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Section 1: 8-K (8-K)

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 8-K

 


 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported):  January 23, 2008

 


 

 

TCF FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

 


 

Delaware

 

001-10253

 

41-1591444

(State or other jurisdiction of

 

(Commission File Number)

 

(IRS Employer Identification No.)

incorporation or organization)

 

 

 

 

 

200 Lake Street East, Mail Code EX0-03-A, Wayzata, Minnesota 55391-1693

(Address of principal executive offices)

 

(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:

 

o  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 



 

Item 2.02  Results of Operations and Financial Condition.

 

In accordance with General Instruction B.2 of Form 8-K, the following information, including Exhibit 99.1, shall not be deemed filed for the purposes of Section 18 of the Securities Exchange Act of 1934, nor shall such information and Exhibit be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such a filing.

 

The registrant issued a press release dated January 23, 2008, attached to this Form 8-K as Exhibit 99.1, announcing its results of operations for the quarter ended December 31, 2007.

 

Item 9.01    Financial Statements and Exhibits.

 

(c)          Exhibits.

 

Exhibit No.

 

Description

 

 

 

99.1

 

Earnings Release of TCF Financial Corporation,

 

 

dated January 23, 2008

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

TCF FINANCIAL CORPORATION

 

 

 

 

 

/s/ Lynn A. Nagorske

 

Lynn A. Nagorske,
Chief Executive Officer and Director
(Principal Executive Officer)

 

 

 

 

 

/s/ Thomas F. Jasper

 

Thomas F. Jasper, Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)

 

 

 

 

 

/s/ David M. Stautz

 

David M. Stautz, Senior Vice President,
Controller and Assistant Treasurer
(Principal Accounting Officer)

 

Dated:    January 23, 2008

 

2


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Section 2: EX-99.1 (EX-99.1)

Exhibit 99.1

 

NEWS RELEASE

 

 

CONTACT:

 

Jason Korstange

 

 

 

(952) 745-2755

 

 

 

www.tcfbank.com

 

 

 

FOR IMMEDIATE RELEASE

 

 

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

 

 

TCF Reports Record 2007 Earnings and EPS ($2.12, up 11.6 percent)
 

 

2007 YEAR END HIGHLIGHTS

·                  Record diluted earnings per share of $2.12, up 11.6 percent

·                  Record net income of $266.8 million, up 8.9 percent

·                  Return on average assets of 1.76 percent

·                  Return on average common equity of 25.82 percent

·                  Quarterly dividend increased 3.1 percent to 25 cents per share

·                  Average Power Assets Ò increased by $950.2 million, or 9.4 percent

·                  Opened 20 branches

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EARNINGS SUMMARY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 1

($ in thousands, except per-share data)

 

 

 

 

 

 

 

Percent Change

 

 

 

 

 

 

 

 

 

4Q

 

3Q

 

4Q

 

4Q07 vs

 

4Q07 vs

 

 

 

 

 

Percent

 

 

 

2007

 

2007

 

2006

 

3Q07

 

4Q06

 

2007

 

2006

 

Change

 

Net income

 

$

62,817

 

$

59,138

 

$

53,733

 

6.2

%

16.9

%

$

266,808

 

$

244,943

 

8.9

%

 

Diluted earnings per common share

 

.50

 

.48

 

.42

 

4.2

 

19.0

 

2.12

 

1.90

 

11.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Ratios (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average assets

 

1.60

%

1.55

%

1.49

%

 

 

 

 

1.76

%

1.74

%

 

 

 

Return on average common equity

 

23.55

 

23.39

 

20.68

 

 

 

 

 

25.82

 

24.37

 

 

 

 

Net interest margin

 

3.83

 

3.90

 

4.07

 

 

 

 

 

3.94

 

4.16

 

 

 

 

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

 

.46

 

.38

 

.24

 

 

 

 

 

.30

 

.17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)   Annualized

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

WAYZATA, MN, January 23, 2008 – TCF Financial Corporation (“TCF”) (NYSE: TCB) today reported diluted earnings per share of $2.12 for 2007, up 11.6 percent from $1.90 in 2006. Net income for 2007 was $266.8 million, compared with $244.9 million for 2006. Net income for 2007 included a $31.2 million pre-tax gain on the sale of 10 out-state Michigan branches, $6.7 million in pre-tax gains on sales of real estate, $13.3 million in pre-tax gains on sales of securities, a $7.7 million pre-tax charge for TCF’s estimated contingent obligation related to Visa U.S.A. Inc. litigation indemnification and $18.4 million of favorable income tax settlements and adjustments for a combined after-tax impact of 37 cents per diluted share. Net income for 2006 included $4.2 million in pre-tax gains on sales of real estate, a $1.6 million net pre-tax gain on the sale of mortgage servicing rights and a $6.1 million reduction of income tax expense for a combined after-tax impact of eight cents per diluted share.

 

Return on average assets (“ROA”) was 1.76 percent and return on average common equity (“ROE”) was 25.82 percent for 2007, compared with 1.74 percent and 24.37 percent, respectively, for 2006.

 

Diluted earnings per share was 50 cents for the 2007 fourth quarter, compared with 42 cents for the same 2006 period, an increase of 19 percent. The fourth quarter of 2007 net income included $11.3 million in pre-tax gains on sales of securities, $2.8 million of pre-tax gains on sales of real estate, a $7.7 million pre-tax charge for TCF’s estimated contingent obligation related to Visa U.S.A. Inc. litigation indemnification and $5.4 million of favorable income tax adjustments for a combined after-tax impact of seven cents per diluted share. Net income for the fourth quarter of 2006 included an $851 thousand reduction in income tax expense for an after-tax impact of one cent per diluted share.

 

Dividend Increase

 

TCF’s Board of Directors announced, for the seventeenth consecutive year, an increase in the regular quarterly dividend to 25 cents per common share, effective for the first quarter of 2008. This represents a 3.1 percent increase over the 2007 quarterly dividend of 24.25 cents per common share. The dividend is payable on February 29, 2008 to common stockholders of record at the close of business on February 1, 2008. TCF’s 10-year compounded dividend growth rate is the ninth highest among the 50 largest banks in the country.

 

2



 

Chief Executive Officer’s Statement

 

“TCF earned a record $2.12 per share in 2007, despite operating in a difficult interest rate and economic environment, which included the impact of a significant slowdown in the housing market,” said Lynn A. Nagorske, CEO, TCF Financial Corporation. “Consistent with TCF’s philosophy of banking, we did not participate in any subprime teaser rate lending programs, collateralized debt obligations or structured investment vehicles which have caused other financial institutions to report large losses.”

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 2

 

 

 

 

 

 

 

 

Percent Change

 

 

 

 

 

 

 

($ in thousands)

 

4Q

 

3Q

 

4Q

 

4Q07 vs

 

4Q07 vs

 

 

 

 

 

Percent

 

 

 

2007

 

2007

 

2006

 

3Q07

 

4Q06

 

2007

 

2006

 

Change

 

Net interest income

 

$

139,571

 

$

137,704

 

$

135,887

 

1.4

%

2.7

%

 

$

550,177

 

$

537,530

 

2.4

%

 

Fees and other revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fees and service charges

 

72,331

 

71,965

 

66,735

 

.5

 

8.4

 

 

278,046

 

270,166

 

2.9

 

 

Card revenue

 

25,058

 

25,685

 

23,485

 

(2.4

)

6.7

 

 

98,880

 

92,084

 

7.4

 

 

ATM revenue

 

8,306

 

9,251

 

9,019

 

(10.2

)

(7.9

)

 

35,620

 

37,760

 

(5.7

)

 

Investments and insurance

 

2,736

 

2,632

 

2,087

 

4.0

 

31.1

 

 

10,318

 

10,695

 

(3.5

)

 

Total banking fees

 

108,431

 

109,533

 

101,326

 

(1.0

)

7.0

 

 

422,864

 

410,705

 

3.0

 

 

Leasing and equipment finance

 

14,841

 

15,110

 

15,165

 

(1.8

)

(2.1

)

 

59,151

 

53,004

 

11.6

 

 

Other

 

1,573

 

1,751

 

2,340

 

(10.2

)

(32.8

)

 

8,270

 

21,567

 

(61.7

)

 

Total fees and other revenue

 

124,845

 

126,394

 

118,831

 

(1.2

)

5.1

 

 

490,285

 

485,276

 

1.0

 

 

Gains on sales of securities available for sale

 

11,261

 

2,017

 

 

N.M.

 

100.0

 

 

13,278

 

 

100.0

 

 

Gains on sales of branches and real estate

 

2,752

 

1,246

 

 

120.9

 

100.0

 

 

37,894

 

4,188

 

N.M

.

 

Total non-interest income

 

138,858

 

129,657

 

118,831

 

7.1

 

16.9

 

 

541,457

 

489,464

 

10.6

 

 

Total revenue

 

$

278,429

 

$

267,361

 

$

254,718

 

4.1

 

9.3

 

 

$

1,091,634

 

$

1,026,994

 

6.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest margin (1)

 

3.83

%

3.90

%

4.07

%

 

 

 

 

3.94

%

4.16

%

 

 

Fees and other revenue as a % of:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue

 

44.84

 

47.27

 

46.65

 

 

 

 

 

44.91

 

47.25

 

 

 

Average assets (1)

 

3.18

 

3.32

 

3.29

 

 

 

 

 

3.24

 

3.45

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

N.M. = Not Meaningful

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)  Annualized

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3



 

Net Interest Income

 

TCF’s net interest income in 2007 was $550.2 million, up $12.6 million, or 2.4 percent, from 2006. Net interest margin in 2007 was 3.94 percent, compared with 4.16 percent for 2006. The increase in net interest income from 2006 was primarily attributable to a $1.1 billion, or 8.2 percent, increase in average interest-earning assets, partially offset by a 22 basis point reduction in net interest margin.

 

Net interest income for the fourth quarter of 2007 increased $3.7 million, or 2.7 percent, compared with the fourth quarter of 2006. Net interest margin in the fourth quarter of 2007 was 3.83 percent, compared with 4.07 percent last year and 3.90 percent in the third quarter of 2007.

 

The decrease in net interest margin from last year is primarily due to partially funding the growth in interest earning assets with borrowings and higher-cost deposits and continued customer preference for lower yielding fixed-rate loans. The decrease in net interest margin from the fourth quarter of 2006 is primarily due to partially funding the growth in interest earning assets with borrowings and higher cost deposits, continued customer preference for lower yielding fixed-rate loans and the net impact of interest rate changes on variable-rate assets and liabilities, partially offset by increased interest rates on higher balances of fixed-rate assets.

 

Non-interest Income

 

Total non-interest income was $541.5 million for 2007, up $52 million, or 10.6 percent, from 2006. Banking fees and service charges were $278 million for 2007, up $7.9 million, or 2.9 percent, from 2006 primarily due to higher activity in deposit service fees. Fees and service charges in 2006 included $5.3 million of fees from the Michigan branches that were sold in the first quarter of 2007. Card revenues totaled $98.9 million for 2007, up $6.8 million, or 7.4 percent, from 2006 due to increased sales volume as a result of increases in the number of active accounts and customer transaction volumes. ATM revenue was $35.6 million, down $2.1 million, or 5.7 percent, from 2006 due to continued declines in fees charged to TCF customers for use of non-TCF ATM machines caused by growth in TCF’s fee free checking products and changes in customer ATM usage behavior. Leasing and equipment finance revenues were $59.2 million for

 

4



 

2007, up $6.1 million, or 11.6 percent, from 2006, due to higher operating lease revenue, sales-type lease revenue and other fees. Average operating lease balances were $73.4 million in 2007, an increase of $6.6 million, or 9.9 percent over average operating lease balances of $66.7 million in 2006. Other revenues were $8.3 million for 2007, down $13.3 million from 2006, primarily due to a $5.2 million decrease in gains on sales of education loans and no mortgage banking revenue in 2007 compared with mortgage banking revenue of $4.7 million in 2006. Gains on sales of securities available for sale were $13.3 million in 2007 on sales of $1.2 billion of mortgage-backed securities. There were no such sales or gains in 2006.

 

Total non-interest income in the fourth quarter of 2007 was $138.9 million, up $20 million, or 16.9 percent, from the fourth quarter of 2006. Fees and service charges were $72.3 million, up $5.6 million, or 8.4 percent, from the fourth quarter of 2006 primarily due to higher deposit service fees. Card revenues totaled $25.1 million for the fourth quarter of 2007, up $1.6 million, or 6.7 percent, over the same period in 2006. ATM revenue was $8.3 million, down $713 thousand, or 7.9 percent, from the fourth quarter of 2006.

 

Branches

 

 

 

 

 

 

 

 

 

 

 

 

Number of Branches

 

 

 

 

 

 

 

 

Table 3

At period end

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

New

 

 

Total

 

New

 

 

 

Branches

 

Branches (1)

 

 

Branches

 

Branches (1)

 

Minnesota

 

109

 

24

 

Traditional

194

 

83

 

Illinois

 

202

 

40

 

Supermarket

244

 

48

 

Michigan

 

56

 

25

 

Campus

15

 

10

 

Colorado

 

46

 

42

 

 

453

 

141

 

Wisconsin

 

31

 

5

 

 

 

 

 

 

Indiana

 

5

 

1

 

 

 

 

 

 

Arizona

 

4

 

4

 

 

 

 

 

 

Total Branches

 

453

 

141

 

 

 

 

 

 

 

 

(1) New branches opened since January 1, 2002.

 

 

 

 

5



 

TCF opened 20 branches during 2007, including 10 traditional branches, seven supermarket branches and three campus branches, and relocated six traditional branches. TCF also closed and consolidated four traditional branches and six supermarket branches and sold 10 Michigan branches, including the related deposit accounts. Since January 2002, TCF has opened 141 new branches, representing 31.1 percent of TCF’s 453 total branches. During the fourth quarter of 2007, TCF opened four traditional branches and two supermarket branches, and relocated four traditional branches. TCF also closed and consolidated two traditional branches into nearby branches to improve operating efficiencies.

 

In 2008, TCF intends to focus on optimizing existing branches in target market areas to improve convenience and service to customers and enhance branch performance, and plans to remodel 19 supermarket branches and one campus branch, and to relocate two traditional branches and one supermarket branch. TCF also plans to open 10 new branches in 2008, consisting of five traditional branches and five supermarket branches, and to close and consolidate three traditional branches into nearby branches. Additional information regarding the results of TCF’s new branches opened since January 1, 2002 is summarized as follows:

 

 

New Branch Information

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 4

 

 

 

 

 

 

4Q07 vs 4Q06

 

 

 

 

 

 

 

($ in thousands)

 

4Q

 

4Q

 

 

 

Percent

 

 

 

 

 

Percent

 

 

 

2007

 

2006

 

Change

 

Change

 

2007

 

2006

 

Change

 

Number of deposit accounts

 

384,062

 

289,459

 

94,603

 

32.7

%

 

 

 

 

 

 

Average deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Checking

 

$

369,148

 

$

302,317

 

$

66,831

 

22.1

 

$

347,865

 

$

280,630

 

24.0

%

 

Savings

 

418,087

 

287,461

 

130,626

 

45.4

 

359,593

 

260,337

 

38.1

 

 

Money market

 

54,029

 

35,422

 

18,607

 

52.5

 

46,949

 

29,162

 

61.0

 

 

Subtotal

 

841,264

 

625,200

 

216,064

 

34.6

 

754,407

 

570,129

 

32.3

 

 

Certificates of deposit

 

366,218

 

431,488

 

(65,270

)

(15.1

)

413,777

 

402,935

 

2.7

 

 

Total deposits

 

$

1,207,482

 

$

1,056,688

 

$

150,794

 

14.3

 

$

1,168,184

 

$

973,064

 

20.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total fees and other revenue

 

$

20,179

 

$

14,250

 

$

5,929

 

41.6

 

$

73,204

 

$

54,786

 

33.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6



 

Power Assets®

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Power Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 5

 

 

 

 

 

 

 

 

Percent Change

 

 

 

 

 

 

 

($ in thousands)

 

4Q

 

3Q

 

4Q

 

4Q07 vs

 

4Q07 vs

 

 

 

 

 

Percent

 

 

 

2007

 

2007

 

2006

 

3Q07

 

4Q06

 

2007

 

2006

 

Change

 

Loans and leases: (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer home equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First mortgage lien

 

$

4,112,086

 

$

3,994,573

 

$

3,718,402

 

2.9

%

10.6

%

 

$

3,953,442

 

$

3,561,922

 

11.0

%

 

Junior lien

 

2,299,461

 

2,211,680

 

2,077,205

 

4.0

 

10.7

 

 

2,190,988

 

1,948,739

 

12.4

 

 

Total consumer home equity

 

6,411,547

 

6,206,253

 

5,795,607

 

3.3

 

10.6

 

 

6,144,430

 

5,510,661

 

11.5

 

 

Consumer other

 

45,294

 

45,440

 

40,119

 

(.3

)

12.9

 

 

43,589

 

36,711

 

18.7

 

 

Total consumer

 

6,456,841

 

6,251,693

 

5,835,726

 

3.3

 

10.6

 

 

6,188,019

 

5,547,372

 

11.5

 

 

Commercial real estate

 

2,445,012

 

2,371,207

 

2,411,232

 

3.1

 

1.4

 

 

2,386,022

 

2,387,402

 

(.1

)

 

Commercial business

 

574,881

 

566,464

 

536,378

 

1.5

 

7.2

 

 

563,218

 

508,250

 

10.8

 

 

Total commercial

 

3,019,893

 

2,937,671

 

2,947,610

 

2.8

 

2.5

 

 

2,949,240

 

2,895,652

 

1.9

 

 

Leasing and equipment finance

 

2,005,889

 

1,937,269

 

1,771,231

 

3.5

 

13.2

 

 

1,915,790

 

1,659,807

 

15.4

 

 

Total Power Assets

 

$

11,482,623

 

$

11,126,633

 

$

10,554,567

 

3.2

 

8.8

 

 

$

11,053,049

 

$

10,102,831

 

9.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Excludes residential real estate loans, education loans held for sale and operating lease receivables.

 

 

 

 

TCF’s average Power Assets grew $950.2 million, or 9.4 percent, in 2007 from 2006. TCF’s average consumer loan balances increased $640.6 million, or 11.5 percent, average leasing and equipment finance balances increased $256 million, or 15.4 percent,

primarily due to record originations, and average commercial loan balances increased $53.6 million, or 1.9 percent, primarily due to lower prepayments.

 

The increase in average consumer home equity loans was primarily due to an $832.6 million increase in fixed-rate consumer home equity loans, partially offset by a $198.9 million decrease in variable-rate consumer home equity loans. At December 31, 2007, 64.1 percent of the consumer home equity portfolio was secured by first liens.

 

7



 

Power Liabilities®

 

Average Power Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 6

 

 

 

 

 

 

 

 

Percent Change

 

 

 

 

 

 

($ in thousands)

 

4Q

 

3Q

 

4Q

 

4Q07 vs

 

4Q07 vs

 

YTD

 

YTD

 

Percent

 

 

2007

 

2007

 

2006

 

3Q07

 

4Q06

 

2007

 

2006

 

Change

Non-interest bearing deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail

 

$

1,348,202

 

$

1,406,155

 

$

1,457,265

 

(4.1

)%

 

(7.5

)%

 

$

1,444,125

 

$

1,513,121

 

(4.6

)%

Small business

 

600,491

 

596,197

 

629,011

 

.7

 

 

(4.5

)

 

594,979

 

609,907

 

(2.4

)

Commercial and custodial

 

201,161

 

195,529

 

206,034

 

2.9

 

 

(2.4

)

 

199,432

 

232,725

 

(14.3

)

Total non-interest bearing

 

2,149,854

 

2,197,881

 

2,292,310

 

(2.2

)

 

(6.2

)

 

2,238,536

 

2,355,753

 

(5.0

)

Interest-bearing deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Premier checking

 

1,026,408

 

1,048,449

 

1,042,361

 

(2.1

)

 

(1.5

)

 

1,054,542

 

1,001,024

 

5.3

 

Other checking

 

816,512

 

823,833

 

813,851

 

(.9

)

 

.3

 

 

824,791

 

864,316

 

(4.6

)

Subtotal

 

1,842,920

 

1,872,282

 

1,856,212

 

(1.6

)

 

(.7

)

 

1,879,333

 

1,865,340

 

.8

 

Premier savings

 

1,353,638

 

1,202,672

 

1,014,427

 

12.6

 

 

33.4

 

 

1,184,756

 

899,067

 

31.8

 

Other savings

 

1,229,808

 

1,274,164

 

1,299,319

 

(3.5

)

 

(5.3

)

 

1,279,577

 

1,376,182

 

(7.0

)

Subtotal

 

2,583,446

 

2,476,836

 

2,313,746

 

4.3

 

 

11.7

 

 

2,464,333

 

2,275,249

 

8.3

 

Money market

 

598,483

 

606,198

 

593,961

 

(1.3

)

 

.8

 

 

604,767

 

620,844

 

(2.6

)

Subtotal

 

5,024,849

 

4,955,316

 

4,763,919

 

1.4

 

 

5.5

 

 

4,948,433

 

4,761,433

 

3.9

 

Certificates of deposit

 

2,307,411

 

2,498,936

 

2,470,659

 

(7.7

)

 

(6.6

)

 

2,461,055

 

2,291,002

 

7.4

 

Total interest-bearing

 

7,332,260

 

7,454,252

 

7,234,578

 

(1.6

)

 

1.4

 

 

7,409,488

 

7,052,435

 

5.1

 

Power Liabilities

 

$

9,482,114

 

$

9,652,133

 

$

9,526,888

 

(1.8

)

 

(.5

)

 

$

9,648,024

 

$

9,408,188

 

2.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average rate on deposits

 

2.29%

 

2.48%

 

2.33%

 

 

 

 

 

2.39%

 

2.08%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Power Liabilities totaled $9.6 billion for 2007, with an average interest rate of 2.39 percent. Excluding the Michigan deposits sold in the first quarter of 2007, average Power Liabilities increased $413.4 million, or 4.5 percent, from 2006. The increase was primarily driven by increases in higher-cost savings and certificates of deposit, partially offset by declines in non-interest bearing deposits driven by the continued customer preference for higher-cost market-rate deposits.

 

Average Power Liabilities totaled $9.5 billion for the fourth quarter of 2007, down $170 million, or 1.8 percent, from the third quarter of 2007, primarily due to a $191.5 million decline in certificates of deposit as a result of intense deposit competition.

 

8



 

Non-interest Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 7

 

 

 

 

 

 

 

 

Percent Change

 

 

 

 

 

 

 

($ in thousands)

 

4Q

 

3Q

 

4Q

 

4Q07 vs

 

4Q07 vs

 

 

 

 

 

Percent

 

 

 

2007

 

2007

 

2006

 

3Q07

 

4Q06

 

2007

 

2006

 

Change

 

Compensation and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

employee benefits

 

$

86,555

 

$

85,113

 

$

85,811

 

1.7

%

 

.9

%

 

$

346,468

 

$

341,857

 

1.3

%

 

Occupancy and equipment

 

30,818

 

30,226

 

29,905

 

2.0

 

 

3.1

 

 

120,824

 

114,618

 

5.4

 

 

Advertising and promotions

 

4,632

 

5,480

 

6,235

 

(15.5

)

 

(25.7

)

 

21,679

 

26,926

 

(19.5

)

 

Other

 

38,391

 

37,632

 

39,611

 

2.0

 

 

(3.1

)

 

147,869

 

151,449

 

(2.4

)

 

Subtotal

 

160,396

 

158,451

 

161,562

 

1.2

 

 

(.7

)

 

636,840

 

634,850

 

.3

 

 

Visa indemnification

 

7,696

 

 

 

100.0

 

 

100.0

 

 

7,696

 

 

100.0

 

 

Operating lease depreciation

 

4,521

 

4,326

 

4,000

 

4.5

 

 

13.0

 

 

17,588

 

14,347

 

22.6

 

 

Total non-interest expense

 

$

172,613

 

$

162,777

 

$

165,562

 

6.0

 

 

4.3

 

 

$

662,124

 

$

649,197

 

2.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-interest expense (excluding Visa indemnification expense and operating lease depreciation) totaled $636.8 million for 2007, up $2 million, or .3 percent, from $634.9 million for 2006. Compensation and employee benefits were well controlled and increased $4.6 million, or 1.3 percent, from 2006. Increases due to branch expansion were partially offset by decreases resulting from branches sold, closed branches and other efficiency initiatives. Occupancy and equipment expenses increased $6.2 million, or 5.4 percent, from 2006, primarily due to the costs associated with branch expansion, relocation and remodeling. Advertising and promotions expense was $21.7 million, down $5.2 million, or 19.5 percent, from 2006, primarily due to spending reductions on media and promotions. Other expense decreased $3.6 million, or 2.4 percent, primarily due to expense control initiatives partially offset by a $3 million increase in loan and lease related costs mainly driven by higher private mortgage insurance expense, a $1.5 million increase in net real estate expenses due to higher losses on foreclosed real estate and a $1.1 million increase in card processing and issuance costs due to increased transactions. Operating lease depreciation increased $3.2 million, or 22.6 percent, from 2006, primarily driven by higher average operating lease balances in TCF’s leasing and equipment finance subsidiaries.

 

9



 

Non-interest expense (excluding Visa indemnification expense and operating lease depreciation) totaled $160.4 million for the 2007 fourth quarter, down $1.2 million, or .7 percent, from the fourth quarter of 2006. Compensation and employee benefits increased $744 thousand, or .9 percent, from the fourth quarter of 2006 primarily due to branch expansion partially offset by decreases resulting from branches sold or closed branches and other efficiency initiatives. Occupancy and equipment expenses increased $913 thousand, or 3.1 percent, from the fourth quarter of 2006 primarily due to costs associated with branch expansion. Advertising and promotions expense was $4.6 million, down $1.6 million, or 25.7 percent, from 2006, primarily due to decreased media and promotion expenses. Other expense decreased $1.2 million, or 3.1 percent, primarily due to expense control initiatives partially offset by an $879 thousand increase in net real estate expenses due to higher losses on foreclosed real estate and a $747 thousand increase in card processing and issuance costs due to increased transactions. The fourth quarter of 2006 included approximately $1 million of severance and other exit costs related to the closure and consolidation of 13 branches and other staff reductions.

 

TCF is a member of Visa U.S.A. Inc. (“Visa”) for issuance and processing of its card transactions. As a member of Visa, TCF has a contingent obligation to indemnify Visa for losses in connection with certain covered litigation matters. TCF recognized a $7.7 million pre-tax charge in the fourth quarter of 2007 for this contingent obligation.

 

10



 

Credit Quality

 

Credit Quality Summary

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 8

 

 

 

 

 

 

 

 

 

Percent Change

 

 

 

 

 

 

 

($ in thousands)

 

4Q

 

3Q

 

4Q

 

4Q07 vs

 

4Q07 vs

 

 

 

 

 

Percent

 

 

 

2007

 

2007

 

2006

 

3Q07

 

4Q06

 

2007

 

2006

 

Change

 

Allowance for loan and lease losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

74,632

 

$

66,809

 

$

55,098

 

11.7

%

 

35.5

%

 

$

58,543

 

$

55,823

 

4.9

%

 

Charge-offs

 

(17,771

)

(14,669

)

(9,895

)

21.1

 

 

79.6

 

 

(52,421

)

(33,221

)

57.8

 

 

Recoveries

 

3,957

 

3,609

 

3,267

 

9.6

 

 

21.1

 

 

17,828

 

15,252

 

16.9

 

 

Net charge-offs

 

(13,814

)

(11,060

)

(6,628

)

24.9

 

 

108.4

 

 

(34,593

)

(17,969

)

92.5

 

 

Provision for credit losses

 

20,124

 

18,883

 

10,073

 

6.6

 

 

99.8

 

 

56,992

 

20,689

 

175.5

 

 

Balance at end of period

 

$

80,942

 

$

74,632

 

$

58,543

 

8.5

 

 

38.3

 

 

$

80,942

 

$

58,543

 

38.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance as a percentage of period end loans and leases

 

.66%

 

.63%

 

.52%

 

 

 

 

 

 

 

.66%

 

.52%

 

 

 

 

Ratio of allowance to net charge-offs (1)

 

1.5X

 

1.7X

 

2.2X

 

 

 

 

 

 

 

2.3X

 

3.3X

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Charge-offs as a Percentage of Average Loans and Leases (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer home equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First mortgage lien

 

.30%

 

.27%

 

.12%

 

 

 

 

 

 

 

.24%

 

.09%

 

 

 

 

Junior lien

 

.62    

 

.58    

 

.39    

 

 

 

 

 

 

 

.50    

 

.22    

 

 

 

 

Total home equity

 

.42    

 

.38    

 

.21    

 

 

 

 

 

 

 

.33    

 

.13    

 

 

 

 

Total consumer

 

.56    

 

.59    

 

.32    

 

 

 

 

 

 

 

.43    

 

.22    

 

 

 

 

Commercial real estate

 

.33    

 

—    

 

—    

 

 

 

 

 

 

 

.10    

 

.01    

 

 

 

 

Commercial business

 

.30    

 

.44    

 

.13    

 

 

 

 

 

 

 

.22    

 

.09    

 

 

 

 

Leasing and equipment finance

 

.45    

 

.24    

 

.36    

 

 

 

 

 

 

 

.20    

 

.29    

 

 

 

 

Residential real estate

 

.05    

 

.07    

 

.10    

 

 

 

 

 

 

 

.04    

 

.04    

 

 

 

 

Total

 

.46    

 

.38    

 

.24    

 

 

 

 

 

 

 

.30    

 

.17    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Credit Quality Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Delinquencies (30+ days) (2)

 

$

82,577

 

$

74,569

 

$

71,693

 

10.7

 

 

15.2

 

 

 

 

 

 

 

 

 

Delinquencies as a percentage of loan and lease portfolio (2):

 

.67%

 

.63%

 

.63%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-accrual loans and leases

 

$

59,854

 

$

47,235

 

$

43,185

 

26.7

 

 

38.6

 

 

 

 

 

 

 

 

 

Real estate owned

 

45,765

 

43,010

 

22,453

 

6.4

 

 

103.8

 

 

 

 

 

 

 

 

 

Total non-performing assets

 

$

105,619

 

$

90,245

 

$

65,638

 

17.0

 

 

60.9

 

 

 

 

 

 

 

 

 

Non-performing assets as a percentage of net loans and leases

 

.86%

 

.76%

 

.58%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)  Annualized

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2)  Excludes non-accrual loans and leases.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11



 

At December 31, 2007, TCF’s allowance for loan and lease losses totaled $80.9 million, or .66 percent of loans and leases, compared with $58.5 million, or .52 percent, at December 31, 2006 and $74.6 million, or .63 percent, at September 30, 2007. The provision for credit losses for 2007 was $57 million, up from $20.7 million in 2006, primarily due to higher consumer home equity net charge-offs and the resulting portfolio reserve rate increases, higher net charge-offs and reserves for certain commercial loans, primarily in Michigan, and reductions in reserves for certain equipment finance loans and leases in 2006.

 

Consumer home equity net charge-offs for 2007, which have steadily increased during the year, were $20.4 million, an increase of $13 million over 2006. The higher net charge-offs are primarily due to the slowdown in the residential real estate market in Minnesota and Michigan.

 

The provision for credit losses was $20.1 million in the fourth quarter of 2007, up from $10.1 million in the fourth quarter of 2006, primarily due to higher consumer home equity net charge-offs and the resulting portfolio reserve rate increases. Net loan and lease charge-offs during the fourth quarter of 2007 were $13.8 million, or .46 percent of average loans and leases, up from $6.6 million, or .24 percent, in the same period of 2006, primarily due to higher consumer home equity and commercial real estate loan net charge-offs.

 

At December 31, 2007, TCF’s over-30-day delinquency rate was .67 percent, up from .63 percent at December 31, 2006, primarily due to consumer home equity loans and leasing and equipment finance receivables, partially offset by a decrease for commercial real estate loans. Total non-performing assets were $105.6 million, or .66 percent of total assets, at December 31, 2007, up from $65.6 million, or .45 percent of total assets, at December 31, 2006. The increase in non-performing assets from December 31, 2006 was primarily due to a $14.5 million increase in commercial real estate owned, an $8.9 million increase in residential real estate owned, a $9.7 million increase in consumer home equity non-accrual loans and a $6.4 million increase in commercial non-accrual loans.

 

12



 

Income Taxes

 

TCF’s income tax expense was $105.7 million for 2007, or 28.4 percent of pre-tax income, compared with $112.2 million, or 31.4 percent, for 2006. Income tax expense for 2007 includes an $8.5 million reduction related to a favorable settlement with the IRS of a tax issue from a prior year and $9.9 million of other reductions primarily resulting from changes in uncertain tax positions and state tax laws. Income tax expense for 2006 includes $6.1 million of reductions for favorable developments involving uncertain tax positions. Excluding these items, the effective income tax rate was 33.9 percent for 2007 and 33.1 percent for 2006.

 

TCF’s income tax expense was $22.9 million for the fourth quarter of 2007, or 26.7 percent of pre-tax income, compared with $25.4 million, or 32.1 percent, for the comparable 2006 period. The lower effective income tax rate for the fourth quarter of 2007 is primarily due to $5.4 million of reductions in income tax expense for uncertain tax positions, compared with $851 thousand of reductions in income tax expense in the fourth quarter of 2006. Excluding these items, the effective income tax rates for the fourth quarters of 2007 and 2006 were 33 percent and 33.1 percent, respectively.

 

Capital

 

Capital Information

 

 

 

 

 

 

 

Table 9

At period end

 

 

 

 

 

 

 

 

 

($in thousands, except per-share data)

 

4Q

 

 

 

4Q

 

 

 

 

 

2007

 

 

 

2006

 

 

 

Stockholders’ equity

 

$

1,099,012

 

 

 

$

1,033,374

 

 

 

Stockholders’ equity to total assets

 

6.88

%

 

 

7.04

%

 

 

Book value per common share

 

$

8.68

 

 

 

$

7.92

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk-based capital

 

 

 

 

 

 

 

 

 

Tier 1

 

$

964,467

 

8.28

%

$

914,128

 

8.65

%

Total

 

1,245,808

 

10.70

 

1,173,073

 

11.10

 

Total “well-capitalized” requirement

 

1,164,829

 

10.00

 

1,056,694

 

10.00

 

Excess over “well-capitalized” requirement

 

80,979

 

.70

 

116,379

 

1.10

 

 

 

 

 

 

 

 

 

 

 

 

13



 

TCF repurchased 3.9 million shares of its common stock during 2007 at an average cost of $26.92 per share. TCF has 5.4 million shares remaining under the stock repurchase program authorized by its Board of Directors as of December 31, 2007.

 

Website Information

 

A live webcast of TCF’s conference call to discuss 2007 earnings will be hosted at TCF’s website, www.tcfbank.com, on January 23, 2008 at 10:00 a.m., CT. Additionally, the webcast is available for replay at TCF’s website after the conference call. The website also includes free access to company news releases, TCF’s annual report, quarterly reports, investor presentations and SEC filings.

 

 

TCF is a Wayzata, Minnesota-based national financial holding company with $16 billion in total assets. TCF has 453 banking offices in Minnesota, Illinois, Michigan, Colorado, Wisconsin, Indiana and Arizona. Other TCF affiliates provide leasing and equipment finance, and investments and insurance sales.

 

 

14



 

Forward-looking Information

 

This earnings release and other reports issued by the Company, including reports filed with the SEC, may contain “forward-looking” statements that deal with future results, plans or performance. In addition, TCF’s management may make such statements orally to the media, or to securities analysts, investors or others. Forward-looking statements deal with matters that do not relate strictly to historical facts. TCF’s future results may differ materially from historical performance and forward-looking statements about TCF’s expected financial results or other plans are subject to a number of risks and uncertainties. These include but are not limited to possible legislative changes and adverse economic, business and competitive developments such as shrinking interest margins; deposit outflows; an inability to increase the number of deposit accounts and the possibility that deposit account losses (fraudulent checks, etc.) may increase; impact of legal, legislative or other changes affecting customer account charges and fee income; reduced demand for financial services and loan and lease products; adverse developments affecting TCF’s supermarket banking relationships or any of the supermarket chains in which TCF maintains supermarket branches; changes in accounting standards or interpretations of existing standards; monetary, fiscal or tax policies of the federal or state governments, including adoption of state legislation that would increase state taxes; impact of federal legislation enacted in September 2007, reducing interest subsidies and other benefits available to TCF in its education lending programs; adverse findings in tax audits or regulatory examinations; changes in credit and other risks posed by TCF’s loan, lease and investment portfolios, including declines in commercial or residential real estate values or changes in allowance for loan and lease losses dictated by new market conditions or regulatory requirements; imposition of vicarious liability on TCF as lessor in its leasing operations; denial of insurance coverage for claims made by TCF; technological, computer-related or operational difficulties or loss or theft of information; adverse changes in securities markets; and results of litigation, including possible increases in indemnification obligations for certain litigation against Visa (“covered litigation”) and potential reductions in card revenues resulting from other litigation against Visa; or other significant uncertainties. Investors should consult TCF’s Annual Report on Form 10-K, and Forms 10-Q and 8-K for additional important information about the Company.

 

15



 

TCF FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per-share data)

(Unaudited)

 

 

 

Three Months Ended

 

 

 

 

 

 

 

December 31,

 

Change

 

 

 

2007

 

2006

 

$

 

%

 

Interest income:

 

 

 

 

 

 

 

 

 

Loans and leases

 

$

215,082

 

$

204,150

 

$

10,932

 

5.4

 

Securities available for sale

 

29,372

 

24,699

 

4,673

 

18.9

 

Education loans held for sale

 

3,153

 

3,019

 

134

 

4.4

 

Investments

 

1,595

 

1,173

 

422

 

36.0

 

Total interest income

 

249,202

 

233,041

 

16,161

 

6.9

 

Interest expense:

 

 

 

 

 

 

 

 

 

Deposits

 

54,788

 

55,996

 

(1,208

)

(2.2

)

Borrowings

 

54,843

 

41,158

 

13,685

 

33.2

 

Total interest expense

 

109,631

 

97,154

 

12,477

 

12.8

 

Net interest income

 

139,571

 

135,887

 

3,684

 

2.7

 

Provision for credit losses

 

20,124

 

10,073

 

10,051

 

99.8

 

Net interest income after provision for

 

 

 

 

 

 

 

 

 

credit losses

 

119,447

 

125,814

 

(6,367

)

(5.1

)

Non-interest income:

 

 

 

 

 

 

 

 

 

Fees and service charges

 

72,331

 

66,735

 

5,596

 

8.4

 

Card revenue

 

25,058

 

23,485

 

1,573

 

6.7

 

ATM revenue

 

8,306

 

9,019

 

(713

)

(7.9

)

Investments and insurance revenue

 

2,736

 

2,087

 

649

 

31.1

 

Subtotal

 

108,431

 

101,326

 

7,105

 

7.0

 

Leasing and equipment finance

 

14,841

 

15,165

 

(324

)

(2.1

)

Other

 

1,573

 

2,340

 

(767

)

(32.8

)

Fees and other revenue

 

124,845

 

118,831

 

6,014

 

5.1

 

Gains on sales of securities available for sale

 

11,261

 

 

11,261

 

100.0

 

Gains on sales of branches and real estate

 

2,752

 

 

2,752

 

100.0

 

Total non-interest income

 

138,858

 

118,831

 

20,027

 

16.9

 

Non-interest expense:

 

 

 

 

 

 

 

 

 

Compensation and employee benefits

 

86,555

 

85,811

 

744

 

.9

 

Occupancy and equipment

 

30,818

 

29,905

 

913

 

3.1

 

Advertising and promotions

 

4,632

 

6,235

 

(1,603

)

(25.7

)

Other

 

46,087

 

39,611

 

6,476

 

16.3

 

Subtotal

 

168,092

 

161,562

 

6,530

 

4.0

 

Operating lease depreciation

 

4,521

 

4,000

 

521

 

13.0

 

Total non-interest expense

 

172,613

 

165,562