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Section 1: 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): January 24, 2007

 


 

 

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 24, 2007, announcing its results of operations for the quarter ended December 31, 2006, 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 24, 2007

 

 

 

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/ Thomas F. Jasper

 

Thomas F. Jasper,
Executive Vice 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 24, 2007

 

2


 

(Back To Top)

Section 2: EX-99.1 (EX-99.1)

Exhibit 99.1

 

NEWS RELEASE

 

CONTACT:

 

Jason Korstange

 

 

 

 

(952) 745-2755

 

 

 

 

www.tcfbank.com

 

 

FOR IMMEDIATE RELEASE

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

 

TCF Reports 2006 Annual Earnings and EPS ($1.90)

 

2006 YEAR END HIGHLIGHTS

                  Diluted earnings per share of $1.90

                  Net income of $244.9 million

                  Return on average assets of 1.74 percent

                  Return on average common equity of 24.37 percent

                  Board declares quarterly dividend increase of 5.4 percent to 24.25 cents per share

                  Average Power Assets® increased by $1.3 billion, or 14 percent

                  Average Power Liabilities® increased by $929 million, or 11 percent

                  Increased deposit accounts by 130,417, or 6 percent, to 2,426,616

                  Opened 19 new branches

 

EARNINGS SUMMARY

($ in thousands, except per-share data)

 

 

 

Three Months
Ended December 31,

 

Year
Ended December 31,

 

 

 

2006

 

2005

 

Change

 

2006

 

2005

 

Change

 

Net income

 

$

 53,733

 

$

 65,540

 

(18.0

)%

$

 244,943

 

$

 265,132

 

(7.6

)%

Diluted earnings per common share

 

.42

 

.50

 

(16.0

)

1.90

 

2.00

 

(5.0

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Ratios (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average assets

 

1.49

%

2.01

%

 

 

1.74

%

2.08

%

 

 

Return on average common equity

 

20.68

 

27.09

 

 

 

24.37

 

28.03

 

 

 

Net interest margin

 

4.07

 

4.31

 

 

 

4.16

 

4.46

 

 

 

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

 

.24

 

.16

 

 

 

.17

 

.29

 

 

 


(1)  Annualized.

 

 

1



 

 

WAYZATA, MN, January 24, 2006 – TCF Financial Corporation (“TCF”) (NYSE: TCB) today reported diluted earnings per share of $1.90 for 2006, down 5 percent from $2.00 in 2005.  Net income for 2006 was $244.9 million, compared with $265.1 million for 2005.  Net income for 2006 included $5.8 million in pre-tax gains on sales of buildings and mortgage servicing rights and a $6.1 million reduction of income tax expense for a combined after-tax impact of eight cents per diluted share.  2005 net income included $24.3 million in pre-tax gains on sales of buildings and mortgage-backed securities, a $3.3 million commercial loan recovery and a $14 million reduction in income tax expense for a combined after-tax impact of 25 cents per diluted share.

 

Diluted earnings per share was 42 cents for the 2006 fourth quarter, compared with 50 cents for the same 2005 period, a decline of 16 percent.  The fourth quarter of 2006 net income included an $851 thousand, or one cent per diluted share, reduction in income tax expense.  Net income for the fourth quarter of 2005 included $3.5 million in pre-tax gains on sales of buildings and branches and an $8.8 million reduction in income tax expense for a combined after-tax impact of nine cents per diluted share.

 

Dividend Increase

 

TCF’s Board of Directors has announced, for the sixteenth consecutive year, an increase in the regular quarterly dividend to 24.25 cents per common share, effective for the first quarter of 2007.  This represents a 5.4 percent increase over the 2006 quarterly dividend of 23 cents per common share.  The dividend is payable on February 28, 2007 to common stockholders of record at the close of business on February 2, 2007.  TCF’s 10-year compounded dividend growth rate is the 5th highest among the 50 largest banks in the country.

 

Chief Executive Officer’s Statement

 

“TCF recorded its second best year in earnings per share despite an interest rate environment that was not favorable,” said Lynn A. Nagorske, Chief Executive Officer.  “In 2006, TCF continued to experience strong Power Asset growth and good growth of lower interest cost retail and small business deposits,” said Nagorske.

 

 

2



 

Total Revenue

 

($ in thousands)

 

Three Months
Ended December 31,

 

Change

 

Year Ended
December 31,

 

Change

 

 

 

2006

 

2005

 

$

 

%

 

2006

 

2005

 

$

 

%

 

Net interest income

 

$

  135,887

 

$

  129,282

 

$

  6,605

 

5.1

 

$

  537,530

 

$

  517,690

 

$

  19,840

 

3.8

 

Fees and other revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fees and service charges

 

66,735

 

67,628

 

(893

)

(1.3

)

270,166

 

262,636

 

7,530

 

2.9

 

Card revenue

 

23,485

 

21,419

 

2,066

 

9.6

 

92,084

 

79,803

 

12,281

 

15.4

 

ATM revenue

 

9,019

 

9,557

 

(538

)

(5.6

)

37,760

 

40,730

 

(2,970

)

(7.3

)

Investments and insurance

 

2,087

 

2,339

 

(252

)

(10.8

)

10,695

 

10,665

 

30

 

.3

 

Total banking fees and other revenue

 

101,326

 

100,943

 

383

 

.4

 

410,705

 

393,834

 

16,871

 

4.3

 

Leasing and equipment finance

 

15,165

 

15,405

 

(240

)

(1.6

)

53,004

 

47,387

 

5,617

 

11.9

 

Other

 

2,340

 

8,590

 

(6,250

)

(72.8

)

25,755

 

26,350

 

(595

)

(2.3

)

Total fees and other revenue

 

118,831

 

124,938

 

(6,107

)

(4.9

)

489,464

 

467,571

 

21,893

 

4.7

 

Gains on sales of securities

 

-

 

-

 

-

 

-

 

-

 

10,671

 

(10,671

)

(100.0

)

Total non-interest income

 

118,831

 

124,938

 

(6,107

)

(4.9

)

489,464

 

478,242

 

11,222

 

2.3

 

Total revenue

 

$

 254,718

 

$

 254,220

 

$

 498

 

.2

 

$

 1,026,994

 

$

 995,932

 

$

 31,062

 

3.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest margin (1)

 

4.07%

 

4.31%

 

 

 

 

 

4.16%

 

4.46%

 

 

 

 

 

Fees and other revenue as a % of:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue

 

46.65

 

49.15

 

 

 

 

 

47.66

 

46.95

 

 

 

 

 

Average assets (1)

 

3.29

 

3.82

 

 

 

 

 

3.48

 

3.67

 

 

 

 

 


(1) Annualized.

 

Net Interest Income

 

TCF’s net interest income in 2006 was $537.5 million, up $19.8 million, or 3.8 percent, from 2005. Net interest margin in 2006 was 4.16 percent, compared with 4.46 percent for 2005.  The increase in net interest income in 2006 was primarily attributable to an increase of $1.3 billion, or 11.2 percent, in average interest-earning assets, partially offset by the 30 basis point decline in net interest margin.

 

TCF’s net interest income in the fourth quarter of 2006 was $135.9 million, up $6.6 million, or 5.1 percent, from the fourth quarter of 2005.  Net interest margin in the fourth quarter of 2006 was 4.07 percent, compared with 4.31 percent last year and 4.11 percent in the third quarter of 2006.  The decreases in net interest margin from 2005 and the third quarter of 2006 were primarily due to the continued customer preference for lower-yielding fixed-rate loans and higher-cost market-rate deposits, largely due to the flat or inverted yield curve which persisted throughout 2006, and the growth of higher interest-cost borrowings.

 

3



 

In December 2006, TCF lengthened the maturities of $500 million of borrowings at a weighted average fixed rate of 4.29 percent.  In January 2007, TCF lengthened the maturities of an additional $300 million of borrowings at a weighted average fixed rate of 4.48 percent.  These actions on long-term borrowings will reduce TCF’s interest expense as they replace short-term borrowings with current interest rates of approximately one percent higher than the average rate on the new long-term borrowings.

 

Non-interest Income

 

Total non-interest income was $489.5 million for 2006, up $11.2 million, or 2.3 percent, from 2005. Fees and service charges were $270.2 million for 2006, up $7.5 million, or 2.9 percent, from 2005, primarily due to the growth in deposit accounts.  Card revenues totaled $92.1 million for 2006, up $12.3 million, or 15.4 percent, from 2005 primarily due to an increase in active accounts and customer transaction volumes.  ATM revenue was $37.8 million, down $3 million from 2005.  The decline in ATM revenue was primarily attributable to continued declines in fees charged to TCF customers for use of non-TCF ATM machines due to expansion of TCF’s ATM network and growth in TCF’s fee free checking products, partially offset by the increased number of TCF customers.  Leasing and equipment finance revenues were $53 million for 2006, up $5.6 million, or 11.9 percent, from 2005, primarily due to an $8.5 million increase in operating lease revenues, partially offset by a $3.7 million decrease in sales-type revenue.  Sales-type revenues may fluctuate from period to period based on customer driven factors not within the control of TCF. During 2005, TCF sold $1 billion of mortgage-backed securities and realized gains of $10.7 million, and had no such sales or gains in 2006.  At December 31, 2006, the unrealized pre-tax loss on TCF’s securities available for sale portfolio was $33.3 million.

 

Total non-interest income in the fourth quarter of 2006 was $118.8 million, down $6.1 million, or 4.9 percent, from the fourth quarter of 2005.  Fees and service charges were $66.7 million, down 1.3 percent from the fourth quarter of 2005 primarily due to lower consumer spending and lower overdraft incident rates.  Card revenues totaled $23.5 million for the fourth quarter of 2006, up 9.6 percent over the same period in 2005.  Other revenues were $2.3 million for the fourth quarter of 2006, down $6.3 million from the same

 

4



 

period of 2005.  This decrease was primarily due to a $3.1 million decrease in mortgage banking revenue relating to the exit from this business in the first quarter of 2006 and a $3.5 million decrease in gains on sales of buildings and branches.

 

Branches

 

TCF opened 19 new branches during 2006, including ten traditional branches, five supermarket branches, and four campus branches.  TCF has now opened 148 new branches since January 2001, representing nearly one-third of TCF’s 453 total branches.  During the fourth quarter of 2006, TCF opened seven new branches consisting of six traditional branches, including its first branch in Arizona, and one campus branch.  TCF closed 13 supermarket branches in the fourth quarter of 2006 primarily as a result of the sale of the supermarket stores.

 

TCF plans to open 20 new branches in 2007; consisting of 11 traditional branches, including six branches carried over from 2006 due to construction and municipal delays; six supermarket branches and three campus branches.  In order to improve the customer experience and enhance deposit and loan growth, TCF also plans to relocate nine branches, including seven traditional branches and two supermarket branches to improved locations and new facilities, and to remodel 15 existing supermarket branches in 2007.  In connection with the traditional branch relocation activities, the sale of existing real estate will produce significant gains in 2007, which will more than offset the increased operating costs of the new branches.

 

In November 2006, TCF entered into a definitive agreement to sell ten outstate Michigan branches with approximately $235 million of deposits.  TCF expects to record a pre-tax gain on the sale of these branches of approximately $29 million, or 15 cents per diluted share after-tax in 2007.

 

5



 

 

 

December 31,

 

December 31,

 

December 31,

 

(# of branches)

 

2006

 

2005

 

2000

 

Total Branches

 

 

 

 

 

 

 

Minnesota

 

107

 

105

 

84

 

Illinois

 

195

 

202

 

167

 

Michigan

 

64

 

63

 

56

 

Colorado

 

44

 

42

 

12

 

Wisconsin

 

36

 

35

 

32

 

Indiana

 

6

 

6

 

1

 

Arizona

 

1

 

-

 

-

 

 

 

453

 

453

 

352

 

 

 

 

 

 

 

 

 

New Branches*

 

 

 

 

 

 

 

Traditional

 

78

 

68

 

 

 

Supermarket

 

63

 

58

 

 

 

Campus

 

7

 

3

 

 

 

Total

 

148

 

129

 

 

 

% of Total Branches

 

33

%

28

%

 

 


*  New branches opened since January 1, 2001.

 

Additional information regarding the results of TCF’s new branches opened since January 1, 2001 is summarized as follows:

 

 

 

At or For the Year Ended
December 31,

 

Change

 

($ in thousands)

 

2006

 

2005

 

$

 

%

 

Number of deposit accounts

 

389,236

 

287,474

 

101,762

 

35.4

 

Average deposits:

 

 

 

 

 

 

 

 

 

Checking

 

$

404,331

 

$

298,706

 

$

105,625

 

35.4

 

Savings

 

313,129

 

208,004

 

105,125

 

50.5

 

Money market

 

35,323

 

20,191

 

15,132

 

74.9

 

Subtotal

 

752,783

 

526,901

 

225,882

 

42.9

 

Certificates of deposit

 

437,708

 

186,889

 

250,819

 

134.2

 

Total deposits

 

$

1,190,491

 

$

713,790

 

$

476,701

 

66.8

 

 

 

 

 

 

 

 

 

 

 

Total fees and other revenue (quarter ended)

 

$

18,447

 

$

15,291

 

$

3,156

 

20.6

 

Total fees and other revenue (year ended)

 

$

71,587

 

$

55,028

 

$

16,559

 

30.1

 

 

 

6



 

Power Assets®

 

Average Power Assets grew $1.3 billion, or 14.1 percent, in 2006.  TCF’s average consumer loan balances increased $757.6 million, or 15.8 percent; average commercial loan balances increased $257.1 million, or 9.7 percent; and average leasing and equipment finance balances increased $236.5 million, or 16.6 percent, from 2005.

 

 

 

Average Balances for the
Year Ended December 31,

 

Change

 

($ in thousands)

 

2006

 

2005

 

$

 

%

 

Loans and leases*:

 

 

 

 

 

 

 

 

 

Consumer home equity and other:

 

 

 

 

 

 

 

 

 

Home equity:

 

 

 

 

 

 

 

 

 

First mortgage lien

 

$

 3,561,922

 

$

 3,139,232

 

$

 422,690

 

13.5

 

Junior lien

 

1,948,739

 

1,615,742

 

332,997

 

20.6

 

Total consumer home equity

 

5,510,661

 

4,754,974

 

755,687

 

15.9

 

Other

 

36,711

 

34,763

 

1,948

 

5.6

 

Total consumer home equity and other

 

5,547,372

 

4,789,737

 

757,635

 

15.8

 

Commercial real estate

 

2,387,402

 

2,212,839

 

174,563

 

7.9

 

Commercial business

 

508,250

 

425,704

 

82,546

 

19.4

 

Total commercial loans

 

2,895,652

 

2,638,543

 

257,109

 

9.7

 

Leasing and equipment finance

 

1,659,807

 

1,423,264

 

236,543

 

16.6

 

Power Assets

 

$

 10,102,831

 

$

 8,851,544

 

$

 1,251,287

 

14.1

 


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

 

Power Liabilities®

 

Average Power Liabilities totaled $9.4 billion for 2006, with an average interest rate of 2.08 percent, an increase of $928.6 million, or 11 percent, from 2005.  The increase was primarily driven by increases in Premier Checking and Savings and certificates of deposit, partially offset by declines in other checking and savings deposits and a $69.8 million decline in non-interest bearing custodial deposits as a result of the sale of mortgage servicing rights.  TCF increased the total number of deposit accounts by 130,417, or 5.7 percent, in 2006 to 2,426,616 accounts, as compared with an increase of 80,186, or 3.6 percent, in 2005.

 

 

7



 

 

 

Average Balances and Rates for the Year Ended December 31,

 

Change

 

($ in thousands)

 

2006

 

2005

 

$

 

%

 

Non-interest bearing deposits:

 

 

 

 

 

 

 

 

 

Retail

 

$

 1,513,121

 

$

 1,548,027

 

$

 (34,906

)

(2.3

)%

Small business

 

609,907

 

585,860

 

24,047

 

4.1

 

Commercial and custodial

 

232,725

 

311,497

 

(78,772

)

(25.3

)

Total non-interest bearing deposits

 

2,355,753

 

2,445,384

 

(89,631

)

(3.7

)

Interest-bearing deposits:

 

 

 

 

 

 

 

 

 

Premier checking

 

1,001,024

 

641,672

 

359,352

 

56.0

 

Other checking

 

864,316

 

1,026,017

 

(161,701

)

(15.8

)

Subtotal

 

1,865,340

 

1,667,689

 

197,651

 

11.9

 

Premier savings

 

899,067

 

427,070

 

471,997

 

110.5

 

Other savings

 

1,376,182

 

1,558,423

 

(182,241

)

(11.7

)

Subtotal

 

2,275,249

 

1,985,493

 

289,756

 

14.6

 

Money market

 

620,844

 

640,576

 

(19,732

)

(3.1

)

Subtotal

 

4,761,433

 

4,293,758

 

467,675

 

10.9

 

Certificates of deposit

 

2,291,002

 

1,740,440

 

550,562

 

31.6

 

Total interest-bearing deposits

 

7,052,435

 

6,034,198

 

1,018,237

 

16.9

 

Power Liabilities

 

$

 9,408,188

 

$

 8,479,582

 

$

 928,606

 

11.0

 

 

 

 

 

 

 

 

 

 

 

Average rate on deposits

 

2.08

%

1.15

%

93

bps

N/A

 

Total number of deposit accounts

 

2,426,616

 

2,296,199

 

130,417

 

5.7

 


N/A Not Applicable.

 

Non-interest Expense

 

Non-interest expense totaled $649.2 million for 2006, an increase of $42.3 million, or 7 percent, from 2005.  Compensation and employee benefits increased $15.3 million, or 4.7 percent, from 2005, primarily due to an $8.2 million increase from new branch expansion, an $8.2 million increase in other salaries and employee benefits, partially offset by lower performance-based incentive compensation.  Occupancy and equipment expenses increased $10.7 million, or 10.3 percent, from 2005, primarily due to $5.3 million associated with new branch expansion. Operating lease depreciation increased $7 million from 2005, primarily driven by a $39.7 million increase in average operating lease balances.  Other expenses totaled $151.4 million for 2006, up $8 million from 2005, primarily driven by a $2.3 million increase in card and

 

 

8



 

internet processing expenses related to transaction increases and a $1.4 million increase in foreclosed real estate expense primarily due to net losses on sales in 2006 versus net gains in 2005.

 

Non-interest expense totaled $165.6 million for the 2006 fourth quarter, up $8.9 million, or 5.7 percent, from the fourth quarter of 2005.  Compensation and employee benefits increased $3.1 million, or 3.8 percent, from the fourth quarter of 2005, primarily due to new branch expansion totaling $1.8 million.  Occupancy and equipment expenses increased $2.1 million, or 7.5 percent, from the fourth quarter of 2005, primarily due to $1.1 million associated with new branch expansion.  Operating lease depreciation increased $1.8 million from the fourth quarter of 2005, primarily driven by a $36.1 million increase in average operating lease balances.  Other expenses increased $1.8 million, or 4.6 percent, from the fourth quarter of 2005, primarily driven by new branch expansion totaling $1.3 million and a $671 thousand increase in net real estate expense primarily due to the sale of real estate owned.

 

During the fourth quarter of 2006, TCF incurred approximately $1 million of severance and other exit costs related to the closure and consolidation of 13 branches, and other staff reductions.  “These actions will improve TCF’s efficiency in 2007,” said Nagorske.

 

 

 

Three Months Ended
December 31,

 

Change

 

Year Ended December 31,

 

Change

 

($ in thousands)

 

2006

 

2005

 

$

 

%

 

2006

 

2005

 

$

 

%

 

Compensation and employee benefits

 

$

85,811

 

$

82,700

 

$

3,111

 

3.8

 

$

341,857

 

$

326,526

 

$

15,331

 

4.7

 

Occupancy and equipment

 

29,905

 

27,819

 

2,086

 

7.5

 

114,618

 

103,900

 

10,718

 

10.3

 

Advertising and promotions

 

6,235

 

6,088

 

147

 

2.4

 

26,926

 

25,691

 

1,235

 

4.8

 

Operating lease depreciation

 

4,000

 

2,164

 

1,836

 

84.8

 

14,347

 

7,335

 

7,012

 

95.6

 

Other

 

39,610

 

37,858

 

1,752

 

4.6

 

151,449

 

143,483

 

7,966

 

5.6

 

Total non-interest expense

 

$

165,561

 

$

156,629

 

$

8,932

 

5.7

 

$

649,197

 

$

606,935

 

$

42,262

 

7.0

 

 

 

9



 

 

Credit Quality

 

At December 31, 2006, TCF’s allowance for loan and lease losses totaled $58.5 million, or .52 percent of loans and leases, compared with $55.8 million, or .55 percent, at December 31, 2005 and $55.1 million, or .49 percent, at September 30, 2006.  The provision for credit losses for 2006 was $20.7 million, up from $8.6 million in 2005, primarily due to higher consumer net charge-offs, a $3.3 million recovery on one commercial business loan in 2005 and the $1.1 billion increase in total loans and leases.  Net loan and lease charge-offs in 2006 were $18 million, or .17 percent of average loans and leases, down from $28.2 million, or .29 percent, in 2005.  Excluding the charge-off of an $18.8 million investment in a leveraged lease, 2005 net charge-offs were $9.4 million, or .10 percent of average loans and leases.

 

The provision for credit losses was $10.1 million in the fourth quarter of 2006, up from $5.4 million in the fourth quarter of 2005, primarily due to higher consumer and leasing and equipment finance net charge-offs and provisions related to increases in commercial real estate non-accrual loans.  Net loan and lease charge-offs during the fourth quarter of 2006 were $6.6 million, or .24 percent of average loans and leases, up from $4.1 million, or .16 percent in the same period of 2005.

 

At December 31, 2006, TCF’s over-30-day delinquency rate was .63 percent, up from .43 percent at December 31, 2005 and .45 percent at September 30, 2006.  Non-accrual loans and leases were $43.2 million, or .38 percent of net loans and leases, at December 31, 2006, compared with $29.6 million, or .29 percent, at December 31, 2005 and $27.3 million, or .25 percent at September 30, 2006.  Non-accrual loans increased primarily due to several Michigan commercial real estate loans.

 

Total non-performing assets were $65.6 million, or .45 percent of total assets, at December 31, 2006, up from $47.4 million, or .35 percent, at December 31, 2005 and $55.1 million, or .39 percent at September 30, 2006.  The increase in non-performing assets was primarily due to increases in commercial real estate non-accrual loans and residential real estate owned.

 

 

10


 


 

 

 

Three Months Ended
 December 31,

 

Year Ended
December 31,

 

($ in thousands)

 

2006

 

2005

 

2006

 

2005

 

Allowance for loan and lease losses:

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

55,098

 

$

54,531

 

$

55,823

 

$

75,393

 

Net (charge-offs) recoveries:

 

 

 

 

 

 

 

 

 

Consumer home equity

 

(3,100

)

(1,784

)

(7,346

)

(4,892

)

Consumer other

 

(1,611

)

(2,062

)

(4,802

)

(3,970

)

Total consumer

 

(4,711

)

(3,846

)

(12,148

)

(8,862

)

Commercial real estate

 

28

 

76

 

(189

)

8

 

Commercial business

 

(168

)

(157

)

(469

)

2,173

 

Leasing and equipment finance

 

(1,611

)

(167

)

(4,892

)

(21,384

)

Residential real estate

 

(166

)

(10

)

(271

)

(91

)

Total net charge-offs

 

(6,628

)

(4,104

)

(17,969

)

(28,156

)

Provision for credit losses

 

10,073

 

5,396

 

20,689

 

8,586

 

Balance at end of period

 

$

58,543

 

$

55,823

 

$

58,543

 

$

55,823

 

 

Accounting for Deposit Account Overdrafts

 

During the fourth quarter of 2006, TCF changed its accounting policy for deposit account overdrafts to a more preferred method under generally accepted accounting principles.  Previously, certain deposit account overdraft balances were presented net in deposits and net losses on uncollectible overdrafts were reported in deposit account losses in non-interest expense.  TCF now reports all overdraft balances in either consumer or commercial loans.  Net losses on uncollectible overdrafts are reported as net charge-offs in the allowance for loan and lease losses.  In addition, the portion of the allowance for loan and lease losses related to uncollectible deposit fees was transferred to other liabilities.  This accounting change had no impact on net income and all prior period amounts have been reclassified to conform to the new accounting policy.

 

 

11



 

Income Taxes

 

TCF’s income tax expense was $112.2 million for 2006, or 31.41 percent of pre-tax income, compared with $115.3 million, or 30.30 percent, for 2005.  The 2006 effective income tax rate increased over the 2005 rate primarily due to $6.1 million of reductions in income tax expense in 2006 for favorable developments involving uncertain tax positions, compared with $14 million of reductions in income tax expense in 2005.  Favorable developments included the closing of certain previous years’ tax returns, clarification of existing state tax legislation and favorable developments in income tax audits.

 

TCF’s income tax expense was $25.4 million for the fourth quarter of 2006, or 32.05 percent of pre-tax income, compared with $26.7 million, or 28.91 percent, for the comparable 2005 period.  The higher effective income tax rate for the fourth quarter of 2006 is primarily due to $851 thousand of reductions in income tax expense for favorable developments involving uncertain tax positions, compared with $8.8 million of reductions in income tax expense in the fourth quarter of 2005.

 

Capital

 

TCF repurchased 3.9 million shares of its common stock during 2006 at an average cost of $25.91 per share.  TCF has 2.8 million shares remaining in its stock repurchase programs authorized by its Board of Directors.

 

During the fourth quarter of 2006, TCF adopted SFAS No. 158, Employer’s Accounting for Defined Benefit Pension and Other Postretirement Plans.  Total stockholders’ equity at December 31, 2006 was reduced by $13.3 million from the adoption of this Statement.

 

In November 2006, TCF retired 52.5 million shares of treasury stock, which reduced additional paid-in capital and retained earnings by $126.7 million and $876.7 million, respectively with an equal offset in treasury stock.

 

12



 

 

($ in thousands, except per-share data)

 

At December 31,
 2006

 

At December 31,
2005

 

Stockholders’ equity

 

$

  1,033,374

 

 

 

$

  998,472

 

 

 

Stockholders’ equity to total assets

 

7.04

%

 

 

7.46

%

 

 

Book value per common share

 

$

  7.92

 

 

 

$

  7.46

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 risk-based capital

 

$

  914,128

 

8.65

%

$

  863,955

 

8.79

%

Total risk-based capital

 

1,173,073

 

11.10

 

1,049,615

 

10.68

 

Total risk-based capital “well-capitalized” requirement

 

1,056,694

 

10.00

 

982,821

 

10.00

 

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

 

116,379

 

1.10

 

66,794

 

.68

 

 

Website Information

 

A live webcast of TCF’s conference call to discuss 2006 earnings will be hosted at TCF’s website, www.tcfbank.com, on January 24, 2007 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 $14.7 billion in total assets.  TCF has 453 banking offices in Minnesota, Illinois, Michigan, Colorado, Wisconsin, Indiana and Arizona.  Other TCF affiliates provide leasing and equipment finance, and investments and insurance sales.


 

 

13


 


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 and 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; an inability to increase the number of deposit 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; monetary, fiscal or tax policies of the federal or state governments; adverse findings in tax audits or regulatory examinations; 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 or loss or theft of information; adverse changes in securities markets; 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 on Form 10-K, and Forms 10-Q and 8-K for additional important information about the Company.

 

 

14


 


 

TCF FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per-share data)

(Unaudited)

 

 

 

Three Months Ended
December 31,

 

Change

 

 

 

2006

 

2005

 

$

 

%

 

Interest income:

 

 

 

 

 

 

 

 

 

Loans and leases

 

$

204,150

 

$

171,436

 

$

32,714

 

19.1

 

Securities available for sale

 

24,699

 

20,766

 

3,933

 

18.9

 

Education loans held for sale

 

3,019

 

3,342

 

(323

)

(9.7

)

Investments

 

1,173

 

841

 

332

 

39.5

 

Total interest income

 

233,041

 

196,385

 

36,656

 

18.7

 

Interest expense:

 

 

 

 

 

 

 

 

 

Deposits

 

55,996

 

34,283

 

21,713

 

63.3

 

Borrowings

 

41,158

 

32,820

 

8,338

 

25.4

 

Total interest expense

 

97,154

 

67,103

 

30,051

 

44.8

 

Net interest income

 

135,887

 

129,282

 

6,605

 

5.1

 

Provision for credit losses

 

10,073

 

5,396

 

4,677

 

86.7

 

Net interest income after provision for credit losses

 

125,814

 

123,886

 

1,928

 

1.6

 

Non-interest income:

 

 

 

 

 

 

 

 

 

Fees and service charges

 

66,735

 

67,628

 

(893

)

(1.3

)

Card revenue

 

23,485

 

21,419

 

2,066

 

9.6

 

ATM revenue

 

9,019

 

9,557

 

(538

)

(5.6

)

Investments and insurance revenue

 

2,087

 

2,339

 

(252

)

(10.8

)

Subtotal

 

101,326

 

100,943

 

383

 

.4

 

Leasing and equipment finance

 

15,165

 

15,405

 

(240

)

(1.6

)

Other

 

2,340

 

8,590

 

(6,250

)

(72.8

)

Fees and other revenue

 

118,831

 

124,938

 

(6,107

)

(4.9

)

Gains on sales of securities available for sale

 

-

 

-

 

-

 

-

 

Total non-interest income

 

118,831

 

124,938

 

(6,107

)

(4.9

)

Non-interest expense:

 

 

 

 

 

 

 

 

 

Compensation and employee benefits

 

85,811

 

82,700

 

3,111

 

3.8

 

Occupancy and equipment

 

29,905

 

27,819

 

2,086

 

7.5

 

Advertising and promotions

 

6,235

 

6,088

 

147

 

2.4

 

Operating lease depreciation

 

4,000

 

2,164

 

1,836

 

84.8

 

Other

 

39,610

 

37,860

 

1,750

 

4.6

 

Total non-interest expense

 

165,561

 

156,631

 

8,930

 

5.7

 

Income before income tax expense

 

79,084

 

92,193

 

(13,109

)

(14.2

)

Income tax expense

 

25,351

 

26,653

 

(1,302

)

(4.9

)

Net income

 

$

53,733

 

$

65,540

 

$

(11,807

)

(18.0

)

 

 

 

 

 

 

 

 

 

 

Net income per common share:

 

 

 

 

 

 

 

 

 

Basic

 

$

.42

 

$

.50

 

$

(.08

)

(16.0

)

Diluted

 

$

.42

 

$

.50

 

$

(.08

)

(16.0

)

 

 

 

 

 

 

 

 

 

 

Dividends declared per common share

 

$

.23

 

$

.2125

 

$

.0175

 

8.2

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

Basic

 

128,209

 

131,447

 

(3,238

)

(2.5

)

Diluted

 

128,515

 

131,816

 

(3,301

)

(2.5

)

 

 

 

15



 

TCF FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per-share data)

(Unaudited)

 

 

 

Year Ended
December 31,

 

Change

 

 

 

2006

 

2005

 

$

 

%

 

Interest income:

 

 

 

 

 

 

 

 

 

Loans and leases

 

$

769,590

 

$

636,172

 

$

133,418

 

21.0

 

Securities available for sale

 

98,035

 

81,479

 

16,556

 

20.3

 

Education loans held for sale

 

15,009

 

10,921

 

4,088

 

37.4

 

Investments

 

3,504

 

3,450

 

54

 

1.6

 

Total interest income

 

886,138

 

732,022

 

154,116

 

21.1

 

Interest expense:

 

 

 

 

 

 

 

 

 

Deposits

 

195,324

 

97,406

 

97,918

 

100.5

 

Borrowings

 

153,284

 

116,926

 

36,358

 

31.1

 

Total interest expense

 

348,608

 

214,332

 

134,276

 

62.6

 

Net interest income

 

537,530

 

517,690

 

19,840

 

3.8

 

Provision for credit losses

 

20,689

 

8,586

 

12,103

 

141.0

 

Net interest income after provision for credit losses

 

516,841

 

509,104

 

7,737

 

1.5

 

Non-interest income:

 

 

 

 

 

 

 

 

 

Fees and service charges

 

270,166

 

262,636

 

7,530

 

2.9

 

Card revenue

 

92,084

 

79,803

 

12,281

 

15.4

 

ATM revenue

 

37,760

 

40,730

 

(2,970

)

(7.3

)

Investments and insurance revenue

 

10,695

 

10,665

 

30

 

.3

 

Subtotal

 

410,705

 

393,834

 

16,871

 

4.3

 

Leasing and equipment finance

 

53,004

 

47,387

 

5,617

 

11.9

 

Other

 

25,755

 

26,350

 

(595

)

(2.3

)

Fees and other revenue

 

489,464

 

467,571

 

21,893

 

4.7

 

Gains on sales of securities available for sale

 

-

 

10,671

 

(10,671

)

(100.0

)

Total non-interest income

 

489,464

 

478,242

 

11,222

 

2.3

 

Non-interest expense:

 

 

 

 

 

 

 

 

 

Compensation and employee benefits

 

341,857

 

326,526

 

15,331

 

4.7

 

Occupancy and equipment

 

114,618

 

103,900

 

10,718

 

10.3

 

Advertising and promotions

 

26,926

 

25,691

 

1,235

 

4.8

 

Operating lease depreciation

 

14,347

 

7,335

 

7,012

 

95.6

 

Other

 

151,449

 

143,484

 

7,965

 

5.6

 

Total non-interest expense

 

649,197

 

606,936

 

42,261

 

7.0

 

Income before income tax expense

 

357,108

 

380,410

 

(23,302

)

(6.1

)

Income tax expense

 

112,165

 

115,278

 

(3,113

)

(2.7

)

Net income

 

$

244,943

 

$

265,132

 

$

(20,189

)

(7.6

)

 

 

 

 

 

 

 

 

 

 

Net income per common share:

 

 

 

 

 

 

 

 

 

Basic

 

$

1.90

 

$

2.00

 

$

(.10

)

(5.0

)

Diluted

 

$

1.90

 

$

2.00

 

$

(.10

)

(5.0

)

 

 

 

 

 

 

 

 

 

 

Dividends declared per common share

 

$

.92

 

$

.85

 

$

.0700

 

8.2

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

Basic

 

129,010

 

132,379

 

(3,369

)

(2.5

)

Diluted

 

129,225

 

132,742

 

(3,517

)

(2.6

)

 

 

16



 

TCF FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Dollars in thousands, except per-share data)

(Unaudited)

 

 

 

At

 

At

 

 

 

 

 

December 31,

 

December 31,

 

Change

 

 

 

2006

 

2005

 

$

 

%

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

348,980

 

$

374,701

 

$

(25,721

)

(6.9

)

Investments

 

170,129

 

79,943

 

90,186

 

112.8

 

Securities available for sale

 

1,816,126

 

1,648,615

 

167,511

 

10.2

 

Education loans held for sale

 

144,574

 

229,820

 

(85,246

)

(37.1

)

Loans and leases:

 

 

 

 

 

 

 

 

 

Consumer home equity and other

 

5,945,077

 

5,206,275

 

738,802

 

14.2

 

Commercial real estate

 

2,390,653

 

2,297,500

 

93,153

 

4.1

 

Commercial business

 

551,995

 

435,203

 

116,792

 

26.8

 

Leasing and equipment finance

 

1,818,165

 

1,503,794

 

314,371

 

20.9

 

Subtotal

 

10,705,890

 

9,442,772

 

1,263,118

 

13.4

 

Residential real estate

 

627,790

 

770,441

 

(142,651

)

(18.5

)

Total loans and leases

 

11,333,680

 

10,213,213

 

1,120,467

 

11.0

 

Allowance for loan and lease losses

 

(58,543

)

(55,823

)

(2,720

)

(4.9

)

Net loans and leases

 

11,275,137

 

10,157,390

 

1,117,747

 

11.0

 

Premises and equipment

 

406,087

 

365,146

 

40,941

 

11.2

 

Goodwill

 

152,599

 

152,599

 

-

 

-

 

Other assets

 

356,102

 

380,380

 

(24,278

)

(6.4

)

 

 

$

14,669,734

 

$

13,388,594

 

1,281,140

 

9.6

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

Checking

 

$

4,348,256

 

$

4,298,145

 

$

50,111

 

1.2

 

Savings

 

2,351,580

 

2,238,562

 

113,018

 

5.0

 

Money market

 

585,779

 

677,028

 

(91,249

)

(13.5

)

Subtotal

 

7,285,615

 

7,213,735

 

71,880

 

1.0

 

Certificates of deposit

 

2,483,635

 

1,915,620

 

568,015

 

29.7

 

Total deposits

 

9,769,250

 

9,129,355

 

639,895

 

7.0

 

Short-term borrowings

 

214,112

 

472,126

 

(258,014

)

(54.6

)

Long-term borrowings

 

3,374,428

 

2,511,010

 

863,418

 

34.4

 

Total borrowings

 

3,588,540

 

2,983,136

 

605,404

 

20.3

 

Accrued expenses and other liabilities

 

278,570

 

277,631

 

939

 

.3

 

Total liabilities

 

13,636,360

 

12,390,122

 

1,246,238

 

10.1

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

 

Common stock, par value $.01 per share,
280,000,000 shares authorized;
131,660,749 and 184,386,193 shares issued

 

1,317

 

1,844

 

(527

)

(28.6

)

Additional paid-in capital

 

343,744

 

476,884

 

(133,140

)

(27.9

)

Retained earnings, subject to certain restrictions

 

784,011

 

1,536,611

 

(752,600

)

(49.0

)

Accumulated other comprehensive loss

 

(34,926

)

(21,215

)

(13,711

)

(64.6

)

Treasury stock at cost, 1,242,413
and 50,609,970 shares, and other

 

(60,772

)

(995,652

)

934,880

 

93.9

 

Total stockholders’ equity

 

1,033,374

 

998,472

 

34,902

 

3.5

 

 

 

$

14,669,734

 

$

13,388,594

 

1,281,140

 

9.6

 

 

17



 

TCF FINANCIAL CORPORATION AND SUBSIDIARIES

CREDIT QUALITY DATA

(Dollars in thousands)

(Unaudited)

 

Allowance for loan and lease losses:

 

 

 

At or For the Year Ended December 31, 2006

 

At or For the Year Ended December 31, 2005

 

 

 

 

 

Allowance

 

Net Charge-offs

 

 

 

Allowance

 

Net Charge-offs

 

 

 

 

 

as a % of

 

(Recoveries)

 

 

 

as a % of

 

(Recoveries)

 

 

 

Allowance

 

Portfolio

 

$

 

%

 

Allowance

 

Portfolio

 

$

 

%

 

Consumer home equity

 

$

12,615

 

.21

%

$

7,346

 

.13

%

$

10,017

 

.19

%

$

4,892

 

.10

%

Consumer other

 

2,211

 

3.54

 

4,802

 

N.M.

 

2,053

 

3.57

 

3,970

 

N.M.

 

Total consumer

 

$

14,826

 

.25

 

$

12,148

 

.22

 

$

12,070

 

.23

 

$

8,862

 

.19

 

Commercial real estate

 

22,662

 

.95

 

189

 

.01

 

21,222

 

.92

 

(8

)

-

 

Commercial business

 

7,503

 

1.36

 

469

 

.09

 

6,602

 

1.52

 

(2,173

)

(.51

)

Leasing and equipment finance

 

12,990

 

.71

 

4,892

 

.29

 

15,313

 

1.02

 

21,384

 

1.50

 

Residential real estate

 

562

 

.09

 

271

 

.04

 

616

 

.08

 

91

 

.01

 

Total

 

$

58,543

 

.52

 

$

17,969

 

.17

 

$

55,823

 

.55

 

$

28,156

 

.29

 

 

Quarterly Net Charge-Offs:

 

 

 

Quarter Ended

 

Change from

 

 

 

Dec. 31,

 

Sep. 30,

 

Jun. 30,

 

Mar. 31,

 

Dec. 31,

 

Sep. 30,

 

Dec. 31,

 

 

 

2006

 

2006

 

2006

 

2006

 

2005

 

2006

 

2005

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer home equity

 

$

3,100

 

$

1,615

 

$

1,232

 

$

1,399

 

$

1,784

 

$

1,485

 

$

1,316

 

Consumer other

 

1,611

 

2,340

 

1,167

 

(316

)

2,062

 

(729

)

(451

)

Total consumer

 

$

4,711

 

$

3,955

 

$

2,399

 

$

1,083

 

$

3,846

 

$

756

 

$

865

 

Commercial real estate

 

(28

)

148

 

-

 

69

 

(76

)

(176

)

48

 

Commercial business

 

168

 

(23

)

170

 

154

 

157

 

191

 

11

 

Leasing and equipment finance

 

1,611

 

745

 

1,705

 

831

 

167

 

866

 

1,444

 

Residential real estate

 

166

 

38

 

35

 

32

 

10

 

128

 

156

 

Total

 

$

6,628

 

$

4,863

 

$

4,309

 

$

2,169

 

$

4,104

 

$

1,765

 

$

2,524

 

 

Quarterly Net Charge-Offs as a Percentage of Average Loans and Leases:

 

 

 

Quarter Ended

 

Change from

 

 

 

Dec. 31,

 

Sep. 30,

 

Jun. 30,

 

Mar. 31,

 

Dec. 31,

 

Sep. 30,

 

Dec. 31,

 

 

 

2006

 

2006

 

2006

 

2006

 

2005

 

2006

 

2005

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer home equity

 

.21

%

.12

%

.09

%

.11

%

.14

%

.09

%

.07

%

Total consumer

 

.32

 

.28

 

.18

 

.08

 

.30

 

.04

 

.02

 

Commercial real estate

 

-

 

.02

 

-

 

.01

 

(.01

)

(.02

)

.01

 

Commercial business

 

.13

 

(.02

)

.14

 

.14

 

.15

 

.15

 

(.02

)

Leasing and equipment finance

 

.36

 

.17

 

.42

 

.22

 

.05

 

.19

 

.31

 

Residential real estate

 

.10

 

.02

 

.02

 

.02

 

.01

 

.08

 

.09

 

Total

 

.24

 

.18

 

.16

 

.08

 

.16

 

.06

 

.08

 

 

Non-performing assets:

 

 

 

At

 

At

 

At

 

Change from

 

 

 

December 31,

 

September 30,

 

December 31,

 

September 30,

 

December 31,

 

 

 

2006

 

2006

 

2005

 

2006

 

2005

 

Non-accrual loans and leases:

 

 

 

 

 

 

 

 

 

 

 

Consumer home equity and other

 

$

16,520

 

$

12,363

 

$

18,410

 

$

4,157

 

$

(1,890

)

Commercial real estate

 

12,849

 

5,226

 

188

 

7,623

 

12,661

 

Commercial business

 

3,421

 

1,337

 

2,207

 

2,084

 

1,214

 

Leasing and equipment finance

 

7,596