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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 27, 2017
 
 390811283_deluxetcfcorplogorgba37.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))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

¨ Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨





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 27, 2017, attached to this Form 8-K as Exhibit 99.1, announcing its results of operations for the quarter ended September 30, 2017.
 
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 2017 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 27, 2017 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






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,
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 27, 2017



(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit
Exhibit 99.1

390811283_deluxetcfcorplogorgba38.jpg
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 $60.5 MILLION, OR 29 CENTS PER SHARE

THIRD QUARTER OBSERVATIONS

Revenue of $343.3 million, up 3.5 percent from the third quarter of 2016
Net interest income of $234.1 million, up 10.4 percent from the third quarter of 2016
Net interest margin of 4.61 percent, up 27 basis points from the third quarter of 2016
Period-end loans and leases of $19.0 billion, up 9.2 percent from September 30, 2016
Net charge-offs as a percentage of average loans and leases of 0.18 percent, down 8 basis points from the third quarter of 2016
Non-accrual loans and leases of $119.6 million, down 37.1 percent from September 30, 2016
Average deposits of $17.6 billion, up 2.9 percent from the third quarter of 2016
Efficiency ratio of 68.46 percent, improved 54 basis points from the third quarter of 2016
Earnings per share of 29 cents, down 2 cents from the third quarter of 2016. Impact of 4 cents per share related to the notice of our intent to redeem the Series A Non-Cumulative Perpetual Preferred Stock.

Summary of Financial Results
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table 1
 
 
 
 
 
 
 
Change
 
 
 
 
 
 
 
(Dollars in thousands, except per-share data)
3Q
 
2Q
 
3Q
 
3Q17 vs
 
3Q17 vs
 
YTD
 
YTD
 
 
 
 
2017
 
2017
 
2016
 
2Q17
 
3Q16
 
2017
 
2016
 
Change
 
Net income attributable to TCF
$
60,528

 
$
60,432

 
$
56,292

 
0.2
 %
 
7.5
 %
 
$
167,238

 
$
162,032

 
3.2
 %
 
Net interest income
234,103

 
227,161

 
212,018

 
3.1

 
10.4

 
683,378

 
636,660

 
7.3

 
Diluted earnings per common share
0.29

 
0.33

 
0.31

 
(12.1
)
 
(6.5
)
 
0.86

 
0.88

 
(2.3
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial Ratios(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Return on average assets
1.15
%
 
1.17
%
 
1.12
%
 
(2) bps

 
3
 bps
 
1.07
%
 
1.07
%
 
 bps
 
Return on average common equity
8.44

 
9.96

 
9.59

 
(152
)
 
(115
)
 
8.69

 
9.39

 
(70
)
 
Return on average tangible common equity(2)
9.57

 
11.15

 
10.78

 
(158
)
 
(121
)
 
9.77

 
10.58

 
(81
)
 
Net interest margin
4.61

 
4.52

 
4.34

 
9

 
27

 
4.53

 
4.35

 
18

 
Net charge-offs as a percentage of average loans and leases
0.18

 
0.28

 
0.26

 
(10
)
 
(8
)
 
0.19

 
0.25

 
(6
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Annualized.
 
 
 
 
 
 
 
(2) See "Reconciliation of GAAP to Non-GAAP Financial Measures" table.
 
 
 
 
 
 
 




WAYZATA, Minn. (October 27, 2017) - TCF Financial Corporation ("TCF" or the "Company") (NYSE: TCF) today reported net income of $60.5 million for the third quarter of 2017, compared with $56.3 million for the third quarter of 2016 and $60.4 million for the second quarter of 2017. Diluted earnings per common share was 29 cents for the third quarter of 2017 (inclusive of a one-time reduction in net income available to common stockholders of $5.8 million and accrued dividends payable of $1.6 million, or 4 cents per common share, related to the notice of our intent to redeem the Series A Non-Cumulative Perpetual Preferred Stock), compared with 31 cents for the third quarter of 2016 and 33 cents for the second quarter of 2017.

"TCF reported strong third quarter results highlighted by solid loan and lease growth, continued net interest margin expansion and stable credit quality," said Craig R. Dahl, chairman and chief executive officer. "A loan and lease portfolio purchase in leasing and equipment finance drove strong growth during the quarter. We continued to deliver strong net interest margin expansion and net interest income growth as yields in our variable- and adjustable-rate loan portfolios benefited from rising interest rates.

"We improved our risk profile and recognized recoveries from previous charge-offs through our second consumer real estate non-accrual loan sale this year. Our consistent execution of our diversification strategy has enabled us to maintain stable credit quality performance.

"The positive traction we are generating from executing on our business strategy has me very optimistic about the future of TCF. With consistent loan and lease growth, a strong revenue base and the successful launch of a new digital banking platform, there is positive momentum into 2018 at TCF.”



2




Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
Table 2
 
 
 
 
 
 
 
Change
 
 
 
 
 
 
 
(Dollars in thousands)
3Q
 
2Q
 
3Q
 
3Q17 vs
 
3Q17 vs
 
YTD
 
YTD
 
 
 
 
2017
 
2017
 
2016
 
2Q17
 
3Q16
 
2017
 
2016
 
Change
 
Total interest income
$
257,605

 
$
248,517

 
$
232,726

 
3.7
 %
 
10.7
 %
 
$
748,429

 
$
699,072

 
7.1
 %
 
Total interest expense
23,502

 
21,356

 
20,708

 
10.0

 
13.5

 
65,051

 
62,412

 
4.2

 
Net interest income
234,103

 
227,161

 
212,018

 
3.1

 
10.4

 
683,378

 
636,660

 
7.3

 
Non-interest income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fees and service charges
34,605

 
32,733

 
35,093

 
5.7

 
(1.4
)
 
98,620

 
102,532

 
(3.8
)
 
Card revenue
14,177

 
14,154

 
13,747

 
0.2

 
3.1

 
41,481

 
41,193

 
0.7

 
ATM revenue
5,234

 
5,061

 
5,330

 
3.4

 
(1.8
)
 
14,970

 
15,639

 
(4.3
)
 
Subtotal
54,016

 
51,948

 
54,170

 
4.0

 
(0.3
)
 
155,071

 
159,364

 
(2.7
)
 
Gains on sales of auto loans, net

 
380

 
11,624

 
(100.0
)
 
(100.0
)
 
3,244

 
33,687

 
(90.4
)
 
Gains on sales of consumer real estate loans, net
8,049

 
8,980

 
13,528

 
(10.4
)
 
(40.5
)
 
25,920

 
33,751

 
(23.2
)
 
Servicing fee income
9,966

 
10,730

 
10,393

 
(7.1
)
 
(4.1
)
 
32,347

 
28,778

 
12.4

 
Subtotal
18,015

 
20,090

 
35,545

 
(10.3
)
 
(49.3
)
 
61,511

 
96,216

 
(36.1
)
 
Leasing and equipment finance
34,080

 
39,830

 
28,289

 
(14.4
)
 
20.5

 
102,208

 
87,850

 
16.3

 
Other
2,930

 
2,795

 
2,270

 
4.8

 
29.1

 
8,428

 
7,518

 
12.1

 
Fees and other revenue
109,041

 
114,663

 
120,274

 
(4.9
)
 
(9.3
)
 
327,218

 
350,948

 
(6.8
)
 
Gains (losses) on securities, net
189

 

 
(600
)
 
N.M.

 
N.M.

 
189

 
(716
)
 
N.M.

 
Total non-interest income
109,230

 
114,663

 
119,674

 
(4.7
)
 
(8.7
)
 
327,407

 
350,232

 
(6.5
)
 
Total revenue
$
343,333

 
$
341,824

 
$
331,692

 
0.4

 
3.5

 
$
1,010,785

 
$
986,892

 
2.4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest margin(1)
4.61
%
 
4.52
%
 
4.34
%
 
9
  bps
 
27
  bps
 
4.53
%
 
4.35
%
 
18
  bps
 
Total non-interest income as a percentage of total revenue
31.8

 
33.5

 
36.1

 
(170)

 
(430)

 
32.4

 
35.5

 
(310)

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

Net Interest Income

Net interest income for the third quarter of 2017 increased $22.1 million, or 10.4 percent, from the third quarter of 2016, primarily due to an increase in interest income on loans and leases, partially offset by a decrease in interest income on loans held for sale and an increase in total interest expense. Total interest income increased $24.9 million, or 10.7 percent, from the third quarter of 2016, primarily due to increased average yields and higher average balances of the variable- and adjustable-rate commercial loans and variable-rate inventory finance loans, as well as increased average yields on the variable- and adjustable-rate consumer real estate loans and fixed-rate auto finance loans. These increases were partially offset by a lower average balance in the fixed-rate consumer real estate portfolio. Total interest expense increased $2.8 million, or 13.5 percent, from the third quarter of 2016, primarily due to increased average rates and higher average balances of certificates of deposit, as well as higher average balances of long-term borrowings, partially offset by decreased average rates and lower average balances of money market accounts.


3




Net interest income for the third quarter of 2017 increased $6.9 million, or 3.1 percent, from the second quarter of 2017, primarily due to an increase in interest income on loans and leases, partially offset by an increase in total interest expense. Total interest income increased $9.1 million, or 3.7 percent, from the second quarter of 2017, primarily due to higher average balances and increased average yields on the variable- and adjustable-rate consumer real estate loans and fixed-rate auto finance loans, as well as increased yields on the variable- and adjustable-rate commercial loans. Total interest expense increased $2.1 million, or 10.0 percent, from the second quarter of 2017, primarily due to higher average balances and increased average rates on certificates of deposit.

Net interest margin was 4.61 percent for the third quarter of 2017, up 27 basis points from the third quarter of 2016 and up 9 basis points from the second quarter of 2017. The increases from both periods were primarily due to higher average yields on the variable- and adjustable-rate loans due to interest rate increases, partially offset by higher average rates on certificates of deposit.

Non-interest Income

TCF sold no auto loans during the third quarter of 2017 due to the strategic shift in auto finance. TCF sold $614.9 million and $48.0 million of auto loans during the third quarter of 2016 and the second quarter of 2017, respectively, resulting in net gains in each respective period.

TCF sold $291.0 million, $437.1 million and $273.4 million of consumer real estate loans during the third quarters of 2017 and 2016 and the second quarter of 2017, respectively, resulting in net gains in each respective period. Included in consumer real estate loans sold in the third quarter of 2017 was $21.8 million of non-accrual loans, servicing released. As these loans were previously partially charged-off, a recovery of $4.6 million was recorded as a reduction to provision for credit losses and transaction fees of $0.4 million related to the sale were recorded in gains on sales of consumer real estate loans, net.

Servicing fee income was $10.0 million on $5.0 billion of average loans and leases serviced for others for the third quarter of 2017, compared with $10.4 million on $5.1 billion for the third quarter of 2016 and $10.7 million on $5.3 billion for the second quarter of 2017. The decreases from both periods were primarily due to run-off in the auto finance serviced for others portfolio.

Leasing and equipment finance non-interest income for the third quarter of 2017 increased $5.8 million, or 20.5 percent, from the third quarter of 2016 and decreased $5.8 million, or 14.4 percent, from the second quarter of 2017. The increase from the third quarter of 2016 was primarily due to an increase in operating lease revenue mainly driven by the acquisition of Equipment Financing & Leasing Corporation ("EFLC") in the second quarter of 2017, partially offset by a decrease in sales-type lease revenue due to customer-driven events. The decrease from the second quarter of 2017 was due to customer-driven events resulting in a decrease in sales-type lease revenue, partially offset by an increase in operating lease revenue due to the acquisition of EFLC.


4




Loans and Leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Period-End and Average Loans and Leases
 
 
 
 
 
 
Table 3
 
 
 
 
 
 
 
Percent Change
 
 
 
 
 
 
 
(Dollars in thousands)
3Q
 
2Q
 
3Q
 
3Q17 vs
 
3Q17 vs
 
YTD
 
YTD
 
Percent
 
 
2017
 
2017
 
2016
 
2Q17
 
3Q16
 
2017
 
2016
 
Change
 
Period-End:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consumer real estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
First mortgage lien
$
1,953,199

 
$
2,070,385

 
$
2,313,044

 
(5.7
)%
 
(15.6
)%
 
 
 
 
 
 
 
Junior lien
2,977,613

 
2,701,592

 
2,674,280

 
10.2

 
11.3

 
 
 
 
 
 
 
Total consumer real estate
4,930,812

 
4,771,977

 
4,987,324

 
3.3

 
(1.1
)
 
 
 
 
 
 
 
Commercial
3,489,680

 
3,488,725

 
3,150,199

 

 
10.8

 
 
 
 
 
 
 
Leasing and equipment finance
4,730,931

 
4,333,735

 
4,236,224

 
9.2

 
11.7

 
 
 
 
 
 
 
Inventory finance
2,576,077

 
2,509,485

 
2,261,086

 
2.7

 
13.9

 
 
 
 
 
 
 
Auto finance
3,240,413

 
3,243,144

 
2,731,900

 
(0.1
)
 
18.6

 
 
 
 
 
 
 
Other
20,439

 
19,459

 
17,886

 
5.0

 
14.3

 
 
 
 
 
 
 
Total
$
18,988,352

 
$
18,366,525

 
$
17,384,619

 
3.4

 
9.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consumer real estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
First mortgage lien
$
2,016,049

 
$
2,117,138

 
$
2,353,097

 
(4.8
)%
 
(14.3
)%
 
$
2,122,850

 
$
2,463,497

 
(13.8
)%
 
Junior lien
2,821,051

 
2,628,980

 
2,782,479

 
7.3

 
1.4

 
2,747,187

 
2,820,319

 
(2.6
)
 
Total consumer real estate
4,837,100

 
4,746,118

 
5,135,576

 
1.9

 
(5.8
)
 
4,870,037

 
5,283,816

 
(7.8
)
 
Commercial
3,473,425

 
3,417,052

 
3,092,115

 
1.6

 
12.3

 
3,398,413

 
3,119,952

 
8.9

 
Leasing and equipment finance
4,316,434

 
4,277,376

 
4,147,488

 
0.9

 
4.1

 
4,293,364

 
4,057,755

 
5.8

 
Inventory finance
2,479,416

 
2,723,340

 
2,272,409

 
(9.0
)
 
9.1

 
2,632,385

 
2,422,979

 
8.6

 
Auto finance
3,280,612

 
3,149,974

 
2,670,272

 
4.1

 
22.9

 
3,050,555

 
2,708,470

 
12.6

 
Other
11,567

 
10,235

 
9,252

 
13.0

 
25.0

 
10,520

 
9,617

 
9.4

 
Total
$
18,398,554

 
$
18,324,095

 
$
17,327,112

 
0.4

 
6.2

 
$
18,255,274

 
$
17,602,589

 
3.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Period-end loans and leases were $19.0 billion at September 30, 2017, an increase of $1.6 billion, or 9.2 percent, from September 30, 2016 and an increase of $621.8 million, or 3.4 percent, from June 30, 2017. Average loans and leases were $18.4 billion for the third quarter of 2017, an increase of $1.1 billion, or 6.2 percent, from the third quarter of 2016 and an increase of $74.5 million, or 0.4 percent, from the second quarter of 2017.


5




The increase from September 30, 2016 for period-end loans and leases was primarily due to increases in the auto finance and leasing and equipment finance portfolios, as well as increases in the commercial and inventory finance portfolios. The increase in the auto finance portfolio was primarily due to the reclassification of loans from held for sale to held for investment during the second quarter of 2017. The increase in the leasing and equipment finance portfolio was primarily attributable to a loan and lease portfolio purchase of $445.5 million on September 29, 2017. The increase in average loans and leases from September 30, 2016 was primarily due to increases in the auto finance and commercial loan portfolios, as well as increases in the inventory finance and leasing and equipment finance portfolios, partially offset by a decrease in the consumer real estate portfolio. The decrease in the consumer real estate portfolio was primarily due to a decrease in the first mortgage lien portfolio due to run-off and the non-accrual loan sales in the first and third quarters of 2017 totaling $71.2 million.

The increase from June 30, 2017 for period-end loans and leases was primarily due to an increase in the leasing and equipment finance portfolio due to a loan and lease portfolio purchase during the third quarter of 2017 and an increase in the consumer real estate junior lien portfolio.

Loan and lease originations were $3.9 billion for the third quarter of 2017, a decrease of $314.2 million, or 7.4 percent, from the third quarter of 2016 and a decrease of $150.9 million, or 3.7 percent, from the second quarter of 2017. The decrease from the third quarter of 2016 was primarily due to decreased originations in auto finance, leasing and equipment finance, and consumer real estate, partially offset by higher inventory finance originations. The decrease from the second quarter of 2017 was primarily due to decreased originations in leasing and equipment finance, partially offset by higher commercial originations.


6




Credit Quality
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Credit Trends
 
 
 
 
 
 
 
Table 4
 
 
 
 
 
 
 
Change
 
(Dollars in thousands)
3Q
2Q
1Q
4Q
3Q
 
3Q17 vs
3Q17 vs
 
 
2017
2017
2017
2016
2016
 
2Q17
3Q16
 
Over 60-day delinquencies as a percentage of period-end loans and leases(1)
0.13
%
0.11
%
0.09
%
0.12
%
0.12
%
 
2
  bps
1
  bps
 
Net charge-offs as a percentage of average loans and leases(2), (3), (4)
0.18

0.28

0.11

0.27

0.26

 
(10
)
(8
)
 
Non-accrual loans and leases and other real estate owned
$
146,024

$
158,000

$
170,940

$
228,242

$
223,759

 
(7.6
)%
(34.7
)%
 
Provision for credit losses
14,545

19,446

12,193

19,888

13,894

 
(25.2
)
4.7

 
 
 
(1) Excludes non-accrual loans and leases.
 
(2) Annualized.
 
(3) Excluding the $4.6 million recovery from the consumer real estate non-accrual loan sale, net charge-offs as a percentage of average loans and leases was 0.28% for 3Q 2017.
 
(4) Excluding the $8.7 million recovery from the consumer real estate non-accrual loan sale, net charge-offs as a percentage of average loans and leases was 0.31% for 1Q 2017.
 

The over 60-day delinquency rate, excluding non-accrual loans and leases, was 0.13 percent at September 30, 2017, up 1 basis point from September 30, 2016, and up 2 basis points from June 30, 2017. The increases from both periods were primarily driven by the leasing and equipment finance loan and lease portfolio purchase and higher delinquencies in the auto finance portfolio. The increase from September 30, 2016 was partially offset by improved credit quality in the consumer real estate first mortgage lien portfolio.

The net charge-off rate was 0.18 percent for the third quarter of 2017, down 8 basis points from the third quarter of 2016 and down 10 basis points from the second quarter of 2017. The decreases from both periods were primarily due to the recovery of previous charge-offs related to the consumer real estate non-accrual loans that were sold, partially offset by increased net charge-offs in the auto finance portfolio. The decrease from the second quarter of 2017 was also due to a net recovery in the commercial portfolio. Excluding the $4.6 million recovery from the non-accrual consumer real estate loan sale, the net charge-off rate was 0.28 percent for the third quarter of 2017, up 2 basis points from the third quarter of 2016 and consistent with the second quarter of 2017.


7




Non-accrual loans and leases and other real estate owned were $146.0 million at September 30, 2017, a decrease of $77.7 million, or 34.7 percent, from September 30, 2016, and a decrease of $12.0 million, or 7.6 percent, from June 30, 2017. Non-accrual loans and leases were $119.6 million at September 30, 2017, a decrease of $70.4 million, or 37.1 percent, from September 30, 2016 and a decrease of $9.7 million, or 7.5 percent, from June 30, 2017. The decrease from September 30, 2016 was primarily due to the consumer real estate non-accrual loan sales in the first and third quarters of 2017, totaling $71.2 million, partially offset by an increase in non-accrual loans and leases in the leasing and equipment finance portfolio. The decrease from June 30, 2017 was primarily due to the consumer real estate non-accrual loan sale of $21.8 million, partially offset by an increase in non-accrual loans and leases in the leasing and equipment finance and commercial portfolios. Other real estate owned was $26.4 million at September 30, 2017, a decrease of $7.3 million, or 21.7 percent, from September 30, 2016, and a decrease of $2.3 million, or 8.1 percent, from June 30, 2017. The decreases from both periods were primarily due to the sales of consumer real estate properties outpacing additions.

Provision for credit losses was $14.5 million for the third quarter of 2017, an increase of $0.7 million, or 4.7 percent, from the third quarter of 2016, and a decrease of $4.9 million, or 25.2 percent, from the second quarter of 2017. The increase from the third quarter of 2016 was primarily due to increased reserve requirements related to recent hurricanes of $5.2 million based on an initial analysis of current exposure and historical portfolio performance following similar natural disasters, primarily related to the auto finance portfolio. The increase was also due to increased net charge-offs in the auto finance portfolio and increased reserve requirements unrelated to the recent hurricanes in the commercial portfolio. These increases were partially offset by the recovery of $4.6 million on previous charge-offs related to the non-accrual loans that were sold and lower reserve requirements in the consumer real estate portfolio. The decrease from the second quarter of 2017 was primarily due to the recovery of previous charge-offs related to the non-accrual loans that were sold and lower reserve requirements in the consumer real estate portfolio, partially offset by increased reserve requirements of $5.2 million related to recent hurricanes. In addition, the provision for credit losses for the second quarter of 2017 included a provision attributable to the reclassification of auto finance loans from held for sale to held for investment.

8




Deposits
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Deposits
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table 5
 
 
 
 
 
 
 
Change
 
 
 
 
 
 
 
(Dollars in thousands)
3Q
 
2Q
 
3Q
 
3Q17 vs
 
3Q17 vs
 
YTD
 
YTD
 
 
 
 
2017
 
2017
 
2016
 
2Q17
 
3Q16
 
2017
 
2016
 
Change
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Checking
$
6,046,372

 
$
6,012,235

 
$
5,673,888

 
0.6
 %
 
6.6
 %
 
$
5,991,419

 
$
5,664,812

 
5.8
 %
 
Savings
4,859,973

 
4,822,338

 
4,672,642

 
0.8

 
4.0

 
4,819,016

 
4,692,189

 
2.7

 
Money market
2,106,814

 
2,221,807

 
2,496,590

 
(5.2
)
 
(15.6
)
 
2,236,972

 
2,509,033

 
(10.8
)
 
Certificates of deposit
4,636,007

 
4,266,488

 
4,304,990

 
8.7

 
7.7

 
4,314,088

 
4,239,676

 
1.8

 
Total average deposits
$
17,649,166

 
$
17,322,868

 
$
17,148,110

 
1.9

 
2.9

 
$
17,361,495

 
$
17,105,710

 
1.5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average interest rate on deposits(1)
0.38
%
 
0.33
%
 
0.37
%
 
5
 bps
 
1
 bps
 
0.35
%
 
0.36
%
 
(1) bps

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Annualized.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Total average deposits for the third quarter of 2017 increased $501.1 million, or 2.9 percent, from the third quarter of 2016 and increased $326.3 million or 1.9 percent, from the second quarter of 2017. The increase from the third quarter of 2016 was primarily due to growth in average checking balances, certificates of deposit and savings balances, partially offset by a decrease in money market balances. The increase from the second quarter of 2017 was primarily due to growth in average certificates of deposit, partially offset by a decrease in money market balances.

The average interest rate on deposits for the third quarter of 2017 was 0.38 percent, up 1 basis point from the third quarter of 2016 and up 5 basis points from the second quarter of 2017. The increases from both periods were primarily due to increased average interest rates on certificates of deposit and savings balances. The increase from the third quarter of 2016 was partially offset by decreased average interest rates on money market balances.


9




Non-interest Expense
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-interest Expense
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table 6
 
 
 
 
 
 
 
 Change
 
 
 
 
 
 
 
(Dollars in thousands)
3Q
 
2Q
 
3Q
 
3Q17 vs
 
3Q17 vs
 
YTD
 
YTD
 
 
 
 
2017
 
2017
 
2016
 
2Q17
 
3Q16
 
2017
 
2016
 
Change
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Compensation and employee benefits
$
115,127

 
$
115,918

 
$
117,155

 
(0.7
)%
 
(1.7
)%
 
$
355,522

 
$
359,721

 
(1.2
)%
 
Occupancy and equipment
38,766

 
38,965

 
37,938

 
(0.5
)
 
2.2

 
117,331

 
111,830

 
4.9

 
Other
61,408

 
61,075

 
59,421

 
0.5

 
3.3

 
186,520

 
172,185

 
8.3

 
Subtotal
215,301

 
215,958

 
214,514

 
(0.3
)
 
0.4

 
659,373

 
643,736

 
2.4

 
Operating lease depreciation
15,696

 
12,466

 
10,038

 
25.9

 
56.4

 
39,404

 
29,453

 
33.8

 
Foreclosed real estate and repossessed assets, net
3,829

 
4,639

 
4,243

 
(17.5
)
 
(9.8
)
 
13,017

 
11,298

 
15.2

 
Other credit costs, net
209

 
24

 
83

 
N.M.

 
151.8

 
334

 
41

 
N.M.

 
Total non-interest expense
$
235,035

 
$
233,087

 
$
228,878

 
0.8

 
2.7

 
$
712,128

 
$
684,528

 
4.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Efficiency ratio
68.46
%
 
68.19
%
 
69.00
%
 
27
  bps
 
(54) bps

 
70.45
%
 
69.36
%
 
109
  bps
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
N.M. Not Meaningful.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Non-interest expense for the third quarter of 2017 increased $6.2 million, or 2.7 percent, from the third quarter of 2016, primarily due to increases in operating lease depreciation and other non-interest expense, partially offset by a decrease in compensation and employee benefits. Non-interest expense for the third quarter of 2017 increased $1.9 million, or 0.8 percent, from the second quarter of 2017, primarily due to an increase in operating lease depreciation, partially offset by decreases in foreclosed real estate and repossessed assets expense and compensation and employee benefits.

Compensation and employee benefits expense decreased $2.0 million, or 1.7 percent, from the third quarter of 2016 and decreased $0.8 million, or 0.7 percent, from the second quarter of 2017. The decrease from the third quarter of 2016 was primarily due to reduced headcount in auto finance, partially offset by higher enterprise services contract labor utilization. The decrease from the second quarter of 2017 was primarily due to lower sales commissions and incentive compensation, partially offset by higher salaries.

Other non-interest expense increased $2.0 million, or 3.3 percent, from the third quarter of 2016 and remained consistent with the second quarter of 2017. The increase from the third quarter of 2016 was primarily due to higher professional fees related to strategic investments in technology capabilities, partially offset by a decrease in impairment charges on interest-only strips.

Operating lease depreciation increased $5.7 million, or 56.4 percent, from the third quarter of 2016 and increased $3.2 million, or 25.9 percent, from the second quarter of 2017. The increases from both periods were due to increases in leasing and equipment finance operating lease revenue related to the acquisition of EFLC.



10




Net expenses related to foreclosed real estate and repossessed assets remained consistent with the third quarter of 2016 and decreased $0.8 million, or 17.5 percent, from the second quarter of 2017. The decrease from the second quarter of 2017 was primarily due to higher gains on sale of consumer and commercial properties and lower operating costs associated with maintaining fewer consumer properties, partially offset by higher repossessed assets expense attributable to auto finance.

Income Tax Expense

The Company’s effective income tax rate was 32.7 percent for the third quarter of 2017, compared with 34.0 percent for the third quarter of 2016 and 28.9 percent for the second quarter of 2017. The effective income tax rate for the second quarter of 2017 was impacted by a $3.4 million favorable state tax settlement.

Capital
 
 
 
 
 
 
 
 
 
Capital Information
 
 
Table 7
 
At Sep. 30,
 
At Dec. 31,
 
(Dollars in thousands, except per-share data)
2017
 
2016
 
Total equity
$
2,596,514

 
$
2,444,645

 
Book value per common share
13.45

 
12.66

 
Tangible book value per common share(1)
11.99

 
11.33

 
Common equity to assets
10.04
%
 
10.09
%
 
Tangible common equity to tangible assets(1)
9.06

 
9.13

 
Capital accumulation rate(2)
7.47

 
8.59

 
 
 
 
 
 
 
At Sep. 30,
 
At Dec. 31,
 
Regulatory Capital:
2017(3)
 
2016
 
Common equity Tier 1 capital
$
2,080,729

 
$
1,970,323

 
Tier 1 capital
2,362,926

 
2,248,221

 
Total capital
2,734,260

 
2,635,925

 
 
 
 
 
 
Regulatory Capital Ratios:
 
 
 
 
Common equity Tier 1 capital ratio
10.05
%
 
10.24
%
 
Tier 1 risk-based capital ratio
11.41

 
11.68

 
Total risk-based capital ratio
13.21

 
13.69

 
Tier 1 leverage ratio
10.88

 
10.73

 
 
 
 
 
 
(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 2017 are preliminary pending completion and filing of the Company's regulatory reports.
 

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

On September 14, 2017, TCF completed the public offering of 7,000,000 depositary shares, each representing a 1/1000th ownership interest in a share of the 5.70% Series C Non-Cumulative Perpetual Preferred Stock (the "Series C Preferred Stock"), par value $0.01 per share. Net proceeds of the offering to TCF, after deducting deferred stock issuance costs of $5.6 million, were $169.4 million.


11




On September 15, 2017, TCF provided notice of its intent to redeem all outstanding shares of its Series A Non-Cumulative Perpetual Preferred Stock (the "Series A Preferred Stock") and the related depositary shares during the fourth quarter of 2017. As a result, TCF reclassified the outstanding liquidation preference amount of the Series A Preferred Stock totaling $172.5 million from preferred stock to accrued expenses and other liabilities on the Consolidated Statement of Financial Condition because upon the notification date, the Series A Preferred Stock became mandatorily redeemable. The liquidation preference amount equals the redemption price for all outstanding shares of the Series A Preferred Stock. Deferred stock issuance costs of $5.8 million originally recorded as a reduction to preferred stock upon the issuance of the Series A Preferred Stock were reclassified to retained earnings and resulted in a non-cash, one-time reduction to net income available to common stockholders utilized in the computation of earnings per common share and diluted earnings per common share. In addition, dividends of $1.6 million on the Series A Preferred Stock were accrued through October 15, 2017. These two items lowered earnings per common share and diluted earnings per common share by 4 cents per share for the third quarter and first nine months of 2017. Effective October 16, 2017, TCF redeemed all outstanding shares of its Series A Preferred Stock and the related depositary shares using the net proceeds from the offering of its Series C Preferred Stock and additional cash on hand.

On October 18, 2017, TCF's Board of Directors declared a regular quarterly cash dividend of 7.5 cents per common share, payable on December 1, 2017, to stockholders of record at the close of business on November 15, 2017. TCF also declared dividends on the 6.45% Series B and 5.70% Series C Non-Cumulative Perpetual Preferred Stock, both payable on December 1, 2017, to stockholders of record at the close of business on November 15, 2017.

Other Matters

As previously announced, the United States District Court for the District of Minnesota (the "Court") granted TCF National Bank's motion to dismiss the Consumer Financial Protection Bureau’s ("CFPB") Regulation E claims. In addition, the Court dismissed the CFPB’s unfair, deceptive and abusive conduct claims under the Consumer Financial Protection Act ("CFPA") for periods prior to July 21, 2011. The Court did not grant TCF National Bank's motion to dismiss CFPA claims for periods after July 21, 2011.


12




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 27, 2017 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, 2017, TCF had $23.0 billion in total assets and 321 bank branches in Illinois, Minnesota, Michigan, Colorado, Wisconsin, Arizona and South Dakota providing retail and commercial banking services. TCF, through its subsidiaries, also conducts commercial leasing, 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.



13




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

Certain factors could cause the Company's future results to differ materially from those expressed or implied in any forward-looking statements contained herein. These factors include the factors discussed in Part I, Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2016 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; the effects of man-made and natural disasters, including fires, floods, tornadoes, hurricanes, acts of terrorism, civil disturbances and environmental damage, which may negatively affect our operations and/or our customers.
 

14




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

Earnings/Capital Risks and Constraints, Liquidity Risks. Limitations on TCF's ability to 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 including those relating to liquidity; uncertainties relating to future retail deposit account changes, including limitations on TCF's ability to predict customer behavior and the impact on TCF's fee revenues.
 
Branching Risk; Growth Risks. Adverse developments affecting TCF's supermarket banking relationships or either of the primary supermarket chains in which TCF maintains supermarket branches; costs related to closing underperforming branches; inability to timely close underperforming branches due to long-term lease obligations; slower than anticipated growth in existing or acquired businesses; inability to successfully execute on TCF's growth strategy through acquisitions or expanding existing business relationships; failure to expand or diversify TCF's balance sheet through new or expanded programs or opportunities; failure to effectuate, and risks of claims related to, sales 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, such as by failing to develop and maintain technology necessary to satisfy customer demands, costs and possible disruptions related to upgrading systems; the failure to attract and retain key employees.
 
Litigation Risks. Results of litigation or government enforcement actions such as TCF's pending litigation with the CFPB and related matters, including class action litigation or enforcement actions concerning TCF's lending or deposit activities, including account opening/origination, servicing practices, fees or charges, employment practices, or checking account overdraft program "opt in" requirements; possible increases in indemnification obligations for certain litigation against Visa U.S.A.

Accounting, Audit, Tax and Insurance Matters. Changes in accounting standards or interpretations of existing standards; federal or state monetary, fiscal or tax policies, including 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.



15




TCF FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per-share data)
(Unaudited)
 
 
 
 
 
 
 
 
 
Quarter Ended September 30,
 
Change
 
2017
 
2016
 
$
 
%
Interest income:
 
 
 
 
 
 
 
Loans and leases
$
243,973

 
$
210,765

 
$
33,208

 
15.8
 %
Securities available for sale
8,486

 
7,126

 
1,360

 
19.1

Securities held to maturity
1,073

 
1,049

 
24

 
2.3

Loans held for sale and other
4,073

 
13,786

 
(9,713
)
 
(70.5
)
Total interest income
257,605

 
232,726

 
24,879

 
10.7

Interest expense:
 
 
 
 
 
 
 
Deposits
17,015

 
15,851

 
1,164

 
7.3

Borrowings
6,487

 
4,857

 
1,630

 
33.6

Total interest expense
23,502

 
20,708

 
2,794

 
13.5

Net interest income
234,103

 
212,018

 
22,085

 
10.4

Provision for credit losses
14,545

 
13,894

 
651

 
4.7

Net interest income after provision for credit losses
219,558

 
198,124

 
21,434

 
10.8

Non-interest income:
 
 
 
 
 
 
 
Fees and service charges
34,605

 
35,093

 
(488
)
 
(1.4
)
Card revenue
14,177

 
13,747

 
430

 
3.1

ATM revenue
5,234

 
5,330

 
(96
)
 
(1.8
)
Subtotal
54,016

 
54,170

 
(154
)
 
(0.3
)
Gains on sales of auto loans, net

 
11,624

 
(11,624
)
 
(100.0
)
Gains on sales of consumer real estate loans, net
8,049

 
13,528

 
(5,479
)
 
(40.5
)
Servicing fee income
9,966

 
10,393

 
(427
)
 
(4.1
)
Subtotal
18,015

 
35,545

 
(17,530
)
 
(49.3
)
Leasing and equipment finance
34,080

 
28,289

 
5,791

 
20.5

Other
2,930

 
2,270

 
660

 
29.1

Fees and other revenue
109,041

 
120,274

 
(11,233
)
 
(9.3
)
Gains (losses) on securities, net
189

 
(600
)
 
789

 
N.M.

Total non-interest income
109,230

 
119,674

 
(10,444
)
 
(8.7
)
Non-interest expense:
 
 
 
 
 
 
 
Compensation and employee benefits
115,127

 
117,155

 
(2,028
)
 
(1.7
)
Occupancy and equipment
38,766

 
37,938

 
828

 
2.2

Other
61,408

 
59,421

 
1,987

 
3.3

Subtotal
215,301

 
214,514

 
787

 
0.4

Operating lease depreciation
15,696

 
10,038

 
5,658

 
56.4

Foreclosed real estate and repossessed assets, net
3,829

 
4,243

 
(414
)
 
(9.8
)
Other credit costs, net
209

 
83

 
126

 
151.8

Total non-interest expense
235,035

 
228,878

 
6,157

 
2.7

Income before income tax expense
93,753

 
88,920

 
4,833

 
5.4

Income tax expense
30,704

 
30,257

 
447

 
1.5

Income after income tax expense
63,049

 
58,663

 
4,386

 
7.5

Income attributable to non-controlling interest
2,521

 
2,371

 
150

 
6.3

Net income attributable to TCF Financial Corporation
60,528

 
56,292

 
4,236

 
7.5

Preferred stock dividends
6,464

 
4,847

 
1,617

 
33.4

Impact of notice to redeem preferred stock
5,779

 

 
5,779

 
N.M.

Net income available to common stockholders
$
48,285

 
$
51,445

 
$
(3,160
)
 
(6.1
)
 
 
 
 
 
 
 
 
Earnings per common share:
 
 
 
 
 
 
 
Basic
$
0.29

 
$
0.31

 
$
(0.02
)
 
(6.5
)%
Diluted
0.29

 
0.31

 
(0.02
)
 
(6.5
)
 
 
 
 
 
 
 
 
Dividends declared per common share
$
0.075

 
$
0.075

 
$

 
 %
 
 
 
 
 
 
 
 
Average common and common equivalent shares
 
 
 
 
 
 
 
outstanding (in thousands):
 
 
 
 
 
 
 
Basic
168,971

 
167,366

 
1,605

 
1.0
 %
Diluted
169,240

 
167,968

 
1,272

 
0.8

 
 
 
 
 
 
 
 
N.M. Not Meaningful.

16




TCF FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per-share data)
(Unaudited)
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30,
 
Change
 
2017
 
2016
 
$
 
%
Interest income:
 
 
 
 
 
 
 
Loans and leases
$
697,613

 
$
639,698

 
$
57,915

 
9.1
 %
Securities available for sale
24,518

 
19,020

 
5,498

 
28.9

Securities held to maturity
3,388

 
3,484

 
(96
)
 
(2.8
)
Loans held for sale and other
22,910

 
36,870

 
(13,960
)
 
(37.9
)
Total interest income
748,429

 
699,072

 
49,357

 
7.1

Interest expense:
 
 
 
 
 
 
 
Deposits
45,166

 
46,735

 
(1,569
)
 
(3.4
)
Borrowings
19,885

 
15,677

 
4,208

 
26.8

Total interest expense
65,051

 
62,412

 
2,639

 
4.2

Net interest income
683,378

 
636,660

 
46,718

 
7.3

Provision for credit losses
46,184

 
45,986

 
198

 
0.4

Net interest income after provision for credit losses
637,194

 
590,674

 
46,520

 
7.9

Non-interest income:
 
 
 
 
 
 
 
Fees and service charges
98,620

 
102,532

 
(3,912
)
 
(3.8
)
Card revenue
41,481

 
41,193

 
288

 
0.7

ATM revenue
14,970

 
15,639

 
(669
)
 
(4.3
)
Subtotal
155,071

 
159,364

 
(4,293
)
 
(2.7
)
Gains on sales of auto loans, net
3,244

 
33,687

 
(30,443
)
 
(90.4
)
Gains on sales of consumer real estate loans, net
25,920

 
33,751

 
(7,831
)
 
(23.2
)
Servicing fee income
32,347

 
28,778

 
3,569

 
12.4

Subtotal
61,511

 
96,216

 
(34,705
)
 
(36.1
)
Leasing and equipment finance
102,208

 
87,850

 
14,358

 
16.3

Other
8,428

 
7,518

 
910

 
12.1

Fees and other revenue
327,218

 
350,948

 
(23,730
)
 
(6.8
)
Gains (losses) on securities, net
189

 
(716
)
 
905

 
N.M.

Total non-interest income
327,407

 
350,232

 
(22,825
)
 
(6.5
)
Non-interest expense:
 
 
 
 
 
 
 
Compensation and employee benefits
355,522

 
359,721

 
(4,199
)
 
(1.2
)
Occupancy and equipment
117,331

 
111,830

 
5,501

 
4.9

Other
186,520

 
172,185

 
14,335

 
8.3

Subtotal
659,373

 
643,736

 
15,637

 
2.4

Operating lease depreciation
39,404

 
29,453

 
9,951

 
33.8

Foreclosed real estate and repossessed assets, net
13,017

 
11,298

 
1,719

 
15.2

Other credit costs, net
334

 
41

 
293

 
N.M.

Total non-interest expense
712,128

 
684,528

 
27,600

 
4.0

Income before income tax expense
252,473

 
256,378

 
(3,905
)
 
(1.5
)
Income tax expense
77,341

 
86,766

 
(9,425
)
 
(10.9
)
Income after income tax expense
175,132

 
169,612

 
5,520

 
3.3

Income attributable to non-controlling interest
7,894

 
7,580

 
314

 
4.1

Net income attributable to TCF Financial Corporation
167,238

 
162,032

 
5,206

 
3.2

Preferred stock dividends
16,158

 
14,541

 
1,617

 
11.1

Impact of notice to redeem preferred stock
5,779

 

 
5,779

 
N.M.

Net income available to common stockholders
$
145,301

 
$
147,491

 
$
(2,190
)
 
(1.5
)
 
 
 
 
 
 
 
 
Earnings per common share:
 
 
 
 
 
 
 
Basic
$
0.86

 
$
0.88

 
$
(0.02
)
 
(2.3
)%
Diluted
0.86

 
0.88

 
(0.02
)
 
(2.3
)
 
 
 
 
 
 
 
 
Dividends declared per common share
$
0.225

 
$
0.225

 
$

 
 %
 
 
 
 
 
 
 
 
Average common and common equivalent shares
 
 
 
 
 
 
 
outstanding (in thousands):
 
 
 
 
 
 
 
Basic
168,493

 
167,155