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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): April 24, 2007

 


 

 

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)

 

(612) 661-6500

(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 April 24, 2007, attached to this Form 8-K as Exhibit 99.1, announcing its results of operations for the quarter ended March 31, 2007.

 

Item 9.01    Financial Statements and Exhibits.

 

(c)  Exhibits.

 

Exhibit No.

 

 

Description

 


99.1

 


Earnings Release of TCF Financial Corporation,
dated April 24, 2007

 

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:    April 24, 2007

 

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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 First Quarter Earnings and EPS ($.65)
 

 

FIRST QUARTER HIGHLIGHTS

·                  Record diluted earnings per share of 65 cents

·                  Net income of $82.7 million

·                  Record return on average assets of 2.24 percent

·                  Record return on average common equity of 31.81 percent

·                  Average Power AssetsÒ increased $1.2 billion, or 12.2 percent

·                  Average Power LiabilitiesÒ increased $566.4 million, or 6.2 percent

 

EARNINGS SUMMARY

($ in thousands, except per-share data)

 

 

 

Three Months
Ended March 31,

 

 

 

2007

 

2006

 

Change

 

Net income

 

$

82,724

 

$

58,222

 

42.1

%

Diluted earnings per common share

 

.65

 

.45

 

44.4

 

 

 

 

 

 

 

 

 

Financial Ratios (1)

 

 

 

 

 

 

 

Return on average assets

 

2.24

%

1.71

%

 

 

Return on average common equity

 

31.81

 

23.82

 

 

 

Net interest margin

 

4.00

 

4.25

 

 

 

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

 

.10

 

.08

 

 

 

 

 

 

 

 

 

 

 

 

(1) Annualized.

 

1



 

WAYZATA, MN, April 24, 2007 – TCF Financial Corporation (“TCF”) (NYSE: TCB) today reported diluted earnings per share of 65 cents for the first quarter of 2007, up 44.4 percent, compared with 45 cents for the same 2006 period. Net income for the first quarter of 2007 was $82.7 million, up 42.1 percent from $58.2 million for the first quarter of 2006. The first quarter of 2007 includes a $31.2 million pre-tax gain on the sale of ten outstate Michigan branches and an $8.5 million reduction of income tax expense related to a favorable settlement with the Internal Revenue Service, for a combined after-tax impact of 23 cents per diluted share. The first quarter of 2006 includes $4.5 million in pre-tax gain on sale of assets, including a $1.6 million net gain on the sale of mortgage servicing rights for a combined after-tax impact of two cents per diluted share.

 

For the first quarter of 2007, return on average assets (“ROA”) was 2.24 percent and return on average common equity (“ROE”) was 31.81 percent, compared with 1.71 percent and 23.82 percent, respectively, for the first quarter of 2006.

 

Chief Executive Officer’s Statement

 

“TCF’s record earnings for the first quarter of 2007 included a non-recurring gain from the sale of ten outstate Michigan branches and a favorable income tax settlement with the IRS. TCF’s first quarter operating results were satisfactory, but like other financial institutions, were negatively impacted by the inverted yield curve and the slow housing markets,” said Lynn A. Nagorske, Chief Executive Officer.

 

2



 

Total Revenue

 

 

 

Three Months

 

 

 

 

 

($ in thousands)

 

Ended March 31,

 

Change

 

 

 

2007

 

2006

 

$

 

%

 

Net interest income

 

$

135,477

 

$

131,168

 

$

4,309

 

3.3

%

Fees and other revenue:

 

 

 

 

 

 

 

 

 

Fees and service charges

 

62,022

 

61,555

 

467

 

.8

 

Card revenue

 

23,261

 

21,262

 

1,999

 

9.4

 

ATM revenue

 

8,749

 

9,099

 

(350

)

(3.8

)

Investments and insurance

 

2,178

 

2,488

 

(310

)

(12.5

)

Total banking fees and other revenue

 

96,210

 

94,404

 

1,806

 

1.9

 

Leasing and equipment finance

 

14,001

 

11,915

 

2,086

 

17.5

 

Other

 

1,953

 

8,252

 

(6,299

)

(76.3

)

Total fees and other revenue

 

112,164

 

114,571

 

(2,407

)

(2.1

)

Gains on sales of branches and real estate

 

31,173

 

2,928

 

28,245

 

N.M.

 

Total non-interest income

 

143,337

 

117,499

 

25,838

 

22.0

 

Total revenue

 

$

278,814

 

$

248,667

 

$

30,147

 

12.1

 

 

 

 

 

 

 

 

 

 

 

Net interest margin (1)

 

4.00

%

4.25

%

 

 

 

 

Fees and other revenue as a % of:

 

 

 

 

 

 

 

 

 

Total revenue

 

40.23

 

46.07

 

 

 

 

 

Average assets (1)

 

3.03

 

3.37

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)  Annualized.

 

Net Interest Income

 

TCF’s net interest income in the first quarter of 2007 was $135.5 million, up $4.3 million, or 3.3 percent, from the first quarter of 2006 and down $410 thousand, or .3 percent, from the fourth quarter of 2006. Net interest margin in the first quarter of 2007 was 4.00 percent, compared with 4.25 percent for the first quarter of 2006 and 4.07 percent for the fourth quarter of 2006.

 

The increase in net interest income from the first quarter of 2006 was primarily attributable to a $1.2 billion, or 9.6 percent, increase in average interest-earning assets, partially offset by the 25 basis point reduction in net interest margin. The decrease in net interest margin from the first quarter of 2006 was primarily due to continued customer preference for lower-yielding fixed-rate loans and higher-cost market-rate deposits, largely due to the flat or inverted yield curve, as well as increased higher-cost borrowings.

 

The decrease in net interest income from the fourth quarter of 2006 was primarily due to two less days in the first quarter of 2007 and a seven basis point reduction in net interest margin. The decrease in net

 

3



 

interest margin from the fourth quarter of 2006 was primarily due to lower yields on interest earning assets and higher rates on deposits.

 

Non-interest Income

 

Total non-interest income was $143.3 million for the first quarter of 2007, up $25.8 million, or 22 percent, from the same period of 2006.

 

Banking fees and service charges were $62 million for the first quarter of 2007, up $467 thousand, or .8 percent, from the first quarter of 2006, primarily attributable to deposit account growth, partially offset by lower overdraft incident rates.

 

Card revenues totaled $23.3 million for the first quarter of 2007, up $2 million, or 9.4 percent, over the same period in 2006, primarily due to increased sales volume as a result of increases in the number of active accounts and transactions per account.

 

Leasing and equipment finance revenues were $14 million for the first quarter of 2007, up $2.1 million, or 17.5 percent, from the 2006 first quarter, primarily due to higher operating lease revenue and other fees.

 

Other revenues were $2 million for the first quarter of 2007, down $6.3 million from the same period of 2006. The decrease in other revenue is partially due to a $4 million decrease in mortgage banking revenue, including a $2.3 million gain on sale of mortgage servicing rights, related to the exit from this business in 2006. Other revenue also declined due to a $2.4 million decrease in gains on sale of educational loans, related to the accelerated sale of certain educational loans in 2006, due to legislative changes to student loan programs.

 

In the first quarter of 2007, TCF completed its sale of ten outstate branches in Michigan, with $241.4 million of deposits, and recorded a pre-tax gain of $31.2 million.

 

4



 

Branches

 

During the first quarter of 2007, TCF opened two new traditional and two new supermarket branches, closed four supermarket branches and transferred the customer accounts to nearby branches, and sold ten branches, including the related deposit accounts. TCF has now opened 126 new branches since January 2002, representing 28 percent of TCF’s 443 total branches. TCF intends to open 16 additional branches in 2007, consisting of nine traditional branches, four supermarket branches and three campus branches. In order to improve the customer experience and enhance deposit growth, TCF also intends to relocate seven branches to improved locations and facilities, including six traditional branches and one supermarket branch, and to remodel 21 supermarket branches and one traditional branch during the remainder of 2007. TCF also plans to close three traditional branches and one supermarket branch during the remainder of 2007.

 

During the first quarter of 2007, TCF entered into a new exclusive campus banking relationship with the University of Illinois. This relationship will provide college students with internet banking, bill payment capabilities and checking account access through their i-cards, as well as access to 12 new TCF ATM machines on campus. The University of Illinois has an annual enrollment of 70,000 students, employs 24,000 faculty and staff, and has more than 550,000 alumni. TCF now has 11 campus banking alliances which provide an excellent source of new customers.

 

5



 

 

 

March 31,

 

December 31,

 

December 31,

 

(# of branches)

 

2007

 

2006

 

2001

 

 

 

 

 

 

 

 

 

Total Branches

 

 

 

 

 

 

 

Minnesota

 

108

 

107

 

88

 

Illinois

 

196

 

195

 

179

 

Michigan

 

55

 

64

 

57

 

Colorado

 

44

 

44

 

13

 

Wisconsin

 

33

 

36

 

33

 

Indiana

 

6

 

6

 

5

 

Arizona

 

1

 

1

 

 

 

 

443

 

453

 

375

 

 

 

 

 

 

 

 

 

New Branches (1)

 

 

 

 

 

 

 

Traditional

 

75

 

73

 

 

 

Supermarket

 

44

 

43

 

 

 

Campus

 

7

 

7

 

 

 

Total

 

126

 

123

 

 

 

% of Total Branches

 

28

%

27

%

 

 

 

 

 

 

 

 

 

 

 

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

 

Additional information regarding the results of TCF’s new branches opened since January 1, 2002 is summarized as follows:

 

 

 

At or For the Three Months Ended

 

 

 

 

 

 

 

March 31,

 

 

 

 

 

($ in thousands)

 

2007

 

2006

 

Change

 

% Change

 

 

 

 

 

 

 

 

 

 

 

Number of deposit accounts

 

312,624

 

227,647

 

84,977

 

37.3

%

Average deposits:

 

 

 

 

 

 

 

 

 

Checking

 

$

345,130

 

$

282,456

 

$

62,674

 

22.2

 

Savings

 

326,598

 

245,728

 

80,870

 

32.9

 

Money market

 

42,243

 

25,724

 

16,519

 

64.2

 

Subtotal

 

713,971

 

553,908

 

160,063

 

28.9

 

Certificates of deposit

 

445,026

 

354,379

 

90,647

 

25.6

 

Total deposits

 

$

1,158,997

 

$

908,287

 

$

250,710

 

27.6

 

 

 

 

 

 

 

 

 

 

 

Total fees and other revenue
(quarter ended)

 

$

14,956

 

$

11,584

 

$

3,372

 

29.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6



 

Power Assets®

 

TCF’s Average Power Assets increased $1.2 billion, or 12.2 percent, from the first quarter of 2006. TCF’s average consumer loan balances increased $709.4 million, or 13.5 percent, average commercial loan balances increased $152.9 million, or 5.5 percent, and leasing and equipment finance balances increased $304.9 million, or 19.9 percent, from the first quarter of 2006.

 

TCF’s Average Power Assets increased $175.2 million, or 6.6 percent (annualized), from the fourth quarter of 2006. The first quarter’s lower annualized growth rate is primarily related to slower growth in consumer home equity loans, resulting from the soft housing markets and increased prepayments of commercial real estate loans.

 

“TCF continues to focus on our high quality, prime home equity customers, in the slower consumer housing market,” said Lynn A. Nagorske, Chief Executive Officer.

 

 

 

Average Balances for the

 

 

 

 

 

 

 

Three Months Ended March 31,

 

Change

 

($ in thousands)

 

2007

 

2006

 

$

 

%

 

Loans and leases (1):

 

 

 

 

 

 

 

 

 

Consumer home equity and other:

 

 

 

 

 

 

 

 

 

Home equity:

 

 

 

 

 

 

 

 

 

First mortgage lien

 

$

3,808,390

 

$

3,409,051

 

$

399,337

 

11.7

%

Junior lien

 

2,109,723

 

1,806,666

 

303,057

 

16.8

 

Total consumer home equity

 

5,918,113

 

5,215,717

 

702,394

 

13.5

 

Other

 

41,853

 

34,833

 

7,021

 

20.2

 

Total consumer home equity and other

 

5,959,966

 

5,250,550

 

709,415

 

13.5

 

Commercial real estate

 

2,377,683

 

2,329,579

 

48,104

 

2.1

 

Commercial business

 

554,127

 

449,364

 

104,763

 

23.3

 

Leasing and equipment finance

 

1,837,964

 

1,533,034

 

304,930

 

19.9

 

Power Assets

 

$

10,729,740

 

$

9,562,527

 

$

1,167,212

 

12.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

7



 

Power Liabilities®

 

Average Power Liabilities totaled $9.7 billion for the first quarter of 2007, with an average interest rate of 2.38 percent, an increase of $566.4 million, or 6.2 percent, from the first quarter of 2006. The growth in average Power Liabilities was primarily driven by increases in Premier Checking, Premier Savings and certificates of deposit, partially offset by declines in other lower-cost interest-bearing checking and savings, and money market balances. Average custodial balances decreased $81.9 million primarily due to the sale of mortgage servicing rights in the first quarter of 2006.

 

Average Power Liabilities increased $210.2 million, or 8.8 percent (annualized), from the fourth quarter of 2006. The first quarter’s higher annualized growth rate is primarily attributable to growth in interest-bearing deposit products.

 

 

 

Average Balances and Rates for the

 

 

 

 

 

 

 

Three Months Ended March 31,

 

Change

 

($ in thousands)

 

2007

 

2006

 

$

 

%

 

Non-interest bearing deposits:

 

 

 

 

 

 

 

 

 

Retail

 

$

1,532,150

 

$

1,554,007

 

$

(21,857

)

(1.4

)%

Small business

 

596,460

 

590,240

 

6,220

 

1.1

 

Commercial and custodial

 

201,860

 

282,409

 

(80,549

)

(28.5

)

Total non-interest bearing deposits

 

2,330,470

 

2,426,656

 

(96,186

)

(4.0

)

Interest-bearing deposits:

 

 

 

 

 

 

 

 

 

Premier checking

 

1,073,500

 

938,055

 

135,445

 

14.4

 

Other checking

 

824,512

 

909,960

 

(85,448

)

(9.4

)

Subtotal

 

1,898,012

 

1,848,015

 

49,997

 

2.7

 

Premier savings

 

1,070,059

 

780,046

 

290,013

 

37.2

 

Other savings

 

1,314,471

 

1,440,818

 

(126,347

)

(8.8

)

Subtotal

 

2,384,530

 

2,220,864

 

163,666

 

7.4

 

Money market

 

610,286

 

669,602

 

(59,316

)

(8.9

)

Subtotal

 

4,892,828

 

4,738,481

 

154,347

 

3.3

 

Certificates of deposit

 

2,513,838

 

2,005,639

 

508,199

 

25.3

 

Total interest-bearing deposits

 

7,406,666

 

6,744,120

 

662,546

 

9.8

 

Power Liabilities

 

$

9,737,136

 

$

9,170,776

 

$

566,360

 

6.2

 

 

 

 

 

 

 

 

 

 

 

Average rate on deposits

 

2.38

%

1.76

%

62

bps

N/A

 

Total number of deposit accounts (1)

 

2,406,725

 

2,289,236

 

117,489

 

5.1

 

 

 

 

 

 

 

 

 

 

 

 

N/A  Not Applicable.

(1) Excluding sold Michigan branches.

 

8



 

Non-interest Expense

 

Non-interest expense totaled $164.2 million for the first quarter of 2007, up $3.9 million, or 2.4 percent, from $160.3 million for the first quarter of 2006.

 

Compensation and employee benefits were well controlled and increased only $1.9 million, or 2.2 percent, from the first quarter of 2006. Branch expansion increased employee compensation and benefits by $1.5 million during the first quarter.

 

Occupancy and equipment expenses increased $2.4 million, or 8.6 percent, from the first quarter of 2006, primarily driven by a $1.1 million increase in costs associated with branch expansion.

 

Operating lease depreciation increased $1.2 million from the first quarter of 2006, primarily due to a $20.1 million increase in average operating lease balances in TCF’s leasing and equipment finance subsidiaries.

 

Other expenses decreased by $1.9 million, or 5 percent, from the first quarter of 2006, primarily attributable to a $700 thousand decrease in expenses due to the sale of mortgage servicing rights in the first quarter of 2006, and a $555 thousand recovery on the redemption of a commercial real estate property in the first quarter of 2007.

 

 

 

Three Months Ended

 

 

 

 

 

 

 

March 31,

 

Change

 

($ in thousands)

 

2007

 

2006

 

$

 

%

 

Compensation and employee benefits

 

$

88,093

 

$

86,168

 

$

1,925

 

2.2

%

Occupancy and equipment

 

30,451

 

28,051

 

2,400

 

8.6

 

Advertising and promotions

 

5,981

 

5,716

 

265

 

4.6

 

Other

 

35,315

 

37,182

 

(1,867

)

(5.0

)

Subtotal

 

159,840

 

157,117

 

2,723

 

1.7

 

Operating lease depreciation

 

4,360

 

3,163

 

1,197

 

37.8

 

Total non-interest expense

 

$

164,200

 

$

160,280

 

$

3,920

 

2.4

 

 

9



 

Credit Quality

 

At March 31, 2007, TCF’s allowance for loan and lease losses totaled $60.5 million, or .53 percent of loans and leases, compared with $58.5 million, or .52 percent, at December 31, 2006. The provision for credit losses for the first quarter of 2007 was $4.7 million, up $3.5 million from the first quarter of 2006, primarily due to higher consumer home equity charge-offs partially offset by a $2.1 million recovery on a previously charged-off lease. Net loan and lease charge-offs in the first quarter of 2007 were $2.7 million, or .10 percent (annualized) of average loans and leases, compared with $2.2 million, or .08 percent (annualized) for the same 2006 period.

 

At March 31, 2007, TCF’s over-30-day delinquency rate was .41 percent, down from .63 percent at December 31, 2006. Non-accrual loans and leases were $55.1 million, or .49 percent of net loans and leases, at March 31, 2007, compared with $43.2 million, or .38 percent, at December 31, 2006. Total non-performing assets were $82.3 million, or .55 percent of total assets, at March 31, 2007, up from $65.6 million, or .45 percent, at December 31, 2006. The increase in non-accrual loans and leases from December 31, 2006 was primarily due to a $13.8 million Minnesota commercial real estate loan, which migrated from delinquent status in the first quarter of 2007.

 

10



 

 

 

Three Months Ended

 

 

 

March 31,

 

($ in thousands)

 

2007

 

2006

 

Allowance for loan and lease losses:

 

 

 

 

 

Balance at beginning of period

 

$

58,543

 

$

55,823

 

Net (charge-offs) recoveries:

 

 

 

 

 

Consumer home equity

 

(3,262

)

(1,399

)

Consumer other

 

287

 

316

 

Total consumer

 

(2,975

)

(1,083

)

Commercial real estate

 

(403

)

(69

)

Commercial business

 

(148

)

(154

)

Leasing and equipment finance

 

838

 

(831

)

Residential real estate

 

(28

)

(32

)

Total

 

(2,716

)

(2,169

)

Provision for credit losses

 

4,656

 

1,151

 

Balance at end of period

 

$

60,483

 

$

54,805

 

 

Income Taxes

 

TCF’s income tax expense was $27.2 million for the first quarter of 2007, or 24.8 percent of pre-tax income, compared with $29 million, or 33.3 percent, for the comparable 2006 period. The income tax expense for the first quarter of 2007 includes an $8.5 million reduction related to a favorable settlement with the IRS of a tax issue from a prior year. Excluding this item, the effective income tax rate was 32.5 percent, slightly lower than the first quarter of 2006.

 

Effective January 1, 2007, TCF adopted Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes, with no adjustment to TCF’s financial statements.

 

Capital

 

During the first quarter of 2007, TCF repurchased 1.1 million shares of its common stock at an average cost of $26.44 per share. On April 14, 2007, TCF’s Board of Directors authorized a new stock repurchase program for the company to acquire up to five percent of TCF common stock, or an additional 6.5 million shares. TCF has a total of 8.2 million shares authorized under its stock repurchase programs.

 

11



 

 

 

At March 31,

 

At March 31,

 

($ in thousands, except per-share data)

 

2007

 

2006

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity

 

$

1,062,008

 

 

 

$

968,300

 

 

 

Stockholders’ equity to total assets

 

7.13

%

 

 

6.99

%

 

 

Book value per common share

 

$

8.21

 

 

 

$

7.35

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 risk-based capital

 

$

940,227

 

8.83

%

$

850,945

 

8.36

%

Total risk-based capital

 

1,201,061

 

11.28

 

1,110,762

 

10.91

 

Total risk-based capital “well-capitalized” requirement

 

1,064,644

 

10.00

 

1,017,778

 

10.00

 

Excess risk-based capital over “well-capitalized” requirement

 

136,417

 

1.28

 

92,984

 

.91

 

 

Website Information

 

A live webcast of TCF’s conference call to discuss first quarter earnings will be hosted at TCF’s website, www.tcfbank.com, on April 24, 2007 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 $14.9 billion in total assets. TCF has 443 banking offices in Minnesota, Illinois, Michigan, Colorado, Wisconsin, Indiana and Arizona. Other TCF affiliates provide leasing and equipment finance, and investments and insurance sales.

 

 

12



 

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; adoption of proposed federal legislation 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 methodology dictated by new 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 reductions in card revenues resulting from litigation brought by various merchants or merchant organizations 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.

 

13



 

TCF FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per-share data)

(Unaudited)

 

 

 

Three Months Ended

 

 

 

 

 

 

 

March 31,

 

Change

 

 

 

2007

 

2006

 

$

 

%

 

Interest income:

 

 

 

 

 

 

 

 

 

Loans and leases

 

$

201,605

 

$

176,983

 

$

24,622

 

13.9

 

Securities available for sale

 

25,105

 

23,699

 

1,406

 

5.9

 

Education loans held for sale

 

4,146

 

4,347

 

(201

)

(4.6

)

Investments

 

2,806

 

677

 

2,129

 

N.M.

 

Total interest income

 

233,662

 

205,706

 

27,956

 

13.6

 

Interest expense:

 

 

 

 

 

 

 

 

 

Deposits

 

57,155

 

39,847

 

17,308

 

43.4

 

Borrowings

 

41,030

 

34,691

 

6,339

 

18.3

 

Total interest expense

 

98,185

 

74,538

 

23,647

 

31.7

 

Net interest income

 

135,477

 

131,168

 

4,309

 

3.3

 

Provision for credit losses

 

4,656

 

1,151

 

3,505

 

N.M.

 

Net interest income after provision for credit losses

 

130,821

 

130,017

 

804

 

.6

 

Non-interest income:

 

 

 

 

 

 

 

 

 

Fees and service charges

 

62,022

 

61,555

 

467

 

.8

 

Card revenue

 

23,261

 

21,262

 

1,999

 

9.4

 

ATM revenue

 

8,749

 

9,099

 

(350

)

(3.8

)

Investments and insurance revenue

 

2,178

 

2,488

 

(310

)

(12.5

)

Subtotal

 

96,210

 

94,404

 

1,806

 

1.9

 

Leasing and equipment finance

 

14,001

 

11,915

 

2,086

 

17.5

 

Other

 

1,953

 

8,252

 

(6,299

)

(76.3

)

Fees and other revenue

 

112,164

 

114,571

 

(2,407

)

(2.1

)

Gains on sales of branches and real estate

 

31,173

 

2,928

 

28,245

 

N.M.

 

Total non-interest income

 

143,337

 

117,499

 

25,838

 

22.0

 

Non-interest expense:

 

 

 

 

 

 

 

 

 

Compensation and employee benefits

 

88,093

 

86,168

 

1,925

 

2.2

 

Occupancy and equipment

 

30,451

 

28,051

 

2,400

 

8.6

 

Advertising and promotions

 

5,981

 

5,716

 

265

 

4.6

 

Other

 

35,315

 

37,182

 

(1,867

)

(5.0

)

Subtotal

 

159,840

 

157,117

 

2,723

 

1.7

 

Operating lease depreciation

 

4,360

 

3,163

 

1,197

 

37.8

 

Total non-interest expense

 

164,200

 

160,280

 

3,920

 

2.4

 

Income before income tax expense

 

109,958

 

87,236

 

22,722

 

26.0

 

Income tax expense

 

27,234

 

29,014

 

(1,780

)

(6.1

)

Net income

 

$

82,724

 

$

58,222

 

$

24,502

 

42.1

 

 

 

 

 

 

 

 

 

 

 

Net income per common share:

 

 

 

 

 

 

 

 

 

Basic

 

$

.65

 

$

.45

 

$

.20

 

44.4

 

Diluted

 

$

.65

 

$

.45

 

$

.20

 

44.4

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per common share

 

$

.2425

 

$

.23

 

$

.0125

 

5.4

 

 

 

 

 

 

 

 

 

 

 

Average common and common equivalent shares outstanding (in thousands):

 

 

 

 

 

 

 

 

 

Basic

 

127,676

 

130,282

 

(2,606

)

(2.0

)

Diluted

 

127,921

 

130,447

 

(2,526

)

(1.9

)

 

N.M. Not meaningful.

 

14



 

TCF FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Dollars in thousands, except per-share data)

 

 

 

At

 

At

 

At

 

% Change from

 

 

 

March 31,

 

December 31,

 

March 31,

 

December 31,

 

March 31,

 

 

 

2007

 

2006

 

2006

 

2006

 

2006

 

 

 

(Unaudited)

 

 

 

(Unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

282,502

 

$

348,980

 

$

330,891

 

(19.0

)%

(14.6

)%

Investments

 

272,273

 

170,129

 

72,082

 

60.0

 

N.M.

 

Securities available for sale

 

1,859,244

 

1,816,126

 

1,816,135

 

2.4

 

2.4

 

Education loans held for sale

 

208,107

 

144,574

 

234,324

 

43.9

 

(11.2

)

Loans and leases:

 

 

 

 

 

 

 

 

 

 

 

Consumer home equity and other

 

6,041,881

 

5,945,077

 

5,384,702

 

1.6

 

12.2

 

Commercial real estate

 

2,362,023

 

2,390,653

 

2,394,722

 

(1.2

)

(1.4

)

Commercial business

 

561,434

 

551,995

 

469,754

 

1.7

 

19.5

 

Leasing and equipment finance

 

1,849,874

 

1,818,165

 

1,575,483

 

1.7

 

17.4

 

Subtotal

 

10,815,212

 

10,705,890

 

9,824,661

 

1.0

 

10.1

 

Residential real estate

 

602,748

 

627,790

 

732,912

 

(4.0

)

(17.8

)

Total loans and leases

 

11,417,960

 

11,333,680

 

10,557,573

 

.7

 

8.1

 

Allowance for loan and lease losses

 

(60,483

)

(58,543

)

(54,805

)

(3.3

)

(10.4

)

Net loans and leases

 

11,357,477

 

11,275,137

 

10,502,768

 

.7

 

8.1

 

Premises and equipment, net

 

416,570

 

406,087

 

375,679

 

2.6

 

10.9

 

Goodwill

 

152,599

 

152,599

 

152,599

 

 

 

Other assets

 

349,603

 

356,102

 

367,458

 

(1.8

)

(4.9

)

 

 

$

14,898,375

 

$

14,669,734

 

$

13,851,936

 

1.6

 

7.6

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

 

Checking

 

$

4,404,950

 

$

4,348,256

 

$

4,463,456

 

1.3

 

(1.3

)

Savings

 

2,415,895

 

2,351,580

 

2,360,507

 

2.7

 

2.3

 

Money market

 

599,635

 

585,779

 

637,223

 

2.4

 

(5.9

)

Subtotal

 

7,420,480

 

7,285,615

 

7,461,186

 

1.9

 

(.5

)

Certificates of deposit

 

2,477,230

 

2,483,635

 

2,128,723

 

(.3

)

16.4

 

Total deposits

 

9,897,710

 

9,769,250

 

9,589,909

 

1.3

 

3.2

 

Short-term borrowings

 

47,376

 

214,112

 

346,528

 

(77.9

)

(86.3

)

Long-term borrowings

 

3,571,930

 

3,374,428

 

2,688,131

 

5.9

 

32.9

 

Total borrowings

 

3,619,306

 

3,588,540

 

3,034,659

 

.9

 

19.3

 

Accrued expenses and other liabilities

 

319,351

 

278,570

 

259,068

 

14.6

 

23.3

 

Total liabilities

 

13,836,367

 

13,636,360

 

12,883,636

 

1.5

 

7.4

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

 

 

 

Common stock, par value $.01 per share, 280,000,000 shares authorized; 131,520,842; 131,660,749 and 184,220,375 shares issued

 

1,315

 

1,317

 

1,842

 

(.2

)

(28.6

)

Additional paid-in capital

 

350,739

 

343,744

 

468,968

 

2.0

 

(25.2

)

Retained earnings, subject to certain restrictions

 

835,218

 

784,011

 

1,564,207

 

6.5

 

(46.6

)

Accumulated other comprehensive loss

 

(32,238

)

(34,926

)

(38,121

)

7.7

 

15.4

 

Treasury stock at cost, 2,214,530; 1,242,413 and 52,397,230 shares, and other

 

(93,026

)

(60,772

)

(1,028,596

)

(53.1

)

91.0

 

Total stockholders’ equity

 

1,062,008

 

1,033,374

 

968,300

 

2.8

 

9.7

 

 

 

$

14,898,375

 

$

14,669,734

 

$

13,851,936

 

1.6

 

7.6

 

 

N.M. Not meaningful.

 

15



 

TCF FINANCIAL CORPORATION AND SUBSIDIARIES

CREDIT QUALITY DATA

(Dollars in thousands)

(Unaudited)

 

Allowance for loan and lease losses:

 

 

 

At or For the Quarter Ended March 31, 2007

 

At or For the Year Ended December 31, 2006

 

 

 

 

 

Allowance

 

 

 

 

 

 

 

Allowance

 

 

 

 

 

 

 

 

 

as a % of

 

Net Charge-offs (Recoveries)

 

 

 

as a % of

 

Net Charge-offs (Recoveries)

 

 

 

Allowance

 

Portfolio

 

$

 

% (1)

 

Allowance

 

Portfolio

 

$

 

%

 

Consumer home equity

 

$

15,345

 

.26

%

$

3,262

 

.22

%

$

12,615

 

.21

%

$

7,346

 

.13

%

Consumer other

 

1,965

 

3.33

 

(287

)

N.M.

 

2,211

 

3.54

 

4,802

 

N.M.

 

Total consumer

 

$

17,310

 

.29

 

$

2,975

 

.20

 

$

14,826

 

.25

 

$

12,148

 

.22

 

Commercial real estate

 

22,367

 

.95

 

403

 

.07

 

22,662

 

.95

 

189

 

.01

 

Commercial business

 

7,294

 

1.30

 

148

 

.11

 

7,503

 

1.36

 

469

 

.09

 

Leasing and equipment finance

 

12,970

 

.70

 

(838

)

(.18

)

12,990

 

.71

 

4,892

 

.29

 

Residential real estate

 

542

 

.09

 

28

 

.02

 

562

 

.09

 

271

 

.04

 

Total

 

$

60,483

 

.53

 

$

2,716

 

.10

 

$

58,543

 

.52

 

$

17,969

 

.17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarterly Net Charge-Offs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended

 

Change from

 

 

 

 

 

 

 

Mar. 31,
2007

 

Dec. 31,
2006

 

Mar. 31,
2006

 

Dec. 31,
2006

 

Mar. 31,
2006

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer home equity

 

 

 

 

 

$

3,262

 

$

3,100

 

$

1,399

 

$

162

 

$

1,863

 

Consumer other

 

 

 

 

 

(287

)

1,611

 

(316

)

(1,898

)

29

 

Total consumer

 

 

 

 

 

$

2,975

 

$

4,711

 

$

1,083

 

$

(1,736

)

$

1,892

 

Commercial real estate

 

 

 

 

 

403

 

(28

)

69

 

431

 

334

 

Commercial business

 

 

 

 

 

148

 

168

 

154

 

(20

)

(6

)

Leasing and equipment finance

 

 

 

(838

)

1,611

 

831

 

(2,449

)

(1,669

)

Residential real estate

 

 

 

 

 

28

 

166

 

32

 

(138

)

(4

)

Total

 

 

 

 

 

$

2,716

 

$

6,628

 

$

2,169

 

$

(3,912

)

$

547

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarterly Net Charge-Offs as a Percentage of Average Loans and Leases:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended (1)

 

Change from

 

 

 

 

 

 

 

Mar. 31,

 

Dec. 31,

 

Mar. 31,

 

Dec. 31,

 

Mar. 31,

 

 

 

 

 

 

 

2007

 

2006

 

2006

 

2006

 

2006

 

Consumer home equity

 

 

 

 

 

.22

%

.21

%

.11

%

.01

%

.11

%

Total consumer

 

 

 

 

 

.20

 

.32

 

.08

 

(.12

)

.12

 

Commercial real estate

 

 

 

 

 

.07

 

 

.01

 

.07

 

.06

 

Commercial business

 

 

 

 

 

.11

 

.13

 

.14

 

(.02

)

(.03

)

Leasing and equipment finance

 

 

 

(.18

)

.36

 

.22

 

(.54

)

(.40

)

Residential real estate

 

 

 

 

 

.02

 

.10

 

.02

 

(.08

)

 

Total

 

 

 

 

 

.10

 

.24

 

.08

 

(.14

)

.02

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-performing assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At

 

At

 

At

 

Change from

 

 

 

 

 

 

 

March 31,

 

December 31,

 

March 31,

 

December 31,

 

March 31,

 

 

 

 

 

 

 

2007

 

2006

 

2006

 

2006

 

2006

 

Non-accrual loans and leases:

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer home equity and other

 

 

 

$

18,059

 

$

16,520

 

$

12,631

 

$

1,539

 

$

5,428

 

Commercial real estate

 

 

 

25,500

 

12,849

 

7,010

 

12,651

 

18,490

 

Commercial business

 

 

 

2,292

 

3,421

 

2,105

 

(1,129

)

187

 

Leasing and equipment finance

 

 

 

5,978

 

7,596

 

7,798

 

(1,618

)

(1,820

)

Residential real estate

 

 

 

3,277

 

2,799

 

1,221

 

478

 

2,056

 

Total non-accrual loans and leases

 

 

 

55,106

 

43,185

 

30,765

 

11,921

 

24,341

 

Other real estate owned:

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential real estate

 

 

 

26,241

 

19,899

 

17,779

 

6,342

 

8,462

 

Commercial real estate

 

 

 

971

 

2,554

 

2,957

 

(1,583

)

(1,986

)

Total other real estate owned

 

 

 

27,212

 

22,453

 

20,736

 

4,759

 

6,476

 

Total non-performing assets

 

 

 

$

82,318

 

$

65,638

 

$

51,501

 

$

16,680

 

$

30,817

 

 

N.M. Not meaningful.

 

(1)  Annualized

 

16



 

TCF FINANCIAL CORPORATION AND SUBSIDIARIES

CREDIT QUALITY DATA

(Dollars in thousands)

(Unaudited)

 

Over 30-day delinquency data (1):

 

 

 

At March 31,

 

At December 31,

 

At March 31,

 

 

 

2007

 

2006

 

2006

 

 

 

Principal

 

% of

 

Principal

 

% of

 

Principal

 

% of

 

 

 

Balances

 

Portfolio

 

Balances

 

Portfolio

 

Balances

 

Portfolio

 

Consumer home equity and other

 

$

27,653

 

.46

%

$

34,313

 

.58

%

$

20,087

 

.37

%

Commercial real estate

 

3,857

 

.17

 

18,072

 

.76

 

3,011

 

.13

 

Commercial business

 

1,021

 

.18

 

762

 

.14

 

124

 

.03

 

Leasing and equipment finance

 

7,102

 

.39

 

8,499

 

.47

 

6,059

 

.39

 

Residential real estate

 

7,181

 

1.20

 

10,047

 

1.61

 

7,669

 

1.05

 

Total

 

$

46,814

 

.41

 

$

71,693

 

.63

 

$

36,950

 

.35

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At

 

At

 

At

 

Change from

 

 

 

 

 

March 31,

 

December 31,

 

March 31,

 

December 31,

 

March 31,

 

 

 

 

 

2007

 

2006

 

2006

 

2006

 

2006

 

Accruing loans and leases 90 or more days past due

 

 

 

$

10,131

 

$

12,214

 

$

12,965

 

$

(2,083

)

$

(2,834

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Potential Problem Loans and Leases (2):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At

 

At

 

At

 

Change from

 

 

 

 

 

March 31,

 

December 31,

 

March 31,

 

December 31,

 

March 31,

 

 

 

 

 

2007

 

2006

 

2006

 

2006

 

2006

 

Commercial real estate

 

 

 

$

25,563

 

$

43,216

 

$

48,360

 

$

(17,653

)

$

(22,797

)

Commercial business

 

 

 

16,747

 

11,664

 

10,026

 

5,083

 

6,721

 

Leasing and equipment finance

 

 

 

12,316

 

11,265

 

8,348

 

1,051

 

3,968

 

 

 

 

 

$

54,626

 

$

66,145

 

$

66,734

 

$

(11,519

)

$

(12,108

)

 

(1)

Excludes non-accrual loans and leases.

(2)

Consists of loans and leases primarily classified for regulatory purposes as substandard and reflect the distinct possibility, but not probability, that they will become non-performing or that TCF will not be able to collect all amounts due according to the contractual terms of the loan or lease agreement.

 

17



 

TCF FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES

(Dollars in thousands)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2007

 

2006

 

 

 

Average

 

 

 

Yields and