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Section 1: 8-K (8-K)

8-K


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):
October 22, 2015
 
 
 
TCF FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
 
Delaware
(State or other jurisdiction of
incorporation)
001-10253
(Commission File Number)
41-1591444
(IRS Employer Identification No.)
 
200 Lake Street East, Mail Code EX0-03-A, Wayzata, Minnesota 55391-1693
(Address of principal executive offices, including Zip Code)
 
(952) 745-2760
(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:
 
[ ]   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
[ ]   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
[ ]   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
[ ]   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.
 
The following information, including Exhibit 99.1, shall not be deemed filed for 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 may be expressly set forth by specific reference in such a filing.
 
TCF Financial Corporation (the "Company") issued a press release dated October 22, 2015, attached to this Form 8-K as Exhibit 99.1, announcing its results of operations for the quarter ended September 30, 2015.
 
The earnings release is also available on the Investor Relations section of the Company’s web site at http://ir.tcfbank.com. The Company’s Annual Report to Shareholders and its reports on Forms 10-K, 10-Q and 8-K and other publicly available information should be consulted for other important information about the Company.
 
Item 7.01 Regulation FD Disclosure.
 
Information is being furnished herein in Exhibit 99.2 with respect to the slide presentation prepared for use with the press release. This information includes selected financial and operational information through the third quarter of 2015 and does not represent a complete set of financial statements and related notes prepared in conformity with generally accepted accounting principles ("GAAP"). Most, but not all, of the selected financial information furnished herein is derived from the Company’s consolidated financial statements and related notes prepared in accordance with GAAP and management’s discussion and analysis of financial condition and results of operations included in the Company’s reports on Forms 10-K and 10-Q. The Company’s annual financial statements are subject to independent audit. These materials are dated October 22, 2015 and TCF does not undertake to update the materials after that date.
 
The presentation is also available on the Investor Relations section of the Company’s web site at http://ir.tcfbank.com. The Company’s Annual Report to Shareholders and its reports on Forms 10-K, 10-Q and 8-K and other publicly available information should be consulted for other important information about the Company.
 
Information contained herein, including Exhibit 99.2, shall not be deemed filed for the purposes 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.
 
Item 9.01 Financial Statements and Exhibits.
 
(d)         Exhibits.

Exhibit No.        Description

99.1            Earnings Release of TCF Financial Corporation, dated October 22, 2015

99.2            Slide presentation prepared for use with the Earnings Release, dated October 22, 2015






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/ William A. Cooper
 
William A. Cooper,
Chairman and Chief Executive Officer
(Principal Executive Officer)
 
 
 
 
 
/s/ Michael S. Jones
 
Michael S. Jones,
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
 
 
 
 
 
/s/ Susan D. Bode
 
Susan D. Bode,
Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer)
 
Dated:  October 22, 2015



(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit
Exhibit 99.1

NEWS RELEASE

TCF Financial Corporation 200 Lake Street East Wayzata MN 55391

FOR IMMEDIATE RELEASE
                                
Contact:
Mark Goldman        (952) 475-7050        [email protected]         (Media)
Jason Korstange    (952) 745-2755        [email protected]        (Investors)

TCF REPORTS QUARTERLY NET INCOME OF $52.6 MILLION,
OR 29 CENTS PER SHARE

THIRD QUARTER HIGHLIGHTS

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

Summary of Financial Results
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table 1

 
 
 
 
 
 
 
Percent Change
 
 
 
 
 
 
(Dollars in thousands, except per-share data)
3Q
 
2Q
 
3Q
 
3Q15 vs
 
3Q15 vs
 
YTD
 
YTD
 
Percent
 
2015
 
2015
 
2014
 
2Q15
 
3Q14
 
2015
 
2014
 
Change
Net income attributable to TCF
$
52,575

 
$
52,255

 
$
52,317

 
0.6
 %
 
0.5
%
 
$
144,631

 
$
150,199

 
(3.7
)%
Net interest income
205,270

 
206,029

 
204,180

 
(0.4
)
 
0.5

 
614,719

 
611,555

 
0.5

Diluted earnings per common share
0.29

 
0.29

 
0.29

 

 

 
0.78

 
0.83

 
(6.0
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial Ratios(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pre-tax pre-provision return
on average assets(2)
1.92
%
 
1.94
%
 
2.13
%
 
 
 
 
 
1.81
%
 
2.02
%
 
 
Return on average assets
1.10

 
1.10

 
1.15

 
 
 
 
 
1.02

 
1.11

 
 
Return on average common equity
9.76

 
9.93

 
10.50

 
 
 
 
 
9.07

 
10.30

 
 
Return on average tangible
common equity(3)
11.12

 
11.34

 
12.11

 
 
 
 
 
10.37

 
11.93

 
 
Net interest margin
4.40

 
4.44

 
4.60

 
 
 
 
 
4.45

 
4.64

 
 
Net charge-offs as a percentage of
average loans and leases
0.23

 
0.41

 
0.66

 
 
 
 
 
0.31

 
0.52

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




WAYZATA, Minn. (October 22, 2015) - TCF Financial Corporation ("TCF" or the "Company") (NYSE: TCB) today reported net income of $52.6 million for the third quarter of 2015, compared with net income of $52.3 million for both the third quarter of 2014 and second quarter of 2015. Diluted earnings per common share was 29 cents for the third quarter of 2015, compared with 29 cents for both the third quarter of 2014 and second quarter of 2015.

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

Chairman's Statement
"During the third quarter, TCF continued to demonstrate its ability to originate high quality loans and leases and generate strong and diversified revenue, despite a persistently low interest rate environment," said William A. Cooper, chairman and chief executive officer. "In addition, TCF strengthened its commitment to drive shareholder value by recently announcing its first common stock dividend increase since 2008.
"As I turn the role of chief executive officer over to Craig Dahl in January 2016, I am confident in the strategies we have developed and the team we have in place. Our success will be driven by a focus on diversification, emphasizing profitable growth, improving operating leverage and maintaining our core funding sources, all within a strong enterprise risk management and credit culture."



2




Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
Table 2
 
 
 
 
 
 
 
 
Percent Change
 
 
 
 
 
 
(Dollars in thousands)
3Q
 
2Q
 
3Q
 
3Q15 vs
 
3Q15 vs
 
YTD
 
YTD
 
Percent
 
2015
 
2015
 
2014
 
2Q15
 
3Q14
 
2015
 
2014
 
Change
Net interest income
$
205,270

 
$
206,029

 
$
204,180

 
(0.4
)%
 
0.5
 %
 
$
614,719

 
$
611,555

 
0.5
 %
Non-interest income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fees and service charges
36,991

 
36,295

 
40,255

 
1.9

 
(8.1
)
 
107,258

 
114,909

 
(6.7
)
Card revenue
13,803

 
13,902

 
12,994

 
(0.7
)
 
6.2

 
40,606

 
38,493

 
5.5

ATM revenue
5,739

 
5,540

 
5,863

 
3.6

 
(2.1
)
 
16,401

 
16,976

 
(3.4
)
Subtotal
56,533

 
55,737

 
59,112

 
1.4

 
(4.4
)
 
164,265

 
170,378

 
(3.6
)
Gains on sales of auto loans, net
10,423

 
10,756

 
14,863

 
(3.1
)
 
(29.9
)
 
27,444

 
30,603

 
(10.3
)
Gains on sales of consumer real
estate loans, net
7,143

 
11,954

 
8,762

 
(40.2
)
 
(18.5
)
 
27,860

 
28,619

 
(2.7
)
Servicing fee income
8,049

 
7,216

 
5,880

 
11.5

 
36.9

 
22,607

 
15,079

 
49.9

Subtotal
25,615

 
29,926

 
29,505

 
(14.4
)
 
(13.2
)
 
77,911

 
74,301

 
4.9

Leasing and equipment finance
27,165

 
26,385

 
24,383

 
3.0

 
11.4

 
75,774

 
69,432

 
9.1

Other
3,070

 
1,460

 
3,170

 
110.3

 
(3.2
)
 
8,657

 
8,341

 
3.8

Fees and other revenue
112,383

 
113,508

 
116,170

 
(1.0
)
 
(3.3
)
 
326,607

 
322,452

 
1.3

Gains (losses) on securities, net
(131
)
 
(59
)
 
(94
)
 
(122.0
)
 
(39.4
)
 
(268
)
 
1,047

 
N.M.

Total non-interest income
112,252

 
113,449

 
116,076

 
(1.1
)
 
(3.3
)
 
326,339

 
323,499

 
0.9

Total revenue
$
317,522

 
$
319,478

 
$
320,256

 
(0.6
)
 
(0.9
)
 
$
941,058

 
$
935,054

 
0.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest margin(1)
4.40
%
 
4.44
%
 
4.60
%
 
 
 
 
 
4.45
%
 
4.64
%
 
 
Total non-interest income as a percentage of total revenue
35.4

 
35.5

 
36.2

 
 
 
 
 
34.7

 
34.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
N.M. Not Meaningful.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Annualized.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Net Interest Income
Net interest income for the third quarter of 2015 increased $1.1 million, or 0.5 percent, compared with the third quarter of 2014. The increase was primarily due to higher average loan and lease balances in the auto finance, inventory finance and leasing and equipment finance portfolios, partially offset by lower consumer real estate first mortgage lien balances due to run-off and margin compression.

Net interest income for the third quarter of 2015 decreased $0.8 million, or 0.4 percent, compared with the second quarter of 2015. The decrease from the second quarter of 2015 was primarily due to lower average loan balances in the inventory finance portfolio due to seasonality as well as higher promotional rates on certificates of deposit. The decrease was partially offset by higher average loan balances in the auto finance portfolio.

Net interest margin for the third quarter of 2015 was 4.40 percent, compared with 4.60 percent for the third quarter of 2014 and 4.44 percent for the second quarter of 2015. The decreases from both periods were primarily due to margin compression resulting from the competitive low interest rate environment and higher rates on total deposits gathered at market rates to fund asset growth.


3




Non-interest Income
Fees and service charges in the third quarter of 2015 were $37.0 million, down $3.3 million, or 8.1 percent, from the third quarter of 2014 and up $0.7 million, or 1.9 percent, from the second quarter of 2015. The decrease from the third quarter of 2014 was primarily due to consumer behavior changes, as well as higher average checking account balances per customer. The increase from the second quarter of 2015 was primarily due to seasonal differences in consumer activity.

TCF sold $436.6 million, $484.4 million and $436.4 million of auto loans during the third quarters of 2015 and 2014, and the second quarter of 2015, respectively, resulting in net gains in each respective period. TCF executed on its third auto loan securitization in the third quarter of 2015.

TCF sold $246.0 million, $233.6 million and $364.9 million of consumer real estate loans during the third quarters of 2015 and 2014, and the second quarter of 2015, respectively, resulting in net gains in each respective period. TCF has two consumer real estate loan sale programs; one that sells nationally originated junior lien loans and the other that sells first mortgage lien loans originated in our footprint through a correspondent relationship.

Servicing fee income was $8.0 million on $4.0 billion of average loans and leases serviced for others during the third quarter of 2015 compared with $5.9 million on $2.9 billion for the third quarter of 2014 and $7.2 million on $3.7 billion for the second quarter of 2015. The increases from both periods were primarily due to the cumulative effect of an increase in the portfolio of auto and consumer real estate loans sold with servicing retained by TCF.


4




Loans and Leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Period-End and Average Loans and Leases
 
 
 
 
 
 
Table 3

 
 
 
 
 
 
 
Percent Change
 
 
 
 
 
 
(Dollars in thousands)
3Q
 
2Q
 
3Q
 
3Q15 vs
 
3Q15 vs
 
YTD
 
YTD
 
Percent
 
2015
 
2015
 
2014
 
2Q15
 
3Q14
 
2015
 
2014
 
Change
Period-End:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consumer real estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
First mortgage lien
$
2,724,594

 
$
2,865,911

 
$
3,444,581

 
(4.9
)%
 
(20.9
)%
 
 
 
 
 
 
Junior lien
2,889,120

 
2,678,118

 
2,526,486

 
7.9

 
14.4

 
 
 
 
 
 
Total consumer real estate
5,613,714

 
5,544,029

 
5,971,067

 
1.3

 
(6.0
)
 
 
 
 
 
 
Commercial
3,112,325

 
3,112,344

 
3,159,766

 

 
(1.5
)
 
 
 
 
 
 
Leasing and equipment finance
3,873,581

 
3,791,215

 
3,632,793

 
2.2

 
6.6

 
 
 
 
 
 
Inventory finance
2,153,385

 
2,106,087

 
1,836,538

 
2.2

 
17.3

 
 
 
 
 
 
Auto finance
2,427,367

 
2,301,714

 
1,749,411

 
5.5

 
38.8

 
 
 
 
 
 
Other
20,674

 
21,852

 
24,003

 
(5.4
)
 
(13.9
)
 
 
 
 
 
 
Total
$
17,201,046

 
$
16,877,241

 
$
16,373,578

 
1.9

 
5.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consumer real estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
First mortgage lien
$
2,793,129

 
$
2,936,793

 
$
3,498,068

 
(4.9
)%
 
(20.2
)%
 
$
2,934,536

 
$
3,607,408

 
(18.7
)%
Junior lien
2,813,253

 
2,650,894

 
2,607,811

 
6.1

 
7.9

 
2,693,623

 
2,571,271

 
4.8

Total consumer real estate
5,606,382

 
5,587,687

 
6,105,879

 
0.3

 
(8.2
)
 
5,628,159

 
6,178,679

 
(8.9
)
Commercial
3,118,024

 
3,148,272

 
3,144,135

 
(1.0
)
 
(0.8
)
 
3,139,969

 
3,132,588

 
0.2

Leasing and equipment finance
3,821,590

 
3,751,776

 
3,575,698

 
1.9

 
6.9

 
3,767,954

 
3,504,194

 
7.5

Inventory finance
2,036,054

 
2,292,481

 
1,806,271

 
(11.2
)
 
12.7

 
2,145,535

 
1,908,628

 
12.4

Auto finance
2,361,057

 
2,211,014

 
1,603,392

 
6.8

 
47.3

 
2,198,983

 
1,483,951

 
48.2

Other
9,833

 
10,734

 
11,599

 
(8.4
)
 
(15.2
)
 
10,721

 
12,299

 
(12.8
)
Total
$
16,952,940

 
$
17,001,964

 
$
16,246,974

 
(0.3
)
 
4.3

 
$
16,891,321

 
$
16,220,339

 
4.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Period-end loans and leases were $17.2 billion at September 30, 2015, an increase of $0.8 billion, or 5.1 percent, compared with September 30, 2014 and an increase of $0.3 billion, or 1.9 percent, compared with June 30, 2015. Average loans and leases were $17.0 billion for the third quarter of 2015, an increase of $0.7 billion, or 4.3 percent, compared with the third quarter of 2014 and consistent with the second quarter of 2015.

The increases from the third quarter of 2014 and the second quarter of 2015 for period-end loans and leases and from the third quarter of 2014 for average loans and leases were primarily due to the continued growth of the auto finance portfolio as TCF expands the number of active dealers in its network, as well as increases in the leasing and equipment finance and inventory finance portfolios, partially offset by run-off in the consumer real estate first mortgage lien portfolio. The increase from the third quarter of 2014 was also partially offset by a decrease in the consumer real estate portfolio as a result of the troubled debt restructuring ("TDR") loan sale that occurred in the fourth quarter of 2014.

Loan and lease originations were $3.9 billion for the third quarter of 2015, an increase of $0.4 billion, or 11.9 percent, compared with the third quarter of 2014 and consistent with the second quarter of 2015. The increase in originations from the third quarter of 2014 was primarily due to an increase in consumer real estate junior lien originations and growth in the lawn and garden and powersports segments of inventory finance.

5




Credit Quality
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Credit Trends
 
 
 
 
 
 
 
Table 4

 
 
 
 
 
 
 
Change
(Dollars in thousands)
3Q
2Q
1Q
4Q
3Q
 
3Q15 vs
3Q15 vs
 
2015
2015
2015
2014
2014
 
2Q15
3Q14
Over 60-day delinquencies as a percentage of portfolio(1)
0.17
%
0.10
%
0.14
%
0.14
%
0.17
%
 
7 bps

— bps

Net charge-offs as a percentage of portfolio(2)
0.23

0.41

0.28

0.40

0.66

 
(18
)
(43
)
Non-accrual loans and leases and other real estate owned
$
264,694

$
263,717

$
284,541

$
282,384

$
342,725

 
0.4%

(22.8)%

Provision for credit losses
10,018

12,528

12,791

55,597

15,739

 
(20.0
)
(36.3
)
 
(1) Excludes acquired portfolios and non-accrual loans and leases.
(2) Annualized.

The over 60-day delinquency rate, excluding acquired portfolios and non-accrual loans and leases, was 0.17 percent at September 30, 2015, consistent with September 30, 2014, and up from 0.10 percent at June 30, 2015. The increase from June 30, 2015 was primarily driven by delinquencies that have been brought current subsequent to quarter end.

The net charge-off rate was 0.23 percent for the third quarter of 2015, down from 0.66 percent for the third quarter of 2014, and down from 0.41 percent for the second quarter of 2015. The decreases from both periods were primarily due to improved credit quality in the consumer real estate and commercial portfolios.

Non-accrual loans and leases and other real estate owned was $264.7 million at September 30, 2015, a decrease of $78.0 million, or 22.8 percent, from September 30, 2014, and consistent with June 30, 2015. The decrease from September 30, 2014 was primarily due to the TDR loan sale that occurred in the fourth quarter of 2014, which included $40.1 million of non-accrual loans, as well as improving credit quality trends and continued efforts to actively work out problem loans in the commercial portfolio.

Provision for credit losses was $10.0 million for the third quarter of 2015, a decrease of $5.7 million, or 36.3 percent, from the third quarter of 2014, and a decrease of $2.5 million, or 20.0 percent, from the second quarter of 2015. The decreases from both periods were driven by improved credit quality in the consumer and commercial real estate portfolios.


6




Deposits
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Deposits
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table 5

 
 
 
 
 
 
 
Percent Change
 
 
 
 
 
 
(Dollars in thousands)
3Q
 
2Q
 
3Q
 
3Q15 vs
 
3Q15 vs
 
YTD
 
YTD
 
Percent
 
2015
 
2015
 
2014
 
2Q15
 
3Q14
 
2015
 
2014
 
Change
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Checking
$
5,405,442

 
$
5,428,419

 
$
5,077,753

 
(0.4
)%
 
6.5
 %
 
$
5,378,571

 
$
5,064,401

 
6.2
 %
Savings
4,872,853

 
5,048,053

 
5,524,409

 
(3.5
)
 
(11.8
)
 
5,026,475

 
5,856,259

 
(14.2
)
Money market
2,297,893

 
2,261,567

 
1,527,820

 
1.6

 
50.4

 
2,236,811

 
1,124,821

 
98.9

Certificates of deposit
3,400,282

 
3,116,718

 
3,028,259

 
9.1

 
12.3

 
3,187,577

 
2,773,254

 
14.9

Total average deposits
$
15,976,470

 
$
15,854,757

 
$
15,158,241

 
0.8

 
5.4

 
$
15,829,434

 
$
14,818,735

 
6.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average interest rate on deposits(1)
0.31
%
 
0.28
%
 
0.28
%
 
 
 
 
 
0.29
%
 
0.25
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Annualized.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Total average deposits for the third quarter of 2015 increased $0.8 billion, or 5.4 percent, from the third quarter of 2014 and increased $0.1 billion, or 0.8 percent, from the second quarter of 2015. The increases from both periods were primarily due to special campaigns for money market accounts and certificates of deposit.

The average interest rate on deposits for the third quarter of 2015 was 0.31 percent, up 3 basis points from both the third quarter of 2014 and the second quarter of 2015. The increase from the third quarter of 2014 was primarily due to increased average interest rates resulting from promotions for money market accounts and certificates of deposit. The increase from the second quarter of 2015 was primarily due to an increase in average interest rates on certificates of deposit.


7




Non-interest Expense
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-interest Expense
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table 6

 
 
 
 
 
 
 
 Percent Change
 
 
 
 
 
 
(Dollars in thousands)
3Q
 
2Q
 
3Q
 
3Q15 vs
 
3Q15 vs
 
YTD
 
YTD
 
Percent
 
2015
 
2015
 
2014
 
2Q15
 
3Q14
 
2015
 
2014
 
Change
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Compensation and employee benefits
$
116,708

 
$
116,159

 
$
112,393

 
0.5
 %
 
3.8
 %
 
$
348,682

 
$
337,146

 
3.4
 %
Occupancy and equipment
34,159

 
36,152

 
34,121

 
(5.5
)
 
0.1

 
107,138

 
103,276

 
3.7

FDIC insurance
4,832

 
4,864

 
7,292

 
(0.7
)
 
(33.7
)
 
15,089

 
22,480

 
(32.9
)
Operating lease depreciation
9,485

 
8,582

 
7,434

 
10.5

 
27.6

 
25,801

 
20,274

 
27.3

Advertising and marketing
5,793

 
5,150

 
5,656

 
12.5

 
2.4

 
17,466

 
17,797

 
(1.9
)
Other
45,750

 
45,887

 
47,888

 
(0.3
)
 
(4.5
)
 
139,770

 
131,841

 
6.0

Subtotal
216,727

 
216,794

 
214,784

 

 
0.9

 
653,946

 
632,814

 
3.3

Foreclosed real estate and repossessed assets, net
5,680

 
6,377

 
5,315

 
(10.9
)
 
6.9

 
18,253

 
17,126

 
6.6

Other credit costs, net
(123
)
 
(62
)
 
(411
)
 
(98.4
)
 
70.1

 
(39
)
 
79

 
N.M.

Total non-interest expense
$
222,284

 
$
223,109

 
$
219,688

 
(0.4
)
 
1.2

 
$
672,160

 
$
650,019

 
3.4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
N.M. Not Meaningful.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Compensation and employee benefits expense increased $4.3 million, or 3.8 percent, from the third quarter of 2014 and remained consistent with the second quarter of 2015. The increase from the third quarter of 2014 was primarily due to the increased staff levels to support the growth of auto finance and further build out of the risk management function.

FDIC insurance expense decreased $2.5 million, or 33.7 percent, from the third quarter of 2014 and remained consistent with the second quarter of 2015. The decrease from the third quarter of 2014 was due to a lower assessment rate primarily as a result of the TDR loan sale in the fourth quarter of 2014 and improved credit metrics.

Operating lease depreciation is a transactional cost that is generally offset by revenue in the same period.



8




Capital
 
 
 
 
 
 
 
Capital Information
 
 
Table 7

 
 
 
 
(Dollars in thousands, except per-share data)
3Q 2015
 
4Q 2014
Total equity
$
2,273,147

 
$
2,135,364

Book value per common share
11.75

 
11.10

Tangible book value per common share(1)
10.40

 
9.72

Tangible common equity to tangible assets(1)
8.86
%
 
8.50
%
Capital accumulation rate(2)
10.70

 
10.36

 
 
 
 
 
3Q 2015(3)
 
4Q 2014
Regulatory Capital:
Under Basel III
 
Under Basel I
Common equity Tier 1 capital
$
1,774,729

 
N.A.

Tier 1 capital
2,054,711

 
$
1,919,887

Total capital
2,446,551

 
2,209,999

 
 
 
 
Regulatory Capital Ratios:
 
 
 
Common equity Tier 1 capital ratio
10.04
%
 
N.A.

Tier 1 risk-based capital ratio
11.62

 
11.76
%
Total risk-based capital ratio
13.84

 
13.54

Tier 1 leverage ratio
10.43

 
10.07

 
 
 
 
N.A. Not Applicable.
 
 
 
(1) See "Reconciliation of GAAP to Non-GAAP Financial Measures" table.
(2) Calculated as the change in annualized year-to-date common equity Tier 1 capital as a percentage of prior year end common equity Tier 1 capital.
(3) The regulatory capital ratios for 3Q 2015 are preliminary pending completion and filing of the Company's regulatory reports.

TCF maintained strong capital ratios as the Company accumulates capital through earnings. The decrease in the Tier 1 risk-based capital ratio from the fourth quarter of 2014 was primarily the result of strong asset growth.

On October 19, 2015, TCF's Board of Directors declared a regular quarterly cash dividend of 7.5 cents per common share, an increase of 50 percent, payable on December 1, 2015, to stockholders of record at the close of business on November 13, 2015. TCF also declared dividends on the 7.50% Series A and 6.45% Series B Non-Cumulative Perpetual Preferred Stock, both payable on December 1, 2015, to stockholders of record at the close of business on November 13, 2015.


9




Webcast Information
A live webcast of TCF's conference call to discuss the third quarter earnings will be hosted at TCF's website,     http://ir.tcfbank.com, on October 22, 2015 at 9:00 a.m. CDT. A slide presentation for the call will be available on the website prior to the call. Additionally, the webcast will be available for replay on TCF's website after the conference call. The website also includes free access to company news releases, TCF's annual report, investor presentations and SEC filings.

TCF is a Wayzata, Minnesota-based national bank holding company. As of September 30, 2015, TCF had $20.1 billion in total assets and 375 branches in Illinois, Minnesota, Michigan, Colorado, Wisconsin, Arizona, South Dakota and Indiana, providing retail and commercial banking services. TCF, through its subsidiaries, also conducts commercial leasing, equipment finance, and auto finance business in all 50 states and commercial inventory finance business in all 50 states and Canada. For more information about TCF, please visit http://ir.tcfbank.com.



10




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

Certain factors could cause the Company's future results to differ materially from those expressed or implied in any forward-looking statements contained herein. These factors include the factors discussed in Part I, Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2014, the factors discussed below and any other cautionary statements, written or oral, which may be made or referred to in connection with any such forward-looking statements. Since it is not possible to foresee all such factors, these factors should not be considered as complete or exhaustive.
 
Adverse Economic or Business Conditions; Competitive Conditions; Credit and Other Risks. Deterioration in general economic and banking industry conditions, including those arising from government shutdowns, defaults, anticipated defaults or rating agency downgrades of sovereign debt (including debt of the U.S.), or increases in unemployment; adverse economic, business and competitive developments such as shrinking interest margins, reduced demand for financial services and loan and lease products, deposit outflows, increased deposit costs due to competition for deposit growth and evolving payment system developments, deposit account attrition or an inability to increase the number of deposit accounts; customers completing financial transactions without using a bank; adverse changes in credit quality and other risks posed by TCF's loan, lease, investment, securities held to maturity and securities available for sale portfolios, including declines in commercial or residential real estate values, changes in the allowance for loan and lease losses dictated by new market conditions or regulatory requirements, or the inability of home equity line borrowers to make increased payments caused by increased interest rates or amortization of principal; deviations from estimates of prepayment rates and fluctuations in interest rates that result in decreases in the value of assets such as interest-only strips that arise in connection with TCF's loan sales activity; interest rate risks resulting from fluctuations in prevailing interest rates or other factors that result in a mismatch between yields earned on TCF's interest-earning assets and the rates paid on its deposits and borrowings; foreign currency exchange risks; counterparty risk, including the risk of defaults by our counterparties or diminished availability of counterparties who satisfy our credit quality requirements; decreases in demand for the types of equipment that TCF leases or finances; the effect of any negative publicity.
 

11




Legislative and Regulatory Requirements. New consumer protection and supervisory requirements and regulations, including those resulting from action by the Consumer Financial Protection Bureau and changes in the scope of Federal preemption of state laws that could be applied to national banks and their subsidiaries; the imposition of requirements that adversely impact TCF's deposit, lending, loan collection and other business activities such as mortgage foreclosure moratorium laws, further regulation of financial institution campus banking programs, use by municipalities of eminent domain on property securing troubled residential mortgage loans, or imposition of underwriting or other limitations that impact the ability to offer certain variable-rate products; changes affecting customer account charges and fee income, including changes to interchange rates; regulatory actions or changes in customer opt-in preferences with respect to overdrafts, which may have an adverse impact on TCF's fee revenue; changes to bankruptcy laws which would result in the loss of all or part of TCF's security interest due to collateral value declines; deficiencies in TCF's compliance under the Bank Secrecy Act in past or future periods, which may result in regulatory enforcement action including monetary penalties; increased health care costs resulting from Federal health care reform; regulatory criticism and resulting enforcement actions or other adverse consequences such as increased capital requirements, higher deposit insurance assessments or monetary damages or penalties; heightened regulatory practices, requirements or expectations, including, but not limited to, requirements related to enterprise risk management, the Bank Secrecy Act and anti-money laundering compliance activity.
 
Earnings/Capital Risks and Constraints, Liquidity Risks. Limitations on TCF's ability to pay dividends or to increase dividends because of financial performance deterioration, regulatory restrictions or limitations; increased deposit insurance premiums, special assessments or other costs related to adverse conditions in the banking industry; the impact on banks of regulatory reform, including additional capital, leverage, liquidity and risk management requirements or changes in the composition of qualifying regulatory capital; adverse changes in securities markets directly or indirectly affecting TCF's ability to sell assets or to fund its operations; diminished unsecured borrowing capacity resulting from TCF credit rating downgrades or unfavorable conditions in the credit markets that restrict or limit various funding sources; costs associated with new regulatory requirements or interpretive guidance relating to liquidity; uncertainties relating to future retail deposit account changes, including limitations on TCF's ability to predict customer behavior and the impact on TCF's fee revenues.
 
Branching Risk; Growth Risks. Adverse developments affecting TCF's supermarket banking relationships or any of the supermarket chains in which TCF maintains supermarket branches; costs related to closing underperforming branches; slower than anticipated growth in existing or acquired businesses; inability to successfully execute on TCF's growth strategy through acquisitions or cross-selling opportunities; failure to expand or diversify TCF's balance sheet through new or expanded programs or opportunities; failure to successfully attract and retain new customers, including the failure to attract and retain manufacturers and dealers to expand the inventory finance business; failure to effectuate, and risks of claims related to, sales and securitizations of loans; risks related to new product additions and addition of distribution channels (or entry into new markets) for existing products.

Technological and Operational Matters. Technological or operational difficulties, loss or theft of information, cyber-attacks and other security breaches, counterparty failures and the possibility that deposit account losses (fraudulent checks, etc.) may increase; failure to keep pace with technological change, including the failure to develop and maintain technology necessary to satisfy customer demands; ability to attract and retain employees given competitive conditions and the impact of consolidating facilities.
 
Litigation Risks. Results of litigation or government enforcement actions, including class action litigation or enforcement actions concerning TCF's lending or deposit activities, including account opening/origination, servicing practices, fees or charges, or employment practices; and possible increases in indemnification obligations for certain litigation against Visa U.S.A. and potential reductions in card revenues resulting from such litigation or other litigation against Visa.
 
Accounting, Audit, Tax and Insurance Matters. Changes in accounting standards or interpretations of existing standards; federal or state monetary, fiscal or tax policies, including adoption of state legislation that would increase state taxes; ineffective internal controls; adverse federal, state or foreign tax assessments or findings in tax audits; lack of or inadequate insurance coverage for claims against TCF; potential for claims and legal action related to TCF's fiduciary responsibilities.


12




TCF FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per-share data)
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended September 30,
 
Change
 
2015
 
2014
 
$
 
%
Interest income:
 
 
 
 
 
 
 
Loans and leases
$
207,250

 
$
205,604

 
$
1,646

 
0.8
 %
Securities available for sale
4,161

 
2,973

 
1,188

 
40.0

Securities held to maturity
1,361

 
1,445

 
(84
)
 
(5.8
)
Investments and other
10,832

 
9,681

 
1,151

 
11.9

Total interest income
223,604

 
219,703

 
3,901

 
1.8

Interest expense:
 
 
 
 
 
 
 
Deposits
12,302

 
10,711

 
1,591

 
14.9

Borrowings
6,032

 
4,812

 
1,220

 
25.4

Total interest expense
18,334

 
15,523

 
2,811

 
18.1

Net interest income
205,270

 
204,180

 
1,090

 
0.5

Provision for credit losses
10,018

 
15,739

 
(5,721
)
 
(36.3
)
Net interest income after provision for credit losses
195,252

 
188,441

 
6,811

 
3.6

Non-interest income:
 
 
 
 
 
 
 
Fees and service charges
36,991

 
40,255

 
(3,264
)
 
(8.1
)
Card revenue
13,803

 
12,994

 
809

 
6.2

ATM revenue
5,739

 
5,863

 
(124
)
 
(2.1
)
Subtotal
56,533

 
59,112

 
(2,579
)
 
(4.4
)
Gains on sales of auto loans, net
10,423

 
14,863

 
(4,440
)
 
(29.9
)
Gains on sales of consumer real estate loans, net
7,143

 
8,762

 
(1,619
)
 
(18.5
)
Servicing fee income
8,049

 
5,880

 
2,169

 
36.9

Subtotal
25,615

 
29,505

 
(3,890
)
 
(13.2
)
Leasing and equipment finance
27,165

 
24,383

 
2,782

 
11.4

Other
3,070

 
3,170

 
(100
)
 
(3.2
)
Fees and other revenue
112,383

 
116,170

 
(3,787
)
 
(3.3
)
Gains (losses) on securities, net
(131
)
 
(94
)
 
(37
)
 
(39.4
)
Total non-interest income
112,252

 
116,076

 
(3,824
)
 
(3.3
)
Non-interest expense:
 
 
 
 
 
 
 
Compensation and employee benefits
116,708

 
112,393

 
4,315

 
3.8

Occupancy and equipment
34,159

 
34,121

 
38

 
0.1

FDIC insurance
4,832

 
7,292

 
(2,460
)
 
(33.7
)
Operating lease depreciation
9,485

 
7,434

 
2,051

 
27.6

Advertising and marketing
5,793

 
5,656

 
137

 
2.4

Other
45,750

 
47,888

 
(2,138
)
 
(4.5
)
Subtotal
216,727

 
214,784

 
1,943

 
0.9

Foreclosed real estate and repossessed assets, net
5,680

 
5,315

 
365

 
6.9

Other credit costs, net
(123
)
 
(411
)
 
288

 
70.1

Total non-interest expense
222,284

 
219,688

 
2,596

 
1.2

Income before income tax expense
85,220

 
84,829

 
391

 
0.5

Income tax expense
30,528

 
30,791

 
(263
)
 
(0.9
)
Income after income tax expense
54,692

 
54,038

 
654

 
1.2

Income attributable to non-controlling interest
2,117

 
1,721

 
396

 
23.0

Net income attributable to TCF Financial Corporation
52,575

 
52,317

 
258

 
0.5

Preferred stock dividends
4,847

 
4,847

 

 

Net income available to common stockholders
$
47,728

 
$
47,470

 
$
258

 
0.5

 
 
 
 
 
 
 
 
Net income per common share:
 
 
 
 
 
 
 
Basic
$
0.29

 
$
0.29

 
$

 
 %
Diluted
0.29

 
0.29

 

 

 
 
 
 
 
 
 
 
Dividends declared per common share
$
0.05

 
$
0.05

 
$

 
 %
 
 
 
 
 
 
 
 
Average common and common equivalent shares
 
 
 
 
 
 
 
outstanding (in thousands):
 
 
 
 
 
 
 
Basic
165,990

 
163,901

 
2,089

 
1.3
 %
Diluted
166,556

 
164,480

 
2,076

 
1.3

 
 
 
 
 
 
 
 



13




TCF FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per-share data)
(Unaudited)
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30,
 
Change
 
2015
 
2014
 
$
 
%
Interest income:
 
 
 
 
 
 
 
Loans and leases
$
620,390

 
$
614,929

 
$
5,461

 
0.9
 %
Securities available for sale
10,784

 
8,941

 
1,843

 
20.6

Securities held to maturity
4,150

 
3,852

 
298

 
7.7

Investments and other
31,155

 
26,699

 
4,456

 
16.7

Total interest income
666,479

 
654,421

 
12,058

 
1.8

Interest expense:
 
 
 
 
 
 
 
Deposits
34,454

 
27,625

 
6,829

 
24.7

Borrowings
17,306

 
15,241

 
2,065

 
13.5

Total interest expense
51,760

 
42,866

 
8,894

 
20.7

Net interest income
614,719

 
611,555

 
3,164

 
0.5

Provision for credit losses
35,337

 
40,140

 
(4,803
)
 
(12.0
)
Net interest income after provision for credit losses
579,382

 
571,415

 
7,967

 
1.4

Non-interest income:
 
 
 
 
 
 
 
Fees and service charges
107,258

 
114,909

 
(7,651
)
 
(6.7
)
Card revenue
40,606

 
38,493

 
2,113

 
5.5

ATM revenue
16,401

 
16,976

 
(575
)
 
(3.4
)
Subtotal
164,265

 
170,378

 
(6,113
)
 
(3.6
)
Gains on sales of auto loans, net
27,444

 
30,603

 
(3,159
)
 
(10.3
)
Gains on sales of consumer real estate loans, net
27,860

 
28,619

 
(759
)
 
(2.7
)
Servicing fee income
22,607

 
15,079

 
7,528

 
49.9

Subtotal
77,911

 
74,301

 
3,610

 
4.9

Leasing and equipment finance
75,774

 
69,432

 
6,342

 
9.1

Other
8,657

 
8,341

 
316

 
3.8

Fees and other revenue
326,607

 
322,452

 
4,155

 
1.3

Gains (losses) on securities, net
(268
)
 
1,047

 
(1,315
)
 
N.M.

Total non-interest income
326,339

 
323,499

 
2,840

 
0.9

Non-interest expense:
 
 
 
 
 
 
 
Compensation and employee benefits
348,682

 
337,146

 
11,536

 
3.4

Occupancy and equipment
107,138

 
103,276

 
3,862

 
3.7

FDIC insurance
15,089

 
22,480

 
(7,391
)
 
(32.9
)
Operating lease depreciation
25,801

 
20,274

 
5,527

 
27.3

Advertising and marketing
17,466

 
17,797

 
(331
)
 
(1.9
)
Other
139,770

 
131,841

 
7,929

 
6.0

Subtotal
653,946

 
632,814

 
21,132

 
3.3

Foreclosed real estate and repossessed assets, net
18,253

 
17,126

 
1,127

 
6.6

Other credit costs, net
(39
)
 
79

 
(118
)
 
N.M.

Total non-interest expense
672,160

 
650,019

 
22,141

 
3.4

Income before income tax expense
233,561

 
244,895

 
(11,334
)
 
(4.6
)
Income tax expense
82,258

 
88,755

 
(6,497
)
 
(7.3
)
Income after income tax expense
151,303

 
156,140

 
(4,837
)
 
(3.1
)
Income attributable to non-controlling interest
6,672

 
5,941

 
731

 
12.3

Net income attributable to TCF Financial Corporation
144,631

 
150,199

 
(5,568
)
 
(3.7
)
Preferred stock dividends
14,541

 
14,541

 

 

Net income available to common stockholders
$
130,090

 
$
135,658

 
$
(5,568
)
 
(4.1
)
 
 
 
 
 
 
 
 
Net income per common share:
 
 
 
 
 
 
 
Basic
$
0.79

 
$
0.83

 
$
(0.04
)
 
(4.8
)%
Diluted
0.78

 
0.83

 
(0.05
)
 
(6.0
)
 
 
 
 
 
 
 
 
Dividends declared per common share
$
0.15

 
$
0.15

 
$

 
 %
 
 
 
 
 
 
 
 
Average common and common equivalent shares
 
 
 
 
 
 
 
outstanding (in thousands):
 
 
 
 
 
 
 
Basic
165,479

 
163,311

 
2,168

 
1.3
 %
Diluted
166,013

 
163,823

 
2,190

 
1.3

 
 
 
 
 
 
 
 
N.M. Not Meaningful.
 
 
 
 
 
 
 


14




TCF FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended September 30,
 
Change
 
2015
 
2014
 
$
 
%
Net income attributable to TCF Financial Corporation
$
52,575

 
$
52,317

 
$
258

 
0.5
 %
Other comprehensive income (loss):
 
 
 
 
 
 
 
Securities available for sale:
 
 
 
 
 
 
 
Unrealized gains (losses) arising during the period
9,972

 
(862
)
 
10,834

 
N.M.

Reclassification of net (gains) losses to net income
281

 
254

 
27

 
10.6

Net investment hedges:
 
 
 
 
 
 
 
Unrealized gains (losses) arising during the period
2,858

 
1,849

 
1,009

 
54.6

Foreign currency translation adjustment:
 
 
 
 
 
 
 
Unrealized gains (losses) arising during the period
(3,049
)
 
(2,066
)
 
(983
)
 
(47.6
)
Recognized postretirement prior service cost:
 
 
 
 
 
 
 
Reclassification of net (gains) losses to net income
(12
)
 
(12
)
 

 

Income tax (expense) benefit
(4,947
)
 
(464
)
 
(4,483
)
 
N.M.

Total other comprehensive income (loss)
5,103

 
(1,301
)
 
6,404

 
N.M.

Comprehensive income
$
57,678

 
$
51,016

 
$
6,662

 
13.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30,
 
Change
 
2015
 
2014
 
$
 
%
Net income attributable to TCF Financial Corporation
$
144,631

 
$
150,199

 
$
(5,568
)
 
(3.7
)%
Other comprehensive income (loss):
 
 
 
 
 
 
 
Securities available for sale:
 
 
 
 
 
 
 
Unrealized gains (losses) arising during the period
2,971

 
19,652

 
(16,681
)
 
(84.9
)
Reclassification of net (gains) losses to net income
871

 
(375
)
 
1,246

 
N.M.

Net investment hedges: