 

 

 

At June 30, 2008

 

 

 

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:

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government sponsored
enterprises and federal agencies

 

$

1,893,095

 

$

(40,149

)   

$

204,068

 

$

(7,000

)   

$

2,097,163

 

$

(47,149

)

Other

 

 

 

3,141

 

(174

)

3,141

 

(174

)

Total

 

$

1,893,095

 

$

(40,149

)

$

207,209

 

$

(7,174

)

$

2,100,304

 

$

(47,323

)

 

 

 

 

 

 

At December 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:

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government sponsored
enterprises and federal agencies

 

$

286,063

 

$

(190

)   

$

977,511

 

$

(18,491

)   

$

1,263,574

 

$

(18,681

)

Other

 

 

 

3,443

 

(190

)

3,443

 

(190

)

Total

 

$

286,063

 

$

(190

)

$

980,954

 

$

(18,681

)

$

1,267,017

 

$

(18,871

)

 

8



 

(4)          Loans and Leases

 

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

 

 

 

At

 

At

 

 

 

 

 

June 30,

 

December 31,

 

Percentage

 

(Dollars in thousands)

 

2008

 

2007

 

Change

 

Consumer home equity and other:

 

 

 

 

 

 

 

Home equity:

 

 

 

 

 

 

 

First mortgage lien

 

$

4,404,117

 

$

4,178,961

 

5.4

%

Junior lien

 

2,446,982

 

2,344,113

 

4.4

 

Total consumer home equity

 

6,851,099

 

6,523,074

 

5.0

 

Other

 

68,477

 

67,557

 

1.4

 

Total consumer home equity and other

 

6,919,576

 

6,590,631

 

5.0

 

Commercial:

 

 

 

 

 

 

 

Commercial real estate:

 

 

 

 

 

 

 

Permanent

 

2,442,966

 

2,280,204

 

7.1

 

Construction and development

 

284,602

 

277,126

 

2.7

 

Total commercial real estate

 

2,727,568

 

2,557,330

 

6.7

 

Commercial business

 

556,176

 

558,325

 

(0.4

)

Total commercial

 

3,283,744

 

3,115,655

 

5.4

 

Leasing and equipment finance (1):

 

 

 

 

 

 

 

Equipment finance loans

 

680,027

 

604,185

 

12.6

 

Lease financings:

 

 

 

 

 

 

 

Direct financing leases

 

1,694,514

 

1,611,881

 

5.1

 

Sales-type leases

 

23,629

 

26,657

 

(11.4

)

Lease residuals

 

47,605

 

41,678

 

14.2

 

Unearned income and deferred lease costs

 

(182,344

)

(180,058

)

(1.3

)

Total lease financings

 

1,583,404

 

1,500,158

 

5.5

 

Total leasing and equipment finance

 

2,263,431

 

2,104,343

 

7.6

 

Total consumer, commercial and leasing and equipment finance

 

12,466,751

 

11,810,629

 

5.6

 

Residential real estate

 

485,795

 

527,607

 

(7.9

)

Total loans and leases

 

$

12,952,546

 

$

12,338,236

 

5.0

 

(1)      Operating leases of $63.9 million at June 30, 2008 and $71.1 million at December 31, 2007 are included in Other Assets on the Consolidated Statements of Financial Condition.

 

9



 

(5)          Long-term Borrowings

 

The following table sets forth information about long-term borrowings.

 

 

 

 

 

 

At June 30, 2008

 

 

At December 31, 2007

 

 

 

 

 

 

 

Weighted-

 

 

 

 

Weighted-

 

 

 

Stated

 

 

 

Average

 

 

 

 

Average

 

(Dollars in thousands)

 

Maturity

 

Amount

 

Rate

 

 

Amount

 

Rate

 

Federal Home Loan Bank advances and
securities sold under repurchase agreements

 

2009

 

$

117,000

 

5.26

%

 

$

117,000

 

5.26

%

 

 

2010

 

100,000

 

6.02

 

 

100,000

 

6.02

 

 

 

2011

 

300,000

 

4.64

 

 

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

 

1,250,000

 

4.60

 

 

1,250,000

 

4.60

 

Sub-total

 

 

 

4,267,000

 

4.48

 

 

4,167,000

 

4.49

 

Subordinated bank notes

 

2014

 

74,821

 

5.27

 

 

74,726

 

5.27

 

 

 

2015

 

49,703

 

5.37

 

 

49,619

 

5.37

 

 

 

2016

 

74,425

 

5.63

 

 

74,395

 

5.63

 

Sub-total

 

 

 

198,949

 

5.43

 

 

198,740

 

5.43

 

Discounted lease rentals

 

2008

 

12,893

 

6.70

 

 

24,318

 

7.13

 

 

 

2009

 

19,592

 

6.58

 

 

15,439

 

7.10

 

 

 

2010

 

11,035

 

6.44

 

 

6,681

 

6.98

 

 

 

2011

 

4,052

 

6.51

 

 

1,732

 

7.00

 

 

 

2012

 

1,369

 

6.71

 

 

276

 

6.98

 

 

 

2013

 

128

 

7.07

 

 

 

 

Sub-total

 

 

 

49,069

 

6.58

 

 

48,446

 

7.09

 

Other borrowings

 

2008

 

13

 

5.00

 

 

2,226

 

4.51

 

 

 

2009

 

966

 

5.00

 

 

966

 

5.00

 

Sub-total

 

 

 

979

 

5.00

 

 

3,192

 

4.66

 

Total long-term borrowings

 

 

 

$

   4,515,997

 

4.54

 

 

$

   4,417,378

 

4.56

 

 

Included in FHLB advances and repurchase agreements at June 30, 2008 were $717 million of FHLB advances, which are callable quarterly by the counterparties at par until maturity.  In addition, TCF has $1.9 billion of FHLB advances and $1.6 billion of repurchase agreements which contain one-time call provisions for various years from 2008 through 2011.  On July 9, 2008, TCF extended the maturity and call dates of $200 million of callable repurchase agreements that previously had a scheduled maturity date in 2015 and a call date in 2008.  The probability that the advances and repurchase agreements will be called by the counterparties depends primarily on the level of related interest rates during the call period. If FHLB advances are called, replacement funding will be available from the FHLB at the then-prevailing market rate of interest for the term selected by TCF, subject to standard terms and conditions.

 

The following table represents the maturity of FHLB advances and repurchase agreements based on the next available call date, compared with the stated maturity date at June 30, 2008.

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

Year

 

Next Call
Date

 

Weighted-
Average Rate

 

 

Stated Maturity

 

Weighted-
Average Rate

 

 

 

 

 

 

 

 

 

 

 

 

2008

 

$

1,617,000

 

4.42

%

 

$

 

%

2009

 

1,000,000

 

4.45

 

 

117,000

 

5.26

 

2010

 

1,450,000

 

4.56

 

 

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

 

 

 

 

1,250,000

 

4.60

 

Total

 

$

4,167,000

 

4.49

 

 

$

4,167,000

 

4.49

 

 

10



 

(6)   Stockholders’ Equity

 

Treasury stock and other consists of the following.

 

 

 

At

 

At

 

 

 

June 30,

 

December 31,

 

(In thousands)

 

2008

 

2007

 

Treasury stock, at cost

 

$

(118,507

)

$

(126,020

)

Shares held in trust for deferred
compensation plans, at cost

 

(38,562

)

(39,666

)

Total

 

$

(157,069

)

$

(165,686

)

 

(7)   Fair Value Measurement

 

Effective January 1, 2008, TCF adopted Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements. In accordance with the FASB Staff Position 157-2, Effective Date of SFAS No. 157, TCF has not applied the provisions of this statement to non-financial assets and liabilities such as real estate owned, repossessed assets and equipment held for sale.  SFAS 157 defines fair value and establishes a consistent framework for measuring fair value under GAAP and expands disclosure requirements for fair value measurements.  Fair values represent the estimated price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

 

The following is a description of valuation methodologies used for assets recorded at fair value on a recurring basis at June 30, 2008.

 

Securities available for sale

 

At June 30, 2008, securities available for sale consisted primarily of U.S. Government sponsored enterprise and federal agency mortgage-backed securities.  The fair value of available for sale securities are recorded using observable market prices from independent asset pricing services that are based on observable transactions, but not a quoted market.

 

Assets held in trust for deferred compensation

 

At June 30, 2008, assets held in trust for deferred compensation plans consisted of investments in publicly traded stock other than TCF stock and mutual funds. The fair value of these assets are based upon quotes from independent asset pricing services based on active markets.

 

11



 

At June 30, 2008, the fair value of assets measured on a recurring basis are:

 

(in thousands)

 

Readily Available

Market Prices (1)

 

Observable Market

Prices (2)

 

Company Determined

Market Prices (3)

 

Total at Fair Value

 

Securities available for sale:

 

 

 

 

 

 

 

 

 

Mortgage-backed securities:

 

 

 

 

 

 

 

 

 

U.S. Government sponsored
enterprises and federal agencies

 

$               —

 

$  2,116,953

 

$               —

 

$  2,116,953

 

Other

 

 

 

3,461

 

3,461

 

Other securities

 

 

 

250

 

250

 

Assets held in trust for deferred compensation plans (4)

 

19,139

 

 

 

19,139

 

Total assets

 

$        19,139

 

$  2,116,953

 

$          3,711

 

$  2,139,803

 

(1) Considered Level 1 under SFAS 157.

(2) Considered Level 2 under SFAS 157.

(3) Considered Level 3 under SFAS 157 and is based on valuation models that use significant assumptions that are not observable in an active market.

(4) A corresponding liability is recorded in other liabilities for TCF’s obligation on these assets.

 

The change in the balance sheet carrying values associated with company determined market priced financial assets carried at fair value during the six months ended June 30, 2008 was not significant.

 

(8)   Stock Compensation

 

The following table reflects TCF’s restricted stock transactions under the TCF Financial Incentive Stock Program since December 31, 2007.

 

 

 

Restricted Stock

 

 

 

 

 

Weighted-Average

 

 

 

Shares

 

Grant Date Fair Value

 

Outstanding at December 31, 2007

 

2,525,216

 

 

 

$

19.72

 

Granted

 

277,150

 

 

 

15.50

 

Forfeited

 

(19,600

)

 

 

26.05

 

Vested

 

(1,107,066

)

 

 

11.11

 

Outstanding at June 30, 2008

 

1,675,700

 

 

 

$

24.64

 

 

The following table reflects TCF’s stock option transactions under the TCF Financial Incentive Stock Program since December 31, 2007.

 

 

 

Stock Options

 

 

 

 

 

 

 

 

Weighted-Average

 

 

 

 

 

Weighted-Average

 

 

Remaining Contractual

 

 

 

Shares

 

Exercise Price

 

 

Term In Years

 

Outstanding at December 31, 2007

 

144,050

 

 

 

$

13.91

 

 

1.32

 

Granted

 

1,626,000

 

 

 

15.75

 

 

9.50

 

Exercised

 

(13,000

)

 

 

12.56

 

 

 

Forfeited

 

(4,250

)

 

 

15.09

 

 

 

Outstanding at June 30, 2008

 

1,752,800

 

 

 

$

15.62

 

 

8.87

 

Exercisable at June 30, 2008

 

126,800

 

 

 

$

14.01

 

 

0.84

 

 

In January 2008, TCF issued 1,626,000 nonqualified stock options. These options have an exercise price of $15.75 per share, with 813,000 options exercisable in 2011, which expire in 2018 and the remaining 813,000 options exercisable in 2012, which expire in 2018. The weighted-average grant date fair value of stock options granted in January 2008 was $3.70 and $3.73, respectively.

 

12



 

Unrecognized stock compensation for restricted stock and stock options was $18.9 million with a weighted-average remaining amortization period of 2.8 years at June 30, 2008.

 

The following table summarizes information about stock options outstanding at June 30, 2008.

 

 

 

Stock Options Outstanding

 

Stock Options Exercisable

 

 

 

 

 

 

 

Weighted-Average

 

 

 

 

 

 

 

 

 

Weighted-Average

 

Remaining Contractual

 

 

 

Weighted-Average

 

Exercise price range

 

Shares

 

Exercise Price

 

Life in Years

 

Shares

 

Exercise Price

 

$10.91-$14.52

 

126,800

 

$    14.01

 

 

0.84

 

 

126,800

 

$    14.01

 

$15.75

 

1,626,000

 

$    15.75

 

 

9.50

 

 

 

$         —

 

 

The 126,800 exercisable stock options are accounted for using Accounting Principles Board Opinion (APB) No. 25, Accounting for Stock Issued to Employees. TCF estimated the fair value of stock options granted during the first quarter of 2008 using a Black-Scholes option valuation model.  Additional valuation and related assumption information for TCF’s stock option plans are presented below.

 

 

 

 

Expected volatility

 

28.5

%

Weighted-average volatility

 

28.5

%

Expected dividends

 

3.5

%

Expected term (in years)

 

6.5 - 7

 

Risk-free rate

 

2.5 - 2.73

%

 

(9)          Regulatory Capital Requirements

 

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 stated minimum and well-capitalized capital ratio requirements.

 

 

 

 

 

Minimum

 

Well-Capitalized

 

 

 

Actual

 

Capital Requirement

 

Capital Requirement

 

(Dollars in thousands)

 

Amount

 

Ratio

 

Amount

 

Ratio

 

Amount

 

Ratio

 

As of June 30, 2008:

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 leverage capital

 

 

 

 

 

 

 

 

 

 

 

 

 

TCF

 

$

972,688

 

5.97

%

$

488,558

 

3.00

%

N.A.

 

N.A.

 

TCF National Bank

 

913,742

 

5.63

 

486,979

 

3.00

 

$

811,632

 

5.00

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 risk-based capital

 

 

 

 

 

 

 

 

 

 

 

 

 

TCF

 

972,688

 

8.08

 

481,563

 

4.00

 

722,345

 

6.00

 

TCF National Bank

 

913,742

 

7.61

 

480,045

 

4.00

 

720,068

 

6.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total risk-based capital

 

 

 

 

 

 

 

 

 

 

 

 

 

TCF

 

1,307,552

 

10.86

 

963,127

 

8.00

 

1,203,908

 

10.00

 

TCF National Bank

 

1,248,373

 

10.40

 

960,090

 

8.00

 

1,200,113

 

10.00

 

As of December 31, 2007:

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 leverage capital

 

 

 

 

 

 

 

 

 

 

 

 

 

TCF

 

$

964,467

 

6.16

%

$

469,914

 

3.00

%

N.A.

 

N.A.

 

TCF National Bank

 

900,864

 

5.76

 

468,806

 

3.00

 

$

781,343

 

5.00

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 risk-based capital

 

 

 

 

 

 

 

 

 

 

 

 

 

TCF

 

964,467

 

8.28

 

465,931

 

4.00

 

698,897

 

6.00

 

TCF National Bank

 

900,864

 

7.75

 

464,934

 

4.00

 

697,402

 

6.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total risk-based capital

 

 

 

 

 

 

 

 

 

 

 

 

 

TCF

 

1,245,808

 

10.70

 

931,863

 

8.00

 

1,164,829

 

10.00

 

TCF National Bank

 

1,182,196

 

10.17

 

929,869

 

8.00

 

1,162,336

 

10.00