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TCF Reports Quarterly Net Income of $52.6 Million, or 29 Cents Per Share

Company Release - 10/22/2015 8:00 AM ET

THIRD QUARTER HIGHLIGHTS

  • Increased quarterly cash dividend by 50 percent to 7.5 cents per common share
  • Loan and lease originations of $3.9 billion, up 11.9 percent from the third quarter of 2014
  • Average deposits of $16.0 billion, up 5.4 percent from the third quarter of 2014
  • Non-accrual loans and leases of $206.1 million, down 25.1 percent from the third quarter of 2014
  • Revenue of $317.5 million, flat to the third quarter of 2014
  • Provision for credit losses of $10.0 million, down 36.3 percent from the third quarter of 2014
  • Earnings per share of 29 cents, flat to the third quarter of 2014

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

                                 
Summary of Financial Results                               Table 1
        Percent Change      
(Dollars in thousands, except per-share data) 3Q 2Q 3Q 3Q15 vs   3Q15 vs YTD YTD Percent
2015   2015   2014   2Q15   3Q14   2015   2014   Change
Net income attributable to TCF $ 52,575 $ 52,255 $ 52,317 0.6 % 0.5 % $ 144,631 $ 150,199 (3.7 )%
Net interest income 205,270 206,029 204,180 (0.4 ) 0.5 614,719 611,555 0.5
Diluted earnings per common share 0.29 0.29 0.29 0.78 0.83 (6.0 )
 

Financial Ratios(1)

Pre-tax pre-provision return on average assets(2)

1.92 % 1.94 % 2.13 % 1.81 % 2.02 %
Return on average assets 1.10 1.10 1.15 1.02 1.11
Return on average common equity 9.76 9.93 10.50 9.07 10.30

Return on average tangible common equity(3)

11.12 11.34 12.11 10.37 11.93
Net interest margin 4.40 4.44 4.60 4.45 4.64

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

0.23 0.41 0.66 0.31 0.52
 
(1) Annualized.
(2) Pre-tax pre-provision profit is calculated as total revenues less non-interest expense.
(3) See "Reconciliation of GAAP to Non-GAAP Financial Measures" table.            
 

TCF Financial Corporation ("TCF" or the "Company") (NYSE: TCB) today reported net income of $52.6 million for the third quarter of 2015, compared with net income of $52.3 million for both the third quarter of 2014 and second quarter of 2015. Diluted earnings per common share was 29 cents for the third quarter of 2015, compared with 29 cents for both the third quarter of 2014 and second quarter of 2015.

TCF reported net income of $144.6 million for the first nine months of 2015, compared with net income of $150.2 million for the same period in 2014. Diluted earnings per common share was 78 cents for the first nine months of 2015, compared with 83 cents for the same period in 2014.

Chairman's Statement

"During the third quarter, TCF continued to demonstrate its ability to originate high quality loans and leases and generate strong and diversified revenue, despite a persistently low interest rate environment," said William A. Cooper, chairman and chief executive officer. "In addition, TCF strengthened its commitment to drive shareholder value by recently announcing its first common stock dividend increase since 2008.

"As I turn the role of chief executive officer over to Craig Dahl in January 2016, I am confident in the strategies we have developed and the team we have in place. Our success will be driven by a focus on diversification, emphasizing profitable growth, improving operating leverage and maintaining our core funding sources, all within a strong enterprise risk management and credit culture."

               
Revenue
                                 
Total Revenue                             Table 2
Percent Change
(Dollars in thousands) 3Q 2Q 3Q 3Q15 vs 3Q15 vs YTD YTD Percent
2015   2015   2014   2Q15   3Q14 2015   2014   Change
Net interest income $ 205,270     $ 206,029     $ 204,180   (0.4 )% 0.5 % $ 614,719     $ 611,555   0.5 %
Non-interest income:
Fees and service charges 36,991 36,295 40,255 1.9 (8.1 ) 107,258 114,909 (6.7 )
Card revenue 13,803 13,902 12,994 (0.7 ) 6.2 40,606 38,493 5.5
ATM revenue 5,739     5,540     5,863   3.6 (2.1 ) 16,401     16,976   (3.4 )
Subtotal 56,533 55,737 59,112 1.4 (4.4 ) 164,265 170,378 (3.6 )

Gains on sales of auto loans, net

10,423 10,756 14,863 (3.1 ) (29.9 ) 27,444 30,603 (10.3 )

Gains on sales of consumer real estate loans, net

7,143 11,954 8,762 (40.2 ) (18.5 ) 27,860 28,619 (2.7 )
Servicing fee income 8,049     7,216     5,880   11.5 36.9 22,607     15,079   49.9
Subtotal 25,615 29,926 29,505 (14.4 ) (13.2 ) 77,911 74,301 4.9
Leasing and equipment finance 27,165 26,385 24,383 3.0 11.4 75,774 69,432 9.1
Other 3,070     1,460     3,170   110.3 (3.2 ) 8,657     8,341   3.8
Fees and other revenue 112,383 113,508 116,170 (1.0 ) (3.3 ) 326,607 322,452 1.3
Gains (losses) on securities, net (131 )   (59 )   (94 ) (122.0 ) (39.4 ) (268 )   1,047   N.M.
Total non-interest income 112,252     113,449     116,076   (1.1 ) (3.3 ) 326,339     323,499   0.9
Total revenue $ 317,522     $ 319,478     $ 320,256   (0.6 ) (0.9 ) $ 941,058     $ 935,054   0.6
 
Net interest margin(1) 4.40 % 4.44 % 4.60 % 4.45 % 4.64 %

Total non-interest income as a percentage of total revenue

35.4 35.5 36.2 34.7 34.6
 
N.M. Not Meaningful.
(1) Annualized.                                
 

Net Interest Income

  • Net interest income for the third quarter of 2015 increased $1.1 million, or 0.5 percent, compared with the third quarter of 2014. The increase was primarily due to higher average loan and lease balances in the auto finance, inventory finance and leasing and equipment finance portfolios, partially offset by lower consumer real estate first mortgage lien balances due to run-off and margin compression.
  • Net interest income for the third quarter of 2015 decreased $0.8 million, or 0.4 percent, compared with the second quarter of 2015. The decrease from the second quarter of 2015 was primarily due to lower average loan balances in the inventory finance portfolio due to seasonality as well as higher promotional rates on certificates of deposit. The decrease was partially offset by higher average loan balances in the auto finance portfolio.
  • Net interest margin for the third quarter of 2015 was 4.40 percent, compared with 4.60 percent for the third quarter of 2014 and 4.44 percent for the second quarter of 2015. The decreases from both periods were primarily due to margin compression resulting from the competitive low interest rate environment and higher rates on total deposits gathered at market rates to fund asset growth.

Non-interest Income

  • Fees and service charges in the third quarter of 2015 were $37.0 million, down $3.3 million, or 8.1 percent, from the third quarter of 2014 and up $0.7 million, or 1.9 percent, from the second quarter of 2015. The decrease from the third quarter of 2014 was primarily due to consumer behavior changes, as well as higher average checking account balances per customer. The increase from the second quarter of 2015 was primarily due to seasonal differences in consumer activity.
  • TCF sold $436.6 million, $484.4 million and $436.4 million of auto loans during the third quarters of 2015 and 2014, and the second quarter of 2015, respectively, resulting in net gains in each respective period. TCF executed on its third auto loan securitization in the third quarter of 2015.
  • TCF sold $246.0 million, $233.6 million and $364.9 million of consumer real estate loans during the third quarters of 2015 and 2014, and the second quarter of 2015, respectively, resulting in net gains in each respective period. TCF has two consumer real estate loan sale programs; one that sells nationally originated junior lien loans and the other that sells first mortgage lien loans originated in our footprint through a correspondent relationship.
  • Servicing fee income was $8.0 million on $4.0 billion of average loans and leases serviced for others during the third quarter of 2015 compared with $5.9 million on $2.9 billion for the third quarter of 2014 and $7.2 million on $3.7 billion for the second quarter of 2015. The increases from both periods were primarily due to the cumulative effect of an increase in the portfolio of auto and consumer real estate loans sold with servicing retained by TCF.
     
Loans and Leases
                                 
Period-End and Average Loans and Leases             Table 3
        Percent Change
(Dollars in thousands) 3Q 2Q 3Q 3Q15 vs 3Q15 vs YTD YTD Percent
2015   2015   2014   2Q15   3Q14   2015   2014   Change
Period-End:
Consumer real estate:
First mortgage lien $ 2,724,594 $ 2,865,911 $ 3,444,581 (4.9 )% (20.9 )%
Junior lien 2,889,120     2,678,118     2,526,486   7.9 14.4
Total consumer real estate 5,613,714 5,544,029 5,971,067 1.3 (6.0 )
Commercial 3,112,325 3,112,344 3,159,766 (1.5 )
Leasing and equipment finance 3,873,581 3,791,215 3,632,793 2.2 6.6
Inventory finance 2,153,385 2,106,087 1,836,538 2.2 17.3
Auto finance 2,427,367 2,301,714 1,749,411 5.5 38.8
Other 20,674     21,852     24,003   (5.4 ) (13.9 )
Total $ 17,201,046     $ 16,877,241     $ 16,373,578   1.9 5.1
 
Average:
Consumer real estate:
First mortgage lien $ 2,793,129 $ 2,936,793 $ 3,498,068 (4.9 )% (20.2 )% $ 2,934,536 $ 3,607,408 (18.7 )%
Junior lien 2,813,253     2,650,894     2,607,811   6.1 7.9 2,693,623     2,571,271   4.8
Total consumer real estate 5,606,382 5,587,687 6,105,879 0.3 (8.2 ) 5,628,159 6,178,679 (8.9 )
Commercial 3,118,024 3,148,272 3,144,135 (1.0 ) (0.8 ) 3,139,969 3,132,588 0.2
Leasing and equipment finance 3,821,590 3,751,776 3,575,698 1.9 6.9 3,767,954 3,504,194 7.5
Inventory finance 2,036,054 2,292,481 1,806,271 (11.2 ) 12.7 2,145,535 1,908,628 12.4
Auto finance 2,361,057 2,211,014 1,603,392 6.8 47.3 2,198,983 1,483,951 48.2
Other 9,833     10,734     11,599   (8.4 ) (15.2 ) 10,721     12,299   (12.8 )
Total $ 16,952,940     $ 17,001,964     $ 16,246,974   (0.3 ) 4.3 $ 16,891,321     $ 16,220,339   4.1
 
  • Period-end loans and leases were $17.2 billion at September 30, 2015, an increase of $0.8 billion, or 5.1 percent, compared with September 30, 2014 and an increase of $0.3 billion, or 1.9 percent, compared with June 30, 2015. Average loans and leases were $17.0 billion for the third quarter of 2015, an increase of $0.7 billion, or 4.3 percent, compared with the third quarter of 2014 and consistent with the second quarter of 2015.

    The increases from the third quarter of 2014 and the second quarter of 2015 for period-end loans and leases and from the third quarter of 2014 for average loans and leases were primarily due to the continued growth of the auto finance portfolio as TCF expands the number of active dealers in its network, as well as increases in the leasing and equipment finance and inventory finance portfolios, partially offset by run-off in the consumer real estate first mortgage lien portfolio. The increase from the third quarter of 2014 was also partially offset by a decrease in the consumer real estate portfolio as a result of the troubled debt restructuring ("TDR") loan sale that occurred in the fourth quarter of 2014.
  • Loan and lease originations were $3.9 billion for the third quarter of 2015, an increase of $0.4 billion, or 11.9 percent, compared with the third quarter of 2014 and consistent with the second quarter of 2015. The increase in originations from the third quarter of 2014 was primarily due to an increase in consumer real estate junior lien originations and growth in the lawn and garden and powersports segments of inventory finance.
             
Credit Quality
                             
Credit Trends                           Table 4
Change
(Dollars in thousands) 3Q 2Q 1Q 4Q 3Q 3Q15 vs 3Q15 vs
2015   2015   2015   2014   2014   2Q15   3Q14
Over 60-day delinquencies as a percentage of portfolio(1) 0.17 % 0.10 % 0.14 % 0.14 % 0.17 % 7 bps bps
Net charge-offs as a percentage of portfolio(2) 0.23 0.41 0.28 0.40 0.66 (18 ) (43 )
Non-accrual loans and leases and other real estate owned $ 264,694 $ 263,717 $ 284,541 $ 282,384 $ 342,725 0.4 % (22.8 )%
Provision for credit losses 10,018 12,528 12,791 55,597 15,739 (20.0 ) (36.3 )
 
(1) Excludes acquired portfolios and non-accrual loans and leases.
(2) Annualized.
 
  • The over 60-day delinquency rate, excluding acquired portfolios and non-accrual loans and leases, was 0.17 percent at September 30, 2015, consistent with September 30, 2014, and up from 0.10 percent at June 30, 2015. The increase from June 30, 2015 was primarily driven by delinquencies that have been brought current subsequent to quarter end.
  • The net charge-off rate was 0.23 percent for the third quarter of 2015, down from 0.66 percent for the third quarter of 2014, and down from 0.41 percent for the second quarter of 2015. The decreases from both periods were primarily due to improved credit quality in the consumer real estate and commercial portfolios.
  • Non-accrual loans and leases and other real estate owned was $264.7 million at September 30, 2015, a decrease of $78.0 million, or 22.8 percent, from September 30, 2014, and consistent with June 30, 2015. The decrease from September 30, 2014 was primarily due to the TDR loan sale that occurred in the fourth quarter of 2014, which included $40.1 million of non-accrual loans, as well as improving credit quality trends and continued efforts to actively work out problem loans in the commercial portfolio.
  • Provision for credit losses was $10.0 million for the third quarter of 2015, a decrease of $5.7 million, or 36.3 percent, from the third quarter of 2014, and a decrease of $2.5 million, or 20.0 percent, from the second quarter of 2015. The decreases from both periods were driven by improved credit quality in the consumer and commercial real estate portfolios.
               
Deposits
                                 
Average Deposits                               Table 5
Percent Change
(Dollars in thousands) 3Q 2Q 3Q 3Q15 vs 3Q15 vs YTD

 

YTD

Percent
2015   2015   2014   2Q15   3Q14   2015  

 

2014

  Change
 
Checking $ 5,405,442 $ 5,428,419 $ 5,077,753 (0.4 )% 6.5 % $ 5,378,571 $ 5,064,401 6.2 %
Savings 4,872,853 5,048,053 5,524,409 (3.5 ) (11.8 ) 5,026,475 5,856,259 (14.2 )
Money market 2,297,893 2,261,567 1,527,820 1.6 50.4 2,236,811 1,124,821 98.9
Certificates of deposit 3,400,282     3,116,718     3,028,259   9.1 12.3 3,187,577     2,773,254   14.9
Total average deposits $ 15,976,470     $ 15,854,757     $ 15,158,241   0.8 5.4 $ 15,829,434     $ 14,818,735   6.8
 
Average interest rate on deposits(1) 0.31 % 0.28 % 0.28 % 0.29 % 0.25 %
 
(1) Annualized.                                
 
  • Total average deposits for the third quarter of 2015 increased $0.8 billion, or 5.4 percent, from the third quarter of 2014 and increased $0.1 billion, or 0.8 percent, from the second quarter of 2015. The increases from both periods were primarily due to special campaigns for money market accounts and certificates of deposit.
  • The average interest rate on deposits for the third quarter of 2015 was 0.31 percent, up 3 basis points from both the third quarter of 2014 and the second quarter of 2015. The increase from the third quarter of 2014 was primarily due to increased average interest rates resulting from promotions for money market accounts and certificates of deposit. The increase from the second quarter of 2015 was primarily due to an increase in average interest rates on certificates of deposit.
               
Non-interest Expense
                                 
Non-interest Expense                               Table 6
Percent Change
(Dollars in thousands) 3Q 2Q 3Q 3Q15 vs 3Q15 vs YTD YTD Percent
2015   2015   2014   2Q15   3Q14   2015   2014   Change
 
Compensation and employee benefits $ 116,708 $ 116,159 $ 112,393 0.5 % 3.8 % $ 348,682 $ 337,146 3.4 %
Occupancy and equipment 34,159 36,152 34,121 (5.5 ) 0.1 107,138 103,276 3.7
FDIC insurance 4,832 4,864 7,292 (0.7 ) (33.7 ) 15,089 22,480 (32.9 )
Operating lease depreciation 9,485 8,582 7,434 10.5 27.6 25,801 20,274 27.3
Advertising and marketing 5,793 5,150 5,656 12.5 2.4 17,466 17,797 (1.9 )
Other 45,750     45,887     47,888   (0.3 ) (4.5 ) 139,770     131,841   6.0
Subtotal 216,727 216,794 214,784 0.9 653,946 632,814 3.3
Foreclosed real estate and repossessed assets, net 5,680 6,377 5,315 (10.9 ) 6.9 18,253 17,126 6.6
Other credit costs, net (123 )   (62 )   (411 ) (98.4 ) 70.1 (39 )   79   N.M.
Total non-interest expense $ 222,284     $ 223,109     $ 219,688   (0.4 ) 1.2 $ 672,160     $ 650,019   3.4
 
N.M. Not Meaningful.                                
 
  • Compensation and employee benefits expense increased $4.3 million, or 3.8 percent, from the third quarter of 2014 and remained consistent with the second quarter of 2015. The increase from the third quarter of 2014 was primarily due to the increased staff levels to support the growth of auto finance and further build out of the risk management function.
  • FDIC insurance expense decreased $2.5 million, or 33.7 percent, from the third quarter of 2014 and remained consistent with the second quarter of 2015. The decrease from the third quarter of 2014 was due to a lower assessment rate primarily as a result of the TDR loan sale in the fourth quarter of 2014 and improved credit metrics.
  • Operating lease depreciation is a transactional cost that is generally offset by revenue in the same period.
   
Capital
         
Capital Information       Table 7
 
(Dollars in thousands, except per-share data) 3Q 2015 4Q 2014
Total equity $ 2,273,147 $ 2,135,364
Book value per common share 11.75 11.10
Tangible book value per common share(1) 10.40 9.72
Tangible common equity to tangible assets(1) 8.86 % 8.50 %
Capital accumulation rate(2) 10.70 10.36
 
3Q 2015(3) 4Q 2014
Regulatory Capital: Under Basel III Under Basel I
Common equity Tier 1 capital $ 1,774,729 N.A.
Tier 1 capital 2,054,711 $ 1,919,887
Total capital 2,446,551 2,209,999
 
Regulatory Capital Ratios:
Common equity Tier 1 capital ratio 10.04 % N.A.
Tier 1 risk-based capital ratio 11.62 11.76 %
Total risk-based capital ratio 13.84 13.54
Tier 1 leverage ratio 10.43 10.07
 
N.A. Not Applicable.
(1) See "Reconciliation of GAAP to Non-GAAP Financial Measures" table.
(2) Calculated as the change in annualized year-to-date common equity Tier 1 capital as a percentage of prior year end common equity Tier 1 capital.
(3) The regulatory capital ratios for 3Q 2015 are preliminary pending completion and filing of the Company's regulatory reports.
 
  • TCF maintained strong capital ratios as the Company accumulates capital through earnings. The decrease in the Tier 1 risk-based capital ratio from the fourth quarter of 2014 was primarily the result of strong asset growth.
  • On October 19, 2015, TCF's Board of Directors declared a regular quarterly cash dividend of 7.5 cents per common share, an increase of 50 percent, payable on December 1, 2015, to stockholders of record at the close of business on November 13, 2015. TCF also declared dividends on the 7.50% Series A and 6.45% Series B Non-Cumulative Perpetual Preferred Stock, both payable on December 1, 2015, to stockholders of record at the close of business on November 13, 2015.

Webcast Information

A live webcast of TCF's conference call to discuss the third quarter earnings will be hosted at TCF's website, http://ir.tcfbank.com, on October 22, 2015 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 September 30, 2015, TCF had $20.1 billion in total assets and 375 branches in Illinois, Minnesota, Michigan, Colorado, Wisconsin, Arizona, South Dakota and Indiana, providing retail and commercial banking services. TCF, through its subsidiaries, also conducts commercial leasing, equipment finance, and auto 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, 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, 2014, 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, securities held to maturity and 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.

Legislative and Regulatory Requirements. New consumer protection and supervisory requirements and regulations, including those resulting from action by the Consumer Financial Protection Bureau 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, use by municipalities of eminent domain on property securing troubled residential mortgage loans, or imposition of underwriting or other limitations that impact the ability to offer certain variable-rate 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's fee revenue; 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; 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 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 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 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 any of the supermarket chains in which TCF maintains supermarket branches; costs related to closing underperforming branches; 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 TCF's balance sheet through new or expanded programs or opportunities; failure to successfully attract and retain new customers, including the failure to attract and retain manufacturers and dealers to expand the inventory finance business; failure to effectuate, and risks of claims related to, sales and securitizations of loans; risks related to new product additions and addition of distribution channels (or entry into new markets) for existing products.

Technological and Operational Matters. Technological or operational difficulties, loss or theft of information, cyber-attacks and other security breaches, counterparty failures and the possibility that deposit account losses (fraudulent checks, etc.) may increase; failure to keep pace with technological change, including the failure to develop and maintain technology necessary to satisfy customer demands; ability to attract and retain employees given competitive conditions and the impact of consolidating facilities.

Litigation Risks. Results of 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, 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 Matters. Changes 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 federal, state or foreign tax assessments or findings in tax audits; lack of or inadequate insurance coverage for claims against TCF; potential for claims and legal action related to TCF's fiduciary responsibilities.

 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per-share data)
(Unaudited)
       
Three Months Ended September 30, Change
2015 2014 $ %
Interest income:
Loans and leases $ 207,250 $ 205,604 $ 1,646 0.8 %
Securities available for sale 4,161 2,973 1,188 40.0
Securities held to maturity 1,361 1,445 (84 ) (5.8 )
Investments and other 10,832   9,681   1,151   11.9
Total interest income 223,604   219,703   3,901   1.8
Interest expense:
Deposits 12,302 10,711 1,591 14.9
Borrowings 6,032   4,812   1,220   25.4
Total interest expense 18,334   15,523   2,811   18.1
Net interest income 205,270 204,180 1,090 0.5
Provision for credit losses 10,018   15,739   (5,721 ) (36.3 )
Net interest income after provision for credit losses 195,252   188,441   6,811   3.6
Non-interest income:
Fees and service charges 36,991 40,255 (3,264 ) (8.1 )
Card revenue 13,803 12,994 809 6.2
ATM revenue 5,739   5,863   (124 ) (2.1 )
Subtotal 56,533 59,112 (2,579 ) (4.4 )
Gains on sales of auto loans, net 10,423 14,863 (4,440 ) (29.9 )
Gains on sales of consumer real estate loans, net 7,143 8,762 (1,619 ) (18.5 )
Servicing fee income 8,049   5,880   2,169   36.9
Subtotal 25,615 29,505 (3,890 ) (13.2 )
Leasing and equipment finance 27,165 24,383 2,782 11.4
Other 3,070   3,170   (100 ) (3.2 )
Fees and other revenue 112,383 116,170 (3,787 ) (3.3 )
Gains (losses) on securities, net (131 ) (94 ) (37 ) (39.4 )
Total non-interest income 112,252   116,076   (3,824 ) (3.3 )
Non-interest expense:
Compensation and employee benefits 116,708 112,393 4,315 3.8
Occupancy and equipment 34,159 34,121 38 0.1
FDIC insurance 4,832 7,292 (2,460 ) (33.7 )
Operating lease depreciation 9,485 7,434 2,051 27.6
Advertising and marketing 5,793 5,656 137 2.4
Other 45,750   47,888   (2,138 ) (4.5 )
Subtotal 216,727 214,784 1,943 0.9
Foreclosed real estate and repossessed assets, net 5,680 5,315 365 6.9
Other credit costs, net (123 ) (411 ) 288   70.1
Total non-interest expense 222,284   219,688   2,596   1.2
Income before income tax expense 85,220 84,829 391 0.5
Income tax expense 30,528   30,791   (263 ) (0.9 )
Income after income tax expense 54,692 54,038 654 1.2
Income attributable to non-controlling interest 2,117   1,721   396   23.0
Net income attributable to TCF Financial Corporation 52,575   52,317   258   0.5
Preferred stock dividends 4,847   4,847    
Net income available to common stockholders $ 47,728   $ 47,470   $ 258   0.5
 
Net income per common share: