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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):  October 22, 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 October 22, 2008, attached to this Form 8-K as Exhibit 99.1, announcing its results of operations for the quarter ended September 30, 2008.

 

Item 9.01    Financial Statements and Exhibits.

 

(d)         Exhibits.

 

Exhibit No.

 

  Description

 

 

 

99.1

 

Earnings Release of TCF Financial Corporation,
dated October 22, 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/ William A. Cooper

 

William A. Cooper,
Chairman and Chief Executive Officer
(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:    October 22, 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 Third Quarter Earnings and EPS ($.24)

 

THIRD QUARTER HIGHLIGHTS

·                 Diluted earnings per share of 24 cents, up 26.3 percent from the second quarter

·                 Net income of $30.1 million

·                 Net interest margin of 3.97 percent

·                 Net loan and lease charge-offs $26.8 million, flat from second quarter

·                 Provision for loan and lease losses $52.1 million, down from $62.9 million in the second quarter

·                 Allowance for loan and lease losses to total loans and leases increased to 1.21 percent at September 30

·                 Average Power AssetsÒ increased by $1.4 billion, or 12.3 percent, from third quarter 2007

·                 Issued $115 million of trust preferred securities

·                 Capital ratios exceed stated well capitalized requirements

 

EARNINGS SUMMARY

 

 

 

 

 

 

 

 

 

 

 

Table 1

 

($ in thousands, except per-share data)

 

 

 

 

 

Percent Change

 

 

 

 

 

 

 

 

3Q

 

2Q

 

3Q

 

3Q08 vs

 

3Q08 vs

 

YTD

 

YTD

 

Percent

 

 

2008

 

2008

 

2007

 

2Q08

 

3Q07

 

2008

 

2007

 

Change

 

Net income

$

 30,126  

 

$

 23,702  

 

$

 59,138  

 

27.1  

%

(49.1)  

%  

$

 101,254  

 

$

 203,991  

 

(50.4)

 %

Diluted earnings per
common share

.24  

 

.19  

 

.48  

 

26.3  

 

(50.0)  

 

.81  

 

1.62  

 

(50.0)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Ratios (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average assets

.73 %

 

.58 %

 

1.55 %

 

 

 

 

 

.83 %

 

1.82 %

 

 

 

Return on average common
equity

11.11    

 

8.57    

 

23.39    

 

 

 

 

 

12.29    

 

26.58    

 

 

 

Net interest margin

3.97    

 

4.00    

 

3.90    

 

 

 

 

 

3.94    

 

3.97    

 

 

 

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

.82    

 

.84    

 

.38    

 

 

 

 

 

.70    

 

.24    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Annualized

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-more-


 

2

 

WAYZATA, MN, October 22, 2008 – TCF Financial Corporation (“TCF”) (NYSE: TCB) today reported diluted earnings per share of 24 cents for the third quarter of 2008, compared with 19 cents in the second quarter of 2008 and 48 cents in the third quarter of 2007. Net income for the third quarter of 2008 was $30.1 million, compared with $23.7 million in the second quarter and $59.1 million for the third quarter of 2007. TCF recorded $52.1 million in the provision for credit losses in the third quarter of 2008, as compared with $62.9 million in the second quarter of 2008 and $18.9 million in the third quarter of 2007. See discussion beginning on page 11 regarding the provision for credit losses.

 

Diluted earnings per share for the first nine months of 2008 was 81 cents, compared with $1.62 for the same 2007 period. Net income for the first nine months of 2008 was $101.3 million, compared with $204 million for the same 2007 period. TCF recorded $145 million in the provision for credit losses for the first nine months of 2008, as compared with $36.9 million for the same 2007 period.

 

Chairman’s Statement

 

“There is no doubt that TCF has been negatively impacted by falling home prices and a slowing of the economy,” said William A. Cooper, Chairman and CEO. “However, TCF’s rate of loan charge-offs during the 2008 third quarter remained flat compared to the upward trend experienced by many of our banking competitors. TCF’s results can be attributed to activities in which TCF did not participate. TCF did not have a subprime lending program, has not made option ARM loans, or loans with teaser rates, etc., and has not securitized any loans, or participated in credit derivatives or any other types of derivatives. In addition, TCF has no investments in Fannie Mae or Freddie Mac preferred stock or other bank trust preferred securities.

 

“TCF continues to be a well-capitalized institution primarily funded by retail deposits.  TCF has remained profitable during the financial crisis and continues to lend to credit-worthy customers.”

 

-more-


 

3

 

 Total Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 ($ in thousands)

 

 

 

 

 

 

 

 

Percent Change

 

 

 

 

 

 

 

 

 

 

 

3Q

 

2Q

 

3Q

 

 

3Q08 vs

3Q08 vs

 

YTD

 

YTD

 

 

Percent

 

 

 

2008

 

2008

 

2007

 

 

2Q08

3Q07

 

2008

 

2007

 

 

Change

 

 Net interest income

 

$ 152,165

 

$ 151,562

 

$ 137,704

 

 

.4

 %

 

10.5

 %

 

 

$ 446,556

 

$ 410,606

 

 

8.8

 %

 

 Fees and other revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Fees and service charges

 

71,783

 

67,961

 

71,965

 

 

5.6

 

 

(.3

)

 

 

203,291

 

205,715

 

 

(1.2

)

 

   Card revenue

 

26,240

 

26,828

 

25,685

 

 

(2.2

)

 

2.2

 

 

 

77,839

 

73,822

 

 

5.4

 

 

   ATM revenue

 

8,720

 

8,267

 

9,251

 

 

5.5

 

 

(5.7

)

 

 

24,957

 

27,314

 

 

(8.6

)

 

   Investments and insurance

 

3,193

 

2,977

 

2,632

 

 

7.3

 

 

21.3

 

 

 

9,405

 

7,582

 

 

24.0

 

 

      Total banking fees

 

109,936

 

106,033

 

109,533

 

 

3.7

 

 

.4

 

 

 

315,492

 

314,433

 

 

.3

 

 

   Leasing and equipment finance

 

13,006

 

14,050

 

15,110

 

 

(7.4

)

 

(13.9

)

 

 

39,190

 

44,310

 

 

(11.6

)

 

   Other

 

103

 

1,421

 

1,751

 

 

(92.8

)

 

(94.1

)

 

 

2,572

 

6,697

 

 

(61.6

)

 

      Total fees and other revenue

 

123,045

 

121,504

 

126,394

 

 

1.3

 

 

(2.6

)

 

 

357,254

 

365,440

 

 

(2.2

)

 

   Visa share redemption

 

-    

 

-    

 

-    

 

 

-

 

 

-

 

 

 

8,308

 

-    

 

 

100.0

 

 

   Gains on sales of securities
available for sale

 

498

 

1,115

 

2,017

 

 

(55.3

)

 

(75.3

)

 

 

7,899

 

2,017

 

 

N.M.

 

 

   Gains on sales of branches 
 and real estate

 

-    

 

-    

 

1,246

 

 

-

 

 

(100.0

)

 

 

-    

 

35,142

 

 

(100.0

)

 

         Total non-interest income

 

123,543

 

122,619

 

129,657

 

 

.8

 

 

(4.7

)

 

 

373,461

 

402,599

 

 

(7.2

)

 

         Total revenue

 

$ 275,708

 

$ 274,181

 

$ 267,361

 

 

.6

 

 

3.1

 

 

 

$ 820,017

 

$ 813,205

 

 

.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Net interest margin (1)

 

3.97   

%

4.00   

%

3.90   

%

 

 

 

 

 

 

 

 

3.94   

%

3.97   

%

 

 

 

 

 Fees and other revenue as a % of:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

       Total revenue

 

44.63   

 

44.32   

 

47.27   

 

 

 

 

 

 

 

 

 

43.57   

 

44.94   

 

 

 

 

 

       Average assets (1)

 

3.00   

 

2.97   

 

3.32   

 

 

 

 

 

 

 

 

 

2.92   

 

3.26   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 N.M. = Not Meaningful

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 (1) Annualized

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Interest Income

 

TCF’s net interest income for the third quarter of 2008 was $152.2 million, up $14.5 million, or 10.5 percent, from the third quarter of 2007 and up $603 thousand, or .4 percent, from the second quarter of 2008. The increase in net interest income from the third quarter of 2007 was primarily attributable to a $1.2 billion, or 8.7 percent, increase in average interest-earning assets. The increase in net interest income from the second quarter of 2008 was primarily due to a $105.4 million, or .7 percent, increase in average interest-earning assets.

 

Net interest margin in the third quarter of 2008 was 3.97 percent, compared with 3.90 percent for the third quarter of 2007 and 4.00 percent for the second quarter of 2008. The three basis point decrease in net interest margin from the second quarter of 2008 was primarily due to the issuance of $115 million of trust preferred securities in August of 2008.

 

-more-


 

4

 

Non-interest Income

 

Total non-interest income was $123.5 million for the third quarter of 2008, down $6.1 million, or 4.7 percent, from the third quarter of 2007 and up $924 thousand, or .8 percent, from the second quarter of 2008.

 

Banking fees and service charges were $71.8 million, essentially flat with the third quarter of 2007. Banking fees and service charges increased $3.8 million, or 5.6 percent, from the second quarter of 2008 primarily due to increased deposit service fees.

 

Card revenues totaled $26.2 million for the third quarter of 2008, up $555 thousand, or 2.2 percent, over the same period in 2007 due to increases in customer transactions and average transaction size. Card revenue decreased $588 thousand, or 2.2 percent, from the second quarter of 2008, due to fewer customer transactions.

 

Leasing and equipment finance revenues were $13 million for the third quarter of 2008, down $2.1 million, or 13.9 percent, from the 2007 third quarter and down $1 million, or 7.4 percent, from the second quarter of 2008, 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 $498 thousand in the third quarter of 2008 on sales of $56.6 million of mortgage-backed securities. In 2007, TCF sold $189.3 million of mortgage-backed securities at gains of $2 million.

 

-more-


 

5

 

Branches

 

 

 Number of Branches

 

 

 

 

 

 

 

 

 

 

Table 3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 At period end

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

New 

 

 

 

 

 

Total

 

New 

 

 

 

Branches

 

Branches(1)

 

 

 

 

 

Branches

 

Branches(1)

 

 Illinois

 

206

 

34

 

 

 

Traditional

 

196

 

75

 

 Minnesota

 

109

 

18

 

 

 

Supermarket

 

234

 

27

 

 Michigan

 

56

 

20

 

 

 

Campus

 

15

 

10

 

 Colorado

 

36

 

29

 

 

 

 

 

445

 

112

 

 Wisconsin

 

27

 

4

 

 

 

 

 

 

 

 

 

 Arizona

 

6

 

6

 

 

 

 

 

 

 

 

 

 Indiana

 

5

 

1

 

 

 

 

 

 

 

 

 

 Total Branches

 

445

 

112

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

During the third quarter of 2008, TCF opened one new supermarket branch. For the remainder of 2008, TCF plans to open one traditional branch and two 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 five supermarket branches during the remainder of 2008. As part of improving operating efficiencies, TCF closed and consolidated 10 Colorado supermarket branches into nearby branches in the third quarter of 2008.

 

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

 

 

New Branch Information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 4

 

 

 

 

 

 

 

 

3Q08 vs 3Q07

 

 

 

 

 

 

 

 

($ in thousands)

 

3Q

 

3Q

 

 

 

Percent

 

YTD

 

YTD

 

Percent

 

 

 

2008

 

2007

 

Change

 

Change

 

2008

 

2007

 

Change

 

Number of deposit accounts

 

315,459

 

263,979

 

51,480

 

19.5

 

%

 

 

 

 

 

 

 

 

Average deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Checking

 

$

310,147

 

$

238,567

 

$

71,580

 

30.0

 

 

 

$

300,684

 

$

223,306

 

34.7

   %

Savings

 

330,550

 

259,964

 

70,586

 

27.2

 

 

 

338,232

 

233,751

 

44.7

 

 

Money market

 

49,536

 

35,792

 

13,744

 

38.4

 

 

 

 

44,246

 

31,723

 

39.5

 

 

Subtotal

 

690,233

 

534,323

 

155,910

 

29.2

 

 

 

683,162

 

488,780

 

39.8

 

 

Certificates of deposit

 

314,326

 

322,699

 

(8,373

)

(2.6

)

 

 

 

319,123

 

329,912

 

(3.3

)

 

Total deposits

 

$

1,004,559

 

$

857,022

 

$

147,537

 

17.2

 

 

 

 

$

1,002,285

 

$

818,692

 

22.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total fees and other revenue

 

$

16,789

 

$

14,310

 

$

2,479

 

17.3

 

 

 

 

$

47,622

 

$

38,589

 

23.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-more-

 


 

6

 

Power Assets®

 

 Average Power Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 5

 

 

 

 

 

 

 

 

 

 

Percent Change

 

 

 

 

 

 

 

 

 ($ in thousands)

 

3Q

 

2Q

 

3Q

 

3Q08 vs

 

3Q08 vs

 

YTD

 

YTD

 

Percent

 

 

 

 

2008

 

2008

 

2007

 

2Q08

 

3Q07

 

2008

 

2007

 

Change

 

 

 Loans and leases: (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Consumer home equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First mortgage lien

 

$

4,396,754

 

$

4,366,623

 

$

3,994,573

 

.7

  %

 

10.1

 %

 

$

4,328,059

 

$

3,899,983

 

11.0

 

%

Junior lien

 

2,434,392

 

2,420,963

 

2,211,680

 

.6

 

 

10.1

 

 

2,407,350

 

2,154,431

 

11.7

 

 

Total consumer home equity

 

6,831,146

 

6,787,586

 

6,206,253

 

.6

 

 

10.1

 

 

6,735,409

 

6,054,414

 

11.2

 

 

Consumer other

 

45,939

 

46,492

 

45,440

 

(1.2

)

 

1.1

 

 

45,481

 

43,014

 

5.7

 

 

Total consumer

 

6,877,085

 

6,834,078

 

6,251,693

 

.6

 

 

10.0

 

 

6,780,890

 

6,097,428

 

11.2

 

 

Commercial real estate

 

2,776,830

 

2,656,392

 

2,371,207

 

4.5

 

 

17.1

 

 

2,666,948

 

2,366,142

 

12.7

 

 

Commercial business

 

544,826

 

529,470

 

566,464

 

2.9

 

 

(3.8

)

 

539,348

 

559,287

 

(3.6

)

 

Total commercial

 

3,321,656

 

3,185,862

 

2,937,671

 

4.3

 

 

13.1

 

 

3,206,296

 

2,925,429

 

9.6

 

 

Leasing and equipment finance

 

2,300,429

 

2,229,467

 

1,937,269

 

3.2

 

 

18.7

 

 

2,223,811

 

1,885,427

 

17.9

 

 

Total Power Assets

 

$

12,499,170

 

$

12,249,407

 

$

11,126,633

 

2.0

 

 

12.3

 

 

$

12,210,997

 

$

10,908,284

 

11.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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 12.3 percent, from the third quarter of 2007. TCF’s average consumer home equity loan balances increased $624.9 million, or 10.1 percent, average commercial loan balances increased $384 million, or 13.1 percent, and average leasing and equipment finance balances increased $363.2 million, or 18.7 percent, from the third quarter of 2007.

 

Average Power Assets increased $249.8 million, or 8.2 percent, annualized, from the second quarter of 2008, a slower growth rate than previous quarters, as management reduced growth due to market conditions and lower profitability. With the successful issuance of trust preferred securities during the third quarter of 2008, management now expects future growth rates to increase.

 

At September 30, 2008, 64.4 percent of the consumer home equity portfolio was secured by first mortgage liens.

 

-more-

 


 

7

 

Power Liabilities®

 

 

 Average Power Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 6

 

 

 

 

 

 

 

 

 

 

Percent Change

 

 

 

 

 

 

 

 

 ($ in thousands)

 

3Q

 

2Q

 

3Q

 

3Q08 vs

 

 

3Q08 vs

 

YTD

 

YTD

 

Percent

 

 

 

 

2008

 

2008

 

2007

 

2Q08

 

 

3Q07

 

2008

 

2007

 

Change

 

 

 Non-interest bearing deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail

 

$

1,409,855

 

$

1,464,237

 

$

1,406,155

 

(3.7

) %

.3

 %

 

$

1,429,752

 

$

1,476,451

 

(3.2

)  %

 

Small business

 

597,894

 

577,510

 

596,197

 

3.5

 

 

.3

 

 

580,248

 

593,122

 

(2.2

)

 

Commercial and custodial

 

253,900

 

238,779

 

195,529

 

6.3

 

 

29.9

 

 

231,184

 

198,848

 

16.3

 

 

Total non-interest bearing

 

2,261,649

 

2,280,526

 

2,197,881

 

(.8

)

 

2.9

 

 

2,241,184

 

2,268,421

 

(1.2

)

 

 Interest-bearing deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Premier checking

 

933,189

 

989,512

 

1,048,449

 

(5.7

)

 

(11.0

)

 

977,007

 

1,064,024

 

(8.2

)

 

Other checking

 

904,351

 

894,436

 

823,833

 

1.1

 

 

9.8

 

 

878,956

 

827,580

 

6.2

 

 

Subtotal

 

1,837,540

 

1,883,948

 

1,872,282

 

(2.5

)

 

(1.9

)

 

1,855,963

 

1,891,604

 

(1.9

)

 

Premier savings

 

1,403,323

 

1,518,703

 

1,202,672

 

(7.6

)

 

16.7

 

 

1,465,115

 

1,127,843

 

29.9

 

 

Other savings

 

1,388,236

 

1,365,141

 

1,274,164

 

1.7

 

 

9.0

 

 

1,335,005

 

1,296,350

 

3.0

 

 

Subtotal

 

2,791,559

 

2,883,844

 

2,476,836

 

(3.2

)

 

12.7

 

 

2,800,120

 

2,424,193

 

15.5

 

 

Money market

 

629,905

 

609,369

 

606,198

 

3.4

 

 

3.9

 

 

609,629

 

606,885

 

.5

 

 

Subtotal

 

5,259,004

 

5,377,161

 

4,955,316

 

(2.2

)

 

6.1

 

 

5,265,712

 

4,922,682

 

7.0

 

 

Certificates of deposit

 

2,469,327

 

2,471,216

 

2,498,936

 

(.1

)

 

(1.2

)

 

2,480,262

 

2,512,832

 

(1.3

)

 

Total interest-bearing

 

7,728,331

 

7,848,377

 

7,454,252

 

(1.5

)

 

3.7

 

 

7,745,974

 

7,435,514

 

4.2

 

 

Power Liabilities

 

$

9,989,980

 

$

10,128,903

 

$

9,652,133

 

(1.4

)

 

3.5

 

 

$

9,987,158

 

$

9,703,935

 

2.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Average rate on deposits

 

1.34    

%

1.47    

%

2.48    

%

 

 

 

 

 

 

1.60    

%

2.42    

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Power Liabilities totaled $10 billion for the third quarter of 2008, with an average interest rate of 1.34 percent, an increase of $337.8 million, or 3.5 percent, from the third quarter of 2007. The increase was primarily driven by increases in savings balances.

 

Average Power Liabilities decreased $138.9 million, or 1.4 percent, from the second quarter of 2008, primarily due to decreases in Premier checking and Premier savings balances as a result of higher interest rates paid by competitors. TCF has in process several initiatives involving products, pricing and marketing in an effort to increase TCF’s market share of deposits.

 

-more-

 


 

8

 

Non-interest Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 7

 

 

 

 

 

 

 

 

 

 Percent Change

 

 

 

 

 

 

 ($ in thousands)

 

 

3Q

 

2Q

 

3Q

 

3Q08 vs

 

3Q08 vs

 

YTD

 

YTD

 

Percent

 

 

 

2008

 

2008

 

2007

 

2Q08

 

3Q07

 

2008

 

2007

 

Change

 Compensation and employee benefits

 

$

84,895

 

$

84,267

 

$

85,113

 

 

.7

%

 

(.3

)%

 

$

257,880

 

$

259,913

 

(.8

)%

 Occupancy and equipment

 

 

31,832

 

31,205

 

30,226

 

 

2.0

 

 

5.3

 

 

95,450

 

90,006

 

6.0

 

 Advertising and promotions

 

 

12,309

 

7,130

 

5,480

 

 

72.6

 

 

124.6

 

 

25,735

 

17,047

 

51.0

 

 Other

 

 

44,337

 

41,667

 

37,632

 

 

6.4

 

 

17.8

 

 

126,105

 

109,478

 

15.2

 

Subtotal

 

 

173,373

 

164,269

 

158,451

 

 

5.5

 

 

9.4

 

 

505,170

 

476,444

 

6.0

 

 Visa indemnification

 

 

-

 

-

 

-

 

 

-

 

 

-

 

 

(3,766

)

-

 

(100.0

)

 Operating lease depreciation

 

 

4,215

 

4,460

 

4,326

 

 

(5.5

)

 

(2.6

)

 

13,189

 

13,067

 

.9

 

Total non-interest expense

 

$

177,588

 

$

168,729

 

$

162,777

 

 

5.3

 

 

9.1

 

 

$

514,593

 

$

489,511

 

5.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-interest expense totaled $177.6 million for the third quarter of 2008, up $14.8 million, or 9.1 percent, from the third quarter of 2007 and $8.9 million, or 5.3 percent, from the second quarter of 2008.

 

Compensation and employee benefits continue to be well controlled and remained relatively flat in the third quarter of 2008 when compared to the third quarter of 2007 and the second quarter of 2008.

 

Occupancy and equipment expenses increased $1.6 million, or 5.3 percent, from the third quarter of 2007 and $627 thousand, or 2 percent, from the second quarter of 2008, primarily due to increased real estate taxes and branch expansion.

 

Advertising and promotions increased $6.8 million, or 124.6 percent, from the third quarter of 2007, and $5.2 million, or 72.6 percent, from the second quarter of 2008 primarily due to higher premium costs as a result of increased checking account production.

 

Other expense increased $6.7 million, or 17.8 percent from the third quarter of 2007, primarily due to a $3.4 million increase in foreclosed real estate expense due to increased property taxes and higher real estate disposition losses as well as increased severance and separation costs of $4.1 million. The increase of $2.7 million, or 6.4 percent, from the second quarter of 2008 was primarily due to increased severance and separation costs, partially offset by lower deposit account losses.

 

-more-


 

9

 

TCF is a member of Visa U.S.A. Inc. (“Visa”) for issuance and processing of its card transactions. As disclosed in TCF’s Form 10-K for the year ended December 31, 2007, TCF has a contingent obligation to indemnify Visa for losses in connections with certain covered litigation matters. Subsequent to quarter end, Visa notified its U.S.A. members that it had reached a settlement on covered litigation with Discover, but released no details. TCF will record any adjustment to its liability as a result of this settlement, if needed, in the fourth quarter of 2008. Further details, if known, will be included in TCF’s quarterly filing on Form 10-Q for the period ended September 30, 2008.

 

-more-

 


 

10

 

Credit Quality

 

 

 Credit Quality Summary

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 8

 

 

 

 

 

 

 

 

 

Percent Change

 

 

 

 

 

 

 

 ($ in thousands)

 

3Q

 

2Q

 

3Q

 

3Q08 vs

 

3Q08 vs

 

YTD

 

YTD

 

Percent

 

 

2008

 

2008

 

2007

 

2Q08

 

3Q07

 

2008

 

2007

 

Change

 

 Allowance for loan and lease losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Balance at beginning of period

 

$

133,637

 

$

97,390

 

$

66,809

 

37.2

 %

 

100.0

 %

 

 

$

80,942

 

$

58,543

 

 

38.3

 %

Charge-offs

 

(29,976

)

(29,902

)

(14,669

)

.2

 

 

104.3

 

 

 

(77,700

)

(34,650

)

 

124.2

 

Recoveries

 

3,212

 

3,254

 

3,609

 

 

(1.3

)

 

(11.0

)

 

 

10,741

 

13,871

 

 

(22.6

)

Net charge-offs

 

(26,764

)

(26,648

)

(11,060

)

.4

 

 

142.0

 

 

 

(66,959

)

(20,779

)

 

N.M.

 

Provision for credit losses

 

52,105

 

62,895

 

18,883

 

 

(17.2

)

 

175.9

 

 

 

144,995

 

36,868

 

 

N.M.

 

 Balance at end of period

 

$

158,978

 

$

133,637

 

$

74,632

 

 

19.0

 

 

113.0

 

 

 

$

158,978

 

$

74,632

 

 

113.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Allowance as a percentage of
period end loans and leases

 

1.21

 %

1.03

 %

.63

 %

 

 

 

 

1.21

 %

.63

 %

 

 

 Ratio of allowance to net charge-offs (1)

 

1.5

 X

1.3

 X

1.7

 X

 

 

 

 

1.8

 X

2.7

 X

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer home equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First mortgage lien

 

.77

 %

.61

 %

.27

 %

 

 

 

 

.59

 %

.21

 %

 

 

Junior lien

 

1.56

 

1.19

 

.58

 

 

 

 

 

1.20

 

.46

 

 

 

Total home equity

 

1.05

 

.82

 

.38

 

 

 

 

 

.81

 

.30

 

 

 

Total consumer

 

1.23

 

.90

 

.59

 

 

 

 

 

.92

 

.39

 

 

 

Commercial real estate

 

.39

 

.86

 

-

 

 

 

 

 

.44

 

.02

 

 

 

Commercial business

 

.05

 

1.74

 

.44

 

 

 

 

 

.73

 

.19

 

 

 

Leasing and equipment finance

 

.42

 

.55

 

.24

 

 

 

 

 

.46

 

.12

 

 

 

Residential real estate

 

.31

 

.09

 

.07

 

 

 

 

 

.17

 

.03

 

 

 

Total

 

.82

 

.84

 

.38

 

 

 

 

 

.70

 

.24

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Other Credit Quality Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Delinquencies (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30+ days

 

$

142,125

 

$

120,823

 

$

74,569

 

17.6

 

90.6

 

 

 

 

 

 

 

90+ days

 

$

34,808

 

$

28,180

 

$

13,887

 

23.5

 

150.7

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30+ days

 

1.10

 %

.94

 %

.63

 %

 

 

 

 

 

 

 

 

 

 

90+ days

 

.27

 %

.22

 %

.12

 %

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-accrual loans and leases

 

$

145,890

 

$

105,247

 

$

47,235

 

38.6

 

N.M.

 

 

 

 

 

 

 

Real estate owned

 

54,179

 

55,112

 

43,010

 

 

(1.7

)

26.0

 

 

 

 

 

 

 

Total non-performing assets

 

$

200,069

 

$

160,359

 

$

90,245

 

 

24.8

 

121.7

 

 

 

 

 

 

 

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

 

1.55

 %

1.25

 %

.76

 %

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 N.M. = Not Meaningful

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 (1)  Annualized

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 (2)  Excludes non-accrual loans and leases.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-more-

 


 

11

 

At September 30, 2008, TCF’s allowance for loan and lease losses totaled $159 million, or 1.21 percent of loans and leases, compared with $74.6 million, or .63 percent, at September 30, 2007 and $133.6 million, or 1.03 percent, at June 30, 2008. The provision for credit losses for the third quarter of 2008 was $52.1 million, up from $18.9 million in the third 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. The provision for credit losses decreased $10.8 million, or 17.2 percent, from the second quarter of 2008.

 

Consumer home equity net charge-offs for the third quarter of 2008 were $17.9 million, an increase of $4 million from the second quarter of 2008 and up $12.1 million from the third 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 third quarter of 2008 were $2.8 million, a decrease of $5.3 million from the second quarter of 2008 and an increase of $2.1 million from the third quarter of 2007. Leasing and equipment finance net charge-offs for the third quarter of 2008 were $2.4 million, down $658 thousand from the second quarter of 2008 and up $1.2 million from the third quarter of 2007.

 

At September 30, 2008, TCF’s over-30-day delinquency rate was 1.10 percent, up from .94 percent at June 30, 2008. TCF’s over-90-day delinquency rate was .27 percent, up from .22 percent at June 30, 2008. Non-performing assets, which include non-accrual loans, are reported separately and were $200.1 million, or 1.21 percent of total assets, at September 30, 2008, up from $160.4 million, or .97 percent of total assets, at June 30, 2008. The increase in non-performing assets from June 30, 2008 was primarily due to a $11.6 million increase in consumer home equity non-accrual loans and a $22.7 million increase in commercial non-accrual loans.

 

-more-

 


 

12

 

Income Taxes

 

TCF’s income tax expense was $15.9 million for the third quarter of 2008, or 34.5 percent of pre-tax income, compared with $26.6 million, or 31 percent, for the comparable 2007 period and $18.9 million, or 44.3 percent, for the second quarter of 2008. The third quarter of 2007 income tax expense included a $2.6 million reduction in income tax expense related to favorable developments in uncertain tax positions. The second quarter of 2008 income tax expense included 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. Excluding these items, the effective income tax rate for the third quarter of 2007 was 34 percent. 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.

 

Capital

 

 

Capital Information

 

 

 

 

 

 

 

Table 9

At period end

 

 

 

 

 

 

 

 

 

($ in thousands, except per-share data)

 

3Q

 

 

 

4Q

 

 

 

 

 

2008

 

 

 

2007

 

 

 

Stockholders’ equity

 

$

1,111,029 

 

 

 

$

1,099,012 

 

 

 

Stockholders’ equity to total assets

 

6.73 

 

%

 

6.88 

 

%

 

Book value per common share

 

$

8.74 

 

 

 

$

8.68 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk-based capital

 

 

 

 

 

 

 

Tier 1

 

$

1,094,985 

 

9.03

  %

$

964,467 

 

8.28

  %

Total

 

1,446,688 

 

11.93

 

1,245,808 

 

10.70

 

Total stated “well-capitalized” requirement

 

1,212,728 

 

10.00

 

1,164,829 

 

10.00

 

Excess over stated “well-capitalized” requirement

 

233,960 

 

1.93

 

80,979 

 

.70

 

 

 

 

 

 

 

 

 

 

 

 

“During the third quarter of 2008, TCF successfully issued $115 million in trust preferred securities, further enhancing TCF’s regulatory capital and ability to grow,” said Mr. Cooper. TCF continues to meet the well capitalized requirements. No repurchases of common stock have been made in 2008 and TCF does not presently expect to change its dividend policy.

 

-more-

 


 

13

 

On October 14, 2008, the United States Treasury, working with the Federal Reserve Bank, announced several initiatives in an effort to stabilize the banking industry.  Amongst those initiatives is a $250 billion capital purchase program for certain qualified and healthy banking institutions.  As part of the program, the United States Treasury will purchase a limited amount of senior perpetual preferred securities with an attached warrant for the purchase of common stock. “TCF is in the process of reviewing the details of this program as the information is being made available, and is analyzing the impact of participation in the program.  Should TCF choose to participate, the magnitude of the government’s potential investment in TCF preferred stock would be approximately $120 to $360 million,” said Mr. Cooper.

 

Website Information

 

A live webcast of TCF’s conference call to discuss third quarter earnings will be hosted at TCF’s website, www.tcfbank.com, on October 22, 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 445 banking offices in Minnesota, Illinois, Michigan, Colorado, Wisconsin, Indiana and Arizona, providing retail and commercial banking services. TCF also conducts leasing and equipment finance business in all 50 states.

 

 

-more-

 


 

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 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; results of litigation, including possible increases in indemnification obligations for certain litigation against Visa U.S.A. Inc. (“covered litigation”) and potential reductions in card revenues resulting from other litigation against Visa; increased deposit insurance premiums or other costs related to deteriorating conditions in the banking industry and the economic impact on banks of the Emergency Economic Stabilization Act or other related legislative and regulatory developments; 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-

 

 


 

15

 

TCF FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per-share data)

(Unaudited)

 

 

 

Three Months Ended

 

 

 

 

 

 

 

 

September 30,

 

Change

 

 

2008

 

2007

 

$

 

%

Interest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans and leases

 

$

210,651

 

 

$

213,528

 

 

$

(2,877

)

 

(1.3

)

 

Securities available for sale

 

28,577

 

 

28,439

 

 

138

 

 

.5

 

 

Education loans held for sale

 

123

 

 

2,588

 

 

(2,465

)

 

(95.2

)

 

Investments and other

 

1,644

 

 

2,279

 

 

(635

)

 

(27.9

)

 

Total interest income

 

240,995

 

 

246,834

 

 

(5,839

)

 

(2.4

)

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

33,730

 

 

60,440

 

 

(26,710

)

 

(44.2

)

 

Borrowings

 

55,100

 

 

48,690

 

 

6,410

 

 

13.2

 

 

Total interest expense

 

88,830

 

 

109,130

 

 

(20,300

)

 

(18.6

)

 

Net interest income

 

152,165

 

 

137,704

 

 

14,461

 

 

10.5

 

 

Provision for credit losses

 

52,105

 

 

18,883

 

 

33,222

 

 

175.9

 

 

Net interest income after provision for

 

 

 

 

 

 

 

 

 

 

 

 

 

credit losses

 

100,060

 

 

118,821

 

 

(18,761

)

 

(15.8

)

 

Non-interest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Fees and service charges

 

71,783

 

 

71,965

 

 

(182

)

 

(.3

)

 

Card revenue

 

26,240

 

 

25,685

 

 

555

 

 

2.2

 

 

ATM revenue

 

8,720

 

 

9,251

 

 

(531

)

 

(5.7

)

 

Investments and insurance revenue

 

3,193

 

 

2,632

 

 

561

 

 

21.3

 

 

Subtotal

 

109,936