TCF Reports Quarterly Net Income of $73.8 Million and Diluted Earnings Per Share of 39 Cents

April 23, 2018 8:00 AM | 296 min read |

FIRST QUARTER OBSERVATIONS

  • Revenue of $355.4 million, up 9.1 percent from the first quarter of 2017
  • Net interest income of $243.2 million, up 9.5 percent from the first quarter of 2017
  • Net interest margin of 4.59 percent, up 13 basis points from the first quarter of 2017
  • Period-end loans and leases of $19.4 billion, up 7.8 percent from March 31, 2017
  • Net charge-offs as a percentage of average loans and leases of 0.29 percent, up 18 basis points from the first quarter of 2017
  • Non-accrual loans and leases of $126.4 million, down 9.0 percent from March 31, 2017
  • Average deposits of $18.3 billion, up 7.0 percent from the first quarter of 2017
  • Efficiency ratio of 69.21 percent, improved 572 basis points from the first quarter of 2017
  • Earnings per share of 39 cents, up 14 cents from the first quarter of 2017. Impact of 2 cents per share related to the redemption of the 6.45% Series B non-cumulative perpetual preferred stock.

TCF Financial Corporation TCF:

                     
Summary of Financial Results                   Table 1
        Change
1Q 4Q 1Q 1Q18 vs   1Q18 vs
(Dollars in thousands, except per-share data) 2018   2017   2017   4Q17   1Q17
Net income attributable to TCF $ 73,761 $ 101,399 $ 46,278 (27.3 )% 59.4 %
Net interest income 243,199 241,860 222,114 0.6 9.5
Diluted earnings per common share 0.39 0.57 0.25 (31.6 ) 56.0
 

Financial Ratios(1)

Return on average assets 1.33 % 1.82 % 0.90 % (49

)bps

43 bps
Return on average common equity 11.23 16.95 7.64 (572 ) 359
Return on average tangible common equity(2) 12.26 32.87 8.55 (2,061 ) 371
Net interest margin 4.59 4.57 4.46 2 13
Net charge-offs as a percentage of average loans and leases 0.29 0.38 0.11 (9 ) 18
 
(1) Annualized.
(2) See "Reconciliation of GAAP to Non-GAAP Financial Measures" table.
 

TCF Financial Corporation ("TCF" or the "Company") TCF today reported net income of $73.8 million for the first quarter of 2018, compared with $46.3 million for the first quarter of 2017 and $101.4 million for the fourth quarter of 2017. Diluted earnings per common share was 39 cents for the first quarter of 2018 (inclusive of a one-time reduction in net income available to common stockholders of 2 cents per common share related to the redemption of the 6.45% Series B non-cumulative perpetual preferred stock in the first quarter of 2018), compared with 25 cents for the first quarter of 2017 and 57 cents for the fourth quarter of 2017 (inclusive of a 29 cents per common share impact from the estimated net tax benefit related to tax reform, goodwill and other intangible assets impairment, severance, other asset impairments, lease termination write-offs associated with the discontinuation of auto finance loan originations and additional TCF Foundation contribution, one-time team member bonuses, planned closure of five branches and inventory finance program extension).

"We delivered a strong start to our year in the first quarter with a continued focus on our four strategic pillars, which drove profitable growth and improved financial performance," said Craig R. Dahl, chairman and chief executive officer. "We are seeing the continued benefits of an asset sensitive balance sheet as our earning asset yields expanded in the quarter, especially in our variable- and adjustable-rate portfolios. Our efficiency ratio improved on a year-over-year basis and we project further improvement throughout 2018. In addition, the run-off of our auto finance portfolio progressed as expected in the first full quarter following our discontinuation of originations, while our overall credit quality remained strong. Finally, we successfully executed various capital initiatives including the redemption of our Series B preferred stock and additional share repurchases.

"As we look to build on our first quarter momentum for the balance of the year, we are focused on driving shareholder value through strong execution of our strategy. We are taking steps to reduce the risk profile of our balance sheet to further lower our credit, operational and liquidity risks. We also maintain a positive outlook for our diversified lending businesses, including consumer real estate, commercial, leasing and equipment finance and inventory finance businesses from a growth, profitability and credit quality perspective. As a result, I believe we are well-positioned to improve our return on average tangible common equity in 2018 while utilizing capital more efficiently and reducing our overall risk profile."

 

Revenue

   
Total Revenue                     Table 2
        Change
1Q 4Q 1Q 1Q18 vs 1Q18 vs
(Dollars in thousands) 2018   2017   2017   4Q17   1Q17  
Total interest income $ 275,262 $ 270,628 $ 242,307 1.7 % 13.6 %
Total interest expense 32,063     28,768     20,193   11.5 58.8
Net interest income 243,199     241,860     222,114   0.6 9.5
Non-interest income:
Fees and service charges 30,751 33,267 31,282 (7.6 ) (1.7 )
Card revenue 13,759 14,251 13,150 (3.5 ) 4.6
ATM revenue 4,650     4,654     4,675   (0.1 ) (0.5 )
Subtotal 49,160 52,172 49,107 (5.8 ) 0.1
Gains on sales of auto loans, net —

2,216

2,864 (100.0 ) (100.0 )
Gains on sales of consumer real estate loans, net 9,123 11,407 8,891 (20.0 ) 2.6
Servicing fee income 8,295     9,000     11,651   (7.8 ) (28.8 )
Subtotal 17,418 22,623 23,406 (23.0 ) (25.6 )
Leasing and equipment finance 41,847 42,831 28,298 (2.3 ) 47.9
Other 3,716     3,218     2,703   15.5 37.5
Fees and other revenue 112,141 120,844 103,514 (7.2 ) 8.3
Gains (losses) on securities, net 63     48     —   31.3 N.M.
Total non-interest income 112,204     120,892     103,514   (7.2 ) 8.4
Total revenue $ 355,403     $ 362,752     $ 325,628   (2.0 ) 9.1
 
Net interest margin(1) 4.59 % 4.57 % 4.46 % 2 bps 13 bps
Total non-interest income as a percentage of total revenue 31.6 33.3 31.8 (170 ) (20 )
 
N.M. Not Meaningful.
(1) Annualized.                        
 

Net Interest Income

  • Net interest income for the first quarter of 2018 increased $21.1 million, or 9.5 percent, from the first quarter of 2017 and $1.3 million, or 0.6 percent, from the fourth quarter of 2017. The increase from the first quarter of 2017 was primarily due to increased interest income on loans and leases held for investment, partially offset by an increase in total interest expense and a decrease in interest income on loans held for sale. Total interest income increased $33.0 million, or 13.6 percent, from the first quarter of 2017 primarily due to higher average balances and increased average yields on inventory finance loans and leasing and equipment finance loans and leases, as well as increased average yields and higher average balances of commercial loans. Total interest expense increased $11.9 million, or 58.8 percent, from the first quarter of 2017 primarily due to increased average rates and higher average balances of certificates of deposit and increased average rates on long-term borrowings and savings accounts, partially offset by lower average balances of money market accounts.
  • The increase in net interest income from the fourth quarter of 2017 was primarily due to increased interest income on loans and leases held for investment, partially offset by an increase in total interest expense. Total interest income increased $4.6 million, or 1.7 percent, from the fourth quarter of 2017 primarily due to higher average balances and increased average yields on inventory finance loans, partially offset by lower average balances of auto finance and consumer real estate loans. Total interest expense increased $3.3 million, or 11.5 percent, from the fourth quarter of 2017 primarily due to increased average rates and higher average balances of long-term borrowings and increased average rates on certificates of deposit and savings accounts.
  • Net interest margin was 4.59 percent for the first quarter of 2018, up 13 basis points from the first quarter of 2017 and up 2 basis points from the fourth quarter of 2017. The increase from the first quarter of 2017 was primarily due to increased average yields on the variable- and adjustable-rate loan portfolios as a result of interest rate increases, partially offset by increased average rates and higher average balances of certificates of deposit and increased average rates on long-term borrowings and savings accounts. The increase from the fourth quarter of 2017 was primarily due to increased average yields on seasonally higher average balances of inventory finance loans, partially offset by lower average balances of auto finance loans, increased average rates on higher average balances of long-term borrowings and increased average rates on certificates of deposit and savings accounts.

Non-interest Income

  • TCF sold $266.3 million, $379.4 million and $359.7 million of consumer real estate loans during the first quarter of 2018 and 2017 and the fourth quarter of 2017, respectively, resulting in net gains in each respective period.
  • Servicing fee income was $8.3 million on $4.5 billion of average loans and leases serviced for others for the first quarter of 2018, compared with $11.7 million on $5.6 billion for the first quarter of 2017 and $9.0 million on $4.7 billion for the fourth quarter of 2017. The decreases from both periods were primarily due to run-off in the auto finance serviced for others portfolio. Servicing fee income on auto finance loans serviced for others comprised $6.4 million of total servicing fee income for the first quarter of 2018, compared with $9.8 million and $7.1 million for the first quarter of 2017 and the fourth quarter of 2017, respectively. Servicing fee income on consumer real estate loans serviced for others comprised $1.5 million of total servicing fee income for the first quarter of 2018 and 2017 and the fourth quarter of 2017.
  • Leasing and equipment finance non-interest income for the first quarter of 2018 increased $13.5 million, or 47.9 percent, from the first quarter of 2017 and was consistent with the fourth quarter of 2017. The increase from the first quarter of 2017 was primarily due to an increase in operating lease revenue, mainly driven by the acquisition of a leasing company in the second quarter of 2017 and an increase in sales-type lease revenue.
 

Loans and Leases

   
Period-End and Average Loans and Leases Table 3
        Percent Change
1Q 4Q 1Q 1Q18 vs 1Q18 vs
(Dollars in thousands) 2018   2017   2017   4Q17   1Q17
Period-End:
Consumer real estate:
First mortgage lien $ 1,878,441 $ 1,959,387 $ 2,166,691 (4.1 )% (13.3 )%
Junior lien 2,843,221     2,860,309     2,494,696   (0.6 ) 14.0
Total consumer real estate 4,721,662 4,819,696 4,661,387 (2.0 ) 1.3
Commercial 3,678,181 3,561,193 3,376,050 3.3 8.9
Leasing and equipment finance 4,666,239 4,761,661 4,276,008 (2.0 ) 9.1
Inventory finance 3,457,855 2,739,754 2,864,248 26.2 20.7
Auto finance 2,839,363 3,199,639 2,780,416 (11.3 ) 2.1
Other 19,854     22,517     16,785   (11.8 ) 18.3
Total $ 19,383,154     $ 19,104,460     $ 17,974,894   1.5 7.8
 
Average:
Consumer real estate:
First mortgage lien $ 1,918,677 $ 1,959,067 $ 2,237,801 (2.1 )% (14.3 )%
Junior lien 2,879,995     3,013,356     2,791,200   (4.4 ) 3.2
Total consumer real estate 4,798,672 4,972,423 5,029,001 (3.5 ) (4.6 )
Commercial 3,601,020 3,536,725 3,302,891 1.8 9.0
Leasing and equipment finance 4,690,868 4,713,015 4,285,944 (0.5 ) 9.4
Inventory finance 3,128,290 2,688,387 2,696,787 16.4 16.0
Auto finance 3,020,187 3,267,855 2,714,862 (7.6 ) 11.2
Other 14,446     13,007     9,740   11.1 48.3
Total $ 19,253,483     $ 19,191,412     $ 18,039,225   0.3 6.7
                                     
 
  • Period-end loans and leases were $19.4 billion at March 31, 2018, an increase of $1.4 billion, or 7.8 percent, from March 31, 2017 and $278.7 million, or 1.5 percent, from December 31, 2017. Average loans and leases were $19.3 billion for the first quarter of 2018, an increase of $1.2 billion, or 6.7 percent, from the first quarter of 2017 and consistent with the fourth quarter of 2017.



    The increase from March 31, 2017 for period-end loans and leases was primarily due to increases in the inventory finance, leasing and equipment finance and commercial portfolios. The increase from the first quarter of 2017 for average loans and leases was primarily due to increases in the inventory finance, leasing and equipment finance, auto finance and commercial portfolios, partially offset by a decrease in the consumer real estate portfolio. The increases in the inventory finance portfolio were primarily due to strong originations and expansion of the number of active dealers. The increases in the leasing and equipment finance portfolio were primarily due to a loan and lease portfolio purchase of $445.5 million on September 29, 2017. The increase in the average auto finance portfolio was primarily attributable to the reclassification of loans from held for sale to held for investment during the second quarter of 2017, partially offset by the discontinuation of auto finance loan originations effective December 1, 2017. The increases in the commercial portfolio were primarily due to strong originations. The decrease in the average consumer real estate portfolio was primarily due to a decrease in the first mortgage lien portfolio due to run-off and lower originations.



    The increase from December 31, 2017 for period-end loans and leases was primarily due to increases in the inventory finance and commercial portfolios, partially offset by decreases in the auto finance, consumer real estate and leasing and equipment finance portfolios. The increase in the inventory finance portfolio was primarily due to a seasonally higher balance in the lawn and garden marketing segment and strong originations. The increase in the commercial portfolio was primarily due to lower pay-offs. The decrease in the auto finance portfolio was primarily attributable to the discontinuation of auto finance loan originations and run-off in the portfolio. The decrease in the consumer real estate portfolio was primarily due to a decrease in the first mortgage lien portfolio due to run-off and lower originations. The decrease in the leasing and equipment finance portfolio was primarily due to lower originations.
  • Loan and lease originations were $3.8 billion for the first quarter of 2018, a decrease of $196.6 million, or 4.9 percent, from the first quarter of 2017 and $116.8 million, or 3.0 percent, from the fourth quarter of 2017. The decrease from the first quarter of 2017 was primarily due to discontinuing auto finance originations and decreased consumer real estate originations, partially offset by higher inventory finance and commercial originations. The decrease from the fourth quarter of 2017 was primarily due to discontinuing auto finance originations and decreased leasing and equipment finance, commercial and consumer real estate originations, partially offset by higher inventory finance originations.
 

Credit Quality

 
Credit Trends                             Table 4
            Change
1Q 4Q 3Q 2Q 1Q 1Q18 vs   1Q18 vs
(Dollars in thousands) 2018   2017   2017   2017   2017   4Q17   1Q17
Over 60-day delinquencies as a percentage of period-end loans and leases(1) 0.10 % 0.12 % 0.13 % 0.11 % 0.09 % (2) bps 1 bps
Net charge-offs as a percentage of average loans and leases(2), (3), (4) 0.29 0.38 0.18 0.28 0.11 (9 ) 18
Non-accrual loans and leases and other real estate owned $ 143,607 $ 136,807 $ 146,024 $ 158,000 $ 170,940 5.0 % (16.0 ) %
Provision for credit losses 11,368 22,259 14,545 19,446 12,193 (48.9 ) (6.8 )
 
(1) Excludes non-accrual loans and leases.
(2) Annualized.
(3) Excluding the $4.6 million recovery from the consumer real estate non-accrual loan sale, net charge-offs as a percentage of average loans and leases was 0.28% for 3Q 2017.
(4) Excluding the $8.7 million recovery from the consumer real estate non-accrual loan sale, net charge-offs as a percentage of average loans and leases was 0.31% for 1Q 2017.
 
  • The over 60-day delinquency rate, excluding non-accrual loans and leases, was 0.10 percent at March 31, 2018, up 1 basis point from the March 31, 2017 rate and down 2 basis points from the December 31, 2017 rate. The increase from March 31, 2017 was primarily due to higher delinquencies in the auto finance portfolio, partially offset by improved delinquencies in the first mortgage lien consumer real estate portfolio. The decrease from December 31, 2017 was primarily due to improved delinquencies in the auto finance and leasing and equipment finance portfolios.
  • The net charge-off rate was 0.29 percent for the first quarter of 2018, up 18 basis points from the first quarter of 2017 and down 9 basis points from the fourth quarter of 2017. The increase from the first quarter of 2017 was primarily due to the recovery of $8.7 million in the first quarter of 2017 on previous charge-offs related to the consumer real estate non-accrual loans that were sold and increased net charge-offs in the auto finance portfolio, partially offset by decreased net charge-offs in the commercial portfolio. Excluding the $8.7 million recovery from the consumer real estate non-accrual loan sale, the net charge-off rate was 0.31 percent for the first quarter of 2017. The decrease from the fourth quarter of 2017 was primarily due to decreased net charge-offs in the leasing and equipment finance portfolio.
  • Non-accrual loans and leases and other real estate owned were $143.6 million at March 31, 2018, a decrease of $27.3 million, or 16.0 percent, from March 31, 2017 and an increase of $6.8 million, or 5.0 percent, from December 31, 2017. Non-accrual loans and leases were $126.4 million at March 31, 2018, a decrease of $12.6 million, or 9.0 percent, from March 31, 2017 and an increase of $7.8 million, or 6.6 percent, from December 31, 2017. The decrease from March 31, 2017 was primarily due to the $21.8 million consumer real estate non-accrual loan sale in the third quarter of 2017, partially offset by an increase in non-accrual loans and leases in the leasing and equipment finance portfolio. The increase from December 31, 2017 was primarily due to increases in non-accrual loans and leases in the commercial and leasing and equipment finance portfolios. Other real estate owned was $17.2 million at March 31, 2018, a decrease of $14.8 million, or 46.2 percent, from March 31, 2017 and $1.0 million, or 5.7 percent, from December 31, 2017. The decreases from both periods were primarily due to sales of consumer real estate properties outpacing additions. The decrease from March 31, 2017 was also due to sales of commercial real estate properties.
  • Provision for credit losses was $11.4 million for the first quarter of 2018, a decrease of $0.8 million, or 6.8 percent, from the first quarter of 2017 and $10.9 million, or 48.9 percent, from the fourth quarter of 2017. The decrease from the first quarter of 2017 was primarily due to run-off in the auto finance portfolio and decreased net charge-offs in the commercial portfolio, partially offset by increased net charge-offs in the consumer real estate portfolio mainly driven by the recovery of $8.7 million in the first quarter of 2017 on previous charge-offs related to the consumer real estate non-accrual loans that were sold. The decrease from the fourth quarter of 2017 was primarily due to run-off in the auto finance portfolio, decreased net charge-offs in the leasing and equipment finance portfolio and a decreased reserve rate for the inventory finance portfolio, partially offset by seasonal growth in the inventory finance portfolio.
         

Deposits

                     
Average Deposits                  

Table 5

Change
1Q 4Q 1Q 1Q18 vs 1Q18 vs
(Dollars in thousands) 2018   2017   2017   4Q17   1Q17
Checking $ 6,192,310 $ 6,098,522 $ 5,914,203 1.5 % 4.7 %
Savings 5,410,652 5,154,216 4,773,788 5.0 13.3
Money market 1,698,064 1,854,442 2,385,353 (8.4 ) (28.8 )
Certificates of deposit 4,998,133     5,032,085     4,033,143   (0.7 ) 23.9
Total average deposits $ 18,299,159     $ 18,139,265     $ 17,106,487   0.9 7.0
 
Average interest rate on deposits(1) 0.50 % 0.46 % 0.33 % 4 bps 17 bps
 
(1) Annualized.                    
 
  • Total average deposits for the first quarter of 2018 increased $1.2 billion, or 7.0 percent, from the first quarter of 2017 and $159.9 million, or 0.9 percent, from the fourth quarter of 2017. The increase from the first quarter of 2017 was primarily due to higher average balances of certificates of deposit, savings accounts and checking accounts, partially offset by lower average balances of money market accounts. The increase from the fourth quarter of 2017 was primarily due to higher average balances of savings accounts and checking accounts, partially offset by lower average balances of money market accounts and certificates of deposit.
  • The average interest rate on deposits for the first quarter of 2018 was 0.50 percent, up 17 basis points from the first quarter of 2017 and 4 basis points from the fourth quarter of 2017. The increases from both periods were primarily due to increased average rates on certificates of deposit and savings accounts as a result of interest rate increases.
         

Non-interest Expense

                       
Non-interest Expense                   Table 6
Change
1Q 4Q 1Q 1Q18 vs 1Q18 vs
(Dollars in thousands) 2018   2017   2017   4Q17   1Q17
Compensation and employee benefits $ 123,840 $ 127,630 $ 124,298 (3.0 )% (0.4 )%
Occupancy and equipment 40,514 39,578 39,600 2.4 2.3
Other 58,819     159,019     64,216   (63.0 ) (8.4 )
Subtotal 223,173 326,227 228,114 (31.6 ) (2.2 )
Operating lease depreciation 17,274 16,497 11,242 4.7 53.7
Foreclosed real estate and repossessed assets, net 4,916 4,739 4,549 3.7 8.1
Other credit costs, net 617     343     101   79.9 N.M.
Total non-interest expense $ 245,980     $ 347,806     $ 244,006   (29.3 ) 0.8
 
Efficiency ratio 69.21 % 95.88 % 74.93 % (2,667 ) bps (572 ) bps
 
N.M. Not Meaningful.                      
 
  • Non-interest expense for the first quarter of 2018 increased $2.0 million, or 0.8 percent, from the first quarter of 2017 and decreased $101.8 million, or 29.3 percent, from the fourth quarter of 2017. The increase from the first quarter of 2017 was primarily due to an increase in operating lease depreciation, partially offset by a decrease in other non-interest expense. The decrease from the fourth quarter of 2017 was primarily due to decreases in other non-interest expense and compensation and employee benefits expense.
  • Compensation and employee benefits expense for the first quarter of 2018 was consistent with the first quarter of 2017 and decreased $3.8 million, or 3.0 percent, from the fourth quarter of 2017. The decrease from the fourth quarter of 2017 was primarily due to one-time team member bonuses recorded in the fourth quarter of 2017 and lower headcount in the auto finance business.
  • Other non-interest expense decreased $5.4 million, or 8.4 percent, from the first quarter of 2017 and $100.2 million, or 63.0 percent, from the fourth quarter of 2017. The decrease from the first quarter of 2017 was primarily due to decreases in severance expense, loan and lease processing expense and professional fees, partially offset by increases in advertising and marketing expense and outside processing expense. The decrease from the fourth quarter of 2017 was primarily due to fourth quarter 2017 charges related to the discontinuation of auto finance loan originations, including goodwill and other intangible assets impairment charges of $73.4 million and severance, asset impairment and lease termination write-offs of $14.8 million, as well as the donation to TCF Foundation of $5.0 million.
  • Operating lease depreciation increased $6.0 million, or 53.7 percent, from the first quarter of 2017 and was consistent with the fourth quarter of 2017. The increase from the first quarter of 2017 was primarily due to an increase in leasing and equipment finance operating lease revenue related to the acquisition of a leasing company in the second quarter of 2017.

Income Tax Expense

  • The Company's effective income tax rate was 22.1% for the first quarter of 2018, compared with 30.0% for the first quarter of 2017. The effective tax rates for the first quarter of 2018 and 2017 were impacted by $1.2 million and $2.0 million, respectively, of tax benefits related to stock compensation.
   

Capital

         
Capital Information       Table 7
At Mar. 31, At Dec. 31,
(Dollars in thousands, except per-share data) 2018 2017
Total equity $ 2,550,950 $ 2,680,584
Book value per common share 13.89 13.96
Tangible book value per common share(1) 12.84 12.92
Common equity to assets 10.06 % 10.42 %
Tangible common equity to tangible assets(1) 9.37 9.72
 
At Mar. 31, At Dec. 31,
Regulatory Capital: 2018(2) 2017
Common equity Tier 1 capital $ 2,222,390 $ 2,242,410
Tier 1 capital 2,414,838 2,522,178
Total capital 2,786,637 2,889,323
 
Regulatory Capital Ratios:
Common equity Tier 1 capital ratio 10.57 % 10.79 %
Tier 1 risk-based capital ratio 11.49 12.14
Total risk-based capital ratio 13.26 13.90
Tier 1 leverage ratio 10.52 11.12
 
(1) See "Reconciliation of GAAP to Non-GAAP Financial Measures" table.
(2) The regulatory capital ratios for 1Q 2018 are preliminary pending completion and filing of the Company's regulatory reports.
 
  • TCF continues to maintain strong capital ratios after the preferred stock redemption and common stock repurchases.
  • TCF repurchased 2,567,171 shares of its common stock during the first quarter of 2018 for approximately $57.6 million, at an average cost of $22.45 per share, under its share repurchase program. TCF has the authority to purchase an additional $83.2 million in aggregate value of shares of TCF's common stock pursuant to its stock repurchase program.
  • On March 1, 2018, TCF redeemed all outstanding shares of its 6.45% Series B non-cumulative perpetual preferred stock for $100.0 million.
  • On April 19, 2018, TCF's Board of Directors declared a regular quarterly cash dividend of 15 cents per common share payable on June 1, 2018, to stockholders of record at the close of business on May 15, 2018. TCF also declared dividends on the 5.70% Series C non-cumulative perpetual preferred stock, payable on June 1, 2018, to stockholders of record at the close of business on May 15, 2018.

Webcast Information

A live webcast of TCF's conference call to discuss the first quarter earnings will be hosted at TCF's website, http://ir.tcfbank.com, on April 23, 2018 at 9:00 a.m. CDT. A slide presentation for the call will be available on the website prior to the call. Additionally, the webcast will be available for replay on TCF's website after the conference call. The website also includes free access to company news releases, TCF's annual report, investor presentations and SEC filings.

 

TCF is a Wayzata, Minnesota-based national bank holding company. As of March 31, 2018, TCF had $23.4 billion in total assets and 318 bank branches in Illinois, Minnesota, Michigan, Colorado, Wisconsin, Arizona and South Dakota providing retail and commercial banking services. TCF, through its subsidiaries, also conducts commercial leasing and equipment finance business in all 50 states and commercial inventory finance business in all 50 states and Canada. For more information about TCF, please visit http://ir.tcfbank.com.

 

Cautionary Statements for Purposes of the Safe Harbor Provisions of the Securities Litigation Reform Act

Any statements contained in this earnings release regarding the outlook for the Company's businesses and their respective markets, such as projections of future performance, targets, guidance, statements of the Company's plans and objectives, forecasts of market trends and other matters are forward-looking statements based on the Company'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.

Certain factors could cause the Company'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 the Company's Annual Report on Form 10-K for the year ended December 31, 2017 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.

Adverse Economic or Business Conditions; Competitive Conditions; Credit and Other Risks. Deterioration in general economic and banking industry conditions, including those arising from government shutdowns, defaults, anticipated defaults or rating agency downgrades of sovereign debt (including debt of the U.S.), or increases in unemployment; adverse economic, business and competitive developments such as shrinking interest margins, reduced demand for financial services and loan and lease products, deposit outflows, increased deposit costs due to competition for deposit growth and evolving payment system developments, deposit account attrition or an inability to increase the number of deposit accounts; customers completing financial transactions without using a bank; adverse changes in credit quality and other risks posed by TCF's loan, lease, investment, debt securities held to maturity and debt securities available for sale portfolios, including declines in commercial or residential real estate values, changes in the allowance for loan and lease losses dictated by new market conditions or regulatory requirements, or the inability of home equity line borrowers to make increased payments caused by increased interest rates or amortization of principal; deviations from estimates of prepayment rates and fluctuations in interest rates that result in decreases in the value of assets such as interest-only strips that arise in connection with TCF's loan sales activity; interest rate risks resulting from fluctuations in prevailing interest rates or other factors that result in a mismatch between yields earned on TCF's interest-earning assets and the rates paid on its deposits and borrowings; foreign currency exchange risks; counterparty risk, including the risk of defaults by our counterparties or diminished availability of counterparties who satisfy our credit quality requirements; decreases in demand for the types of equipment that TCF leases or finances; the effect of any negative publicity; the effects of man-made and natural disasters, including fires, floods, tornadoes, hurricanes, acts of terrorism, civil disturbances and environmental damage, which may negatively affect our operations and/or our customers.

Legislative and Regulatory Requirements. New consumer protection and supervisory requirements and regulations, including those resulting from action by the Consumer Financial Protection Bureau ("CFPB") and changes in the scope of Federal preemption of state laws that could be applied to national banks and their subsidiaries; the imposition of requirements that adversely impact TCF's deposit, lending, loan collection and other business activities such as mortgage foreclosure moratorium laws, further regulation of financial institution campus banking programs, restrictions on arbitration or new restrictions on loan and lease products; changes affecting customer account charges and fee income, including changes to interchange rates; regulatory actions or changes in customer opt-in preferences with respect to overdrafts, which may have an adverse impact on TCF; governmental regulations or judicial actions affecting the security interests of creditors; deficiencies in TCF's compliance programs, including under the Bank Secrecy Act, which may result in regulatory enforcement action including monetary penalties; increased health care costs including those resulting from health care reform; regulatory criticism and resulting enforcement actions or other adverse consequences such as increased capital requirements, higher deposit insurance assessments or monetary damages or penalties; heightened regulatory practices, requirements or expectations, including, but not limited to, requirements related to enterprise risk management, the Bank Secrecy Act and anti-money laundering compliance activity.

Earnings/Capital Risks and Constraints, Liquidity Risks. Limitations on TCF's ability to carry out its share repurchase program, pay dividends or increase dividends because of financial performance deterioration, regulatory restrictions or limitations; increased deposit insurance premiums, special assessments or other costs related to adverse conditions in the banking industry; the impact on banks of regulatory reform, including additional capital, leverage, liquidity and risk management requirements or changes in the composition of qualifying regulatory capital; adverse changes in securities markets directly or indirectly affecting TCF's ability to sell assets or to fund its operations; diminished unsecured borrowing capacity resulting from TCF credit rating downgrades or unfavorable conditions in the credit markets that restrict or limit various funding sources; costs associated with new regulatory requirements or interpretive guidance including those relating to liquidity; uncertainties relating to future retail deposit account changes, including limitations on TCF's ability to predict customer behavior and the impact on TCF's fee revenues.

Branching Risk; Growth Risks. Adverse developments affecting TCF's supermarket banking relationships or either of the primary supermarket chains in which TCF maintains supermarket branches; costs related to closing underperforming branches; inability to timely close underperforming branches due to long-term lease obligations; slower than anticipated growth in existing or acquired businesses; inability to successfully execute on TCF's growth strategy through acquisitions or expanding existing business relationships; failure to expand or diversify TCF's balance sheet through new or expanded programs or opportunities; failure to effectuate, and risks of claims related to, sales of loans; risks related to new product additions and addition of distribution channels (or entry into new markets) for existing products.

Technological and Operational Matters. Technological or operational difficulties, loss or theft of information, cyber-attacks and other security breaches, counterparty failures and the possibility that deposit account losses (from fraudulent checks, stolen debit card information, etc.) may increase; failure to keep pace with technological change, such as by failing to develop and maintain technology necessary to satisfy customer demands and prevent cyber-attacks, costs and possible disruptions related to upgrading systems or cyber-attacks; the failure to attract and retain key employees.

Litigation Risks. Results of litigation or government enforcement actions such as TCF's pending litigation with the CFPB and related matters, including class action litigation or enforcement actions concerning TCF's lending or deposit activities, including account opening/origination, servicing practices, fees or charges, employment practices or checking account overdraft program "opt in" requirements; possible increases in indemnification obligations for certain litigation against Visa U.S.A.

Accounting, Audit, Tax and Insurance Matters. Changes in accounting standards or interpretations of existing standards; federal or state monetary, fiscal or tax policies, including the impact of the Tax Cuts and Jobs Act tax reform legislation and adoption of federal or state legislation that would increase federal or state taxes; ineffective internal controls; adverse federal, state or foreign tax assessments or findings in tax audits; lack of or inadequate insurance coverage for claims against TCF; potential for claims and legal action related to TCF's fiduciary responsibilities.

 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per-share data)
(Unaudited)
       
Quarter Ended March 31, Change
2018 2017 $ %
Interest income:
Loans and leases $ 260,375 $ 219,548 $ 40,827 18.6 %
Debt securities available for sale 10,123 7,980 2,143 26.9
Debt securities held to maturity 1,019 1,280 (261 ) (20.4 )
Loans held for sale and other 3,745   13,499   (9,754 ) (72.3 )
Total interest income 275,262   242,307   32,955   13.6
Interest expense:
Deposits 22,510 13,715 8,795 64.1
Borrowings 9,553   6,478   3,075   47.5
Total interest expense 32,063   20,193   11,870   58.8
Net interest income 243,199 222,114 21,085 9.5
Provision for credit losses 11,368   12,193   (825 ) (6.8 )
Net interest income after provision for credit losses 231,831   209,921   21,910   10.4
Non-interest income:
Fees and service charges 30,751 31,282 (531 ) (1.7 )
Card revenue 13,759 13,150 609 4.6
ATM revenue 4,650   4,675   (25 ) (0.5 )
Subtotal 49,160 49,107 53 0.1
Gains on sales of auto loans, net — 2,864 (2,864 ) (100.0 )
Gains on sales of consumer real estate loans, net 9,123 8,891 232 2.6
Servicing fee income 8,295   11,651   (3,356 ) (28.8 )
Subtotal 17,418 23,406 (5,988 ) (25.6 )
Leasing and equipment finance 41,847 28,298 13,549 47.9
Other 3,716   2,703   1,013   37.5
Fees and other revenue 112,141 103,514 8,627 8.3
Gains (losses) on debt securities, net 63   —   63   N.M.
Total non-interest income 112,204   103,514   8,690   8.4
Non-interest expense:
Compensation and employee benefits 123,840 124,298 (458 ) (0.4 )
Occupancy and equipment 40,514 39,600 914 2.3
Other 58,819   64,216   (5,397 ) (8.4 )
Subtotal 223,173 228,114 (4,941 ) (2.2 )
Operating lease depreciation 17,274 11,242 6,032 53.7
Foreclosed real estate and repossessed assets, net 4,916 4,549 367 8.1
Other credit costs, net 617   101   516   N.M.
Total non-interest expense 245,980   244,006   1,974   0.8
Income before income tax expense 98,055 69,429 28,626 41.2
Income tax expense 21,631   20,843   788   3.8
Income after income tax expense 76,424 48,586 27,838 57.3
Income attributable to non-controlling interest 2,663   2,308   355   15.4
Net income attributable to TCF Financial Corporation 73,761 46,278 27,483 59.4
Preferred stock dividends 4,106 4,847 (741 ) (15.3 )
Impact of preferred stock redemption 3,481   —   3,481   N.M.
Net income available to common stockholders $ 66,174   $ 41,431   $

24,743

  59.7
 
Earnings per common share:
Basic $ 0.39 $ 0.25 $ 0.14 56.0 %
Diluted 0.39 0.25 0.14 56.0
 
Dividends declared per common share $ 0.15 $ 0.075 $ 0.075 100.0 %
 

Average common and common equivalent shares outstanding (in thousands):

Basic 168,507 167,903 604 0.4 %
Diluted 169,997 168,530 1,467 0.9
 

N.M. Not Meaningful.

 
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
(Unaudited)
       
Quarter Ended March 31, Change
2018 2017 $ %
Net income attributable to TCF Financial Corporation $ 73,761   $ 46,278   $ 27,483   59.4 %
Other comprehensive income (loss), net of tax:
Net unrealized gains (losses) on debt securities available for sale and interest-only strips (27,819 ) 2,769 (30,588 ) N.M.
Net unrealized gains (losses) on net investment hedges 1,604 (313 ) 1,917 N.M.
Foreign currency translation adjustment (2,110 ) 581 (2,691 ) N.M.
Recognized postretirement prior service cost (9 ) (7 ) (2 ) (28.6 )
Total other comprehensive income (loss), net of tax (28,334 ) 3,030   (31,364 ) N.M.
Comprehensive income $ 45,427   $ 49,308   $ (3,881 ) (7.9 )
 
N.M. Not Meaningful.
 
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except per share data)
(Unaudited)
       
At Mar. 31, At Dec. 31, Change
2018 2017 $ %
ASSETS:
Cash and due from banks $ 588,893 $ 621,782 $ (32,889 ) (5.3 )%
Investments 91,661 82,644 9,017 10.9
Debt securities held to maturity 158,099 161,576 (3,477 ) (2.2 )
Debt securities available for sale 1,954,246 1,709,018 245,228 14.3
Loans and leases held for sale 50,706 134,862 (84,156 ) (62.4 )
Loans and leases:
Consumer real estate:
First mortgage lien 1,878,441 1,959,387 (80,946 ) (4.1 )
Junior lien 2,843,221   2,860,309   (17,088 ) (0.6 )
Total consumer real estate 4,721,662 4,819,696 (98,034 ) (2.0 )
Commercial 3,678,181 3,561,193 116,988 3.3
Leasing and equipment finance 4,666,239 4,761,661 (95,422 ) (2.0 )
Inventory finance 3,457,855 2,739,754 718,101 26.2
Auto finance 2,839,363 3,199,639 (360,276 ) (11.3 )
Other 19,854   22,517   (2,663 ) (11.8 )
Total loans and leases 19,383,154 19,104,460 278,694 1.5
Allowance for loan and lease losses (167,703 ) (171,041 ) 3,338   2.0
Net loans and leases 19,215,451 18,933,419 282,032 1.5
Premises and equipment, net 427,497 421,549 5,948 1.4
Goodwill, net 154,757 154,757 — —
Other assets 743,742   782,552   (38,810 ) (5.0 )
Total assets $ 23,385,052   $ 23,002,159   $ 382,893   1.7
 
LIABILITIES AND EQUITY:
Deposits:
Checking $ 6,541,409 $ 6,300,127 $ 241,282 3.8 %
Savings 5,551,155 5,287,606 263,549 5.0
Money market 1,609,472 1,764,998 (155,526 ) (8.8 )
Certificates of deposit 4,995,636   4,982,271   13,365   0.3
Total deposits 18,697,672   18,335,002   362,670   2.0
Short-term borrowings 775 — 775

N.M.

Long-term borrowings 1,457,976   1,249,449   208,527   16.7
Total borrowings 1,458,751 1,249,449 209,302 16.8
Accrued expenses and other liabilities 677,679   737,124   (59,445 ) (8.1 )
Total liabilities 20,834,102   20,321,575   512,527   2.5
Equity:

Preferred stock, par value $0.01 per share, 30,000,000 shares authorized; 7,000 and 4,007,000 shares issued, respectively

169,302 265,821 (96,519 ) (36.3 )

Common stock, par value $0.01 per share, 280,000,000 shares authorized; 172,472,035 and 172,158,449 shares issued, respectively

1,725 1,722 3 0.2
Additional paid-in capital 878,096 877,217 879 0.1
Retained earnings, subject to certain restrictions 1,618,041 1,577,311 40,730 2.6
Accumulated other comprehensive income (loss) (46,851 ) (18,517 ) (28,334 ) (153.0 )
Treasury stock at cost, 3,056,201 and 489,030 shares, respectively and other (97,800 ) (40,797 ) (57,003 ) (139.7 )
Total TCF Financial Corporation stockholders' equity 2,522,513 2,662,757 (140,244 ) (5.3 )
Non-controlling interest in subsidiaries 28,437   17,827   10,610   59.5
Total equity 2,550,950   2,680,584   (129,634 ) (4.8 )
Total liabilities and equity $ 23,385,052   $ 23,002,159   $ 382,893   1.7
 

N.M. Not Meaningful.

 
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
SUMMARY OF CREDIT QUALITY DATA
(Dollars in thousands)
(Unaudited)
 

Over 60-Day Delinquencies as a Percentage of Portfolio(1)

            Change from
At Mar. 31, At Dec. 31, At Sep. 30, At Jun. 30, At Mar. 31, Dec. 31,   Mar. 31,
2018 2017 2017 2017 2017 2017 2017
Consumer real estate:
First mortgage lien 0.23 % 0.25 % 0.32 % 0.31 % 0.28 % (2 ) bps (5 ) bps
Junior lien 0.06 0.04 0.05 0.05 0.05 2 1
Total consumer real estate 0.13 0.13 0.15 0.16 0.15 — (2 )
Commercial — — — — — — —
Leasing and equipment finance 0.11 0.14 0.15 0.14 0.12 (3 ) (1 )
Inventory finance — 0.01 0.01 0.01 — (1 ) —
Auto finance 0.24 0.28 0.25 0.20 0.13 (4 ) 11
Other 0.24 0.04 0.07 0.30 0.05 20 19
Subtotal 0.09 0.11 0.12 0.11 0.09 (2 ) —
Portfolios acquired with deteriorated credit quality 12.95 13.18 9.42 — — (23 ) 1,295
Total delinquencies 0.10 0.12 0.13 0.11 0.09 (2 ) 1
 

(1) Excludes non-accrual loans and leases.

 
 

Net Charge-Offs as a Percentage of Average Loans and Leases

   
Quarter Ended(1) Change from
Mar. 31,   Dec. 31,   Sep. 30,   Jun. 30,   Mar. 31, Dec. 31,   Mar. 31,
2018 2017 2017 2017 2017 2017 2017
Consumer real estate:
First mortgage lien 0.16 % 0.18 % (0.16 )% 0.15 % (0.18 )% (2 ) bps 34 bps
Junior lien 0.05 (0.03 ) (0.38 ) 0.05 (0.89 ) 8 94
Total consumer real estate 0.09 0.05 (0.29 ) 0.09 (0.58 ) 4 67
Commercial — (0.04 ) (0.02 ) 0.29 0.32 4 (32 )
Leasing and equipment finance 0.11 0.41 0.10 0.14 0.13 (30 ) (2 )
Inventory finance 0.05 0.15 0.08 0.09 0.01 (10 ) 4
Auto finance 1.41 1.36 1.13 0.83 1.12 5 29
Other N.M. N.M. N.M. N.M. N.M. N.M. N.M.
Total 0.29 0.38 0.18 0.28 0.11 (9 ) 18
 

N.M. Not Meaningful.

(1) Annualized.

 
 

Non-Accrual Loans and Leases Rollforward

             
Quarter Ended Change from
Mar. 31, Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31, Mar. 31,
2018 2017 2017 2017 2017 2017 2017
Balance, beginning of period $ 118,582 $ 119,619 $ 129,273 $ 138,981 $ 181,445 $ (1,037 ) $ (62,863 )
Additions 34,462 32,384 39,094 23,667 34,661 2,078 (199 )
Charge-offs (3,891 ) (7,636 ) (3,916 ) (6,819 ) (6,412 ) 3,745 2,521
Transfers to other assets (8,457 ) (9,551 ) (7,308 ) (10,870 ) (8,786 ) 1,094 329
Return to accrual status (4,335 ) (2,187 ) (3,559 ) (3,077 ) (2,591 ) (2,148 ) (1,744 )
Payments received (10,608 ) (14,412 ) (7,993 ) (11,647 ) (10,732 ) 3,804 124
Sales — — (25,924 ) (892 ) (49,916 ) — 49,916
Other, net 675   365   (48 ) (70 ) 1,312   310   (637 )
Balance, end of period $ 126,428   $ 118,582   $ 119,619   $ 129,273   $ 138,981   $ 7,846   $ (12,553 )
 
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
SUMMARY OF CREDIT QUALITY DATA, CONTINUED
(Dollars in thousands)
(Unaudited)
 

Other Real Estate Owned Rollforward

             
Quarter Ended Change from
Mar. 31, Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31, Mar. 31,
2018 2017 2017 2017 2017 2017 2017
Balance, beginning of period $ 18,225 $ 26,405 $ 28,727 $ 31,959 $ 46,797 $ (8,180 ) $ (28,572 )
Transferred in 5,196 5,638 5,685 8,638 7,212 (442 ) (2,016 )
Sales (7,348 ) (13,395 ) (9,204 ) (11,243 ) (14,982 ) 6,047 7,634
Writedowns (1,063 ) (1,024 ) (1,345 ) (1,674 ) (1,538 ) (39 ) 475
Other, net(1) 2,169   601   2,542   1,047   (5,530 ) 1,568   7,699  
Balance, end of period $ 17,179   $ 18,225   $ 26,405   $ 28,727   $ 31,959   $ (1,046 ) $ (14,780 )
 

(1) Includes transfers (to) from premises and equipment.

 
       

Allowance for Loan and Lease Losses

 
  At Mar. 31,   At Dec. 31,   At Sep. 30,   At Jun. 30,   At Mar. 31,
2018 2017 2017 2017 2017
% of % of % of % of   % of
Balance

 

Portfolio

Balance

 

Portfolio

Balance

 

Portfolio

Balance

 

Portfolio

Balance Portfolio
Consumer real estate $ 47,685 1.01 % $ 47,168 0.98 % $ 47,838 0.97 % $ 52,408 1.10 % $ 53,851 1.16 %
Commercial 37,198 1.01 37,195 1.04 36,344 1.04 34,669 0.99 33,697 1.00
Leasing and equipment finance 23,182 0.50 22,528 0.47 22,771 0.48 21,922 0.51 21,257 0.50
Inventory finance 13,253 0.38 13,233 0.48 11,978 0.46 12,129 0.48 15,816 0.55
Auto finance 45,822 1.61 50,225 1.57 48,660 1.50 43,893 1.35 35,108 1.26
Other 563   2.84 692   3.07 653   3.19 599   3.08 437   2.60
Total $ 167,703   0.87 $ 171,041   0.90 $ 168,244   0.89 $ 165,620   0.90 $ 160,166   0.89
 
 

Changes in Allowance for Loan and Lease Losses

             
Quarter Ended Change from
Mar. 31, Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31, Mar. 31,
2018 2017 2017 2017 2017 2017 2017
Balance, beginning of period $ 171,041 $ 168,244 $ 165,620 $ 160,166 $ 160,269 $ 2,797 $ 10,772
Charge-offs (19,865 ) (23,865 ) (17,999 ) (18,326 ) (18,902 ) 4,000 (963 )
Recoveries 5,714   5,580   9,847   5,412   13,813   134   (8,099 )
Net (charge-offs) recoveries (14,151 ) (18,285 ) (8,152 ) (12,914 ) (5,089 ) 4,134 (9,062 )
Provision for credit losses 11,368 22,259 14,545 19,446 12,193 (10,891 ) (825 )
Other (555 ) (1,177 ) (3,769 ) (1,078 ) (7,207 ) 622   6,652  
Balance, end of period $ 167,703   $ 171,041   $ 168,244   $ 165,620   $ 160,166   $ (3,338 ) $ 7,537  
 
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES

(Dollars in thousands)
(Unaudited)
           
Quarter Ended March 31,
2018 2017
Average Yields and Average Yields and
Balance Interest(1) Rates(1)(2) Balance Interest(1) Rates(1)(2)
ASSETS:
Investments and other $ 332,319 $ 2,776 3.38 % $ 286,519 $ 2,747 3.88 %
Debt securities held to maturity 159,139 1,019 2.56 177,939 1,280 2.88
Debt securities available for sale:(3)
Taxable 981,843 5,813 2.37 815,867 4,654 2.28
Tax-exempt(4) 821,642 5,456 2.66 640,826 5,117 3.19
Loans and leases held for sale 63,095 969 6.22 464,301 10,752 9.39
Loans and leases:(5)
Consumer real estate:
Fixed-rate 1,786,636 24,613 5.58 2,083,472 29,287 5.70
Variable- and adjustable-rate 3,012,036   45,881   6.18 2,945,529   40,239   5.54
Total consumer real estate 4,798,672 70,494 5.96 5,029,001 69,526 5.60
Commercial:
Fixed-rate 931,275 10,597 4.61 1,000,316 11,713 4.75
Variable- and adjustable-rate 2,669,745   33,160   5.04 2,302,575   24,391   4.30
Total commercial 3,601,020 43,757 4.93 3,302,891 36,104 4.43
Leasing and equipment finance 4,690,868 56,407 4.81 4,285,944 47,976 4.48
Inventory finance 3,128,290 51,195 6.64 2,696,787 39,451 5.93
Auto finance 3,020,187 39,285 5.28 2,714,862 27,771 4.15
Other 14,446   147   4.16 9,740   131   5.44
Total loans and leases 19,253,483   261,285   5.49 18,039,225   220,959   4.95
Total interest-earning assets 21,611,521   277,318   5.19 20,424,677   245,509   4.86
Other assets(6) 1,453,742   1,263,678  
Total assets $ 23,065,263   $ 21,688,355  
LIABILITIES AND EQUITY:
Non-interest bearing deposits:
Retail $ 2,182,780 $ 1,880,298
Small business 928,057 894,845
Commercial and custodial 634,908   626,081  
Total non-interest bearing deposits 3,745,745 3,401,224
Interest-bearing deposits:
Checking 2,461,548 113 0.02 2,530,281 83 0.01
Savings 5,395,669 3,165 0.24 4,756,486 501 0.04
Money market 1,698,064 2,409 0.58 2,385,353 2,938 0.50
Certificates of deposit 4,998,133   16,823   1.36 4,033,143   10,193   1.02
Total interest-bearing deposits 14,553,414   22,510   0.63 13,705,263   13,715   0.41
Total deposits 18,299,159   22,510   0.50 17,106,487   13,715   0.33
Borrowings:
Short-term borrowings 3,952 19 1.99 4,628 7 0.65
Long-term borrowings 1,423,075   9,534   2.70 1,459,053   6,471   1.78
Total borrowings 1,427,027   9,553   2.70 1,463,681   6,478   1.78
Total interest-bearing liabilities 15,980,441   32,063   0.81 15,168,944   20,193   0.54
Total deposits and borrowings 19,726,186   32,063   0.66 18,570,168   20,193   0.44
Accrued expenses and other liabilities 758,157   665,301  
Total liabilities 20,484,343   19,235,469  
Total TCF Financial Corp. stockholders' equity 2,557,729 2,431,755
Non-controlling interest in subsidiaries 23,191   21,131  
Total equity 2,580,920   2,452,886  
Total liabilities and equity $ 23,065,263   $ 21,688,355  
Net interest income and margin $ 245,255   4.59 $ 225,316   4.46
 
(1)   Interest and yields are presented on a fully tax-equivalent basis.
(2) Annualized.
(3) Average balances and yields of debt securities available for sale are based upon historical amortized cost.
(4) The yield on tax-exempt debt securities available for sale is computed on a tax-equivalent basis using a statutory federal income tax rate of 21% for the first quarter of 2018 and 35% for the same period in 2017.
(5) Average balances of loans and leases include non-accrual loans and leases and are presented net of unearned income.
(6) Includes leased equipment and related initial direct costs under operating leases of $281.9 million and $180.3 million for the first quarter of 2018 and 2017, respectively.
 
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND FINANCIAL HIGHLIGHTS
(Dollars in thousands, except per-share data)
(Unaudited)
         
Quarter Ended
Mar. 31, Dec. 31, Sep. 30, Jun. 30, Mar. 31,
2018 2017 2017 2017 2017
Interest income:
Loans and leases $ 260,375 $ 256,633 $ 243,973 $ 234,092 $ 219,548
Debt securities available for sale 10,123 8,760 8,486 8,052 7,980
Debt securities held to maturity 1,019 1,048 1,073 1,035 1,280
Loans held for sale and other 3,745   4,187   4,073   5,338   13,499  
Total interest income 275,262   270,628   257,605   248,517   242,307  
Interest expense:
Deposits 22,510 20,846 17,015 14,436 13,715
Borrowings 9,553   7,922   6,487   6,920   6,478  
Total interest expense 32,063   28,768   23,502   21,356   20,193  
Net interest income 243,199 241,860 234,103 227,161 222,114
Provision for credit losses 11,368   22,259   14,545   19,446   12,193  

Net interest income after provision for credit losses

231,831   219,601   219,558   207,715   209,921  
Non-interest income:
Fees and service charges 30,751 33,267 34,605 32,733 31,282
Card revenue 13,759 14,251 14,177 14,154 13,150
ATM revenue 4,650   4,654   5,234   5,061   4,675  
Subtotal 49,160 52,172 54,016 51,948 49,107
Gains on sales of auto loans, net — 2,216 — 380 2,864
Gains on sales of consumer real estate loans, net 9,123 11,407 8,049 8,980 8,891
Servicing fee income 8,295   9,000   9,966   10,730   11,651  
Subtotal 17,418 22,623 18,015 20,090 23,406
Leasing and equipment finance 41,847 42,831 34,080 39,830 28,298
Other 3,716   3,218   2,930   2,795   2,703  
Fees and other revenue 112,141 120,844 109,041 114,663 103,514
Gains (losses) on debt securities, net 63   48   189   —   —  
Total non-interest income 112,204   120,892   109,230   114,663   103,514  
Non-interest expense:
Compensation and employee benefits 123,840 127,630 114,954 115,630 124,298
Occupancy and equipment 40,514 39,578 38,766 38,965 39,600
Other 58,819   159,019   61,581   61,363   64,216  
Subtotal 223,173 326,227 215,301 215,958 228,114
Operating lease depreciation 17,274 16,497 15,696 12,466 11,242
Foreclosed real estate and repossessed assets, net 4,916 4,739 3,829 4,639 4,549
Other credit costs, net 617   343   209   24   101  
Total non-interest expense 245,980   347,806   235,035   233,087   244,006  
Income (loss) before income tax expense (benefit) 98,055 (7,313 ) 93,753 89,291 69,429
Income tax expense (benefit) 21,631   (110,965 ) 30,704   25,794   20,843  
Income after income tax expense (benefit) 76,424 103,652 63,049 63,497 48,586
Income attributable to non-controlling interest 2,663   2,253   2,521   3,065   2,308  
Net income attributable to TCF Financial Corporation 73,761 101,399 60,528 60,432 46,278
Preferred stock dividends 4,106 3,746 6,464 4,847 4,847
Impact of preferred stock redemption 3,481   —   5,779   —   —  
Net income available to common stockholders $ 66,174   $ 97,653   $ 48,285   $ 55,585   $ 41,431  
 
Earnings per common share:
Basic $ 0.39 $ 0.58 $ 0.29 $ 0.33 $ 0.25
Diluted 0.39 0.57 0.29 0.33 0.25
 
Dividends declared per common share $ 0.15 $ 0.075 $ 0.075 $ 0.075 $ 0.075
 
Financial highlights:(1)
Return on average assets 1.33 % 1.82 % 1.15 % 1.17 % 0.90 %
Return on average common equity 11.23 16.95 8.44 9.96 7.64
Net interest margin 4.59 4.57 4.61 4.52 4.46
 

(1) Annualized.

 
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED QUARTERLY AVERAGE BALANCE SHEETS
(In thousands)
(Unaudited)
         

Mar. 31,

2018

Dec. 31,

2017

Sep. 30,

2017

Jun. 30,

2017

Mar. 31,

2017

ASSETS:
Investments and other $ 332,319 $ 303,958 $ 279,839 $ 259,548 $ 286,519
Debt securities held to maturity 159,139 163,080 166,883 172,322 177,939
Debt securities available for sale:(1)
Taxable 981,843 831,113 825,192 821,744 815,867
Tax-exempt 821,642 779,964 737,859 689,667 640,826
Loans and leases held for sale 63,095 113,501 96,143 165,859 464,301
Loans and leases:(2)
Consumer real estate:
Fixed-rate 1,786,636 1,821,240 1,872,607 1,963,822 2,083,472
Variable- and adjustable-rate 3,012,036   3,151,183   2,964,493   2,782,296   2,945,529
Total consumer real estate 4,798,672 4,972,423 4,837,100 4,746,118 5,029,001
Commercial:
Fixed-rate 931,275 963,703 980,262 966,884 1,000,316
Variable- and adjustable-rate 2,669,745   2,573,022   2,493,163   2,450,168   2,302,575
Total commercial 3,601,020 3,536,725 3,473,425 3,417,052 3,302,891
Leasing and equipment finance 4,690,868 4,713,015 4,316,434 4,277,376 4,285,944
Inventory finance 3,128,290 2,688,387 2,479,416 2,723,340 2,696,787
Auto finance 3,020,187 3,267,855 3,280,612 3,149,974 2,714,862
Other 14,446   13,007   11,567   10,235   9,740
Total loans and leases 19,253,483   19,191,412   18,398,554   18,324,095   18,039,225
Total interest-earning assets 21,611,521   21,383,028   20,504,470   20,433,235   20,424,677
Other assets(3) 1,453,742   1,437,126   1,434,957   1,315,495   1,263,678
Total assets $ 23,065,263   $ 22,820,154   $ 21,939,427   $ 21,748,730   $ 21,688,355
 
LIABILITIES AND EQUITY:
Non-interest-bearing deposits:
Retail $ 2,182,780 $ 1,938,053 $ 1,940,797 $ 1,967,542 $ 1,880,298
Small business 928,057 972,493 937,847 897,391 894,845
Commercial and custodial 634,908   660,300   642,400   608,706   626,081
Total non-interest bearing deposits 3,745,745 3,570,846 3,521,044 3,473,639 3,401,224
Interest-bearing deposits:
Checking 2,461,548 2,541,475 2,539,211 2,554,563 2,530,281
Savings 5,395,669 5,140,417 4,846,090 4,806,371 4,756,486
Money market 1,698,064 1,854,442 2,106,814 2,221,807 2,385,353
Certificates of deposit 4,998,133   5,032,085   4,636,007   4,266,488   4,033,143
Total interest-bearing deposits 14,553,414   14,568,419   14,128,122   13,849,229   13,705,263
Total deposits 18,299,159   18,139,265   17,649,166   17,322,868   17,106,487
Borrowings:
Short-term borrowings 3,952 3,759 6,448 6,230 4,628
Long-term borrowings 1,423,075   1,295,268   983,004   1,225,022   1,459,053
Total borrowings 1,427,027   1,299,027   989,452   1,231,252   1,463,681
Total interest-bearing liabilities 15,980,441   15,867,446   15,117,574   15,080,481   15,168,944
Total deposits and borrowings 19,726,186   19,438,292   18,638,618   18,554,120   18,570,168
Accrued expenses and other liabilities 758,157   790,850   723,792   673,740   665,301
Total liabilities 20,484,343   20,229,142   19,362,410   19,227,860   19,235,469
Total TCF Financial Corporation stockholders' equity 2,557,729 2,570,613 2,554,667 2,494,682 2,431,755
Non-controlling interest in subsidiaries 23,191   20,399   22,350   26,188   21,131
Total equity 2,580,920   2,591,012   2,577,017   2,520,870   2,452,886
Total liabilities and equity $ 23,065,263   $ 22,820,154   $ 21,939,427   $ 21,748,730   $ 21,688,355
 
(1)   Average balances of debt securities available for sale are based upon historical amortized cost.
(2) Average balances of loans and leases include non-accrual loans and leases and are presented net of unearned income.
(3) Includes leased equipment and related initial direct costs under operating leases of $281.9 million, $267.8 million, $249.0 million, $200.7 million and $180.3 million for the first quarter of 2018 and for the fourth, third, second and first quarter of 2017, respectively.
 
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED QUARTERLY YIELDS AND RATES(1)(2)
(Unaudited)
         

Mar. 31,

2018

Dec. 31,

2017

Sep. 30,

2017

Jun. 30,

2017

Mar. 31,

2017

ASSETS:
Investments and other 3.38 % 3.07 % 3.80 % 4.20 % 3.88 %
Debt securities held to maturity 2.56 2.57 2.57 2.40 2.88
Debt securities available for sale:(3)
Taxable 2.37 2.25 2.24 2.16 2.28
Tax-exempt(4) 2.66 3.22 3.22 3.23 3.19
Loans and leases held for sale 6.22 6.43 5.75 6.34 9.39
Loans and leases:
Consumer real estate:
Fixed-rate 5.58 5.61 5.61 5.65 5.70
Variable- and adjustable rate 6.18 5.95 5.91 5.76 5.54
Total consumer real estate 5.96 5.83 5.80 5.72 5.60
Commercial:
Fixed-rate 4.61 5.49 4.62 4.62 4.75
Variable- and adjustable-rate 5.04 4.68 4.76 4.45 4.30
Total commercial 4.93 4.90 4.72 4.50 4.43
Leasing and equipment finance 4.81 4.90 4.53 4.48 4.48
Inventory finance 6.64 6.01 6.71 6.22 5.93
Auto finance 5.28 5.23 5.17 5.01 4.15
Other 4.16 4.75 5.03 5.37 5.44
Total loans and leases 5.49 5.35 5.31 5.15 4.95
 
Total interest-earning assets 5.19 5.11 5.07 4.94 4.86
 
LIABILITIES:
Interest-bearing deposits:
Checking 0.02 0.02 0.02 0.01 0.01
Savings 0.24 0.18 0.08 0.04 0.04
Money market 0.58 0.48 0.47 0.45 0.50
Certificates of deposit 1.36 1.28 1.16 1.07 1.02
Total interest-bearing deposits 0.63 0.57 0.48 0.42 0.41
Total deposits 0.50 0.46 0.38 0.33 0.33
Borrowings:
Short-term borrowings 1.99 1.75 1.33 0.79 0.65
Long-term borrowings 2.70 2.43 2.62 2.26 1.78
Total borrowings 2.70 2.43 2.62 2.25 1.78
 
Total interest-bearing liabilities 0.81 0.72 0.62 0.57 0.54
 
Net interest margin 4.59 4.57 4.61 4.52 4.46
 
(1)   Annualized.
(2) Yields are presented on a fully tax-equivalent basis.
(3) Average yields of debt securities available for sale are based upon historical amortized cost.
(4) The yield on tax-exempt debt securities available for sale is computed on a tax-equivalent basis using a statutory federal income tax rate of 21% for the first quarter of 2018 and 35% for the fourth, third, second and first quarter of 2017, respectively.
 
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES(1)
(Dollars in thousands, except per-share data)
(Unaudited)
    At Mar. 31,   At Dec. 31,
2018 2017

Computation of tangible common equity to tangible assets and tangible book value per common share:

Total equity $ 2,550,950 $ 2,680,584
Less: Non-controlling interest in subsidiaries 28,437   17,827  
Total TCF Financial Corporation stockholders' equity 2,522,513 2,662,757
Less: Preferred stock 169,302   265,821  
Total common stockholders' equity (a) 2,353,211 2,396,936
Less:
Goodwill, net 154,757 154,757
Other intangibles, net 23,112   23,687  
Tangible common equity (b) $ 2,175,342   $ 2,218,492  
 
Total assets (c) $ 23,385,052 $ 23,002,159
Less:
Goodwill, net 154,757 154,757
Other intangibles, net 23,112   23,687  
Tangible assets (d) $ 23,207,183   $ 22,823,715  
 
Common stock shares outstanding (e) 169,415,834 171,669,419
 
Common equity to assets (a) / (c) 10.06 % 10.42 %
Tangible common equity to tangible assets (b) / (d) 9.37 % 9.72 %
 
Book value per common share (a) / (e) $ 13.89 $ 13.96
Tangible book value per common share (b) / (e) $ 12.84 $ 12.92
   
Quarter Ended
Mar. 31,   Dec. 31,   Mar. 31,
2018 2017 2017

Computation of return on average tangible common equity:

Net income available to common stockholders (f) $ 66,174 $ 97,653 $ 41,431
Plus: Goodwill impairment — 73,041 —
Plus: Other intangibles amortization and impairment 831 1,187 123
Less: Income tax expense attributable to other intangibles amortization and impairment 199   530   42  
Adjusted net income available to common stockholders (g) $ 66,806   $ 171,351   $ 41,512  
 
Average balances:
Total equity $ 2,580,920 $ 2,591,012 $ 2,452,886
Less: Non-controlling interest in subsidiaries 23,191   20,399   21,131  
Total TCF Financial Corporation stockholders' equity 2,557,729 2,570,613 2,431,755
Less: Preferred stock 200,404   265,821   263,240  
Average total common stockholders' equity (h) 2,357,325 2,304,792 2,168,515
Less:
Goodwill, net 154,757 197,734 225,640
Other intangibles, net 23,274   21,901   1,675  
Average tangible common equity (i) $ 2,179,294   $ 2,085,157   $ 1,941,200  
 
Return on average common equity(2) (f) / (h) 11.23 % 16.95 % 7.64 %
Return on average tangible common equity(2) (g) / (i) 12.26 % 32.87 % 8.55 %
 
(1)   When evaluating capital adequacy and utilization, management considers financial measures such as tangible common equity to tangible assets, tangible book value per common share and return on average tangible common equity. These measures are non-GAAP financial measures and are viewed by management as useful indicators of capital levels available to withstand unexpected market or economic conditions and also provide investors, regulators and other users with information to be viewed in relation to other banking institutions.
(2) Annualized.
 

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