Table 4 - Credit Trends (Graphic: TCF Financial Corporation)

TCF Financial Corporation (NYSE:TCB):

THIRD QUARTER HIGHLIGHTS
  • Earnings per share of 23 cents, up 17 cents from the third quarter of 2012
  • Core revenue (1) of $305.9 million, up 2.1 percent from the third quarter of 2012
  • Provision for credit losses of $24.6 million, down 74.4 percent from the third quarter of 2012
  • Non-accrual loans and leases of $282.9 million, down 32.9 percent from the third quarter of 2012
  • Loan and lease originations increased $595.5 million, or 23.9 percent, from the third quarter of 2012
  • Average deposits increased $758.2 million, or 5.6 percent, from the third quarter of 2012
  • Announced common and preferred stock dividend payments payable November 29, 2013 and December 2, 2013, respectively
                                   
Summary of Financial Results                           Table 1
(Dollars in thousands, except per-share data)           Percent Change      
3Q 2Q 3Q

 

3Q13 vs
  3Q13 vs YTD YTD Percent
2013     2013     2012     2Q13     3Q12     2013    

2012 (2)
Change
Net income (loss) $ 37,948 $ 34,057 $ 9,322 11.4 % N.M. % $ 97,455 $ (242,041 ) N.M. %
Net interest income 199,627 202,044 200,559 (1.2 ) (0.5 ) 600,762 578,956 3.8
Diluted earnings (loss) per common share .23 .21 .06 9.5 N.M. .60 (1.52 ) N.M.
 

Financial Ratios (3)

Pre-tax pre-provision profit return on average assets (4)
2.04 % 2.04 % 2.61 % 2.00 % (1.32 ) %
Return on average assets .97

 
.90

 
.30

 
.86

 
(1.73 )

 
Return on average common equity 9.28 8.39 2.36 8.03 (19.50 )
Net interest margin 4.62 4.72 4.85 4.69 4.61

Net charge-offs as a percentage of average loans and leases
.71 .70 2.74 .82 1.67
 
N.M. Not Meaningful                                                  
 
(1)  

Core revenue is calculated as total revenue less gains (losses) on sales of securities of $(80) thousand and $13 million at September 30, 2013 and September 30, 2012, respectively.
(2) Includes a net, after-tax charge of $295.8 million, or $1.87 per common share, related to the balance sheet repositioning.
(3) Annualized.
(4)

Pre-tax pre-provision profit (''PTPP'') is calculated as total revenues less non-interest expense. Year-to-date 2012 PTPP excludes the non-recurring net loss of $473.8 million related to the balance sheet repositioning completed in the first quarter of 2012.

 

TCF Financial Corporation (“TCF” or the “Company”) (NYSE:TCB) today reported net income for the third quarter of 2013 of $37.9 million, compared with $9.3 million for the third quarter of 2012, and $34.1 million for the second quarter of 2013. Diluted earnings per common share was 23 cents for the third quarter of 2013, compared with 6 cents for the third quarter of 2012, and 21 cents for the second quarter of 2013.

TCF reported net income for the first nine months of 2013 of $97.5 million, compared with a net loss of $242 million for the same period in 2012 (inclusive of a net after-tax charge of $295.8 million, or $1.87 per common share, related to a balance sheet repositioning involving certain investments and borrowings in the first quarter of 2012 and a net after-tax gain of $8.2 million, or 5 cents per common share, related to the sale of Visa® Class B stock in the second quarter of 2012). Diluted earnings per common share was 60 cents for the first nine months of 2013, compared with a diluted loss per common share of $1.52 for the same period in 2012 (earnings per common share of 30 cents excluding the balance sheet repositioning charge and the net gain related to the sale of Visa Class B stock).

Chairman’s Statement

“TCF’s credit quality showed steady improvement for the fourth consecutive quarter,” said William A. Cooper, Chairman and Chief Executive Officer. “The third quarter was highlighted by meaningful reductions in provision, delinquencies, and commercial classified assets.”

“During the quarter, TCF continued to take advantage of loan and lease origination opportunities. Meanwhile, TCF’s fifth consecutive quarter of net checking account growth has offset some of the banking fee pressure caused by a change in consumer behavior leading to reduced transaction volumes.

“I am pleased by the progress we have made in executing on our business strategies over the past two years. There is more work to be done, but we believe TCF is now in a much better position for future success, especially as interest rates eventually begin to rise.”
     
Revenue
                                                   
Total Revenue                             Table 2  
          Percent Change
3Q 2Q 3Q 3Q13 vs   3Q13 vs YTD YTD Percent
(Dollars in thousands)     2013       2013     2012     2Q13     3Q12     2013       2012 Change
Net interest income $ 199,627       $ 202,044     $ 200,559 (1.2 ) % (.5 ) % $ 600,762       $ 578,956 3.8 %
Fees and other revenue:
Fees and service charges 42,457 41,572 43,745 2.1 (2.9 ) 123,352 133,691 (7.7 )
Card revenue 13,167 13,270 12,927 (.8 ) 1.9 38,854 39,664 (2.0 )
ATM revenue   5,941         5,828       6,122 1.9 (3.0 )   17,274         18,597 (7.1 )
Total banking fees 61,565 60,670 62,794 1.5 (2.0 ) 179,480 191,952 (6.5 )
Leasing and equipment finance 29,079 22,874 20,498 27.1 41.9 68,413 66,572 2.8
Gains on sales of auto loans 7,140 8,135 7,486 (12.2 ) (4.6 ) 22,421 15,232 47.2
Gains on sales of consumer real estate loans 4,152 4,069 4,559 2.0 (8.9 ) 16,347 4,559 N.M.
Other   4,304         4,035       3,688 6.7 16.7   12,065         9,211 31.0
Total fees and other revenue   106,240         99,783       99,025 6.5 7.3   298,726         287,526 3.9
Subtotal - core revenue 305,867 301,827 299,584 1.3 2.1 899,488 866,482 3.8
(Losses) gains on securities, net   (80 )       -       13,033 N.M. N.M.   (80 )       102,760 N.M.
Total revenue $ 305,787       $ 301,827     $ 312,617 1.3 (2.2 ) $ 899,408       $ 969,242 (7.2 )
 
Net interest margin (1) 4.62 % 4.72 % 4.85 % 4.69 % 4.61 %

Fees and other revenue as a % of total revenue
34.74 33.06 31.68 33.21 29.67
 
N.M. Not meaningful.
(1) Annualized.
 

Net Interest Income
  • Net interest income for the third quarter of 2013 decreased $932 thousand, or .5 percent, compared with the third quarter of 2012. The decrease was driven by downward pressure on yields across the lending businesses due to the prolonged low interest rate environment, partially offset by increases in average loan and lease balances primarily in the auto finance, inventory finance and leasing and equipment finance businesses.
  • Net interest income for the third quarter of 2013 decreased $2.4 million, or 1.2 percent, compared with the second quarter of 2013. The decrease was attributable to a combination of downward pressure on yields within the quarter mainly in auto finance and consumer real estate and lower average loan balances in the inventory finance portfolio from seasonal liquidations.
  • Net interest margin in the third quarter of 2013 was 4.62 percent, compared with 4.85 percent in the third quarter of 2012 and 4.72 percent in the second quarter of 2013. The decrease from the third quarter of 2012 was primarily due to increased cash held at the Federal Reserve. The decrease from the second quarter of 2013 was primarily due to run-off of higher yielding fixed-rate first mortgages exceeding originations and margin pressure within auto finance, as well as the impact of increased cash held at the Federal Reserve.

Non-interest Income
  • Fees and service charges in the third quarter of 2013 were $42.5 million, down $1.3 million, or 2.9 percent, from the third quarter of 2012 and up $885 thousand, or 2.1 percent, from the second quarter of 2013. The decrease from the third quarter of 2012 was due to fewer average transactions per customer, partially offset by a higher account base. The increase from the second quarter of 2013 was primarily due to growth in the account base for the fifth consecutive quarter.
  • Leasing and equipment finance revenue was $29.1 million during the third quarter of 2013, up $8.6 million, or 41.9 percent, from the third quarter of 2012 and up $6.2 million, or 27.1 percent, from the second quarter of 2013. The increase was primarily due to higher sales-type lease revenue in the leasing and equipment finance portfolio as a result of customer-driven events.
  • TCF sold $182.5 million, $161.1 million and $196.9 million of auto loans during the third quarters of 2013 and 2012, and the second quarter of 2013, respectively, resulting in gains in the same respective periods.
  • TCF sold $142.4 million, $136 million and $139.2 million of consumer real estate loans during the third quarters of 2013 and 2012, and the second quarter of 2013, respectively, resulting in gains in the same respective periods.
         
Loans and Leases
                                         
Period-End and Average Loans and Leases                   Table 3  
      Percent Change
(Dollars in thousands) 3Q 2Q 3Q 3Q13 vs 3Q13 vs YTD YTD Percent
2013   2013   2012   2Q13     3Q12     2013   2012   Change  
Period-End:
Consumer real estate $ 6,415,632 $ 6,356,426 $ 6,648,036 .9 % (3.5 ) %
Commercial 3,137,088 3,350,334 3,511,234 (6.4 ) (10.7 )
Leasing and equipment finance 3,286,506 3,251,703 3,157,977 1.1 4.1
Inventory finance 1,716,542 1,713,528 1,466,269 .2 17.1
Auto finance 1,069,053 882,202 407,091 21.2 162.6
Other   26,827     25,099     27,610 6.9 (2.8 )
Total $ 15,651,648   $ 15,579,292   $ 15,218,217 .5 2.8
 
Average:
Consumer real estate $ 6,402,612 $ 6,430,685 $ 6,729,254 (.4 ) % (4.9 ) % $ 6,462,677 $ 6,789,026 (4.8 ) %
Commercial 3,282,880 3,336,406 3,538,111 (1.6 ) (7.2 ) 3,321,458 3,496,114 (5.0 )
Leasing and equipment finance 3,261,638 3,236,799 3,164,592 .8 3.1 3,232,873 3,146,345 2.8
Inventory finance 1,637,538 1,875,810 1,440,298 (12.7 ) 13.7 1,731,022 1,392,828 24.3
Auto finance 973,418 823,102 367,271 18.3 165.0 823,316 226,092 N.M.
Other   12,299     13,060     16,280 (5.8 ) (24.5 )   12,996     17,166 (24.3 )
Total $ 15,570,385   $ 15,715,862   $ 15,255,806 (.9 ) 2.1 $ 15,584,342   $ 15,067,571 3.4
 
N.M. Not meaningful.
 
  • Loans and leases were $15.7 billion at September 30, 2013, an increase of $433.4 million, or 2.8 percent, compared with September 30, 2012. Quarterly average loans and leases were $15.6 billion for the third quarter of 2013, an increase of $314.6 million, or 2.1 percent, compared with the third quarter of 2012. The increases in period-end and average loans and leases were primarily due to the continued growth of the auto finance portfolio as TCF expands the number of active dealers and sales force in its network and the penetration of existing territories, as well as an increase in the inventory finance portfolio. These increases were partially offset by decreases in commercial loans, primarily due to payoffs in this low interest rate environment exceeding new originations, as well as decreases in consumer real estate loans driven by ongoing loan sales and run-off of first mortgages exceeding originations.
  • Loan and lease originations were $3.1 billion for the third quarter of 2013, an increase of $595.5 million, or 23.9 percent, compared with the third quarter of 2012. This increase was due to increased fundings in the inventory finance business, execution of strategies in the consumer business and continued growth within auto finance, partially offset by a decrease in leasing and equipment finance originations. Loan and lease originations decreased $94.8 million, or 3 percent, compared with the second quarter of 2013, due to low seasonal balances in the inventory finance portfolio and lower leasing and equipment finance originations, partially offset by continued growth within auto finance.

Credit Quality

(Table 4 - Credit Trends: http://www.businesswire.com/cgi-bin/mmg.cgi?eid=50735570&lang=en)
  • Non-accrual loans and leases were $282.9 million at September 30, 2013, an increase of $4.4 million, or 1.6 percent, from June 30, 2013 and a decrease of $138.9 million, or 32.9 percent, from September 30, 2012. The increase from June 30, 2013 was primarily due to a change in the non-accrual policy for consumer real estate loans which resulted in an additional $48.6 million, primarily offset by a decrease in the commercial non-accrual balance of $39.8 million as the portfolio improves. The reduction from September 30, 2012 was primarily due to fewer non-accrual commercial and consumer real estate loans, which was the result of improved credit quality in those portfolios resulting in fewer loans entering non-accrual status, as well as the sale of $40.5 million of loans during the second quarter of 2013. The reduction was partially offset by the change in the non-accrual policy for consumer real estate loans.
  • Other real estate owned was $65.6 million at September 30, 2013, a decrease of $653 thousand from June 30, 2013 and a decrease of $54.8 million from September 30, 2012. The decrease from September 30, 2012 was primarily due to a portfolio sale of 184 consumer properties during the first quarter of 2013 and continued efforts to actively workout problem loans.
  • The over 60-day delinquency rate, excluding acquired portfolios and non-accrual loans and leases, at September 30, 2013 was .25 percent, down from .52 percent at June 30, 2013 and .67 percent at September 30, 2012. The decreases from June 30, 2013 and September 30, 2012 were primarily a result of reduced over 60-day delinquencies in the consumer real estate portfolio due to a change in the non-accrual policy.
  • Net charge-offs decreased $76.8 million from the third quarter of 2012. The decrease was primarily due to improved credit quality in the consumer real estate portfolio and the impact of the clarifying bankruptcy-related regulatory guidance implemented in the third quarter of 2012, as well as improved credit quality in the commercial portfolio and continued efforts to actively workout problem loans. Consumer real estate net charge-offs were down for the fourth consecutive quarter.
  • Provision for credit losses was $24.6 million for the third quarter of 2013, a decrease of $8 million from the second quarter of 2013 and a decrease of $71.7 million from the third quarter of 2012. The decrease from second quarter of 2013 was primarily due to decreased net charge-offs in the consumer real estate portfolio. The decrease from third quarter of 2012 was primarily due to decreased net charge-offs in the consumer real estate portfolio due to improved credit quality and the impact of the clarifying bankruptcy-related regulatory guidance implemented in the third quarter of 2012, as well as commercial portfolios due to improved credit quality and continued efforts to actively workout problem loans.
                 
Deposits
                                         
Average Deposits                           Table 5  
Percent Change
(Dollars in thousands) 3Q 2Q 3Q 3Q13 vs 3Q13 vs YTD YTD Percent
2013     2013     2012     2Q13     3Q12     2013     2012     Change  
 
Checking $ 4,833,196 $ 4,884,433 $ 4,582,088 (1.0 )

%

5.5
% $ 4,834,368 $ 4,594,572 5.2 %
Savings 6,258,866 6,082,200 6,173,524 2.9 1.4 6,152,292 6,044,442 1.8
Money market   822,094       791,859       848,899   3.8 (3.2 )   809,800       753,486   7.5
Subtotal 11,914,156 11,758,492 11,604,511 1.3 2.7 11,796,460 11,392,500 3.5
Certificates   2,401,811       2,360,881       1,953,208   1.7

23.0
  2,362,274       1,567,258   50.7
Total average deposits $ 14,315,967     $ 14,119,373     $ 13,557,719   1.4 5.6 $ 14,158,734     $ 12,959,758   9.3
 
Average interest rate on deposits (1) .27 % .25 % .32 % .27 % .31 %
 
(1) Annualized.
 
  • Total average deposits for the third quarter of 2013 increased $758.2 million, or 5.6 percent, from the third quarter of 2012 and increased $196.6 million, or 1.4 percent, from the second quarter of 2013. The increase from the third quarter of 2012 was primarily due to special programs for certificates of deposit, as well as checking account growth. The increase from the second quarter of 2013 was primarily due to higher average savings balances, offset by lower average checking balances on a greater number of accounts.
  • The average interest rate on deposits in the third quarter of 2013 was .27 percent, down five basis points from the third quarter of 2012 and up two basis points from the second quarter of 2013. The decrease from the third quarter of 2012 was primarily due to declines in average interest rates on various savings accounts. The increase from second quarter of 2013 was due to increased balances in savings and money market accounts with higher rates.
                 
Non-interest Expense
                                         
Non-interest Expense                           Table 6  
Percent Change
(Dollars in thousands) 3Q 2Q 3Q 3Q13 vs 3Q13 vs YTD YTD Percent
2013   2013   2012   2Q13     3Q12     2013     2012   Change  

Compensation and employee benefits
$ 110,833 $ 105,537 $ 98,409 5.0 % 12.6 % $ 320,599 $ 292,163 9.7 %
Occupancy and equipment 33,253 33,062 33,006 .6 .7 99,190 97,983 1.2
FDIC insurance 8,102 8,362 6,899 (3.1 ) 17.4 24,174 21,754 11.1
Operating lease depreciation 6,706 6,150 6,325 9.0 6.0 18,491 19,473 (5.0 )
Advertising and marketing 4,593 5,532 4,248 (17.0 ) 8.1 15,857 12,269 29.2
Deposit account premiums 664 600 485 10.7 36.9 1,866 8,146 (77.1 )
Other   43,675     41,946       36,173 4.1 20.7   123,560       110,425 11.9
Core operating expenses 207,826 201,189 185,545 3.3 12.0 603,737 562,213 7.4
Loss on termination of debt 55 - - N.M. N.M. 55 550,735 (100.0 )

Foreclosed real estate and repossessed assets, net
4,162 7,555 10,670 (44.9 ) (61.0 ) 21,884 33,776 (35.2 )
Other credit costs, net   189     (228 )     593 N.M. (68.1 )   (876 )     1,781 N.M.
Total non-interest expense $ 212,232   $ 208,516     $ 196,808 1.8 7.8 $ 624,800     $ 1,148,505 (45.6 )
N.M. Not meaningful.  
 
  • Compensation and employee benefits expense for the third quarter of 2013 increased $12.4 million, or 12.6 percent, from the third quarter of 2012 and increased $5.3 million, or 5 percent, from the second quarter of 2013. The increase from both periods was primarily due to increased staff levels to support the growth of auto finance and expenses related to higher commissions based on production results and performance incentives.
  • Foreclosed real estate and repossessed assets expense decreased $6.5 million, or 61 percent, from the third quarter of 2012 and decreased $3.4 million, or 44.9 percent, from the second quarter of 2013. The decrease from the third quarter of 2012 was driven by reduced expenses related to fewer foreclosed properties in consumer and commercial. The decrease from the second quarter of 2013 was due to a reduction in write-downs of values of existing foreclosed real estate properties as a result of improved real estate property values.
           
Capital
                                 
Capital Information               Table 7  
At period end
(Dollars in thousands, except per-share data) 3Q 4Q
2013 2012
Total equity $ 1,941,243 $ 1,876,643
Book value per common share $ 10.10 $ 9.79
Tangible realized common equity to tangible assets (1) 7.99 % 7.52 %
 
Risk-based capital (2)
Tier 1 $ 1,729,992 11.36 % $ 1,633,336 11.09 %
Total 2,071,454 13.61 2,007,835 13.63
 
Tier 1 leverage capital $ 1,729,992 9.53 % $ 1,633,336 9.21 %
 
Tier 1 common capital (3) $ 1,453,474 9.55 % $ 1,356,826 9.21 %
 
(1)   Excludes the impact of goodwill, other intangibles and accumulated other comprehensive (loss) income (see “Reconciliation of GAAP to Non-GAAP Financial Measures” table).
(2) The Company's capital ratios continue to be in excess of "well-capitalized" regulatory benchmarks.
(3)   Excludes the effect of preferred shares and qualifying non-controlling interest in subsidiaries (see “Reconciliation of GAAP to Non-GAAP Financial Measures” table).
 
  • On October 21, 2013, the Board of Directors of TCF declared a regular quarterly cash dividend of 5 cents per common share payable on November 29, 2013, to stockholders of record at the close of business on November 15, 2013. TCF also declared dividends on the 7.50% Series A and 6.45% Series B Non-Cumulative Perpetual Preferred Stock, both payable on December 2, 2013, to stockholders of record at the close of business on November 15, 2013.

Webcast Information

A live webcast of TCF’s conference call to discuss the third quarter earnings will be hosted at TCF’s website, http://ir.tcfbank.com, on October 25, 2013 at 8:00 a.m. CT. A slide presentation for the call will be available on the website prior to the call. Additionally, the webcast will be 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, investor presentations and SEC filings.
 

TCF is a Wayzata, Minnesota-based national bank holding company with $18.4 billion in total assets at September 30, 2013. TCF has over 425 branches in Minnesota, Illinois, Michigan, Colorado, Wisconsin, Indiana, Arizona and South Dakota, providing retail and commercial banking services. TCF, through its subsidiaries, also conducts commercial leasing and equipment finance business in all 50 states, commercial inventory finance business in the U.S. and Canada, and indirect auto finance business in over 40 states. For more information about TCF, please visit http://ir.tcfbank.com .
 

Cautionary Statements for Purposes of the Safe Harbor Provisions of the Securities Litigation Reform Act

Any statements contained in this earnings release regarding the outlook for the Company’s businesses and their respective markets, such as projections of future performance, guidance, statements of the Company’s plans and objectives, forecasts of market trends and other matters, are forward-looking statements based on the Company’s assumptions and beliefs. Such statements may be identified by such words or phrases as “will likely result,” “are expected to,” “will continue,” “outlook,” “will benefit,” “is anticipated,” “estimate,” “project,” “management believes” or similar expressions. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those discussed in such statements and no assurance can be given that the results in any forward-looking statement will be achieved. For these statements, TCF claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Any forward-looking statement speaks only as of the date on which it is made, and we disclaim any obligation to subsequently revise any forward-looking statement to reflect events or circumstances after such date or to reflect the occurrence of anticipated or unanticipated events.

Certain factors could cause the Company’s future results to differ materially from those expressed or implied in any forward-looking statements contained in this earnings release. These factors include the factors discussed in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2012 under the heading “Risk Factors,” the factors discussed below and any other cautionary statements, written or oral, which may be made or referred to in connection with any such forward-looking statements. Since it is not possible to foresee all such factors, these factors should not be considered as complete or exhaustive.

Adverse Economic or Business Conditions; Competitive Conditions; Credit and Other Risks. Deterioration in general economic and banking industry conditions, including those arising from government shutdowns, defaults, anticipated defaults or rating agency downgrades of sovereign debt (including debt of the U.S.), or continued high rates of or increases in unemployment in TCF’s primary banking markets; adverse economic, business and competitive developments such as shrinking interest margins, reduced demand for financial services and loan and lease products, deposit outflows, deposit account attrition or an inability to increase the number of deposit accounts; customers completing financial transactions without using a bank; adverse changes in credit quality and other risks posed by TCF’s loan, lease, investment and securities available for sale portfolios, including declines in commercial or residential real estate values, changes in the allowance for loan and lease losses dictated by new market conditions or regulatory requirements, or the inability of home equity line borrowers to make increased payments caused by increased interest rates or amortization of principal; deviations from estimates of prepayment rates and fluctuations in interest rates that result in decreases in value of assets such as interest-only strips that arise in connection with TCF’s loan sales activity; interest rate risks resulting from fluctuations in prevailing interest rates or other factors that result in a mismatch between yields earned on TCF’s interest-earning assets and the rates paid on its deposits and borrowings; foreign currency exchange risks; counterparty risk, including the risk of defaults by our counterparties or diminished availability of counterparties who satisfy our credit quality requirements; decreases in demand for the types of equipment that TCF leases or finances; the effect of any negative publicity.

Legislative and Regulatory Requirements. New consumer protection and supervisory requirements and regulations, including those resulting from action by the Consumer Financial Protection Bureau and changes in the scope of Federal preemption of state laws that could be applied to national banks and their subsidiaries; the imposition of requirements that adversely impact TCF’s lending, loan collection and other business activities as a result of the Dodd-Frank Act, or other legislative or regulatory developments such as mortgage foreclosure moratorium laws, use by municipalities of eminent domain on underwater mortgages, or imposition of underwriting or other limitations that impact the ability to use certain variable-rate products; impact of legislative, regulatory or other changes affecting customer account charges and fee income; changes to bankruptcy laws which would result in the loss of all or part of TCF’s security interest due to collateral value declines; deficiencies in TCF’s compliance under the Bank Secrecy Act in past or future periods, which may result in regulatory enforcement action including monetary penalties; increased health care costs resulting from Federal health care reform legislation; adverse regulatory examinations and resulting enforcement actions or other adverse consequences such as increased capital requirements or higher deposit insurance assessments; heightened regulatory practices, requirements or expectations, including, but not limited to, requirements related to the Bank Secrecy Act and anti-money laundering compliance activity.

Earnings/Capital Risks and Constraints, Liquidity Risks. Limitations on TCF’s ability to pay dividends or to increase dividends because of financial performance deterioration, regulatory restrictions or limitations; increased deposit insurance premiums, special assessments or other costs related to adverse conditions in the banking industry, the economic impact on banks of the Dodd-Frank Act and other regulatory reform legislation; the impact of financial regulatory reform, including additional capital, leverage, liquidity and risk management requirements or changes in the composition of qualifying regulatory capital (including those resulting from U.S. implementation of Basel III requirements); adverse changes in securities markets directly or indirectly affecting TCF’s ability to sell assets or to fund its operations; diminished unsecured borrowing capacity resulting from TCF credit rating downgrades and unfavorable conditions in the credit markets that restrict or limit various funding sources; costs associated with new regulatory requirements or interpretive guidance relating to liquidity; uncertainties relating to regulatory requirements or customer opt-in preferences with respect to overdraft, which may have an adverse impact on TCF’s fee revenue; uncertainties relating to future retail deposit account changes, including limitations on TCF’s ability to predict customer behavior and the impact on TCF’s fee revenues.

Supermarket Branching Risk; Growth Risks. Adverse developments affecting TCF’s supermarket banking relationships or any of the supermarket chains in which TCF maintains supermarket branches; costs related to closing underperforming branches; slower than anticipated growth in existing or acquired businesses; inability to successfully execute on TCF’s growth strategy through acquisitions or cross-selling opportunities; failure to expand or diversify TCF’s balance sheet through programs or new opportunities; failure to successfully attract and retain new customers, including the failure to attract and retain manufacturers and dealers to expand the inventory finance business; failure to effectuate, and risks of claims related to, sales and securitizations of loans; risks related to new product additions and addition of distribution channels (or entry into new markets) for existing products.

Technological and Operational Matters. Technological or operational difficulties, loss or theft of information, cyber-attacks and other security breaches, counterparty failures and the possibility that deposit account losses (fraudulent checks, etc.) may increase; failure to keep pace with technological change.

Litigation Risks. Results of litigation, including class action litigation concerning TCF’s lending or deposit activities including account servicing processes or fees or charges, or employment practices, the effect of interchange rate litigation against the Federal Reserve on debit card interchange fees and possible increases in indemnification obligations for certain litigation against Visa U.S.A. and potential reductions in card revenues resulting from such litigation or other litigation against Visa.

Accounting, Audit, Tax and Insurance Matters. Changes in accounting standards or interpretations of existing standards; federal or state monetary, fiscal or tax policies, including adoption of state legislation that would increase state taxes; ineffective internal controls; adverse Federal, state or foreign tax assessments or findings in tax audits; lack of or inadequate insurance coverage for claims against TCF; potential for claims and legal action related to TCF’s fiduciary responsibilities.
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per-share data)
(Unaudited)
               
Three Months Ended September 30, Change
2013 2012 $ %
Interest income:
Loans and leases $ 203,879 $ 210,140 $ (6,261 ) (3.0 ) %
Securities available for sale 4,448 5,607 (1,159 ) (20.7 )
Investments and other   7,126     4,105   3,021   73.6
Total interest income   215,453     219,852   (4,399 ) (2.0 )
Interest expense:
Deposits 9,644 10,757 (1,113 ) (10.3 )
Borrowings   6,182     8,536   (2,354 ) (27.6 )
Total interest expense   15,826     19,293   (3,467 ) (18.0 )
Net interest income 199,627 200,559 (932 ) (.5 )
Provision for credit losses   24,602     96,275   (71,673 ) (74.4 )

Net interest income after provision for credit losses
  175,025     104,284   70,741   67.8
Non-interest income:
Fees and service charges 42,457 43,745 (1,288 ) (2.9 )
Card revenue 13,167 12,927 240 1.9
ATM revenue   5,941     6,122   (181 ) (3.0 )
Subtotal 61,565 62,794 (1,229 ) (2.0 )
Leasing and equipment finance 29,079 20,498 8,581 41.9
Gains on sales of auto loans 7,140 7,486 (346 ) (4.6 )
Gains on sales of consumer real estate loans 4,152 4,559 (407 ) (8.9 )
Other   4,304     3,688   616   16.7
Fees and other revenue 106,240 99,025 7,215 7.3
(Losses) gains on securities, net   (80 )   13,033   (13,113 ) N.M.
Total non-interest income   106,160     112,058   (5,898 ) (5.3 )
Non-interest expense:
Compensation and employee benefits 110,833 98,409 12,424 12.6
Occupancy and equipment 33,253 33,006 247 .7
FDIC insurance 8,102 6,899 1,203 17.4
Operating lease depreciation 6,706 6,325 381 6.0
Advertising and marketing 4,593 4,248 345 8.1
Deposit account premiums 664 485 179 36.9
Other   43,675     36,173   7,502   20.7
Subtotal 207,826 185,545 22,281 12.0
Loss on termination of debt 55 - 55 N.M.
Foreclosed real estate and repossessed assets, net 4,162 10,670 (6,508 ) (61.0 )
Other credit costs, net   189     593   (404 ) (68.1 )
Total non-interest expense   212,232     196,808   15,424   7.8
Income before income tax expense 68,953 19,534 49,419 N.M.
Income tax expense   24,551     6,304   18,247   N.M.
Income after income tax expense 44,402 13,230 31,172 N.M.
Income attributable to non-controlling interest   1,607     1,536   71   4.6
Net income attributable to TCF Financial Corporation   42,795     11,694   31,101   N.M.
Preferred stock dividends   4,847     2,372   2,475   104.3
Net income available to common stockholders $ 37,948   $ 9,322 $ 28,626   N.M.
 
Net income per common share:
Basic $ .24 $ .06 $ .18 N.M.
Diluted .23 .06 .17 N.M.
 
Dividends declared per common share $ .05 $ .05 $ - -
 

Average common and common equivalent shares outstanding (in thousands):
Basic 161,220 159,533 1,687 1.1
Diluted 162,184 160,016 2,168 1.4
 
N.M. Not meaningful.
 
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per-share data)
(Unaudited)
               
Nine Months Ended September 30, Change
2013 2012 $ %
Interest income:
Loans and leases $ 615,459 $ 624,890 $ (9,431 ) (1.5 ) %
Securities available for sale 13,880 30,535 (16,655 ) (54.5 )
Investments and other   19,272     10,171     9,101   89.5
Total interest income   648,611     665,596     (16,985 ) (2.6 )
Interest expense:
Deposits 28,176 30,015 (1,839 ) (6.1 )
Borrowings   19,673     56,625     (36,952 ) (65.3 )
Total interest expense   47,849     86,640     (38,791 ) (44.8 )
Net interest income 600,762 578,956 21,806 3.8
Provision for credit losses   95,576     198,923     (103,347 ) (52.0 )

Net interest income after provision for credit losses
  505,186     380,033     125,153   32.9
Non-interest income:
Fees and service charges 123,352 133,691 (10,339 ) (7.7 )
Card revenue 38,854 39,664 (810 ) (2.0 )
ATM revenue   17,274     18,597     (1,323 ) (7.1 )
Subtotal 179,480 191,952 (12,472 ) (6.5 )
Leasing and equipment finance 68,413 66,572 1,841 2.8
Gains on sales of auto loans 22,421 15,232 7,189 47.2
Gains on sales of consumer real estate loans 16,347 4,559 11,788 N.M.
Other   12,065     9,211     2,854   31.0
Fees and other revenue 298,726 287,526 11,200 3.9
(Losses) gains on securities, net   (80 )   102,760     (102,840 ) N.M.
Total non-interest income   298,646     390,286     (91,640 ) (23.5 )
Non-interest expense:
Compensation and employee benefits 320,599 292,163 28,436 9.7
Occupancy and equipment 99,190 97,983 1,207 1.2
FDIC insurance 24,174 21,754 2,420 11.1
Operating lease depreciation 18,491 19,473 (982 ) (5.0 )
Advertising and marketing 15,857 12,269 3,588 29.2
Deposit account premiums 1,866 8,146 (6,280 ) (77.1 )
Other   123,560     110,425     13,135   11.9
Subtotal 603,737 562,213 41,524 7.4
Loss on termination of debt 55 550,735 (550,680 ) (100.0 )
Foreclosed real estate and repossessed assets, net 21,884 33,776 (11,892 ) (35.2 )
Other credit costs, net   (876 )   1,781     (2,657 ) N.M.
Total non-interest expense   624,800     1,148,505     (523,705 ) (45.6 )
Income (loss) before income tax expense (benefit) 179,032 (378,186 ) 557,218 N.M.
Income tax expense (benefit)   61,554     (143,398 )   204,952   N.M.
Income (loss) after income tax expense (benefit) 117,478 (234,788 ) 352,266 N.M.
Income attributable to non-controlling interest   5,805     4,881     924   18.9
Net income (loss) attributable to TCF Financial Corporation   111,673     (239,669 )   351,342   N.M.
Preferred stock dividends   14,218     2,372     11,846   N.M.
Net income (loss) available to common stockholders $ 97,455   $ (242,041 ) $ 339,496   N.M.
 
Net income (loss) per common share:
Basic $ .61 $ (1.52 ) $ 2.13 N.M.
Diluted .60 (1.52 ) 2.12 N.M.
 
Dividends declared per common share $ .15 $ .15 $ - -
 

Average common and common equivalent shares outstanding (in thousands):
Basic 160,838 159,052 1,786 1.1
Diluted 161,694 159,052 2,642 1.7
 
N.M. Not meaningful.
 
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
(Unaudited)
               
Three Months Ended September 30, Change
2013 2012 $ %
Net income attributable to TCF Financial Corporation $ 42,795   $ 11,694   $ 31,101   N.M. %
Other comprehensive income:

Reclassification adjustment for securities gains included in net income
- (12,912 ) 12,912 (100.0 )

Unrealized holding gains arising during the period on securities available for sale
850 16,283 (15,433 ) (94.8 )
Foreign currency hedge (647 ) (630 ) (17 ) (2.7 )
Foreign currency translation adjustment 615 640 (25 ) (3.9 )

Recognized postretirement prior service cost and transition obligation
(11 ) (7 ) (4 ) (57.1 )
Income tax expense   (72 )   (1,010 )   938   92.9
Total other comprehensive income   735     2,364     (1,629 ) (68.9 )
Comprehensive income $ 43,530   $ 14,058   $ 29,472   N.M.
 
Nine Months Ended September 30, Change
2013 2012 $ %
Net income (loss) attributable to TCF Financial Corporation $ 111,673   $ (239,669 ) $ 351,342   N.M. %
Other comprehensive income (loss):

Reclassification adjustment for securities gains included in net income
- (89,879 ) 89,879 (100.0 )

Unrealized holding (losses) gains arising during the period on securities available for sale
(47,399 ) 28,383 (75,782 ) N.M.
Foreign currency hedge 764 (766 ) 1,530 N.M.
Foreign currency translation adjustment (980 ) 701 (1,681 ) N.M.

Recognized postretirement prior service cost and transition obligation
(35 ) (21 ) (14 ) (66.7 )
Income tax benefit   17,609     22,823     (5,214 ) (22.8 )
Total other comprehensive loss   (30,041 )   (38,759 )   8,718   22.5
Comprehensive income (loss) $ 81,632   $ (278,428 ) $ 360,060   N.M.
 
N.M. Not meaningful.
 
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except per-share data)
(Unaudited)
               
At Sep. 30, At Dec. 31, Change
2013 2012 $ %
ASSETS
 
Cash and due from banks $ 983,846 $ 1,100,347 $ (116,501 ) (10.6 ) %
Investments 101,950 120,867 (18,917 ) (15.7 )
Securities available for sale 631,677 712,091 (80,414 ) (11.3 )
Loans and leases held for sale 170,699 10,289 160,410 N.M.
Loans and leases:
Consumer real estate 6,415,632 6,674,501 (258,869 ) (3.9 )
Commercial 3,137,088 3,405,235 (268,147 ) (7.9 )
Leasing and equipment finance 3,286,506 3,198,017 88,489 2.8
Inventory finance 1,716,542 1,567,214 149,328 9.5
Auto finance 1,069,053 552,833 516,220 93.4
Other loans and leases   26,827     27,924     (1,097 ) (3.9 )
Total loans and leases 15,651,648 15,425,724 225,924 1.5
Allowance for loan and lease losses   (261,285 )   (267,128 )   5,843   2.2
Net loans and leases 15,390,363 15,158,596 231,767 1.5
Premises and equipment, net 437,051 440,466 (3,415 ) (.8 )
Goodwill 225,640 225,640 - -
Other assets   428,862     457,621     (28,759 ) (6.3 )
Total assets $ 18,370,088   $ 18,225,917   $ 144,171   .8
 
LIABILITIES AND EQUITY
 
Deposits:
Checking $ 4,911,479 $ 4,834,632 $ 76,847 1.6
Savings 6,263,690 6,104,104 159,586 2.6
Money market   870,727     820,553     50,174   6.1
Subtotal 12,045,896 11,759,289 286,607 2.4
Certificates of deposit   2,379,134     2,291,497     87,637   3.8
Total deposits   14,425,030     14,050,786     374,244   2.7
Short-term borrowings 8,249 2,619 5,630 N.M.
Long-term borrowings   1,523,235     1,931,196     (407,961 ) (21.1 )
Total borrowings 1,531,484 1,933,815 (402,331 ) (20.8 )
Accrued expenses and other liabilities   472,331     364,673     107,658   29.5
Total liabilities   16,428,845     16,349,274     79,571   .5
Equity:

Preferred stock, par value $.01 per share, 30,000,000 authorized; and 4,006,900 shares issued
263,240 263,240 - -

Common stock, par value $.01 per share, 280,000,000 shares authorized; 164,820,917 and 163,428,763 shares issued, respectively
1,648 1,634 14 .9
Additional paid-in capital 771,570 750,040 21,530 2.9
Retained earnings, subject to certain restrictions 950,777 877,445 73,332 8.4
Accumulated other comprehensive (loss) income (17,598 ) 12,443 (30,041 ) N.M.
Treasury stock at cost, 42,566 shares, and other   (41,672 )   (41,429 )   (243 ) (.6 )
Total TCF Financial Corporation stockholders' equity 1,927,965 1,863,373 64,592 3.5
Non-controlling interest in subsidiaries   13,278     13,270     8   .1
Total equity   1,941,243     1,876,643     64,600   3.4
Total liabilities and equity $ 18,370,088   $ 18,225,917   $ 144,171   .8
 
N.M. Not Meaningful.
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
SUMMARY OF CREDIT QUALITY DATA
(Dollars in thousands)
(Unaudited)
   
At At At At At Change from
Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30, Jun. 30, Sep. 30,
2013 2013 2013 2012 2012 2013 2012

Delinquency Data - Principal Balances (1)
60 days or more:
Consumer real estate
First mortgage lien $ 23,576 $ 66,876 $ 66,164 $ 76,020 $ 80,153 $ (43,300 ) $ (56,577 )
Junior lien 3,822   8,022   9,674   13,141   13,388   (4,200 ) (9,566 )
Total consumer real estate 27,398 74,898 75,838 89,161 93,541 (47,500 ) (66,143 )
Commercial 7,201 1,679 906 2,630 2,652 5,522 4,549
Leasing and equipment finance 2,539 1,840 2,067 2,568 1,554 699 985
Inventory finance 71 33 156 119 80 38 (9 )
Auto finance 1,429 868 563 532 305 561 1,124
Other -   26   -   31   22   (26 ) (22 )
Subtotal 38,638 79,344 79,530 95,041 98,154 (40,706 ) (59,516 )
Acquired portfolios 334   627   578   982   1,069   (293 ) (735 )
Total delinquencies $ 38,972   $ 79,971   $ 80,108   $ 96,023   $ 99,223   $ (40,999 ) $ (60,251 )
 

Delinquency Data - % of Portfolio (1)
60 days or more:
Consumer real estate
First mortgage lien .64 % 1.74 % 1.67 % 1.88 % 1.93 % (110 ) bps (129 ) bps
Junior lien .15 .34 .43 .55 .59 (19 ) (44 )
Total consumer real estate .44 1.21 1.22 1.38 1.46 (77 ) (102 )
Commercial .23 .05 .03 .08 .08 18 15
Leasing and equipment finance .08 .06 .07 .08 .05 2 3
Inventory finance - - .01 .01 .01 - (1 )
Auto finance .13 .10 .08 .10 .08 3 5
Other - .11 - .12 .09 (11 ) (9 )
Subtotal .25 .52 .53 .64 .67 (27 ) (42 )
Acquired portfolios .33 .51 .37 .58 .50 (18 ) (17 )
Total delinquencies .25 .52 .52 .64 .67 (27 ) (42 )
 
(1) Excludes non-accrual loans and leases.
 
At At At At At Change from
Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30, Jun. 30, Sep. 30,
2013 2013 2013 2012 2012 2013 2012

Non-Accrual Loans and Leases
Non-accrual loans and leases:
Consumer real estate
First mortgage lien $ 170,306 $ 132,586 $ 186,218 $ 199,631 $ 197,649 $ 37,720 $ (27,343 )
Junior lien 35,732   30,744   33,907   35,269   35,936   4,988   (204 )
Total consumer real estate 206,038 163,330 220,125 234,900 233,585 42,708 (27,547 )
Commercial 62,273 102,103 108,505 127,746 169,339 (39,830 ) (107,066 )
Leasing and equipment finance 11,820 11,103 11,695 13,652 15,812 717 (3,992 )
Inventory finance 1,802 1,008 1,480 1,487 1,120 794 682
Auto finance 212 118 106 101 - 94 212
Other 728   809   1,477   1,571   1,957   (81 ) (1,229 )
Total non-accrual loans and leases $ 282,873   $ 278,471   $ 343,388   $ 379,457   $ 421,813   $ 4,402   $ (138,940 )
 
Non-accrual loans and leases - rollforward
Balance, beginning of period $ 278,471 $ 343,388 $ 379,457 $ 421,813 $ 324,426 $ (64,917 ) $ (45,955 )
Additions 93,337 41,549 56,712 88,235 210,916 51,788 (117,579 )
Charge-offs (10,225 ) (12,780 ) (23,773 ) (27,657 ) (49,116 ) 2,555 38,891
Transfers to other assets (23,810 ) (16,014 ) (20,087 ) (17,305 ) (24,632 ) (7,796 ) 822
Return to accrual status (16,218 ) (21,360 ) (34,692 ) (55,261 ) (30,300 ) 5,142 14,082
Payments received (40,319 ) (16,977 ) (15,399 ) (30,832 ) (9,652 ) (23,342 ) (30,667 )
Sales - (40,461 ) (133 ) - - 40,461 -
Other, net 1,637   1,126   1,303   464   171   511   1,466  
Balance, end of period $ 282,873   $ 278,471   $ 343,388   $ 379,457   $ 421,813   $ 4,402   $ (138,940 )
 
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
SUMMARY OF CREDIT QUALITY DATA, CONTINUED
(Dollars in thousands)
(Unaudited)
               
Change from
Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Jun 30, Sep 30,
2013 2013 2013 2012 2012 2013 2012

Other Real Estate Owned
Other real estate owned (1)
Consumer real estate $ 48,910 $ 44,759 $ 46,404 $ 69,599 $ 85,764 $ 4,151 $ (36,854 )
Commercial real estate 16,669   21,473   25,359   27,379   34,662   (4,804 ) (17,993 )
Total other real estate owned $ 65,579   $ 66,232   $ 71,763   $ 96,978   $ 120,426   $ (653 ) $ (54,847 )
 
Other real estate owned - rollforward
Balance, beginning of period $ 66,232 $ 71,763 $ 96,978 $ 120,426 $ 125,876 $ (5,531 ) $ (59,644 )
Transferred in 23,339 16,503 20,855 18,444 26,097 6,836 (2,758 )
Sales (22,683 ) (17,895 ) (40,456 ) (39,528 ) (28,479 ) (4,788 ) 5,796
Writedowns (2,197 ) (4,270 ) (5,294 ) (4,614 ) (3,493 ) 2,073 1,296
Other, net 888   131   (320 ) 2,250   425   757   463  
Balance, end of period $ 65,579   $ 66,232   $ 71,763   $ 96,978   $ 120,426   $ (653 ) $ (54,847 )
 
Ending number of properties owned
Consumer real estate 327 246 224 418 425 81 (98 )
Commercial real estate 18   20   18   18   26   (2 ) (8 )
Total 345   266   242   436   451   79   (106 )
 
(1) Includes properties owned and foreclosed properties subject to redemption.
 
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
SUMMARY OF CREDIT QUALITY DATA, CONTINUED
(Dollars in thousands)
(Unaudited)
           

Allowance for Loan and Lease Losses
At September 30, 2013 At June 30, 2013 At September 30, 2012 Change from
% of % of % of Jun. 30, Sep. 30,
Balance Portfolio Balance Portfolio Balance Portfolio 2013 2012
Consumer real estate $ 177,970 2.77 % $ 181,052 2.85 % $ 178,942 2.69 % (8 ) bps 8 bps
Commercial 46,638 1.49 50,072 1.49 53,756 1.53 - (4 )

Leasing and equipment finance
18,216 .55 17,975 .55 21,331 .68 - (13 )
Inventory finance 8,547 .50 8,197 .48 7,003 .48 2 2
Auto finance 9,112 .85 7,509 .85 3,059 .75 - 10
Other 802 2.99 794   3.16 750 2.72 (17 ) 27
Total $ 261,285 1.67 $ 265,599   1.70 $ 264,841 1.74 (3 ) (7 )
 

Net Charge-Offs
Change from
Quarter Ended Quarter Ended
Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30, Jun. 30, Sep. 30,
2013 2013 2013 2012 2012 2013 2012
Consumer real estate
First mortgage lien $ 12,770 $ 15,084 $ 19,907 $ 22,163 $ 40,469

 

$
(2,314 )

 

$
(27,699 )
Junior lien 5,474 8,642   10,540 11,757 34,202 (3,168 ) (28,728 )
Total consumer real estate 18,244 23,726 30,447 33,920 74,671 (5,482 ) (56,427 )
Commercial 6,513 2,449 7,849 8,351 20,547 4,064 (14,034 )
Leasing and equipment finance 658 244 1,210 1,345 7,521 414 (6,863 )
Inventory finance 86 (14 ) 355 193 444 100 (358 )
Auto finance 1,122 765 836 771 280 357 842
Other 993 524   307 940 991 469   2  
Total $ 27,616 $ 27,694   $ 41,004 $ 45,520 $ 104,454

 

$
(78 )

 

$
(76,838 )
 

Net Charge-Offs as a Percentage of Average Loans and Leases
Change from
Quarter Ended (1) Quarter Ended
Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30, Jun. 30, Sep. 30,
2013 2013 2013 2012 2012 2013 2012
Consumer real estate
First mortgage lien 1.30 % 1.48 % 1.90 % 2.06 % 3.60 % (18 ) bps (230 ) bps
Junior lien .88 1.46 1.78 1.99 6.12 (58 ) (524 )
Total consumer real estate 1.14 1.48 1.86 2.04 4.44 (34 ) (330 )
Commercial .79 .29 .94 .97 2.32 50 (153 )
Leasing and equipment finance .08 .03 .15 .17 .95 5 (87 )
Inventory finance .02 - .08 .05 .12 2 (10 )
Auto finance .46 .37 .50 .61 .30 9 16
Other NM 16.05 9.01 N.M. N.M. N.M. N.M.
Total .71 .70 1.06 1.18 2.74 1 (203 )
 
(1) Annualized.
N.M. Not Meaningful.
 
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES
(Dollars in thousands)
(Unaudited)
           
Three Months Ended September 30,
2013 2012
Average Yields and Average Yields and
Balance Interest

Rates (1)(2)
Balance Interest

Rates (1)(2)
ASSETS:
Investments and other $ 876,685 $ 4,161 1.89 % $ 479,083 $ 2,508 2.09 %
U.S. Government sponsored entities:
Mortgage-backed securities, fixed rate 638,418 4,448 2.79 710,835 5,605 3.15
U.S. Treasury securities - - - - - -
Other securities   110   - 2.04   154   2 3.32
Total securities available for sale (3)   638,528   4,448 2.79   710,989   5,607 3.15
Loans and leases held for sale 156,593 2,965 7.51 80,549 1,597 7.89
Loans and leases:
Consumer real estate:
Fixed-rate 3,678,665 53,120 5.73 4,197,903 62,679 5.94
Variable-rate   2,723,947   34,987 5.10   2,531,351   32,071 5.04
Total consumer real estate   6,402,612   88,107 5.46   6,729,254   94,750 5.60
Commercial:
Fixed- and adjustable-rate 2,284,318 30,479 5.29 2,682,193 37,565 5.57
Variable-rate   998,562   9,124 3.62   855,918   8,116 3.77
Total commercial   3,282,880   39,603 4.79   3,538,111   45,681 5.14
Leasing and equipment finance 3,261,638 40,281 4.94 3,164,592 42,152 5.33
Inventory finance 1,637,538 24,820 6.01 1,440,298 22,395 6.19
Auto finance 973,418 11,544 4.70 367,271 5,515 5.97
Other   12,299   258 8.34   16,280   320 7.83
Total loans and leases (4)   15,570,385   204,613 5.22   15,255,806   210,813 5.50
Total interest-earning assets   17,242,191   216,187 4.98   16,526,427   220,525 5.32
Other assets (5)   1,060,409   1,190,094
Total assets $ 18,302,600 $ 17,716,521
LIABILITIES AND EQUITY:
Non-interest bearing deposits:
Retail $ 1,435,958 $ 1,275,722
Small business 777,538 746,511
Commercial and custodial   347,971   324,739
Total non-interest bearing deposits   2,561,467   2,346,972
Interest-bearing deposits:
Checking 2,292,133 350 .06 2,255,561 698 .12
Savings 6,238,462 3,574 .23 6,153,079 4,720 .31
Money market   822,094   588 .28   848,899   816 .38
Subtotal 9,352,689 4,512 .19 9,257,539 6,234 .27
Certificates of deposit   2,401,811   5,132 .85   1,953,208   4,523 .92
Total interest-bearing deposits   11,754,500   9,644 .33   11,210,747   10,757 .38
Total deposits   14,315,967   9,644 .27   13,557,719   10,757 .32
Borrowings:
Short-term borrowings 6,545 11 .59 65,531 39 .24
Long-term borrowings   1,609,211   6,171 1.53   1,985,094   8,497 1.71
Total borrowings   1,615,756   6,182 1.52   2,050,625   8,536 1.66
Total interest-bearing liabilities   13,370,256   15,826 .47   13,261,372   19,293 .58
Total deposits and borrowings   15,931,723   15,826 .39   15,608,344   19,293 .49
Other liabilities   455,911   343,336
Total liabilities   16,387,634   15,951,680

Total TCF Financial Corp. stockholders' equity
1,899,282 1,749,951
Non-controlling interest in subsidiaries   15,684   14,890
Total equity   1,914,966   1,764,841
Total liabilities and equity $ 18,302,600 $ 17,716,521
Net interest income and margin $ 200,361 4.62 $ 201,232 4.85
 
(1) Annualized.
(2) Interest and yields are presented on a fully tax equivalent basis.
(3) Average balances and yields of securities available for sale are based upon historical amortized cost and exclude equity securities.
(4) Average balances of loans and leases include non-accrual loans and leases, and are presented net of unearned income.
(5) Includes operating leases.
 
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES
(Dollars in thousands)
(Unaudited)
             
Nine Months Ended September 30,
2013 2012
Average Yields and Average Yields and
Balance Interest

Rates (1)(2)
Balance Interest

Rates (1)(2)
ASSETS:
Investments and other $ 809,237 $ 11,168 1.84 % $ 551,653 $ 7,550 1.83 %
U.S. Government sponsored entities:
Mortgage-backed securities, fixed rate 655,949 13,878 2.82 1,175,514 30,529 3.46
U.S. Treasury securities 461 - .07 - - -
Other securities   103   2 2.35   203   6 3.92
Total securities available for sale (3)   656,513   13,880 2.82   1,175,717   30,535 3.46
Loans and leases held for sale 142,590 8,104 7.60 43,871 2,621 7.98
Loans and leases:
Consumer real estate:
Fixed-rate 3,800,608 166,155 5.84 4,335,073 192,263 5.92
Variable-rate   2,662,069   101,614 5.10   2,453,953   92,341 5.03
Total consumer real estate   6,462,677   267,769 5.54   6,789,026   284,604 5.60
Commercial:
Fixed- and adjustable-rate 2,384,194 94,287 5.29 2,716,583 113,017 5.56
Variable-rate   937,264   24,992 3.57   779,531   23,179 3.97
Total commercial   3,321,458   119,279 4.80   3,496,114   136,196 5.20
Leasing and equipment finance 3,232,873 121,184 5.00 3,146,345 129,261 5.48
Inventory finance 1,731,022 78,285 6.05 1,392,828 64,811 6.22
Auto finance 823,316 30,379 4.93 226,092 10,933 6.46
Other   12,996   797 8.21   17,166   1,025 7.97
Total loans and leases (4)   15,584,342   617,693 5.30   15,067,571   626,830 5.55
Total interest-earning assets   17,192,682   650,845 5.06   16,838,812   667,536 5.29
Other assets (5)   1,098,845   1,256,931
Total assets $ 18,291,527 $ 18,095,743
LIABILITIES AND EQUITY:
Non-interest bearing deposits:
Retail $ 1,446,184 $ 1,317,448
Small business 758,156 726,732
Commercial and custodial   334,978   313,240
Total non-interest bearing deposits   2,539,318   2,357,420
Interest-bearing deposits:
Checking 2,317,290 1,224 .07 2,258,843 2,482 .15
Savings 6,130,052 9,733 .21 6,022,751 15,323 .34
Money market   809,800   1,765 .29   753,486   2,144 .38
Subtotal 9,257,142 12,722 .18 9,035,080 19,949 .29
Certificates of deposit   2,362,274   15,454 .87   1,567,258   10,067 .86
Total interest-bearing deposits   11,619,416   28,176 .32   10,602,338   30,016 .38
Total deposits   14,158,734   28,176 .27   12,959,758   30,016 .31
Borrowings:
Short-term borrowings 7,487 27 .47 401,305 904 .31
Long-term borrowings   1,804,144   19,646 1.45   2,593,917   55,720 2.86
Total borrowings   1,811,631   19,673 1.45   2,995,222   56,624 2.52
Total interest-bearing liabilities   13,431,047   47,849 .48   13,597,560   86,640 .85
Total deposits and borrowings   15,970,365   47,849 .40   15,954,980   86,640 .72
Other liabilities   421,222   411,114
Total liabilities   16,391,587   16,366,094

Total TCF Financial Corp. stockholders' equity
1,882,363 1,714,238
Non-controlling interest in subsidiaries   17,577   15,411
Total equity   1,899,940   1,729,649
Total liabilities and equity $ 18,291,527 $ 18,095,743
Net interest income and margin $ 602,996 4.69 $ 580,896 4.61
 
(1) Annualized.
(2) Interest and yields are presented on a fully tax equivalent basis.
(3) Average balances and yields of securities available for sale are based upon historical amortized cost and exclude equity securities.
(4) Average balances of loans and leases include non-accrual loans and leases, and are presented net of unearned income.
(5) Includes operating leases.
 
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND FINANCIAL HIGHLIGHTS
(Dollars in thousands, except per-share data)
(Unaudited)
           
Three Months Ended
Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30,
2013 2013 2013 2012 2012
Interest income:
Loans and leases $ 203,879 $ 206,675 $ 204,905 $ 210,490 $ 210,140
Securities available for sale 4,448 4,637 4,795 4,615 5,607
Investments and other   7,126     6,296     5,850     3,922     4,105
Total interest income   215,453     217,608     215,550     219,027     219,852
Interest expense:
Deposits 9,644 8,851 9,681 10,972 10,757
Borrowings   6,182     6,713     6,778     6,992     8,536
Total interest expense   15,826     15,564     16,459     17,964     19,293
Net interest income 199,627 202,044 199,091 201,063 200,559
Provision for credit losses   24,602     32,591     38,383     48,520     96,275

Net interest income after provision for credit losses
  175,025     169,453     160,708     152,543     104,284
Non-interest income:
Fees and service charges 42,457 41,572 39,323 44,262 43,745
Card revenue 13,167 13,270 12,417 12,974 12,927
ATM revenue   5,941     5,828     5,505     5,584     6,122
Subtotal 61,565 60,670 57,245 62,820 62,794
Leasing and equipment finance 29,079 22,874 16,460 26,149 20,498
Gains on sales of auto loans 7,140 8,135 7,146 6,869 7,486
Gains on sales of consumer real estate loans 4,152 4,069 8,126 854 4,559
Other   4,304     4,035     3,726     3,973     3,688
Fees and other revenue 106,240 99,783 92,703 100,665 99,025
Gains on securities, net   (80 )   -     -     (528 )   13,033
Total non-interest income   106,160     99,783     92,703     100,137     112,058
Non-interest expense:
Compensation and employee benefits 110,833 105,537 104,229 101,678 98,409
Occupancy and equipment 33,253 33,062 32,875 32,809 33,006
FDIC insurance 8,102 8,362 7,710 8,671 6,899
Operating lease depreciation 6,706 6,150 5,635 5,905 6,325
Advertising and marketing 4,593 5,532 5,732 4,303 4,248
Deposit account premiums 664 600 602 523 485
Other   43,675     41,946     37,939     53,472     36,173
Subtotal 207,826 201,189 194,722 207,361 185,545
Loss on termination of debt 55 - - - -
Foreclosed real estate and repossessed assets, net 4,162 7,555 10,167 7,582 10,670
Other credit costs, net   189     (228 )   (837 )   (894 )   593
Total non-interest expense   212,232     208,516     204,052     214,049     196,808
Income before income tax expense 68,953 60,720 49,359 38,631 19,534
Income tax expense   24,551     19,444     17,559     10,540     6,304
Income after income tax expense 44,402 41,276 31,800 28,091 13,230
Income attributable to non-controlling interest   1,607     2,372     1,826     1,306     1,536
Net income attributable to TCF Financial Corporation   42,795     38,904     29,974     26,785     11,694
Preferred stock dividends   4,847     4,847     4,524     3,234     2,372
Net income available to common stockholders $ 37,948   $ 34,057   $ 25,450   $ 23,551   $ 9,322
 
Net income per common share:
Basic $ .24 $ .21 $ .16 $ .15 $ .06
Diluted .23 .21 .16 .15 .06
 
Dividends declared per common share $ .05 $ .05 $ .05 $ .05 $ .05
 
Financial Highlights:
Pre-tax pre-provision profit (1) $ 93,555 $ 93,311 $ 87,742 $ 87,151 $ 115,809
Return on average assets (2) .97 % .90 % .70 % .63 % .30 %
Return on average common equity (2) 9.28 8.39 6.36 5.93 2.36
Net interest margin (2) 4.62 4.72 4.72 4.79 4.85
 
(1) Pre-tax pre-provision profit (''PTPP'') is calculated as total revenues less non-interest expense.
(2) Annualized.
 
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED QUARTERLY AVERAGE BALANCE SHEETS
(In thousands)
(Unaudited)
           
Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30,
2013 2013 2013 2012 2012
ASSETS
Cash and due from banks $ 1,031,785 $ 871,288 $ 945,928 $ 777,995 $ 628,697
Investments 107,393 120,427 122,014 122,970 123,223
U.S. Government sponsored entities:
Mortgage-backed securities 642,322 655,795 676,296 696,506 701,155
U.S. Treasury securities - 494 900 - -
Other securities   2,675     2,575     2,400     2,150     2,224  
Total securities available for sale 644,997 658,864 679,596 698,656 703,379
Loans and leases held for sale 156,593 116,390 154,766 53,140 80,549
Loans and leases:
Consumer real estate:
Fixed-rate 3,678,665 3,809,066 3,916,709 4,012,702 4,197,903
Variable-rate   2,723,947     2,621,619     2,639,717     2,650,958     2,531,351  
Total consumer real estate 6,402,612 6,430,685 6,556,426 6,663,660 6,729,254
Commercial:
Fixed- and adjustable-rate 2,284,318 2,392,315 2,478,079 2,614,824 2,682,193
Variable-rate   998,562     944,091     867,701     837,944     855,918  
Total commercial 3,282,880 3,336,406 3,345,780 3,452,768 3,538,111
Leasing and equipment finance 3,261,638 3,236,799 3,199,499 3,184,540 3,164,592
Inventory finance 1,637,538 1,875,810 1,686,364 1,570,829 1,440,298
Auto finance 973,418 823,102 670,096 504,565 367,271
Other   12,299     13,060     13,641     14,704     16,280  
Total loans and leases   15,570,385     15,715,862     15,471,806     15,391,066     15,255,806  
Allowance for loan and lease losses   (263,228 )   (264,403 )   (265,392 )   (269,578 )   (264,626 )
Net loans and leases 15,307,157 15,451,459 15,206,414 15,121,488 14,991,180
Premises and equipment, net 439,307 440,383 440,437 442,287 442,456
Goodwill 225,640 225,640 225,640 225,640 225,640
Other assets   389,728     448,647     469,757     506,212     521,397  
Total assets $ 18,302,600   $ 18,333,098   $ 18,244,552   $ 17,948,388   $ 17,716,521  
 
LIABILITIES AND EQUITY
Non-interest-bearing deposits:
Retail $ 1,435,958 $ 1,476,173 $ 1,426,314 $ 1,294,027 $ 1,275,722
Small business 777,538 752,395 744,168 775,334 746,511
Commercial and custodial   347,971     326,773     329,992     329,919     324,739  
Total non-interest bearing deposits 2,561,467 2,555,341 2,500,474 2,399,280 2,346,972
Interest-bearing deposits:
Checking 2,292,133 2,351,652 2,308,263 2,248,481 2,255,561
Savings 6,238,462 6,059,640 6,090,427 6,083,168 6,153,079
Money market   822,094     791,859     815,374     819,596     848,899  

Subtotal
9,352,689 9,203,151 9,214,064 9,151,245 9,257,539
Certificates of deposit   2,401,811     2,360,881     2,323,267     2,206,173     1,953,208  
Total interest-bearing deposits   11,754,500     11,564,032     11,537,331     11,357,418     11,210,747  
Total deposits   14,315,967     14,119,373     14,037,805     13,756,698     13,557,719  
Borrowings:
Short-term borrowings 6,545 7,314 8,631 47,715 65,531
Long-term borrowings   1,609,211     1,879,576     1,927,139     1,928,507     1,985,094  
Total borrowings 1,615,756 1,886,890 1,935,770 1,976,222 2,050,625
Accrued expenses and other liabilities   455,911     420,398     390,825     434,471     343,336  
Total liabilities   16,387,634     16,426,661     16,364,400     16,167,391     15,951,680  
Equity:
Preferred stock 263,240 263,240 263,240 180,359 166,721
Common stock 1,646 1,642 1,637 1,634 1,631
Additional paid-in capital 767,630 760,256 753,583 749,445 742,598
Retained earnings, subject to certain restrictions 931,979 903,300 880,582 866,895 862,570
Accumulated other comprehensive (loss) income (23,757 ) (758 ) 5,624 13,131 19,321
Treasury stock at cost and other   (41,456 )   (41,542 )   (41,273 )   (43,462 )   (42,890 )
Total TCF Financial Corporation stockholders' equity 1,899,282 1,886,138 1,863,393 1,768,002 1,749,951
Non-controlling interest in subsidiaries   15,684     20,299     16,759     12,995     14,890  
Total equity   1,914,966     1,906,437     1,880,152     1,780,997     1,764,841  
Total liabilities and equity $ 18,302,600   $ 18,333,098   $ 18,244,552   $ 17,948,388   $ 17,716,521  
 
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED QUARTERLY YIELDS AND RATES (1)(2)
(Unaudited)
           
Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30,
2013 2013 2013 2012 2012
ASSETS
 
Investments and other 1.89 % 2.05 % 1.61 % 1.77 % 2.09 %
U.S. Government sponsored entities:
Mortgage-backed securities, fixed-rate 2.79 2.83 2.84 2.64 3.15
U.S. Treasury securities - .07 .07 - -
Other securities 2.04 2.54 2.49 2.52 3.32
Total securities available for sale (3) 2.79 2.83 2.84 2.64 3.15
Loans and leases held for sale 7.51 8.74 6.82 8.00 7.89
Loans and leases:
Consumer real estate:
Fixed-rate 5.73 5.89 5.91 5.95 5.94
Variable-rate 5.10 5.13 5.08 5.07 5.04
Total consumer real estate 5.46 5.58 5.58 5.60 5.60
Commercial:
Fixed- and adjustable-rate 5.29 5.24 5.33 5.60 5.57
Variable-rate 3.62 3.55 3.51 3.55 3.77
Total commercial 4.79 4.76 4.86 5.10 5.14
Leasing and equipment finance 4.94 4.94 5.11 5.24 5.33
Inventory finance 6.01 5.96 6.16 6.11 6.19
Auto finance 4.70 4.97 5.23 5.53 5.97
Other 8.34 8.10 8.19 8.31 7.83
Total loans and leases 5.22 5.29 5.38 5.47 5.50
 
Total interest-earning assets 4.98 5.08 5.11 5.21 5.32
 
LIABILITIES
 
Interest-bearing deposits:
Checking .06 .06 .09 .11 .12
Savings .23 .18 .22 .29 .31
Money market .28 .28 .31 .35 .38

Subtotal
.19 .16 .20 .25 .27
Certificates of deposit .85 .87 .90 .92 .92
Total interest-bearing deposits .33 .31 .34 .38 .38
Total deposits .27 .25 .28 .32 .32
Borrowings:
Short-term borrowings .59 .44 .40 .41 .24
Long-term borrowings 1.53 1.43 1.41 1.44 1.71
Total borrowings 1.52 1.42 1.41 1.41 1.66
 
Total interest-bearing liabilities .47 .46 .49 .54 .58
 
Net interest margin 4.62 4.72 4.72 4.79 4.85
 
(1) Annualized.
(2) Yields are presented on a fully tax equivalent basis.
(3) Average yields of securities available for sale are based upon the historical amortized cost and excludes equity securities.
 
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (1)
(Dollars in thousands)
(Unaudited)
    At Sep. 30,   At Dec. 31,
  2013   2012
Computation of tangible realized common equity to tangible assets:
Total equity $ 1,941,243 $ 1,876,643
Less: Non-controlling interest in subsidiaries   13,278     13,270
Total TCF Financial Corporation stockholders’ equity 1,927,965 1,863,373
Less:
Preferred stock 263,240 263,240
Goodwill 225,640 225,640
Other intangibles 6,829 8,674
Accumulated other comprehensive (loss) income   (17,598 )   12,443
Tangible realized common equity $ 1,449,854   $ 1,353,376
 
Total assets $ 18,370,088 $ 18,225,917
Less:
Goodwill 225,640 225,640
Other intangibles   6,829     8,674
Tangible assets $ 18,137,619   $ 17,991,603
 
Tangible realized common equity to tangible assets 7.99 % 7.52 %
 
At Sep. 30, At Dec. 31,
  2013   2012
Computation of tier 1 risk-based capital ratio:
Total tier 1 capital $ 1,729,992 $ 1,633,336
Total risk-weighted assets 15,224,820 14,733,203
Total tier 1 risk-based capital ratio 11.36 % 11.09 %
 
Computation of tier 1 common capital ratio:
Total tier 1 capital $ 1,729,992 $ 1,633,336
Less:
Preferred stock 263,240 263,240
Qualifying non-controlling interest in subsidiaries   13,278     13,270
Total tier 1 common capital $ 1,453,474   $ 1,356,826
 
Total tier 1 common capital ratio 9.55 % 9.21 %
 

(1) When evaluating capital adequacy and utilization, management considers financial measures such as Tangible Realized Common Equity to Tangible Assets and the Tier 1 Common Capital Ratio. These measures are non-GAAP financial measures and are viewed by management as useful indicators of capital levels available to withstand unexpected market or economic conditions, and also provide investors, regulators, and other users with information to be viewed in relation to other banking institutions.

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