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Press Release

TCF Reports Net Income of $9.3 Million, or 6 Cents Per Share

Company Release - 10/26/2012 8:00 AM ET

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

THIRD QUARTER HIGHLIGHTS

  • Net interest margin of 4.85 percent, up 89 bps from third quarter 2011
  • Pre-tax pre-provision profit of $115.8 million, up 10.3 percent from third quarter 2011
  • Over 60-day accruing delinquent loans improved by $10.4 million from the second quarter of 2012
  • Provision for credit losses of $96.3 million includes $31.5 million related to regulatory guidance
  • Total loans and leases of $15.2 billion, increase of 6.1 percent from September 30, 2011
  • Announced common and preferred stock dividend payments, payable November 30, 2012 and December 3, 2012, respectively
                                                         
Summary of Financial Results                                                  

 

 

Table 1

($ in thousands, except per-share data)         Percent Change      
3Q2Q

3Q

3Q12 vs

  3Q12 vs

YTD

YTD

Percent

2012

 

2012

 

2011

 

2Q12

 

3Q11

 

2012(3)

   

2011

 

Change

Net income (loss) $ 9,322 $ 31,531 $ 32,255 (70.4 ) % (71.1 ) % $ (242,041 ) $ 92,951 N.M. %
Net interest income 200,559 198,224 176,064 1.2 13.9 578,956 526,254 10.0
Pre-tax pre-provision profit(1) 115,809 108,117 104,972 7.1 10.3 371,471 295,480 25.72
Diluted earnings (loss) per common share .06 .20 .20 (70.0 ) (70.0 ) (1.52 ) .60 N.M.
 

Financial Ratios(2)

Return on average assets .30 % .76 % .71 % (1.73 ) % .69 %
Return on average common equity 2.36 8.13 7.12 (19.50 ) 7.33
Net interest margin 4.85 4.86 3.96 4.61 4.01

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

2.74 1.18 1.48 1.67 1.39
 
N.M. = Not meaningful.

(1) Pre-tax pre-provision profit ("PTPP") is calculated as total revenues less non-interest expense. Year-to-date 2012 PTPP excludes the net loss of $473.8 million related to the balance sheet repositioning completed in the first quarter of 2012.

(2) Annualized.
(3) Includes a net, after-tax charge of $295.8 million, or $1.87 per share, related to repositioning certain investments and borrowings.
 

TCF Financial Corporation (“TCF”) (NYSE: TCB) today reported net income for the third quarter of 2012 of $9.3 million, compared with net income of $32.3 million in the third quarter of 2011 and net income of $31.5 million for the second quarter of 2012. Net income for the third quarter of 2012 included a net after-tax charge of $20.6 million, or 13 cents per common share, related to the implementation of clarifying regulatory guidance requiring loans subject to a borrower’s discharge from personal liability following Chapter 7 bankruptcy, to be reported as non-accrual loans, and written down to the estimated collateral value, regardless of delinquency status. Of these loans, 93 percent were less than 60 days past due on their payments as of September 30, 2012. Diluted earnings per common share was 6 cents for the third quarter of 2012, compared with diluted earnings per common share of 20 cents in both the third quarter of 2011 and the second quarter of 2012.

TCF reported a net loss of $242 million for the first nine months of 2012, compared with net income of $93 million for the same period in 2011. The net loss for the first nine months of 2012 included a net, after-tax charge of $295.8 million, or $1.87 per common share, related to a balance sheet repositioning involving certain investments and borrowings as well as the after-tax charge of $20.6 million, or 13 cents per common share, related to the implementation of clarifying bankruptcy-related regulatory guidance. Diluted loss per common share for the first nine months of 2012 was $1.52, compared with diluted earnings per common share of 60 cents for the same period in 2011.

TCF declared a quarterly cash dividend of 5 cents per common share payable on November 30, 2012 to stockholders of record at the close of business on November 15, 2012. TCF also declared a dividend on its 7.50 percent Series A Non-cumulative Perpetual Preferred Stock payable on December 3, 2012, to stockholders of record at the close of business on November 15, 2012.

Chairman’s Statement

“TCF’s third quarter results were impacted by incremental charge-offs reported in accordance with regulatory guidance and by increased provision in the commercial portfolio as we aggressively addressed credit issues in the area,” said William A. Cooper, Chairman and Chief Executive Officer. “While these credit-related items were notable in the third quarter, there has been much accomplished throughout the bank in the first nine months of 2012, a building and investing year for TCF.

“We continue to experience the benefits of the first quarter repositioning of our balance sheet with increased net interest margin, reduction of mark-to-market risk on securities and a pre-tax pre-provision profit that is one of the strongest in the industry. In addition, our national lending businesses continue to contribute to the bottom line with Gateway One, our new auto finance business, being integrated into TCF and originating high quality loans into the portfolio and our inventory finance business completing the integration of our BRP relationship; increasing outstanding balances in a challenging growth market.

“Another encouraging sign was our success in bringing back Free Checking. Upon review of the first full quarter impact, we saw the results we expected with increased checking account production, decreased attrition and overall net checking account growth.

“While the third quarter results were not what we anticipated due to the impact of the adoption of the clarifying regulatory guidance, we believe we are on the right track as we work through the remainder of 2012 and move forward with our strategy into 2013.”

Revenue

 
                                                               
Total Revenue                                                      

Table 2

          Percent Change      
3Q2Q3Q3Q12 vs   3Q12 vsYTDYTDPercent
($ in thousands)   2012   2012   2011   2Q12   3Q11   2012   2011   Change
Net interest income $ 200,559     $ 198,224     $ 176,064 1.2 % 13.9 % $ 578,956     $ 526,254 10.0 %
Fees and other revenue:
Fees and service charges 43,745 48,090 58,452 (9.0 ) (25.2 ) 133,691 168,361 (20.6 )
Card revenue 12,927 13,530 27,701 (4.5 ) (53.3 ) 39,664 82,504 (51.9 )
ATM revenue   6,122       6,276       7,523 (2.5 ) (18.6 )   18,597       21,319 (12.8 )
Total banking fees 62,794 67,896 93,676 (7.5 ) (33.0 ) 191,952 272,184 (29.5 )
Leasing and equipment finance 20,498 23,207 21,646 (11.7 ) (5.3 ) 66,572 70,675 (5.8 )
Gains on sales of auto loans 7,486 5,496 - 36.2 N.M. 15,232 - N.M.
Gain on sale of consumer real estate loans 4,559 - - N.M. N.M. 4,559 - N.M.
Other   3,688       3,168       786

16.4

N.M.   9,211       1,864 N.M.
Total fees and other revenue   99,025       99,767       116,108 (.7 ) (14.7 )   287,526       344,723 (16.6 )
Subtotal 299,584 297,991 292,172 .5 2.5 866,482 870,977 (.5 )
Gains on securities, net   13,033       13,116       1,648 (.6 ) N.M.   102,760       1,421 N.M.
Total revenue $ 312,617     $ 311,107     $ 293,820 .5 6.4 $ 969,242     $ 872,398 11.1
 
Net interest margin(1) 4.85 % 4.86 % 3.96 % 4.61 % 4.01 %
Fees and other revenue as
a % of total revenue 31.68 32.07 39.52 29.67 39.51
 
N.M. = Not meaningful.
(1) Annualized.                                                          
 

Net Interest Income

  • Net interest income for the third quarter of 2012 increased $24.5 million, or 13.9 percent, compared with the third quarter of 2011. The increase was due to the balance sheet repositioning completed in the first quarter of 2012, which resulted in a $37.9 million reduction to the cost of borrowings, partially offset by a $16 million reduction of interest income on lower levels of mortgage-backed securities and by higher average balances of inventory and auto finance loans. Offsetting the increase in net interest income were lower yields on leasing and equipment finance loans and leases and consumer and commercial real estate loans as higher yielding loans prepay or refinance and are replaced with lower yielding loans in the current rate environment.
  • Net interest income for the third quarter of 2012 increased $2.3 million, or 1.2 percent, compared with the second quarter of 2012. The increase in net interest income from the second quarter of 2012 was primarily due to a higher average balance of auto finance loans. This was partially offset by a seasonally lower average balance of inventory finance loans. Additionally, interest expense decreased due to the redemption of $115 million of Trust Preferred securities, partially offset by both the issuance of $110 million of subordinated debt and slightly higher deposit expenses due to product mix, primarily in certificates of deposit.
  • Net interest margin in the third quarter of 2012 was 4.85 percent, compared with 3.96 percent in the third quarter of 2011 and 4.86 percent in the second quarter of 2012. The increase from the third quarter of 2011 was primarily due to a lower average cost of borrowings due to the effects of the balance sheet repositioning, which increased net interest margin by 92 basis points.
  • At September 30, 2012, interest-bearing deposits held at the Federal Reserve and unencumbered securities were $1.3 billion, a decrease of $189 million from the third quarter of 2011 and $156 million from the second quarter of 2012.

Non-interest Income

  • Banking fees and service charges in the third quarter of 2012 were $43.7 million, down $14.7 million, or 25.2 percent, from the third quarter of 2011, and down $4.3 million, or 9 percent, from the second quarter of 2012. The decrease in banking fees and revenues from the third quarter of 2011 was primarily due to lower transaction volume related to a lower account base driven by our deposit product fee structure changes. The decrease from the second quarter of 2012 was primarily due to the decrease in monthly maintenance fee revenue resulting from the reintroduction of free checking products.
  • Card revenues were $12.9 million in the third quarter of 2012, a decrease of $14.8 million, or 53.3 percent, from the third quarter of 2011 and down $603 thousand, or 4.5 percent, from the second quarter of 2012. The decrease from the prior year is due to debit card interchange regulations which took effect on October 1, 2011. The decrease in card revenue from the second quarter of 2012 was primarily due to a decrease in transaction volume.
  • TCF sold $161.1 million of auto loans and recognized $7.5 million in associated gains during the third quarter of 2012, compared with the sale of $144.1 million of auto loans and recognition of $5.5 million in associated gains during the second quarter of 2012.
  • TCF sold $136.7 million of consumer real estate loans and $164.7 million of mortgage-backed securities and recognized $4.6 million and $13.2 million in associated gains, respectively, during the third quarter of 2012.
Loans and Leases                
                                                     
Period-End and Average Loans and Leases                                 Table 3
    Percent Change
($ in thousands) 3Q2Q3Q3Q12 vs3Q12 vsYTDYTDPercent
2012   2012   2011   2Q12   3Q11   2012   2011   Change
Period-End:
Consumer real estate $ 6,648,036 $ 6,811,784 $ 6,970,821 (2.4 ) % (4.6 ) %
Commercial 3,511,234 3,523,070 3,495,797 (.3 ) .4
Leasing and equipment finance 3,157,977 3,151,105 3,011,795 .2 4.9
Inventory finance 1,466,269 1,457,263 828,214 .6 77.0
Auto finance 407,091 262,188 - 55.3 N.M.
Other   27,610     29,094     33,088 (5.1 ) (16.6 )
Total $ 15,218,217   $ 15,234,504   $ 14,339,715 (.1 ) 6.1
 
Average:
Consumer real estate $ 6,729,254 $ 6,793,415 $ 6,985,821 (.9 ) (3.7 ) $ 6,789,026 $ 7,040,318 (3.6 ) %
Commercial 3,538,111 3,492,049 3,564,198 1.3 (.7 ) 3,496,114 3,594,884 (2.7 )
Leasing and equipment finance 3,164,592 3,145,914 3,066,208 .6 3.2 3,146,345 3,084,613 2.0
Inventory finance 1,440,298 1,571,004 826,198 (8.3 ) 74.3 1,392,828 889,709 56.5
Auto finance 367,271 223,893 - 64.0 N.M. 226,092 - N.M.
Other   16,280     17,647     18,183 (7.7 ) (10.5 )   17,166     19,788 (13.3 )
Total $ 15,255,806   $ 15,243,922   $ 14,460,608 .1 5.5 $ 15,067,571   $ 14,629,312 3.0
 
N.M. = Not meaningful.                                                
 
  • Loans and leases were $15.2 billion at September 30, 2012, an increase of $878.5 million, or 6.1 percent, compared with September 30, 2011, and nearly flat compared with June 30, 2012. The increase from 2011 was due to new programs in inventory finance, the addition of auto finance and growth in equipment finance and commercial banking, partially offset by the third quarter 2012 sale and net run off of consumer real estate loans.
  • Auto finance loans are expected to continue growing as Gateway One Lending and Finance, LLC (“Gateway One”) expands its number and geographic coverage of active dealers in its network by expanding its sales force. Gateway One increased its portfolio of managed loans, which includes portfolio loans, loans held for sale, and loans sold and serviced for others, by 31.3 percent to $1 billion at September 30, 2012 from $780.3 million at June 30, 2012. Gateway One expanded its active dealers to 6,087 at September 30, 2012 from 5,420 at June 30, 2012.
  • Originations were $2.4 billion for the third quarter of 2012, an increase of $1.2 billion, or 92 percent, compared with the third quarter of 2011. This increase was primarily due to growth in our national lending businesses (leasing and equipment finance, inventory finance and auto finance) and includes the high velocity of fundings and repayments with dealers in the inventory finance business. Originations decreased $188 million, or 7.2 percent, compared with the second quarter of 2012, due to slower seasonal transactions in the inventory finance portfolio, partially offset by growth in auto finance.
  • Average loans and leases were $15.3 billion at September 30, 2012, an increase of $795 million, or 5.5 percent, compared with September 30, 2011, and an increase of $11.9 million, or .1 percent, compared with June 30, 2012. The increase from June 30, 2012 was primarily due to growth in the auto finance portfolio, partially offset by a decrease in the average inventory finance portfolio due to lower seasonal levels of transactions. The increase from September 30, 2011 was primarily due to growth in the inventory finance portfolio due to the funding of dealers of BRP products, as well as the addition of the auto finance portfolio in the fourth quarter of 2011.

Credit Quality

(Table 4 - Credit Trends: http://www.businesswire.com/cgi-bin/mmg.cgi?eid=50453358&lang=en)

  • Over 60-day delinquencies improved slightly from June 30, 2012 and net charge-offs increased primarily due to $43.9 million in charge-offs related to the implementation of clarifying bankruptcy-related regulatory guidance in the third quarter of 2012, as well as more aggressive commercial loan workouts. Non-performing assets increased from the second quarter due to the implementation of clarifying bankruptcy-related regulatory guidance in the third quarter of 2012 which caused an increase in consumer real estate non-accrual loans of $103.2 million, partially offset by decreases in other real estate owned and non-accrual loans in leasing and equipment finance.
  • The over 60-day delinquency rate was .67 percent, down from .73 percent at June 30, 2012 and down from .75 percent at September 30, 2011. The decrease from the third quarter of 2011 and second quarter of 2012 was primarily due to improvements in commercial and leasing and equipment finance delinquencies.
  • Non-accrual loans and leases were $421.8 million at September 30, 2012, an increase of $97.4 million, or 30 percent, from June 30, 2012 and an increase of $114.1 million, or 37.1 percent, from September 30, 2011. The increase from June 30, 2012 was primarily due to $103.2 million of additional consumer non-accrual loans resulting from the implementation of clarifying bankruptcy-related regulatory guidance in the third quarter of 2012. Of these loans, 93 percent were less than 60 days past due on their payments as of September 30, 2012. These increases were partially offset by decreases in leasing and equipment finance non-accrual loans. The increase from September 30, 2011 was primarily due to the implementation of clarifying bankruptcy-related regulatory guidance as well as increased commercial real estate non-accrual loans. Of the commercial and leasing non-accrual loans and leases, which totaled $185.2 million at September 30, 2012, 75.6 percent were less than 60 days past due.
  • Other real estate owned was $120.4 million at September 30, 2012, a decrease of $5.5 million from June 30, 2012 and a decrease of $10 million from September 30, 2011. The decrease from September 30, 2011 was primarily due to a decrease in the number of consumer properties owned.
Allowance for Loan and Lease Losses
                                                                             
Credit Quality Summary                                                                   Table 6
($ in thousands)         Percent Change      
    3Q2Q3Q3Q12 vs   3Q12 vsYTDYTDPercent
Allowance for Loan and Lease Losses   2012     2012     2011     2Q12   3Q11   3Q12   3Q11     Change
Balance at beginning of period $ 274,161 $ 265,293 $ 255,472 3.3 % 7.3 % $ 255,672 $ 265,819 (3.8 ) %
Charge-offs (108,714 ) (49,833 ) (57,761 ) 118.2 88.2 (203,223 ) (167,323 ) 21.5
Recoveries 4,260   4,974   4,359   (14.4 ) (2.3 ) 14,976   14,263   5.0
Net charge-offs (104,454 ) (44,859 ) (53,402 ) 132.8 95.6 (188,247 ) (153,060 ) 23.0
Provision for credit losses 96,275 54,106 52,315 77.9 84.0 198,923 141,594 40.5
Other (1,141 ) (379 ) (60 ) N.M. N.M. (1,507 ) (28 ) N.M.
Balance at end of period $ 264,841   $ 274,161   $ 254,325   (3.4 ) 4.1 $ 264,841   $ 254,325   4.1
 
Net charge-offs as a percentage of
average loans and leases(1)
Consumer real estate
First mortgage lien 3.60

%

 

1.58

%

 

2.29 % 202 bps 131 bps 2.26 1.96 30 bps
Junior lien 6.12 3.07 2.99 305 313 4.10 2.70 140
Total consumer real estate 4.44 2.05 2.51 239 193 2.85 2.19 66
Commercial 2.32 .97 .57 135 175 1.16 .95 21
Leasing and equipment finance .95 .15 .36 80 59 .37 .39 (2 )
Inventory finance .12 .06 .13 6 (1 ) .13 .12 1
Auto finance .30 .14 - 16 30 .21 - 21
Other

N.M.

N.M.

N.M.

N.M.

N.M.

N.M.

N.M.

N.M.

Total 2.74 1.18 1.48 156 126 1.67 1.39 28
 

Allowance as a percentage of period end loans and leases

1.74

%

 

1.80

%

 

1.77 % 1.74 % 1.77 %
Ratio of allowance to net charge-offs(1) .60

X

 

1.50

X

 

1.20 X 1.10 X 1.20 X
 
N.M. = Not meaningful.
(1) Annualized.                                                                        
 
  • Allowance for loan and lease losses was $264.8 million, or 1.7 percent of loans and leases, a decrease of $9.4 million, compared with $274.2 million, or 1.8 percent of loans and leases, at June 30, 2012 and an increase of $10.5 million, compared with $254.3 million, or 1.8 percent of loans and leases, at September 30, 2011.
  • Provision for credit losses was $96.3 million, an increase of $42.2 million from the second quarter of 2012 and an increase of $44 million from the third quarter of 2011. The increase from both periods was primarily due to an additional provision recorded for consumer real estate loans of $31.5 million related to the implementation of clarifying bankruptcy-related regulatory guidance and increased provision in the commercial portfolio as we aggressively addressed credit issues in this area in the third quarter of 2012.
  • Net loan and lease charge-offs were $104.5 million, or 2.74 percent, annualized, of average loans and leases, up $59.6 million, or 1.2 percent, annualized, of average loans and leases, from the second quarter of 2012 and up $51.1 million, or 1.5 percent, annualized, of average loans and leases, from the third quarter of 2011. Excluding the additional net charge-offs of $43.9 million related to the implementation of bankruptcy-related regulatory guidance, net loan and lease charge-offs were $61 million up $16 million from the second quarter of 2012. The increase in net charge-offs from the second quarter of 2012 and third quarter of 2011, excluding the additional net charge-offs due to the bankruptcy-related regulatory guidance, was primarily due to increased net charge-offs on a small population of commercial loans, which was driven by a more aggressive workout approach and the charge off of one large lease exposure.
Deposits                
                                                 
Average Deposits                                           Table 7
Percent Change
($ in thousands) 3Q2Q3Q3Q12 vs3Q12 vsYTDYTDPercent
2012   2012   2011   2Q12   3Q11   2012   2011   Change
 
Checking $ 4,582,088 $ 4,636,700 $ 4,475,566 (1.2 ) % 2.4 % $ 4,594,572 $ 4,515,916 1.7 %
Savings 6,173,524 6,053,264 5,812,187 2.0 6.2 6,044,442 5,629,620 7.4
Money market   848,899       748,016       650,598   13.5 30.5   753,486       657,570   14.6
Subtotal 11,604,511 11,437,980 10,938,351 1.5 6.1 11,392,500 10,803,106 5.5
Certificates   1,953,208       1,608,654       1,114,935   21.4 75.2   1,567,258       1,100,029   42.5
Total average deposits $ 13,557,719     $ 13,046,634     $ 12,053,286   3.9 12.5 $ 12,959,758     $ 11,903,135   8.9
 
Average interest rate on deposits(1) .32 % .31 % .39 % .31 % .40 %
 
(1) Annualized.                                                
 
  • Total average deposits increased $1.5 billion, or 12.5 percent, from the third quarter of 2011 and increased $511.1 million, or 3.9 percent, from the second quarter of 2012. The increase from the third quarter of 2011 was primarily due to the assumption of $778 million of deposits from Prudential Bank & Trust, FSB (“PB&T”) in June 2012 and the reintroduction of free checking and special programs for certificates of deposits. The increase from the second quarter of 2012 is primarily due to increased certificates of deposit due to special promotions on these products in the third quarter of 2012, as well as the full quarter average of the PB&T deposits.
  • The average interest cost of deposits in the third quarter of 2012 was .32 percent, down 7 basis points from the third quarter of 2011 and up 1 basis point from the second quarter of 2012. The decrease in the average interest cost of deposits from the third quarter of 2011 was primarily due to pricing strategies on certain deposit products, partially offset by higher average interest costs on the PB&T deposits.
Non-interest Expense                
                                                       
Non-interest Expense                                               Table 8
  Percent Change
($ in thousands) 3Q2Q3Q3Q12 vs3Q12 vsYTDYTDPercent
2012   2012   2011   2Q12   3Q11   2012   2011   Change
Compensation and
employee benefits $ 98,409 $ 97,787 $ 87,758 .6 % 12.1 % $ 292,163 $ 266,197 9.8 %
Occupancy and equipment 33,006 32,731 31,129 .8 6.0 97,983 94,071 4.2
FDIC insurance 6,899 8,469 7,363 (18.5 ) (6.3 ) 21,754 22,100 (1.6 )
Advertising and marketing 4,248 5,404 1,145 (21.4 ) N.M. 12,269 7,784 57.6
Deposit account premiums 485 1,690 7,045 (71.3 ) (93.1 ) 8,146 16,409 (50.4 )
Operating lease depreciation 6,325 6,417 7,409 (1.4 ) (14.6 ) 19,473 23,196 (16.1 )
Other   36,173     36,956     34,708   (2.1 ) 4.2   110,425     106,341 3.8
Core operating expenses 185,545 189,454 176,557 (2.1 ) 5.1 562,213 536,098 4.9
Loss on termination of debt - - - - - 550,735 - N.M.
Foreclosed real estate and
repossessed assets, net 10,670 12,059 12,430 (11.5 ) (14.2 ) 33,776 37,915 (10.9 )
Other credit costs, net   593     1,476     (139 ) (59.8 ) N.M.   1,781     2,905 (38.7 )
Total non-interest expense $ 196,808   $ 202,989   $ 188,848   (3.0 ) 4.2 $ 1,148,505   $ 576,918 99.1
 
N.M. = Not meaningful.                                                    
 
  • Compensation and employee benefits expense increased $10.7 million, or 12.1 percent, from the third quarter of 2011 and increased $622 thousand, or .6 percent, from the second quarter of 2012. The increase from the third quarter of 2011 was primarily due to Gateway One, acquired in November 2011, as well as increased staffing levels to support the increased assets of the BRP program in Inventory Finance. The increase from the second quarter of 2012 was primarily due to higher salary expense in the auto finance business as it ramps up capacity to originate and service higher loan volumes.
  • The combined expense associated with advertising, marketing and deposit account premiums decreased $3.5 million from the third quarter of 2011 and decreased $2.4 million compared with the second quarter of 2012. The decreases are attributable to TCF's shift in strategy for acquiring high quality accounts through the reintroduction of a free checking product, versus the utilization of high dollar premiums.
  • Foreclosed real estate and repossessed asset expense decreased $1.8 million, or 14.2 percent, from the third quarter of 2011 and decreased $1.4 million, or 11.5 percent, from the second quarter of 2012. The decrease from the third quarter of 2011 was primarily due to fewer consumer real estate properties owned. The decrease from the second quarter of 2012 was primarily due to decreased write-downs on commercial real estate properties owned.
Capital and Borrowing Capacity        
                             
Capital Information                         Table 9
At period end
($ in thousands, except per-share data) 3Q4Q
20122011
Total equity $ 1,764,669 $ 1,878,627
Total equity to total assets 9.87 % 9.90 %
Book value per common share $ 9.71 $ 11.65
Tangible realized common equity to tangible assets(1) 7.55 % 8.42 %
 
Risk-based capital
Tier 1 $ 1,515,050 10.40 % $ 1,706,926 12.67 %
Total(2) 1,887,488 12.96 1,994,875 14.80
 
Tier 1 leverage capital $ 1,515,050 8.66 % $ 1,706,926 9.15 %
 
Tier 1 common capital(3) $ 1,335,124 9.17 % $ 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 Company's capital ratios continue to be in excess of "Well-capitalized" regulatory benchmarks.

(3) Excludes the effect of preferred shares, qualifying trust preferred securities and qualifying non-controlling interest in subsidiaries (see “Reconciliation of GAAP to Non-GAAP Measures” table).
 
  • On July 30, 2012, TCF redeemed all of its $115 million Trust Preferred securities.
  • TCF’s Tier 1 common capital ratio decreased to 9.17 percent from 9.26 percent at June 30, 2012.
  • On October 25, 2012, the Board of Directors of TCF declared a regular quarterly cash dividend of 5 cents per common share payable on November 30, 2012, to stockholders of record at the close of business on November 15, 2012. TCF also declared dividends on the 7.50 percent Series A Non-cumulative Perpetual Preferred Stock payable on December 3, 2012, to stockholders of record at the close of business on November 15, 2012.
  • At September 30, 2012, TCF had $2.4 billion in unused, secured borrowing capacity at the FHLB of Des Moines, $531 million in unused, secured borrowing capacity at the Federal Reserve Discount Window and $571 million in unused borrowing capacity under existing federal funds lines.

Webcast Information

A live webcast of TCF’s conference call to discuss third quarter earnings will be hosted at TCF’s website, http://ir.tcfbank.com, on October 26, 2012 at 8:00 a.m. CT. A slide presentation for the call will be available on the website prior to the call. 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 $17.9 billion in total assets at September 30, 2012. TCF has nearly 430 branches in Minnesota, Illinois, Michigan, Colorado, Wisconsin, Indiana, 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, commercial inventory finance business in the U.S. and Canada, and indirect auto finance business in 40 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.

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 or expense; 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 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 or the success of TCF’s reintroduction of the Free Checking product 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 including the announcement on July 11, 2012 by SuperValu that it is exploring strategic alternatives; 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, limitations on TCF’s ability to attract and retain manufacturers and dealers to expand the inventory finance business or dealers in connection with its expansion of the automobile finance business.

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, deposit or leasing activities including account servicing processes or fees or charges, or employment practices, and possible increases in financial 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 September 30,Change
20122011$%
Interest income:
Loans and leases$210,140$210,885$(745)(.4)
Securities available for sale5,60722,561(16,954)(75.1)
Investments and other4,105   1,997   2,108   105.6
Total interest income219,852   235,443   (15,591)(6.6)
Interest expense:
Deposits10,75711,883(1,126)(9.5)
Borrowings8,536   47,496   (38,960)(82.0)
Total interest expense19,293   59,379   (40,086)(67.5)
Net interest income200,559176,06424,49513.9
Provision for credit losses96,275   52,315   43,960   84.0
Net interest income after provision for
credit losses104,284   123,749   (19,465)(15.7)
Non-interest income:
Fees and service charges43,74558,452(14,707)(25.2)
Card revenue12,92727,701(14,774)(53.3)
ATM revenue6,122   7,523   (1,401)(18.6)
Subtotal62,79493,676(30,882)(33.0)
Leasing and equipment finance20,49821,646(1,148)(5.3)
Gain on sales of auto loans7,486-7,486N.M.
Gain on sale of consumer real estate loans4,559-4,559N.M.
Other3,688   786   2,902   N.M.
Fees and other revenue99,025116,108(17,083)(14.7)
Gains on securities, net13,033   1,648   11,385   N.M.
Total non-interest income112,058   117,756   (5,698)(4.8)
Non-interest expense:
Compensation and employee benefits98,40987,75810,65112.1
Occupancy and equipment33,00631,1291,8776.0
FDIC insurance6,8997,363(464)(6.3)
Advertising and marketing4,2481,1453,103N.M.
Deposit account premiums4857,045(6,560)(93.1)
Operating lease depreciation6,3257,409(1,084)(14.6)
Other36,173   34,708   1,465   4.2
Subtotal185,545176,5578,9885.1
Foreclosed real estate and repossessed assets, net10,67012,430(1,760)(14.2)
Other credit costs, net593   (139)732   N.M.
Total non-interest expense196,808   188,848   7,960   4.2
Income before income tax expense19,53452,657(33,123)(62.9)
Income tax expense6,304   19,159   (12,855)(67.1)
Income after income tax expense13,23033,498(20,268)(60.5)
Income attributable to non-controlling interest1,5361,24329323.6
Preferred Stock Dividends2,372   -   2,372   N.M.
Net income available to common stockholders9,322   32,255   (22,933)(71.1)
Other comprehensive income:
Reclassification adjustment for securities gains
included in net income(12,912)(1,915)(10,997)N.M.
Unrealized holding gains arising during the
period on securities available for sale16,283116,958(100,675)(86.1)
Foreign currency hedge(630)1,319(1,949)(147.8)
Foreign currency translation adjustment640(1,410)2,050(145.4)
Recognized postretirement prior service cost
and transition obligation(6)1(7)N.M.
Income tax expense(1,011)(42,643)41,632   97.6
Total other comprehensive income2,364   72,310   (69,946)(96.7)
Comprehensive income$11,686   $104,565   $(92,879)(88.8)
Net income per common share:
Basic$.06$.20$(.14)(70.0)
Diluted.06.20(.14)(70.0)
 
Dividends declared per common share$.05$.05$--
 
Average common and common equivalent
shares outstanding (in thousands):
Basic159,533157,4192,1141.3
Diluted160,016157,6212,3951.5
N.M. Not meaningful.
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands, except per-share data)
(Unaudited)
             
Nine Months Ended September 30,Change
20122011$%
Interest income:
Loans and leases$624,890$639,381$(14,491)(2.3)%
Securities available for sale30,53562,629(32,094)(51.2)
Investments and other10,171   5,634   4,537   80.5
Total interest income665,596   707,644   (42,048)(5.9)
Interest expense:
Deposits30,01535,317(5,302)(15.0)
Borrowings56,625   146,073   (89,448)(61.2)
Total interest expense86,640   181,390   (94,750)(52.2)
Net interest income578,956526,25452,70210.0
Provision for credit losses198,923   141,594   57,329   40.5
Net interest income after provision for
credit losses380,033   384,660   (4,627)(1.2)
Non-interest income:
Fees and service charges133,691168,361(34,670)(20.6)
Card revenue39,66482,504(42,840)(51.9)
ATM revenue18,597   21,319   (2,722)(12.8)
Subtotal191,952272,184(80,232)(29.5)
Leasing and equipment finance66,57270,675(4,103)(5.8)
Gain on sale of auto loans15,232-15,232N.M.
Gain on sale of consumer real estate loans4,559-4,559N.M.
Other9,211   1,864   7,347   N.M.
Fees and other revenue287,526344,723(57,197)(16.6)
Gains on securities, net102,760   1,421   101,339   N.M.
Total non-interest income390,286   346,144   44,142   12.8
Non-interest expense:
Compensation and employee benefits292,163266,19725,9669.8
Occupancy and equipment97,98394,0713,9124.2
FDIC insurance21,75422,100(346)(1.6)
Advertising and marketing12,2697,7844,48557.6
Deposit account premiums8,14616,409(8,263)(50.4)
Operating lease depreciation19,47323,196(3,723)(16.1)
Other110,425   106,341   4,084   3.8
Subtotal562,213536,09826,1154.9
Loss on termination of debt550,735-550,735N.M.
Foreclosed real estate and repossessed assets, net33,77637,915(4,139)(10.9)
Other credit costs, net1,781   2,905   (1,124)(38.7)
Total non-interest expense1,148,505   576,918   571,587   99.1
(Loss) income before income tax expense(378,186)153,886(532,072)N.M.
Income tax (benefit) expense(143,398)57,017   (200,415)N.M.
(Loss) income after income tax expense(234,788)96,869(331,657)N.M.
Income attributable to non-controlling interest4,8813,91896324.6
Preferred Stock Dividends2,372   -   2,372   N.M.
Net (loss) income available to common stockholders(242,041)92,951   (334,992)N.M.
Other comprehensive (loss) income:
Reclassification adjustment for securities gains
included in net income(89,879)(1,915)(87,964)N.M.
Unrealized holding gains (losses) arising during the
period on securities available for sale28,383126,972(98,589)(77.6)
Foreign currency hedge(766)719(1,485)N.M.
Foreign currency translation adjustment701(876)1,577(180.0)
Recognized postretirement prior service cost
and transition obligation(20)3(23)N.M.
Income tax benefit (expense)22,822   (46,101)68,923   (149.5)
Total other comprehensive (loss) income(38,759)78,802   (117,561)(149.2)
Comprehensive (loss) income$(280,800)$171,753   $(452,553)N.M.
Net (loss) income per common share:
Basic$(1.52)$.61$(2.13)N.M.
Diluted(1.52).60(2.12)N.M.
 
Dividends declared per common share$.15$.15$--
 
Average common and common equivalent
shares outstanding (in thousands):
Basic159,052153,0076,0454.0
Diluted159,052153,3025,7503.8
 
N.M. Not meaningful.
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except per-share data)
(Unaudited)
             
At Sep. 30At Dec. 31Change
20122011$%
ASSETS
 
Cash and due from banks$922,127$1,389,704$(467,577)(33.6)%
Investments126,487157,780(31,293)(19.8)
Securities available for sale559,6712,324,038(1,764,367)(75.9)
Loans and leases held for sale3,69114,321(10,630)(74.2)
Loans and leases:
Consumer real estate6,648,0366,895,291(247,255)(3.6)
Commercial3,511,2343,449,49261,7421.8
Leasing and equipment finance3,157,9773,142,25915,718.5
Inventory finance1,466,269624,700841,569134.7
Auto finance407,0913,628403,463N.M.
Other loans and leases27,610   34,885   (7,275)(20.9)
Total loans and leases15,218,21714,150,2551,067,9627.5
Allowance for loan and lease losses(264,841)(255,672)(9,169)(3.6)
Net loans and leases14,953,37613,894,5831,058,7937.6
Premises and equipment, net442,356436,2816,0751.4
Goodwill225,640225,640--
Other assets645,045   537,041   108,004   20.1
Total assets$17,878,393   $18,979,388   $(1,100,995)(5.8)
 
LIABILITIES AND EQUITY
 
Deposits:
Checking$4,707,179$4,629,749$77,4301.7
Savings6,127,8895,855,263272,6264.7
Money market812,442   651,377   161,065   24.7
Subtotal11,647,51011,136,389511,1214.6
Certificates of deposit2,073,909   1,065,615   1,008,294   94.6
Total deposits13,721,419   12,202,004   1,519,415   12.5
Short-term borrowings115,5296,416109,113N.M.
Long-term borrowings1,936,988   4,381,664   (2,444,676)(55.8)
Total borrowings2,052,5174,388,080(2,335,563)(53.2)
Accrued expenses and other liabilities339,788   510,677   (170,889)(33.5)
Total liabilities16,113,724   17,100,761   (987,037)(5.8)
Equity:
Preferred stock, par value $.01 per share,
30,000,000 authorized; and 6,900 shares issued166,721-166,721N.M.
Common stock, par value $.01 per share,
280,000,000 shares authorized; 163,281,955
and 160,366,380 shares issued1,6331,604291.8
Additional paid-in capital746,543715,24731,2964.4
Retained earnings, subject to certain restrictions861,8951,127,823(265,928)(23.6)
Accumulated other comprehensive income18,06756,826(38,759)(68.2)
Treasury stock at cost, 42,566 shares, and other(43,395)(33,367)(10,028)(30.1)
Total TCF Financial Corporation stockholders' equity1,751,464   1,868,133   (116,669)(6.2)
Non-controlling interest in subsidiaries13,205   10,494   2,711   25.8
Total equity1,764,669   1,878,627   (113,958)(6.1)
Total liabilities and equity$17,878,393   $18,979,388   $(1,100,995)(5.8)
 
N.M. Not meaningful.
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
SUMMARY OF CREDIT QUALITY DATA
(Dollars in thousands)
(Unaudited)
                         
AtAtAtAtAtChange from
Sep. 30,Jun. 30,Mar. 31,Dec. 31,Sep. 30,Jun. 30,Sep. 30,
2012201220122011201120122011

Delinquency Data - Principal Balances(1)

60 days or more:
Consumer real estate
First mortgage lien$80,153$86,714$88,092$87,358$78,241$(6,561)$1,912
Junior lien13,388   13,967   15,563   22,277   18,499   (579)(5,111)
Total consumer real estate93,541100,681103,655109,63596,740(7,140)(3,199)
Commercial2,6525,6163,4251,1483,079(2,964)(427)
Leasing and equipment finance1,5541,4924,9193,5122,84062(1,286)
Inventory finance80206185160306(126)(226)
Auto finance305622--243305
Other22   34   52   41   58   (12)(36)
Subtotal98,154108,091112,238114,496103,023(9,937)(4,869)
Acquired portfolios1,069   1,483   2,198   3,140   1,870   (414)(801)
Total delinquencies$99,223   $109,574   $114,436   $117,636   $104,893   $(10,351)$(5,670)
 

Delinquency Data - % of Portfolio(1)

60 days or more:
Consumer real estate
First mortgage lien1.93%1.93%1.93%1.89%1.68%-bps25bps
Junior lien.59.64.741.04.86(5)(27)
Total consumer real estate1.461.511.551.631.42(5)4
Commercial.08.17.10.03.09(9)(1)
Leasing and equipment finance.05.05.17.13.11-(6)
Inventory finance.01.01.01.03.04-(3)
Auto finance.08.02---68
Other.09.13.20.12.18(4)(9)
Subtotal.67.74.77.85.75(7)(8)
Acquired portfolios.50.58.66.84.51(8)(1)
Total delinquencies.67.73.77.85.75(6)(8)
 
(1) Excludes non-accrual loans and leases.
AtAtAtAtAtChange from
Sep. 30,Jun. 30,Mar. 31,Dec. 31,Sep. 30,Jun. 30,Sep. 30,
2012201220122011201120122011

Non-Accrual Loans and Leases

Non-accrual loans and leases:
Consumer real estate
First mortgage lien$197,649$122,406$125,895$129,114$130,671$75,243$66,978
Junior lien35,936   18,272   23,409   20,257   18,223   17,664   17,713  
Total consumer real estate233,585140,678149,304149,371148,89492,90784,691
Commercial169,339150,215135,677127,519133,26019,12436,079
Leasing and equipment finance15,81229,42920,01520,58324,437(13,617)(8,625)
Inventory finance1,1201,9001,1098231,077(780)43
Other1,957   2,204   2,838   15   4   (247)1,953  
Total non-accrual loans and leases$421,813   $324,426   $308,943   $298,311   $307,672   $97,387   $114,141  
 
Non-accrual loans and leases - rollforward
Balance, beginning of period$324,426$308,943$298,311$307,672$321,661$15,483$2,765
Additions210,916111,73985,670125,89380,01499,177130,902
Charge-offs(49,116)(28,228)(19,683)(38,263)(29,338)(20,888)(19,778)
Transfers to other assets(24,632)(34,473)(25,603)(31,486)(21,654)9,841(2,978)
Return to accrual status(30,300)(22,200)(21,243)(19,932)(20,272)(8,100)(10,028)
Payments received(9,652)(12,261)(9,202)(45,238)(23,843)2,60914,191
Other, net171   906   693   (335)1,104   (735)(933)
Balance, end of period$421,813   $324,426   $308,943   $298,311   $307,672   $97,387