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

TCF Financial Corporation (NYSE:TCB):

2013 HIGHLIGHTS
  • Net interest margin of 4.68 percent, up 3 basis points from 2012
  • Core revenue(1) of $1.2 billion, up 3.2 percent from 2012
  • Provision for credit losses of $118.4 million, down 52.2 percent from 2012
  • Non-accrual loans and leases of $277 million, down 27 percent from 2012
  • Loan and lease originations increased $1.3 billion, or 12.4 percent, from 2012
  • Average deposits increased $1 billion, or 8 percent, from 2012

FOURTH QUARTER HIGHLIGHTS
  • Earnings per share of 22 cents, up 7 cents from the fourth quarter of 2012
  • Core revenue(1) of $306.2 million, up 1.5 percent from the fourth quarter of 2012
  • Provision for credit losses of $22.8 million, down 53 percent from the fourth quarter of 2012
  • Loan and lease originations increased $213.4 million, or 7.4 percent, from the fourth quarter of 2012
  • Average deposits increased $603.5 million, or 4.4 percent, from the fourth quarter of 2012
  • Announced that the OCC has lifted the regulatory order related to TCF’s BSA compliance program
  • Branch realignment after-tax charge of $5.6 million, or 3 cents per share, related to 46 branches to be consolidated in the first quarter of 2014
                                             
Summary of Financial Results                                           Table 1
(Dollars in thousands, except per-share data)     Percent Change
    4Q     3Q     4Q

 

4Q13 vs
  4Q13 vs     YTD     YTD Percent
2013       2013         2012      

3Q13
      4Q12       2013        

2012 (2)
Change
Net income (loss) $ 35,148 $ 37,948 $ 23,551   (7.4 ) %   49.2 % $ 132,603 $ (218,490 )     N.M. %
Net interest income 201,862 199,627 201,063 1.1 .4 802,624 780,019 2.9

Diluted earnings (loss) per common share
.22 .23 .15 (4.3 ) 46.7 .82 (1.37 ) N.M.
 

Financial Ratios (3)

Pre-tax pre-provision return on average assets (4)
1.90 % 2.04 % 1.94 % 1.98 % (.51 ) %
Return on average assets .90 .97 .63 .87 (1.14 )
Return on average common equity 8.39 9.28 5.93 8.12 (13.33 )
Net interest margin 4.67 4.62 4.79 4.68 4.65

Net charge-offs as a percentage of average loans and leases
.76 .71 1.18 .81 1.54
 
N.M. Not Meaningful                                                                      
(1)   Core revenue is calculated as total revenue less gains (losses) on sales of securities of $1 million and $(528) thousand for the three months ended December 31, 2013 and 2012, respectively, and $964 thousand and $102.2 million for the year ended December 31, 2013 and 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.
 

TCF Financial Corporation (“TCF” or the “Company”) (NYSE: TCB) today reported net income of $35.1 million for the fourth quarter of 2013, compared with net income of $23.6 million for the fourth quarter of 2012, and net income of $37.9 million for the third quarter of 2013. Diluted earnings per common share was 22 cents for the fourth quarter of 2013 (inclusive of a net after-tax charge of $5.6 million, or 3 cents per common share, related to the realignment of 46 branches), compared with 15 cents for the fourth quarter of 2012, and 23 cents for the third quarter of 2013.

TCF reported net income of $132.6 million for the year ended December 31, 2013, compared with a net loss of $218.5 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). Diluted earnings per common share was 82 cents for the year ended December 31, 2013, compared with a diluted loss per common share of $1.37 for the same period in 2012 (or earnings per common share of 49 cents when excluding the balance sheet repositioning charge).

Chairman’s Statement

“TCF’s focus in 2013 was to execute on the numerous investments we made in 2012,” said William A. Cooper, Chairman and Chief Executive Officer. “Earnings per share increased 67 percent to 82 cents in 2013 from 49 cents in 2012, excluding the balance sheet repositioning charge, reflecting the positive impact that the balance sheet repositioning had on the organization. Throughout the year, we have been successful on several initiatives as we maintained our strong pre-tax pre-provision return on average assets and significantly improved our overall credit quality. At 4.68 percent, TCF has one of the highest net interest margins in the industry. Loan and lease growth and strong origination volume and diversity continue to be a positive part of the TCF story while significant changes made to the branch system will pave the way for future customer experience enhancements in 2014.

“TCF is a much different looking bank than it was two years ago and we believe its strength and diversity will serve our customers and shareholders well in today’s banking environment. The investments in 2012 and the execution in 2013 have positioned TCF to capitalize on opportunities in 2014 and beyond. I am very excited about what lies ahead.”
       
Revenue
                                                                 
Total Revenue                                                         Table 2  
          Percent Change  
4Q 3Q 4Q 4Q13 vs     4Q13 vs YTD YTD Percent
(Dollars in thousands)       2013       2013         2012       3Q13       4Q12         2013       2012 Change
Net interest income $ 201,862     $ 199,627       $ 201,063   1.1 % .4 % $ 802,624     $ 780,019 2.9 %
Fees and other revenue:
Fees and service charges 43,254 42,457 44,262 1.9 (2.3 ) 166,606 177,953 (6.4 )
Card revenue 13,066 13,167 12,974 (.8 ) .7 51,920 52,638 (1.4 )
ATM revenue   5,382       5,941         5,584   (9.4 ) (3.6 )   22,656       24,181 (6.3 )
Total banking fees 61,702 61,565 62,820 .2 (1.8 ) 241,182 254,772 (5.3 )
Leasing and equipment finance 23,624 29,079 26,149 (18.8 ) (9.7 ) 92,037 92,721 (.7 )
Gains on sales of auto loans 7,278 7,140 6,869 1.9 6.0 29,699 22,101 34.4
Gains on sales of consumer real estate loans 5,345 4,152 854 28.7 N.M. 21,692 5,413 N.M.
Other   6,419       4,304         3,973   49.1 61.6   18,484       13,184 40.2
Total fees and other revenue   104,368       106,240         100,665   (1.8 ) 3.7   403,094       388,191 3.8
 
Subtotal - core revenue 306,230 305,867 301,728 .1 1.5 1,205,718 1,168,210 3.2
Gains (losses) on securities, net   1,044       (80 )       (528 ) N.M. N.M.   964       102,232 (99.1 )
 
Total revenue $ 307,274     $ 305,787       $ 301,200   .5 2.0 $ 1,206,682     $ 1,270,442 (5.0 )
 
Net interest margin (1) 4.67 % 4.62 % 4.79 % 4.68 % 4.65 %

Fees and other revenue as a % of total revenue
33.97 34.74 33.42 33.41 30.56
 
N.M. Not meaningful.
(1) Annualized.                                                                
 

Net Interest Income
  • Net interest income for the fourth quarter of 2013 increased $799 thousand, or .4 percent, compared with the fourth quarter of 2012. The increase was driven by higher average loan and lease balances in the auto finance and inventory finance businesses as well as decreased rates on various deposit products. This increase was partially offset by downward pressure on yields across the lending businesses in this low interest rate environment as well as lower average balances of consumer real estate and commercial fixed-rate loans due to run-off exceeding originations.
  • Net interest income for the fourth quarter of 2013 increased $2.2 million, or 1.1 percent, compared with the third quarter of 2013. The increase was attributable to higher average loan and lease balances in the auto finance and inventory finance businesses as well as decreased rates on various deposit products, partially offset by lower average balances of fixed-rate commercial loans primarily resulting from run-off and the impact of a portfolio loan sale.
  • Net interest margin in the fourth quarter of 2013 was 4.67 percent, compared with 4.79 percent in the fourth quarter of 2012 and 4.62 percent in the third quarter of 2013. The decrease from the fourth quarter of 2012 was primarily due to downward pressure on origination yields in the lending businesses due to the low interest rate environment as well as a shift in commercial real estate from higher yielding fixed-rate loans to lower yielding variable-rate loans due to marketplace demand. The increase from the third quarter of 2013 was primarily due to cash balances held at the Federal Reserve in the previous quarter being utilized to fund asset growth and a decline in overall funding costs.

Non-interest Income
  • Fees and service charges in the fourth quarter of 2013 were $43.3 million, down $1 million, or 2.3 percent, from the fourth quarter of 2012. The decrease from the fourth quarter of 2012 was due to lower transaction activity and higher average checking account balances per customer, partially offset by a larger account base.
  • Leasing and equipment finance revenue was $23.6 million during the fourth quarter of 2013, down $2.5 million, or 9.7 percent, from the fourth quarter of 2012 and down $5.5 million, or 18.8 percent, from the third quarter of 2013. These decreases were primarily due to lower sales-type lease revenue in the leasing and equipment finance portfolio as a result of customer-driven events.
  • TCF sold $236 million, $159.6 million and $182.5 million of auto loans during the fourth quarters of 2013 and 2012, and the third quarter of 2013, respectively, resulting in gains in the same respective periods.
  • TCF sold $202.3 million, $25.7 million and $142.4 million of consumer real estate loans during the fourth quarters of 2013 and 2012, and the third 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) 4Q 3Q 4Q 4Q13 vs 4Q13 vs YTD YTD Percent
  2013       2013       2012     3Q13       4Q12         2013       2012     Change    
Period-End:
Consumer real estate $ 6,339,326 $ 6,415,632 $ 6,674,501 (1.2 ) % (5.0 ) %
Commercial 3,148,352 3,137,088 3,405,235 .4 (7.5 )
Leasing and equipment finance 3,428,755 3,286,506 3,198,017 4.3 7.2
Inventory finance 1,664,377 1,716,542 1,567,214 (3.0 ) 6.2
Auto finance 1,239,386 1,069,053 552,833 15.9 124.2
Other   26,743       26,827       27,924 (.3 ) (4.2 )
Total $ 15,846,939     $ 15,651,648     $ 15,425,724 1.2 2.7
 
Average:
Consumer real estate $ 6,412,182 $ 6,402,612 $ 6,663,660 .1 % (3.8 ) % $ 6,449,950 $ 6,757,512 (4.6 ) %
Commercial 3,088,524 3,282,880 3,452,768 (5.9 ) (10.5 ) 3,262,746 3,485,218 (6.4 )
Leasing and equipment finance 3,342,182 3,261,638 3,184,540 2.5 5.0 3,260,425 3,155,946 3.3
Inventory finance 1,734,286 1,637,538 1,570,829 5.9 10.4 1,723,253 1,434,643 20.1
Auto finance 1,157,586 973,418 504,565 18.9 129.4 907,571 296,083 N.M.
Other   13,369       12,299       14,704 8.7 (9.1 )   13,088       16,549 (20.9 )
Total $ 15,748,129     $ 15,570,385     $ 15,391,066 1.1 2.3 $ 15,617,033     $ 15,145,951 3.1
N.M. Not meaningful.  
 
  • Loans and leases were $15.8 billion at December 31, 2013, an increase of $421.2 million, or 2.7 percent, compared with December 31, 2012. Average loans and leases were $15.7 billion for the fourth quarter of 2013, an increase of $357.1 million, or 2.3 percent, compared with the fourth 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 further penetrates existing territories, as well as an increase in both the leasing and equipment finance and inventory finance portfolios. These increases were partially offset by decreases in commercial loans, primarily due to run-off exceeding new originations, as well as decreases in consumer real estate loans driven by run-off in the first mortgage real estate business and ongoing loan sales.
  • Loan and lease originations were $3.1 billion for the fourth quarter of 2013, an increase of $213.4 million, or 7.4 percent, compared with the fourth quarter of 2012. This increase was due to the continued growth within auto finance, as well as an increase in leasing and equipment finance originations as a result of an improving economic environment and customer-driven events.

Credit Quality

(Table 4 - Credit Trends: http://www.businesswire.com/cgi-bin/mmg.cgi?eid=50791368&lang=en)
  • Non-accrual loans and leases were $277 million at December 31, 2013, a decrease of $102.4 million, or 27 percent, from December 31, 2012. The decrease from December 31, 2012 was primarily due to continued efforts to actively work out problem loans in the commercial portfolio. The decrease was further driven by fewer non-accrual consumer real estate loans as a result of improved credit quality, and the sale of $40.5 million of non-accrual loans during the second quarter of 2013. The reduction was partially offset by $48.6 million of delinquent loans entering non-accrual status due to a change in the non-accrual policy for consumer real estate loans during the third quarter of 2013.
  • Other real estate owned was $68.9 million at December 31, 2013, a decrease of $28.1 million from December 31, 2012. The decrease was primarily due to a portfolio sale of 184 consumer properties during the first quarter of 2013 and continued efforts to actively work out problem assets.
  • The over 60-day delinquency rate, excluding acquired portfolios and non-accrual loans and leases, at December 31, 2013 was .19 percent, down from .25 percent at September 30, 2013 and .64 percent at December 31, 2012. The decrease from September 30, 2013 was primarily driven by loans in the commercial portfolio which were previously delinquent becoming current during the quarter. The decrease from December 31, 2012 was primarily a result of reduced over 60-day delinquencies in the consumer real estate portfolio due to a change in the non-accrual policy for consumer real estate loans during the third quarter of 2013.
  • Net charge-offs were $30.1 million for the fourth quarter of 2013, an increase of $2.5 million from the third quarter of 2013 and a decrease of $15.4 million from the fourth quarter of 2012. The increase from September 30, 2013 was primarily driven by a charge-off on one large commercial loan reserved for in a previous quarter. The decrease from December 31, 2012 was primarily due to improved credit quality in the consumer real estate portfolio as home values improve and incident rates of default decline. Consumer real estate net charge-offs were down for the fifth consecutive quarter.
  • Provision for credit losses was $22.8 million for the fourth quarter of 2013, a decrease of $1.8 million from the third quarter of 2013 and a decrease of $25.7 million from the fourth quarter of 2012. The decrease from the third quarter of 2013 was due to reduced reserve requirements in the commercial and consumer real estate portfolios as credit quality in those portfolios improved. The decrease from the fourth quarter of 2012 was primarily due to decreased net charge-offs in the consumer real estate portfolio resulting from improved home values and a reduction in incidents of default.
                               
Deposits
                                                                 
Average Deposits                                                           Table 5  
Percent Change
(Dollars in thousands) 4Q 3Q 4Q 4Q13 vs 4Q13 vs YTD YTD Percent
2013     2013     2012     3Q13       4Q12       2013     2012     Change  
 
Checking $ 4,904,125 $ 4,833,196 $ 4,627,627 1.5 % 6.0 % $ 4,851,952 $ 4,602,881 5.4 %
Savings 6,217,662 6,258,866 6,103,302 (.7 ) 1.9 6,168,768 6,059,237 1.8
Money market   845,562         822,094         819,596   2.9 3.2   818,814         770,104   6.3
Subtotal 11,967,349 11,914,156 11,550,525 .4 3.6 11,839,534 11,432,222 3.6
Certificates of deposit   2,392,896         2,401,811         2,206,173   (.4 ) 8.5   2,369,992         1,727,859   37.2
Total average deposits $ 14,360,245       $ 14,315,967       $ 13,756,698   .3 4.4 $ 14,209,526       $ 13,160,081   8.0
 
Average interest rate on deposits (1) .23 % .27 % .32 % .26 % .31 %
 
(1) Annualized.                                                                
 
  • Total average deposits for the fourth quarter of 2013 increased $603.5 million, or 4.4 percent, from the fourth quarter of 2012 and increased $44.3 million, or .3 percent, from the third quarter of 2013. The increase from the fourth quarter of 2012 was primarily due to checking account growth, as well as special campaigns for certificates of deposit. The increase from the third quarter of 2013 was primarily due to higher average checking account balances per customer as well as higher average money market balances, partially offset by lower average savings balances.
  • The average interest rate on deposits in the fourth quarter of 2013 was .23 percent, down nine basis points from the fourth quarter of 2012 and down four basis points from the third quarter of 2013. The decreases from both periods were primarily due to reduced average interest rates on various savings accounts and certificates of deposit.
                               
Non-interest Expense
                                                                   
Non-interest Expense                                                             Table 6    
Percent Change
(Dollars in thousands) 4Q 3Q 4Q 4Q13 vs 4Q13 vs YTD YTD Percent
  2013       2013       2012     3Q13       4Q12         2013       2012     Change    

Compensation and employee benefits
$ 108,589 $ 110,833 $ 101,678 (2.0 ) % 6.8 % $ 429,188 $ 393,841 9.0 %
Occupancy and equipment 35,504 33,253 32,809 6.8 8.2 134,694 130,792 3.0
FDIC insurance 7,892 8,102 8,671 (2.6 ) (9.0 ) 32,066 30,425 5.4
Operating lease depreciation 6,009 6,706 5,905 (10.4 ) 1.8 24,500 25,378 (3.5 )
Advertising and marketing 3,275 4,593 4,303 (28.7 ) (23.9 ) 19,132 16,572 15.4
Deposit account premiums 479 664 523 (27.9 ) (8.4 ) 2,345 8,669 (72.9 )
Other   44,162         43,730       53,472   1.0 (17.4 )   167,777         163,897 2.4
Core operating expenses 205,910 207,881 207,361 (.9 ) (.7 ) 809,702 769,574 5.2
Loss on termination of debt - - - - - - 550,735 (100.0 )
Branch realignment 8,869 - - N.M. N.M. 8,869 - N.M.

Foreclosed real estate and repossessed assets, net
6,066 4,162 7,582 45.7 (20.0 ) 27,950 41,358 (32.4 )
Other credit costs, net   (376 )       189       (894 ) N.M. 57.9   (1,252 )       887 N.M.
 
Total non-interest expense $ 220,469       $ 212,232     $ 214,049   3.9 3.0 $ 845,269       $ 1,362,554 (38.0 )
 
N.M. Not meaningful.                                                                  
 
  • Compensation and employee benefits expense for the fourth quarter of 2013 increased $6.9 million, or 6.8 percent, from the fourth quarter of 2012. The increase from the fourth quarter of 2012 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 $1.5 million, or 20 percent, from the fourth quarter of 2012 and increased $1.9 million, or 45.7 percent, from the third quarter of 2013. The decrease from the fourth quarter of 2012 was driven by reduced expenses related to fewer foreclosed consumer properties and a reduction in write-downs in balances of existing foreclosed real estate properties as a result of improved real estate property values. The increase from the third quarter of 2013 was primarily due to continued efforts to actively work out problem commercial loans.
  • TCF executed a realignment of its retail banking system to support its strategic initiatives, which resulted in a pre-tax charge of $8.9 million in the fourth quarter of 2013. The consolidation of 46 branches in Illinois and Minnesota (45 in-store branches and 1 traditional branch) will occur near the end of the first quarter of 2014. The ongoing benefit of this branch realignment is expected to exceed the pre-tax charges, together with the estimated financial impact of related ongoing account attrition, over a period of approximately one year.
       
Capital
                             
Capital Information                         Table 7  
At period end
(Dollars in thousands, except per-share data) 4Q 4Q
2013 2012
Total equity $ 1,964,759 $ 1,876,643
Book value per common share $ 10.23 $ 9.79
Tangible realized common equity to tangible assets (1) 8.18 % 7.52 %
 
Risk-based capital (2)
Tier 1 $ 1,763,682 11.41 % $ 1,633,336 11.09 %
Total 2,107,981 13.64 2,007,835 13.63
 
Tier 1 leverage capital $ 1,763,682 9.71 % $ 1,633,336 9.21 %
 
Tier 1 common capital (3) $ 1,488,651 9.63 % $ 1,356,826 9.21 %

(1)
 

Excludes the impact of preferred shares, 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 January 25, 2014, the Board of Directors of TCF declared a regular quarterly cash dividend of 5 cents per common share, payable on March 3, 2014, to stockholders of record at the close of business on February 14, 2014. TCF also declared dividends on the 7.50% Series A and 6.45% Series B Non-Cumulative Perpetual Preferred Stock, both payable on March 3, 2014, to stockholders of record at the close of business on February 14, 2014.
  • All capital ratios improved during the period, with retained earnings less dividends supporting the asset growth of the organization.

Webcast Information

A live webcast of TCF’s conference call to discuss the 2013 year-end and fourth quarter earnings will be hosted at TCF’s website, http://ir.tcfbank.com, on January 29, 2014 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. As of December 31, 2013, TCF had $18.4 billion in total assets and nearly 430 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 45 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 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; application of bankruptcy laws which result in the loss of all or part of TCF’s security interest due to collateral value declines; deficiencies in TCF’s regulatory compliance programs, which may result in regulatory enforcement actions, including monetary penalties; increased health care costs resulting from Federal health care reform legislation; adverse regulatory examinations and resulting 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 (including the loss of account information by, or theft from, third parties such as merchants), 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 December 31, Change
2013 2012 $ %
Interest income:
Loans and leases $ 204,042 $ 210,490 $ (6,448 ) (3.1 ) %
Securities available for sale 4,194 4,615 (421 ) (9.1 )
Investments and other   7,693     3,922     3,771   96.1
Total interest income   215,929     219,027     (3,098 ) (1.4 )
Interest expense:
Deposits 8,428 10,972 (2,544 ) (23.2 )
Borrowings   5,639     6,992     (1,353 ) (19.4 )
Total interest expense   14,067     17,964     (3,897 ) (21.7 )
Net interest income 201,862 201,063 799 .4
Provision for credit losses   22,792     48,520     (25,728 ) (53.0 )
Net interest income after provision for credit losses   179,070     152,543     26,527   17.4
Non-interest income:
Fees and service charges 43,254 44,262 (1,008 ) (2.3 )
Card revenue 13,066 12,974 92 .7
ATM revenue   5,382     5,584     (202 ) (3.6 )
Subtotal 61,702 62,820 (1,118 ) (1.8 )
Leasing and equipment finance 23,624 26,149 (2,525 ) (9.7 )
Gains on sales of auto loans 7,278 6,869 409 6.0
Gains on sales of consumer real estate loans 5,345 854 4,491 N.M.
Other   6,419     3,973     2,446   61.6
Fees and other revenue 104,368 100,665 3,703 3.7
Gains (losses) on securities, net   1,044     (528 )   1,572   N.M.
Total non-interest income   105,412     100,137     5,275   5.3
Non-interest expense:
Compensation and employee benefits 108,589 101,678 6,911 6.8
Occupancy and equipment 35,504 32,809 2,695 8.2
FDIC insurance 7,892 8,671 (779 ) (9.0 )
Operating lease depreciation 6,009 5,905 104 1.8
Advertising and marketing 3,275 4,303 (1,028 ) (23.9 )
Deposit account premiums 479 523 (44 ) (8.4 )
Other   44,162     53,472     (9,310 ) (17.4 )
Subtotal 205,910 207,361 (1,451 ) (.7 )
Branch realignment 8,869 - 8,869 N.M.
Foreclosed real estate and repossessed assets, net 6,066 7,582 (1,516 ) (20.0 )
Other credit costs, net   (376 )   (894 )   518   57.9
Total non-interest expense   220,469     214,049     6,420   3.0
Income before income tax expense 64,013 38,631 25,382 65.7
Income tax expense   22,791     10,540     12,251   116.2
Income after income tax expense 41,222 28,091 13,131 46.7
Income attributable to non-controlling interest   1,227     1,306     (79 ) (6.0 )
Net income attributable to TCF Financial Corporation   39,995     26,785     13,210   49.3
Preferred stock dividends   4,847     3,234     1,613   49.9
Net income available to common stockholders $ 35,148   $ 23,551   $ 11,597   49.2
 
Net income per common share:
Basic $ .22 $ .15 $ .07 46.7

%
Diluted .22 .15 .07 46.7

 
 
Dividends declared per common share $ .05 $ .05 $ - -

%
 

Average common and common equivalent shares outstanding (in thousands):
Basic 161,544 159,914 1,630 1.0

%
Diluted 162,625 160,500 2,125 1.3
 
N.M. Not meaningful.
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per-share data)
(Unaudited)
               
Year Ended December 31, Change
2013 2012 $ %
Interest income:
Loans and leases $ 819,501 $ 835,380 $ (15,879 ) (1.9 ) %
Securities available for sale 18,074 35,150 (17,076 ) (48.6 )
Investments and other   26,965     14,093     12,872   91.3
Total interest income   864,540     884,623     (20,083 ) (2.3 )
Interest expense:
Deposits 36,604 40,987 (4,383 ) (10.7 )
Borrowings   25,312     63,617     (38,305 ) (60.2 )
Total interest expense   61,916     104,604     (42,688 ) (40.8 )
Net interest income 802,624 780,019 22,605 2.9
Provision for credit losses   118,368     247,443     (129,075 ) (52.2 )
Net interest income after provision for credit losses   684,256     532,576     151,680   28.5
Non-interest income:
Fees and service charges 166,606 177,953 (11,347 ) (6.4 )
Card revenue 51,920 52,638 (718 ) (1.4 )
ATM revenue   22,656     24,181     (1,525 ) (6.3 )
Subtotal 241,182 254,772 (13,590 ) (5.3 )
Leasing and equipment finance 92,037 92,721 (684 ) (.7 )
Gains on sales of auto loans 29,699 22,101 7,598 34.4
Gains on sales of consumer real estate loans 21,692 5,413 16,279 N.M.
Other   18,484     13,184     5,300   40.2
Fees and other revenue 403,094 388,191 14,903 3.8
Gains on securities, net   964     102,232     (101,268 ) (99.1 )
Total non-interest income   404,058     490,423     (86,365 ) (17.6 )
Non-interest expense:
Compensation and employee benefits 429,188 393,841 35,347 9.0
Occupancy and equipment 134,694 130,792 3,902 3.0
FDIC insurance 32,066 30,425 1,641 5.4
Operating lease depreciation 24,500 25,378 (878 ) (3.5 )
Advertising and marketing 19,132 16,572 2,560 15.4
Deposit account premiums 2,345 8,669 (6,324 ) (72.9 )
Other   167,777     163,897     3,880   2.4
Subtotal 809,702 769,574 40,128 5.2
Loss on termination of debt - 550,735 (550,735 ) (100.0 )
Branch realignment 8,869 - 8,869 N.M.
Foreclosed real estate and repossessed assets, net 27,950 41,358 (13,408 ) (32.4 )
Other credit costs, net   (1,252 )   887     (2,139 ) N.M.
Total non-interest expense   845,269     1,362,554     (517,285 ) (38.0 )
Income (loss) before income tax expense (benefit) 243,045 (339,555 ) 582,600 N.M.
Income tax expense (benefit)   84,345     (132,858 )   217,203   N.M.
Income (loss) after income tax expense (benefit) 158,700 (206,697 ) 365,397 N.M.
Income attributable to non-controlling interest   7,032     6,187     845   13.7
Net income (loss) attributable to TCF Financial Corporation   151,668     (212,884 )   364,552   N.M.
Preferred stock dividends   19,065     5,606     13,459   N.M.
Net income (loss) available to common stockholders $ 132,603   $ (218,490 ) $ 351,093   N.M.
 
Net income (loss) per common share:
Basic $ .82 $ (1.37 ) $ 2.19 N.M.
Diluted .82 (1.37 ) 2.19 N.M.
 
Dividends declared per common share $ .20 $ .20 $ - -

%
 

Average common and common equivalent shares outstanding (in thousands):
Basic 161,016 159,269 1,747 1.1

%
Diluted 161,927 159,269 2,658 1.7
 
N.M. Not meaningful.
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
(Unaudited)
               
Three Months Ended December 31, Change
2013   2012   $   %
Net income attributable to TCF Financial Corporation $ 39,995   $ 26,785   $ 13,210   49.3 %
Other comprehensive loss:

Reclassification adjustment for securities gains included in net income
(860 ) - (860 ) N.M.

Unrealized holding losses arising during the period on securities available for sale
(13,778 ) (8,589 ) (5,189 ) (60.4 )
Foreign currency hedge 861 136 725 N.M.
Foreign currency translation adjustment (999 ) (170 ) (829 ) N.M.

Recognized postretirement prior service cost and transition obligation
(11 ) 144 (155 ) N.M.
Income tax benefit   5,172     2,855     2,317   81.2
Total other comprehensive loss   (9,615 )   (5,624 )   (3,991 ) (71.0 )
Comprehensive income $ 30,380   $ 21,161   $ 9,219   43.6
 
 
Year Ended December 31, Change
2013 2012 $ %
Net income (loss) attributable to TCF Financial Corporation $ 151,668   $ (212,884 ) $ 364,552   N.M. %
Other comprehensive loss:

Reclassification adjustment for securities gains included in net income
(860 ) (89,879 ) 89,019 99.0

Unrealized holding (losses) gains arising during the period on securities available for sale
(61,177 ) 19,794 (80,971 ) N.M.
Foreign currency hedge 1,625 (630 ) 2,255 N.M.
Foreign currency translation adjustment (1,979 ) 531 (2,510 ) N.M.

Recognized postretirement prior service cost and transition obligation
(46 ) 123 (169 ) N.M.
Income tax benefit   22,781     25,678     (2,897 ) (11.3 )
Total other comprehensive loss   (39,656 )   (44,383 )   4,727   10.7
Comprehensive income (loss) $ 112,012   $ (257,267 ) $ 369,279   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 Dec. 31, Change
2013 2012 $ %
ASSETS
 
Cash and due from banks $ 915,076 $ 1,100,347 $ (185,271 ) (16.8 ) %
Investments 114,238 120,867 (6,629 ) (5.5 )
Securities available for sale 551,064 712,091 (161,027 ) (22.6 )
Loans and leases held for sale 79,768 10,289 69,479 N.M.
Loans and leases:
Consumer real estate 6,339,326 6,674,501 (335,175 ) (5.0 )
Commercial 3,148,352 3,405,235 (256,883 ) (7.5 )
Leasing and equipment finance 3,428,755 3,198,017 230,738 7.2
Inventory finance 1,664,377 1,567,214 97,163 6.2
Auto finance 1,239,386 552,833 686,553 124.2
Other loans and leases   26,743     27,924     (1,181 ) (4.2 )
Total loans and leases 15,846,939 15,425,724 421,215 2.7
Allowance for loan and lease losses   (252,230 )   (267,128 )   14,898   5.6
Net loans and leases 15,594,709 15,158,596 436,113 2.9
Premises and equipment, net 437,602 440,466 (2,864 ) (.7 )
Goodwill 225,640 225,640 - -
Other assets   461,743     457,621     4,122   .9
Total assets $ 18,379,840   $ 18,225,917   $ 153,923   .8
 
LIABILITIES AND EQUITY
 
Deposits:
Checking $ 4,980,451 $ 4,834,632 $ 145,819 3.0
Savings 6,194,003 6,104,104 89,899 1.5
Money market   831,910     820,553     11,357   1.4
Subtotal 12,006,364 11,759,289 247,075 2.1
Certificates of deposit   2,426,412     2,291,497     134,915   5.9
Total deposits   14,432,776     14,050,786     381,990   2.7
Short-term borrowings 4,918 2,619 2,299 87.8
Long-term borrowings   1,483,325     1,931,196     (447,871 ) (23.2 )
Total borrowings 1,488,243 1,933,815 (445,572 ) (23.0 )
Accrued expenses and other liabilities   494,062     364,673     129,389   35.5
Total liabilities   16,415,081     16,349,274     65,807   .4
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; 165,164,861 and 163,428,763 shares issued, respectively
1,652 1,634 18 1.1
Additional paid-in capital 779,641 750,040 29,601 3.9
Retained earnings, subject to certain restrictions 977,846 877,445 100,401 11.4
Accumulated other comprehensive (loss) income (27,213 ) 12,443 (39,656 ) N.M.
Treasury stock at cost, 42,566 shares, and other   (42,198 )   (41,429 )   (769 ) (1.9 )
Total TCF Financial Corporation stockholders' equity 1,952,968 1,863,373 89,595 4.8
Non-controlling interest in subsidiaries   11,791     13,270     (1,479 ) (11.1 )
Total equity   1,964,759     1,876,643     88,116   4.7
Total liabilities and equity $ 18,379,840   $ 18,225,917   $ 153,923   .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
Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30, Dec. 31,
2013 2013 2013 2013 2012 2013 2012

Delinquency Data - Principal Balances (1)
60 days or more:
Consumer real estate
First mortgage lien $ 20,894 $ 23,576 $ 66,876 $ 66,164 $ 76,020 $ (2,682 ) $ (55,126 )
Junior lien 3,532   3,822   8,022   9,674   13,141   (290 ) (9,609 )
Total consumer real estate 24,426 27,398 74,898 75,838 89,161 (2,972 ) (64,735 )
Commercial 1,430 7,201 1,679 906 2,630 (5,771 ) (1,200 )
Leasing and equipment finance 2,401 2,539 1,840 2,067 2,568 (138 ) (167 )
Inventory finance 50 71 33 156 119 (21 ) (69 )
Auto finance 1,877 1,429 868 563 532 448 1,345
Other 10   -   26   -   31   10   (21 )
Subtotal 30,194 38,638 79,344 79,530 95,041 (8,444 ) (64,847 )
Acquired portfolios 458   334   627   578   982   124   (524 )
Total delinquencies $ 30,652   $ 38,972   $ 79,971   $ 80,108   $ 96,023   $ (8,320 ) $ (65,371 )
 

Delinquency Data - % of Portfolio (1)
60 days or more:
Consumer real estate
First mortgage lien .58 % .64 % 1.74 % 1.67 % 1.88 % (6 ) bps (130 ) bps
Junior lien .14 .15 .34 .43 .55 (1 ) (41 )
Total consumer real estate .40 .44 1.21 1.22 1.38 (4 ) (98 )
Commercial .05 .23 .05 .03 .08 (18 ) (3 )
Leasing and equipment finance .07 .08 .06 .07 .08 (1 ) (1 )
Inventory finance - - - .01 .01 - (1 )
Auto finance .15 .13 .10 .08 .10 2 5
Other .04 - .11 - .12 4 (8 )
Subtotal .19 .25 .52 .53 .64 (6 ) (45 )
Acquired portfolios 1.64 .80 .99 .65 .89 84 75
Total delinquencies .20 .25 .52 .52 .64 (5 ) (44 )
 
(1) Excludes non-accrual loans and leases.
At At At At At Change from
Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30, Dec. 31,
2013 2013 2013 2013 2012 2013 2012

Non-Accrual Loans and Leases
Non-accrual loans and leases:
Consumer real estate
First mortgage lien $ 180,811 $ 170,306 $ 132,586 $ 186,218 $ 199,631 $ 10,505 $ (18,820 )
Junior lien 38,222   35,732   30,744   33,907   35,269   2,490   2,953  
Total consumer real estate 219,033 206,038 163,330 220,125 234,900 12,995 (15,867 )
Commercial 40,539 62,273 102,103 108,505 127,746 (21,734 ) (87,207 )
Leasing and equipment finance 14,041 11,820 11,103 11,695 13,652 2,221 389
Inventory finance 2,529 1,802 1,008 1,480 1,487 727 1,042
Auto finance 470 212 118 106 101 258 369
Other 410   728   809   1,477   1,571   (318 ) (1,161 )
Total non-accrual loans and leases $ 277,022   $ 282,873   $ 278,471   $ 343,388   $ 379,457   $ (5,851 ) $ (102,435 )
 
Non-accrual loans and leases - rollforward
Balance, beginning of period $ 282,873 $ 278,471 $ 343,388 $ 379,457 $ 421,813 $ 4,402 $ (138,940 )
Additions 71,513 93,337 41,549 56,712 88,235 (21,824 ) (16,722 )
Charge-offs (25,195 ) (10,225 ) (12,780 ) (23,773 ) (27,657 ) (14,970 ) 2,462
Transfers to other assets (23,085 ) (23,810 ) (16,014 ) (20,087 ) (17,305 ) 725 (5,780 )
Return to accrual status (13,085 ) (16,218 ) (21,360 ) (34,692 ) (55,261 ) 3,133 42,176
Payments received (13,331 ) (40,319 ) (16,977 ) (15,399 ) (30,832 ) 26,988 17,501
Sales (3,602 ) - (40,461 ) (133 ) - (3,602 ) (3,602 )
Other, net 934   1,637   1,126   1,303   464   (703 ) 470  
Balance, end of period $ 277,022   $ 282,873   $ 278,471   $ 343,388   $ 379,457   $ (5,851 ) $ (102,435 )
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
SUMMARY OF CREDIT QUALITY DATA, CONTINUED
(Dollars in thousands)
(Unaudited)
               
 
 
Change from
Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Dec 31,
2013 2013 2013 2013 2012 2013 2012

Other Real Estate Owned
Other real estate owned (1)
Consumer real estate $ 47,637 $ 48,910 $ 44,759 $ 46,404 $ 69,599 $ (1,273 ) $ (21,962 )
Commercial real estate 21,237   16,669   21,473   25,359   27,379   4,568   (6,142 )
Total other real estate owned $ 68,874   $ 65,579   $ 66,232   $ 71,763   $ 96,978   $ 3,295   $ (28,104 )
 
Other real estate owned - rollforward
Balance, beginning of period $ 65,579 $ 66,232 $ 71,763 $ 96,978 $ 120,426 $ (653 ) $ (54,847 )
Transferred in 21,045 23,339 16,503 20,855 18,444 (2,294 ) 2,601
Sales (15,939 ) (22,683 ) (17,895 ) (40,456 ) (39,528 ) 6,744 23,589
Writedowns (3,496 ) (2,197 ) (4,270 ) (5,294 ) (4,614 ) (1,299 ) 1,118
Other, net 1,685   888   131   (320 ) 2,250   797   (565 )
Balance, end of period $ 68,874   $ 65,579   $ 66,232   $ 71,763   $ 96,978   $ 3,295   $ (28,104 )
 
Ending number of properties owned
Consumer real estate 336 327 246 224 418 9 (82 )
Commercial real estate 18   18   20   18   18   -   -  
Total 354   345   266   242   436   9   (82 )
 
(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 December 31, 2013 At September 30, 2013 At December 31, 2012 Change from
% of % of % of Sep. 30, Dec. 31,
Balance Portfolio Balance Portfolio Balance Portfolio 2013 2012
Consumer real estate $ 176,030 2.78 % $ 177,970 2.77

%

 
$ 182,013 2.73

%

 
1

bps

 
5 bps
Commercial 37,467 1.19 46,638 1.49 51,575 1.51 (30 ) (32 )

Leasing and equipment finance
18,733 .55 18,216 .55 21,037 .66 - (11 )
Inventory finance 8,592 .52 8,547 .50 7,569 .48 2 4
Auto finance 10,623 .86 9,112 .85 4,136 .75 1 11
Other 785 2.94 802 2.99 798 2.86 (5 ) 8

Total
$ 252,230 1.59 $ 261,285 1.67 $ 267,128 1.73 (8 ) (14 )
 

Net Charge-Offs
Change from
Quarter Ended Quarter Ended
Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30, Dec. 31,
2013 2013 2013 2013 2012 2013 2012
Consumer real estate

First mortgage lien
$ 10,545 $ 12,770 $ 15,084 $ 19,907 $ 22,163 $ (2,225 ) $ (11,618 )
Junior lien 5,901 5,474 8,642   10,540 11,757 427   (5,856 )
Total consumer real estate 16,446 18,244 23,726 30,447 33,920 (1,798 ) (17,474 )
Commercial 9,363 6,513 2,449 7,849 8,351 2,850 1,012
Leasing and equipment finance 1,197 658 244 1,210 1,345 539 (148 )
Inventory finance 341 86 (14 ) 355 193 255 148
Auto finance 1,976 1,122 765 836 771 854 1,205
Other 774 993 524   307 940 (219 ) (166 )
Total $ 30,097 $ 27,616 $ 27,694   $ 41,004 $ 45,520 $ 2,481   $ (15,423 )
 

Net Charge-Offs as a Percentage of Average Loans and Leases
Change from
Quarter Ended (1) Quarter Ended
Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30, Dec. 31,
2013 2013 2013 2013 2012 2013 2012
Consumer real estate
First mortgage lien 1.11 % 1.30

%

 
1.48

%

 
1.90

%

 
2.06

%

 
(19 )

bps

 
(95 ) bps
Junior lien .91 .88 1.46 1.78 1.99 3 (108 )
Total consumer real estate 1.03 1.14 1.48 1.86 2.04 (11 ) (101 )
Commercial 1.21 .79 .29 .94 .97 42 24
Leasing and equipment finance .14 .08 .03 .15 .17 6 (3 )
Inventory finance .08 .02 - .08 .05 6 3
Auto finance .68 .46 .37 .50 .61 22 7
Other N.M. N.M. 16.05 9.01 N.M. N.M. N.M.
Total .76 .71 .70 1.06 1.18 5 (42 )
 
(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 December 31,
2013 2012
Average Yields and Average Yields and
Balance Interest Rates (1) (2) Balance Interest Rates (1) (2)
ASSETS:
Investments and other $ 673,750 $ 4,150 2.45 % $ 642,580 $ 2,854 1.77 %
U.S. Government sponsored entities:
Mortgage-backed securities, fixed rate 625,156 4,194 2.68 699,528 4,614 2.64
Other securities   84   - 2.50   115   1 2.52
Total securities available for sale (3)   625,240   4,194 2.68   699,643   4,615 2.64
Loans and leases held for sale 193,164 3,543 7.28 53,140 1,068 8.00
Loans and leases:
Consumer real estate:
Fixed-rate 3,584,072 51,736 5.73 4,012,702 59,968 5.95
Variable-rate   2,828,110   36,578 5.13   2,650,958   33,817 5.07
Total consumer real estate   6,412,182   88,314 5.46   6,663,660   93,785 5.60
Commercial:
Fixed- and adjustable-rate 2,060,455 26,661 5.13 2,614,824 36,776 5.60
Variable-rate   1,028,069   9,572 3.69   837,944   7,475 3.55
Total commercial   3,088,524   36,233 4.65   3,452,768   44,251 5.10
Leasing and equipment finance 3,342,182 40,851 4.89 3,184,540 41,729 5.24
Inventory finance 1,734,286 25,559 5.85 1,570,829 24,124 6.11
Auto finance 1,157,586 13,542 4.64 504,565 7,016 5.53
Other   13,369   263 7.78   14,704   307 8.31
Total loans and leases (4)   15,748,129   204,762 5.17   15,391,066   211,212 5.47
Total interest-earning assets   17,240,283   216,649 4.99   16,786,429   219,749 5.21
Other assets (5)   1,074,655   1,161,959
Total assets $ 18,314,938 $ 17,948,388
LIABILITIES AND EQUITY:
Non-interest bearing deposits:
Retail $ 1,430,998 $ 1,294,027
Small business 812,394 775,334
Commercial and custodial   377,568   329,919
Total non-interest bearing deposits   2,620,960   2,399,280
Interest-bearing deposits:
Checking 2,303,416 261 .05 2,248,481 625 .11
Savings 6,197,411 2,704 .17 6,083,168 4,511 .29
Money market   845,562   626 .29   819,596   716 .35
Subtotal 9,346,389 3,591 .15 9,151,245 5,852 .25
Certificates of deposit   2,392,896   4,837 .80   2,206,173   5,120 .92
Total interest-bearing deposits   11,739,285   8,428 .28   11,357,418   10,972 .38
Total deposits   14,360,245   8,428 .23   13,756,698   10,972 .32
Borrowings:
Short-term borrowings 8,333 19 .96 47,715 49 .41
Long-term borrowings   1,486,189   5,620 1.51   1,928,507   6,943 1.44
Total borrowings   1,494,522   5,639 1.50   1,976,222   6,992 1.41
Total interest-bearing liabilities   13,233,807   14,067 .42   13,333,640   17,964 .54
Total deposits and borrowings   15,854,767   14,067 .35   15,732,920   17,964 .45
Other liabilities   508,253   434,471
Total liabilities   16,363,020   16,167,391
Total TCF Financial Corp. stockholders' equity 1,938,646 1,768,002
Non-controlling interest in subsidiaries   13,272   12,995
Total equity   1,951,918   1,780,997
Total liabilities and equity $ 18,314,938 $ 17,948,388
Net interest income and margin $ 202,582 4.67 $ 201,785 4.79
 
(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)
           
Year Ended December 31,
2013 2012
Average Yields and Average Yields and
Balance Interest Rates (1) (2) Balance Interest Rates (1) (2)
ASSETS:
Investments and other $ 774,917 $ 15,318 1.98 % $ 574,422 $ 10,404 1.81 %
U.S. Government sponsored entities:
Mortgage-backed securities, fixed rate 648,187 18,072 2.79 1,055,868 35,143 3.33
U.S. Treasury securities 345 - .07 - - -
Other securities   98   2 2.38   180   7 3.70
Total securities available for sale (3)   648,630   18,074 2.79   1,056,048   35,150 3.33
Loans and leases held for sale 155,337 11,647 7.50 46,201 3,689 7.98
Loans and leases:
Consumer real estate:
Fixed-rate 3,746,029 217,891 5.82 4,254,039 252,233 5.93
Variable-rate   2,703,921   138,192 5.11   2,503,473   126,158 5.04
Total consumer real estate   6,449,950   356,083 5.52   6,757,512   378,391 5.60
Commercial:
Fixed- and adjustable-rate 2,302,594 120,948 5.25 2,691,004 149,793 5.57
Variable-rate   960,152   34,564 3.60   794,214   30,653 3.86
Total commercial   3,262,746   155,512 4.77   3,485,218   180,446 5.18
Leasing and equipment finance 3,260,425 162,035 4.97 3,155,946 170,991 5.42
Inventory finance 1,723,253 103,844 6.03 1,434,643 88,934 6.20
Auto finance 907,571 43,921 4.84 296,083 17,949 6.06
Other   13,088   1,060 8.10   16,549   1,332 8.05
Total loans and leases (4)   15,617,033   822,455 5.27   15,145,951   838,043 5.53
Total interest-earning assets   17,195,917   867,494 5.04   16,822,622   887,286 5.27
Other assets (5)   1,092,681   1,233,042
Total assets $ 18,288,598 $ 18,055,664
LIABILITIES AND EQUITY:
Non-interest bearing deposits:
Retail $ 1,442,356 $ 1,311,561
Small business 771,827 738,949
Commercial and custodial   345,713   317,432
Total non-interest bearing deposits   2,559,896   2,367,942
Interest-bearing deposits:
Checking 2,313,794 1,485 .06 2,256,237 3,105 .14
Savings 6,147,030 12,437 .20 6,037,939 19,834 .33
Money market   818,814   2,391 .29   770,104   2,859 .37
Subtotal 9,279,638 16,313 .18 9,064,280 25,798 .28
Certificates of deposit   2,369,992   20,291 .86   1,727,859   15,189 .88
Total interest-bearing deposits   11,649,630   36,604 .31   10,792,139   40,987 .38
Total deposits   14,209,526   36,604 .26   13,160,081   40,987 .31
Borrowings:
Short-term borrowings 7,685 46 .60 312,417 937 .30
Long-term borrowings   1,724,002   25,266 1.46   2,426,655   62,680 2.58
Total borrowings   1,731,687   25,312 1.46   2,739,072   63,617 2.32
Total interest-bearing liabilities   13,381,317   61,916 .46   13,531,211   104,604 .77
Total deposits and borrowings   15,941,213   61,916 .39   15,899,153   104,604 .66
Other liabilities   434,763   412,170
Total liabilities   16,375,976   16,311,323
Total TCF Financial Corp. stockholders' equity 1,896,131 1,729,537
Non-controlling interest in subsidiaries   16,491   14,804
Total equity   1,912,622   1,744,341
Total liabilities and equity $ 18,288,598 $ 18,055,664
Net interest income and margin $ 805,578 4.68 $ 782,682 4.65
 
(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
Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31,
2013 2013 2013 2013 2012
Interest income:
Loans and leases $ 204,042 $ 203,879 $ 206,675 $ 204,905 $ 210,490
Securities available for sale 4,194 4,448 4,637 4,795 4,615
Investments and other   7,693     7,126     6,296     5,850     3,922  
Total interest income   215,929     215,453     217,608     215,550     219,027  
Interest expense:
Deposits 8,428 9,644 8,851 9,681 10,972
Borrowings   5,639     6,182     6,713     6,778     6,992  
Total interest expense   14,067     15,826     15,564     16,459     17,964  
Net interest income 201,862 199,627 202,044 199,091 201,063
Provision for credit losses   22,792     24,602     32,591     38,383     48,520  

Net interest income after provision for credit losses
  179,070     175,025     169,453     160,708     152,543  
Non-interest income:
Fees and service charges 43,254 42,457 41,572 39,323 44,262
Card revenue 13,066 13,167 13,270 12,417 12,974
ATM revenue   5,382     5,941     5,828     5,505     5,584  
Subtotal 61,702 61,565 60,670 57,245 62,820
Leasing and equipment finance 23,624 29,079 22,874 16,460 26,149
Gains on sales of auto loans 7,278 7,140 8,135 7,146 6,869
Gains on sales of consumer real estate loans 5,345 4,152 4,069 8,126 854
Other   6,419     4,304     4,035     3,726     3,973  
Fees and other revenue 104,368 106,240 99,783 92,703 100,665
Gains (losses) on securities, net   1,044     (80 )   -     -     (528 )
Total non-interest income   105,412     106,160     99,783     92,703     100,137  
Non-interest expense:
Compensation and employee benefits 108,589 110,833 105,537 104,229 101,678
Occupancy and equipment 35,504 33,253 33,062 32,875 32,809
FDIC insurance 7,892 8,102 8,362 7,710 8,671
Operating lease depreciation 6,009 6,706 6,150 5,635 5,905
Advertising and marketing 3,275 4,593 5,532 5,732 4,303
Deposit account premiums 479 664 600 602 523
Other   44,162     43,730     41,946     37,939     53,472  
Subtotal 205,910 207,881 201,189 194,722 207,361
Branch realignment 8,869 - - - -
Foreclosed real estate and repossessed assets, net 6,066 4,162 7,555 10,167 7,582
Other credit costs, net   (376 )   189     (228 )   (837 )   (894 )
Total non-interest expense   220,469     212,232     208,516     204,052     214,049  
Income before income tax expense 64,013 68,953 60,720 49,359 38,631
Income tax expense   22,791     24,551     19,444     17,559     10,540  
Income after income tax expense 41,222 44,402 41,276 31,800 28,091
Income attributable to non-controlling interest   1,227     1,607     2,372     1,826     1,306  
Net income attributable to TCF Financial Corporation   39,995     42,795     38,904     29,974     26,785  
Preferred stock dividends   4,847     4,847     4,847     4,524     3,234  
Net income available to common stockholders $ 35,148   $ 37,948   $ 34,057   $ 25,450   $ 23,551  
 
Net income per common share:
Basic $ .22 $ .24 $ .21 $ .16 $ .15
Diluted .22 .23 .21 .16 .15
 
Dividends declared per common share $ .05 $ .05 $ .05 $ .05 $ .05
 
Financial highlights:
Pre-tax pre-provision profit(1) $ 86,805 $ 93,555 $ 93,311 $ 87,742 $ 87,151
Return on average assets(2) .90 % .97 % .90 % .70 % .63 %
Return on average common equity(2) 8.39 9.28 8.39 6.36 5.93
Net interest margin(2) 4.67 4.62 4.72 4.72 4.79
 
(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)
         
Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31,
2013 2013 2013 2013 2012
ASSETS
Cash and due from banks $ 832,833 $ 1,031,785 $ 871,288 $ 945,928 $ 777,995
Investments 105,003 107,393 120,427 122,014 122,970
U.S. Government sponsored entities:
Mortgage-backed securities 622,146 642,322 655,795 676,296 696,506
U.S. Treasury securities - - 494 900 -
Other securities   2,812     2,675     2,575     2,400     2,150  
Total securities available for sale 624,958 644,997 658,864 679,596 698,656
Loans and leases held for sale 193,164 156,593 116,390 154,766 53,140
Loans and leases:
Consumer real estate:
Fixed-rate 3,584,072 3,678,665 3,809,066 3,916,709 4,012,702
Variable-rate   2,828,110     2,723,947     2,621,619     2,639,717     2,650,958  
Total consumer real estate 6,412,182 6,402,612 6,430,685 6,556,426 6,663,660
Commercial:
Fixed- and adjustable-rate 2,060,455 2,284,318 2,392,315 2,478,079 2,614,824
Variable-rate   1,028,069     998,562     944,091     867,701     837,944  
Total commercial 3,088,524 3,282,880 3,336,406 3,345,780 3,452,768
Leasing and equipment finance 3,342,182 3,261,638 3,236,799 3,199,499 3,184,540
Inventory finance 1,734,286 1,637,538 1,875,810 1,686,364 1,570,829
Auto finance 1,157,586 973,418 823,102 670,096 504,565
Other   13,369     12,299     13,060     13,641     14,704  
Total loans and leases   15,748,129     15,570,385     15,715,862     15,471,806     15,391,066  
Allowance for loan and lease losses   (256,953 )   (263,228 )   (264,403 )   (265,392 )   (269,578 )
Net loans and leases 15,491,176 15,307,157 15,451,459 15,206,414 15,121,488
Premises and equipment, net 438,824 439,307 440,383 440,437 442,287
Goodwill 225,640 225,640 225,640 225,640 225,640
Other assets   403,340     389,728     448,647     469,757     506,212  
Total assets $ 18,314,938   $ 18,302,600   $ 18,333,098   $ 18,244,552   $ 17,948,388  
 
LIABILITIES AND EQUITY
Non-interest-bearing deposits:
Retail $ 1,430,998 $ 1,435,958 $ 1,476,173 $ 1,426,314 $ 1,294,027
Small business 812,394 777,538 752,395 744,168 775,334
Commercial and custodial   377,568     347,971     326,773     329,992     329,919  
Total non-interest bearing deposits 2,620,960 2,561,467 2,555,341 2,500,474 2,399,280
Interest-bearing deposits:
Checking 2,303,416 2,292,133 2,351,652 2,308,263 2,248,481
Savings 6,197,411 6,238,462 6,059,640 6,090,427 6,083,168
Money market   845,562     822,094     791,859     815,374     819,596  
Subtotal 9,346,389 9,352,689 9,203,151 9,214,064 9,151,245
Certificates of deposit   2,392,896     2,401,811     2,360,881     2,323,267     2,206,173  
Total interest-bearing deposits   11,739,285     11,754,500     11,564,032     11,537,331     11,357,418  
Total deposits   14,360,245     14,315,967     14,119,373     14,037,805     13,756,698  
Borrowings:
Short-term borrowings 8,333 6,545 7,314 8,631 47,715
Long-term borrowings   1,486,189     1,609,211     1,879,576     1,927,139     1,928,507  
Total borrowings 1,494,522 1,615,756 1,886,890 1,935,770 1,976,222
Accrued expenses and other liabilities   508,253     455,911     420,398     390,825     434,471  
Total liabilities   16,363,020     16,387,634     16,426,661     16,364,400     16,167,391  
Equity:
Preferred stock 263,240 263,240 263,240 263,240 180,359
Common stock 1,650 1,646 1,642 1,637 1,634
Additional paid-in capital 775,432 767,630 760,256 753,583 749,445
Retained earnings, subject to certain restrictions 960,852 931,979 903,300 880,582 866,895
Accumulated other comprehensive (loss) income (20,717 ) (23,757 ) (758 ) 5,624 13,131
Treasury stock at cost and other   (41,811 )   (41,456 )   (41,542 )   (41,273 )   (43,462 )
Total TCF Financial Corporation stockholders' equity 1,938,646 1,899,282 1,886,138 1,863,393 1,768,002
Non-controlling interest in subsidiaries   13,272     15,684     20,299     16,759     12,995  
Total equity   1,951,918     1,914,966     1,906,437     1,880,152     1,780,997  
Total liabilities and equity $ 18,314,938   $ 18,302,600   $ 18,333,098   $ 18,244,552   $ 17,948,388  
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED QUARTERLY YIELDS AND RATES(1)(2)
(Unaudited)
         
Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31,
2013 2013 2013 2013 2012
ASSETS
 
Investments and other 2.45 % 1.89 % 2.05 % 1.61 % 1.77 %
U.S. Government sponsored entities:
Mortgage-backed securities, fixed-rate 2.68 2.79 2.83 2.84 2.64
U.S. Treasury securities - - .07 .07 -
Other securities 2.50 2.04 2.54 2.49 2.52
Total securities available for sale(3) 2.68 2.79 2.83 2.84 2.64
Loans and leases held for sale 7.28 7.51 8.74 6.82 8.00
Loans and leases:
Consumer real estate:
Fixed-rate 5.73 5.73 5.89 5.91 5.95
Variable-rate 5.13 5.10 5.13 5.08 5.07
Total consumer real estate 5.46 5.46 5.58 5.58 5.60
Commercial:
Fixed- and adjustable-rate 5.13 5.29 5.24 5.33 5.60
Variable-rate 3.69 3.62 3.55 3.51 3.55
Total commercial 4.65 4.79 4.76 4.86 5.10
Leasing and equipment finance 4.89 4.94 4.94 5.11 5.24
Inventory finance 5.85 6.01 5.96 6.16 6.11
Auto finance 4.64 4.70 4.97 5.23 5.53
Other 7.78 8.34 8.10 8.19 8.31
Total loans and leases 5.17 5.22 5.29 5.38 5.47
 
Total interest-earning assets 4.99 4.98 5.08 5.11 5.21
 
LIABILITIES
 
Interest-bearing deposits:
Checking .05 .06 .06 .09 .11
Savings .17 .23 .18 .22 .29
Money market .29 .28 .28 .31 .35
Subtotal .15 .19 .16 .20 .25
Certificates of deposit .80 .85 .87 .90 .92
Total interest-bearing deposits .28 .33 .31 .34 .38
Total deposits .23 .27 .25 .28 .32
Borrowings:
Short-term borrowings .96 .59 .44 .40 .41
Long-term borrowings 1.51 1.53 1.43 1.41 1.44
Total borrowings 1.50 1.52 1.42 1.41 1.41
 
Total interest-bearing liabilities .42 .47 .46 .49 .54
 
Net interest margin 4.67 4.62 4.72 4.72 4.79
 
(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 exclude equity securities.
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (1)
(Dollars in thousands)
(Unaudited)
At Dec. 31,   At Dec. 31,
2013   2012

Computation of tangible realized common equity to tangible assets:
Total equity $ 1,964,759 $ 1,876,643
Less: Non-controlling interest in subsidiaries   11,791     13,270
Total TCF Financial Corporation stockholders’ equity 1,952,968 1,863,373
Less:
Preferred stock 263,240 263,240
Goodwill 225,640 225,640
Other intangibles 6,326 8,674
Accumulated other comprehensive (loss) income   (27,213 )   12,443
Tangible realized common equity $ 1,484,975   $ 1,353,376
 
Total assets $ 18,379,840 $ 18,225,917
Less:
Goodwill 225,640 225,640
Other intangibles   6,326     8,674
Tangible assets $ 18,147,874   $ 17,991,603
 
Tangible realized common equity to tangible assets 8.18 % 7.52 %
 
At Dec. 31, At Dec. 31,
2013 2012

Computation of tier 1 risk-based capital ratio:
Total tier 1 capital $ 1,763,682 $ 1,633,336
Total risk-weighted assets 15,455,706 14,733,203
Total tier 1 risk-based capital ratio 11.41 % 11.09 %
 
Computation of tier 1 common capital ratio:
Total tier 1 capital $ 1,763,682 $ 1,633,336
Less:
Preferred stock 263,240 263,240
Qualifying non-controlling interest in subsidiaries   11,791     13,270
Total tier 1 common capital $ 1,488,651   $ 1,356,826
 
Total tier 1 common capital ratio 9.63 % 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.

Copyright Business Wire 2010

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