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Section 1: 8-K (CURRENT REPORT OF MATERIAL EVENTS OR CORPORATE CHANGES)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 


 

FORM 8-K

 


 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): January 18, 2006

 


 

 

TCF FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

 


 

Delaware

 

001-10253

 

41-1591444

(State or other jurisdiction of
incorporation or organization)

 

(Commission File Number)

 

(IRS Employer Identification No.)

 

 

 

 

 

200 Lake Street East, Mail Code EX0-03-A, Wayzata, Minnesota 55391-1693

(Address of principal executive offices)

 

 

 

 

 

(612) 661-6500

(Registrant’s telephone number, including area code)

 


 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

o   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 



 

Item 2.02  Results of Operations and Financial Condition.

 

In accordance with General Instruction B.2 of Form 8-K, the following information, including Exhibit 99.1, shall not be deemed filed for the purposes of Section 18 of the Securities Exchange Act of 1934, nor shall such information and Exhibit be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such a filing.

 

The registrant issued a press release dated January 18, 2006, announcing its results of operations for the quarter ended December 31, 2005, which is attached to this Form 8-K as Exhibit 99.1.

 

 

Item 9.01    Financial Statements and Exhibits.

 

(c)          Exhibits.

 

Exhibit No.

 

Description

 

 

 

99.1

 

Earnings Release of TCF Financial Corporation,

 

 

Dated January 18, 2006

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

 TCF FINANCIAL CORPORATION

 

 

 

 

 

/s/ Lynn A. Nagorske

 

Lynn A. Nagorske,

Chief Executive Officer and Director

 

 

 

 

 

 

 

/s/ Neil W. Brown

 

Neil W. Brown, President and

Chief Financial Officer

(Principal Financial Officer)

 

 

 

 

 

 

 

/s/ David M. Stautz

 

David M. Stautz, Senior Vice President,

Controller and Assistant Treasurer

(Principal Accounting Officer)

 

 

Dated:    January 18, 2006

 

2


(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99)

Exhibit 99.1

 

NEWS RELEASE

 

 

CONTACT:

Jason Korstange

 

 

(952) 745-2755

 

 

www.TCFExpress.com

 

FOR IMMEDIATE RELEASE

 

TCF FINANCIAL CORPORATION 200 Lake Street East, Wayzata, MN 55391-1693

 

TCF Reports Record 2005 Annual Earnings and EPS ($2.00, up 7.5 percent)
 
2005 YEAR-END HIGHLIGHTS

                  Record diluted earnings per share of $2.00, up 7.5 percent

                  Record net income of $265.1 million, up 4 percent

                  Record return on average common equity of 28.03 percent

                  Return on average assets of 2.08 percent

                  Board declares quarterly dividend increase of 8.2 percent to 23 cents per share

                  Average Power AssetsÒ increased $1.1 billion, or 14.5 percent

                  Average Power LiabilitiesÒ increased $704 million, or 9.1 percent

                  Increased checking accounts by 68,021, or 4.4 percent, to 1,603,173

                  Opened 28 new branches in 2005

 

EARNINGS SUMMARY

($ in thousands, except per-share data)

 

 

 

Three Months
Ended December 31,

 

Year
Ended December 31,

 

 

 

2005

 

2004

 

Change

 

2005

 

2004

 

Change

 

Net income

 

$

65,540  

 

$

67,402  

 

(2.8)

%

$

265,132  

 

$

254,993  

 

4.0

%

Diluted earnings per common share

 

.50  

 

.50  

 

 

-

 

2.00  

 

1.86  

 

7.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Ratios

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average assets

 

2.01  

%

2.22  

%

 

 

 

2.08  

%

2.15  

%

 

 

Return on average common equity

 

27.09  

 

28.35  

 

 

 

 

28.03  

 

27.02  

 

 

 

Net interest margin

 

4.31  

 

4.56  

 

 

 

 

4.46  

 

4.54  

 

 

 

 

-more-

 



 

2

 

WAYZATA, MN, January 18, 2006 – TCF Financial Corporation (“TCF”) (NYSE: TCB) today reported record results for 2005.  Diluted earnings per share was a record $2.00 for 2005, compared with $1.86 for 2004.  Net income for 2005 was a record $265.1 million, up $10.1 million from 2004.  For 2005, return on average assets (“ROA”) was 2.08 percent and return on average common equity (“ROE”) was 28.03 percent, compared with 2.15 percent and 27.02 percent, respectively, for 2004.  Diluted earnings per share was 50 cents for the 2005 fourth quarter, unchanged from the same period of 2004.  Net income was $65.5 million for the fourth quarter of 2005, compared with $67.4 million for the same period of 2004.

 

Dividend Increase

 

TCF’s Board of Directors has announced, for the fifteenth consecutive year, an increase in the regular quarterly dividend to 23 cents per common share, effective for the first quarter of 2006.  This represents an 8.2 percent increase over the 2005 quarterly dividend of 21.25 cents per common share.  The dividend is payable on February 28, 2006 to common shareholders of record at the close of business on January 27, 2006.  TCF’s 10-year compounded dividend growth rate is the 6th highest among the 50 largest banks in the country.

 

Chief Executive Officer’s Statement

 

“2005 was a challenging year for TCF.  Despite a flat yield curve and the deposit service charge challenges facing the banking industry in 2005, TCF produced record results,” said Lynn A. Nagorske, Chief Executive Officer.  “TCF remains focused on its long-term strategies of high quality secured lending, targeted new branch expansion and product and service innovation,” said Nagorske.

-more-

 



 

3

 

Total Revenue

 

($ in thousands)

 

Three Months
Ended December 31,

 

 

 

%

 

Year Ended
December 31,

 

 

 

%

 

 

 

2005

 

2004

 

$ Change

 

Change

 

2005

 

2004

 

$ Change

 

Change

 

Net interest income

 

$

129,282

 

 

$

126,489

 

 

$

2,793

 

 

2.2

 

%

$

517,690

 

 

$

491,891

 

 

$

25,799

 

 

5.2

 

%

Fees and other revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fees and service charges

 

66,744

 

 

67,291

 

 

(547

)

 

(.8

)

 

258,779

 

 

271,259

 

 

(12,480

)

 

(4.6

)

 

Card revenue

 

21,419

 

 

17,609

 

 

3,810

 

 

21.6

 

 

79,803

 

 

63,463

 

 

16,340

 

 

25.7

 

 

ATM revenue

 

9,557

 

 

10,326

 

 

(769

)

 

(7.4

)

 

40,730

 

 

42,935

 

 

(2,205

)

 

(5.1

)

 

Investments and insurance

 

2,339

 

 

2,609

 

 

(270

)

 

(10.3

)

 

10,665

 

 

12,558

 

 

(1,893

)

 

(15.1

)

 

Total banking fees and other revenue

 

100,059

 

 

97,835

 

 

2,224

 

 

2.3

 

 

389,977

 

 

390,215

 

 

(238

)

 

(.1

)

 

Leasing and equipment finance

 

15,405

 

 

21,047

 

 

(5,642

)

 

(26.8

)

 

47,387

 

 

50,323

 

 

(2,936

)

 

(5.8

)

 

Mortgage banking (1)

 

3,238

 

 

(122

)

 

3,360

 

 

N.M.

 

 

5,578

 

 

12,960

 

 

(7,382

)

 

(57.0

)

 

Other

 

6,324

 

 

7,455

 

 

(1,131

)

 

(15.2

)

 

24,717

 

 

14,113

 

 

10,604

 

 

75.1

 

 

Total fees and other revenue

 

125,026

 

 

126,215

 

 

(1,189

)

 

(.9

)

 

467,659

 

 

467,611

 

 

48

 

 

 

-

 

 

Gains on sales of securities

 

 

-

 

 

6,204

 

 

(6,204

)

 

(100.0

)

 

10,671

 

 

22,600

 

 

(11,929

)

 

(52.8

)

 

Total non-interest income

 

125,026

 

 

132,419

 

 

(7,393

)

 

(5.6

)

 

478,330

 

 

490,211

 

 

(11,881

)

 

(2.4

)

 

Total revenue

 

$

254,308

 

 

$

258,908

 

 

$

(4,600

)

 

(1.8

)

 

$

996,020

 

 

$

982,102

 

 

$

13,918

 

 

1.4

 

 

Net interest margin (2)

 

4.31

 

%

4.56

 

%

 

 

 

 

4.46

 

%

4.54

 

%

 

 

 

 

Fees and other revenue as a % of:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue

 

49.16

 

 

48.75

 

 

 

 

 

 

46.95

 

 

47.61

 

 

 

 

 

 

Average assets (2)

 

3.83

 

 

4.15

 

 

 

 

 

 

3.67

 

 

3.94

 

 

 

 

 

 

 

 (1)  Beginning in 2005, TCF’s mortgage banking business no longer originates or sells loans (see pages 11 and 12).

 (2)  Annualized.

 N.M. Not meaningful.

 

Net Interest Income

 

TCF’s net interest income in 2005 was $517.7 million, up $25.8 million, or 5.2 percent, from 2004.  Net interest margin in 2005 was 4.46 percent, compared with 4.54 percent for 2004.  The increase in net interest income in 2005 was primarily driven by increased average Power Assets, up $1.1 billion, partially offset by higher funding costs.  Fixed- and adjustable-rate Power Assets increased $1.9 billion and variable-rate Power Assets decreased $842.9 million from 2004 due to changing customer preferences to lower cost fixed-rate loans.  The increase in average Power Assets was funded primarily by a $704 million increase in average Power Liabilities and a $163.1 million increase in average borrowings.  The weighted-average rate on Power Liabilities was 1.15 percent for 2005, up 60 basis points from 2004 and the weighted-average rate on borrowings was 3.96 percent, up 80 basis points from 2004.

 

TCF’s net interest income in the fourth quarter of 2005 was $129.3 million, up $2.8 million, or 2.2 percent, from the fourth quarter of 2004 and up $1.2 million from the third quarter of 2005.  Net interest

 

-more-

 



 

4

 

margin in the fourth quarter of 2005 was 4.31 percent, compared with 4.56 percent last year and 4.43 percent in the third quarter of 2005.  The decrease in the quarter’s net interest margin from the fourth quarter of 2004 is primarily due to the average rates on interest-bearing liabilities increasing more than the average yields on interest-earning assets.  During the fourth quarter of 2005, TCF purchased $400.4 million of mortgage-backed securities at a yield of 5.68 percent, which were funded by three- and five-year borrowings at a cost of 4.16 percent. These transactions contributed $1 million to net interest income during the fourth quarter and resulted in a reduction in the quarter’s net interest margin of approximately seven basis points, as compared with the third quarter of 2005.

 

Non-interest Income

 

Total non-interest income was $478.3 million for 2005, down $11.9 million, or 2.4 percent, from 2004. Increases in card and other revenues were more than offset by lower fees and service charges, leasing and equipment finance revenues, mortgage banking revenues and gains on sales of mortgage-backed securities.  Card revenues totaled $79.8 million for 2005, up $16.3 million, or 25.7 percent, from 2004 primarily attributable to an increase in customer transaction volumes and related fees.

 

During 2005, TCF sold $1 billion of mortgage-backed securities and realized gains of $10.7 million, compared with sales of $1.4 billion of mortgage-backed securities and gains of $22.6 million in 2004.  Other revenue was $24.7 million for 2005, up $10.6 million from 2004, primarily due to $13.6 million of gains on sales of branch buildings in conjunction with our mature branch renovation program, the Michigan Bank headquarters building and one rural branch, partially offset by a decrease in gains on sales of education loans.

 

Total non-interest income in the fourth quarter of 2005 was $125 million, down $7.4 million, or 5.6 percent, from the fourth quarter of 2004 primarily due to declines in leasing and equipment finance revenues, reflecting the unusually high revenues last year, and lower gains on sales of mortgage-backed securities, partially offset by increased card revenue.  Card revenues totaled $21.4 million for the fourth quarter of 2005, up 21.6 percent over the same period in 2004.

 

-more-

 



 

5

 

Leasing and equipment finance revenues were $15.4 million for the fourth quarter of 2005, down $5.6 million from the 2004 fourth quarter primarily due to lower sales-type revenues, partially offset by higher operating lease revenues.  Sales-type revenues may fluctuate from quarter to quarter based on customer driven factors not within the control of TCF.

 

Other revenues were $6.3 million for the fourth quarter of 2005, down $1.1 million from the same period of 2004.  This decrease was primarily due to a decrease in gains on sales of education loans, partially offset by gains on the sale of a rural branch and other branch buildings.

 

New Branch Expansion

 

TCF opened 28 new branches during 2005, including 18 traditional branches, seven supermarket branches, and three campus branches.  TCF has now opened 153 new branches since January 2000, representing 34 percent of TCF’s 453 total branches.  During the fourth quarter of 2005, TCF opened 13 new branches consisting of nine traditional branches, three supermarket branches and one campus branch.  TCF plans to open 24 new branches in 2006, consisting of 17 traditional branches, five supermarket branches, and two campus branches.

 

During the fourth quarter of 2005, TCF announced plans to enter the Phoenix, Arizona metropolitan area market.  Initially, TCF plans to open several consumer loan production offices during 2006 with construction of retail branches to begin later in 2006 or early 2007.  “The Arizona market has a growing population and excellent demographics.  We are excited about the expansion opportunity Arizona presents,” said Nagorske.

 

-more-

 



 

6

 

(# of branches)

 

December 31,

 

December 31,

 

December 31,

 

 

2005

 

2004

 

1999

 

 

 

 

 

 

 

 

 

Total Branches

 

 

 

 

 

 

 

Minnesota

 

105

 

101

 

82

 

Illinois

 

202

 

197

 

150

 

Wisconsin

 

35

 

34

 

31

 

Michigan

 

63

 

60

 

64

 

Colorado

 

42

 

32

 

10

 

Indiana

 

6

 

6

 

1

 

 

 

453

 

430

 

338

 

 

 

 

 

 

 

 

 

New Branches*

 

 

 

 

 

 

 

Traditional

 

71

 

53

 

 

 

Supermarket

 

79

 

72

 

 

 

Campus

 

3

 

-    

 

 

 

Total

 

153

 

125

 

 

 

% of Total Branches

 

34%

 

29%

 

 

 

 

* New branches opened since January 1, 2000.

 

 

Additional information regarding the results of TCF’s new branches opened since January 1, 2000 is summarized as follows:

 

($ in thousands)

 

At or For the Year Ended
December 31,

 

 

 

 

 

 

2005

 

2004

 

Change

 

% Change

 

 

 

 

 

 

 

 

 

 

 

Number of checking accounts

 

266,512

 

 

206,229

 

 

60,283

 

 

29.2

 

%

Average deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

Checking

 

$

371,440

 

 

$

251,558

 

 

$

119,882

 

 

47.7

 

 

Savings

 

248,675

 

 

135,888

 

 

112,787

 

 

83.0

 

 

Money market

 

25,849

 

 

20,873

 

 

4,976

 

 

23.8

 

 

Subtotal

 

645,964

 

 

408,319

 

 

237,645

 

 

58.2

 

 

Certificates of deposit

 

211,465

 

 

56,614

 

 

154,851

 

 

N.M.

 

 

Total deposits

 

$

857,429

 

 

$

464,933

 

 

$

392,496

 

 

84.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total fees and other revenue
(quarter ended)

 

$

18,657

 

 

$

14,477

 

 

$

4,180

 

 

28.9

 

 

Total fees and other revenue
(year ended)

 

$

68,220

 

 

$

50,968

 

 

$

17,252

 

 

33.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

N.M. Not meaningful.

 

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7

 

Power Assets®

 

Average Power Assets grew $1.1 billion, or 14.5 percent, in 2005.  “Consumer lending continued to drive Power Asset growth with a $784.2 million, or 19.6 percent, increase in average consumer loan balances over 2004,” said Nagorske.  TCF’s average commercial loan balances increased $197.8 million, or 8.1 percent; and leasing and equipment finance average balances increased $137.3 million, or 10.7 percent, from 2004.

 

($ in thousands)

 

Average Balances for the
Year Ended December 31,

 

 

 

 

 

 

2005

 

2004

 

Change

 

% Change

 

Loans and leases*:

 

 

 

 

 

 

 

 

 

Consumer home equity and other

 

 

 

 

 

 

 

 

 

Home equity:

 

 

 

 

 

 

 

 

 

First mortgage lien

 

$

3,139,233

 

 

$

2,663,819

 

 

$

475,414

 

 

17.8

 

%

Junior lien

 

1,615,741

 

 

1,302,578

 

 

313,163

 

 

24.0

 

 

Total consumer home equity

 

4,754,974

 

 

3,966,397

 

 

788,577

 

 

19.9

 

 

Other

 

34,763

 

 

39,161

 

 

(4,398

)

 

(11.2

)

 

Total consumer home equity and other

 

4,789,737

 

 

4,005,558

 

 

784,179

 

 

19.6

 

 

Commercial real estate

 

2,212,839

 

 

2,008,943

 

 

203,896

 

 

10.1

 

 

Commercial business

 

425,704

 

 

431,793

 

 

(6,089

)

 

(1.4

)

 

Leasing and equipment finance

 

1,423,264

 

 

1,285,925

 

 

137,339

 

 

10.7

 

 

Power Assets

 

$

8,851,544

 

 

$

7,732,219

 

 

$

1,119,325

 

 

14.5

 

 

 

 *Excludes residential real estate loans, loans held for sale and operating leases.

 

Power Liabilities®

 

Average Power Liabilities totaled $8.5 billion for 2005, an increase of $704 million, or 9.1 percent, from 2004.  The increase is primarily driven by increases in Premier Checking of $443 million, Premier Savings of $341.6 million and certificates of deposit of $246.5 million, partially offset by declines in other interest-bearing checking, other savings and money market deposits.  TCF increased checking accounts by 68,021, or 4.4 percent, in 2005 to 1,603,173 accounts.

 

-more-

 



 

8

 

($ in thousands)

 

Average Balances and Rates for the
Year Ended December 31,

 

 

 

 

 

 

2005

 

2004

 

Change

 

% Change

 

Non-interest bearing deposits:

 

 

 

 

 

 

 

 

 

Retail

 

$

1,548,027

 

 

$

1,504,392

 

 

$

43,635

 

 

2.9

 

%

Small business

 

585,860

 

 

508,162

 

 

77,698

 

 

15.3

 

 

Commercial and custodial

 

311,497

 

 

342,446

 

 

(30,949

)

 

(9.0

)

 

Total non-interest bearing deposits

 

2,445,384

 

 

2,355,000

 

 

90,384

 

 

3.8

 

 

Interest-bearing deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

Premier checking

 

641,672

 

 

198,651

 

 

443,021

 

 

N.M.

 

 

Other checking

 

1,026,017

 

 

1,140,242

 

 

(114,225

)

 

(10.0

)

 

Subtotal

 

1,667,689

 

 

1,338,893

 

 

328,796

 

 

24.6

 

 

Premier savings

 

427,070

 

 

85,478

 

 

341,592

 

 

N.M.

 

 

Other savings

 

1,558,423

 

 

1,738,374

 

 

(179,951

)

 

(10.4

)

 

Subtotal

 

1,985,493

 

 

1,823,852

 

 

161,641

 

 

8.9

 

 

Money market

 

640,576

 

 

763,925

 

 

(123,349

)

 

(16.1

)

 

Subtotal

 

4,293,758

 

 

3,926,670

 

 

367,088

 

 

9.3

 

 

Certificates of deposit

 

1,740,440

 

 

1,493,938

 

 

246,502

 

 

16.5

 

 

Total interest-bearing deposits

 

6,034,198

 

 

5,420,608

 

 

613,590

 

 

11.3

 

 

Power Liabilities

 

$

8,479,582

 

 

$

7,775,608

 

 

$

703,974

 

 

9.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of checking accounts, period-end

 

1,603,173

 

 

1,535,152

 

 

68,021

 

 

4.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

N.M. Not meaningful.

 

Residential Real Estate Loans and Securities Available for Sale

 

Average balances of residential real estate loans and securities available for sale (consisting primarily of mortgage-backed securities) totaled $2.5 billion for 2005, a decrease of $185.9 million from 2004.  At December 31, 2005, the unrealized pre-tax loss on TCF’s securities available for sale portfolio was $33.2 million.

 

($ in thousands)

 

Average Balances and Yields
for the Year Ended December 31,

 

Change

 

 

2005

 

2004

 

$

 

%

 

Securities available for sale

 

$

1,569,808

 

 

$

1,536,673

 

 

$

33,135

 

 

2.2

 

%

Residential real estate loans

 

885,735

 

 

1,104,814

 

 

(219,079

)

 

(19.8

)

 

Total

 

$

2,455,543

 

 

$

2,641,487

 

 

$

(185,944

)

 

(7.0

)

 

 

Non-interest Expense

 

Non-interest expense totaled $610.6 million for 2005, a 4.1 percent increase from 2004.  Compensation and employee benefits increased $3.7 million, or 1.1 percent, from 2004, primarily due to costs associated with new branch expansion, partially offset by decreases in mortgage banking and commissions and incentives.  Occupancy and equipment expenses increased $8.3 million, or 8.7 percent, from 2004, primarily due to

 

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9

 

increased expenses associated with new branch expansion.  Deposit account losses decreased $1.9 million, or 8.5 percent, from 2004, primarily due to lower uncollectable overdraft losses, partially offset by increased fraud losses.  Operating lease depreciation increased $5.5 million from 2004, primarily driven by a $25.1 million increase in average operating lease balances in TCF’s leasing and equipment finance subsidiaries.  Other expenses totaled $126.7 million for 2005, up $9 million from 2004, primarily driven by a $3.1 million increase in card processing and issuance expenses related to the increase in card transactions and revenues, and a $2.4 million increase in net real estate expense as a result of net recoveries on sales of foreclosed properties in 2004.

 

Non-interest expense totaled $158.5 million for the 2005 fourth quarter, up $4.2 million, or 2.7 percent, from $154.3 million for the 2004 fourth quarter.  Compensation and employee benefits decreased $3.6 million, or 4.2 percent, from the fourth quarter of 2004, primarily due to lower performance-related commissions and incentives expense.  Occupancy and equipment expenses increased $2.8 million, or 11 percent, from the fourth quarter of 2004, due to increased expenses associated with new branch expansion.    Deposit account losses increased $1 million, or 18.4 percent, from the fourth quarter of 2004, primarily due to higher fraud losses.  Other expenses increased $3 million, or 10.1 percent, from the fourth quarter of 2004, primarily driven by an increase in net real estate expense due to net recoveries on sales of foreclosed properties in 2004, and a $671 thousand increase in card processing and issuance expenses related to the increase in card transactions and revenues.

 

 

 

Three Months Ended
December 31,

 

Change

 

Year Ended
December 31,

 

Change

 

($ in thousands)

 

2005

 

2004

 

$

 

%

 

2005

 

2004

 

$

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and employee benefits

 

$

82,700

 

 

$

86,338

 

 

$

(3,638

)

 

(4.2

)

%

$

326,526

 

 

$

322,824

 

 

$

3,702

 

 

1.1

 

%

Occupancy and equipment

 

27,819

 

 

25,057

 

 

2,762

 

 

11.0

 

 

103,900

 

 

95,617

 

 

8,283

 

 

8.7

 

 

Advertising and promotions

 

6,088

 

 

6,568

 

 

(480

)

 

(7.3

)

 

25,691

 

 

26,353

 

 

(662

)

 

(2.5

)

 

Deposit account losses

 

6,607

 

 

5,580

 

 

1,027

 

 

18.4

 

 

20,473

 

 

22,369

 

 

(1,896

)

 

(8.5

)

 

Operating lease depreciation

 

2,164

 

 

700

 

 

1,464

 

 

N.M.

 

 

7,335

 

 

1,843

 

 

5,492

 

 

N.M.

 

 

Other

 

33,100

 

 

30,058

 

 

3,042

 

 

10.1

 

 

126,663

 

 

117,673

 

 

8,990

 

 

7.6

 

 

Total non-interest expense

 

$

158,478

 

 

$

154,301

 

 

$

4,177

 

 

2.7

 

 

$

610,588

 

 

$

586,679

 

 

$

23,909

 

 

4.1

 

 

 

N.M. Not meaningful.

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10

 

Credit Quality

 

At December 31, 2005, TCF’s allowance for loan and lease losses totaled $60.4 million, or .59 percent of loans and leases, compared with $79.9 million, or .85 percent, at December 31, 2004.  The provision for credit losses for 2005 was $5 million, down from $10.9 million for 2004, due to improved credit quality and a relatively large commercial loan recovery.  Net loan and lease charge-offs in 2005 were $24.5 million, or .25 percent of average loans and leases, up from $9.5 million, or .11 percent in 2004.  Net loan and lease charge-offs excluding the leveraged lease charge-off in the third quarter of 2005 were $5.7 million, or .06 percent of average loans and leases for 2005.  Net loan and lease charge-offs in the fourth quarter of 2005 were $2.3 million, or .09 percent of average loans and leases, down from $3.2 million, or .14 percent in the same period of 2004.  This decrease is primarily due to lower leasing and equipment finance net charge-offs due to improved credit quality, partially offset by slightly higher consumer loan net charge-offs.

 

At December 31, 2005, TCF’s over-30-day delinquency rate was .43 percent, up from .37 percent at December 31, 2004.  Non-accrual loans and leases were $29.6 million, or .29 percent of net loans and leases, at December 31, 2005, compared with $46.9 million, or .50 percent, at December 31, 2004.  Total non-performing assets were $47.4 million, or .35 percent of total assets, at December 31, 2005, down from $64.1 million, or .52 percent, at December 31, 2004.  The decrease in non-accrual loans and leases and non-performing assets was primarily due to the 2005 charge-off of the leveraged lease, partially offset by increases in consumer home equity loans in non-accrual status, mainly the result of changes in bankruptcy laws that occurred in October 2005.

 

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11

 

($ in thousands)

 

Three Months Ended
December 31,

 

Year Ended
December 31,

 

 

2005

 

2004

 

2005

 

2004

 

Allowance for loan and lease losses:

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

59,016

 

 

$

78,976

 

 

$

79,878

 

 

$

76,619

 

 

Net (charge-offs) recoveries:

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer home equity and other

 

(1,999

)

 

(806

)

 

(5,210

)

 

(3,232

)

 

Commercial real estate

 

76

 

 

2

 

 

8

 

 

(476

)

 

Commercial business

 

(157

)

 

(67

)

 

2,173

 

 

(153

)

 

Leasing and equipment finance

 

(167

)

 

(2,273

)

 

(21,384

)

 

(5,545

)

 

Residential real estate

 

(10

)

 

(27

)

 

(91

)

 

(73

)

 

Total

 

(2,257

)

 

(3,171

)

 

(24,504

)

 

(9,479

)

 

Provision for credit losses

 

3,637

 

 

4,073

 

 

5,022

 

 

10,947

 

 

Acquired allowance

 

-

 

 

-

 

 

-

 

 

1,791

 

 

Balance at end of period

 

$

60,396

 

 

$

79,878

 

 

$

60,396

 

 

$

79,878

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Key Indicators:

 

 

 

 

 

 

 

 

 

 

 

 

 

Annualized net charge-offs as a percentage of average loans and leases

 

.09

 

%

.14

 

%

.25

 

%

.11

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Annualized net charge-offs as a percentage of average loans and leases - excluding the leveraged lease

 

.09

 

%

.14

 

%

.06

 

%

.11

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Period-end allowance as a multiple of annualized net charge-offs

 

6.7

 

X

6.3

 

X

2.5

 

X

8.4

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes and provision for loan losses as a multiple of net charge-offs

 

42.5

 

X

33.0

 

X

15.7

 

X

41.7

 

X

 

Mortgage Banking

 

At December 31, 2005, TCF’s mortgage servicing portfolio totaled $3.4 billion and the mortgage servicing rights asset totaled $37.3 million, or 1.11 percent of the related servicing portfolio, down from $4.5 billion and $46.4 million, respectively, at December 31, 2004.  During the fourth quarter of 2005, TCF recorded a $2 million impairment recovery driven by slowing prepayments and slower assumed prepayments in the mortgage servicing rights portfolio, as compared with a $2.5 million impairment charge for the same 2004 period.  The following table summarizes the components of mortgage banking revenues.

 

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12

 

($ in thousands)

 

Three Months Ended
December 31,

 

Change

 

Year Ended
December 31,

 

Change

 

 

2005

 

2004

 

$

 

%

 

2005

 

2004

 

$

 

%

 

Servicing income

 

$

3,171

 

 

$

4,170

 

 

$

(999

)

 

(24.0

)

%

$

13,998

 

 

$

17,349

 

 

$

(3,351

)

 

(19.3

)

%

Less mortgage servicing rights:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization

 

2,086

 

 

3,366

 

 

(1,280

)

 

(38.0

)

 

10,108

 

 

13,091

 

 

(2,983

)

 

(22.8

)

 

(Recovery) impairment

 

(2,000

)

 

2,500

 

 

(4,500

)

 

(180.0

)

 

(1,000

)

 

1,500

 

 

(2,500

)

 

(166.7

)

 

Net servicing income

 

3,085

 

 

(1,696

)

 

4,781

 

 

N.M.

 

 

4,890

 

 

2,758

 

 

2,132

 

 

77.3

 

 

Gains on sales of loans *

 

    -

 

 

1,361

 

 

(1,361

)

 

(100.0

)

 

 

-

 

 

8,107

 

 

(8,107

)

 

(100.0

)

 

Other income

 

153

 

 

213

 

 

(60

)

 

(28.2

)

 

688

 

 

2,095

 

 

(1,407

)

 

(67.2

)

 

Total

 

$

3,238

 

 

$

(122

)

 

$

3,360

 

 

N.M.

 

 

$

5,578

 

 

$

12,960

 

 

$

(7,382

)

 

(57.0

)

 

 

 *  Beginning in 2005, TCF’s mortgage banking business no longer originates or sells loans.

 N.M. Not meaningful.

 

Income Taxes

 

TCF’s income tax expense was $115.3 million for 2005, or 30.3 percent of pre-tax income, compared with $129.5 million, or 33.7 percent, for 2004.  The lower annual effective tax rate for 2005, compared with 2004, was primarily due to the closing of previous years’ tax returns, clarification of existing state tax legislation and developments in income tax audits.  TCF’s income tax expense was $26.7 million for the fourth quarter of 2005, or 28.9 percent of pre-tax income, compared with $33.1 million, or 33 percent, for the comparable 2004 period.  The lower effective tax rate for the fourth quarter of 2005, compared with the same 2004 period, is primarily due to the same items noted above.

 

Capital

 

TCF repurchased 3,450,000 shares of its common stock during 2005 at an average cost of $27.10 per share.  TCF has 6.7 million shares remaining in its stock repurchase programs authorized by its Board of Directors.

 

($ in thousands, except per-share data)

 

At December 31,
2005

 

At December 31,
2004

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity

 

$

998,472

 

 

 

 

 

$

958,418

 

 

 

 

 

Stockholders’ equity to total assets

 

7.47

 

%

 

 

 

7.77

 

%

 

 

 

Book value per common share

 

$

7.46

 

 

 

 

 

$

6.99

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total risk-based capital

 

$

1,049,615

 

 

10.68

 

%

$

958,900

 

 

10.88

 

%

Total risk-based capital “well-capitalized” requirement

 

$

982,821

 

 

10.00

 

%

$

881,481

 

 

10.00

 

%

Excess risk-based capital over “well-capitalized” requirement

 

$

66,794

 

 

.68

 

%

$

77,419

 

 

.88

 

%

 

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13

 

Website Information

 

A live webcast of TCF’s conference call to discuss 2005 and fourth quarter earnings will be hosted at TCF’s website, www.TCFExpress.com, on January 18, 2006 at 10:00 a.m., CT.  Additionally, the webcast is available for replay at TCF’s website after the conference call.  The website also includes free access to company news releases, TCF’s annual report, quarterly reports, investor presentations and SEC filings.

 

 

TCF is a Wayzata, Minnesota-based national financial holding company with $13.4 billion in assets.  TCF has 453 banking offices in Minnesota, Illinois, Michigan, Wisconsin, Colorado and Indiana.  Other TCF affiliates provide leasing and equipment finance, securities brokerage, and investments and insurance sales.

 

 

Forward-looking Information

 

This earnings release and other reports issued by the Company, including reports filed with the SEC, may contain “forward-looking” statements that deal with future results, plans or performance.  In addition, TCF’s management may make such statements orally to the media, or to securities analysts, investors or others.  Forward-looking statements deal with matters that do not relate strictly to historical facts.  TCF’s future results may differ materially from historical performance and forward-looking statements about TCF’s expected financial results or other plans are subject to a number of risks and uncertainties.  These include but are not limited to possible legislative changes and adverse economic, business and competitive developments such as shrinking interest margins; deposit outflows; ability to increase the number of checking accounts and the possibility that deposit account losses (fraudulent checks, etc.) may increase; reduced demand for financial services and loan and lease products; adverse developments affecting TCF’s supermarket banking relationships or any of the supermarket chains in which TCF maintains supermarket branches; changes in accounting standards or interpretations of existing standards, or monetary, fiscal or tax policies of the federal or state governments; adverse findings in tax audits; changes in credit and other risks posed by TCF’s loan, lease and investment portfolios, including declines in commercial or residential real estate values; imposition of vicarious liability on TCF as lessor in its leasing operations; denial of insurance coverage for claims made by TCF; technological, computer-related or operational difficulties; adverse changes in securities markets; the risk that TCF could be unable to effectively manage the volatility of its mortgage servicing portfolio, which could adversely affect earnings; and results of litigation, including reductions in card revenues resulting from litigation brought by various merchants or merchant organizations against VISA, or other significant uncertainties.  Investors should consult TCF’s Annual Report to Shareholders and reports on Forms 10-K, 10-Q and 8-K for additional important information about the Company.

 

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14

 

TCF FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per-share data)

(Unaudited)

 

 

 

Three Months Ended
December 31,

 

 

 

 

 

 

 

2005

 

2004

 

$ Change

 

% Change

 

Interest income:

 

 

 

 

 

 

 

 

 

Loans and leases

 

$

171,436

 

 

$

140,469

 

 

$

30,967

 

 

22.0

 

%

Securities available for sale

 

20,766

 

 

19,484

 

 

1,282

 

 

6.6

 

 

Loans held for sale

 

3,342

 

 

2,421

 

 

921

 

 

38.0

 

 

Investments

 

841

 

 

1,014

 

 

(173

)

 

(17.1

)

 

Total interest income

 

196,385

 

 

163,388

 

 

32,997

 

 

20.2

 

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

34,283

 

 

12,250

 

 

22,033

 

 

179.9

 

 

Borrowings

 

32,820

 

 

24,649

 

 

8,171

 

 

33.1

 

 

Total interest expense

 

67,103

 

 

36,899

 

 

30,204

 

 

81.9

 

 

Net interest income

 

129,282

 

 

126,489

 

 

2,793

 

 

2.2

 

 

Provision for credit losses

 

3,637

 

 

4,073

 

 

(436

)

 

(10.7

)

 

Net interest income after provision for credit losses

 

125,645

 

 

122,416

 

 

3,229

 

 

2.6

 

 

Non-interest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Fees and service charges

 

66,744

 

 

67,291

 

 

(547

)

 

(.8

)

 

Card revenue

 

21,419

 

 

17,609

 

 

3,810

 

 

21.6

 

 

ATM revenue

 

9,557

 

 

10,326

 

 

(769

)

 

(7.4

)

 

Investments and insurance revenue

 

2,339

 

 

2,609

 

 

(270

)

 

(10.3

)

 

Subtotal

 

100,059

 

 

97,835

 

 

2,224

 

 

2.3

 

 

Leasing and equipment finance

 

15,405

 

 

21,047

 

 

(5,642

)

 

(26.8

)

 

Mortgage banking

 

3,238

 

 

(122

)

 

3,360

 

 

N.M.

 

 

Other

 

6,324

 

 

7,455

 

 

(1,131

)

 

(15.2

)

 

Fees and other revenue

 

125,026

 

 

126,215

 

 

(1,189

)

 

(.9

)

 

Gains on sales of securities available for sale

 

-

 

 

6,204

 

 

(6,204

)

 

(100.0

)

 

Total non-interest income

 

125,026

 

 

132,419

 

 

(7,393

)

 

(5.6

)

 

Non-interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and employee benefits

 

82,700

 

 

86,338

 

 

(3,638

)

 

(4.2

)

 

Occupancy and equipment

 

27,819

 

 

25,057

 

 

2,762

 

 

11.0

 

 

Advertising and promotions

 

6,088

 

 

6,568

 

 

(480

)

 

(7.3

)

 

Deposit account losses

 

6,607

 

 

5,580

 

 

1,027

 

 

18.4

 

 

Other

 

35,264

 

 

30,758

 

 

4,506

 

 

14.6

 

 

Total non-interest expense

 

158,478

 

 

154,301

 

 

4,177

 

 

2.7

 

 

Income before income tax expense

 

92,193

 

 

100,534

 

 

(8,341

)

 

(8.3

)

 

Income tax expense

 

26,653

 

 

33,132

 

 

(6,479

)

 

(19.6

)

 

Net income

 

$

65,540

 

 

$

67,402

 

 

$

(1,862

)

 

(2.8

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

.50

 

 

$

.50

 

 

$

    -

 

 

-

 

 

Diluted

 

$

.50

 

 

$

.50

 

 

$

    -

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per common share

 

$

.2125

 

 

$

.1875

 

 

$

.025

 

 

13.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

131,447

 

 

134,760

 

 

(3,313

)

 

(2.5

)

 

Diluted

 

131,816

 

 

135,610

 

 

(3,794

)

 

(2.8

)

 

 

N.M. Not meaningful.

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15

 

TCF FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per-share data)

(Unaudited)

 

 

 

Year Ended

 

 

 

 

 

 

 

December 31,

 

 

 

 

 

 

 

2005

 

2004

 

$ Change

 

% Change

 

Interest income:

 

 

 

 

 

 

 

 

 

Loans and leases

 

$

636,172

 

 

$

527,178

 

 

$

108,994

 

 

20.7

 

%

Securities available for sale

 

81,479

 

 

80,643

 

 

836

 

 

1.0

 

 

Loans held for sale

 

10,921

 

 

11,533

 

 

(612

)

 

(5.3

)

 

Investments

 

3,450

 

 

3,455

 

 

(5

)

 

(.1

)

 

Total interest income

 

732,022

 

 

622,809

 

 

109,213

 

 

17.5

 

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

97,406

 

 

42,581

 

 

54,825

 

 

128.8

 

 

Borrowings

 

116,926

 

 

88,337

 

 

28,589

 

 

32.4

 

 

Total interest expense

 

214,332

 

 

130,918

 

 

83,414

 

 

63.7

 

 

Net interest income

 

517,690

 

 

491,891

 

 

25,799

 

 

5.2

 

 

Provision for credit losses

 

5,022

 

 

10,947

 

 

(5,925

)

 

(54.1

)

 

Net interest income after provision for credit losses

 

512,668

 

 

480,944

 

 

31,724

 

 

6.6

 

 

Non-interest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Fees and service charges

 

258,779

 

 

271,259

 

 

(12,480

)

 

(4.6

)

 

Card revenue

 

79,803

 

 

63,463

 

 

16,340

 

 

25.7

 

 

ATM revenue

 

40,730

 

 

42,935

 

 

(2,205

)

 

(5.1

)

 

Investments and insurance revenue

 

10,665

 

 

12,558

 

 

(1,893

)

 

(15.1

)

 

Subtotal

 

389,977

 

 

390,215

 

 

(238

)

 

(.1

)

 

Leasing and equipment finance

 

47,387

 

 

50,323

 

 

(2,936

)

 

(5.8

)

 

Mortgage banking

 

5,578

 

 

12,960

 

 

(7,382

)

 

(57.0

)

 

Other

 

24,717

 

 

14,113

 

 

10,604

 

 

75.1

 

 

Fees and other revenue

 

467,659

 

 

467,611

 

 

48

 

 

-

 

 

Gains on sales of securities available for sale

 

10,671

 

 

22,600

 

 

(11,929

)

 

(52.8

)

 

Total non-interest income

 

478,330

 

 

490,211

 

 

(11,881

)

 

(2.4

)

 

Non-interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and employee benefits

 

326,526

 

 

322,824

 

 

3,702

 

 

1.1

 

 

Occupancy and equipment

 

103,900

 

 

95,617

 

 

8,283

 

 

8.7

 

 

Advertising and promotions

 

25,691

 

 

26,353

 

 

(662

)

 

(2.5

)

 

Deposit account losses

 

20,473

 

 

22,369

 

 

(1,896

)

 

(8.5

)

 

Other

 

133,998

 

 

119,516

 

 

14,482

 

 

12.1

 

 

Total non-interest expense

 

610,588

 

 

586,679

 

 

23,909

 

 

4.1

 

 

Income before income tax expense

 

380,410

 

 

384,476

 

 

(4,066

)

 

(1.1

)

 

Income tax expense

 

115,278

 

 

129,483

 

 

(14,205

)

 

(11.0

)

 

Net income

 

$

265,132

 

 

$

254,993

 

 

$

10,139

 

 

4.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

2.00

 

 

$

1.87

 

 

$

.13

 

 

7.0

 

 

Diluted

 

$

2.00

 

 

$

1.86

 

 

$

.14

 

 

7.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per common share

 

$

.85

 

 

$

.75

 

 

$

.10

 

 

13.3