Forward-looking Information
Any statements contained in this Quarterly Report on Form 10-Q regarding the outlook for the Corporation's businesses and their respective markets, such as projections of future performance, targets, guidance, statements of the Corporation's plans and objectives, forecasts of market trends and other matters are forward-looking statements based on the Corporation's assumptions and beliefs. Such statements may be identified by such words or phrases as "will likely result," "are expected to," "will continue," "outlook," "will benefit," "is anticipated," "estimate," "project," "management believes" or similar expressions. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those discussed in such statements, and no assurance can be given that the results in any forward-looking statement will be achieved. For these statements, TCF claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Any forward-looking statement speaks only as of the date on which it is made, and we disclaim any obligation to subsequently revise any forward-looking statement to reflect events or circumstances after such date or to reflect the occurrence of anticipated or unanticipated events. These statements include, among others, statements related to: our strategic plan to develop customer relationships that will drive core deposit growth and stability, management's belief that our commercial and commercial real estate loan portfolios are generally well-secured, the impact of projected changes in net interest income assuming changes to short-term market interest rates, statements regarding our risk exposure, statements related to our planned merger with Huntington, including statements related to the anticipated effects on results of operations and financial condition from expected developments. All statements referencing future time periods are forward-looking. Furthermore, management's determination of the allowance for credit losses and related provision; the carrying value of goodwill and loan servicing rights; the fair value of investment securities (including whether there is any credit impairment); and management's assumptions concerning postretirement benefit plans involve judgments that are inherently forward-looking. There can be no assurance that future loan losses will be limited to the amounts estimated. All of the information concerning interest rate sensitivity is forward-looking. The future effect of changes in the financial and credit markets and the national and regional economies on the banking industry, generally, and on us, specifically, are also inherently uncertain.
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Table of Contents Certain factors could cause the Corporation's future results to differ materially from those expressed or implied in any forward-looking statements contained herein. These factors include the factors discussed in Part I, Item 1A of our Annual Report on Form 10-K under the heading "Risk Factors", the factors discussed below and any other cautionary statements, written or oral, which may be made or referred to in connection with any such forward-looking statements. Since it is not possible to foresee all such factors, these factors should not be considered as complete or exhaustive: macroeconomic and other challenges and uncertainties resulting from the COVID-19 pandemic, such as the extent and duration of the impact on public health, theU.S. and global economies, financial markets and consumer and corporate customers and clients, including economic activity, employment levels and market liquidity, as well as the various actions taken in response to the challenges and uncertainties by governments, central banks and others, including TCF; a failure to manage credit risk; cyber-security breaches involving us or third parties, hacking, denial of service, loss or theft of information, or other cyber-attacks that disrupt TCF's business operations or damage its reputation; adverse developments affecting TCF's banking centers; inability to successfully execute on TCF's growth strategy through business combinations or expanding existing business relationships; calculating an allowance for loan and lease losses insufficient to absorb actual losses in our loan and lease portfolio; adverse effects related to competition from traditional competitors, non-bank providers of financial services and new technologies; technological difficulties, including those related to system upgrades or the failure to keep pace with technological changes in response to customer demands; risks related to developing new products, markets or lines of business; adverse political or economic conditions; risks related to TCF's loan origination and sales activity; lack of access to liquidity or ability to raise capital that isn't dilutive; adverse changes in monetary, fiscal or tax policies; litigation or government enforcement actions; heightened consumer protection, supervisory or regulatory practices or requirements; deficiencies in TCF's compliance programs, risk mitigation frameworks or ineffective internal controls; dependence on accurate and complete information from customers and counterparties; the failure to attract and retain key employees; soundness of other financial institutions and other counterparty risk, including the risk of default, operational disruptions, or diminished availability of counterparties who satisfy our credit quality requirements; inability to grow deposits, increase earnings and revenue, manage operating expenses, or pay and receive dividends; interruptions, systems failures in information technology and telecommunications systems failures of third-party services; deficiencies in TCF's quantitative models; the effect of any negative publicity or reputational damage; changes in accounting standards or interpretations of existing standards; adverse federal, state or foreign tax assessments; and the effects of man-made and natural disasters, any of which may negatively affect our operations and/or our customers. This report also contains forward-looking statements regarding TCF's outlook or expectations with respect to the planned merger with Huntington. Examples of forward-looking statements include, but are not limited to, statements regarding the outlook and expectations of TCF and Huntington with respect to the planned merger, the strategic benefits and financial benefits of the merger, including the expected impact of the merger on the combined corporation's future financial performance including the timing of the closing of the transaction. Such risks, uncertainties and assumptions, include, among others, the following: •the failure to obtain necessary regulatory approvals when expected or at all (and the risk that such approvals may result in the imposition of conditions that could adversely affect TCF or Huntington or the expected benefits of the merger); •the failure of either TCF or Huntington to satisfy any of the other closing conditions to the merger on a timely basis or at all; •the occurrence of any event, change or other circumstances that could give rise to the right of one or both of the parties to terminate the merger agreement; •the possibility that the anticipated benefits of the transaction, including anticipated cost savings and strategic gains, are not realized when expected or at all, including as a result of the impact of, or problems arising from, economic weakness, competitive factors in the areas where TCF and Huntington do business, or as a result of other unexpected factors or events; •the impact of purchase accounting with respect to the transaction, or any change in the assumptions used regarding the assets purchased and liabilities assumed to determine their fair value; •diversion of management's attention from ongoing business operations and opportunities; •potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the transaction; •the ability of either TCF or Huntington to repurchase their stock and the prices at which such repurchases may be made; •the outcome of any legal proceedings that may be instituted against TCF or Huntington; 44
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Table of Contents •the integration of the businesses and operations of TCF and Huntington, which may take longer than anticipated or be more costly than anticipated or have unanticipated adverse results relating to our existing businesses •business disruptions following the merger; and •other factors that may affect future results of TCF and Huntington including changes in asset quality and credit risk; the inability to grow revenue and earnings; changes in interest rates and capital markets; inflation; customer borrowing, repayment, investment and deposit practices; the impact, extent and timing of technological changes; capital management activities; and other actions of theFederal Reserve Board and legislative and regulatory actions and reforms.
Additional factors that could cause results to differ materially from those
described above can be found in the risk factors described in Part I, Item 1A of
this Annual Report on Form 10-K under the heading "Risk Factors" and
Huntington's Annual Report on Form 10-K filed with the
Overview
Through our wholly-owned bank subsidiary,
References herein to "TCF Financial" or the "Holding Company" refer to
Business Overview
Net interest income, the difference between interest income earned on loans and
leases, investments securities and other earning assets (interest income) and
interest paid on deposits and borrowings (interest expense), represented 74.3%
of our total revenue for the three months ended
Noninterest income is a significant source of our revenue and an important component of our results of operations. The significant components of noninterest income are leasing revenue, fees and service charges on deposit accounts, card and ATM revenue, mortgage banking income, wealth management revenue and net gains on sales of loans and leases. Leasing revenue generates noninterest income primarily from operating and sales-type leases. Primary drivers of fees and service charges include the number of customers we attract, the customers' level of engagement and the frequency with which the customer uses our solutions. Mortgage banking earns fee income from the origination and servicing of residential loans, and recognizes gains or losses from the sale of those loans. Providing a wide range of consumer banking services is an integral component of our business philosophy.
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Table of Contents Proposed Merger with Huntington Bancshares Incorporated
The following portions of this Management's Discussion and Analysis of Financial
Condition and Results of Operations ("Management's Discussion and Analysis")
focus in more detail on the results of operations for the three months ended
Critical Accounting Policies and Estimates
Our Consolidated Financial Statements are prepared in accordance with
Certain accounting measurements inherently have a greater reliance on the use of estimates, assumptions and judgments and, as such, have a greater possibility of producing results that could be materially different than originally reported. We use third-party sources to assist us with developing certain estimates, assumptions and judgments regarding certain amounts reported in our Consolidated Financial Statements and accompanying notes. When using third-party sources, management remains responsible for complying with GAAP. To meet management's responsibilities, we have processes in place to develop an understanding of the third-party methodologies used and to design and implement internal controls.
We have identified the determination of the allowance for credit losses (loans and leases and unfunded lending commitments), accounting for business combinations (including fair value of purchased loans and leases and core deposit intangibles), and the evaluation of goodwill impairment to be the accounting areas that require the most subjective or complex judgments and, as such, could be most subject to revision as new or additional information becomes available or circumstances change, including overall changes in the economic climate and/or market interest rates. Therefore, we consider them to be critical accounting estimates and discuss them directly with the Audit Committee of our Board of Directors.
Our significant accounting policies are more fully described in "Note 2. Summary
of Significant Accounting Policies" and our critical accounting estimates are
more fully described in the "Critical Accounting Policies and Estimates" section
of the Management's Discussion and Analysis of Financial Condition and Result of
Operations in our Annual Report on Form 10-K for the year ended
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Table of Contents Selected Financial Data
The following table provides our selected financial information for the periods and at the dates indicated. This information should be read together with our Consolidated Financial Statements and the related notes thereto, which are included elsewhere in this report. As noted in the following table, we have included certain non-GAAP financial measures, which should be read in conjunction with the section entitled "Non-GAAP Financial Measures" and the accompanying table entitled "Reconciliation of Non-GAAP Operating Results," for an explanation of the use of non-GAAP financial measures in this Quarterly Report on Form 10-Q and a reconciliation of non-GAAP measures to the most directly comparable GAAP financial measure. Historical data is not necessarily indicative of TCF's future results of operations or financial condition.
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