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

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

SECOND QUARTER OBSERVATIONS

  • Revenue of $364.9 million, up 6.8 percent from the second quarter of 2017
  • Net interest income of $250.8 million, up 10.4 percent from the second quarter of 2017
  • Net interest margin of 4.67 percent, up 15 basis points from the second quarter of 2017
  • Reported efficiency ratio of 74.55 percent, up 636 basis points from the second quarter of 2017; adjusted efficiency ratio of 65.78 percent,(1) down 241 basis points from the second quarter of 2017
  • Auto finance portfolio run-off of $596.4 million year-to-date
  • Non-performing assets down 36.0 percent from June 30, 2017
  • Settlement with the Bureau of Consumer Financial Protection ("BCFP") and the Office of the Comptroller of the Currency ("OCC") resulting in a pre-tax charge, including related expenses, of $32.0 million, or 15 cents per share after-tax
  • Reported return on average common equity ("ROACE") of 9.72 percent; adjusted ROACE of 14.11 percent(1)
  • Reported return on average tangible common equity ("ROATCE") of 10.65 percent;(1) adjusted ROATCE of 15.39 percent(1)
  • Repurchased 2.8 million common shares at a cost of $68.2 million in the second quarter of 2018; repurchased $135.0 million of $150.0 million authorization through June 30, 2018
  • Additional $150.0 million share repurchase authorization approved by TCF's Board of Directors on July 25, 2018
Friday, July 27, 2018 7:00 am CDT

Dateline:

WAYZATA, Minn.

Public Company Information:

NYSE:
TCF
"Our performance in the second quarter was highlighted by strong revenue growth driven by net interest margin expansion, as well as enhanced capital efficiency and the continued reduction of the risk profile of the Company"

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

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

Financial Ratios (2)

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

15.39

12.26 11.15

313

424

13.81

9.87

394

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

TCF Financial Corporation ("TCF" or the "Company") (NYSE: TCF) today reported net income of $58.7 million for the second quarter of 2018, compared with $60.4 million for the second quarter of 2017 and $73.8 million for the first quarter of 2018. Diluted earnings per common share was 34 cents for the second quarter of 2018 (inclusive of a charge of 15 cents per common share after-tax related to the settlement with the BCFP and OCC), compared with 33 cents for the second quarter of 2017 and 39 cents for the first quarter of 2018 (inclusive of a one-time reduction in net income available to common stockholders of 2 cents per common share related to the redemption of the 6.45% Series B non-cumulative perpetual preferred stock in the first quarter of 2018).

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

Revenue

 

Total Revenue

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

Total Revenue

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

Net Interest Income

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

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

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

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

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

Non-interest Income

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

Loans and Leases

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

    The increases in period-end loans and leases from June 30, 2017 and average loans and leases from the second quarter of 2017 were primarily due to increases in the inventory finance, leasing and equipment finance, and commercial portfolios, partially offset by a decrease in the auto finance portfolio. The increases in the inventory finance portfolio were primarily due to growth with existing customers through new manufacturer products, additional dealers and increased customer sales, as well as the addition of new exclusive programs. The increases in the leasing and equipment finance portfolio were primarily due to a loan and lease portfolio purchase of $445.5 million on September 29, 2017. The increases in the commercial portfolio were primarily due to strong originations. The decreases in the auto finance portfolio were primarily attributable to the discontinuation of auto finance loan originations and run-off in the portfolio.

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

Credit Quality

                                             
Credit Trends                                   Table 4
                        Change
2Q 1Q 4Q 3Q 2Q 2Q18 vs     2Q18 vs
(Dollars in thousands)     2018     2018     2017     2017     2017     1Q18     2Q17
Over 60-day delinquencies as a percentage of period-end loans and leases(1) 0.11 % 0.10 % 0.12 % 0.13 % 0.11 % 1 bps bps
Net charge-offs as a percentage of average loans and leases(2), (3) 0.27 0.29 0.38 0.18 0.28 (2 ) (1 )
Non-accrual loans and leases and other real estate owned $ 101,125 $ 143,607 $ 136,807 $ 146,024 $ 158,000 (29.6 ) % (36.0 ) %
Provision for credit losses 14,236 11,368 22,259 14,545 19,446 25.2 (26.8 )
 
(1) Excludes non-accrual loans and leases
(2) Annualized
(3) Excluding the $4.6 million recovery from the consumer real estate non-accrual loan sale, net charge-offs as a percentage of average loans and leases was 0.28% for 3Q 2017.
 
  • The over 60-day delinquency rate, excluding non-accrual loans and leases, was 0.11 percent at June 30, 2018, consistent with the June 30, 2017 rate and up 1 basis point from the March 31, 2018 rate. The over 60-day delinquency rate, excluding non-accrual loans and leases, at June 30, 2018 was consistent with the June 30, 2017 rate primarily due to higher delinquencies in the auto finance portfolio, mostly offset by lower delinquencies in the first mortgage lien consumer real estate portfolio. The increase from March 31, 2018 was primarily due to higher delinquencies in the auto finance portfolio.
  • The net charge-off rate was 0.27 percent for the second quarter of 2018, down 1 basis point from the second quarter of 2017 and 2 basis points from the first quarter of 2018. The decrease from the second quarter of 2017 was primarily due to decreased net charge-offs in the commercial portfolio, offset by increased net charge-offs in the auto finance and leasing and equipment finance portfolios. The decrease from the first quarter of 2018 was primarily due to decreased net charge-offs in the auto finance portfolio, partially offset by increased net charge-offs in the leasing and equipment finance portfolio.
  • Non-accrual loans and leases and other real estate owned were $101.1 million at June 30, 2018, a decrease of $56.9 million, or 36.0 percent, from June 30, 2017 and $42.5 million, or 29.6 percent, from March 31, 2018. Non-accrual loans and leases were $84.9 million at June 30, 2018, a decrease of $44.4 million, or 34.4 percent, from June 30, 2017 and $41.6 million, or 32.9 percent, from March 31, 2018. The decrease from June 30, 2017 was primarily due to the transfer of $36.7 million of consumer real estate non-accrual loans to held for sale in the second quarter of 2018 and the $21.8 million consumer real estate non-accrual loan sale in the third quarter of 2017, partially offset by an increase in non-accrual loans and leases in the leasing and equipment finance and commercial portfolios. The decrease from March 31, 2018 was primarily due to the transfer of consumer real estate non-accrual loans to held for sale, as well as a decrease in non-accrual loans and leases in the leasing and equipment finance portfolio. Other real estate owned was $16.3 million at June 30, 2018, a decrease of $12.5 million, or 43.4 percent, from June 30, 2017 and $0.9 million, or 5.3 percent, from March 31, 2018. The decreases from both periods were primarily due to sales of consumer real estate properties outpacing additions, with the decrease from June 30, 2017 also due to sales of commercial real estate properties.
  • Provision for credit losses was $14.2 million for the second quarter of 2018, a decrease of $5.2 million, or 26.8 percent, from the second quarter of 2017 and an increase of $2.9 million, or 25.2 percent, from the first quarter of 2018. The decrease from the second quarter of 2017 was primarily due to run-off in the auto finance portfolio, partially offset by an increase in the provision for credit losses attributable to the inventory finance portfolio. The increase from the first quarter of 2018 was primarily due to increased reserve requirements in the commercial and auto finance portfolios, partially offset by a decrease in consumer real estate due to decreased reserve requirements, as well as seasonal decreases in the inventory finance portfolio.

Deposits

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

Non-interest Expense

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

Income Tax Expense

  • The Company's effective income tax rate was 20.9 percent for the second quarter of 2018, compared with 28.9 percent for the second quarter of 2017 and 22.1 percent for the first quarter of 2018. The lower effective tax rate from the second quarter of 2017 was primarily due to changes in the corporate statutory tax rate as a result of the Tax Cuts and Jobs Act ("Tax Reform"). The effective income tax rate for the second quarter of 2018 included a net discrete income tax benefit of $1.8 million primarily related to the one-time finalization of the provisional amounts recorded for the year ended December 31, 2017 related to Tax Reform and excess tax benefits related to vesting of stock based compensation. Tax benefits related to stock compensation will fluctuate throughout the year based on the Company's stock price and the vesting of stock based compensation.

Capital

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

Webcast Information

A live webcast of TCF's conference call to discuss the second quarter earnings will be hosted at TCF's website, http://ir.tcfbank.com , on July 27, 2018 at 9:00 a.m. CDT. A slide presentation for the call will be available on the website prior to the call. Additionally, the webcast will be available for replay on TCF's website after the conference call. The website also includes free access to company news releases, TCF's annual report, investor presentations and SEC filings.

 

TCF is a Wayzata, Minnesota-based national bank holding company. As of June 30, 2018, TCF had $23.2 billion in total assets and 315 bank branches in Illinois, Minnesota, Michigan, Colorado, Wisconsin, Arizona and South Dakota providing retail and commercial banking services. TCF, through its subsidiaries, also conducts commercial leasing and equipment finance business in all 50 states and commercial inventory finance business in all 50 states and Canada. For more information about TCF, please visit http://ir.tcfbank.com .

 

Cautionary Statements for Purposes of the Safe Harbor Provisions of the Securities Litigation Reform Act

Any statements contained in this earnings release regarding the outlook for the Company's businesses and their respective markets, such as projections of future performance, targets, guidance, statements of the Company's plans and objectives, forecasts of market trends and other matters are forward-looking statements based on the Company's assumptions and beliefs. Such statements may be identified by such words or phrases as "will likely result," "are expected to," "will continue," "outlook," "will benefit," "is anticipated," "estimate," "project," "management believes" or similar expressions. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those discussed in such statements and no assurance can be given that the results in any forward-looking statement will be achieved. For these statements, TCF claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Any forward-looking statement speaks only as of the date on which it is made and we disclaim any obligation to subsequently revise any forward-looking statement to reflect events or circumstances after such date or to reflect the occurrence of anticipated or unanticipated events.

Certain factors could cause the Company's future results to differ materially from those expressed or implied in any forward-looking statements contained herein. These factors include the factors discussed in Part I, Item 1A. of the Company's Annual Report on Form 10-K for the year ended December 31, 2017 under the heading "Risk Factors," the factors discussed below and any other cautionary statements, written or oral, which may be made or referred to in connection with any such forward-looking statements. Since it is not possible to foresee all such factors, these factors should not be considered as complete or exhaustive.

Adverse Economic or Business Conditions; Competitive Conditions; Credit and Other Risks.  Deterioration in general economic and banking industry conditions, including those arising from government shutdowns, defaults, anticipated defaults or rating agency downgrades of sovereign debt (including debt of the U.S.), or increases in unemployment; adverse economic, business and competitive developments such as shrinking interest margins, reduced demand for financial services and loan and lease products, deposit outflows, increased deposit costs due to competition for deposit growth and evolving payment system developments, deposit account attrition or an inability to increase the number of deposit accounts; customers completing financial transactions without using a bank; adverse changes in credit quality and other risks posed by TCF's loan, lease, investment, debt securities held to maturity and debt securities available for sale portfolios, including declines in commercial or residential real estate values, changes in the allowance for loan and lease losses dictated by new market conditions or regulatory requirements, or the inability of home equity line borrowers to make increased payments caused by increased interest rates or amortization of principal; deviations from estimates of prepayment rates and fluctuations in interest rates that result in decreases in the value of assets such as interest-only strips that arise in connection with TCF's loan sales activity; interest rate risks resulting from fluctuations in prevailing interest rates or other factors that result in a mismatch between yields earned on TCF's interest-earning assets and the rates paid on its deposits and borrowings; foreign currency exchange risks; counterparty risk, including the risk of defaults by our counterparties or diminished availability of counterparties who satisfy our credit quality requirements; decreases in demand for the types of equipment that TCF leases or finances; the effect of any negative publicity; the effects of man-made and natural disasters, including fires, floods, tornadoes, hurricanes, acts of terrorism, civil disturbances and environmental damage, which may negatively affect our operations and/or our customers.

Legislative and Regulatory Requirements.  New consumer protection and supervisory requirements and regulations, including those resulting from action by the BCFP and changes in the scope of Federal preemption of state laws that could be applied to national banks and their subsidiaries; the imposition of requirements that adversely impact TCF's deposit, lending, loan collection and other business activities such as mortgage foreclosure moratorium laws, further regulation of financial institution campus banking programs, restrictions on arbitration or new restrictions on loan and lease products; changes affecting customer account charges and fee income, including changes to interchange rates; regulatory actions or changes in customer opt-in preferences with respect to overdrafts, which may have an adverse impact on TCF; governmental regulations or judicial actions affecting the security interests of creditors; deficiencies in TCF's compliance programs, including under the Bank Secrecy Act, which may result in regulatory enforcement action including monetary penalties; increased health care costs including those resulting from health care reform; regulatory criticism and resulting enforcement actions or other adverse consequences such as increased capital requirements, higher deposit insurance assessments or monetary damages or penalties; heightened regulatory practices, requirements or expectations, including, but not limited to, requirements related to enterprise risk management, the Bank Secrecy Act and anti-money laundering compliance activity.

Earnings/Capital Risks and Constraints, Liquidity Risks. Limitations on TCF's ability to carry out its share repurchase program, pay dividends or increase dividends because of financial performance deterioration, regulatory restrictions or limitations; increased deposit insurance premiums, special assessments or other costs related to adverse conditions in the banking industry; the impact on banks of regulatory reform, including additional capital, leverage, liquidity and risk management requirements or changes in the composition of qualifying regulatory capital; adverse changes in securities markets directly or indirectly affecting TCF's ability to sell assets or to fund its operations; diminished unsecured borrowing capacity resulting from TCF credit rating downgrades or unfavorable conditions in the credit markets that restrict or limit various funding sources; costs associated with new regulatory requirements or interpretive guidance including those relating to liquidity; uncertainties relating to future retail deposit account changes, including limitations on TCF's ability to predict customer behavior and the impact on TCF's fee revenues.

Branching Risk; Growth Risks.  Adverse developments affecting TCF's supermarket banking relationships or either of the primary supermarket chains in which TCF maintains supermarket branches; costs related to closing underperforming branches; inability to timely close underperforming branches due to long-term lease obligations; slower than anticipated growth in existing or acquired businesses; inability to successfully execute on TCF's growth strategy through acquisitions or expanding existing business relationships; failure to expand or diversify TCF's balance sheet through new or expanded programs or opportunities; failure to effectuate, and risks of claims related to, sales of loans; risks related to new product additions and addition of distribution channels (or entry into new markets) for existing products.

Technological and Operational Risks.  Technological or operational difficulties, loss or theft of information, cyber-attacks and other security breaches, counterparty failures and the possibility that deposit account losses (from fraudulent checks, stolen debit card information, etc.) may increase; failure to keep pace with technological change, such as by failing to develop and maintain technology necessary to satisfy customer demands and prevent cyber-attacks, costs and possible disruptions related to upgrading systems or cyber-attacks; the failure to attract and retain key employees.

Litigation Risks. Litigation or government enforcement actions, including class action litigation or enforcement actions concerning TCF's lending or deposit activities, including account opening/origination, servicing practices, fees or charges, employment practices or checking account overdraft program "opt in" requirements; possible increases in indemnification obligations for certain litigation against Visa U.S.A.

Accounting, Audit, Tax and Insurance Matters. Changes in accounting standards or interpretations of existing standards; federal or state monetary, fiscal or tax policies, including the impact of the Tax Cuts and Jobs Act tax reform legislation and adoption of federal or state legislation that would increase federal or state taxes; ineffective internal controls; adverse federal, state or foreign tax assessments or findings in tax audits; lack of or inadequate insurance coverage for claims against TCF; potential for claims and legal action related to TCF's fiduciary responsibilities.

Use of Non-GAAP Financial Measures

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

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

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

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

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

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

N.M. Not Meaningful

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

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

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

N.M. Not Meaningful

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

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

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

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

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

N.M. Not Meaningful

 
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
SUMMARY OF CREDIT QUALITY DATA
(Dollars in thousands)
(Unaudited)
 
Over 60-Day Delinquencies as a Percentage of Portfolio (1)
                        Change from
At Jun. 30, At Mar. 31, At Dec. 31, At Sep. 30, At Jun. 30, Mar. 31,     Jun. 30,
      2018     2018     2017     2017     2017     2018     2017
Consumer real estate:
First mortgage lien 0.20 % 0.23 % 0.25 % 0.32 % 0.31 % (3 ) bps (11 ) bps
Junior lien 0.07 0.06 0.04 0.05 0.05 1 2
Total consumer real estate 0.12 0.13 0.13 0.15 0.16 (1 ) (4 )
Commercial
Leasing and equipment finance 0.11 0.11 0.14 0.15 0.14 (3 )
Inventory finance 0.01 0.01 0.01 (1 )
Auto finance 0.33 0.24 0.28 0.25 0.20 9 13
Other 0.16 0.24 0.04 0.07 0.30 (8 ) (14 )
Subtotal 0.11 0.09 0.11 0.12 0.11 2
Portfolios acquired with deteriorated credit quality 13.48 12.95 13.18 9.42 53 1,348
Total delinquencies     0.11       0.10       0.12       0.13       0.11       1            

(1) Excludes non-accrual loans and leases

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

Total

    0.27       0.29       0.38       0.18       0.28       (2 )       (1 )  

N.M. Not Meaningful

(1) Annualized

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

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

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

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

(2) Annualized

(3) The yield on tax-exempt debt securities available for sale is computed on a tax-equivalent basis using a statutory federal income tax rate of 21% and 35% for the quarters ended June 30, 2018 and 2017, respectively.

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

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

 
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES
(Dollars in thousands)
(Unaudited)
                       
Six Months Ended June 30,
2018     2017
Average Yields and Average Yields and
      Balance     Interest (1)     Rates (1)(2)     Balance     Interest (1)     Rates (1)(2)
ASSETS:
Investments and other $ 320,655 $ 5,633 3.54 % $ 272,959 $ 5,463 4.03 %
Debt securities held to maturity 157,450 2,017 2.56 175,115 2,315 2.64
Debt securities available for sale:
Taxable 1,123,017 13,976 2.49 818,821 9,088 2.22
Tax-exempt(3) 824,906 10,966 2.66 665,382 10,683 3.21
Loans and leases held for sale 54,261 1,641 6.09 314,256 13,374 8.58
Loans and leases:(4)
Consumer real estate:
Fixed-rate 1,750,765 48,225 5.55 2,023,317 56,966 5.67
Variable- and adjustable-rate       3,019,212       94,212 6.29   2,863,461       80,221 5.65
Total consumer real estate 4,769,977 142,437 6.02 4,886,778 137,187 5.66
Commercial:
Fixed-rate 915,784 20,684 4.55 983,508 22,839 4.68
Variable- and adjustable-rate       2,736,267       71,204 5.25   2,376,779       51,589 4.38

Total commercial

3,652,051 91,888 5.07 3,360,287 74,428 4.47
Leasing and equipment finance 4,665,144 113,643 4.87 4,281,636 95,912 4.48
Inventory finance 3,214,618 108,333 6.80 2,710,137 81,711 6.08
Auto finance 2,857,169 74,917 5.29 2,933,620 67,080 4.61
Other       14,145       290 4.13   9,989       268 5.40
Total loans and leases       19,173,104       531,508 5.58   18,182,447       456,586 5.05
Total interest-earning assets 21,653,393 565,741 5.26 20,428,980 497,509 4.90
Other assets(5)       1,442,117   1,289,730
Total assets     $ 23,095,510 $ 21,718,710
LIABILITIES AND EQUITY:
Non-interest bearing deposits $ 3,812,765 $ 3,437,631
Interest-bearing deposits:
Checking 2,461,126 232 0.02 2,542,489 166 0.01
Savings 5,469,523 6,901 0.25 4,781,566 1,039 0.04
Money market 1,634,965 5,029 0.62 2,303,129 5,419 0.47
Certificates of deposit       4,953,533       34,301 1.40   4,150,460       21,527 1.05
Total interest-bearing deposits       14,519,147       46,463 0.65   13,777,644       28,151 0.41
Total deposits       18,331,912       46,463 0.51   17,215,275       28,151 0.33
Borrowings:
Short-term borrowings 3,532 37 2.14 5,434 20 0.73
Long-term borrowings       1,477,531       21,087 2.87   1,341,391       13,378 2.00
Total borrowings       1,481,063       21,124 2.87   1,346,825       13,398 2.00
Total interest-bearing liabilities       16,000,210       67,587 0.85   15,124,469       41,549 0.55
Total deposits and borrowings 19,812,975 67,587 0.69 18,562,100 41,549 0.45
Accrued expenses and other liabilities       736,201   669,544
Total liabilities       20,549,176   19,231,644
Total TCF Financial Corp. stockholders' equity 2,520,396 2,463,393
Non-controlling interest in subsidiaries       25,938   23,673
Total equity       2,546,334   2,487,066

Total liabilities and equity

    $ 23,095,510 $ 21,718,710
Net interest income and margin           $ 498,154     4.63             $ 455,960     4.49  

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

(2) Annualized

(3) The yield on tax-exempt debt securities available for sale is computed on a tax-equivalent basis using a statutory federal income tax rate of 21% and 35% for the six months ended June 30, 2018 and 2017, respectively.

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

(5) Includes leased equipment and related initial direct costs under operating leases of $285.2 million and $190.5 million for the six months ended June 30, 2018 and 2017, respectively.

 
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND FINANCIAL HIGHLIGHTS
(Dollars in thousands, except per share data)
(Unaudited)
                   
Quarter Ended
Jun. 30, Mar. 31, Dec. 31, Sep. 30, Jun. 30,
      2018     2018     2017     2017     2017
Interest income:
Loans and leases $ 269,280 $ 260,375 $ 256,633 $ 243,973 $ 234,092
Debt securities available for sale 12,516 10,123 8,760 8,486 8,052
Debt securities held to maturity 998 1,019 1,048 1,073 1,035
Loans held for sale and other       3,529         3,745         4,187         4,073         5,338  
Total interest income       286,323         275,262         270,628         257,605         248,517  
Interest expense:
Deposits 23,953 22,510 20,846 17,015 14,436
Borrowings       11,571         9,553         7,922         6,487         6,920  
Total interest expense       35,524         32,063         28,768         23,502         21,356  
Net interest income 250,799 243,199 241,860 234,103 227,161
Provision for credit losses       14,236         11,368         22,259         14,545         19,446  
Net interest income after provision for credit losses       236,563         231,831         219,601         219,558         207,715  
Non-interest income:
Fees and service charges 32,670 30,751 33,267 34,605 32,733
Card revenue 14,962 13,759 14,251 14,177 14,154
ATM revenue       4,933         4,650         4,654         5,234         5,061  
Subtotal 52,565 49,160 52,172 54,016 51,948
Gains on sales of auto loans, net 2,216 380
Gains on sales of consumer real estate loans, net 7,192 9,123 11,407 8,049 8,980
Servicing fee income       7,484         8,295         9,000         9,966         10,730  
Subtotal 14,676 17,418 22,623 18,015 20,090
Leasing and equipment finance 42,904 41,847 42,831 34,080 39,830
Other       3,934         3,716         3,218         2,930         2,795  
Fees and other revenue 114,079 112,141 120,844 109,041 114,663
Gains (losses) on debt securities, net       24         63         48         189          
Total non-interest income       114,103         112,204         120,892         109,230         114,663  
Non-interest expense:
Compensation and employee benefits 120,575 123,840 127,630 114,954 115,630
Occupancy and equipment 40,711 40,514 39,578 38,766 38,965
Other       89,084         58,819         159,019         61,581         61,363  
Subtotal 250,370 223,173 326,227 215,301 215,958
Operating lease depreciation 17,945 17,274 16,497 15,696 12,466
Foreclosed real estate and repossessed assets, net 3,857 4,916 4,739 3,829 4,639
Other credit costs, net       (133 )       617         343         209         24  
Total non-interest expense       272,039         245,980         347,806         235,035         233,087  
Income (loss) before income tax expense (benefit) 78,627 98,055 (7,313 ) 93,753 89,291
Income tax expense (benefit)       16,418         21,631         (110,965 )       30,704         25,794  
Income after income tax expense (benefit) 62,209 76,424 103,652 63,049 63,497
Income attributable to non-controlling interest       3,460         2,663         2,253         2,521         3,065  
Net income attributable to TCF Financial Corporation 58,749 73,761 101,399 60,528 60,432
Preferred stock dividends 2,494 4,106 3,746 6,464 4,847
Impact of preferred stock redemption               3,481                 5,779          
Net income available to common stockholders     $ 56,255       $ 66,174       $ 97,653       $ 48,285       $ 55,585  
 
Earnings per common share:
Basic $ 0.34 $ 0.39 $ 0.58 $ 0.29 $ 0.33
Diluted 0.34 0.39 0.57 0.29 0.33
 
Dividends declared per common share $ 0.15 $ 0.15 $ 0.075 $ 0.075 $ 0.075
 
Financial highlights: (1)
Return on average assets 1.08 % 1.33 % 1.82 % 1.15 % 1.17 %
Return on average common equity 9.72 11.23 16.95 8.44 9.96
Net interest margin       4.67         4.59         4.57         4.61         4.52  

(1) Annualized

 
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED QUARTERLY AVERAGE BALANCE SHEETS
(In thousands)
(Unaudited)
    Quarter Ended
      Jun. 30, 2018     Mar. 31, 2018     Dec. 31, 2017     Sep. 30, 2017     Jun. 30, 2017
ASSETS:                
Investments and other $ 309,120 $ 332,319 $ 303,958 $ 279,839 $ 259,548
Debt securities held to maturity 155,779 159,139 163,080 166,883 172,322
Debt securities available for sale:
Taxable 1,262,642 981,843 831,113 825,192 821,744
Tax-exempt 828,131 821,642 779,964 737,859 689,667
Loans and leases held for sale 45,525 63,095 113,501 96,143 165,859
Loans and leases:(1)
Consumer real estate:
Fixed-rate 1,715,289 1,786,636 1,821,240 1,872,607 1,963,822
Variable- and adjustable-rate       3,026,310       3,012,036       3,151,183       2,964,493       2,782,296
Total consumer real estate 4,741,599 4,798,672 4,972,423 4,837,100 4,746,118
Commercial:
Fixed-rate 900,462 931,275 963,703 980,262 966,884
Variable- and adjustable-rate       2,802,059       2,669,745       2,573,022       2,493,163       2,450,168
Total commercial 3,702,521 3,601,020 3,536,725 3,473,425 3,417,052
Leasing and equipment finance 4,639,703 4,690,868 4,713,015 4,316,434 4,277,376
Inventory finance 3,299,996 3,128,290 2,688,387 2,479,416 2,723,340
Auto finance 2,695,943 3,020,187 3,267,855 3,280,612 3,149,974
Other       13,845       14,446       13,007       11,567       10,235
Total loans and leases       19,093,607       19,253,483       19,191,412       18,398,554       18,324,095
Total interest-earning assets 21,694,804 21,611,521 21,383,028 20,504,470 20,433,235
Other assets(2)       1,430,621       1,453,742       1,437,126       1,434,957       1,315,495
Total assets     $ 23,125,425     $ 23,065,263     $ 22,820,154     $ 21,939,427     $ 21,748,730
LIABILITIES AND EQUITY:
Non-interest bearing deposits $ 3,879,048 $ 3,745,745 $ 3,570,846 $ 3,521,044 $ 3,473,639
Interest-bearing deposits:
Checking 2,460,709 2,461,548 2,541,475 2,539,211 2,554,563
Savings 5,542,565 5,395,669 5,140,417 4,846,090 4,806,371
Money market 1,572,560 1,698,064 1,854,442 2,106,814 2,221,807
Certificates of deposit       4,909,422       4,998,133       5,032,085       4,636,007       4,266,488
Total interest-bearing deposits       14,485,256       14,553,414       14,568,419       14,128,122       13,849,229
Total deposits       18,364,304       18,299,159       18,139,265       17,649,166       17,322,868
Borrowings:
Short-term borrowings 3,116 3,952 3,759 6,448 6,230
Long-term borrowings       1,531,389       1,423,075       1,295,268       983,004       1,225,022
Total borrowings       1,534,505       1,427,027       1,299,027       989,452       1,231,252
Total interest-bearing liabilities       16,019,761       15,980,441       15,867,446       15,117,574       15,080,481
Total deposits and borrowings 19,898,809 19,726,186 19,438,292 18,638,618 18,554,120
Accrued expenses and other liabilities       714,488       758,157       790,850       723,792       673,740
Total liabilities       20,613,297       20,484,343       20,229,142       19,362,410       19,227,860
Total TCF Financial Corporation stockholders' equity 2,483,474 2,557,729 2,570,613 2,554,667 2,494,682
Non-controlling interest in subsidiaries       28,654       23,191       20,399       22,350       26,188
Total equity       2,512,128       2,580,920       2,591,012       2,577,017       2,520,870
Total liabilities and equity     $ 23,125,425     $ 23,065,263     $ 22,820,154     $ 21,939,427     $ 21,748,730

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

(2) Includes leased equipment and related initial direct costs under operating leases of $288.4 million, $281.9 million, $267.8 million, $249.0 million and $200.7 million for the second and first quarters of 2018 and for the fourth, third and second quarters of 2017, respectively.

 
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED QUARTERLY YIELDS AND RATES (1)(2)
(Unaudited)
    Quarter Ended
      Jun. 30, 2018     Mar. 31, 2018     Dec. 31, 2017     Sep. 30, 2017     Jun. 30, 2017
ASSETS:                
Investments and other 3.71 % 3.38 % 3.07 % 3.80 % 4.20 %
Debt securities held to maturity 2.56 2.56 2.57 2.57 2.40
Debt securities available for sale:
Taxable 2.59 2.37 2.25 2.24 2.16
Tax-exempt(3) 2.66 2.66 3.22 3.22 3.23
Loans and leases held for sale 5.93 6.22 6.43 5.75 6.34
Loans and leases:
Consumer real estate:
Fixed-rate 5.52 5.58 5.61 5.61 5.65
Variable- and adjustable rate 6.41 6.18 5.95 5.91 5.76
Total consumer real estate 6.09 5.96 5.83 5.80 5.72
Commercial:
Fixed-rate 4.49 4.61 5.49 4.62 4.62
Variable- and adjustable-rate 5.45 5.04 4.68 4.76 4.45
Total commercial 5.21 4.93 4.90 4.72 4.50
Leasing and equipment finance 4.93 4.81 4.90 4.53 4.48
Inventory finance 6.94 6.64 6.01 6.71 6.22
Auto finance 5.30 5.28 5.23 5.17 5.01
Other 4.10 4.16 4.75 5.03 5.37
Total loans and leases 5.67 5.49 5.35 5.31 5.15
 
Total interest-earning assets 5.33 5.19 5.11 5.07 4.94
 
LIABILITIES:
Interest-bearing deposits:
Checking 0.02 0.02 0.02 0.02 0.01
Savings 0.27 0.24 0.18 0.08 0.04
Money market 0.67 0.58 0.48 0.47 0.45
Certificates of deposit 1.43 1.36 1.28 1.16 1.07
Total interest-bearing deposits 0.66 0.63 0.57 0.48 0.42
Total deposits 0.52 0.50 0.46 0.38 0.33
Borrowings:
Short-term borrowings 2.33 1.99 1.75 1.33 0.79
Long-term borrowings 3.02 2.70 2.43 2.62 2.26
Total borrowings 3.02 2.70 2.43 2.62 2.25
 
Total interest-bearing liabilities 0.89 0.81 0.72 0.62 0.57
 
Net interest margin     4.67       4.59       4.57       4.61       4.52  

(1) Annualized

(2) Yields are presented on a fully tax-equivalent basis.

(3) The yield on tax-exempt debt securities available for sale is computed on a tax-equivalent basis using a statutory federal income tax rate of 21% for the second and first quarters of 2018 and 35% for the fourth, third and second quarters of 2017, respectively.

 
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(Dollars in thousands, except per share data)
(Unaudited)
        Quarter Ended     Six Months Ended
Jun. 30,     Mar. 31,     Jun. 30,     Jun. 30,     Jun. 30,
            2018     2018     2017     2018     2017
Computation of adjusted diluted earnings per common share:
Net income available to common stockholders $ 56,255 $ 66,174 $ 55,585 $ 122,429 $ 97,016
Less: Earnings allocated to participating securities       8         9         9         17         17  
Earnings allocated to common stock (a) 56,247 66,165 55,576 122,412 96,999
Plus: BCFP/OCC settlement adjustment 32,000 32,000
Less: Income tax expense attributable to BCFP/OCC settlement adjustment             6,491                         6,491          
Adjusted earnings allocated to common stock     (b)     $ 81,756       $ 66,165       $ 55,576       $ 147,921       $ 96,999  
 
Weighted-average common shares outstanding for diluted earnings per common share (c) 166,857,640 169,997,146 168,857,218 168,464,546 168,615,437
 
Diluted earnings per common share (a) / (c) $ 0.34 $ 0.39 $ 0.33 $ 0.73 $ 0.58
Adjusted diluted earnings per common share     (b) / (c)     $ 0.49       $ 0.39       $ 0.33       $ 0.88       $ 0.58  
 
Quarter Ended     Six Months Ended
Jun. 30, Mar. 31, Jun. 30, Jun. 30, Jun. 30,
            2018     2018     2017     2018     2017
Computation of adjusted efficiency ratio:
Total non-interest expense (d) $ 272,039 $ 245,980 $ 233,087 $ 518,019 $ 477,093
Less: BCFP/OCC settlement adjustment             32,000                         32,000          
Adjusted non-interest expense     (e)     $ 240,039       $ 245,980       $ 233,087       $ 486,019       $ 477,093  
 
Revenue (f) $ 364,902 $ 355,403 $ 341,824 $ 720,305 $ 667,452
 
Efficiency ratio (d) / (f) 74.55 % 69.21 % 68.19 % 71.92 % 71.48 %
Adjusted efficiency ratio     (e) / (f)       65.78 %       69.21 %       68.19 %       67.47 %       71.48 %
 
At Jun. 30, At Jun. 30,
                              2018     2017
Computation of tangible common equity ratio and tangible book value per common share:
Total equity $ 2,504,578 $ 2,549,831
Less: Non-controlling interest in subsidiaries                               23,646         22,766  
Total TCF Financial Corporation stockholders' equity 2,480,932 2,527,065
Less: Preferred stock                               169,302         263,240  
Total common stockholders' equity     (g)                         2,311,630         2,263,825  
Less:
Goodwill, net 154,757 227,072
Other intangibles, net                               22,247         22,682  
Tangible common stockholders' equity     (h)                       $ 2,134,626       $ 2,014,071  
 
Total assets (i) $ 23,184,462 $ 22,054,651
Less:
Goodwill, net 154,757 227,072
Other intangibles, net                               22,247         22,682  
Tangible assets     (j)                       $ 23,007,458       $ 21,804,897  
 
Common stock shares outstanding (k) 167,684,971 171,489,921
 
Common equity ratio (g) / (i) 9.97 % 10.26 %
Tangible common equity ratio (h) / (j) 9.28 % 9.24 %
 
Book value per common share (g) / (k) $ 13.79 $ 13.20
Tangible book value per common share     (h) / (k)                       $ 12.73       $ 11.74  
 
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES, CONTINUED
(Dollars in thousands)
(Unaudited)
        Quarter Ended     Six Months Ended
Jun. 30,     Mar. 31,     Jun. 30,     Jun. 30,     Jun. 30,
            2018     2018     2017     2018     2017
Computation of adjusted return on average tangible common equity, return on average tangible common equity and adjusted return on average common equity:
Net income available to common stockholders (a) $ 56,255 $ 66,174 $ 55,585 $ 122,429 $ 97,016
Plus: Other intangibles amortization 835 831 238 1,666 361
Less: Income tax expense attributable to other intangibles amortization             201         199         83         401         125  
Adjusted net income available to common stockholders     (b)     $ 56,889       $ 66,806       $ 55,740       $ 123,694       $ 97,252  
 
Net income available to common stockholders adjusted for BCFP/OCC settlement:
Net income available to common stockholders $ 56,255 $ 66,174 $ 55,585 $ 122,429 $ 97,016
Plus: BCFP/OCC settlement adjustment 32,000 32,000
Less: Income tax expense attributable to BCFP/OCC settlement adjustment             6,491                         6,491          
Net income available to common stockholders adjusted for BCFP/OCC settlement (c) 81,764 66,174 55,585 147,938 97,016
Plus: Other intangibles amortization 835 831 238 1,666 361
Less: Income tax expense attributable to other intangibles amortization             201         199         83         401         125  
Adjusted net income available to common stockholders adjusted for BCFP/OCC settlement     (d)