Menu
Email page PDF view Print view Email Alert Social Media Sharing

Press Release

Previously Announced Balance Sheet Repositioning Drives TCF's First Quarter 2012 Results

Company Release - 4/19/2012 8:00 AM ET

Total Loans and Leases up $1 billion in the first quarter

WAYZATA, Minn.--(BUSINESS WIRE)-- TCF Financial Corporation (“TCF”) (NYSE:TCB):

FIRST QUARTER HIGHLIGHTS

  • Net loss of $282.9 million or $1.78 per share
  • Balance sheet repositioned through reductions and refinance of long-term borrowings and sales of mortgage backed - securities at a net loss of $295.8 million, or $1.87 per share
  • Total loans and leases of $15.2 billion, up 7.5 percent from $14.2 billion at December 31, 2011
  • Net interest margin of 4.14 percent, up 22 bps from the fourth quarter 2011
  • Total delinquent loans declined $18.5 million from December 31, 2011
  • Announced quarterly cash dividend of 5 cents per common share, payable May 31, 2012
                                       
Summary of Financial Results                                   Table 1  
($ in thousands, except per-share data)         Percent Change  
1Q4Q1Q1Q 2012 vs   1Q 2012 vs
2012       2011       2011     4Q 2011     1Q 2011  
Net (loss) income $ (282,894 ) $ 16,443 $ 30,272 N.M. % N.M. %
Diluted earnings per common share (1.78 ) .10 .21 N.M. N.M.
 

Financial Ratios(1)

Return on average assets (5.96 ) % .37 % .68 %
Return on average common equity (63.38 ) 3.55 8.00
Net interest margin 4.14 3.92 4.06

Net charge-offs as a percentage of average loans and leases

1.06 1.63 1.51
 
(1) Annualized.
N.M. = Not meaningful.                                      
 

TCF Financial Corporation (“TCF”) (NYSE:TCB) today reported a net loss for the first quarter of 2012 of $282.9 million, or $1.78 per share, inclusive of a net, after-tax charge of $295.8 million, or $1.87 per share, related to repositioning certain investments and borrowings of TCF’s balance sheet. TCF reported net income of $30.3 million, or 21 cents per share, in the first quarter of 2011 and $16.4 million, or 10 cents per share, in the fourth quarter of 2011.

TCF declared a quarterly cash dividend of 5 cents per common share payable on May 31, 2012 to stockholders of record at the close of business on April 27, 2012.

Chairman’s Statement

“TCF’s first quarter results were highlighted by significant loan and lease growth from our specialty finance businesses, along with the successful completion of the repositioning of our balance sheet,” said William A. Cooper, Chairman and Chief Executive Officer. “While the balance sheet repositioning resulted in TCF’s first quarterly loss in 17 years, it was absolutely the right thing to do. Through the elimination of much of the high-cost, long-term debt and the sale of lower yielding, long-term mortgage-backed securities that were significantly limiting our net interest margin, we increased the transparency for the market to see the true franchise value of TCF in future periods.

“The growth in loans and leases during the quarter was primarily in inventory finance and auto finance. We are very excited about the growth potential of these businesses, especially in a time where many banks are struggling to find disciplined loan growth opportunities. TCF’s emphasis over the past several years on diversification into additional secured lending-oriented national specialty finance platforms has become a major contributor to TCF’s value proposition.

“With the asset growth tailwind at our back and the elimination of the headwind related to our long-term borrowing costs, we can focus our efforts on growing revenue and continuing overall improvements in credit quality. We look for our newly launched Choice Checking account product to positively impact both checking account generation and attrition. Meanwhile, as the economy slowly improves and we continue to focus on our underperforming real estate loans, I am optimistic about our credit outlook for the second half of 2012. While there are still challenges ahead, I am confident that the recent evolution of the bank has put TCF on the right path for success in today’s unique banking environment.”

                                         
Total Revenue                                   Table 2    
        Percent Change  
1Q4Q1Q1Q12 vs   1Q12 vs
($ in thousands)     2012       2011       2011     4Q11     1Q11  
Net interest income $ 180,173     $ 173,434     $ 174,040 3.9 % 3.5 %
Fees and other revenue:
Fees and service charges 41,856 51,002 53,513 (17.9 ) (21.8 )
Card revenue 13,207 13,643 26,584 (3.2 ) (50.3 )
ATM revenue 6,199       6,608       6,705 (6.2 ) (7.5 )
Total banking fees 61,262 71,253 86,802 (14.0 ) (29.4 )
Leasing and equipment finance 22,867 18,492 26,750 23.7 (14.52 )
Gains on sales of auto loans 2,250 1,133 - 98.6

N.M

.

Other 2,355       1,570       694 50.0

N.M

.

Total fees and other revenue 88,734       92,448       114,246 (4.0 ) (22.3 )
Subtotal 268,907 265,882 288,286 1.1 (6.7 )
Gains on securities, net 76,611       5,842       -

N.M

.

N.M

.

Total revenue $ 345,518     $ 271,724     $ 288,286 27.2 19.9
 
Net interest margin(1) 4.14 % 3.92 % 4.06 %

Fees and other revenue as a % of total revenue

25.68 34.02 39.63
 
(1) Annualized.
N.M. = Not meaningful.                                        
 

Net Interest Income

  • Net interest income for first quarter of 2012 increased $6.1 million, or 3.5 percent, compared with the first quarter of 2011. This increase is primarily due to lower average balances and cost of borrowings resulting from the balance sheet repositioning completed in March 2012, lower average borrowings due to 2011 debt maturities replaced with deposits, decreased rates on various deposit products and higher average loan and lease balances as a result of growth in the inventory finance and auto finance portfolios. These increases were partially offset by decreases in the consumer and commercial real estate portfolio balances and average yields. Net interest income for the first quarter of 2012 increased $6.7 million, or 3.9 percent, compared with the fourth quarter of 2011. This increase is primarily due to increased growth in the inventory finance portfolio, lower average cost of borrowings offset by lower mortgage-backed securities balances resulting from the balance sheet repositioning completed in March 2012, and growth in the auto finance portfolio. These increases were partially offset by decreases in the consumer and commercial real estate portfolio average balances and yields.
  • Net interest margin in the first quarter of 2012 was 4.14 percent, compared with 4.06 percent in the first quarter of 2011. This increase is primarily due to lower average balance and cost of borrowings due to the effects of the balance sheet repositioning completed in March 2012, lower average borrowings due to 2011 debt maturities replaced with deposits, as well as decreased rates on various deposit products. These increases were partially offset by a decrease in yields in the consumer, commercial, and leasing and equipment finance portfolios as a result of the lower interest rate environment. Net interest margin increased by 22 basis points from 3.92 percent in the fourth quarter of 2011. This increase is primarily due to a lower average cost of borrowings due to the effects of the balance sheet repositioning completed in March 2012. This increase was partially offset by decreased levels of higher yielding loans and leases in the consumer, commercial, and leasing and equipment finance portfolios as a result of the lower interest rate environment.
  • At March 31, 2012, interest-bearing deposits held at the Federal Reserve and unencumbered securities were $1.1 billion, an increase of $372 million from March 31, 2011 and a decrease of $319 million from December 31, 2011.

Non-interest Income

  • Banking fees and service charges in the first quarter of 2012 were $41.9 million, down $11.7 million, or 21.8 percent, from the first quarter of 2011 and down $9.1 million, or 17.9 percent, from the fourth quarter of 2011. The decrease in banking fees and revenues from the first quarter of 2011 was primarily due to changes in customer behaviors and increased levels of checking account attrition. The decrease from the fourth quarter of 2011 was primarily due to modifications to fee structures, seasonality, changes in customer behaviors and checking account attrition. Certain changes in checking account product design were implemented late in the first quarter, which management expects will have a meaningful impact on these revenues in the second quarter and beyond.
  • Card revenues were $13.2 million in the first quarter of 2012, a decrease of $13.4 million, or 50.3 percent, from the first quarter of 2011 and down $436 thousand, or 3.2 percent, from the fourth quarter of 2011. Compared with the first quarter of 2011, the average interchange rate per transaction decreased due to new debit card interchange regulations which took effect on October 1, 2011. The decrease in card revenue from the fourth quarter of 2011 was primarily due to lower seasonal transaction volume.
  • Leasing and equipment finance revenues were $22.9 million in the first quarter of 2012, down $3.9 million, or 14.5 percent, from the first quarter of 2011 and up $4.4 million, or 23.7 percent, from the fourth quarter of 2011. The changes from the prior periods were attributable to differing levels of customer-initiated lease activity.
  • TCF sold $72 million of auto loans and recognized $2.3 million in associated gains during the first quarter of 2012, compared with the sale of $37.4 million of auto loans and recognition of $1.1 million in associated gains during the fourth quarter of 2011.
Loans and Leases            
                                 
Period-End and Average Loans and Leases                             Table 3  
Percent Change  
($ in thousands) 1Q4Q1Q

1Q 2012
vs

1Q 2012
vs

  2012     2011     2011     4Q 2011     1Q 2011  
Period-End:
Consumer real estate $ 6,815,909 $ 6,895,291 $ 7,062,035 (1.2 ) % (3.5 ) %
Commercial 3,467,089 3,449,492 3,608,356 .5 (3.9 )
Leasing and equipment finance 3,118,755 3,142,259 3,079,966 (.7 ) 1.3
Inventory finance 1,637,958 624,700 1,011,044 162.2 62.0
Auto finance 139,047 3,628 - N.M. N.M.
Other   29,178     34,885     35,140 (16.4 ) (17.0 )
Total $ 15,207,936   $ 14,150,255   $ 14,796,541 7.5 2.8
 
Average:
Consumer real estate $ 6,845,063 $ 6,933,051 $ 7,101,959 (1.3 ) (3.6 )
Commercial 3,457,720 3,476,660 3,623,463 (.5 ) (4.6 )
Leasing and equipment finance 3,128,329 3,043,329 3,119,669 2.8 .3
Inventory finance 1,145,183 766,885 872,785 49.3 31.2
Auto finance 85,562 1,442 - N.M. N.M.
Other   17,582     17,944     21,757 (2.0 ) (19.2 )
Total $ 14,679,439   $ 14,239,311   $ 14,739,633 3.1 (.4 )
 
N.M. = Not meaningful.                                
 
  • Period end loans and leases were $15.2 billion at March 31, 2012, an increase of $411.4 million, or 2.8 percent, compared with March 31, 2011, and $1.1 billion, or 7.5 percent, compared with December 31, 2011. The increases in total loans and leases from March 31, 2011 and December 31, 2011 were primarily due to growth in the inventory finance and auto finance portfolios. The increase in the inventory finance portfolio, from the first quarter of 2011 was primarily due to the funding of dealers of Bombardier Recreational Products Inc. (“BRP”), a new program commencing on February 1, 2012. The increase from the fourth quarter of 2011 was primarily due to seasonal growth in the lawn and garden programs and the funding of BRP® dealers. Auto finance loans are expected to grow throughout 2012 as Gateway One expands its sales force, the number of active dealers and the number of states in its network. Gateway One increased its portfolio of managed loans, including loans, loans held for sale, and loans sold and serviced for others, by 39.1 percent to $555.8 million at March 31, 2012 from $399.7 million at December 31, 2011. Gateway One expanded its active dealers to 4,452 at March 31, 2012, from 3,438 at December 31, 2011.
  • Average loans and leases were $14.7 billion at March 31, 2012, a decrease of $60.2 million, or .4 percent, compared with March 31, 2011, and an increase of $440.1 million, or 3.1 percent, compared with December 31, 2011. The decrease in average loans and leases from March 31, 2011 was primarily due to a decrease in the consumer real estate and commercial portfolios, offset by growth in the inventory finance, auto finance, and leasing and equipment finance portfolios. The increase in average loans and leases from December 31, 2011 was primarily due to growth in the inventory finance, leasing and equipment finance, and auto finance portfolios. The decreases in the average consumer real estate portfolios reflect a decline in production of new loans as marketplace rates available for fixed-rate loans are not as attractive to TCF. The increase in the average leasing and equipment finance portfolios from both periods was primarily due to growth in core market segments and an equipment finance portfolio acquisition in December 2011, partially offset by runoff of acquired portfolios. The increase in average inventory finance portfolios from the first quarter of 2011 was primarily due to the funding of dealers of BRP. The increase from the fourth quarter of 2011 was primarily due to seasonal growth in the lawn and garden programs and the funding of BRPdealers.

Credit Quality

(Table 4 - Credit Trends: http://www.businesswire.com/cgi-bin/mmg.cgi?eid=50242826&lang=en)

  • Non-performing assets and over 60-day delinquencies remained relatively flat and first quarter 2012 net charge-offs were at the lowest quarterly level over the last eight quarters.
                                             
Credit Quality Summary of Performing and Underperforming Loans and Leases                 Table 5  
 
($ in thousands) Performing Loans and Leases(1) 60+ Days
Accruing Delinquent and Non-accrual Total Loans

March 31, 2012

Non-classified   Classified(2)   TDRs(3)   Total   Accruing   Loans and Leases   and Leases
Consumer real estate $ 6,149,586 $ - $ 413,364 $ 6,562,950 $ 103,655 $ 149,304 $ 6,815,909
Commercial 3,011,101 207,691 109,195 3,327,987 3,425 135,677 3,467,089
Leasing and equipment finance 3,071,833 19,111 845 3,091,789 6,951 20,015 3,118,755
Inventory finance 1,630,126 6,538 - 1,636,664 185 1,109 1,637,958
Auto finance 138,879 - - 138,879 168 - 139,047
Other   26,288     -     -     26,288     52     2,838     29,178
Total loans and leases $ 14,027,813   $ 233,340   $ 523,404   $ 14,784,557   $ 114,436   $ 308,943   $ 15,207,936
Percent of total loans and leases 92.3

%

 

1.5

%

 

3.4

%

 

97.2

%

 

.8

%

 

2.0

%

 

100.0 %
                                             
 
($ in thousands) Performing Loans and Leases(1) 60+ Days
Accruing Delinquent and Non-accrual Total Loans

December 31, 2011

Non-classified   Classified(2)   TDRs(3)     Total   Accruing   Loans and Leases   and Leases
Consumer real estate $ 6,233,515 $ - $ 402,770 $ 6,636,285 $ 109,635 $ 149,371 $ 6,895,291
Commercial 2,987,876 234,501 98,448 3,320,825 1,148 127,519 3,449,492
Leasing and equipment finance 3,093,194 21,451 776 3,115,421 6,255 20,583 3,142,259
Inventory finance 616,677 7,040 - 623,717 160 823 624,700
Auto finance 3,231 - - 3,231 397 - 3,628
Other   34,829     -     -     34,829     41     15     34,885
Total loans and leases $ 12,969,322   $ 262,992   $ 501,994   $ 13,734,308   $ 117,636   $ 298,311   $ 14,150,255
Percent of total loans and leases 91.7

%

 

1.9

%

 

3.5

%

 

97.1

%

 

.8

%

 

2.1

%

 

100.0 %
                                             
 
($ in thousands) Performing Loans and Leases(1) 60+ Days
Accruing Delinquent and Non-accrual Total Loans

March 31, 2011

Non-classified   Classified(2)   TDRs(3)   Total   Accruing   Loans and Leases   and Leases
Consumer real estate $ 6,489,701 $ - $ 327,592 $ 6,817,293 $ 89,552 $ 155,190 $ 7,062,035
Commercial 3,053,296 398,524 26,927 3,478,747 1,864 127,745 3,608,356
Leasing and equipment finance 3,001,250 33,333 1,110 3,035,693 9,639 34,634 3,079,966
Inventory finance 1,005,837 3,496 - 1,009,333 274 1,437 1,011,044
Other   35,019     -     -     35,019     78     43     35,140
Total loans and leases $ 13,585,103   $ 435,353   $ 355,629   $ 14,376,085   $ 101,407   $ 319,049   $ 14,796,541
Percent of total loans and leases 91.8

%

 

2.9

%

 

2.4

%

 

97.1

%

 

.7

%

 

2.2

%

 

100.0 %
 
(1) Includes all loans and leases that are not 60+ days delinquent or on non-accrual status.
 
(2) Excludes classified loans and leases that are accruing TDRs and 60+ days delinquent. "Classified" loans and leases are those for which management has concerns regarding the borrower's ability to meet the existing terms and conditions, but may never become non-performing or result in a loss.
 
(3) Excludes accruing TDRs that are 60+ days delinquent.
 

At March 31, 2012:

  • Performing loans and leases includes all loans and leases that are not over 60-days delinquent or on non-accrual status. Performing loans and leases were 97.2 percent of total loans and leases at March 31, 2012, a slight increase from 97.1 percent at December 31, 2011. The increase was due to the growth of high credit quality inventory finance loans.
  • The over 60-day delinquency rate was .77 percent, down from .85 percent at December 31, 2011 and up from .7 percent at March 31, 2011. The decrease from the fourth quarter of 2011 was primarily due to growth in the overall inventory finance portfolio and, to a lesser extent, decreases in consumer real estate junior lien delinquencies.
  • Non-accrual loans and leases were $308.9 million at March 31, 2012, an increase of $10.6 million, or 3.6 percent, from December 31, 2011 and a decrease of $10.1 million, or 3.2 percent, from March 31, 2011. The increase from December 31, 2011 was primarily due to a $15.2 million increase in commercial real estate non-accrual loans, partially offset by a $7 million decrease in commercial business non-accrual loans. The decrease from March 31, 2011 was primarily due to a $14.6 million decrease in leasing and equipment finance non-accrual loans and leases as a result of fewer loans and leases entering non-accrual status, partially offset by an increase in commercial real estate non-accruals.
  • Other real estate owned was $127.2 million at March 31, 2012, a decrease of $7.7 million from December 31, 2011 and a decrease of $14.9 million from March 31, 2011. The decrease from December 31, 2011 was primarily due to decreased transfers of commercial real estate loans from non-accrual status. The decrease from March 31, 2011 was primarily due to a decrease in the number of consumer properties owned.
  • Consumer real estate TDRs include loans where a payment modification (but not a reduction of principal) has been granted to a residential real estate customer. Accruing consumer real estate TDRs totaled $445 million at March 31, 2012, and had been in that status for an average of 15 months. These loans had a weighted average yield of 3.7 percent, were reserved at 13.5 percent and 7.1 percent were over 60-days delinquent.
  • At March 31, 2012, approximately 56 percent of the accruing consumer real estate TDRs were permanent modifications and 4.1 percent of the accruing permanent modifications were over 60-days delinquent.
  • Commercial TDRs include loans where a payment or other modification (but not a reduction of principal) has been granted. Accruing commercial TDRs had a weighted average yield of 5.4 percent and .63 percent were over 60-days delinquent at March 31, 2012.
Allowance for Loan and Lease Losses
                                         
Credit Quality Summary                                       Table 6
($ in thousands)   Percent Change
1Q4Q1Q

1Q 2012 vs

 

1Q 2012 vs

Allowance for Loan and Lease Losses

2012     2011     2011   4Q 2011     1Q 2011  
Balance at beginning of period $ 255,672 $ 254,325 $ 265,819 .5 % (3.8 ) %
Charge-offs (44,675 ) (62,973 ) (61,105 ) (29.1 ) (26.9 )
Recoveries 5,742   5,051   5,293   13.7 8.5
Net charge-offs 38,933 57,922 55,812 (32.8 ) (30.2 )
Provision for credit losses 48,542 59,249 45,274 (18.1 ) 7.2
Other 12   20   27   (40.0 ) (55.6 )
Balance at end of period $ 265,293   $ 255,672   $ 255,308   3.8 3.9
 
Net charge-offs as a percentage of
average loans and leases(1)
Consumer real estate
First mortgage lien 1.66

%

 

1.94

%

 

1.81 % (28 ) bps (15 ) bps
Junior lien 3.03 2.63 2.39 40 64
Total consumer real estate 2.09 2.15 1.99 (6 ) 10
Commercial .18 1.79 1.96 (161 ) (178 )
Leasing and equipment finance .02 .46 .36 (44 ) (34 )
Inventory finance .22 .03 .10 19 12
Auto finance .01 - - 1 1
Other

N.M

.

N.M

.

N.M

.

N.M

.

N.M

.

Total 1.06 1.63 1.51 (57 ) (45 )
 

Allowance as a percentage of period end loans and leases

1.74

%

 

1.81

%

 

1.73 %
Ratio of allowance to net charge-offs(1) 1.70

X

 

1.10

X

 

1.10 X
 
N.M. = Not meaningful.
(1) Annualized.                                        
 

At March 31, 2012:

  • Allowance for loan and lease losses was $265.3 million, or 1.74 percent of loans and leases, an increase of $10 million compared with $255.7 million, or 1.81 percent, at December 31, 2011 and $255.3 million, or 1.73 percent, at March 31, 2011.

For the quarter ended March 31, 2012:

  • Provision for credit losses was $48.5 million, a decrease of $10.7 million from $59.2 million recorded in the fourth quarter of 2011 and an increase from $45.3 million in the first quarter of 2011. The decrease from the fourth quarter of 2011 was primarily due to decreased net charge-offs in the commercial portfolio and decreased provision expense on consumer real estate TDRs, as fewer loans were modified in the first quarter of 2012 compared with the fourth quarter of 2011. The increase from the first quarter of 2011 was primarily due to increased reserves on the inventory finance portfolio as a result of increased loan balances.
  • Net loan and lease charge-offs were $38.9 million, or 1.06 percent, annualized, of average loans and leases, down $19 million from $57.9 million, or 1.63 percent, annualized, in the fourth quarter of 2011 and down from $55.8 million, or 1.51 percent, annualized, in the first quarter of 2011. The decrease from both the first quarter and the fourth quarter of 2011 was primarily due to decreases in net charge-offs in commercial real estate and leasing and equipment finance.
Deposits      
                                 
Average Deposits                       Table 7  
Percent Change
($ in thousands) 1Q4Q1Q

1Q 2012
vs

1Q 2012
vs

  2012     2011     2011     4Q 2011     1Q 2011  
 
Checking $ 4,565,065 $ 4,449,640 $ 4,501,931 2.6 % 1.4 %
Savings 5,905,118 5,878,392 5,444,381 .5 8.5
Money market 662,493     662,024     673,503 .1 (1.6)
Subtotal 11,132,676 10,990,056 10,619,815 1.3 4.8
Certificates 1,135,673     1,112,735     1,092,537 2.1 3.9
Total deposits $ 12,268,349   $ 12,102,791   $ 11,712,352 1.4 4.8
 
Total new checking accounts 97,719 94,321 97,459 3.6 .27
Average interest rate on deposits(1) .30

%

 

.32

%

 

.42 %
 
(1) Annualized.                                
 
  • Total average deposits increased $165.6 million, or 1.4 percent, from the fourth quarter of 2011 primarily due to increases in the average balances of checking accounts. Total average deposits increased $556 million, or 4.8 percent, from the first quarter of 2011 primarily due to an increase in the average balance of savings accounts.
  • The average interest cost of deposits in the first quarter of 2012 was .30 percent, down 2 basis points from the fourth quarter of 2011 and down 12 basis points from the first quarter of 2011. The decrease from both periods was primarily due to pricing strategies on certain deposit products. The weighted average interest rate on deposits was .29 percent at March 31, 2012.
Non-interest Expense          
 
Non-interest Expense                                   Table 8  
Percent Change  
($ in thousands) 1Q4Q1Q1Q 2012 vs1Q 2012 vs
2012   2011   2011   4Q 2011     1Q 2011  

Compensation and employee benefits

$ 95,967 $ 82,595 $ 89,357 16.2 % 7.4 %
Occupancy and equipment 32,246 32,366 32,159 (.4 ) .3
FDIC insurance 6,386 6,647 7,195 (3.9 ) (11.2 )
Deposit account premiums 5,971 6,482 3,198 (7.9 ) 86.7
Advertising and marketing 2,617 2,250 3,160 16.3 (17.2 )
Other   37,296       39,148       34,566 (4.7 ) 7.9
Core operating expenses 180,483 169,488 169,635 6.5 6.4
Loss on termination of debt 550,735 - - 100.0 100.0

Foreclosed real estate and repossessed assets, net

11,047 11,323 12,868 (2.4 ) (14.2 )
Operating lease depreciation 6,731 6,811 7,928 (1.2 ) (15.1 )
Other credit costs, net   (288 )     (89 )     2,548

N.M

.

N.M

.

Total non-interest expense $ 748,708     $ 187,533     $ 192,979

N.M

.

N.M

.

 
N.M. = Not meaningful.                                        
 
  • Compensation and employee benefits expense increased $6.6 million, or 7.4 percent, from the first quarter of 2011 and increased $13.4 million, or 16.2 percent, from the fourth quarter of 2011. The increase from the first quarter of 2011 was primarily due to the newly acquired auto finance business as well as increased headcount related to achieving staffing levels for increased assets in the BRP program in Inventory Finance. The increase from the fourth quarter of 2011 was primarily due to $4.4 million of net gains recognized on the annual re-measurement of retirement benefit plan assets and liabilities during the fourth quarter of 2011, the newly acquired auto finance business as it ramps up capacity to originate loans and service higher loan volumes and higher seasonal payroll tax expenses in the first quarter of 2012.
  • FDIC insurance expense decreased $809 thousand, or 11.2 percent, from the first quarter of 2011 and decreased $261 thousand, or 3.9 percent, from the fourth quarter of 2011. The decrease from the first quarter of 2011 was primarily due to the balance sheet repositioning during March of 2012 which resulted in a lower assessment base and changes in the FDIC insurance rate calculation for banks over $10 billion in assets, which were implemented on April 1, 2011. The decrease from the fourth quarter of 2011 was primarily due to the balance sheet repositioning during March of 2012 which resulted in a lower assessment base.
  • Deposit account premiums increased $2.8 million, or 86.7 percent, from the first quarter of 2011 and decreased $511 thousand, or 7.9 percent, from the fourth quarter of 2011. The increase from the first quarter of 2011 was primarily due to changes in the account premium programs, beginning in April 2011, resulting in increased premiums paid to qualifying accounts. The decrease from the fourth quarter of 2011 was primarily due to a decrease in the production of accounts that qualified for premiums despite an overall increase in account production.
  • Other non-interest expense increased $2.7 million, or 7.9 percent, from the first quarter of 2011 and decreased $1.9 million, or 4.7 percent, from the fourth quarter of 2011. The increase from the first quarter of 2011 was primarily due to an increase in expenses incurred as a result of the transfer of certain bank operations to South Dakota during the first quarter of 2012. The decrease from the fourth quarter of 2011 was primarily due to transaction costs related to the acquisition of Gateway One that were incurred during the fourth quarter of 2011.
  • As previously disclosed, during March of 2012, TCF restructured $3.6 billion of long-term borrowings that had a 4.3 percent weighted average rate and recognized a pre-tax loss of $551 million. TCF replaced $2.1 billion of 4.4 percent weighted average fixed-rate, Federal Home Loan Bank advances with a mix of floating and fixed-rate borrowings with a current weighted average rate of .5 percent. In addition, TCF terminated $1.5 billion of 4.2 percent weighted average fixed-rate borrowings under repurchase agreements. Related to these transactions, TCF sold $1.9 billion of mortgage backed securities and recognized a pre-tax gain of $77 million.
  • Foreclosed real estate and repossessed asset expense decreased $1.8 million, or 14.2 percent, from the first quarter of 2011 and decreased $276 thousand, or 2.4 percent, from the fourth quarter of 2011. The decrease from the first quarter of 2011 was primarily due to reduced writedowns on consumer real estate properties as a result of a decrease in the number of properties owned. The decrease from the fourth quarter of 2011 was primarily due to reduced writedowns on consumer real estate properties owned, partially offset by increased property tax expenses on consumer real estate and commercial real estate properties owned.
Capital and Borrowing Capacity        
                             
Capital Information                         Table 9  
At period end
($ in thousands, except per-share data) 1Q4Q
20122011
Total equity $ 1,549,325 $ 1,878,627
Total equity to total assets 8.69 % 9.90 %
Book value per common share $ 9.44 $ 11.65
Tangible realized common equity to tangible assets(1) 7.36 % 8.42 %
 
Risk-based capital
Tier 1 $ 1,431,565 9.97 % $ 1,706,926 12.67 %
Total 1,705,518 11.88 1,994,875 14.80

Excess over 10%(2)

269,779 1.88 647,342 4.80
 
Tier 1 Leverage Capital $ 1,431,565 7.68 % $ 1,706,926 9.15 %
 

Tier 1 common capital(3)

$ 1,298,259 9.04 % $ 1,581,432 11.74 %
 
(1) Excludes the impact of goodwill, other intangibles and accumulated other comprehensive income (loss) (see
“Reconciliation of GAAP to Non-GAAP Measures” table).

(2) The well-capitalized requirements are determined by the Federal Reserve for TCF pursuant to the FDIC

Improvement Act of 1991.

(3) Excludes the effect of qualifying trust preferred securities and qualifying non-controlling interest in subsidiaries (see

“Reconciliation of GAAP to Non-GAAP Measures” table).  
 
  • Changes in capital ratios since December 31, 2011 are primarily the result of the balance sheet repositioning completed during March 2012, offset by earnings from operations in the quarter. TCF continues to exceed the 10 percent “well-capitalized” requirement.
  • On April 16, 2012, the Board of Directors of TCF declared a regular quarterly cash dividend of 5 cents per common share payable on May 31, 2012 to stockholders of record at the close of business on April 27, 2012.
  • At March 31, 2012, TCF had $2.8 billion in unused, secured borrowing capacity at the FHLB of Des Moines and $530 million in unused, secured borrowing capacity at the Federal Reserve Discount Window.

Website 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 19, 2012 at 10:00 a.m. CT. Additionally, the webcast will be available for replay at 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 with $17.8 billion in total assets at March 31, 2012. TCF has over 430 branches in Minnesota, Illinois, Michigan, Colorado, Wisconsin, Indiana, Arizona and South Dakota, providing retail and commercial banking services. TCF also conducts commercial leasing and equipment finance business and leverage lending in all 50 states, commercial inventory finance business in the U.S. and Canada, and indirect auto finance business in over 30 states. 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, 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 in this release.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, 2011 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, Credit and Other RisksDeterioration in general economic and banking industry conditions, including defaults, anticipated defaults or rating agency downgrades of sovereign debt (including debt of the U.S.), or continued high rates of or increases in unemployment in TCF’s primary banking markets; adverse economic, business and competitive developments such as shrinking interest margins, deposit outflows, deposit account attrition or an inability to increase the number of deposit accounts; adverse changes in credit quality and other risks posed by TCF’s loan, lease, investment and securities available for sale portfolios, including declines in commercial or residential real estate values or changes in the allowance for loan and lease losses dictated by new market conditions or regulatory requirements; 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; limitations on TCF’s ability to attract and retain manufacturers and dealers to expand the inventory finance business.

Legislative and Regulatory RequirementsNew consumer protection and supervisory requirements and regulations, including those resulting from action by the CFPB and changes in the scope of Federal preemption of state laws that could be applied to national banks; the imposition of requirements with an adverse impact relating to TCF’s lending, loan collection and other business activities as a result of theDodd-Frank Act, or other legislative or regulatory developments such as mortgage foreclosure moratorium laws or imposition of underwriting or other limitations that impact the ability to use certain variable-rate products; impact of legislative, regulatory or other changes affecting customer account charges and fee income; changes to bankruptcy laws which would result in the loss of all or part of TCF’s security interest due to collateral value declines; deficiencies in TCF’s compliance under the Bank Secrecy Act in past or future periods, which may result in regulatory enforcement action including monetary penalties; increased health care costs resulting from Federal health care reform legislation; adverse regulatory examinations and resulting enforcement actions or other adverse consequences such as increased capital requirements or higher deposit insurance assessments; heightened regulatory practices, requirements or expectations, including, but not limited to, requirements related to the Bank Secrecy Act and anti-money laundering compliance activity.

Earnings/Capital Risks and Constraints, Liquidity RisksLimitations on TCF’s ability to pay dividends or to 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 economic impact on banks of the Dodd-Frank Act and other regulatory reform legislation; the impact of financial regulatory reform, including the phase out of trust preferred securities in tier 1 capital called for by the Dodd-Frank Act, or additional capital, leverage, liquidity and risk management requirements or changes in the composition of qualifying regulatory capital (including those resulting from U.S. implementation of Basel III requirements); 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 and unfavorable conditions in the credit markets that restrict or limit various funding sources; costs associated with new regulatory requirements or interpretive guidance relating to liquidity; uncertainties relating to customer opt-in preferences with respect to overdraft fees on point of sale and ATM transactions which may have an adverse impact on TCF’s fee revenue; 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.

Competitive Conditions; Supermarket Branching Risk; Growth RisksReduced demand for financial services and loan and lease products; adverse developments affecting TCF’s supermarket banking relationships or any of the supermarket chains in which TCF maintains supermarket branches; customers completing financial transactions without using a bank; the effect of any negative publicity; slower than anticipated growth in existing or acquired businesses; inability to successfully execute on TCF’s growth strategy through acquisitions or cross-selling opportunities; failure to expand or diversify our balance sheet through programs or new opportunities; failure to successfully attract and retain new customers; product additions and addition of distribution channels (or entry into new markets) for existing products.

Technological and Operational MattersTechnological or operational difficulties, loss or theft of information, counterparty failures and the possibility that deposit account losses (fraudulent checks, etc.) may increase; failure to keep pace with technological change.

Litigation RisksResults of litigation, including class action litigation concerning TCF’s lending or deposit activities including account servicing processes or fees or charges, or employment practices, and possible increases in indemnification obligations for certain litigation against Visa U.S.A. and potential reductions in card revenues resulting from such litigation or other litigation against Visa.

Accounting, Audit, Tax and Insurance MattersChanges in accounting standards or interpretations of existing standards; federal or state monetary, fiscal or tax policies, including adoption of state legislation that would increase state taxes; ineffective internal controls; adverse state or Federal 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 COMPREHENSIVE INCOME
(Dollars in thousands, except per-share data)
(Unaudited)
       
Three Months Ended March 31,Change
2012     2011$%
Interest income:
Loans and leases$205,984$214,673$(8,689)(4.0)%
Securities available for sale19,11219,429(317)(1.6)
Investments and other2,433   1,801   632   35.1
Total interest income227,529   235,903   (8,374)(3.5)
Interest expense:
Deposits9,06112,004(2,943)(24.5)