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TCF Financial Corporation

TCF Financial Corporation

200 Lake Street East
Wayzata, Minnesota 55391-1693
Telephone: (952) 745-2760
Fax: (952) 745-2775
Web site:

Public Company
1923 as Twin City Building and Loan
Employees: 7,500
Total Assets: $11.35 billion (2001)
Stock Exchanges: New York
Ticker Symbol: TCB
NAIC: 522110 Commercial Banking; 551111 Offices of Bank Holding Companies; 522291 Consumer Lending; 522210 Credit Card Issuing

TCF Financial Corporation, a financial holding company that compares itself to large successful retailers instead of other banks, operates the fourth largest supermarket branch system in the United States. The company markets itself aggressively to middle- and lower-income customers with products such as Totally Free Checking accounts. The Minnesota-based company has banking offices in Minnesota, Illinois, Wisconsin, Indiana, Michigan, and Colorado and provides leasing and equipment finance, mortgage banking, discount brokerage, and investments and insurance sales through various affiliates.

Early Leadership: 1920s60s

Twin City Building and Loan Association opened its doors on April 2, 1923, in downtown Minneapolis. The firm was organized by a life insurance man who thought the savings business would feed his life business, Leonard Inskip reported in the Minneapolis Tribune in 1960. Back in the 1920s, real estate investors were also setting up savings and loans (S&Ls) as affiliated business ventures to drive up profits.

The operation, though, was not a sure bet. Public skepticism borne of the failure of other S&Ls initially made the hunt for investors a challenge. The membership fee was $2 per share, and investors in the savings and loan association would receive dividends at a rate of 7 percent.

But, persistence paid. By April of the next year, a second office had opened across the Mississippi River in neighboring St. Paul, Minnesota, and held nearly $50,000 in resources. During its second year of operation the Twin City Building and Loan Association grew nearly fivefold. The rapid growth prompted a move to larger facilities in both cities.

The economic hardships of the early 1930s cut into the associations earnings. In turn, interest rates were pared down, falling to a low of 2.5 percent. The mid-1930s introduction of a government insurance program for S&Ls proved to be a catalyst for growth in the industry and the Minnesota operation.

Twin City Building and Loan, upon receiving a federal charter in 1936, changed its name to Twin City Federal Savings and Loan Association. Its resources were $3.5 million at that time but grew to $10 million over the next three years.

Calendar years 1941 and 1942 proved to be stellar ones. Member accounts increased by over $7 milliona growth rate near if not at the top of the industry for the time period. By 1943, the operations 20th year of business, the association was the seventh largest savings and loan in the nation, holding over $20 million in resources. During its first two decades, Twin City Federal disbursed to its members approximately $2.9 million in dividends while also financing 14,126 homes.

Roy W. Larsen, who had been on board from day one, led the company as president though its growth spurt. Assets doubled every few years: $50 million in 1946; $100 million in 1951; $200 million in 1955. Another man on hand in 1923, company Vice-President and Secretary Burch N. Bell, still served alongside Larsen as the 1960s approached.

In the fall of 1959, Twin City Federal had surpassed in terms of total size its biggest competitor in the Minneapolis/St. Paul savings market. With year-end assets of $357 million, the S&L was also closing in on some of St. Pauls largest banks.

Twin City Federals rapid rate of growth had been propelled by a number of factors. S&Ls could offer larger interest rates on savings accounts than banks, which were capped by law at a rate of 3 percent. Plus, Twin City Federal had been spending some $700,000 annually on self-promotion. Moreover, the post-World War II housing boom helped the S&L grow: most of its funds were dedicated to long-term mortgages. Finally, there was Larsens leadership and drive to beat out competitors. Business is a game, and I have a competitive urge, he told Inskip. If I didnt like to win I would have quit years ago. He continued to man the helm even as others his age retired.

In 1960 Twin City Federal had about 26 percent of total assets held by the states savings institutions. The bulk of the S&Ls assets came from its savings account volume, primarily in the Twin Cities of Minneapolis and St. Paul. But about 20 to 25 percent came from customers outside the Twin Cities; from folks seeking more interest for their deposits than what local banks offered. Its not just that we pay a higher rate for money than the country people, Larsen said in the Minneapolis Tribune. A lot of people just dont want the rest of the people in their home town knowing how much money theyve got salted away. Originating from rural northwestern Minnesota himself, Larsen led the urban operation for over four decades. Two other company veterans followed in the wake of his tenure. Under those early leaders, the company grew to $1 billion in assets, a milestone reached in 1972.

Storm on the Horizon: 1970s-80s

The new leadership of the 1970s inherited an operation which was at the top of the local thrift market thanks largely to an aggressive, personality-driven marketing strategy, wrote John R. Engen for Corporate Report Minnesota. A popular local radio host, an outspoken Twins baseball manager, a gregarious Vikings football player, and droll comedian Jack Benny all promoted Twin City Federal. That and a strong branch network, sports team sponsorships, a few catchy jingles (Tuck-abuckadayaway), and the omnipresent premium giveaways add up to TCFs oldtime formula for success, observed Engen.

S&Ls had historically been tied to the strength of the economy and the home building industry: approximately 40 percent of all home loans were made by S&Ls at the beginning of the 1960s. But by the late 1970s, many of the nations thrifts, including Twin City Federal, were chasing commercial real estate ventures and other activities promising higher return on investment.

Skyrocketing inflation and interest rates eroded the value of traditional fixed-rate mortgage portfolios, according to Engen. Thrifts posted losses in the early 1980s. Margins shrunk, as interest paid out on savings accounts rose, but interest coming in on loans remained the same. Moreover, federal legislation had changed the lending and investment landscape, leaving S&Ls looking for new ways to drive up profits.

But by the mid-1980s, the cyclical nature of interest rates was the least of the S&L industrys problems: it was about to sink in a sea of red ink created from risky ventures and questionable business practices. The federal agencies regulating the S&Ls would be overwhelmed by the sheer number of thrifts that were insolvent or teetering on the brink.

The weight of ventures such as condominium conversions on the Upper East Side of Manhattan and interest rate swap contracts was about to kill off Twin City Federal. William Cooper, named CEO in the spring of 1985, was charged with keeping the operation alive.

Coming from a working class background, Cooper served as a Detroit police officer while studying to become an accountant during the mid-1960s. A CPA job with Touche Ross would lead him to Michigan National Bank, where he was mentored in retail banking by the company vice-chairman. He held executive positions with Huntington Bancshares in Ohio and American Savings & Loan Association in Miami before arriving in Minnesota.

Cooper returned Twin City Federal to the basics, cutting expenses and revamping the culture. He stripped the corporate headquarters of its luxuries, including expansive executive suites fragrant with orchids tended by flower ladies. Thirty-five upper level officers would retire or be fired during Coopers first three years in command. Branch managers found their incomes tied tightly to performance.

Seeking capital, Twin City Federal went public in 1986, under the name TCF Banking and Savings, F.A. (TCF Bank). Meanwhile, Cooper continued to clean house. He shut down the companys New York real estate subsidiary, incurring a loss of more than $200 million; a $40 million race track construction loan was sold off; and a billion in interest rate contractsused by his predecessor to lock in high rateswere canceled to the tune of $70 million.

Company Perspectives:

TCF became a public company in 1986 and since that time we have had a simple and consistent philosophy of banking. Our strong conviction that our customers come first is the driving force that has made TCF one of the best performing banks in the country. We listen to our customers and we have provided the products and services they want. The results speak for themselves; over this time we have recorded some of the highest performance ratios among the top 50 banks in the country and posted record operating earnings for the last 11 years.

While tearing down on one end of the spectrum, TCF built on the other. Totally Free Checking was introduced in 1986 to court low- and middle-income customers. Thrift patrons paid for their checks but incurred no other service fees on the noninterest- bearing accounts. Cooper believed that this strategy would drive up net interest margins. He intended to draw in a large number of small deposits, on which TCF paid little or no interest, and use that cheap source of money for higher-yielding consumer loans. By 1988 TCFs consumer loan portfolio including home equity, credit card, and direct auto and recreational loanshad climbed to $1 billion from about $200 million in 1986.

Cooper also began an expansion drive. During 1987, TCF acquired approximately $300 million of insured deposits from an S&L in Illinois. The holding company TCF Financial Corporation was also formed. The next year, TCF entered the supermarket sector, opening a branch in an Eagan, Minnesota, Cub Foods store. At decade end, TCF converted to a federal savings bank, operating under the name TCF Bank Savings fsb, and company stock began trading on the New York Stock Exchange.

Despite Coopers moves, TCFs future was still in the balance in 1990. The firm remained in the red, and federal regulators watched it closely. During a period of three years, from 1989 to 1991, the government seized 633 thrifts, and the industry faced ever tighter controls. In those dark times TCFs management bought heavily into the stock while the board, under Coopers direction, turned to stock-driven incentives as a bigger part of the pay formula, wrote Engen.

TCF, unlike so many others, survived. Entering the last quarter of 1991, TCF had reduced its nonperforming assets to $87.3 million, down from $156 million at the end of 1986. The companys commercial real estate portfolio was split about evenly between multifamily loans, such as for apartment buildings, and higher risk loans for retail development and office space. A record $1 billion in new mortgages was generated by TCF Mortgage Corporation, TCF Banks mortgage lending subsidiary.

Warp Speed: Mid- to Late 1990s

By 1993, TCF had boosted its share of Minnesotas consumer banking market to 18 percent, up from 8 percent in 1986, according to a May 1993 American Banker article by Brian Hellauer. Its figures surpassed larger commercial banks Norwest Corp. and First Bank Systems Inc.

In addition to growing market share by aggressively selling its banking services, TCF was beefing up profits with technology. According to Hellauer, a lean data processing operation allowed the company to continue to service mortgages while other operations farmed the work out to third parties. Furthermore, TCFs widespread automatic teller machine (ATM) network generated income with each transaction.

We charge for just about everything, and we charge for things other people dont charge for, Cooper told Hellauer. Were very aggressive pricers, but we give people a lot of servicelonger hours, a broader base of products, more access to ATMs.

Through the mid-1990s, TCF relied heavily on acquisitions to build business in Illinois, Wisconsin, and Michigan. In 1993, TCF acquired $960 million-in-assets Republic Capital Group, Inc. of Milwaukee, Wisconsin. The company also spent about $14.5 million to buy $220 million of deposits and 15 branches of the failed thrift First Federal Savings and Loan Association of Pontiac, Michigan. TCF added 39 offices in Michigan when it acquired a struggling $2.4 billion Great Lakes Bancorp in 1995.

By 1996 TCF was clearly on solid ground, ranked among the best-performing thrifts in the nation, according to Corporate Report Minnesota. It was the 14th largest savings bank in the United States, holding just over $7 billion in assets. But in 1997, Cooper led TCFs conversion from a thrift to a bank.

Also in 1997, TCF entered the leasing business through the acquisition of Winthrop Resources Corporation. The operation leased computers and other equipment to businesses nationwide. Additionally, banking operations were expanded to Colorado.

TCF directed a lot of attention to the Chicago area in 1997 and 1998, first purchasing the Bank of Chicago and then acquiring 76 bank branches in Jewel-Osco stores from BankAmerica Corp. The supermarket branches had failed to turn a profit under Bank of America: its upscale product was not in line with the profile of the typical Jewel customer. TCF turned the branches around by marketing products such as Totally Free Checking to modest-means customers.

A small number times a large number equals a large number, Cooper told Crains Chicago Business in 2000, citing the same strategy that had worked so well in the Twin Cities market. In terms of total number of branches in Chicago, TCF ranked second only to Bank One Corp.

Mixed Results: 19992002

From 1990 to 1998 TCFs stock rose spectacularly, exceeding the pace of even strong industry performers. But as its earnings growth slowed in 1998, the stock nosedived. A February 1999 American Banker article reported profits were hurt by a $10 million price tag to open 105 supermarket branches; mortgage prepayments; and the discontinuation of its indirect automobile lending operation.

Key Dates:

Twin City Building and Loan Association is founded in Minneapolis, Minnesota.
The business is granted a federal charter and changes its name to Twin City Federal Savings and Loan Association.
Twin City Federal ranks as the seventh largest S&L in the nation, with $20 million in assets
Twin City Federal reaches $1 billion in assets.
Company goes public under name TCF Banking and Savings, F.A.
TCF Financial Corporation is formed as a holding company.
TCF opens first supermarket branch location.
TCF switches to a federal savings bank and begins trading on the NYSE.
Company converts to a national bank charter.
TCF opens its one-millionth retail checking account.

Coopers investor-relations problems coincided with voter dissatisfaction with his politics, wrote John Engen in a June 2001 American Business article. In 1990, Cooper served as finance chairman for a Republican gubernatorial candidate. Arne Carlsons unexpected victory in strongly democratic Minnesota gave Cooper a solid foothold in the party, and in 1997, as party chairman, he helped bring in record contributions. But, another unexpected victory took the shine off Coopers political star. Ex-professional wrestler Jesse Ventura defeated both the Democratic and Republican candidates for governor in 1998. Cooper was not shy about exchanging barbs with the colorful new governor. Engen wrote, Mr. Cooper displayed a bumper sticker that said, Your governor is smarter than my governor. In 1999, Cooper stepped down as party chairman, but he remained politically active, serving as finance chair.

Meanwhile, TCF opened its one-millionth retail checking account. In other business sectors, TCF both expanded and contracted in 1999. Leasing operations grew with the establishment of TCF Leasing, Inc. But, the company sold off substantially all of its remaining automobile loan portfolio. Additionally, TCF sold its title insurance and appraisal operations and formed a strategic alliance with the buyer.

In 2000, TCF surpassed $1 billion in supermarket branch deposits. The Minnesota-based bank was the fourth largest operator of supermarket bank branches in the country with over 200.

TCF also ranked as the 16th largest issuer of Visa debit cards in the United States with 1.1 million cards in circulationTCF had introduced the card that worked like a check to its Minnesota customers back in 1996. During 2000, TCFs debit card transactions produced $28.7 million in revenue, an increase of 47 percent over 1999.

TCF continued to apply technology as a means to draw customers: phone cards were introduced as part of a customer loyalty program and an Internet banking site was launched in 2000. As committed as ever to the concept of convenience, in 2001 TCF expanded Sunday hours to some of its traditional banking locations, a practice already in place in its supermarket sites. Its investment business was also expanded in 2001 with the introduction of a discount brokerage service. TCF had begun offering annuities in the 1980s and mutual funds in the 1990s.

TCF initiated some business activity outside its markets of Colorado, Illinois, Indiana, Michigan, Minnesota, and Wisconsin in the new millennium. Its venture capital unit planted seed money in new banks: the companys first two investments were made in Florida. TCF intended to invest between 5 and 25 percent of needed start-up capital. In addition to Florida, TCF was looking toward the Southwest for start-up bank locations, particularly in areas in which there had been a recent merger or buyout of a community bank, according to a February 2002 American Banker article.

Principal Subsidiaries

TCF Mortgage Corporation; Winthrop Resources Corporation; TCF Leasing, Inc.

Principal Competitors

Associated Bank-Corp.; U.S. Bancorp; Wells Fargo & Company.

Further Reading

Arndorfer, James B., Julie Johnsson, Grocery Outlets a Real Jewel for TCF, Crains Chicago Business, September 4, 2000, p. 1.

Chase, Brett, High-Performing TCF Defies Banking Wisdom, American Banker, July 12, 1996, p. 4.

, TCF Bids for Respect with Conversion to Bank Charter, April 7, 1997, p. 6.

, TCFs Check Mastermind to Retire on New Years Day, American Banker, October 6, 1997, p. 8.

, TCF Isnt Ready to Check Out of Supermarket Strategy, American Banker, February 25, 1999, p. 5.

Conroy, Bill, Minnesotas S&Ls: Asset or Liability? Minneapolis-St. Paul CityBusiness, October 21, 1991, pp. 1 + .

Engen, John R., CEO CooperWrestled Ventura, Sluggish EarningsWont Budge, American Banker, June 15, 2001, p. 1.

, A Master of MarketingSupermarketing, That Is, American Banker, April 4, 1994, pp. 6+.

, Pin Money, Corporate Report Minnesota, October 1996, pp. 46 + .

Hellauer, Bill, TCF Financial Finds Fees, Profits Catering to Mass Market, American Banker, May 10, 1993, pp. 1A + .

Inskip, Leonard, Twin City Builds Pennies into 373 Million Dollars, Minneapolis Tribune, April, 24, 1960, pp. 9, 11.

Jackson, Ben, Start-Up Investor TCF Says Control Is Not Its Goal, American Banker, February 4, 2002, p. 5.

, TCF Financial Introduces Sunday Hours, American Banker, October 26, 2001, p. 1.

Kimelman, John, Thrifts Slow to Abandon Traditional Ways, American Banker, November 1, 1999, p. 25.

Leuty, Ron, TCF Fills Its Shopping Bag with Old BofA Branches, San Francisco Business Times, September 15, 2000, p. 15.

Rieker, Matthias, TCF Financial of Minnesota Wins Praise from Merrill, American Banker, May 10, 2001, p. 20.

Schafer, Lee, Alive and Well Among the Living Dead, Corporate Report Minnesota, December 1988, pp. 5154.

Schwab, Paul, TCF Launches Discount Brokerage, Business JournalMilwaukee, June 29, 2001, p. 9.

Silvestri, Scott, TCF Plans to Stock Up on Store Branches, American Banker, September 12, 2000, p. 1.

Twenty Million in Twenty Years, Minneapolis: Jones Press and Twin City Federal Saving and Loan Association, 1943.

Kathleen Peippo

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