Market Overview

TCF Reports Quarterly Net Income of $58.7 Million and Diluted Earnings Per Common Share of 34 Cents

Share:

Adjusted diluted earnings per common share of 49 cents,(1)
excluding 15 cent per share after-tax impact related
to BCFP/OCC settlement

SECOND QUARTER OBSERVATIONS

  • Revenue of $364.9 million, up 6.8 percent from the second quarter of
    2017
  • Net interest income of $250.8 million, up 10.4 percent from the second
    quarter of 2017
  • Net interest margin of 4.67 percent, up 15 basis points from the
    second quarter of 2017
  • Reported efficiency ratio of 74.55 percent, up 636 basis points from
    the second quarter of 2017; adjusted efficiency ratio of 65.78 percent,(1)
    down 241 basis points from the second quarter of 2017
  • Auto finance portfolio run-off of $596.4 million year-to-date
  • Non-performing assets down 36.0 percent from June 30, 2017
  • Settlement with the Bureau of Consumer Financial Protection ("BCFP")
    and the Office of the Comptroller of the Currency ("OCC") resulting in
    a pre-tax charge, including related expenses, of $32.0 million, or
    15 cents per share after-tax
  • Reported return on average common equity ("ROACE") of 9.72 percent;
    adjusted ROACE of 14.11 percent(1)
  • Reported return on average tangible common equity ("ROATCE") of 10.65
    percent;(1) adjusted ROATCE of 15.39 percent(1)
  • Repurchased 2.8 million common shares at a cost of $68.2 million in
    the second quarter of 2018; repurchased $135.0 million of $150.0
    million authorization through June 30, 2018
  • Additional $150.0 million share repurchase authorization approved by
    TCF's Board of Directors on July 25, 2018

TCF Financial Corporation (NYSE:TCF):

                                             
Summary of Financial Results                                     Table 1
                Change            
(Dollars in thousands, except per-share data) 2Q 1Q 2Q 2Q18 vs     2Q18 vs YTD YTD
    2018     2018     2017     1Q18     2Q17     2018     2017     Change
Net income attributable to TCF $ 58,749 $ 73,761 $ 60,432 (20.4 ) % (2.8 ) % $ 132,510 $ 106,710 24.2 %
Net interest income 250,799 243,199 227,161 3.1 10.4 493,998 449,275 10.0
Diluted earnings per common share 0.34 0.39 0.33 (12.8 ) 3.0 0.73 0.58 25.9
Adjusted diluted earnings per common share(1) 0.49 0.39 0.33 25.6 48.5 0.88 0.58 51.7
 

Financial Ratios(2)

Return on average assets 1.08 % 1.33 % 1.17 % (25 ) bps (9 ) bps 1.20 % 1.03 % 17 bps
ROACE 9.72 11.23 9.96 (151 ) (24 ) 10.48 8.82 166
Adjusted ROACE(1) 14.11 11.23 9.96 288 415 12.66 8.82 384
ROATCE(1) 10.65 12.26 11.15 (161 ) (50 ) 11.46 9.87 159
Adjusted ROATCE(1)

15.39

12.26 11.15

313

424

13.81

9.87

394

Net interest margin 4.67 4.59 4.52 8 15 4.63 4.49 14
Net charge-offs as a percentage of average loans and leases 0.27 0.29 0.28 (2 ) (1 ) 0.28 0.20 8
 
(1) See "Reconciliation of GAAP to Non-GAAP Financial Measures"
tables
(2) Annualized
 

TCF Financial Corporation ("TCF" or the "Company") (NYSE:TCF) today
reported net income of $58.7 million for the second quarter of 2018,
compared with $60.4 million for the second quarter of 2017 and $73.8
million for the first quarter of 2018. Diluted earnings per common share
was 34 cents for the second quarter of 2018 (inclusive of a charge of
15 cents per common share after-tax related to the settlement with the
BCFP and OCC), compared with 33 cents for the second quarter of 2017 and
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).

"Our performance in the second quarter was highlighted by strong revenue
growth driven by net interest margin expansion, as well as enhanced
capital efficiency and the continued reduction of the risk profile of
the Company," said Craig R. Dahl, chairman and chief executive officer.
"With strong revenue growth and well-controlled core expense growth, we
delivered improved core operating leverage while making investments in
people and technology that support our strategic initiatives. We
benefited from our asset sensitivity again this quarter as higher
earning asset yields exceeded increases to our cost of deposits –
demonstrating the true value of our core retail deposit franchise as
interest rates continue to rise. We continued to run-off our auto
finance portfolio as planned, while overall credit metrics improved with
lower non-performing asset levels. We also remain focused on driving
improved returns on capital and maintaining a disciplined capital
management strategy, including our announcement of an additional $150
million share repurchase program. Finally, the resolution of our
outstanding litigation with the BCFP removes legacy risk and uncertainty
and allows us to remain fully focused on executing our strategy and
pursuing business growth opportunities."

Revenue

 

Total Revenue

                                          Table 2
                Change            
2Q 1Q 2Q 2Q18 vs     2Q18 vs YTD YTD
(Dollars in thousands)     2018     2018     2017     1Q18     2Q17     2018     2017     Change
Total interest income $ 286,323 $ 275,262 $ 248,517 4.0 % 15.2 % $ 561,585 $ 490,824 14.4 %
Total interest expense       35,524         32,063         21,356   10.8 66.3   67,587         41,549   62.7
Net interest income       250,799         243,199         227,161   3.1 10.4   493,998         449,275   10.0
Non-interest income:
Fees and service charges 32,670 30,751 32,733 6.2 (0.2 ) 63,421 64,015 (0.9 )
Card revenue 14,962 13,759 14,154 8.7 5.7 28,721 27,304 5.2
ATM revenue       4,933         4,650         5,061   6.1 (2.5 )   9,583         9,736   (1.6 )
Subtotal 52,565 49,160 51,948 6.9 1.2 101,725 101,055 0.7
Gains on sales of auto loans, net 380 (100.0 ) 3,244 (100.0 )
Gains on sales of consumer real estate loans, net 7,192 9,123 8,980 (21.2 ) (19.9 ) 16,315 17,871 (8.7 )
Servicing fee income       7,484         8,295         10,730   (9.8 ) (30.3 )   15,779         22,381   (29.5 )
Subtotal 14,676 17,418 20,090 (15.7 ) (26.9 ) 32,094 43,496 (26.2 )
Leasing and equipment finance 42,904 41,847 39,830 2.5 7.7 84,751 68,128 24.4
Other       3,934         3,716         2,795   5.9 40.8   7,650         5,498   39.1
Fees and other revenue 114,079 112,141 114,663 1.7 (0.5 ) 226,220 218,177 3.7
Gains (losses) on debt securities, net       24         63           (61.9 ) N.M.   87           N.M.
Total non-interest income       114,103         112,204         114,663   1.7 (0.5 )   226,307         218,177   3.7
Total revenue     $ 364,902       $ 355,403       $ 341,824   2.7 6.8 $ 720,305       $ 667,452   7.9
 
Net interest margin(1) 4.67 % 4.59 % 4.52 % 8 bps 15 bps 4.63 % 4.49 % 14 bps
Total non-interest income as a percentage of total revenue 31.3 31.6 33.5 (30 ) (220 ) 31.4 32.7 (130 )
 
N.M. Not Meaningful
(1) Annualized
 

Total Revenue

  • Total revenue for the second quarter of 2018 increased $23.1 million,
    or 6.8 percent, from the second quarter of 2017 and $9.5 million, or
    2.7 percent, from the first quarter of 2018. The increases from both
    periods were primarily due to increased net interest income.

Net Interest Income

  • Net interest income for the second quarter of 2018 increased $23.6
    million, or 10.4 percent, from the second quarter of 2017 and $7.6
    million, or 3.1 percent, from the first quarter of 2018. The increases
    from both periods were primarily due to increased interest income on
    loans and leases held for investment and debt securities available for
    sale, partially offset by an increase in total interest expense.

    Total
    interest income increased $37.8 million, or 15.2 percent, from the
    second quarter of 2017 primarily due to higher average balances and
    increased average yields on the variable- and adjustable-rate loan
    portfolios, as well as increased average yields and higher average
    balances of leasing and equipment finance loans and leases and higher
    average balances of debt securities available for sale. These
    increases were partially offset by lower average balances of auto
    finance and fixed-rate consumer real estate loans.

    Total
    interest expense increased $14.2 million, or 66.3 percent, from the
    second quarter of 2017 primarily due to increased average rates and
    higher average balances of certificates of deposit and long-term
    borrowings, as well as increased average rates on savings accounts.

    Total
    interest income increased $11.1 million, or 4.0 percent, from the
    first quarter of 2018 primarily due to increased average yields and
    higher average balances of the variable- and adjustable-rate loan
    portfolios, as well as higher average balances of debt securities
    available for sale. These increases were partially offset by lower
    average balances of auto finance loans.

    Total interest
    expense increased $3.5 million, or 10.8 percent, from the first
    quarter of 2018 primarily due to increased average rates and higher
    average balances of long-term borrowings, as well as increased average
    rates on deposits.
  • Net interest margin was 4.67 percent for the second quarter of 2018,
    up 15 basis points from the second quarter of 2017 and 8 basis points
    from the first quarter of 2018. The increases from both periods were
    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 cost of funds.

Non-interest Income

  • Non-interest income for the second quarter of 2018 was consistent with
    the second quarter of 2017 and increased $1.9 million, or 1.7 percent,
    from the first quarter of 2018. Non-interest income for the second
    quarter of 2018 was consistent with the second quarter of 2017
    primarily due to decreases in servicing fee income and gains on sales
    of consumer real estate loans, mostly offset by increases in leasing
    and equipment finance non-interest income, other non-interest income
    and card revenue. The increase from the first quarter of 2018 was
    primarily due to increases in fees and service charges, card revenue
    and leasing and equipment finance non-interest income, partially
    offset by decreases in gains on sales of consumer real estate loans
    and servicing fee income.
  • TCF sold $181.7 million, $273.4 million and $266.3 million of consumer
    real estate loans during the second quarters of 2018 and 2017 and the
    first quarter of 2018, respectively, resulting in net gains of
    $7.2 million, $9.0 million and $9.1 million, respectively.
  • Servicing fee income was $7.5 million on $4.1 billion of average loans
    and leases serviced for others for the second quarter of 2018,
    compared with $10.7 million on $5.3 billion for the second quarter of
    2017 and $8.3 million on $4.5 billion for the first quarter of 2018.
    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 $5.6 million of total
    servicing fee income for the second quarter of 2018, compared with
    $8.7 million and $6.4 million for the second quarter of 2017 and the
    first quarter of 2018, respectively. Servicing fee income on consumer
    real estate loans serviced for others comprised $1.5 million of total
    servicing fee income for the second quarter of 2018, compared with
    $1.7 million and $1.5 million for the second quarter of 2017 and the
    first quarter of 2018, respectively.
  • Leasing and equipment finance non-interest income for the second
    quarter of 2018 increased $3.1 million, or 7.7 percent, from the
    second quarter of 2017 and $1.1 million, or 2.5 percent, from the
    first quarter of 2018. The increases from both periods were primarily
    due to an increase in operating lease revenue, partially offset by a
    decrease in sales-type lease revenue due to customer-driven events.

Loans and Leases

                         
Period-End and Average Loans and Leases                 Table 3
                Change            
2Q 1Q 2Q 2Q18 vs     2Q18 vs YTD YTD
(Dollars in thousands)       2018       2018       2017     1Q18     2Q17       2018       2017     Change
Period-End:
Consumer real estate:
First mortgage lien $ 1,800,885 $ 1,878,441 $ 2,070,385 (4.1 ) % (13.0 ) %
Junior lien       2,830,029       2,843,221       2,701,592 (0.5 ) 4.8
Total consumer real estate 4,630,914 4,721,662 4,771,977 (1.9 ) (3.0 )
Commercial 3,706,401 3,678,181 3,488,725 0.8 6.2
Leasing and equipment finance 4,648,049 4,666,239 4,333,735 (0.4 ) 7.3
Inventory finance 3,005,165 3,457,855 2,509,485 (13.1 ) 19.8
Auto finance 2,603,260 2,839,363 3,243,144 (8.3 ) (19.7 )
Other       20,957       19,854       19,459 5.6 7.7
Total     $ 18,614,746     $ 19,383,154     $ 18,366,525 (4.0 ) 1.4
 
Average:
Consumer real estate:
First mortgage lien $ 1,836,600 $ 1,918,677 $ 2,117,138 (4.3 ) % (13.3 ) % $ 1,877,412 $ 2,177,136 (13.8 ) %
Junior lien       2,904,999       2,879,995       2,628,980 0.9 10.5   2,892,565       2,709,642 6.8
Total consumer real estate 4,741,599 4,798,672 4,746,118 (1.2 ) (0.1 ) 4,769,977 4,886,778 (2.4 )
Commercial 3,702,521 3,601,020 3,417,052 2.8 8.4 3,652,051 3,360,287 8.7
Leasing and equipment finance 4,639,703 4,690,868 4,277,376 (1.1 ) 8.5 4,665,144 4,281,636 9.0
Inventory finance 3,299,996 3,128,290 2,723,340 5.5 21.2 3,214,618 2,710,137 18.6
Auto finance 2,695,943 3,020,187 3,149,974 (10.7 ) (14.4 ) 2,857,169 2,933,620 (2.6 )
Other       13,845       14,446       10,235 (4.2 ) 35.3   14,145       9,989 41.6
Total     $ 19,093,607     $ 19,253,483     $ 18,324,095 (0.8 ) 4.2 $ 19,173,104     $ 18,182,447 5.4
                                                       
 
  • Period-end loans and leases were $18.6 billion at June 30, 2018, an
    increase of $248.2 million, or 1.4 percent, from June 30, 2017 and a
    decrease of $768.4 million, or 4.0 percent, from March 31, 2018.
    Average loans and leases were $19.1 billion for the second quarter of
    2018, an increase of $769.5 million, or 4.2 percent, from the second
    quarter of 2017 and a decrease of $159.9 million, or 0.8 percent, from
    the first quarter of 2018.

    The increases in period-end
    loans and leases from June 30, 2017 and average loans and leases from
    the second quarter of 2017 were primarily due to increases in the
    inventory finance, leasing and equipment finance, and commercial
    portfolios, partially offset by a decrease in the auto finance
    portfolio. The increases in the inventory finance portfolio were
    primarily due to growth with existing customers through new
    manufacturer products, additional dealers and increased customer
    sales, as well as the addition of new exclusive programs. 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 increases in the commercial portfolio were
    primarily due to strong originations. The decreases in the auto
    finance portfolio were primarily attributable to the discontinuation
    of auto finance loan originations and run-off in the portfolio.

    The
    decrease from March 31, 2018 for period-end loans and leases was
    primarily due to a seasonal decrease in the inventory finance
    portfolio and decreases in the auto finance and consumer real estate
    portfolios. The decrease in the auto finance portfolio was primarily
    due to run-off. The decrease in the consumer real estate portfolio was
    primarily due to the transfer of consumer real estate loans to held
    for sale and run-off in the first mortgage lien portfolio. The
    decrease from the first quarter of 2018 for average loans and leases
    was primarily due to run-off in the auto finance and consumer real
    estate first mortgage lien portfolios, partially offset by increases
    in the inventory finance and commercial portfolios. The increase in
    the inventory finance portfolio was primarily due to seasonally higher
    balances and the increase in the commercial portfolio was primarily
    due to strong originations.
  • Loan and lease originations were $4.0 billion for the second quarter
    of 2018, a decrease of $35.2 million, or 0.9 percent, from the second
    quarter of 2017 and an increase of $242.4 million, or 6.4 percent,
    from the first quarter of 2018. The decrease from the second quarter
    of 2017 was primarily due to the discontinuation of auto finance
    originations and decreased consumer real estate originations,
    partially offset by higher inventory finance and commercial
    originations. The increase from the first quarter of 2018 was
    primarily due to higher consumer real estate, leasing and equipment
    finance and commercial originations.

Credit Quality

                                             
Credit Trends                                   Table 4
                        Change
2Q 1Q 4Q 3Q 2Q 2Q18 vs     2Q18 vs
(Dollars in thousands)     2018     2018     2017     2017     2017     1Q18     2Q17
Over 60-day delinquencies as a percentage of period-end loans and
leases(1)
0.11 % 0.10 % 0.12 % 0.13 % 0.11 % 1 bps bps
Net charge-offs as a percentage of average loans and leases(2),
(3)
0.27 0.29 0.38 0.18 0.28 (2 ) (1 )
Non-accrual loans and leases and other real estate owned $ 101,125 $ 143,607 $ 136,807 $ 146,024 $ 158,000 (29.6 ) % (36.0 ) %
Provision for credit losses 14,236 11,368 22,259 14,545 19,446 25.2 (26.8 )
 
(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.
 
  • The over 60-day delinquency rate, excluding non-accrual loans and
    leases, was 0.11 percent at June 30, 2018, consistent with the
    June 30, 2017 rate and up 1 basis point from the March 31, 2018 rate.
    The over 60-day delinquency rate, excluding non-accrual loans and
    leases, at June 30, 2018 was consistent with the June 30, 2017 rate
    primarily due to higher delinquencies in the auto finance portfolio,
    mostly offset by lower delinquencies in the first mortgage lien
    consumer real estate portfolio. The increase from March 31, 2018 was
    primarily due to higher delinquencies in the auto finance portfolio.
  • The net charge-off rate was 0.27 percent for the second quarter of
    2018, down 1 basis point from the second quarter of 2017 and 2 basis
    points from the first quarter of 2018. The decrease from the second
    quarter of 2017 was primarily due to decreased net charge-offs in the
    commercial portfolio, offset by increased net charge-offs in the auto
    finance and leasing and equipment finance portfolios. The decrease
    from the first quarter of 2018 was primarily due to decreased net
    charge-offs in the auto finance portfolio, partially offset by
    increased net charge-offs in the leasing and equipment finance
    portfolio.
  • Non-accrual loans and leases and other real estate owned were $101.1
    million at June 30, 2018, a decrease of $56.9 million, or 36.0
    percent, from June 30, 2017 and $42.5 million, or 29.6 percent, from
    March 31, 2018. Non-accrual loans and leases were $84.9 million at
    June 30, 2018, a decrease of $44.4 million, or 34.4 percent, from
    June 30, 2017 and $41.6 million, or 32.9 percent, from March 31, 2018.
    The decrease from June 30, 2017 was primarily due to the transfer of
    $36.7 million of consumer real estate non-accrual loans to held for
    sale in the second quarter of 2018 and 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 and commercial portfolios. The decrease from
    March 31, 2018 was primarily due to the transfer of consumer real
    estate non-accrual loans to held for sale, as well as a decrease in
    non-accrual loans and leases in the leasing and equipment finance
    portfolio. Other real estate owned was $16.3 million at June 30, 2018,
    a decrease of $12.5 million, or 43.4 percent, from June 30, 2017 and
    $0.9 million, or 5.3 percent, from March 31, 2018. The decreases from
    both periods were primarily due to sales of consumer real estate
    properties outpacing additions, with the decrease from June 30, 2017
    also due to sales of commercial real estate properties.
  • Provision for credit losses was $14.2 million for the second quarter
    of 2018, a decrease of $5.2 million, or 26.8 percent, from the second
    quarter of 2017 and an increase of $2.9 million, or 25.2 percent, from
    the first quarter of 2018. The decrease from the second quarter of
    2017 was primarily due to run-off in the auto finance portfolio,
    partially offset by an increase in the provision for credit losses
    attributable to the inventory finance portfolio. The increase from the
    first quarter of 2018 was primarily due to increased reserve
    requirements in the commercial and auto finance portfolios, partially
    offset by a decrease in consumer real estate due to decreased reserve
    requirements, as well as seasonal decreases in the inventory finance
    portfolio.

Deposits

                                             
Average Deposits                                     Table 5
                Change            
2Q 1Q 2Q 2Q18 vs     2Q18 vs YTD YTD
(Dollars in thousands)     2018     2018     2017     1Q18     2Q17     2018     2017     Change
Checking $ 6,325,042 $ 6,192,310 $ 6,012,235 2.1 % 5.2 % $ 6,259,043 $ 5,963,488 5.0 %
Savings 5,557,280 5,410,652 4,822,338 2.7 15.2 5,484,371 4,798,198 14.3
Money market 1,572,560 1,698,064 2,221,807 (7.4 ) (29.2 ) 1,634,965 2,303,129 (29.0 )
Certificates of deposit       4,909,422         4,998,133         4,266,488   (1.8 ) 15.1   4,953,533         4,150,460   19.3
Total average deposits     $ 18,364,304       $ 18,299,159       $ 17,322,868   0.4 6.0 $ 18,331,912       $ 17,215,275   6.5
 
Average interest rate on deposits(1) 0.52 % 0.50 % 0.33 % 2 bps 19 bps 0.51 % 0.33 % 18 bps
 
(1) Annualized
 
  • Total average deposits for the second quarter of 2018 increased
    $1.0 billion, or 6.0 percent, from the second quarter of 2017 and
    $65.1 million, or 0.4 percent, from the first quarter of 2018. The
    increase from the second quarter of 2017 was primarily due to higher
    average balances of savings accounts, certificates of deposit and
    checking accounts, partially offset by lower average balances of money
    market accounts. The increase from the first quarter of 2018 was
    primarily due to higher average balances of savings 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 second quarter of 2018
    was 0.52 percent, up 19 basis points from the second quarter of 2017
    and 2 basis points from the first quarter of 2018. The increase from
    the second quarter of 2017 was primarily due to increased average
    rates on certificates of deposit, savings accounts and money market
    accounts as a result of interest rate increases. The increase from the
    first quarter of 2018 was primarily due to increased average rates on
    money market accounts and certificates of deposit.

Non-interest Expense

                                                   
Non-interest Expense                                                 Table 6
                Change            
2Q 1Q 2Q 2Q18 vs     2Q18 vs YTD YTD
(Dollars in thousands)     2018     2018     2017     1Q18     2Q17     2018     2017     Change
Compensation and employee benefits $ 120,575 $ 123,840 $ 115,630 (2.6 ) % 4.3 % $ 244,415 $ 239,928 1.9 %
Occupancy and equipment 40,711 40,514 38,965 0.5 4.5 81,225 78,565 3.4
Other       89,084         58,819         61,363   51.5 45.2   147,903         125,579   17.8
Subtotal 250,370 223,173 215,958 12.2 15.9 473,543 444,072 6.6
Operating lease depreciation 17,945 17,274 12,466 3.9 44.0 35,219 23,708 48.6
Foreclosed real estate and repossessed assets, net 3,857 4,916 4,639 (21.5 ) (16.9 ) 8,773 9,188 (4.5 )
Other credit costs, net       (133 )       617         24   N.M. N.M.   484         125   N.M.
Total non-interest expense     $ 272,039       $ 245,980       $ 233,087   10.6 16.7 $ 518,019       $ 477,093   8.6
 
Efficiency ratio 74.55 % 69.21 % 68.19 % 534 bps 636 bps 71.92 % 71.48 % 44 bps
Adjusted efficiency ratio(1) 65.78 69.21 68.19 (343 ) (241 ) 67.47 71.48 (401 )
 
N.M. Not Meaningful
(1) See "Reconciliation of GAAP to Non-GAAP Financial Measures"
tables
 
  • Non-interest expense for the second quarter of 2018 increased $39.0
    million, or 16.7 percent, from the second quarter of 2017 and $26.1
    million, or 10.6 percent, from the first quarter of 2018. The increase
    from the second quarter of 2017 was primarily due to increases in
    other non-interest expense, operating lease depreciation and
    compensation and employee benefits expense. The increase from the
    first quarter of 2018 was primarily due to an increase in other
    non-interest expense, partially offset by a decrease in compensation
    and employee benefits expense.
  • Compensation and employee benefits expense for the second quarter of
    2018 increased $4.9 million, or 4.3 percent, from the second quarter
    of 2017 and decreased $3.3 million, or 2.6 percent, from the first
    quarter of 2018. The increase from the second quarter of 2017 was
    primarily due to higher salaries, commissions and incentive
    compensation, as well as higher medical claims expense, partially
    offset by lower headcount in the auto finance business. The decrease
    from the first quarter of 2018 was primarily due to seasonality of
    payroll taxes, partially offset by higher commissions expense.
  • Other non-interest expense for the second quarter of 2018 increased
    $27.7 million, or 45.2 percent, from the second quarter of 2017 and
    $30.3 million, or 51.5 percent, from the first quarter of 2018. The
    increase from the second quarter of 2017 was primarily due to the
    settlement with the BCFP/OCC of $32.0 million, comprised of $25.0
    million of restitution, $5.0 million in penalties and $2.0 million of
    related expenses, partially offset by decreases in professional fees
    and loan and lease processing expense. The increase from the first
    quarter of 2018 was primarily due to the settlement with the BCFP/OCC,
    partially offset by decreases in severance expense and professional
    fees.
  • Operating lease depreciation for the second quarter of 2018 increased
    $5.5 million, or 44.0 percent, from the second quarter of 2017 and was
    consistent with the first quarter of 2018. The increase from the
    second quarter of 2017 was primarily due to an increase in 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 20.9 percent for the
    second quarter of 2018, compared with 28.9 percent for the second
    quarter of 2017 and 22.1 percent for the first quarter of 2018. The
    lower effective tax rate from the second quarter of 2017 was primarily
    due to changes in the corporate statutory tax rate as a result of the
    Tax Cuts and Jobs Act ("Tax Reform"). The effective income tax rate
    for the second quarter of 2018 included a net discrete income tax
    benefit of $1.8 million primarily related to the one-time finalization
    of the provisional amounts recorded for the year ended December 31,
    2017 related to Tax Reform and excess tax benefits related to vesting
    of stock based compensation. Tax benefits related to stock
    compensation will fluctuate throughout the year based on the Company's
    stock price and the vesting of stock based compensation.

Capital

             
Capital Information     Table 7
    At Jun. 30,     At Jun. 30,
(Dollars in thousands, except per-share data)     2018     2017
Total equity $ 2,504,578 $ 2,549,831
Book value per common share 13.79 13.20
Tangible book value per common share(1) 12.73 11.74
Common equity ratio 9.97 % 10.26 %
Tangible common equity ratio(1) 9.28 9.24
 
Regulatory Capital:(2)
Common equity Tier 1 capital $ 2,186,528 $ 2,036,369
Tier 1 capital 2,375,210 2,317,915
Total capital 2,728,076 2,683,319
 
Regulatory Capital Ratios:(2)
Common equity Tier 1 capital ratio 10.60 % 10.24 %
Tier 1 risk-based capital ratio 11.51 11.66
Total risk-based capital ratio 13.22 13.49
Tier 1 leverage ratio 10.31 10.76
 
(1) See "Reconciliation of GAAP to Non-GAAP Financial Measures"
tables
(2) The regulatory capital and regulatory capital ratios at June 30,
2018 are preliminary pending completion and filing of the Company's
regulatory reports.
 
  • TCF continues to maintain strong capital ratios after the common stock
    repurchases.
  • TCF repurchased $68.2 million of its common stock during the second
    quarter of 2018 pursuant to its share repurchase program. At June 30,
    2018, TCF had the authority to repurchase an additional $15.0 million
    in aggregate value of shares pursuant to its existing share repurchase
    program. On July 25, 2018, TCF's Board of Directors approved a new
    authorization to repurchase up to an additional $150.0 million of TCF
    common stock.
  • On July 25, 2018, TCF's Board of Directors declared a regular
    quarterly cash dividend of 15 cents per common share payable on
    September 4, 2018, to stockholders of record at the close of business
    on August 15, 2018. TCF also declared dividends on the 5.70% Series C
    non-cumulative perpetual preferred stock, payable on September 4,
    2018, to stockholders of record at the close of business on August 15,
    2018.

Webcast Information

A live webcast of TCF's conference call to discuss the second quarter
earnings will be hosted at TCF's website, http://ir.tcfbank.com,
on July 27, 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 June 30, 2018, TCF had $23.2 billion in total
assets and 315 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 BCFP 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 Risks. 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. Litigation or
government enforcement actions, 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.

Use of Non-GAAP Financial Measures

Management uses the adjusted diluted earnings per common share and
adjusted efficiency ratio internally to measure performance and believes
that these financial measures not recognized under generally accepted
accounting principles in the United States ("GAAP") (i.e. non-GAAP)
provide meaningful information to investors that will permit them to
assess the performance of the Company on the same basis as that applied
by management and analysts. Adjusted diluted earnings per common share
is calculated by excluding the amounts related to the settlement with
the BCFP/OCC from earnings allocated to common stock used to calculate
diluted earnings per common share. The adjusted efficiency ratio is
calculated by also excluding the amount related to the settlement with
the BCFP/OCC from total non-interest expense used to calculate the
efficiency ratio. TCF believes that the exclusion of this adjustment
provides a meaningful base for period-to-period comparisons, which
management believes will assist investors in analyzing the operating
results of the Company and predicting future performance because
management does not believe that activities related to the adjustment
will recur.

Management utilizes the tangible common equity ratio, tangible book
value per common share, adjusted ROACE ratio, ROATCE ratio and adjusted
ROATCE ratio internally to measure performance and believes that these
non-GAAP financial measures provide meaningful information to investors
that will permit them to assess the Company's capital and ability to
withstand unexpected market or economic conditions and to assess the
performance of the Company in relation to other banking institutions on
the same basis as that applied by management, analysts and banking
regulators. These measures exclude equity attributable to
non-controlling interests, preferred stock, intangible assets,
amortization of other intangibles, where applicable, and in the adjusted
ROACE and adjusted ROATCE ratios, the settlement with the BCFP/OCC.

These non-GAAP financial measures are not defined by GAAP and other
entities may calculate them differently than TCF does. Non-GAAP
financial measures have inherent limitations and are not required to be
uniformly applied. Although these non-GAAP financial measures are
frequently used by stakeholders in the evaluation of a company, they
have limitations as analytical tools and should not be considered in
isolation or as a substitute for analyses of results as reported under
GAAP. In particular, a measure of earnings that excludes selected items
does not represent the amount that effectively accrues directly to
stockholders.

 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(Unaudited)
               
Quarter Ended June 30,     Change
      2018     2017     $     %
Interest income:
Loans and leases $ 269,280 $ 234,092 $ 35,188 15.0 %
Debt securities available for sale 12,516 8,052 4,464 55.4
Debt securities held to maturity 998 1,035 (37 ) (3.6 )
Loans held for sale and other       3,529         5,338       (1,809 ) (33.9 )
Total interest income       286,323         248,517       37,806   15.2
Interest expense:
Deposits 23,953 14,436 9,517 65.9
Borrowings       11,571         6,920       4,651   67.2
Total interest expense       35,524         21,356       14,168   66.3
Net interest income 250,799 227,161 23,638 10.4
Provision for credit losses       14,236         19,446       (5,210 ) (26.8 )
Net interest income after provision for credit losses       236,563         207,715       28,848   13.9
Non-interest income:
Fees and service charges 32,670 32,733 (63 ) (0.2 )
Card revenue 14,962 14,154 808 5.7
ATM revenue       4,933         5,061       (128 ) (2.5 )
Subtotal 52,565 51,948 617 1.2
Gains on sales of auto loans, net 380 (380 ) (100.0 )
Gains on sales of consumer real estate loans, net 7,192 8,980 (1,788 ) (19.9 )
Servicing fee income       7,484         10,730       (3,246 ) (30.3 )
Subtotal 14,676 20,090 (5,414 ) (26.9 )
Leasing and equipment finance 42,904 39,830 3,074 7.7
Other       3,934         2,795       1,139   40.8
Fees and other revenue 114,079 114,663 (584 ) (0.5 )
Gains (losses) on debt securities, net       24               24   N.M.
Total non-interest income       114,103         114,663       (560 ) (0.5 )
Non-interest expense:
Compensation and employee benefits 120,575 115,630 4,945 4.3
Occupancy and equipment 40,711 38,965 1,746 4.5
Other       89,084         61,363       27,721   45.2
Subtotal 250,370 215,958 34,412 15.9
Operating lease depreciation 17,945 12,466 5,479 44.0
Foreclosed real estate and repossessed assets, net 3,857 4,639 (782 ) (16.9 )
Other credit costs, net       (133 )       24       (157 ) N.M.
Total non-interest expense       272,039         233,087       38,952   16.7
Income before income tax expense 78,627 89,291 (10,664 ) (11.9 )
Income tax expense       16,418         25,794       (9,376 ) (36.3 )
Income after income tax expense 62,209 63,497 (1,288 ) (2.0 )
Income attributable to non-controlling interest       3,460         3,065       395   12.9
Net income attributable to TCF Financial Corporation 58,749 60,432 (1,683 ) (2.8 )
Preferred stock dividends       2,494         4,847       (2,353 ) (48.5 )
Net income available to common stockholders     $ 56,255       $ 55,585     $ 670       1.2    
 
Earnings per common share:
Basic $ 0.34 $ 0.33 $ 0.01 3.0 %
Diluted 0.34 0.33 0.01 3.0
 
Dividends declared per common share $ 0.15 $ 0.075 $ 0.075 100.0 %
 

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

Basic 165,729 168,594 (2,865 ) (1.7 ) %
Diluted       166,858         168,857       (1,999 )     (1.2 )  

N.M. Not Meaningful

 
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(Unaudited)
               
Six Months Ended June 30,     Change
      2018     2017     $     %
Interest income:
Loans and leases $ 529,655 $ 453,640 $ 76,015 16.8 %
Debt securities available for sale 22,639 16,032 6,607 41.2
Debt securities held to maturity 2,017 2,315 (298 ) (12.9 )
Loans held for sale and other       7,274       18,837       (11,563 ) (61.4 )
Total interest income       561,585       490,824       70,761   14.4
Interest expense:
Deposits 46,463 28,151 18,312 65.0
Borrowings       21,124       13,398       7,726   57.7
Total interest expense       67,587       41,549       26,038   62.7
Net interest income 493,998 449,275 44,723 10.0
Provision for credit losses       25,604       31,639       (6,035 ) (19.1 )
Net interest income after provision for credit losses       468,394       417,636       50,758   12.2
Non-interest income:
Fees and service charges 63,421 64,015 (594 ) (0.9 )
Card revenue 28,721 27,304 1,417 5.2
ATM revenue       9,583       9,736       (153 ) (1.6 )
Subtotal 101,725 101,055 670 0.7
Gains on sales of auto loans, net 3,244 (3,244 ) (100.0 )
Gains on sales of consumer real estate loans, net 16,315 17,871 (1,556 ) (8.7 )
Servicing fee income       15,779       22,381       (6,602 ) (29.5 )
Subtotal 32,094 43,496 (11,402 ) (26.2 )
Leasing and equipment finance 84,751 68,128 16,623 24.4
Other       7,650       5,498       2,152   39.1
Fees and other revenue 226,220 218,177 8,043 3.7
Gains (losses) on debt securities, net       87             87   N.M.
Total non-interest income       226,307       218,177       8,130   3.7
Non-interest expense:
Compensation and employee benefits 244,415 239,928 4,487 1.9
Occupancy and equipment 81,225 78,565 2,660 3.4
Other       147,903       125,579       22,324   17.8
Subtotal 473,543 444,072 29,471 6.6
Operating lease depreciation 35,219 23,708 11,511 48.6
Foreclosed real estate and repossessed assets, net 8,773 9,188 (415 ) (4.5 )
Other credit costs, net       484       125       359   N.M.
Total non-interest expense       518,019       477,093       40,926   8.6
Income before income tax expense 176,682 158,720 17,962 11.3
Income tax expense       38,049       46,637       (8,588 ) (18.4 )
Income after income tax expense 138,633 112,083 26,550 23.7
Income attributable to non-controlling interest       6,123       5,373       750   14.0
Net income attributable to TCF Financial Corporation 132,510 106,710 25,800 24.2
Preferred stock dividends 6,600 9,694 (3,094 ) (31.9 )
Impact of preferred stock redemption       3,481             3,481   N.M.
Net income available to common stockholders     $ 122,429     $ 97,016     $ 25,413       26.2    
 
Earnings per common share:
Basic $ 0.73 $ 0.58 $ 0.15 25.9 %
Diluted 0.73 0.58 0.15 25.9
 
Dividends declared per common share $ 0.30 $ 0.15 $ 0.15 100.0 %
 

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

Basic 167,110 168,250 (1,140 ) (0.7 ) %
Diluted       168,465       168,615       (150 )     (0.1 )  

N.M. Not Meaningful

 
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
(Unaudited)
               
Quarter Ended June 30,     Change
      2018     2017     $     %
Net income attributable to TCF Financial Corporation     $ 58,749       $ 60,432       $ (1,683 ) (2.8 ) %
Other comprehensive income (loss), net of tax:
Net unrealized gains (losses) on debt securities available for sale
and interest-only strips
(4,806 ) 12,341 (17,147 ) N.M.
Net unrealized gains (losses) on net investment hedges 3,779 (1,149 ) 4,928 N.M.
Foreign currency translation adjustment (4,925 ) 2,007 (6,932 ) N.M.
Recognized postretirement prior service cost       (8 )       (7 )       (1 ) (14.3 )
Total other comprehensive income (loss), net of tax       (5,960 )       13,192         (19,152 ) N.M.
Comprehensive income     $ 52,789       $ 73,624       $ (20,835 )     (28.3 )  
 
Six Months Ended June 30,     Change
      2018     2017     $     %
Net income attributable to TCF Financial Corporation     $ 132,510       $ 106,710       $ 25,800   24.2 %
Other comprehensive income (loss), net of tax:
Net unrealized gains (losses) on debt securities available for sale
and interest-only strips
(32,625 ) 15,110 (47,735 ) N.M.
Net unrealized gains (losses) on net investment hedges 5,383 (1,462 ) 6,845 N.M.
Foreign currency translation adjustment (7,035 ) 2,588 (9,623 ) N.M.
Recognized postretirement prior service cost       (17 )       (14 )       (3 ) (21.4 )
Total other comprehensive income (loss), net of tax       (34,294 )       16,222         (50,516 ) N.M.
Comprehensive income     $ 98,216       $ 122,932       $ (24,716 )     (20.1 )  
N.M. Not Meaningful
 
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except per share data)
(Unaudited)
               
At Jun. 30, At Dec. 31, Change
      2018     2017     $     %
ASSETS:
Cash and due from banks $ 581,876 $ 621,782 $ (39,906 ) (6.4 ) %
Investments 95,661 82,644 13,017 15.8
Debt securities held to maturity 155,962 161,576 (5,614 ) (3.5 )
Debt securities available for sale 2,249,784 1,709,018 540,766 31.6
Loans and leases held for sale 291,871 134,862 157,009 116.4
Loans and leases:
Consumer real estate:
First mortgage lien 1,800,885 1,959,387 (158,502 ) (8.1 )
Junior lien       2,830,029         2,860,309         (30,280 ) (1.1 )
Total consumer real estate 4,630,914 4,819,696 (188,782 ) (3.9 )
Commercial 3,706,401 3,561,193 145,208 4.1
Leasing and equipment finance 4,648,049 4,761,661 (113,612 ) (2.4 )
Inventory finance 3,005,165 2,739,754 265,411 9.7
Auto finance 2,603,260 3,199,639 (596,379 ) (18.6 )
Other       20,957         22,517         (1,560 ) (6.9 )
Total loans and leases 18,614,746 19,104,460 (489,714 ) (2.6 )
Allowance for loan and lease losses       (165,619 )       (171,041 )       5,422   3.2
Net loans and leases 18,449,127 18,933,419 (484,292 ) (2.6 )
Premises and equipment, net 430,956 421,549 9,407 2.2
Goodwill, net 154,757 154,757
Other assets       774,468         782,552         (8,084 ) (1.0 )
Total assets     $ 23,184,462       $ 23,002,159       $ 182,303       0.8    
LIABILITIES AND EQUITY:
Deposits:
Checking $ 6,408,174 $ 6,300,127 $ 108,047 1.7 %
Savings 5,570,979 5,287,606 283,373 5.4
Money market 1,562,008 1,764,998 (202,990 ) (11.5 )
Certificates of deposit       4,822,112         4,982,271         (160,159 ) (3.2 )
Total deposits       18,363,273         18,335,002         28,271   0.2
Short-term borrowings 761 761 N.M.
Long-term borrowings       1,554,569         1,249,449         305,120   24.4
Total borrowings 1,555,330 1,249,449 305,881 24.5
Accrued expenses and other liabilities       761,281         737,124         24,157   3.3
Total liabilities       20,679,884         20,321,575         358,309   1.8
Equity:

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

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

Common stock, par value $0.01 per share, 280,000,000 shares
authorized; 173,522,007 and 172,158,449 shares issued

1,735 1,722 13 0.8
Additional paid-in capital 877,364 877,217 147
Retained earnings, subject to certain restrictions 1,649,449 1,577,311 72,138 4.6
Accumulated other comprehensive income (loss) (52,811 ) (18,517 ) (34,294 ) (185.2 )
Treasury stock at cost, 5,837,036 and 489,030 shares and other       (164,107 )       (40,797 )       (123,310 ) N.M.
Total TCF Financial Corporation stockholders' equity 2,480,932 2,662,757 (181,825 ) (6.8 )
Non-controlling interest in subsidiaries       23,646         17,827         5,819   32.6
Total equity       2,504,578         2,680,584         (176,006 ) (6.6 )
Total liabilities and equity     $ 23,184,462       $ 23,002,159       $ 182,303       0.8    

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 Jun. 30, At Mar. 31, At Dec. 31, At Sep. 30, At Jun. 30, Mar. 31,     Jun. 30,
      2018     2018     2017     2017     2017     2018     2017
Consumer real estate:
First mortgage lien 0.20 % 0.23 % 0.25 % 0.32 % 0.31 % (3 ) bps (11 ) bps
Junior lien 0.07 0.06 0.04 0.05 0.05 1 2
Total consumer real estate 0.12 0.13 0.13 0.15 0.16 (1 ) (4 )
Commercial
Leasing and equipment finance 0.11 0.11 0.14 0.15 0.14 (3 )
Inventory finance 0.01 0.01 0.01 (1 )
Auto finance 0.33 0.24 0.28 0.25 0.20 9 13
Other 0.16 0.24 0.04 0.07 0.30 (8 ) (14 )
Subtotal 0.11 0.09 0.11 0.12 0.11 2
Portfolios acquired with deteriorated credit quality 13.48 12.95 13.18 9.42 53 1,348
Total delinquencies     0.11       0.10       0.12       0.13       0.11       1            

(1) Excludes non-accrual loans and leases

 
 
Net Charge-Offs as a Percentage of Average Loans and Leases
       
Quarter Ended(1)     Change from
Jun. 30,     Mar. 31,     Dec. 31,     Sep. 30,     Jun. 30, Mar. 31,     Jun. 30,
      2018     2018     2017     2017     2017     2018     2017
Consumer real estate:
First mortgage lien 0.16 % 0.16 % 0.18 % (0.16 )% 0.15 % bps 1 bps
Junior lien 0.01 0.05 (0.03 ) (0.38 ) 0.05 (4 ) (4 )
Total consumer real estate 0.07 0.09 0.05 (0.29 ) 0.09 (2 ) (2 )
Commercial (0.04 ) (0.02 ) 0.29 (29 )
Leasing and equipment finance 0.18 0.11 0.41 0.10 0.14 7 4
Inventory finance 0.06 0.05 0.15 0.08 0.09 1 (3 )
Auto finance 1.26 1.41 1.36 1.13 0.83 (15 ) 43
Other N.M. N.M. N.M. N.M. N.M. N.M. N.M.

Total

    0.27       0.29       0.38       0.18       0.28       (2 )       (1 )  

N.M. Not Meaningful

(1) Annualized

 
 
Non-Accrual Loans and Leases Rollforward
                           
Quarter Ended     Change from
Jun. 30, Mar. 31, Dec. 31, Sep. 30, Jun. 30, Mar. 31, Jun. 30,
      2018     2018     2017     2017     2017     2018     2017
Balance, beginning of period $ 126,428 $ 118,582 $ 119,619 $ 129,273 $ 138,981 $ 7,846 $ (12,553 )
Additions 23,101 34,462 32,384 39,094 23,667 (11,361 ) (566 )
Charge-offs (4,520 ) (3,891 ) (7,636 ) (3,916 ) (6,819 ) (629 ) 2,299
Transfers to other assets (7,686 ) (8,457 ) (9,551 ) (7,308 ) (10,870 ) 771 3,184
Transfers to loans and leases held for sale (36,720 ) (36,720 ) (36,720 )
Return to accrual status (2,982 ) (4,335 ) (2,187 ) (3,559 ) (3,077 ) 1,353 95
Payments received (12,727 ) (10,608 ) (14,412 ) (7,993 ) (11,647 ) (2,119 ) (1,080 )
Sales (25,924 ) (892 ) 892
Other, net       (35 )       675         365         (48 )       (70 )       (710 )       35  
Balance, end of period     $ 84,859       $ 126,428       $ 118,582       $ 119,619       $ 129,273       $ (41,569 )     $ (44,414 )
 
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
SUMMARY OF CREDIT QUALITY DATA, CONTINUED
(Dollars in thousands)
(Unaudited)
 
Other Real Estate Owned Rollforward
                           
Quarter Ended     Change from
Jun. 30, Mar. 31, Dec. 31, Sep. 30, Jun. 30, Mar. 31, Jun. 30,
      2018     2018       2017       2017     2017     2018     2017
Balance, beginning of period $ 17,179 $ 18,225 $ 26,405 $ 28,727 $ 31,959 $ (1,046 ) $ (14,780 )
Transferred in 4,476 5,196 5,638 5,685 8,638 (720 ) (4,162 )
Sales (6,239 ) (7,348 ) (13,395 ) (9,204 ) (11,243 ) 1,109 5,004
Writedowns (638 ) (1,063 ) (1,024 ) (1,345 ) (1,674 ) 425 1,036
Other, net(1)       1,488         2,169         601         2,542         1,047         (681 )       441  
Balance, end of period     $ 16,266       $ 17,179       $ 18,225       $ 26,405       $ 28,727       $ (913 )     $ (12,461 )

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

 
 
Allowance for Loan and Lease Losses
                                       
At Jun. 30, At Mar. 31, At Dec. 31, At Sep. 30, At Jun. 30,
2018     2018     2017     2017     2017
% of % of % of % of % of
      Balance     Portfolio     Balance     Portfolio     Balance     Portfolio     Balance     Portfolio     Balance     Portfolio
Consumer real estate $ 43,954 0.95 % $ 47,685 1.01 % $ 47,168 0.98 % $ 47,838 0.97 % $ 52,408 1.10 %
Commercial 40,291 1.09 37,198 1.01 37,195 1.04 36,344 1.04 34,669 0.99
Leasing and equipment finance 22,247 0.48 23,182 0.50 22,528 0.47 22,771 0.48 21,922 0.51
Inventory finance 11,840 0.39 13,253 0.38 13,233 0.48 11,978 0.46 12,129 0.48
Auto finance 46,608 1.79 45,822 1.61 50,225 1.57 48,660 1.50 43,893 1.35
Other       679 3.24   563 2.84   692 3.07   653 3.19   599 3.08
Total     $ 165,619     0.89       $ 167,703     0.87       $ 171,041     0.90       $ 168,244     0.89       $ 165,620     0.90  
 
 
Changes in Allowance for Loan and Lease Losses
                           
Quarter Ended     Change from
Jun. 30, Mar. 31, Dec. 31, Sep. 30, Jun. 30, Mar. 31, Jun. 30,
      2018     2018     2017     2017     2017     2018     2017
Balance, beginning of period $ 167,703 $ 171,041 $ 168,244 $ 165,620 $ 160,166 $ (3,338 ) $ 7,537
Charge-offs (18,188 ) (19,865 ) (23,865 ) (17,999 ) (18,326 ) 1,677 138
Recoveries       5,418         5,714         5,580         9,847         5,412         (296 )       6  
Net (charge-offs) recoveries (12,770 ) (14,151 ) (18,285 ) (8,152 ) (12,914 ) 1,381 144
Provision for credit losses 14,236 11,368 22,259 14,545 19,446 2,868 (5,210 )
Other       (3,550 )       (555 )       (1,177 )       (3,769 )       (1,078 )       (2,995 )       (2,472 )
Balance, end of period     $ 165,619       $ 167,703       $ 171,041       $ 168,244       $ 165,620       $ (2,084 )     $ (1 )
 
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES
(Dollars in thousands)
(Unaudited)
                       
Quarter Ended June 30,
2018     2017
Average Yields and Average Yields and
      Balance     Interest(1)     Rates(1)(2)     Balance     Interest(1)     Rates(1)(2)
ASSETS:
Investments and other $ 309,120 $ 2,857 3.71 % $ 259,548 $ 2,716 4.20 %
Debt securities held to maturity 155,779 998 2.56 172,322 1,035 2.40
Debt securities available for sale:
Taxable 1,262,642 8,163 2.59 821,744 4,434 2.16
Tax-exempt(3) 828,131 5,510 2.66 689,667 5,566 3.23
Loans and leases held for sale 45,525 672 5.93 165,859 2,622 6.34
Loans and leases:(4)
Consumer real estate:
Fixed-rate 1,715,289 23,612 5.52 1,963,822 27,679 5.65
Variable- and adjustable-rate       3,026,310       48,331 6.41   2,782,296       39,982 5.76
Total consumer real estate 4,741,599 71,943 6.09 4,746,118 67,661 5.72
Commercial:
Fixed-rate 900,462 10,087 4.49 966,884 11,126 4.62
Variable- and adjustable-rate       2,802,059       38,044 5.45   2,450,168       27,198 4.45
Total commercial 3,702,521 48,131 5.21 3,417,052 38,324 4.50
Leasing and equipment finance 4,639,703 57,236 4.93 4,277,376 47,936 4.48
Inventory finance 3,299,996 57,138 6.94 2,723,340 42,260 6.22
Auto finance 2,695,943 35,632 5.30 3,149,974 39,309 5.01
Other       13,845       143 4.10   10,235       137 5.37
Total loans and leases       19,093,607       270,223 5.67   18,324,095       235,627 5.15
Total interest-earning assets 21,694,804 288,423 5.33 20,433,235 252,000 4.94
Other assets(5)       1,430,621   1,315,495
Total assets     $ 23,125,425 $ 21,748,730
LIABILITIES AND EQUITY:
Non-interest bearing deposits $ 3,879,048 $ 3,473,639
Interest-bearing deposits:
Checking 2,460,709 119 0.02 2,554,563 83 0.01
Savings 5,542,565 3,736 0.27 4,806,371 538 0.04
Money market 1,572,560 2,620 0.67 2,221,807 2,481 0.45
Certificates of deposit       4,909,422       17,478 1.43   4,266,488       11,334 1.07
Total interest-bearing deposits       14,485,256       23,953 0.66   13,849,229       14,436 0.42
Total deposits       18,364,304       23,953 0.52   17,322,868       14,436 0.33
Borrowings:
Short-term borrowings 3,116 18 2.33 6,230 13 0.79
Long-term borrowings       1,531,389       11,553 3.02   1,225,022       6,907 2.26
Total borrowings       1,534,505       11,571 3.02   1,231,252       6,920 2.25
Total interest-bearing liabilities       16,019,761       35,524 0.89   15,080,481       21,356 0.57
Total deposits and borrowings 19,898,809 35,524 0.72 18,554,120 21,356 0.46
Accrued expenses and other liabilities       714,488   673,740
Total liabilities       20,613,297   19,227,860
Total TCF Financial Corp. stockholders' equity 2,483,474 2,494,682
Non-controlling interest in subsidiaries       28,654   26,188
Total equity       2,512,128   2,520,870
Total liabilities and equity     $ 23,125,425 $ 21,748,730
Net interest income and margin           $ 252,899     4.67             $ 230,644     4.52  

(1) Interest and yields are presented on a fully tax-equivalent
basis.

(2) Annualized

(3) 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% and 35% for the quarters ended June 30,
2018 and 2017, respectively.

(4) Average balances of loans and leases include non-accrual loans
and leases and are presented net of unearned income.

(5) Includes leased equipment and related initial direct costs
under operating leases of $288.4 million and $200.7 million for
the quarters ended June 30, 2018 and 2017, respectively.

 
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES