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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):
July 27, 2018
 
 394390154_deluxetcfcorplogorgba59.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 July 27, 2018, attached to this Form 8-K as Exhibit 99.1, announcing its results of operations for the quarter ended June 30, 2018.
 
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 second quarter of 2018 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 July 27, 2018 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 8.01.  Other Events.

On July 27, 2018, the Company announced the authorization of an additional $150.0 million under its existing share repurchase program.  The timing and extent of any repurchases will depend upon market conditions, the trading price of the Company's shares and other factors. There are no assurances the Company will repurchase any shares, and the share repurchase may be commenced or suspended at any time or from time to time by the Company. 

Item 9.01 Financial Statements and Exhibits.
 
(d)         Exhibits.
Exhibit No.
Description
99.1
99.2






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:  July 27, 2018



(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit
Exhibit 99.1
394390154_deluxetcfcorplogorgba58.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)
 
Timothy Sedabres
(952) 745-2766
investor@tcfbank.com
(Investors)
 
 
 
 
 
 
TCF REPORTS QUARTERLY NET INCOME OF $58.7 MILLION
AND DILUTED EARNINGS PER COMMON SHARE OF 34 CENTS
Adjusted diluted earnings per common share of 49 cents,(1)  
excluding 15 cent per share after-tax impact related to BCFP/OCC settlement
 
SECOND QUARTER OBSERVATIONS
Revenue of $364.9 million, up 6.8 percent from the second quarter of 2017
Net interest income of $250.8 million, up 10.4 percent from the second quarter of 2017
Net interest margin of 4.67 percent, up 15 basis points from the second quarter of 2017
Reported efficiency ratio of 74.55 percent, up 636 basis points from the second quarter of 2017;
adjusted efficiency ratio of 65.78 percent,(1) down 241 basis points from the second quarter of 2017
Auto finance portfolio run-off of $596.4 million year-to-date
Non-performing assets down 36.0 percent from June 30, 2017
Settlement with the Bureau of Consumer Financial Protection ("BCFP") and the Office of the Comptroller of the Currency ("OCC") resulting in a pre-tax charge, including related expenses, of $32.0 million, or 15 cents per share after-tax
Reported return on average common equity ("ROACE") of 9.72 percent; adjusted ROACE of 14.11 percent(1)
Reported return on average tangible common equity ("ROATCE") of 10.65 percent;(1) adjusted ROATCE of 15.39 percent(1)
Repurchased 2.8 million common shares at a cost of $68.2 million in the second quarter of 2018; repurchased $135.0 million of $150.0 million authorization through June 30, 2018
Additional $150.0 million share repurchase authorization approved by TCF's Board of Directors on July 25, 2018
Summary of Financial Results
 
 
 
 
 
 
 
 
 
 
 
 
Table 1
 
 
 
 
 
 
 
Change
 
 
 
 
 
 
 
(Dollars in thousands, except per-share data)
2Q
 
1Q
 
2Q
 
2Q18 vs
2Q18 vs
YTD
 
YTD
 
 
 
 
2018
 
2018
 
2017
 
1Q18
2Q17
2018
 
2017
 
Change
 
Net income attributable to TCF
$
58,749

 
$
73,761

 
$
60,432

 
(20.4
)
%
(2.8
)
%
$
132,510

 
$
106,710

 
24.2

%
 
Net interest income
250,799

 
243,199

 
227,161

 
3.1

 
10.4

 
493,998

 
449,275

 
10.0

 
 
Diluted earnings per common share
0.34

 
0.39

 
0.33

 
(12.8
)
 
3.0

 
0.73

 
0.58

 
25.9

 
 
Adjusted diluted earnings per common share(1)
0.49

 
0.39

 
0.33

 
25.6

 
48.5

 
0.88

 
0.58

 
51.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial Ratios(2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Return on average assets
1.08
%
 
1.33
%
 
1.17
%
 
(25
)
bps
(9
)
bps
1.20
%
 
1.03
%
 
17

bps
 
ROACE
9.72

 
11.23

 
9.96

 
(151
)
 
(24
)
 
10.48

 
8.82

 
166

 
 
Adjusted ROACE(1)
14.11

 
11.23

 
9.96

 
288

 
415

 
12.66

 
8.82

 
384

 
 
ROATCE(1)
10.65

 
12.26

 
11.15

 
(161
)
 
(50
)
 
11.46

 
9.87

 
159

 
 
Adjusted ROATCE(1)
15.39

 
12.26

 
11.15

 
313

 
424

 
13.81

 
9.87

 
394

 
 
Net interest margin
4.67

 
4.59

 
4.52

 
8

 
15

 
4.63

 
4.49

 
14

 
 
Net charge-offs as a percentage of average loans and leases
0.27

 
0.29

 
0.28

 
(2
)
 
(1
)
 
0.28

 
0.20

 
8

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




WAYZATA, Minn. (July 27, 2018) - TCF Financial Corporation ("TCF" or the "Company") (NYSE: TCF) today reported net income of $58.7 million for the second quarter of 2018, compared with $60.4 million for the second quarter of 2017 and $73.8 million for the first quarter of 2018. Diluted earnings per common share was 34 cents for the second quarter of 2018 (inclusive of a charge of 15 cents per common share after-tax related to the settlement with the BCFP and OCC), compared with 33 cents for the second quarter of 2017 and 39 cents for the first quarter of 2018 (inclusive of a one-time reduction in net income available to common stockholders of 2 cents per common share related to the redemption of the 6.45% Series B non-cumulative perpetual preferred stock in the first quarter of 2018).

"Our performance in the second quarter was highlighted by strong revenue growth driven by net interest margin expansion, as well as enhanced capital efficiency and the continued reduction of the risk profile of the Company," said Craig R. Dahl, chairman and chief executive officer. "With strong revenue growth and well-controlled core expense growth, we delivered improved core operating leverage while making investments in people and technology that support our strategic initiatives. We benefited from our asset sensitivity again this quarter as higher earning asset yields exceeded increases to our cost of deposits – demonstrating the true value of our core retail deposit franchise as interest rates continue to rise. We continued to run-off our auto finance portfolio as planned, while overall credit metrics improved with lower non-performing asset levels. We also remain focused on driving improved returns on capital and maintaining a disciplined capital management strategy, including our announcement of an additional $150 million share repurchase program. Finally, the resolution of our outstanding litigation with the BCFP removes legacy risk and uncertainty and allows us to remain fully focused on executing our strategy and pursuing business growth opportunities."



2




Revenue

Total Revenue
 
 
 
 
 
 
 
 
 
 
 
Table 2
 
 
 
 
 
 
Change
 
 
 
 
 
 
 
2Q
 
1Q
 
2Q
2Q18 vs
2Q18 vs
YTD
 
YTD
 
 
 
(Dollars in thousands)
2018
 
2018
 
2017
1Q18
2Q17
2018
 
2017
Change
 
Total interest income
$
286,323

 
$
275,262

 
$
248,517

4.0

%
15.2

%
$
561,585

 
$
490,824

14.4

%
 
Total interest expense
35,524

 
32,063

 
21,356

10.8

 
66.3

 
67,587

 
41,549

62.7

 
 
Net interest income
250,799

 
243,199

 
227,161

3.1

 
10.4

 
493,998

 
449,275

10.0

 
 
Non-interest income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fees and service charges
32,670

 
30,751

 
32,733

6.2

 
(0.2
)
 
63,421

 
64,015

(0.9
)
 
 
Card revenue
14,962

 
13,759

 
14,154

8.7

 
5.7

 
28,721

 
27,304

5.2

 
 
ATM revenue
4,933

 
4,650

 
5,061

6.1

 
(2.5
)
 
9,583

 
9,736

(1.6
)
 
 
Subtotal
52,565

 
49,160

 
51,948

6.9

 
1.2

 
101,725

 
101,055

0.7

 
 
Gains on sales of auto loans, net

 

 
380


 
(100.0
)
 

 
3,244

(100.0
)
 
 
Gains on sales of consumer real estate loans, net
7,192

 
9,123

 
8,980

(21.2
)
 
(19.9
)
 
16,315

 
17,871

(8.7
)
 
 
Servicing fee income
7,484

 
8,295

 
10,730

(9.8
)
 
(30.3
)
 
15,779

 
22,381

(29.5
)
 
 
Subtotal
14,676

 
17,418

 
20,090

(15.7
)
 
(26.9
)
 
32,094

 
43,496

(26.2
)
 
 
Leasing and equipment finance
42,904

 
41,847

 
39,830

2.5

 
7.7

 
84,751

 
68,128

24.4

 
 
Other
3,934

 
3,716

 
2,795

5.9

 
40.8

 
7,650

 
5,498

39.1

 
 
Fees and other revenue
114,079

 
112,141

 
114,663

1.7

 
(0.5
)
 
226,220

 
218,177

3.7

 
 
Gains (losses) on debt securities, net
24

 
63

 

(61.9
)
 
N.M.

 
87

 

N.M.

 
 
Total non-interest income
114,103

 
112,204

 
114,663

1.7

 
(0.5
)
 
226,307

 
218,177

3.7

 
 
Total revenue
$
364,902

 
$
355,403

 
$
341,824

2.7

 
6.8

 
$
720,305

 
$
667,452

7.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest margin(1)
4.67
%
 
4.59
%
 
4.52
%
8

bps
15

bps
4.63
%
 
4.49
%
14

bps
 
Total non-interest income as a percentage of total revenue
31.3

 
31.6

 
33.5

(30
)
 
(220
)
 
31.4

 
32.7

(130
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
N.M. Not Meaningful
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Annualized
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Total Revenue

Total revenue for the second quarter of 2018 increased $23.1 million, or 6.8 percent, from the second quarter of 2017 and $9.5 million, or 2.7 percent, from the first quarter of 2018. The increases from both periods were primarily due to increased net interest income.

Net Interest Income

Net interest income for the second quarter of 2018 increased $23.6 million, or 10.4 percent, from the second quarter of 2017 and $7.6 million, or 3.1 percent, from the first quarter of 2018. The increases from both periods were primarily due to increased interest income on loans and leases held for investment and debt securities available for sale, partially offset by an increase in total interest expense.


3




Total interest income increased $37.8 million, or 15.2 percent, from the second quarter of 2017 primarily due to higher average balances and increased average yields on the variable- and adjustable-rate loan portfolios, as well as increased average yields and higher average balances of leasing and equipment finance loans and leases and higher average balances of debt securities available for sale. These increases were partially offset by lower average balances of auto finance and fixed-rate consumer real estate loans.

Total interest expense increased $14.2 million, or 66.3 percent, from the second quarter of 2017 primarily due to increased average rates and higher average balances of certificates of deposit and long-term borrowings, as well as increased average rates on savings accounts.

Total interest income increased $11.1 million, or 4.0 percent, from the first quarter of 2018 primarily due to increased average yields and higher average balances of the variable- and adjustable-rate loan portfolios, as well as higher average balances of debt securities available for sale. These increases were partially offset by lower average balances of auto finance loans.

Total interest expense increased $3.5 million, or 10.8 percent, from the first quarter of 2018 primarily due to increased average rates and higher average balances of long-term borrowings, as well as increased average rates on deposits.

Net interest margin was 4.67 percent for the second quarter of 2018, up 15 basis points from the second quarter of 2017 and 8 basis points from the first quarter of 2018. The increases from both periods were primarily due to increased average yields on the variable- and adjustable-rate loan portfolios as a result of interest rate increases, partially offset by increased cost of funds.

4




Non-interest Income

Non-interest income for the second quarter of 2018 was consistent with the second quarter of 2017 and increased $1.9 million, or 1.7 percent, from the first quarter of 2018. Non-interest income for the second quarter of 2018 was consistent with the second quarter of 2017 primarily due to decreases in servicing fee income and gains on sales of consumer real estate loans, mostly offset by increases in leasing and equipment finance non-interest income, other non-interest income and card revenue. The increase from the first quarter of 2018 was primarily due to increases in fees and service charges, card revenue and leasing and equipment finance non-interest income, partially offset by decreases in gains on sales of consumer real estate loans and servicing fee income.

TCF sold $181.7 million, $273.4 million and $266.3 million of consumer real estate loans during the second quarters of 2018 and 2017 and the first quarter of 2018, respectively, resulting in net gains of $7.2 million, $9.0 million and $9.1 million, respectively.

Servicing fee income was $7.5 million on $4.1 billion of average loans and leases serviced for others for the second quarter of 2018, compared with $10.7 million on $5.3 billion for the second quarter of 2017 and $8.3 million on $4.5 billion for the first quarter of 2018. The decreases from both periods were primarily due to run-off in the auto finance serviced for others portfolio. Servicing fee income on auto finance loans serviced for others comprised $5.6 million of total servicing fee income for the second quarter of 2018, compared with $8.7 million and $6.4 million for the second quarter of 2017 and the first quarter of 2018, respectively. Servicing fee income on consumer real estate loans serviced for others comprised $1.5 million of total servicing fee income for the second quarter of 2018, compared with $1.7 million and $1.5 million for the second quarter of 2017 and the first quarter of 2018, respectively.

Leasing and equipment finance non-interest income for the second quarter of 2018 increased $3.1 million, or 7.7 percent, from the second quarter of 2017 and $1.1 million, or 2.5 percent, from the first quarter of 2018. The increases from both periods were primarily due to an increase in operating lease revenue, partially offset by a decrease in sales-type lease revenue due to customer-driven events.

5




Loans and Leases

Period-End and Average Loans and Leases
 
 
 
 
Table 3
 
 
 
 
 
 
Change
 
 
 
 
 
 
 
2Q
 
1Q
 
2Q
2Q18 vs
2Q18 vs
YTD
 
YTD
 
 
(Dollars in thousands)
2018
 
2018
 
2017
1Q18
2Q17
2018
 
2017
Change
 
Period-End:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consumer real estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
First mortgage lien
$
1,800,885

 
$
1,878,441

 
$
2,070,385

(4.1
)
%
(13.0
)
%
 
 
 
 
 
 
Junior lien
2,830,029

 
2,843,221

 
2,701,592

(0.5
)
 
4.8

 
 
 
 
 
 
 
Total consumer real estate
4,630,914

 
4,721,662

 
4,771,977

(1.9
)
 
(3.0
)
 
 
 
 
 
 
 
Commercial
3,706,401

 
3,678,181

 
3,488,725

0.8

 
6.2

 
 
 
 
 
 
 
Leasing and equipment finance
4,648,049

 
4,666,239

 
4,333,735

(0.4
)
 
7.3

 
 
 
 
 
 
 
Inventory finance
3,005,165

 
3,457,855

 
2,509,485

(13.1
)
 
19.8

 
 
 
 
 
 
 
Auto finance
2,603,260

 
2,839,363

 
3,243,144

(8.3
)
 
(19.7
)
 
 
 
 
 
 
 
Other
20,957

 
19,854

 
19,459

5.6

 
7.7

 
 
 
 
 
 
 
Total
$
18,614,746

 
$
19,383,154

 
$
18,366,525

(4.0
)
 
1.4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consumer real estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
First mortgage lien
$
1,836,600

 
$
1,918,677

 
$
2,117,138

(4.3
)
%
(13.3
)
%
$
1,877,412

 
$
2,177,136

(13.8
)
%
 
Junior lien
2,904,999

 
2,879,995

 
2,628,980

0.9

 
10.5

 
2,892,565

 
2,709,642

6.8

 
 
Total consumer real estate
4,741,599

 
4,798,672

 
4,746,118

(1.2
)
 
(0.1
)
 
4,769,977

 
4,886,778

(2.4
)
 
 
Commercial
3,702,521

 
3,601,020

 
3,417,052

2.8

 
8.4

 
3,652,051

 
3,360,287

8.7

 
 
Leasing and equipment finance
4,639,703

 
4,690,868

 
4,277,376

(1.1
)
 
8.5

 
4,665,144

 
4,281,636

9.0

 
 
Inventory finance
3,299,996

 
3,128,290

 
2,723,340

5.5

 
21.2

 
3,214,618

 
2,710,137

18.6

 
 
Auto finance
2,695,943

 
3,020,187

 
3,149,974

(10.7
)
 
(14.4
)
 
2,857,169

 
2,933,620

(2.6
)
 
 
Other
13,845

 
14,446

 
10,235

(4.2
)
 
35.3

 
14,145

 
9,989

41.6

 
 
Total
$
19,093,607

 
$
19,253,483

 
$
18,324,095

(0.8
)
 
4.2

 
$
19,173,104

 
$
18,182,447

5.4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Period-end loans and leases were $18.6 billion at June 30, 2018, an increase of $248.2 million, or 1.4 percent, from June 30, 2017 and a decrease of $768.4 million, or 4.0 percent, from March 31, 2018. Average loans and leases were $19.1 billion for the second quarter of 2018, an increase of $769.5 million, or 4.2 percent, from the second quarter of 2017 and a decrease of $159.9 million, or 0.8 percent, from the first quarter of 2018.

The increases in period-end loans and leases from June 30, 2017 and average loans and leases from the second quarter of 2017 were primarily due to increases in the inventory finance, leasing and equipment finance, and commercial portfolios, partially offset by a decrease in the auto finance portfolio. The increases in the inventory finance portfolio were primarily due to growth with existing customers through new manufacturer products, additional dealers and increased customer sales, as well as the addition of new exclusive programs. The increases in the leasing and equipment finance portfolio were primarily due to a loan and lease portfolio purchase of $445.5 million on September 29, 2017. The increases in the commercial portfolio were primarily due to strong originations. The decreases in the auto finance portfolio were primarily attributable to the discontinuation of auto finance loan originations and run-off in the portfolio.


6




The decrease from March 31, 2018 for period-end loans and leases was primarily due to a seasonal decrease in the inventory finance portfolio and decreases in the auto finance and consumer real estate portfolios. The decrease in the auto finance portfolio was primarily due to run-off. The decrease in the consumer real estate portfolio was primarily due to the transfer of consumer real estate loans to held for sale and run-off in the first mortgage lien portfolio. The decrease from the first quarter of 2018 for average loans and leases was primarily due to run-off in the auto finance and consumer real estate first mortgage lien portfolios, partially offset by increases in the inventory finance and commercial portfolios. The increase in the inventory finance portfolio was primarily due to seasonally higher balances and the increase in the commercial portfolio was primarily due to strong originations.

Loan and lease originations were $4.0 billion for the second quarter of 2018, a decrease of $35.2 million, or 0.9 percent, from the second quarter of 2017 and an increase of $242.4 million, or 6.4 percent, from the first quarter of 2018. The decrease from the second quarter of 2017 was primarily due to the discontinuation of auto finance originations and decreased consumer real estate originations, partially offset by higher inventory finance and commercial originations. The increase from the first quarter of 2018 was primarily due to higher consumer real estate, leasing and equipment finance and commercial originations.

Credit Quality

Credit Trends
 
 
 
 
 
 
 
 
Table 4
 
 
 
 
 
 
 
Change
 
 
2Q
1Q
4Q
3Q
2Q
 
2Q18 vs
2Q18 vs
 
(Dollars in thousands)
2018
2018
2017
2017
2017
 
1Q18
2Q17
 
Over 60-day delinquencies as a percentage of period-end loans and leases(1)
0.11
%
0.10
%
0.12
%
0.13
%
0.11
%
 
1

bps

bps
 
Net charge-offs as a percentage of average loans and leases(2), (3)
0.27

0.29

0.38

0.18

0.28

 
(2
)
 
(1
)
 
 
Non-accrual loans and leases and other real estate owned
$
101,125

$
143,607

$
136,807

$
146,024

$
158,000

 
(29.6
)
%
(36.0
)
%
 
Provision for credit losses
14,236

11,368

22,259

14,545

19,446

 
25.2

 
(26.8
)
 
 
 
 
(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.
 

The over 60-day delinquency rate, excluding non-accrual loans and leases, was 0.11 percent at June 30, 2018, consistent with the June 30, 2017 rate and up 1 basis point from the March 31, 2018 rate. The over 60-day delinquency rate, excluding non-accrual loans and leases, at June 30, 2018 was consistent with the June 30, 2017 rate primarily due to higher delinquencies in the auto finance portfolio, mostly offset by lower delinquencies in the first mortgage lien consumer real estate portfolio. The increase from March 31, 2018 was primarily due to higher delinquencies in the auto finance portfolio.


7




The net charge-off rate was 0.27 percent for the second quarter of 2018, down 1 basis point from the second quarter of 2017 and 2 basis points from the first quarter of 2018. The decrease from the second quarter of 2017 was primarily due to decreased net charge-offs in the commercial portfolio, offset by increased net charge-offs in the auto finance and leasing and equipment finance portfolios. The decrease from the first quarter of 2018 was primarily due to decreased net charge-offs in the auto finance portfolio, partially offset by increased net charge-offs in the leasing and equipment finance portfolio.

Non-accrual loans and leases and other real estate owned were $101.1 million at June 30, 2018, a decrease of $56.9 million, or 36.0 percent, from June 30, 2017 and $42.5 million, or 29.6 percent, from March 31, 2018. Non-accrual loans and leases were $84.9 million at June 30, 2018, a decrease of $44.4 million, or 34.4 percent, from June 30, 2017 and $41.6 million, or 32.9 percent, from March 31, 2018. The decrease from June 30, 2017 was primarily due to the transfer of $36.7 million of consumer real estate non-accrual loans to held for sale in the second quarter of 2018 and the $21.8 million consumer real estate non-accrual loan sale in the third quarter of 2017, partially offset by an increase in non-accrual loans and leases in the leasing and equipment finance and commercial portfolios. The decrease from March 31, 2018 was primarily due to the transfer of consumer real estate non-accrual loans to held for sale, as well as a decrease in non-accrual loans and leases in the leasing and equipment finance portfolio. Other real estate owned was $16.3 million at June 30, 2018, a decrease of $12.5 million, or 43.4 percent, from June 30, 2017 and $0.9 million, or 5.3 percent, from March 31, 2018. The decreases from both periods were primarily due to sales of consumer real estate properties outpacing additions, with the decrease from June 30, 2017 also due to sales of commercial real estate properties.

Provision for credit losses was $14.2 million for the second quarter of 2018, a decrease of $5.2 million, or 26.8 percent, from the second quarter of 2017 and an increase of $2.9 million, or 25.2 percent, from the first quarter of 2018. The decrease from the second quarter of 2017 was primarily due to run-off in the auto finance portfolio, partially offset by an increase in the provision for credit losses attributable to the inventory finance portfolio. The increase from the first quarter of 2018 was primarily due to increased reserve requirements in the commercial and auto finance portfolios, partially offset by a decrease in consumer real estate due to decreased reserve requirements, as well as seasonal decreases in the inventory finance portfolio.

8




Deposits

Average Deposits
 
 
 
 
 
 
 
 
 
 
 
Table 5
 
 
 
 
 
 
 
Change
 
 
 
 
 
 
 
2Q
 
1Q
 
2Q
 
2Q18 vs
2Q18 vs
YTD
 
YTD
 
 
 
(Dollars in thousands)
2018
 
2018
 
2017
 
1Q18
2Q17
2018
 
2017
Change
 
Checking
$
6,325,042

 
$
6,192,310

 
$
6,012,235

 
2.1

%
5.2

%
$
6,259,043

 
$
5,963,488

5.0

%
 
Savings
5,557,280

 
5,410,652

 
4,822,338

 
2.7

 
15.2

 
5,484,371

 
4,798,198

14.3

 
 
Money market
1,572,560

 
1,698,064

 
2,221,807

 
(7.4
)
 
(29.2
)
 
1,634,965

 
2,303,129

(29.0
)
 
 
Certificates of deposit
4,909,422

 
4,998,133

 
4,266,488

 
(1.8
)
 
15.1

 
4,953,533

 
4,150,460

19.3

 
 
Total average deposits
$
18,364,304

 
$
18,299,159

 
$
17,322,868

 
0.4

 
6.0

 
$
18,331,912

 
$
17,215,275

6.5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average interest rate on deposits(1)
0.52
%
 
0.50
%
 
0.33
%
 
2

bps
19

bps
0.51
%
 
0.33
%
18

bps
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Annualized
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Total average deposits for the second quarter of 2018 increased $1.0 billion, or 6.0 percent, from the second quarter of 2017 and $65.1 million, or 0.4 percent, from the first quarter of 2018. The increase from the second quarter of 2017 was primarily due to higher average balances of savings accounts, certificates of deposit and checking accounts, partially offset by lower average balances of money market accounts. The increase from the first quarter of 2018 was primarily due to higher average balances of savings and checking accounts, partially offset by lower average balances of money market accounts and certificates of deposit.

The average interest rate on deposits for the second quarter of 2018 was 0.52 percent, up 19 basis points from the second quarter of 2017 and 2 basis points from the first quarter of 2018. The increase from the second quarter of 2017 was primarily due to increased average rates on certificates of deposit, savings accounts and money market accounts as a result of interest rate increases. The increase from the first quarter of 2018 was primarily due to increased average rates on money market accounts and certificates of deposit.


9




Non-interest Expense

Non-interest Expense
 
 
 
 
 
 
 
 
 
 
 
 
 
Table 6
 
 
 
 
 
 
 
 Change
 
 
 
 
 
 
 
 
2Q
 
1Q
 
2Q
 
2Q18 vs
2Q18 vs
YTD
 
YTD
 
 
 
 
(Dollars in thousands)
2018
 
2018
 
2017
 
1Q18
2Q17
2018
 
2017
 
Change
 
Compensation and employee benefits
$
120,575

 
$
123,840

 
$
115,630

 
(2.6
)
%
4.3

%
$
244,415

 
$
239,928

 
1.9

%
 
Occupancy and equipment
40,711

 
40,514

 
38,965

 
0.5

 
4.5

 
81,225

 
78,565

 
3.4

 
 
Other
89,084

 
58,819

 
61,363

 
51.5

 
45.2

 
147,903

 
125,579

 
17.8

 
 
Subtotal
250,370

 
223,173

 
215,958

 
12.2

 
15.9

 
473,543

 
444,072

 
6.6

 
 
Operating lease depreciation
17,945

 
17,274

 
12,466

 
3.9

 
44.0

 
35,219

 
23,708

 
48.6

 
 
Foreclosed real estate and repossessed assets, net
3,857

 
4,916

 
4,639

 
(21.5
)
 
(16.9
)
 
8,773

 
9,188

 
(4.5
)
 
 
Other credit costs, net
(133
)
 
617

 
24

 
N.M.

 
N.M.

 
484

 
125

 
N.M.

 
 
Total non-interest expense
$
272,039

 
$
245,980

 
$
233,087

 
10.6

 
16.7

 
$
518,019

 
$
477,093

 
8.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Efficiency ratio
74.55
%
 
69.21
%
 
68.19
%
 
534

bps
636

bps
71.92
%
 
71.48
%
 
44

bps
 
Adjusted efficiency ratio(1)
65.78

 
69.21

 
68.19

 
(343
)
 
(241
)
 
67.47

 
71.48

 
(401
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
N.M. Not Meaningful
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) See "Reconciliation of GAAP to Non-GAAP Financial Measures" tables
 
 
 
 
 
 
 
 
 
 
 
 

Non-interest expense for the second quarter of 2018 increased $39.0 million, or 16.7 percent, from the second quarter of 2017 and $26.1 million, or 10.6 percent, from the first quarter of 2018. The increase from the second quarter of 2017 was primarily due to increases in other non-interest expense, operating lease depreciation and compensation and employee benefits expense. The increase from the first quarter of 2018 was primarily due to an increase in other non-interest expense, partially offset by a decrease in compensation and employee benefits expense.
 
Compensation and employee benefits expense for the second quarter of 2018 increased $4.9 million, or 4.3 percent, from the second quarter of 2017 and decreased $3.3 million, or 2.6 percent, from the first quarter of 2018. The increase from the second quarter of 2017 was primarily due to higher salaries, commissions and incentive compensation, as well as higher medical claims expense, partially offset by lower headcount in the auto finance business. The decrease from the first quarter of 2018 was primarily due to seasonality of payroll taxes, partially offset by higher commissions expense.



10




Other non-interest expense for the second quarter of 2018 increased $27.7 million, or 45.2 percent, from the second quarter of 2017 and $30.3 million, or 51.5 percent, from the first quarter of 2018. The increase from the second quarter of 2017 was primarily due to the settlement with the BCFP/OCC of $32.0 million, comprised of $25.0 million of restitution, $5.0 million in penalties and $2.0 million of related expenses, partially offset by decreases in professional fees and loan and lease processing expense. The increase from the first quarter of 2018 was primarily due to the settlement with the BCFP/OCC, partially offset by decreases in severance expense and professional fees.

Operating lease depreciation for the second quarter of 2018 increased $5.5 million, or 44.0 percent, from the second quarter of 2017 and was consistent with the first quarter of 2018. The increase from the second quarter of 2017 was primarily due to an increase in operating lease revenue related to the acquisition of a leasing company in the second quarter of 2017.

Income Tax Expense

The Company's effective income tax rate was 20.9 percent for the second quarter of 2018, compared with 28.9 percent for the second quarter of 2017 and 22.1 percent for the first quarter of 2018. The lower effective tax rate from the second quarter of 2017 was primarily due to changes in the corporate statutory tax rate as a result of the Tax Cuts and Jobs Act ("Tax Reform"). The effective income tax rate for the second quarter of 2018 included a net discrete income tax benefit of $1.8 million primarily related to the one-time finalization of the provisional amounts recorded for the year ended December 31, 2017 related to Tax Reform and excess tax benefits related to vesting of stock based compensation. Tax benefits related to stock compensation will fluctuate throughout the year based on the Company's stock price and the vesting of stock based compensation.

11




Capital

Capital Information
 
 
Table 7
 
At Jun. 30,
 
At Jun. 30,
 
(Dollars in thousands, except per-share data)
2018
 
2017
 
Total equity
$
2,504,578

 
$
2,549,831

 
Book value per common share
13.79

 
13.20

 
Tangible book value per common share(1)
12.73

 
11.74

 
Common equity ratio
9.97
%
 
10.26
%
 
Tangible common equity ratio(1)
9.28

 
9.24

 
 
 
 
 
 
Regulatory Capital:(2)
 
 
 
 
Common equity Tier 1 capital
$
2,186,528

 
$
2,036,369

 
Tier 1 capital
2,375,210

 
2,317,915

 
Total capital
2,728,076

 
2,683,319

 
 
 
 
 
 
Regulatory Capital Ratios:(2)
 
 
 
 
Common equity Tier 1 capital ratio
10.60
%
 
10.24
%
 
Tier 1 risk-based capital ratio
11.51

 
11.66

 
Total risk-based capital ratio
13.22

 
13.49

 
Tier 1 leverage ratio
10.31

 
10.76

 
 
 
 
 
 
(1) See "Reconciliation of GAAP to Non-GAAP Financial Measures" tables
 
(2) The regulatory capital and regulatory capital ratios at June 30, 2018 are preliminary pending completion and filing of the Company's regulatory reports.
 

TCF continues to maintain strong capital ratios after the common stock repurchases.

TCF repurchased $68.2 million of its common stock during the second quarter of 2018 pursuant to its share repurchase program. At June 30, 2018, TCF had the authority to repurchase an additional $15.0 million in aggregate value of shares pursuant to its existing share repurchase program. On July 25, 2018, TCF's Board of Directors approved a new authorization to repurchase up to an additional $150.0 million of TCF common stock.

On July 25, 2018, TCF's Board of Directors declared a regular quarterly cash dividend of 15 cents per common share payable on September 4, 2018, to stockholders of record at the close of business on August 15, 2018. TCF also declared dividends on the 5.70% Series C non-cumulative perpetual preferred stock, payable on September 4, 2018, to stockholders of record at the close of business on August 15, 2018.

12




Webcast Information
A live webcast of TCF's conference call to discuss the second quarter earnings will be hosted at TCF's website,     http://ir.tcfbank.com, on July 27, 2018 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 June 30, 2018, TCF had $23.2 billion in total assets and 315 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 and equipment 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, 2017 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, debt securities held to maturity and debt 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 BCFP 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, 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 carry out its share repurchase program, pay dividends or 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 of loans; risks related to new product additions and addition of distribution channels (or entry into new markets) for existing products.

Technological and Operational Risks. Technological or operational difficulties, loss or theft of information, cyber-attacks and other security breaches, counterparty failures and the possibility that deposit account losses (from fraudulent checks, stolen debit card information, etc.) may increase; failure to keep pace with technological change, such as by failing to develop and maintain technology necessary to satisfy customer demands and prevent cyber-attacks, costs and possible disruptions related to upgrading systems or cyber-attacks; the failure to attract and retain key employees.
 
Litigation Risks. 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; 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 the impact of the Tax Cuts and Jobs Act tax reform legislation and adoption of federal or state legislation that would increase federal or 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




Use of Non-GAAP Financial Measures
Management uses the adjusted diluted earnings per common share and adjusted efficiency ratio internally to measure performance and believes that these financial measures not recognized under generally accepted accounting principles in the United States ("GAAP") (i.e. non-GAAP) provide meaningful information to investors that will permit them to assess the performance of the Company on the same basis as that applied by management and analysts. Adjusted diluted earnings per common share is calculated by excluding the amounts related to the settlement with the BCFP/OCC from earnings allocated to common stock used to calculate diluted earnings per common share. The adjusted efficiency ratio is calculated by also excluding the amount related to the settlement with the BCFP/OCC from total non-interest expense used to calculate the efficiency ratio. TCF believes that the exclusion of this adjustment provides a meaningful base for period-to-period comparisons, which management believes will assist investors in analyzing the operating results of the Company and predicting future performance because management does not believe that activities related to the adjustment will recur.
Management utilizes the tangible common equity ratio, tangible book value per common share, adjusted ROACE ratio, ROATCE ratio and adjusted ROATCE ratio internally to measure performance and believes that these non-GAAP financial measures provide meaningful information to investors that will permit them to assess the Company's capital and ability to withstand unexpected market or economic conditions and to assess the performance of the Company in relation to other banking institutions on the same basis as that applied by management, analysts and banking regulators. These measures exclude equity attributable to non-controlling interests, preferred stock, intangible assets, amortization of other intangibles, where applicable, and in the adjusted ROACE and adjusted ROATCE ratios, the settlement with the BCFP/OCC.
These non-GAAP financial measures are not defined by GAAP and other entities may calculate them differently than TCF does. Non-GAAP financial measures have inherent limitations and are not required to be uniformly applied. Although these non-GAAP financial measures are frequently used by stakeholders in the evaluation of a company, they have limitations as analytical tools and should not be considered in isolation or as a substitute for analyses of results as reported under GAAP. In particular, a measure of earnings that excludes selected items does not represent the amount that effectively accrues directly to stockholders.


16




TCF FINANCIAL CORPORATION AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF INCOME
 
(Dollars in thousands, except per share data)
 
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
Quarter Ended June 30,
 
Change
 
2018
 
2017
 
$
 
%
 
Interest income:
 
 
 
 
 
 
 
 
Loans and leases
$
269,280

 
$
234,092

 
$
35,188

 
15.0

%
Debt securities available for sale
12,516

 
8,052

 
4,464

 
55.4

 
Debt securities held to maturity
998

 
1,035

 
(37
)
 
(3.6
)
 
Loans held for sale and other
3,529

 
5,338

 
(1,809
)
 
(33.9
)
 
Total interest income
286,323

 
248,517

 
37,806

 
15.2

 
Interest expense:
 
 
 
 

 


 
Deposits
23,953

 
14,436

 
9,517

 
65.9

 
Borrowings
11,571

 
6,920

 
4,651

 
67.2

 
Total interest expense
35,524

 
21,356

 
14,168

 
66.3

 
Net interest income
250,799

 
227,161

 
23,638

 
10.4

 
Provision for credit losses
14,236

 
19,446

 
(5,210
)
 
(26.8
)
 
Net interest income after provision for credit losses
236,563

 
207,715

 
28,848

 
13.9

 
Non-interest income:
 
 
 
 

 


 
Fees and service charges
32,670

 
32,733

 
(63
)
 
(0.2
)
 
Card revenue
14,962

 
14,154

 
808

 
5.7

 
ATM revenue
4,933

 
5,061

 
(128
)
 
(2.5
)
 
Subtotal
52,565

 
51,948

 
617

 
1.2

 
Gains on sales of auto loans, net

 
380

 
(380
)
 
(100.0
)
 
Gains on sales of consumer real estate loans, net
7,192

 
8,980

 
(1,788
)
 
(19.9
)
 
Servicing fee income
7,484

 
10,730

 
(3,246
)
 
(30.3
)
 
Subtotal
14,676

 
20,090

 
(5,414
)
 
(26.9
)
 
Leasing and equipment finance
42,904

 
39,830

 
3,074

 
7.7

 
Other
3,934

 
2,795

 
1,139

 
40.8

 
Fees and other revenue
114,079

 
114,663

 
(584
)
 
(0.5
)
 
Gains (losses) on debt securities, net
24

 

 
24

 
N.M.

 
Total non-interest income
114,103

 
114,663

 
(560
)
 
(0.5
)
 
Non-interest expense:
 
 
 
 

 


 
Compensation and employee benefits
120,575

 
115,630

 
4,945

 
4.3

 
Occupancy and equipment
40,711

 
38,965

 
1,746

 
4.5

 
Other
89,084

 
61,363

 
27,721

 
45.2

 
Subtotal
250,370

 
215,958

 
34,412

 
15.9

 
Operating lease depreciation
17,945

 
12,466

 
5,479

 
44.0

 
Foreclosed real estate and repossessed assets, net
3,857

 
4,639

 
(782
)
 
(16.9
)
 
Other credit costs, net
(133
)
 
24

 
(157
)
 
N.M.

 
Total non-interest expense
272,039

 
233,087

 
38,952

 
16.7

 
Income before income tax expense
78,627

 
89,291

 
(10,664
)
 
(11.9
)
 
Income tax expense
16,418

 
25,794

 
(9,376
)
 
(36.3
)
 
Income after income tax expense
62,209

 
63,497

 
(1,288
)
 
(2.0
)
 
Income attributable to non-controlling interest
3,460

 
3,065

 
395

 
12.9

 
Net income attributable to TCF Financial Corporation
58,749

 
60,432

 
(1,683
)
 
(2.8
)
 
Preferred stock dividends
2,494

 
4,847

 
(2,353
)
 
(48.5
)
 
Net income available to common stockholders
$
56,255

 
$
55,585

 
$
670

 
1.2

 
 
 
 
 
 


 


 
Earnings per common share:
 
 
 
 


 


 
Basic
$
0.34

 
$
0.33

 
$
0.01

 
3.0

%
Diluted
0.34

 
0.33

 
0.01

 
3.0

 
 
 
 
 
 


 


 
Dividends declared per common share
$
0.15

 
$
0.075

 
$
0.075

 
100.0

%
 
 
 
 
 
 
 
 
 
Average common and common equivalent shares
 
 
 
 
 
 
 
 
outstanding (in thousands):
 
 
 
 
 
 
 
 
Basic
165,729

 
168,594

 
(2,865
)
 
(1.7
)
%
Diluted
166,858

 
168,857

 
(1,999
)
 
(1.2
)
 
N.M. Not Meaningful

17




TCF FINANCIAL CORPORATION AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF INCOME
 
(Dollars in thousands, except per share data)
 
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30,
 
Change
 
 
2018
 
2017
 
$
 
%
 
Interest income:
 
 
 
 
 
 
 
 
Loans and leases
$
529,655

 
$
453,640

 
$
76,015


16.8

%
Debt securities available for sale
22,639

 
16,032

 
6,607


41.2

 
Debt securities held to maturity
2,017

 
2,315

 
(298
)

(12.9
)
 
Loans held for sale and other
7,274

 
18,837

 
(11,563
)
 
(61.4
)
 
Total interest income
561,585

 
490,824

 
70,761

 
14.4

 
Interest expense:
 
 
 
 

 


 
Deposits
46,463

 
28,151

 
18,312

 
65.0

 
Borrowings
21,124

 
13,398

 
7,726

 
57.7

 
Total interest expense
67,587

 
41,549

 
26,038

 
62.7

 
Net interest income
493,998

 
449,275

 
44,723

 
10.0

 
Provision for credit losses
25,604

 
31,639

 
(6,035
)
 
(19.1
)
 
Net interest income after provision for credit losses
468,394

 
417,636

 
50,758

 
12.2

 
Non-interest income:
 
 
 
 

 


 
Fees and service charges
63,421

 
64,015

 
(594
)
 
(0.9
)
 
Card revenue
28,721

 
27,304

 
1,417

 
5.2

 
ATM revenue
9,583

 
9,736

 
(153
)
 
(1.6
)
 
Subtotal
101,725

 
101,055

 
670

 
0.7

 
Gains on sales of auto loans, net

 
3,244

 
(3,244
)
 
(100.0
)
 
Gains on sales of consumer real estate loans, net
16,315

 
17,871

 
(1,556
)
 
(8.7
)
 
Servicing fee income
15,779

 
22,381

 
(6,602
)
 
(29.5
)
 
Subtotal
32,094

 
43,496

 
(11,402
)
 
(26.2
)
 
Leasing and equipment finance
84,751

 
68,128

 
16,623

 
24.4

 
Other
7,650

 
5,498

 
2,152

 
39.1

 
Fees and other revenue
226,220

 
218,177

 
8,043

 
3.7

 
Gains (losses) on debt securities, net
87

 

 
87

 
N.M.

 
Total non-interest income
226,307

 
218,177

 
8,130

 
3.7

 
Non-interest expense:
 
 
 
 

 


 
Compensation and employee benefits
244,415

 
239,928

 
4,487

 
1.9

 
Occupancy and equipment
81,225

 
78,565

 
2,660

 
3.4

 
Other
147,903

 
125,579

 
22,324

 
17.8

 
Subtotal
473,543

 
444,072

 
29,471

 
6.6

 
Operating lease depreciation
35,219

 
23,708

 
11,511

 
48.6

 
Foreclosed real estate and repossessed assets, net
8,773

 
9,188

 
(415
)
 
(4.5
)
 
Other credit costs, net
484

 
125

 
359

 
N.M.

 
Total non-interest expense
518,019

 
477,093

 
40,926

 
8.6

 
Income before income tax expense
176,682

 
158,720

 
17,962

 
11.3

 
Income tax expense
38,049

 
46,637

 
(8,588
)
 
(18.4
)
 
Income after income tax expense
138,633

 
112,083

 
26,550

 
23.7

 
Income attributable to non-controlling interest
6,123

 
5,373

 
750

 
14.0

 
Net income attributable to TCF Financial Corporation
132,510

 
106,710

 
25,800

 
24.2

 
Preferred stock dividends
6,600

 
9,694

 
(3,094
)
 
(31.9
)
 
Impact of preferred stock redemption
3,481

 

 
3,481

 
N.M.

 
Net income available to common stockholders
$
122,429

 
$
97,016

 
$
25,413

 
26.2

 
 
 
 
 
 

 


 
Earnings per common share:
 
 
 
 

 


 
Basic
$
0.73

 
$
0.58

 
$
0.15

 
25.9

%
Diluted
0.73

 
0.58

 
0.15

 
25.9

 
 
 
 
 
 

 


 
Dividends declared per common share
$
0.30

 
$
0.15

 
$
0.15

 
100.0

%
 
 
 
 
 
 
 
 
 
Average common and common equivalent shares
 
 
 
 
 
 
 
 
outstanding (in thousands):
 
 
 
 
 
 
 
 
Basic
167,110

 
168,250

 
(1,140
)
 
(0.7
)
%
Diluted
168,465

 
168,615

 
(150
)
 
(0.1
)
 
N.M. Not Meaningful

18