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TCF Reports Quarterly Net Income of $52.5 Million, or 29 Cents Per Share and Annual Net Income of $197.1 Million, or $1.07 Per Share

Company Release - 1/28/2016 8:00 AM ET

2015 HIGHLIGHTS

  • Loan and lease originations of $15.3 billion, up 13.1 percent from 2014
  • Period-end loans and leases of $17.4 billion, up 6.3 percent from 2014
  • Non-accrual loans and leases of $200.5 million, down 7.5 percent from 2014
  • Average deposits of $15.9 billion, up 6.7 percent from 2014
  • Revenue of $1.3 billion, up 1.1 percent from 2014
  • Provision for credit losses of $52.9 million, down 44.7 percent from 2014
  • Earnings per share of $1.07, up 13.8 percent from 2014

FOURTH QUARTER HIGHLIGHTS

  • Loan and lease originations of $3.8 billion, up 11.2 percent from the fourth quarter of 2014
  • Average deposits of $16.3 billion, up 6.4 percent from the fourth quarter of 2014
  • Revenue of $321.3 million, up 2.4 percent from the fourth quarter of 2014
  • Provision for credit losses of $17.6 million, down 68.3 percent from the fourth quarter of 2014
  • Earnings per share of 29 cents, up 141.7 percent from the fourth 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) 4Q 3Q 4Q 4Q15 vs   4Q15 vs YTD YTD Percent
2015   2015   2014   3Q15   4Q14   2015   2014   Change
Net income attributable to TCF $ 52,492 $ 52,575 $ 23,988 (0.2 )% 118.8 % $ 197,123 $ 174,187 13.2 %
Net interest income 205,669 205,270 204,074 0.2 0.8 820,388 815,629 0.6
Diluted earnings per common share 0.29 0.29 0.12 141.7 1.07 0.94 13.8
 

Financial Ratios(1)

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

1.95 % 1.92 % 1.91 % 1.85 % 2.00 %
Return on average assets 1.08 1.10 0.53 1.03 0.96
Return on average common equity 9.53 9.76 4.15 9.19 8.71

Return on average tangible common equity(3)

10.82 11.12 4.80 10.48 10.08
Net interest margin 4.35 4.40 4.49 4.42 4.61

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

0.29 0.23 0.40 0.30 0.49
 
(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 $52.5 million for the fourth quarter of 2015, compared with net income of $24.0 million for the fourth quarter of 2014, and net income of $52.6 million for the third quarter of 2015. Diluted earnings per common share was 29 cents for the fourth quarter of 2015, compared with 12 cents for the fourth quarter of 2014, and 29 cents for the third quarter of 2015.

TCF reported net income of $197.1 million for the year ended December 31, 2015, compared with net income of $174.2 million for the same period in 2014. Diluted earnings per common share was $1.07 for the year ended December 31, 2015, compared with 94 cents for the same period in 2014.

"TCF experienced another successful year in 2015 as earnings per share increased 13.8 percent while return on average tangible common equity improved by 40 basis points," said Craig R. Dahl, chief executive officer. "Meanwhile, loan and lease originations increased 13.1 percent during the year which led to additional revenue growth and diversification. Fourth quarter results were highlighted by continued progress toward improving operating leverage and continued strong performance on credit results.

"As I begin my new role, I look forward to building on TCF's historical track record of delivering sustained growth and returns for our shareholders by executing against our four strategic pillars: diversification, profitable growth, operating leverage and core funding. As we entered the new year, we implemented several leadership changes that align the expertise of our senior management team with these core priorities. I am confident we have a strong team in place to execute our strategy and build on TCF's long history of delivering business results. With a well-positioned balance sheet and business model for rising interest rates, and continued strong credit performance, we are poised to drive shareholder value in 2016 and beyond."

                   
Revenue
                                   

 

Total Revenue                                

 

Table 2

Percent Change
(Dollars in thousands) 4Q 3Q 4Q 4Q15 vs 4Q15 vs YTD YTD Percent
2015   2015   2014   3Q15   4Q14   2015   2014   Change
Net interest income $ 205,669     $ 205,270     $ 204,074   0.2 % 0.8 % $ 820,388     $ 815,629   0.6 %
Non-interest income:
Fees and service charges 37,741 36,991 39,477 2.0 (4.4 ) 144,999 154,386 (6.1 )
Card revenue 13,781 13,803 12,830 (0.2 ) 7.4 54,387 51,323 6.0
ATM revenue 5,143     5,739     5,249   (10.4 ) (2.0 ) 21,544     22,225   (3.1 )
Subtotal 56,665 56,533 57,556 0.2 (1.5 ) 220,930 227,934 (3.1 )
Gains on sales of auto loans, net 3,136 10,423 12,962 (69.9 ) (75.8 ) 30,580 43,565 (29.8 )

Gains on sales of consumer real estate loans, net

13,104 7,143 6,175 83.5 112.2 40,964 34,794 17.7
Servicing fee income 8,622     8,049     6,365   7.1 35.5 31,229     21,444   45.6
Subtotal 24,862 25,615 25,502 (2.9 ) (2.5 ) 102,773 99,803 3.0
Leasing and equipment finance 32,355 27,165 24,367 19.1 32.8 108,129 93,799 15.3
Other 1,806     3,070     2,363   (41.2 ) (23.6 ) 10,463     10,704   (2.3 )
Fees and other revenue 115,688 112,383 109,788 2.9 5.4 442,295 432,240 2.3
Gains (losses) on securities, net (29 )   (131 )   (20 ) 77.9 (45.0 ) (297 )   1,027   N.M.
Total non-interest income 115,659     112,252     109,768   3.0 5.4 441,998     433,267   2.0
Total revenue $ 321,328     $ 317,522     $ 313,842   1.2 2.4 $ 1,262,386     $ 1,248,896   1.1
 
Net interest margin(1) 4.35 % 4.40 % 4.49 % 4.42 % 4.61 %
Total non-interest income as a percentage of total revenue 36.0 35.4 35.0 35.0 34.7
 
N.M. Not Meaningful.
 
(1) Annualized.                                    
 

Net Interest Income

  • Net interest income for the fourth quarter of 2015 increased $1.6 million, or 0.8 percent, compared with the fourth quarter of 2014 and increased $0.4 million, or 0.2 percent, compared with the third quarter of 2015. The increases from both periods were primarily due to higher average loan and lease balances in the auto finance, inventory finance and leasing and equipment finance portfolios, partially offset by the run-off of consumer real estate first mortgage lien balances and overall net margin compression.
  • Net interest margin for the fourth quarter of 2015 was 4.35 percent, compared with 4.49 percent for the fourth quarter of 2014 and 4.40 percent for the third quarter of 2015. The decreases from both periods were primarily due to margin compression resulting from the impact of the competitive low interest rate environment on the asset composition and higher rates on total deposits, driven primarily by certificates of deposits, acquired at market rates to fund asset growth.

Non-interest Income

  • Fees and service charges in the fourth quarter of 2015 were $37.7 million, down $1.7 million, or 4.4 percent, from the fourth quarter of 2014 and consistent with the third quarter of 2015. The decrease from the fourth quarter of 2014 was primarily due to consumer behavior changes, as well as higher average checking account balances per customer.
  • TCF sold $271.1 million, $367.0 million and $436.6 million of auto loans during the fourth quarters of 2015 and 2014, and the third quarter of 2015, respectively, resulting in net gains in each respective period. TCF executed another auto loan securitization in the four quarter of 2015.
  • TCF sold $389.1 million, $613.7 million and $246.0 million of consumer real estate loans during the fourth quarters of 2015 and 2014, and the third 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 originates first mortgage lien loans in our primary banking markets and sells the loans through a correspondent relationship. Included in consumer real estate loans sold (servicing released) for the fourth quarter of 2014 is $405.9 million related to the portfolio sale of consumer real estate loans, primarily troubled debt restructuring ("TDR") loans, the proceeds of which were reinvested in our core businesses in 2015.
  • Servicing fee income was $8.6 million on $4.2 billion of average loans and leases serviced for others during the fourth quarter of 2015 compared with $6.4 million on $3.3 billion for the fourth quarter of 2014 and $8.0 million on $4.0 billion for the third 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) 4Q 3Q 4Q 4Q15 vs   4Q15 vs YTD YTD Percent
2015   2015   2014   3Q15   4Q14   2015   2014   Change
Period-End:
Consumer real estate:
First mortgage lien $ 2,624,956 $ 2,724,594 $ 3,139,152 (3.7 )% (16.4 )%
Junior lien 2,839,316     2,889,120     2,543,212   (1.7 ) 11.6
Total consumer real estate 5,464,272 5,613,714 5,682,364 (2.7 ) (3.8 )
Commercial 3,145,832 3,112,325 3,157,665 1.1 (0.4 )
Leasing and equipment finance 4,012,248 3,873,581 3,745,322 3.6 7.1
Inventory finance 2,146,754 2,153,385 1,877,090 (0.3 ) 14.4
Auto finance 2,647,596 2,427,367 1,915,061 9.1 38.3
Other 19,297     20,674     24,144   (6.7 ) (20.1 )
Total $ 17,435,999     $ 17,201,046     $ 16,401,646   1.4 6.3
 
Average:
Consumer real estate:
First mortgage lien $ 2,670,355 $ 2,793,129 $ 3,447,447 (4.4 )% (22.5 )% $ 2,867,948 $ 3,567,088 (19.6 )%
Junior lien 2,934,169     2,813,253     2,611,709   4.3 12.3 2,754,253     2,581,464   6.7
Total consumer real estate 5,604,524 5,606,382 6,059,156 (7.5 ) 5,622,201 6,148,552 (8.6 )
Commercial 3,117,983 3,118,024 3,143,614 (0.8 ) 3,134,428 3,135,367
Leasing and equipment finance 3,911,025 3,821,590 3,611,557 2.3 8.3 3,804,015 3,531,256 7.7
Inventory finance 2,180,534 2,036,054 1,891,504 7.1 15.3 2,154,357 1,888,080 14.1
Auto finance 2,514,923 2,361,057 1,817,024 6.5 38.4 2,278,617 1,567,904 45.3
Other 9,060     9,833     11,396   (7.9 ) (20.5 ) 10,303     12,071   (14.6 )
Total $ 17,338,049     $ 16,952,940     $ 16,534,251   2.3 4.9 $ 17,003,921     $ 16,283,230   4.4
 
  • Period-end loans and leases were $17.4 billion at December 31, 2015, an increase of $1.0 billion, or 6.3 percent, compared with December 31, 2014 and an increase of $0.2 billion, or 1.4 percent, compared with September 30, 2015. Average loans and leases were $17.3 billion for the fourth quarter of 2015, an increase of $0.8 billion, or 4.9 percent, compared with the fourth quarter of 2014 and an increase of $0.4 billion, or 2.3 percent, compared with the third quarter of 2015.

    The increases from both periods for period-end loans and leases and 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, partially offset by run-off in the consumer real estate first mortgage lien portfolio. The increases from the fourth quarter of 2014 for period-end loans and leases and from both periods for average loans and leases were also due to increases in the inventory finance and the leasing and equipment finance portfolios. The increase from the third quarter of 2015 for period-end loans and leases was also due to an increase in the leasing and equipment finance portfolio due to strong fourth quarter originations.
  • Loan and lease originations were $3.8 billion for the fourth quarter of 2015, an increase of $0.4 billion, or 11.2 percent, compared with the fourth quarter of 2014 and a decrease of $0.1 billion, or 1.3 percent, compared with the third quarter of 2015. The increase in originations from the fourth quarter of 2014 was primarily due to an increase in commercial originations and continued growth in auto finance. The decrease in originations from the third quarter of 2015 was primarily due to seasonality of inventory finance originations and a decrease in consumer real estate originations, partially offset by an increase in commercial and leasing and equipment finance originations.
                   
Credit Quality
                                   
Credit Trends                                 Table 4
Change
(Dollars in thousands) 4Q 3Q 2Q 1Q 4Q 4Q15 vs 4Q15 vs
2015   2015   2015   2015   2014     3Q15   4Q14

Over 60-day delinquencies as a percentage of portfolio(1)

0.11

%

0.17

% 0.10 % 0.14 % 0.14 %

(6

) bps

(3

) bps

Net charge-offs as a percentage of portfolio(2)

0.29 0.23 0.41 0.28 0.40 6 (11 )

Non-accrual loans and leases and other real estate owned

$ 250,448 $ 264,694 $ 263,717 $ 284,541 $ 282,384 (5.4 )% (11.3 )%
Provision for credit losses 17,607 10,018 12,528 12,791 55,597 75.8 (68.3 )
 
(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 0.11 percent at December 31, 2015, down from 0.14 percent at December 31, 2014, and down from 0.17 percent at September 30, 2015. The decrease from December 31, 2014 was primarily a result of the stabilization of the consumer real estate portfolio as economic conditions improved in our markets. The decrease from September 30, 2015 was primarily driven by delinquencies in the commercial and leasing and equipment finance portfolios at September 30, 2015 that have been brought current.
  • The net charge-off rate was 0.29 percent for the fourth quarter of 2015, down from 0.40 percent for the fourth quarter of 2014, and up from 0.23 percent for the third quarter of 2015. The decrease from the fourth quarter of 2014 was primarily due to improved credit quality in the consumer real estate and commercial portfolios. The increase from the third quarter of 2015 was due to increased net charge-offs of loans in the auto finance portfolio as a result of seasonality, increased net charge-offs in the leasing and equipment finance portfolio and net recoveries in the commercial portfolio during the third quarter of 2015.
  • Non-accrual loans and leases and other real estate owned was $250.4 million at December 31, 2015, a decrease of $31.9 million, or 11.3 percent, from December 31, 2014, and a decrease of $14.2 million, or 5.4 percent, from September 30, 2015. The decreases from both periods were primarily due to the improving credit quality trends and continued efforts to actively work out problem loans in the commercial portfolio.
  • Provision for credit losses was $17.6 million for the fourth quarter of 2015, a decrease of $38.0 million, or 68.3 percent, from the fourth quarter of 2014, and an increase of $7.6 million, or 75.8 percent, from the third quarter of 2015. The decrease from the fourth quarter of 2014 was primarily due to provision expense recorded in the fourth quarter of 2014 related to the TDR loan sale in that period. The increase from the third quarter of 2015 was due to increased reserve requirements related to asset growth and increased net charge-offs of loans in the auto finance portfolio driven by seasonality.
                   
Deposits
                                     
Average Deposits                                   Table 5
Percent Change
(Dollars in thousands) 4Q 3Q 4Q 4Q15 vs 4Q15 vs YTD YTD Percent
2015   2015   2014   3Q15   4Q14   2015   2014   Change
 
Checking $ 5,412,454 $ 5,405,442 $ 5,109,465 0.1 % 5.9 % $ 5,387,112 $ 5,075,759 6.1 %
Savings 4,733,703 4,872,853 5,289,435 (2.9 ) (10.5 ) 4,952,680 5,713,389 (13.3 )
Money market 2,349,127 2,297,893 1,869,350 2.2 25.7 2,265,121 1,312,483 72.6
Certificates of deposit 3,793,653     3,400,282     3,041,722   11.6 24.7 3,340,341     2,840,922   17.6
Total average deposits $ 16,288,937     $ 15,976,470     $ 15,309,972   2.0 6.4 $ 15,945,254     $ 14,942,553   6.7
 
Average interest rate on deposits(1) 0.34 % 0.31 % 0.28 % 0.30 % 0.26 %
 
(1) Annualized.                                    
 
  • Total average deposits for the fourth quarter of 2015 increased $1.0 billion, or 6.4 percent, from the fourth quarter of 2014 and increased $0.3 billion, or 2.0 percent, from the third quarter of 2015. The increases from both periods were primarily due to special campaigns for certificates of deposit and money market accounts.
  • The average interest rate on deposits for the fourth quarter of 2015 was 0.34 percent, up 6 basis points from the fourth quarter of 2014 and up 3 basis points from the third quarter of 2015. The increases from both periods were primarily due to increased average interest rates resulting from promotions for certificates of deposit.
                   
Non-interest Expense
                                     
Non-interest Expense