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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):  July 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 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.

 

The registrant issued a press release dated July 23, 2008, attached to this Form 8-K as Exhibit 99.1, announcing its results of operations for the quarter ended June 30, 2008.

 

Item 9.01    Financial Statements and Exhibits.

 

(c)          Exhibits.

 

Exhibit No.

 

  Description

 

 

 

99.1

 

Earnings Release of TCF Financial Corporation,
dated July 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:    July 23, 2008

 

2

(Back To Top)

Section 2: EX-99.1 (EX-99.1)

Exhibit 99.1

 

NEWS RELEASE

 

 

CONTACT:

Jason Korstange

 

 

(952) 745-2755

 

 

www.tcfbank.com

 

 

 

 

FOR IMMEDIATE RELEASE

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

 

TCF Reports Second Quarter Earnings and EPS ($.19)

 
SECOND QUARTER HIGHLIGHTS

·      Diluted earnings per share of 19 cents

·      Net income of $23.7 million

·      Net interest margin of 4.00 percent, up 16 basis points from first quarter

·      Provision for loan and lease losses of $62.9 million, net charge-offs of $26.6 million

·      Allowance for loan and lease losses to loans ratio increased to 1.03 percent at June 30

·      Average Power Assets Ò increased by $1.4 billion, or 12.8 percent

·      Capital ratios exceed stated well capitalized requirements

 

EARNINGS SUMMARY

 

 

 

 

 

 

 

 

 

 

Table 1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in thousands, except per-share data)

 

 

 

 

Percent Change

 

 

 

 

 

 

 

 

 

 

  2Q

 

 

  1Q

 

 

  2Q

 

2Q08 vs

 

2Q08 vs

 

 

YTD

 

 

YTD

 

Percent

 

 

 

 

2008

 

 

2008

 

 

2007

 

1Q08

 

2Q07

 

 

2008

 

 

2007

 

Change

 

Net income

 

$

23,702

 

$

47,426

 

$

62,129

 

   (50.0)

%

   (61.9)

%

$

71,128

 

$

144,853

 

(50.9)

%

Diluted earnings per common share

 

 

.19 

 

 

      .38

 

 

      .49

 

   (50.0)

 

   (61.2)

 

 

      .57

 

 

      1.14

 

(50.0)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Ratios (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average assets

 

 

  .58 %

 

 

  1.18 %

 

 

  1.67 %

 

 

 

 

 

 

    .88 %

 

 

  1.95 %

 

 

 

Return on average common equity

 

 

8.57

 

 

17.08

 

 

24.16

 

 

 

 

 

 

12.85

 

 

28.08

 

 

 

Net interest margin

 

 

4.00

 

 

  3.84

 

 

  4.02

 

 

 

 

 

 

  3.92

 

 

  4.01

 

 

 

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

 

 

  .84

 

 

    .44

 

 

    .24

 

 

 

 

 

 

    .64

 

 

    .17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Annualized

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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2

 

WAYZATA, MN, July 23, 2008 – TCF Financial Corporation (“TCF”) (NYSE: TCB) today reported diluted earnings per share of 19 cents for the second quarter of 2008, compared with 49 cents in 2007. Net income for the second quarter of 2008 was $23.7 million, compared with $62.1 million for the second quarter of 2007. Net income for the second quarter of 2008 included $1.1 million in pre-tax gains on sales of securities and $5 million of adjustments related to increased state income taxes, for a net after-tax charge of three cents per diluted share. Net income for the second quarter of 2007 included $2.7 million in pre-tax gains on the sales of real estate and $1.9 million of favorable income tax adjustments, for a combined after-tax credit of three cents per diluted share. TCF also recorded $62.9 million in the provision for credit losses in the second quarter of 2008, as compared with $13.3 million in the second quarter of 2007. See discussion beginning on page 11 regarding the provision for credit losses.

 

Diluted earnings per share for the first six months of 2008 was 57 cents, compared with $1.14 for the same 2007 period.  The first six months of 2008 includes an $8.3 million pre-tax gain from Visa’s initial public offering, a $3.8 million pre-tax expense reduction related to a decrease in TCF’s estimated contingent obligation in regard to TCF’s Visa USA litigation indemnification, $7.4 million in pre-tax gains on sales of securities and $5 million of adjustments related to increased state income taxes for a net after-tax credit of six cents per diluted share. The first six months of 2007 included a $31.2 million pre-tax gain on the sale of ten outstate Michigan branches, $2.7 million of pre-tax gains on sales of real estate, and $10.4 million of favorable income tax settlements and adjustments for a total after-tax credit of 26 cents per diluted share.

 

Chief Executive Officer’s Statement

 

“TCF’s results continue to be impacted by the depressed housing markets and a weakening economy,” said Lynn A. Nagorske, CEO, TCF Financial Corporation. “TCF’s second quarter operating results were positively impacted by improved net interest income and net interest margin as well as strong loan and lease growth.

 

“During the second quarter, TCF recorded $62.9 million of provisions for loan and lease losses, which exceeded net charge-offs by $36.3 million and resulted in an increase to the allowance for loan and

 

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3

 

lease losses ratio to 1.03 percent. The continuing deterioration in the housing markets and economic conditions makes these actions prudent at this time.

 

“TCF’s Board of Directors declared a regular cash dividend of 25 cents per share, payable August 29. Given the company’s well-capitalized status, anticipated earnings, and efforts to manage asset growth to maintain or improve its regulatory capital ratios, the Company’s Board of Directors does not presently expect to raise additional capital through any type of equity offering related to TCF’s stock or change its dividend policy. As previously disclosed, in order to fund future balance sheet growth, we continue to monitor market conditions for the possible issuance of trust preferred securities, that would be included in regulatory capital.” TCF currently has no trust preferred securities outstanding.

 

 Total Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Percent Change

 

 

 

 

 

 

 

 ($in thousands)

 

2Q

 

1Q

 

 

  2Q

 

2Q08 vs

 

 

2Q08 vs

 

YTD

 

 

YTD

 

Percent 

 

 

 

2008

 

2008

 

 

2007 

 

1Q08  

 

 

2Q07

 

2008

 

 

2007

 

Change 

  

 Net interest income

 

$ 151,562

 

$ 142,829

 

$

137,425

 

 

6.1

 

%

10.3

 

%

 $ 294,391

 

$

272,902

 

7.9 

%

 Fees and other revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Fees and service charges

 

67,961

 

63,547

 

 

  71,728

 

 

6.9

 

 

(5.3

)

 

131,508

 

 

133,750

 

(1.7)

 

 Card revenue

 

26,828

 

24,771

 

 

  24,876

 

 

8.3

 

 

7.8

 

 

51,599

 

 

  48,137

 

 

 

 ATM revenue

 

8,267

 

7,970

 

 

    9,314

 

 

3.7

 

 

(11.2

)

 

16,237

 

 

  18,063

 

(10.1)

 

 Investments and insurance

 

2,977

 

3,235

 

 

    2,772

 

 

(8.0

)

 

7.4

 

 

6,212

 

 

   4,950

 

25.5 

 

 Total banking fees

 

106,033

 

99,523

 

 

108,690

 

 

6.5

 

 

(2.4

)

 

205,556

 

 

204,900

 

.3 

 

 Leasing and equipment finance

 

14,050

 

12,134

 

 

  15,199

 

 

15.8

 

 

(7.6

)

 

26,184

 

 

  29,200

 

(10.3)

 

 Other

 

1,421

 

1,048

 

 

    2,993

 

 

35.6

 

 

(52.5

)

 

2,469

 

 

   4,946

 

(50.1)

 

 Total fees and other revenue

 

121,504

 

112,705

 

 

126,882

 

 

7.8

 

 

(4.2

)

 

234,209

 

 

239,046

 

(2.0)

 

 Visa share redemption

 

  -

 

8,308

 

 

-  

 

 

(100.0

)

 

-

 

 

8,308

 

 

-

 

100.0 

 

 Gains on sales of securities available for sale

 

1,115

 

6,286

 

 

-  

 

 

(82.3

)

 

N.M.

 

 

7,401

 

 

-

 

100.0 

 

 Gains on sales of branches and real estate

 

  -

 

-

 

 

    2,723

 

 

-

 

 

(100.0

)

 

    -

 

 

  33,896

 

(100.0)

 

Total non-interest income

 

122,619

 

127,299

 

 

129,605

 

 

(3.7

)

 

(5.4

)

 

249,918

 

 

272,942

 

(8.4)

 

Total revenue

 

$ 274,181

 

$ 270,128

 

$

267,030

 

 

1.5

 

 

2.7

 

 

 $ 544,309

 

$

545,844

 

(.3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Net interest margin (1)

 

4.00

 

%

3.84

 

%

 

     4.02

%

 

 

 

 

 

 

 

3.92

 

%

 

     4.01

%

 

 

 Fees and other revenue as a % of:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue

 

44.32

 

 

41.72

 

 

 

   47.52

 

 

 

 

 

 

 

43.03

 

 

 

   43.79

 

 

 

Average assets (1)

 

2.97

 

 

2.79

 

 

 

     3.42

 

 

 

 

 

 

 

2.88

 

 

 

     3.23

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 N.M. = Not Meaningful

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 (1)  Annualized

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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4

 

Net Interest Income

 

TCF’s net interest income for the second quarter of 2008 was $151.6 million, up $14.1 million, or 10.3 percent, from the second quarter of 2007 and up $8.7 million, or 6.1 percent, from the first quarter of 2008. The increase in net interest income from the second quarter of 2007 was primarily attributable to a $1.5 billion, or 10.9 percent, increase in average interest-earning assets, partially offset by a two basis point reduction in net interest margin. The increase in net interest income from the first quarter of 2008 was primarily due to a $296.1 million, or 2 percent, increase in average interest-earning assets and a 16 basis point increase in net interest margin.

 

Net interest margin in the second quarter of 2008 was 4.00 percent, compared with 4.02 percent for the second quarter of 2007 and 3.84 percent for the first quarter of 2008. The 16 basis point increase in net interest margin from the first quarter of 2008 was primarily due to declines in rates paid on deposits and borrowings, as a result of generally lower market interest rates, exceeding the market driven decline in yields on Power Assets, partially due to loans at their contractual interest rate floor. The average balance of consumer home equity loans that were at their contractual interest rate floor was $1.2 billion for the second quarter of 2008, compared with $645 million for the first quarter of 2008. In addition, the net interest margin for the second quarter of 2008, as compared with the first quarter of 2008, benefited from increased lower cost deposits as a percentage of total deposits and borrowings.

 

Non-interest Income

 

Total non-interest income was $122.6 million for the second quarter of 2008, down $7 million from the second quarter of 2007.

 

Banking fees and service charges were $68 million, down $3.8 million, or 5.3 percent, from the second quarter of 2007 primarily due to decreased deposit service fees resulting from higher per account average deposit balances partially attributable to the Federal Economic Stimulus Plan.

 

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5

 

Card revenues totaled $26.8 million for the second quarter of 2008, up $2 million, or 7.8 percent, over the same period in 2007 due to higher sales volume primarily as a result of increases in customer transactions.

 

Leasing and equipment finance revenues were $14.1 million for the second quarter of 2008, down $1.1 million, or 7.6 percent, from the 2007 second quarter due to lower sales-type lease revenue and operating lease revenue. Leasing and equipment finance revenues may fluctuate from period to period based on customer driven factors not entirely within the control of TCF.

 

Gains on sales of securities available for sale were $1.1 million in the second quarter of 2008 on sales of $124.6 million of mortgage-backed securities. There were no such sales or gains in the same period of 2007.

 

There were no gains on sales of real estate in the second quarter of 2008, compared with $2.7 million for the second quarter of 2007.

 

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6

 

Branches

 

 

 Number of Branches

 

 

 

 

 

 

 

 

 

 

Table 3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 At period end

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

New 

 

 

 

 

 

Total

 

New 

 

 

 

Branches

 

Branches(1)

 

 

 

 

 

Branches

 

Branches(1)

 

 Illinois

 

205

 

33

 

 

 

Traditional

 

196

 

75

 

 Minnesota

 

109

 

18

 

 

 

Supermarket

 

243

 

36

 

 Michigan

 

56

 

20

 

 

 

Campus

 

15

 

10

 

 Colorado

 

46

 

39

 

 

 

 

 

454

 

121

 

 Wisconsin

 

27

 

4

 

 

 

 

 

 

 

 

 

 Arizona

 

6

 

6

 

 

 

 

 

 

 

 

 

 Indiana

 

5

 

1

 

 

 

 

 

 

 

 

 

 Total Branches

 

454

 

121

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 (1) New branches opened since January 1, 2003.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

During the second quarter of 2008, TCF opened four new branches, consisting of two traditional branches and two supermarket branches.

 

During the remainder of 2008, TCF plans to open four additional branches, consisting of one traditional branch and three supermarket branches. To improve the customer experience and enhance deposit growth, TCF intends to relocate three traditional branches to improved locations and facilities and to remodel 19 supermarket branches during the remainder of 2008. As part of improving operating efficiencies, TCF closed and consolidated two Colorado supermarket branches into nearby branches in the second quarter of 2008. Ten additional Colorado supermarket branches have been closed and consolidated in July.

 

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7

 

Additional information regarding the results of TCF’s new branches opened since January 1, 2003 is summarized as follows:

 

 

New Branch Information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 4

 

 

 

 

 

 

 

 

2Q08 vs 2Q07

 

 

 

 

 

 

 

 

($in thousands)

 

2Q

 

2Q

 

 

 

Percent

 

YTD

 

YTD

 

Percent

 

 

 

2008

 

2007

 

Change

 

Change

 

2008

 

2007

 

Change

 

Number of deposit accounts

 

300,844

 

246,369

 

54,475

 

22.1

 

 

%

 

 

 

 

 

 

 

Average deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Checking

 

$

303,067

 

$

224,819

 

$

78,248

 

34.8

 

 

 

$

295,901

 

$

215,549

 

37.3

   %

Savings

 

349,668

 

229,376

 

120,292

 

52.4

 

 

 

342,115

 

220,427

 

55.2

 

 

Money market

 

44,447

 

31,777

 

12,670

 

39.9

 

 

 

 

41,572

 

29,655

 

40.2

 

 

Subtotal

 

697,182

 

485,972

 

211,210

 

43.5

 

 

 

679,588

 

465,631

 

45.9

 

 

Certificates of deposit

 

330,934

 

336,804

 

(5,870

)

(1.7

)

 

 

 

321,547

 

333,579

 

(3.6

)

 

Total deposits

 

$

1,028,116

 

$

822,776

 

$

205,340

 

25.0

 

 

 

 

$

1,001,135

 

$

799,210

 

25.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total fees and other revenue

 

$

16,275

 

$

13,575

 

$

2,700

 

19.9

 

 

 

$

30,833

 

$

24,279

 

27.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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8

 

Power Assets®

 

Average Power Assets

 

 

 

 

 

 

 

 

 

 

 

Table 5

 

 

 

 

 

 

 

 

 

 

Percent Change

 

 

 

 

 

 

 

 

($ in thousands)

 

2Q

 

1Q

 

2Q

 

2Q08 vs

 

2Q08 vs

 

YTD

 

YTD

 

Percent

 

 

 

 

2008

 

2008

 

2007

 

   1Q08

 

 

2Q07

 

2008

 

2007

 

Change

 

 

Loans and leases: (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer home equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First mortgage lien

 

$ 4,366,623

 

$ 4,220,046

 

$ 3,894,939

 

3.5

  %

 

12.1

 %

 

$ 4,293,337

 

$ 3,851,905

 

11.5

 

%

Junior lien

 

2,420,963

 

2,366,396

 

2,140,773

 

2.3

 

 

13.1

 

 

2,393,678

 

2,125,333

 

12.6

 

 

   Total consumer home equity

 

6,787,586

 

6,586,442

 

6,035,712

 

3.1

 

 

12.5

 

 

6,687,015

 

5,977,238

 

11.9

 

 

Consumer other

 

46,492

 

44,008

 

41,708

 

5.6

 

 

11.5

 

 

45,250

 

41,780

 

8.3

 

 

Total consumer

 

6,834,078

 

6,630,450

 

6,077,420

 

3.1

 

 

12.5

 

 

6,732,265

 

6,019,018

 

11.8

 

 

Commercial real estate

 

2,656,392

 

2,566,415

 

2,349,608

 

3.5

 

 

13.1

 

 

2,611,403

 

2,363,568

 

10.5

 

 

Commercial business

 

529,470

 

543,688

 

557,134

 

(2.6

)

 

(5.0

)

 

536,579

 

555,639

 

(3.4

)

 

Total commercial

 

3,185,862

 

3,110,103

 

2,906,742

 

2.4

 

 

9.6

 

 

3,147,982

 

2,919,207

 

7.8

 

 

Leasing and equipment finance

 

2,229,467

 

2,140,695

 

1,879,958

 

4.1

 

 

18.6

 

 

2,185,081

 

1,859,077

 

17.5

 

 

Total Power Assets

 

$12,249,407

 

$11,881,248

 

$10,864,120

 

3.1

 

 

12.8

 

 

$12,065,328

 

$10,797,302

 

11.7

 

 

 

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

 

 

 

TCF’s average Power Assets grew $1.4 billion, or 12.8 percent, from the second quarter of 2007. TCF’s average consumer home equity loan balances increased $751.9 million, or 12.5 percent, average commercial loan balances increased $279.1 million, or 9.6 percent, and average leasing and equipment finance balances increased $349.5 million, or 18.6 percent.

 

TCF does not have any subprime lending programs. TCF also does not originate consumer home equity loans with multiple payment options or loans with “teaser” interest rates. At June 30, 2008, 63.9 percent of the consumer home equity portfolio was secured by first liens.

 

During the second quarter of 2008, TCF decided to exit the Education Lending business as a result of legislative changes that eroded the profitability of the business and market challenges in selling such loans.

 

-more-

 


 

9

 

Power Liabilities®

 

 

Average Power Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 6

 

 

 

 

 

 

 

 

 

 

Percent Change

 

 

 

 

 

 

 

 

($ in thousands)

 

2Q

 

1Q

 

2Q

 

2Q08 vs

 

 

2Q08 vs

 

YTD

 

YTD

 

Percent

 

 

 

 

2008

 

2008

 

2007

 

1Q08

 

 

2Q07

 

2008

 

2007

 

Change

 

 

Non-interest bearing deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail

 

$

1,464,237

 

$

1,415,379

 

$

1,492,429

 

3.5

 %

(1.9

) %

 

$

1,439,810

 

$

1,512,180

 

(4.8

)  %

 

Small business

 

577,510

 

565,148

 

586,711

 

2.2

 

 

(1.6

)

 

571,329

 

591,559

 

(3.4

)

 

Commercial and custodial

 

238,779

 

200,624

 

199,226

 

19.0

 

 

19.9

 

 

219,701

 

200,534

 

9.6

 

 

Total non-interest bearing

 

2,280,526

 

2,181,151

 

2,278,366

 

4.6

 

 

.1

 

 

2,230,840

 

2,304,273

 

(3.2

)

 

Interest-bearing deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Premier checking

 

989,512

 

1,008,802

 

1,070,397

 

(1.9

)

 

(7.6

)

 

999,157

 

1,071,940

 

(6.8

)

 

Other checking

 

894,436

 

837,804

 

834,405

 

6.8

 

 

7.2

 

 

866,120

 

829,486

 

4.4

 

 

Subtotal

 

1,883,948

 

1,846,606

 

1,904,802

 

2.0

 

 

(1.1

)

 

1,865,277

 

1,901,426

 

(1.9

)

 

Premier savings

 

1,518,703

 

1,473,997

 

1,109,341

 

3.0

 

 

36.9

 

 

1,496,350

 

1,089,809

 

37.3

 

 

Other savings

 

1,365,141

 

1,251,053

 

1,300,857

 

9.1

 

 

4.9

 

 

1,308,096

 

1,307,627

 

.0

 

 

Subtotal

 

2,883,844

 

2,725,050

 

2,410,198

 

5.8

 

 

19.7

 

 

2,804,446

 

2,397,436

 

17.0

 

 

Money market

 

609,369

 

589,392

 

604,217

 

3.4

 

 

.9

 

 

599,380

 

607,235

 

(1.3

)

 

Subtotal

 

5,377,161

 

5,161,048

 

4,919,217

 

4.2

 

 

9.3

 

 

5,269,103

 

4,906,097

 

7.4

 

 

Certificates of deposit

 

2,471,216

 

2,500,362

 

2,525,886

 

(1.2

)

 

(2.2

)

 

2,485,789

 

2,519,895

 

(1.4

)

 

Total interest-bearing

 

7,848,377

 

7,661,410

 

7,445,103

 

2.4

 

 

5.4

 

 

7,754,892

 

7,425,992

 

4.4

 

 

Power Liabilities

 

$

10,128,903

 

$

9,842,561

 

$

9,723,469

 

2.9

 

 

4.2

 

 

$

9,985,732

 

$

9,730,265

 

2.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average rate on deposits

 

1.47    

%

1.99    

%

2.40    

%

 

 

 

 

 

 

1.73  

%

2.39  

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Power Liabilities totaled $10.1 billion for the second quarter of 2008, with an average interest rate of 1.47 percent, an increase of $405 million, or 4.2 percent, from the second quarter of 2007. The increase was primarily driven by increases in savings balances, partially offset by declines in checking deposits and certificates of deposits.

 

Average Power Liabilities increased $286.3 million, or 2.9 percent, from the first quarter of 2008, primarily due to increases in non-interest bearing checking and savings deposits.

 

-more-

 


 

10

 

Non-interest Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 7

 

 

 

 

 

 

 

 

 

 

 

 

 Percent Change

 

 

 

 

 

 

 

 

 ($ in thousands)

 

 

2Q

 

1Q

 

2Q

 

2Q08 vs

 

2Q08 vs

 

 

 

 

 

Percent

 

 

 

 

2008

 

2008

 

2007

 

1Q08

 

2Q07

 

2008

 

2007

 

Change

 

 Compensation and employee benefits

 

 

$

84,267

 

$

88,718

 

$

86,707

 

 

(5.0

)%

 

(2.8

)%

 

 $

172,985

 

 $

174,800

 

(1.0

)%

 Occupancy and equipment

 

 

31,205

 

32,413

 

29,329

 

 

(3.7

)

 

6.4

 

 

63,618

 

59,780

 

6.4

 

 Advertising and promotions

 

 

7,130

 

6,296

 

5,586

 

 

13.2

 

 

27.6

 

 

13,426

 

11,567

 

16.1

 

 Other

 

 

41,667

 

40,101

 

36,531

 

 

3.9

 

 

14.1

 

 

 

81,768

 

71,846

 

13.8

 

Subtotal

 

 

164,269

 

167,528

 

158,153

 

 

(1.9

)

 

3.9

 

 

331,797

 

317,993

 

4.3

 

 Visa indemnification

 

 

-

 

(3,766

)

-

 

 

(100.0

)

 

-

 

 

(3,766

)

-

 

(100.0

)

 Operating lease depreciation

 

 

4,460

 

4,514

 

4,381

 

 

(1.2

)

 

1.8

 

 

 

8,974

 

8,741

 

2.7

 

Total non-interest expense

 

 

$

168,729

 

$

168,276

 

$

162,534

 

 

.3

 

 

3.8

 

 

 

 $

337,005

 

 $

326,734

 

3.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-interest expense totaled $168.7 million for the second quarter of 2008, up $6.2 million, or 3.8 percent, from $162.5 million for the second quarter of 2007.

 

Compensation and employee benefits continue to be well controlled and decreased $2.4 million, or 2.8 percent, from the second quarter of 2007.

 

Occupancy and equipment expenses increased $1.9 million, or 6.4 percent, from the second quarter of 2007, primarily due to branch expansion and exit costs associated with the 2008 closure of 12 Colorado supermarket branches.

 

Other expense increased $5.1 million, or 14.1 percent, from the second quarter of 2007, primarily due to a $3.1 million increase in foreclosed real estate expense due to increased property taxes and higher real estate disposition losses in 2008, costs associated with exiting the Education Lending business and reductions of lending employees.

 

-more-

 


 

11

 

Credit Quality

 

 

 Credit Quality Summary

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 8

 

 

 

 

 

 

 

 

 

Percent Change

 

 

 

 

 

 

 

 

 

2Q

 

1Q

 

2Q

 

2Q08 vs

 

2Q08 vs

 

YTD

 

YTD

 

Percent

 

 

 

2008

 

2008

 

2007

 

1Q08

 

2Q07

 

2008

 

2007

 

Change

 

 Allowance for loan and lease losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Balance at beginning of period

 

$

97,390

 

$

80,942

 

$

60,483

 

20.3

 %

 

61.0

 %

 

$

80,942

 

$

58,543

 

38.3

 %

Charge-offs

 

(29,902

 

(17,822

)

(10,749

)

67.8

 

 

178.2

 

 

(47,724

)

(19,981

)

138.8

 

Recoveries

 

3,254

 

4,275

 

3,746

 

 

(23.9

)

 

(13.1

)

 

 

7,529

 

10,262

 

 

(26.6

)

Net charge-offs

 

(26,648

 

(13,547

)

(7,003

)

96.7

 

 

N.M.

 

 

(40,195

)

(9,719

)

N.M.

 

Provision for credit losses

 

62,895

 

29,995

 

13,329

 

 

109.7

 

 

N.M.

 

 

 

92,890

 

17,985

 

 

N.M.

 

 Balance at end of period

 

$

133,637

 

$

97,390

 

$

66,809

 

 

37.2

 

 

100.0

 

 

 

$

133,637

 

$

66,809

 

 

100.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Allowance as a percentage of
period end loans and leases

 

1.03

 %

.77

 %

.58

 %

 

 

 

 

1.03

 %

.58

 %

 

 

 Ratio of allowance to net
 charge-offs (1)

 

1.3

 X

1.8

 X

2.4

 X

 

 

 

 

1.7

 X

3.4

 X

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Net Charge-offs as a Percentage of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Average Loans and Leases (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer home equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First mortgage lien

 

.61

 %

.38

 %

.22

 %

 

 

 

 

.50

 %

.18

 %

 

 

Junior lien

 

1.19

 

.84

 

.44

 

 

 

 

 

1.02

 

.40

 

 

 

Total home equity

 

.82

 

.55

 

.30

 

 

 

 

 

.69

 

.26

 

 

 

Total consumer

 

.90

 

.62

 

.37

 

 

 

 

 

.76

 

.28

 

 

 

Commercial real estate

 

.86

 

.07

 

-

 

 

 

 

 

.47

 

.03

 

 

 

Commercial business

 

1.74

 

.44

 

.03

 

 

 

 

 

1.08

 

.07

 

 

 

Leasing and equipment finance

 

.55

 

.39

 

.29

 

 

 

 

 

.47

 

.06

 

 

 

Residential real estate

 

.09

 

.13

 

.01

 

 

 

 

 

.11

 

.02

 

 

 

Total

 

.84

 

.44

 

.24

 

 

 

 

 

.64

 

.17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Other Credit Quality Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Delinquencies (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30+ days

 

$

120,823

 

$

104,337

 

$

58,687

 

15.8 

 

105.9 

 

 

 

 

 

 

 

90+ days

 

$

28,180

 

$

23,538

 

$

20,754

 

19.7 

 

35.8 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30+ days

 

.94

 %

.83

 %

.51

 %

 

 

 

 

 

 

 

 

 

 

90+ days

 

.22

 %

.19

 %

.18

 %

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-accrual loans and leases

 

$

105,247

 

$

86,226

 

$

40,391

 

22.1 

 

160.6 

 

 

 

 

 

 

 

Real estate owned

 

55,112

 

47,815

 

44,813

 

 

15.3 

 

23.0 

 

 

 

 

 

 

 

Total non-performing assets

 

$

160,359

 

$

134,041

 

$

85,204

 

 

19.6 

 

88.2 

 

 

 

 

 

 

 

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

 

1.25

 %

1.07

 %

.74 %

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 (1)  Annualized

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 (2)  Excludes non-accrual loans and leases.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-more-

 


 

12

 

At June 30, 2008, TCF’s allowance for loan and lease losses totaled $133.6 million, or 1.03 percent of loans and leases, compared with $66.8 million, or .58 percent, at June 30, 2007 and $97.4 million, or .77 percent, at March 31, 2008. The provision for credit losses for the second quarter of 2008 was $62.9 million, up from $13.3 million in the second quarter of 2007, primarily due to higher consumer home equity net charge-offs and the resulting portfolio reserve rate increases, and higher reserves and net charge-offs for commercial loans, primarily in Michigan. Home values continued to decline in all of TCF’s markets and financial stress on consumers continued to rise, especially in Minnesota and Michigan. These trends adversely impacted consumer loans as the number of credit loss incidents and the average severity of individual losses increased.

 

Consumer home equity net charge-offs for the second quarter of 2008 were $13.9 million, an increase of $4.9 million from the first quarter of 2008 and up $9.4 million from the second quarter of 2007. The higher net charge-offs were primarily due to the depressed residential real estate market conditions in Minnesota and Michigan. Commercial net charge-offs for the second quarter of 2008 were $8 million, an increase of $7 million from the first quarter of 2008. Commercial net charge-offs in the second quarter of 2008 included $4 million of loans to residential home builders. Leasing and equipment finance net charge-offs for the second quarter of 2008 were $3 million, up $1 million from the first quarter of 2008.

 

At June 30, 2008, TCF’s over-30-day delinquency rate was .94 percent, up from .83 percent at March 31, 2008. TCF’s over-90-day delinquency rate was .22 percent, up from .19 percent at March 31, 2008. Non-performing assets, which include non-accrual loans, are reported separately and were $160 million, or .97 percent of total assets, at June 30, 2008, up from $134 million, or .82 percent of total assets, at March 31, 2008. The increase in non-performing assets from March 31, 2008 was primarily due to a $13.6 million increase in consumer home equity non-accrual loans, a $3.1 million increase in commercial non-accrual loans and a $7.3 million increase in real estate owned.

 

-more-

 


 

13

 

Income Taxes

 

TCF’s income tax expense was $18.9 million for the second quarter of 2008, or 44.3 percent of pre-tax income, compared with $29 million, or 31.9 percent, for the comparable 2007 period. The second quarter of 2008 income tax expense includes a $2.2 million year-to-date increase in income tax expense and a $2.8 million increase in deferred income taxes related to changes in state income taxes, primarily in Minnesota. The second quarter of 2007 income tax expense included a $1.9 million reduction in income tax expense related to favorable developments in uncertain tax positions. Excluding the first quarter of 2008 component of the increase in state income taxes and the increase in deferred income taxes, the 2008 second quarter effective income tax rate would have been 34.5 percent, compared with 33.9 percent for the second quarter of 2007 after excluding the impact of the favorable developments in uncertain tax positions.

 

Capital

 

Capital Information

 

 

 

 

 

 

 

Table 9

At period end

 

 

 

 

 

 

 

 

 

($ in thousands, except per-share data)

 

2Q

 

 

 

4Q

 

 

 

 

 

2008

 

 

 

2007

 

 

 

Stockholders’ equity

 

$

1,088,301

 

 

 

$

1,099,012

 

 

 

Stockholders’ equity to total assets

 

6.61

 

  %

 

6.88

 

  %

 

Book value per common share

 

$

8.60

 

 

 

$

8.68

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk-based capital

 

 

 

 

 

 

 

 

 

Tier 1

 

$

972,688

 

8.08

  %

$

964,467

 

8.28

  %

Total

 

1,307,552

 

10.86

 

1,245,808

 

10.70

 

Total stated “well-capitalized” requirement

 

1,203,908

 

10.00

 

1,164,829

 

10.00

 

Excess over stated “well-capitalized” requirement

 

103,644

 

.86

 

80,979

 

.70

 

 

 

 

 

 

 

 

 

 

 

 

TCF continues to meet the well capitalized requirements. No repurchases of common stock have been made in 2008.

 

-more-

 


 

14

 

Website Information

 

A live webcast of TCF’s conference call to discuss second quarter earnings will be hosted at TCF’s website, www.tcfbank.com, on July 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 $16.5 billion in total assets. The company has 454 banking offices in Minnesota, Illinois, Michigan, Colorado, Wisconsin, Indiana and Arizona, providing retail and commercial banking services, and investments and insurance products. TCF also conducts leasing and equipment finance business in all 50 states

 

 

-more-

 


 

15

 

Forward-looking Information

 

This earnings release and other reports issued by the Company, including reports filed with the SEC, may contain “forward-looking” statements that deal with future results, plans or performance. In addition, TCF’s management may make such statements orally to the media, or to securities analysts, investors or others. Forward-looking statements deal with matters that do not relate strictly to historical facts. TCF’s future results may differ materially from historical performance and forward-looking statements about TCF’s expected financial results or other plans and are subject to a number of risks and uncertainties. These include, but are not limited, to possible legislative changes and adverse economic, business and competitive developments such as shrinking interest margins; deposit outflows; an inability to increase the number of deposit accounts and the possibility that deposit account losses (fraudulent checks, etc.) may increase; 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; adverse findings in tax audits or regulatory examinations and resulting enforcement actions; changes in credit and other risks posed by TCF’s loan, lease, investment, and securities available for sale portfolios, including declines in commercial or residential real estate values or changes in allowance for loan and lease losses methodology dictated by new market conditions or regulatory requirements; lack of or inadequate insurance coverage for claims against TCF; technological, computer-related or operational difficulties or loss or theft of information; adverse changes in securities markets directly or indirectly affecting TCF’s ability to sell assets or to fund its operations; and results of litigation, including possible increases in indemnification obligations for certain litigation against Visa USA (“covered litigation”) and potential reductions in card revenues resulting from other litigation against Visa; heightened regulatory practices, requirements or expectations; 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.

 

-more-

 


 

16

 

TCF FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per-share data)

(Unaudited)

 

 

 

Three Months Ended

 

 

 

 

 

 

 

 

 

June 30,

 

 

Change

 

 

 

2008

 

2007

 

$

 

%

Interest income:

 

 

 

 

 

 

 

 

 

 

Loans and leases

 

$

208,407

 

$

206,738

 

$

1,669

 

 

.8

 

Securities available for sale

 

28,858

 

26,665

 

2,193

 

 

8.2

 

Education loans held for sale

 

1,756

 

3,365

 

(1,609

)

 

(47.8

)

Investments and other

 

1,427

 

1,557

 

(130

)

 

(8.3

)

Total interest income

 

240,448

 

238,325

 

2,123

 

 

.9

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

Deposits

 

36,954

 

58,242

 

(21,288

)

 

(36.6

)

Borrowings

 

51,932

 

42,658

 

9,274

 

 

21.7

 

Total interest expense

 

88,886

 

100,900

 

(12,014

)

 

(11.9

)

Net interest income

 

151,562

 

137,425

 

14,137

 

 

10.3

 

Provision for credit losses

 

62,895

 

13,329

 

49,566

 

 

N.M.

 

Net interest income after provision for

 

 

 

 

 

 

 

 

 

 

credit losses

 

88,667

 

124,096

 

(35,429

)

 

(28.5

)

Non-interest income:

 

 

 

 

 

 

 

 

 

 

Fees and service charges

 

67,961

 

71,728

 

(3,767

)

 

(5.3

)

Card revenue

 

26,828

 

24,876

 

1,952

 

 

7.8

 

ATM revenue

 

8,267

 

9,314

 

(1,047

)

 

(11.2

)

Investments and insurance revenue

 

2,977

 

2,772

 

205

 

 

7.4

 

Subtotal

 

106,033

 

108,690

 

(2,657

)

 

(2.4

)

Leasing and equipment finance

 

14,050

 

15,199

 

(1,149

)

 

(7.6

)

Other

 

1,421

 

2,993

 

(1,572

)

 

(52.5

)

Fees and other revenue

 

121,504

 

126,882

 

(5,378

)

 

(4.2

)

Gains on sales of securities available for sale

 

1,115

 

-

 

1,115

 

 

N.M.

 

Gains on sales of branches and real estate

 

-

 

2,723

 

(2,723

)