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Section 1: 8-K (8-K)

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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 21, 2016
 
 36337677_deluxetcfcorplogorgba27.jpg
 
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 21, 2016, attached to this Form 8-K as Exhibit 99.1, announcing its results of operations for the quarter ended September 30, 2016.
 
The earnings release is also available on the Investor Relations section of the Company’s website 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 2016 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 21, 2016 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 website 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 21, 2016

99.2            Slide presentation prepared for use with the Earnings Release, dated October 21, 2016






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/ Craig R. Dahl
 
Craig R. Dahl,
Vice Chairman, President and Chief Executive Officer
(Principal Executive Officer)
 
 
 
 
 
/s/ Brian W. Maass
 
Brian W. Maass,
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 21, 2016



(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit
Exhibit 99.1

36337677_deluxetcfcorplogorgba27.jpg
NEWS RELEASE

TCF Financial Corporation • 200 Lake Street East • Wayzata MN 55391

FOR IMMEDIATE RELEASE
                                
Contact:
Mark Goldman        (952) 475-7050        news@tcfbank.com         (Media)
Jason Korstange        (952) 745-2755        investor@tcfbank.com        (Investors)

TCF REPORTS QUARTERLY NET INCOME OF $56.3 MILLION, OR 31 CENTS PER SHARE

THIRD QUARTER HIGHLIGHTS
- Revenue of $331.7 million, up 4.5 percent from the third quarter of 2015
- Non-interest expense of $228.9 million, up 3.0 percent from the third quarter of 2015
- Efficiency ratio of 69.0 percent, down 101 basis points from the third quarter of 2015
- Period-end loans and leases of $17.4 billion, up 1.1 percent from September 30, 2015
- Loan and lease originations of $4.2 billion, up 8.7 percent from the third quarter of 2015
- Average deposits of $17.1 billion, up 7.3 percent from the third quarter of 2015
- Non-accrual loans and leases of $190.0 million, down 7.8 percent from September 30, 2015
- Net charge-offs as a percentage of average loans and leases of 0.26 percent, up 3 basis points from the third quarter of 2015
- Earnings per share of 31 cents, up 6.9 percent from the third quarter of 2015

Summary of Financial Results
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table 1

 
 
 
 
 
 
 
Percent Change
 
 
 
 
 
 
(Dollars in thousands, except per-share data)
3Q
 
2Q
 
3Q
 
3Q16 vs
 
3Q16 vs
 
YTD
 
YTD
 
Percent
 
2016
 
2016
 
2015
 
2Q16
 
3Q15
 
2016
 
2015
 
Change
Net income attributable to TCF
$
56,292

 
$
57,694

 
$
52,575

 
(2.4
)%
 
7.1
%
 
$
162,032

 
$
144,631

 
12.0
%
Net interest income
212,018

 
212,984

 
205,270

 
(0.5
)
 
3.3

 
636,660

 
614,719

 
3.6

Diluted earnings per common share
0.31

 
0.31

 
0.29

 

 
6.9

 
0.88

 
0.78

 
12.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial Ratios(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Return on average assets
1.12
%
 
1.14
%
 
1.10
%
 
 
 
 
 
1.07
%
 
1.02
%
 
 
Return on average common equity
9.59

 
10.09

 
9.76

 
 
 
 
 
9.39

 
9.07

 
 
Return on average tangible common equity(2)
10.78

 
11.38

 
11.12

 
 
 
 
 
10.58

 
10.37

 
 
Net interest margin
4.34

 
4.35

 
4.40

 
 
 
 
 
4.35

 
4.45

 
 
Net charge-offs as a percentage of average loans and leases
0.26

 
0.23

 
0.23

 
 
 
 
 
0.25

 
0.31

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Annualized.
 
 
 
 
 
 
(2) See "Reconciliation of GAAP to Non-GAAP Financial Measures" table.
 
 
 
 
 
 




WAYZATA, Minn. (October 21, 2016) - TCF Financial Corporation ("TCF" or the "Company") (NYSE: TCB) today reported net income of $56.3 million for the third quarter of 2016, compared with $52.6 million for the third quarter of 2015 and $57.7 million for the second quarter of 2016. Diluted earnings per common share was 31 cents for the third quarter of 2016, compared with 29 cents for the third quarter of 2015 and 31 cents for the second quarter of 2016.

TCF reported net income of $162.0 million for the first nine months of 2016, compared with $144.6 million for the same period in 2015. Diluted earnings per common share was 88 cents for the first nine months of 2016, compared with 78 cents for the same period in 2015.

"TCF reported another good quarter of financial results demonstrating consistent performance and revenue growth year-over-year," said Craig R. Dahl, president and chief executive officer. "During the third quarter, loan and lease originations remained strong, credit stabilization continued, deposit costs remained flat and capital levels increased – all of which position us for consistent profitability and continued value creation for shareholders.

"Despite a slow growth economy and persistent rate headwinds, we successfully achieved profitable growth and positive operating leverage, while at the same time reinvesting in our businesses to enhance our ability to meet the evolving needs of our customers. I am encouraged by the enterprise-wide commitment TCF has shown toward serving our customers while executing on our four strategic pillars of diversification, profitable growth, operating leverage and core funding."



2




Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
Table 2
 
 
 
 
 
 
 
 
Percent Change
 
 
 
 
 
 
(Dollars in thousands)
3Q
 
2Q
 
3Q
 
3Q16 vs
 
3Q16 vs
 
YTD
 
YTD
 
Percent
 
2016
 
2016
 
2015
 
2Q16
 
3Q15
 
2016
 
2015
 
Change
Net interest income
$
212,018

 
$
212,984

 
$
205,270

 
(0.5
)%
 
3.3
 %
 
$
636,660

 
$
614,719

 
3.6
 %
Non-interest income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fees and service charges
35,093

 
34,622

 
36,991

 
1.4

 
(5.1
)
 
102,532

 
107,258

 
(4.4
)
Card revenue
13,747

 
14,083

 
13,803

 
(2.4
)
 
(0.4
)
 
41,193

 
40,606

 
1.4

ATM revenue
5,330

 
5,288

 
5,739

 
0.8

 
(7.1
)
 
15,639

 
16,401

 
(4.6
)
Subtotal
54,170

 
53,993

 
56,533

 
0.3

 
(4.2
)
 
159,364

 
164,265

 
(3.0
)
Gains on sales of auto loans, net
11,624

 
10,143

 
10,423

 
14.6

 
11.5

 
33,687

 
27,444

 
22.7

Gains on sales of consumer real estate loans, net
13,528

 
10,839

 
7,143

 
24.8

 
89.4

 
33,751

 
27,860

 
21.1

Servicing fee income
10,393

 
9,502

 
8,049

 
9.4

 
29.1

 
28,778

 
22,607

 
27.3

Subtotal
35,545

 
30,484

 
25,615

 
16.6

 
38.8

 
96,216

 
77,911

 
23.5

Leasing and equipment finance
28,289

 
31,074

 
27,165

 
(9.0
)
 
4.1

 
87,850

 
75,774

 
15.9

Other
2,270

 
2,405

 
3,070

 
(5.6
)
 
(26.1
)
 
7,518

 
8,657

 
(13.2
)
Fees and other revenue
120,274

 
117,956

 
112,383

 
2.0

 
7.0

 
350,948

 
326,607

 
7.5

Gains (losses) on securities, net
(600
)
 

 
(131
)
 
N.M.

 
N.M.

 
(716
)
 
(268
)
 
(167.2
)
Total non-interest income
119,674

 
117,956

 
112,252

 
1.5

 
6.6

 
350,232

 
326,339

 
7.3

Total revenue
$
331,692

 
$
330,940

 
$
317,522

 
0.2

 
4.5

 
$
986,892

 
$
941,058

 
4.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest margin(1)
4.34
%
 
4.35
%
 
4.40
%
 
 
 
 
 
4.35
%
 
4.45
%
 
 
Total non-interest income as a percentage of total revenue
36.1

 
35.6

 
35.4

 
 
 
 
 
35.5

 
34.7

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

Net Interest Income
Net interest income for the third quarter of 2016 increased $6.7 million, or 3.3 percent, compared with the third quarter of 2015. The increase was primarily due to higher interest income from inventory finance loans and higher average balances of loans and leases held for sale, securities available for sale, auto finance loans, and leasing and equipment finance loans and leases. These increases were partially offset by lower interest income from consumer real estate first mortgage lien loan balances and higher interest expense on certificates of deposit.

Net interest margin for the third quarter of 2016 was 4.34 percent, compared with 4.40 percent for the third quarter of 2015. The decrease was primarily due to higher average interest rates resulting from promotions for certificates of deposit.

3




Non-interest Income
Fees and service charges for the third quarter of 2016 were $35.1 million, down $1.9 million, or 5.1 percent, from the third quarter of 2015. The decrease was primarily due to ongoing consumer behavior changes, as well as higher average checking account balances per customer.

Gains on sales of auto loans, net for the third quarter of 2016 were $11.6 million, up $1.2 million, or 11.5 percent, from the third quarter of 2015 and up $1.5 million, or 14.6 percent, from the second quarter of 2016. TCF sold $614.9 million, $436.6 million and $533.4 million of auto loans during the third quarters of 2016 and 2015 and the second quarter of 2016, respectively.

Gains on sales of consumer real estate loans, net for the third quarter of 2016 were $13.5 million, up $6.4 million, or 89.4 percent, from the third quarter of 2015 and up $2.7 million, or 24.8 percent, from the second quarter of 2016. TCF sold $437.1 million, $246.0 million and $344.6 million of consumer real estate loans during the third quarters of 2016 and 2015 and the second quarter of 2016, respectively.

Servicing fee income was $10.4 million on $5.1 billion of average loans and leases serviced for others for the third quarter of 2016, compared with $8.0 million on $4.0 billion for the third quarter of 2015 and $9.5 million on $4.7 billion for the second quarter of 2016. The increases from both periods were primarily due to the cumulative effect of the 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
 
3Q16 vs
 
3Q16 vs
 
YTD
 
YTD
 
Percent
 
2016
 
2016
 
2015
 
2Q16
 
3Q15
 
2016
 
2015
 
Change
Period-End:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consumer real estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
First mortgage lien
$
2,313,044

 
$
2,409,320

 
$
2,724,594

 
(4.0
)%
 
(15.1
)%
 
 
 
 
 
 
Junior lien
2,674,280

 
2,677,522

 
2,889,120

 
(0.1
)
 
(7.4
)
 
 
 
 
 
 
Total consumer real estate
4,987,324

 
5,086,842

 
5,613,714

 
(2.0
)
 
(11.2
)
 
 
 
 
 
 
Commercial
3,150,199

 
3,096,046

 
3,112,325

 
1.7

 
1.2

 
 
 
 
 
 
Leasing and equipment finance
4,236,224

 
4,120,359

 
3,873,581

 
2.8

 
9.4

 
 
 
 
 
 
Inventory finance
2,261,086

 
2,334,893

 
2,153,385

 
(3.2
)
 
5.0

 
 
 
 
 
 
Auto finance
2,731,900

 
2,812,807

 
2,427,367

 
(2.9
)
 
12.5

 
 
 
 
 
 
Other
17,886

 
20,890

 
20,674

 
(14.4
)
 
(13.5
)
 
 
 
 
 
 
Total
$
17,384,619

 
$
17,471,837

 
$
17,201,046

 
(0.5
)
 
1.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consumer real estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
First mortgage lien
$
2,353,097

 
$
2,464,692

 
$
2,793,129

 
(4.5
)%
 
(15.8
)%
 
$
2,463,497

 
$
2,934,536

 
(16.1
)%
Junior lien
2,782,479

 
2,794,035

 
2,813,253

 
(0.4
)
 
(1.1
)
 
2,820,319

 
2,693,623

 
4.7

Total consumer real estate
5,135,576

 
5,258,727

 
5,606,382

 
(2.3
)
 
(8.4
)
 
5,283,816

 
5,628,159

 
(6.1
)
Commercial
3,092,115

 
3,109,946

 
3,118,024

 
(0.6
)
 
(0.8
)
 
3,119,952

 
3,139,969

 
(0.6
)
Leasing and equipment finance
4,147,488

 
4,032,112

 
3,821,590

 
2.9

 
8.5

 
4,057,755

 
3,767,954

 
7.7

Inventory finance
2,272,409

 
2,564,648

 
2,036,054

 
(11.4
)
 
11.6

 
2,422,979

 
2,145,535

 
12.9

Auto finance
2,670,272

 
2,751,679

 
2,361,057

 
(3.0
)
 
13.1

 
2,708,470

 
2,198,983

 
23.2

Other
9,252

 
9,585

 
9,833

 
(3.5
)
 
(5.9
)
 
9,617

 
10,721

 
(10.3
)
Total
$
17,327,112

 
$
17,726,697

 
$
16,952,940

 
(2.3
)
 
2.2

 
$
17,602,589

 
$
16,891,321

 
4.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Period-end loans and leases were $17.4 billion at September 30, 2016, an increase of $0.2 billion, or 1.1 percent, compared with September 30, 2015 and a decrease of $0.1 billion, or 0.5 percent, compared with June 30, 2016. Average loans and leases were $17.3 billion for the third quarter of 2016, an increase of $0.4 billion, or 2.2 percent, compared with the third quarter of 2015 and a decrease of $0.4 billion, or 2.3 percent, compared with the second quarter of 2016.

The increases from September 30, 2015 were primarily due to an increase in the leasing and equipment finance portfolio due to strong originations, the maturation of the business model in auto finance and the expansion of the number of active dealers in inventory finance, partially offset by run-off in the consumer real estate first mortgage lien portfolio. The decrease from the second quarter of 2016 for average loans and leases was primarily due to the seasonal decrease in the inventory finance portfolio and run-off in the consumer real estate first mortgage lien portfolio, partially offset by an increase in the leasing and equipment finance portfolio due to strong originations.


5




Loan and lease originations were $4.2 billion for the third quarter of 2016, an increase of $0.3 billion, or 8.7 percent, compared with the third quarter of 2015 and consistent with the second quarter of 2016. The increase from the third quarter of 2015 was primarily due to increased originations in auto finance, inventory finance and consumer real estate.

Credit Quality
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Credit Trends
 
 
 
 
 
 
 
Table 4

 
 
 
 
 
 
 
Change
(Dollars in thousands)
3Q
2Q
1Q
4Q
3Q
 
3Q16 vs
3Q16 vs
 
2016
2016
2016
2015
2015
 
2Q16
3Q15
Over 60-day delinquencies as a percentage of period-end loans and leases(1)
0.11
%
0.12
%
0.10
%
0.11
%
0.17
%
 
(1) bps

(6) bps

Net charge-offs as a percentage of average loans and leases(2)
0.26

0.23

0.27

0.29

0.23

 
3

3

Non-accrual loans and leases and other real estate owned
$
223,759

$
232,334

$
241,090

$
250,448

$
264,694

 
(3.7)%

(15.5)%

Provision for credit losses
13,894

13,250

18,842

17,607

10,018

 
4.9

38.7

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

The over 60-day delinquency rate, excluding acquired portfolios and non-accrual loans and leases, was 0.11 percent at September 30, 2016, down from 0.17 percent at September 30, 2015, and down from 0.12 percent at June 30, 2016. The decreases from both periods were primarily driven by improved delinquencies in the commercial real estate portfolio, partially offset by an increase in delinquencies in the auto finance portfolio.

The net charge-off rate was 0.26 percent for the third quarter of 2016, up from 0.23 percent for both the third quarter of 2015 and the second quarter of 2016. The increases from both periods were primarily due to increased net charge-offs in the auto finance portfolio, partially offset by improved credit quality in the consumer real estate portfolio.

Non-accrual loans and leases and other real estate owned was $223.8 million at September 30, 2016, a decrease of $40.9 million, or 15.5 percent, from September 30, 2015, and a decrease of $8.6 million, or 3.7 percent, from June 30, 2016. The decreases from both periods were primarily due to improving credit quality trends in the consumer and commercial real estate portfolios and sales of other real estate owned outpacing additions. Total non-accrual loans and leases and other real estate owned at September 30, 2016 was the lowest balance since the third quarter of 2008.

6




Provision for credit losses was $13.9 million for the third quarter of 2016, an increase of $3.9 million, or 38.7 percent, from the third quarter of 2015, and an increase of $0.6 million, or 4.9 percent, from the second quarter of 2016. The increase from the third quarter of 2015 was primarily due to increased reserve requirements related to growth and higher net charge-offs in the auto finance and leasing and equipment finance portfolios. The increase from the second quarter of 2016 was primarily due to higher net charge-offs and growth in the leasing and equipment finance portfolio.

Deposits
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Deposits
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table 5

 
 
 
 
 
 
 
Percent Change
 
 
 
 
 
 
(Dollars in thousands)
3Q
 
2Q
 
3Q
 
3Q16 vs
 
3Q16 vs
 
YTD
 
YTD
 
Percent
 
2016
 
2016
 
2015
 
2Q16
 
3Q15
 
2016
 
2015
 
Change
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Checking
$
5,673,888

 
$
5,727,147

 
$
5,405,442

 
(0.9
)%
 
5.0
 %
 
$
5,664,812

 
$
5,378,571

 
5.3
 %
Savings
4,672,642

 
4,690,376

 
4,872,853

 
(0.4
)
 
(4.1
)
 
4,692,189

 
5,026,475

 
(6.7
)
Money market
2,496,590

 
2,557,897

 
2,297,893

 
(2.4
)
 
8.6

 
2,509,033

 
2,236,811

 
12.2

Certificates of deposit
4,304,990

 
4,308,367

 
3,400,282

 
(0.1
)
 
26.6

 
4,239,676

 
3,187,577

 
33.0

Total average deposits
$
17,148,110

 
$
17,283,787

 
$
15,976,470

 
(0.8
)
 
7.3

 
$
17,105,710

 
$
15,829,434

 
8.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average interest rate on deposits(1)
0.37
%
 
0.37
%
 
0.31
%
 
 
 
 
 
0.36
%
 
0.29
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Annualized.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Total average deposits for the third quarter of 2016 increased $1.2 billion, or 7.3 percent, from the third quarter of 2015, primarily due to special campaigns for certificates of deposit as well as growth in checking and money market balances.

The average interest rate on deposits for the third quarter of 2016 was 0.37 percent, up 6 basis points from the third quarter of 2015, primarily due to higher average interest rates resulting from promotions for certificates of deposit.


7




Non-interest Expense
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-interest Expense
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table 6

 
 
 
 
 
 
 
 Change
 
 
 
 
 
 
(Dollars in thousands)
3Q
 
2Q
 
3Q
 
3Q16 vs
 
3Q16 vs
 
YTD
 
YTD
 
Percent
 
2016
 
2016
 
2015
 
2Q16
 
3Q15
 
2016
 
2015
 
Change
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Compensation and employee benefits
$
117,155

 
$
118,093

 
$
116,708

 
(0.8
)%
 
0.4
 %
 
$
359,721

 
$
348,682

 
3.2
 %
Occupancy and equipment
37,938

 
36,884

 
34,159

 
2.9

 
11.1

 
111,830

 
107,138

 
4.4

FDIC insurance
4,082

 
3,751

 
4,832

 
8.8

 
(15.5
)
 
11,946

 
15,089

 
(20.8
)
Advertising and marketing
5,488

 
5,678

 
5,793

 
(3.3
)
 
(5.3
)
 
17,053

 
17,466

 
(2.4
)
Other
49,851

 
49,987

 
45,750

 
(0.3
)
 
9.0

 
143,186

 
139,770

 
2.4

Subtotal
214,514

 
214,393

 
207,242

 
0.1

 
3.5

 
643,736

 
628,145

 
2.5

Operating lease depreciation
10,038

 
9,842

 
9,485

 
2.0

 
5.8

 
29,453

 
25,801

 
14.2

Foreclosed real estate and repossessed assets, net
4,243

 
3,135

 
5,680

 
35.3

 
(25.3
)
 
11,298

 
18,253

 
(38.1
)
Other credit costs, net
83

 
(54
)
 
(123
)
 
N.M.
 
N.M.
 
41

 
(39
)
 
N.M.
Total non-interest expense
$
228,878

 
$
227,316

 
$
222,284

 
0.7

 
3.0

 
$
684,528

 
$
672,160

 
1.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Efficiency ratio
69.00
%
 
68.69
%
 
70.01
%
 
31 bps

 
(101) bps

 
69.36
%
 
71.43
%
 
(207) bps

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
N.M. Not Meaningful.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Total non-interest expense for the third quarter of 2016 increased $6.6 million, or 3.0 percent, compared with the third quarter of 2015 and increased $1.6 million, or 0.7 percent compared with the second quarter of 2016. The increase from the third quarter of 2015 was primarily due to increases in other non-interest expense and occupancy and equipment expense, partially offset by a decrease in foreclosed real estate and repossessed assets, net expense. The increase from the second quarter of 2016 was primarily due to increases in foreclosed real estate and repossessed assets, net expense and occupancy and equipment expense, partially offset by a decrease in compensation and employee benefits expense.

Net expenses related to foreclosed real estate and repossessed assets decreased $1.4 million, or 25.3 percent, from the third quarter of 2015 and increased $1.1 million, or 35.3 percent, from the second quarter of 2016. The decrease from the third quarter of 2015 was primarily due to lower operating costs associated with maintaining fewer consumer and commercial properties and lower write-downs on existing foreclosed consumer properties, partially offset by lower gains on sales of consumer and commercial properties and higher repossessed asset expense. The increase from the second quarter of 2016 was primarily due to lower gains on sales of consumer and commercial properties.


8




Capital
 
 
 
 
 
 
 
Capital Information
 
 
Table 7

 
 
 
 
 
At Sep. 30,
 
At Dec. 31,
(Dollars in thousands, except per-share data)
2016
 
2015
Total equity
$
2,452,380

 
$
2,306,917

Book value per common share
12.69

 
11.94

Tangible book value per common share(1)
11.36

 
10.59

Common equity to assets
10.29
%
 
9.80
%
Tangible common equity to tangible assets(1)
9.31

 
8.79

Capital accumulation rate(2)
8.93

 
10.44

 
 
 
 
 
At Sep. 30,
 
At Dec. 31,
Regulatory Capital:
2016(3)
 
2015
Common equity Tier 1 capital
$
1,936,029

 
$
1,814,442

Tier 1 capital
2,215,312

 
2,092,195

Total capital
2,596,697

 
2,487,060

 
 
 
 
Regulatory Capital Ratios:
 
 
 
Common equity Tier 1 capital ratio
10.35
%
 
10.00
%
Tier 1 risk-based capital ratio
11.85

 
11.54

Total risk-based capital ratio
13.89

 
13.71

Tier 1 leverage ratio
10.66

 
10.46

 
 
 
 
(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 2016 are preliminary pending completion and filing of the Company's regulatory reports.

TCF maintained strong capital ratios as the Company accumulates capital through earnings.

On October 19, 2016, TCF's Board of Directors declared a regular quarterly cash dividend of 7.5 cents per common share, payable on December 1, 2016, to stockholders of record at the close of business on November 15, 2016. 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, 2016, to stockholders of record at the close of business on November 15, 2016.


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 21, 2016 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, 2016, TCF had $21.1 billion in total assets and 341 branches in Illinois, Minnesota, Michigan, Colorado, Wisconsin, Arizona and South Dakota providing retail and commercial banking services. TCF, through its subsidiaries, also conducts commercial leasing, 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, 2015 under the heading "Risk Factors", the factors discussed below and any other cautionary statements, written or oral, which may be made or referred to in connection with any such forward-looking statements. Since it is not possible to foresee all such factors, these factors should not be considered as complete or exhaustive.
 
Adverse Economic or Business Conditions; Competitive Conditions; Credit and Other Risks. Deterioration in general economic and banking industry conditions, including those arising from government shutdowns, defaults, anticipated defaults or rating agency downgrades of sovereign debt (including debt of the U.S.), or increases in unemployment; adverse economic, business and competitive developments such as shrinking interest margins, reduced demand for financial services and loan and lease products, deposit outflows, increased deposit costs due to competition for deposit growth and evolving payment system developments, deposit account attrition or an inability to increase the number of deposit accounts; customers completing financial transactions without using a bank; adverse changes in credit quality and other risks posed by TCF's loan, lease, investment, 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; 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; inability to timely close underperforming branches due to long-term lease obligations; slower than anticipated growth in existing or acquired businesses; inability to successfully execute on TCF's growth strategy through acquisitions or 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.
 
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, employment practices, or checking account overdraft program "opt in" requirements; and possible increases in indemnification obligations for certain litigation against Visa U.S.A.

Accounting, Audit, Tax and Insurance Matters. Changes in accounting standards or interpretations of existing standards; federal or state monetary, fiscal or tax policies, including 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
 
2016
 
2015
 
$
 
%
Interest income:
 
 
 
 
 
 
 
Loans and leases
$
210,765

 
$
207,250

 
$
3,515

 
1.7
 %
Securities available for sale
7,126

 
4,161

 
2,965

 
71.3

Securities held to maturity
1,049

 
1,361

 
(312
)
 
(22.9
)
Investments and other
13,786

 
10,832

 
2,954

 
27.3

Total interest income
232,726

 
223,604

 
9,122

 
4.1

Interest expense:
 
 
 
 
 
 
 
Deposits
15,851

 
12,302

 
3,549

 
28.8

Borrowings
4,857

 
6,032

 
(1,175
)
 
(19.5
)
Total interest expense
20,708

 
18,334

 
2,374

 
12.9

Net interest income
212,018

 
205,270

 
6,748

 
3.3

Provision for credit losses
13,894

 
10,018

 
3,876

 
38.7

Net interest income after provision for credit losses
198,124

 
195,252

 
2,872

 
1.5

Non-interest income:
 
 
 
 
 
 
 
Fees and service charges
35,093

 
36,991

 
(1,898
)
 
(5.1
)
Card revenue
13,747

 
13,803

 
(56
)
 
(0.4
)
ATM revenue
5,330

 
5,739

 
(409
)
 
(7.1
)
Subtotal
54,170

 
56,533

 
(2,363
)
 
(4.2
)
Gains on sales of auto loans, net
11,624

 
10,423

 
1,201

 
11.5

Gains on sales of consumer real estate loans, net
13,528

 
7,143

 
6,385

 
89.4

Servicing fee income
10,393

 
8,049

 
2,344

 
29.1

Subtotal
35,545

 
25,615

 
9,930

 
38.8

Leasing and equipment finance
28,289

 
27,165

 
1,124

 
4.1

Other
2,270

 
3,070

 
(800
)
 
(26.1
)
Fees and other revenue
120,274

 
112,383

 
7,891

 
7.0

Gains (losses) on securities, net
(600
)
 
(131
)
 
(469
)
 
N.M.

Total non-interest income
119,674

 
112,252

 
7,422

 
6.6

Non-interest expense:
 
 
 
 
 
 
 
Compensation and employee benefits
117,155

 
116,708

 
447

 
0.4

Occupancy and equipment
37,938

 
34,159

 
3,779

 
11.1

FDIC insurance
4,082

 
4,832

 
(750
)
 
(15.5
)
Advertising and marketing
5,488

 
5,793

 
(305
)
 
(5.3
)
Other
49,851

 
45,750

 
4,101

 
9.0

Subtotal
214,514

 
207,242

 
7,272

 
3.5

Operating lease depreciation
10,038

 
9,485

 
553

 
5.8

Foreclosed real estate and repossessed assets, net
4,243

 
5,680

 
(1,437
)
 
(25.3
)
Other credit costs, net
83

 
(123
)
 
206

 
N.M.

Total non-interest expense
228,878

 
222,284

 
6,594

 
3.0

Income before income tax expense
88,920

 
85,220

 
3,700

 
4.3

Income tax expense
30,257

 
30,528

 
(271
)
 
(0.9
)
Income after income tax expense
58,663

 
54,692

 
3,971

 
7.3

Income attributable to non-controlling interest
2,371

 
2,117

 
254

 
12.0

Net income attributable to TCF Financial Corporation
56,292

 
52,575

 
3,717

 
7.1

Preferred stock dividends
4,847

 
4,847

 

 

Net income available to common stockholders
$
51,445

 
$
47,728

 
$
3,717

 
7.8

 
 
 
 
 
 
 
 
Net income per common share:
 
 
 
 
 
 
 
Basic
$
0.31

 
$
0.29

 
$
0.02

 
6.9
 %
Diluted
0.31

 
0.29

 
0.02

 
6.9

 
 
 
 
 
 
 
 
Dividends declared per common share
$
0.075

 
$
0.05

 
$
0.025

 
50.0
 %
 
 
 
 
 
 
 
 
Average common and common equivalent shares
 
 
 
 
 
 
 
outstanding (in thousands):
 
 
 
 
 
 
 
Basic
167,366

 
165,990

 
1,376

 
0.8
 %
Diluted
167,968

 
166,556

 
1,412

 
0.8

 
 
 
 
 
 
 
 
N.M. Not Meaningful.

13




TCF FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per-share data)
(Unaudited)
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30,
 
Change
 
2016
 
2015
 
$
 
%
Interest income:
 
 
 
 
 
 
 
Loans and leases
$
639,698

 
$
620,390

 
$
19,308

 
3.1
 %
Securities available for sale
19,020

 
10,784

 
8,236

 
76.4

Securities held to maturity
3,484

 
4,150

 
(666
)
 
(16.0
)
Investments and other
36,870

 
31,155

 
5,715

 
18.3

Total interest income
699,072

 
666,479

 
32,593

 
4.9

Interest expense:
 
 
 
 
 
 
 
Deposits
46,735

 
34,454

 
12,281

 
35.6

Borrowings
15,677

 
17,306

 
(1,629
)
 
(9.4
)
Total interest expense
62,412

 
51,760

 
10,652

 
20.6

Net interest income
636,660

 
614,719

 
21,941

 
3.6

Provision for credit losses
45,986

 
35,337

 
10,649

 
30.1

Net interest income after provision for credit losses
590,674

 
579,382

 
11,292

 
1.9

Non-interest income:
 
 
 
 
 
 
 
Fees and service charges
102,532

 
107,258

 
(4,726
)
 
(4.4
)
Card revenue
41,193

 
40,606

 
587

 
1.4

ATM revenue
15,639

 
16,401

 
(762
)
 
(4.6
)
Subtotal
159,364

 
164,265

 
(4,901
)
 
(3.0
)
Gains on sales of auto loans, net
33,687

 
27,444

 
6,243

 
22.7

Gains on sales of consumer real estate loans, net
33,751

 
27,860

 
5,891

 
21.1

Servicing fee income
28,778

 
22,607

 
6,171

 
27.3

Subtotal
96,216

 
77,911

 
18,305

 
23.5

Leasing and equipment finance
87,850

 
75,774

 
12,076

 
15.9

Other
7,518

 
8,657

 
(1,139
)
 
(13.2
)
Fees and other revenue
350,948

 
326,607

 
24,341

 
7.5

Gains (losses) on securities, net
(716
)
 
(268
)
 
(448
)
 
(167.2
)
Total non-interest income
350,232

 
326,339

 
23,893

 
7.3

Non-interest expense:
 
 
 
 
 
 
 
Compensation and employee benefits
359,721

 
348,682

 
11,039

 
3.2

Occupancy and equipment
111,830

 
107,138

 
4,692

 
4.4

FDIC insurance
11,946

 
15,089

 
(3,143
)
 
(20.8
)
Advertising and marketing
17,053

 
17,466

 
(413
)
 
(2.4
)
Other
143,186

 
139,770

 
3,416

 
2.4

Subtotal
643,736

 
628,145

 
15,591

 
2.5

Operating lease depreciation
29,453

 
25,801

 
3,652

 
14.2

Foreclosed real estate and repossessed assets, net
11,298

 
18,253

 
(6,955
)
 
(38.1
)
Other credit costs, net
41

 
(39
)
 
80

 
N.M.

Total non-interest expense
684,528

 
672,160

 
12,368

 
1.8

Income before income tax expense
256,378

 
233,561

 
22,817

 
9.8

Income tax expense
86,766

 
82,258

 
4,508

 
5.5

Income after income tax expense
169,612

 
151,303

 
18,309

 
12.1

Income attributable to non-controlling interest
7,580

 
6,672

 
908

 
13.6

Net income attributable to TCF Financial Corporation
162,032

 
144,631

 
17,401

 
12.0

Preferred stock dividends
14,541

 
14,541

 

 

Net income available to common stockholders
$
147,491

 
$
130,090

 
$
17,401

 
13.4

 
 
 
 
 
 
 
 
Net income per common share:
 
 
 
 
 
 
 
Basic
$
0.88

 
$
0.79

 
$
0.09

 
11.4
 %
Diluted
0.88

 
0.78

 
0.10

 
12.8

 
 
 
 
 
 
 
 
Dividends declared per common share
$
0.225

 
$
0.15

 
$
0.075

 
50.0
 %
 
 
 
 
 
 
 
 
Average common and common equivalent shares
 
 
 
 
 
 
 
outstanding (in thousands):
 
 
 
 
 
 
 
Basic
167,155

 
165,479

 
1,676

 
1.0
 %
Diluted
167,708

 
166,013

 
1,695

 
1.0

 
 
 
 
 
 
 
 
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
 
2016
 
2015
 
$
 
%
Net income attributable to TCF Financial Corporation
$
56,292

 
$
52,575

 
$
3,717

 
7.1
 %
Other comprehensive income (loss):
 
 
 
 
 
 
 
Securities available for sale and interest-only strips:
 
 
 
 
 
 
 
Unrealized gains (losses) arising during the period
(7,624
)
 
9,972

 
(17,596
)
 
N.M.

Reclassification of net (gains) losses to net income
425

 
281

 
144

 
51.2

Net investment hedges:
 
 
 
 
 
 
 
Unrealized gains (losses) arising during the period
904

 
2,858

 
(1,954
)
 
(68.4
)
Foreign currency translation adjustment:
 
 
 
 
 
 
 
Unrealized gains (losses) arising during the period
(957
)
 
(3,049
)
 
2,092

 
68.6

Recognized postretirement prior service cost:
 
 
 
 
 
 
 
Reclassification of net (gains) losses to net income
(12
)
 
(12
)
 

 

Income tax (expense) benefit
2,396

 
(4,947
)
 
7,343

 
N.M.

Total other comprehensive income (loss)
(4,868
)
 
5,103

 
(9,971
)
 
N.M.

Comprehensive income
$
51,424

 
$
57,678

 
$
(6,254
)
 
(10.8
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30,
 
Change
 
2016
 
2015
 
$
 
%
Net income attributable to TCF Financial Corporation
$
162,032

 
$
144,631

 
$
17,401

 
12.0
 %
Other comprehensive income (loss):