TCF Financial Corporation (NYSE:TCB):
 
Summary of Financial Results                                               Table 1
                Percent Change            
(Dollars in thousands, except per-share data) 4Q 3Q 4Q 4Q16 vs     4Q16 vs YTD YTD Percent
2016     2016     2015     3Q16     4Q15     2016     2015     Change
Net income attributable to TCF $ 50,092 $ 56,292 $ 52,492 (11.0 )% (4.6 )% $ 212,124 $ 197,123 7.6 %
Net interest income 211,446 212,018 205,669 (0.3 ) 2.8 848,106 820,388 3.4
Diluted earnings per common share 0.27 0.31 0.29 (12.9 ) (6.9 ) 1.15 1.07 7.5
 

Financial Ratios (1)
Return on average assets 0.99 % 1.12 % 1.08 % 1.05 % 1.03 %
Return on average common equity 8.40 9.59 9.53 9.13 9.19
Return on average tangible common equity (2) 9.43 10.78 10.82 10.29 10.48
Net interest margin 4.30 4.34 4.35 4.34 4.42
Net charge-offs as a percentage of average loans and leases 0.27 0.26 0.29 0.26 0.30
 
(1) Annualized.
(2) See "Reconciliation of GAAP to Non-GAAP Financial Measures" table.                  
 

TCF Financial Corporation ("TCF" or the "Company") (NYSE:TCB) today reported net income of $50.1 million for the fourth quarter of 2016, compared with $52.5 million for the fourth quarter of 2015 and $56.3 million for the third quarter of 2016. Diluted earnings per common share was 27 cents for the fourth quarter of 2016, compared with 29 cents for the fourth quarter of 2015 and 31 cents for the third quarter of 2016.

TCF reported net income of $212.1 million for the year ended December 31, 2016, compared with $197.1 million for the same period in 2015. Diluted earnings per common share was $1.15 for the year ended December 31, 2016, compared with $1.07 for the same period in 2015.

"I am proud of the progress we have made and the successes we have achieved during 2016," said Craig R. Dahl, president and chief executive officer. "We took significant strides toward driving the Company forward in ways that align with our four strategic pillars. Execution of our diversification philosophy has resulted in strong performance from a credit quality perspective. Our unique loan and lease origination capabilities allow us to grow profitably in a variety of markets. We generated positive operating leverage throughout the year as revenue growth steadily outpaced expense growth. We also continued to expand our deposit base which will be very beneficial should interest rates continue to increase.

"While our long term results will continue to be driven by these four strategic pillars, market volatility and softness in the auto lending industry provided some near term headwinds. As we move forward into 2017, there is much to be excited about. Our focus will be on taking the next step in creating superior and sustainable financial performance. We can do this by optimizing our diverse loan and lease origination platforms to grow in areas that will continue to drive profitability. In addition, we will look to create new efficiencies throughout the organization while offering product and service solutions that meet the financial needs of our customers."
Revenue
 
Total Revenue                                           Table 2
    Percent Change    
(Dollars in thousands)     4Q     3Q     4Q 4Q16 vs     4Q16 vs YTD     YTD     Percent
2016     2016     2015     3Q16     4Q15     2016     2015     Change
Net interest income $ 211,446       $ 212,018       $ 205,669   (0.3 )% 2.8 % $ 848,106       $ 820,388   3.4 %
Non-interest income:
Fees and service charges 35,132 35,093 37,741 0.1 (6.9 ) 137,664 144,999 (5.1 )
Card revenue 13,689 13,747 13,781 (0.4 ) (0.7 ) 54,882 54,387 0.9
ATM revenue 4,806       5,330       5,143   (9.8 ) (6.6 ) 20,445       21,544   (5.1 )
Subtotal 53,627 54,170 56,665 (1.0 ) (5.4 ) 212,991 220,930 (3.6 )
Gains on sales of auto loans, net 1,145 11,624 3,136 (90.1 ) (63.5 ) 34,832 30,580 13.9
Gains on sales of consumer real estate loans, net 16,676 13,528 13,104 23.3 27.3 50,427 40,964 23.1
Servicing fee income 11,404       10,393       8,622   9.7 32.3 40,182       31,229   28.7
Subtotal 29,225 35,545 24,862 (17.8 ) 17.5 125,441 102,773 22.1
Leasing and equipment finance 31,316 28,289 32,355 10.7 (3.2 ) 119,166 108,129 10.2
Other 1,365       2,270       1,806   (39.9 ) (24.4 ) 8,883       10,463   (15.1 )
Fees and other revenue 115,533 120,274 115,688 (3.9 ) (0.1 ) 466,481 442,295 5.5
Gains (losses) on securities, net 135       (600 )     (29 ) N.M. N.M. (581 )     (297 ) (95.6 )
Total non-interest income 115,668       119,674       115,659   (3.3 ) 465,900       441,998   5.4
Total revenue $ 327,114       $ 331,692       $ 321,328   (1.4 ) 1.8 $ 1,314,006       $ 1,262,386   4.1
 
Net interest margin (1) 4.30 % 4.34 % 4.35 % 4.34 % 4.42 %
Total non-interest income as a percentage of total revenue 35.4 36.1 36.0 35.5 35.0
 
N.M. Not Meaningful.
(1) Annualized.                        

Net Interest Income
  • Net interest income for the fourth quarter of 2016 increased $5.8 million, or 2.8 percent, compared with the fourth quarter of 2015 and was consistent with the third quarter of 2016. The increase from the fourth quarter of 2015 was primarily due to higher average balances of loans and leases held for sale, leasing and equipment finance loans and leases, inventory finance loans and securities available for sale. These increases were partially offset by lower average consumer real estate loan balances and a lower average yield on the overall loan and lease portfolio. Net interest income for the fourth quarter of 2016 was consistent with the third quarter of 2016 due to growth in the inventory finance and leasing and equipment finance portfolios, offset by a lower average yield on the overall loan and lease portfolio.
  • Net interest margin for the fourth quarter of 2016 was 4.30 percent, compared with 4.35 percent for the fourth quarter of 2015 and 4.34 percent for the third quarter of 2016. The decrease from the fourth quarter of 2015 was primarily due to lower yields on commercial loans, leasing and equipment finance loans and leases, auto finance loans and loans and leases held for sale. The decrease from the third quarter of 2016 was primarily due to lower yields on inventory finance loans.

Non-interest Income
  • Fees and service charges for the fourth quarter of 2016 were $35.1 million, down $2.6 million, or 6.9 percent, from the fourth quarter of 2015 and consistent with the third quarter of 2016. The decrease from the fourth quarter of 2015 was primarily due to ongoing consumer behavior changes, as well as higher average checking account balances per customer.
  • TCF sold $516.0 million, $271.1 million and $614.9 million of auto loans during the fourth quarters of 2016 and 2015 and the third quarter of 2016, respectively, resulting in net gains in each respective period.
  • TCF sold $520.8 million, $389.1 million and $437.1 million of consumer real estate loans during the fourth quarters of 2016 and 2015 and the third quarter of 2016, respectively, resulting in net gains in each respective period.
  • Servicing fee income was $11.4 million on $5.5 billion of average loans and leases serviced for others for the fourth quarter of 2016, compared with $8.6 million on $4.2 billion for the fourth quarter of 2015 and $10.4 million on $5.1 billion for the third quarter of 2016.
Loans and Leases            
                                                 
Period-End and Average Loans and Leases                     Table 3
                Percent Change
(Dollars in thousands) 4Q 3Q 4Q 4Q16 vs   4Q16 vs YTD YTD Percent
2016     2016     2015     3Q16     4Q15     2016     2015     Change
Period-End:
Consumer real estate:
First mortgage lien $ 2,292,596 $ 2,313,044 $ 2,624,956 (0.9 )% (12.7 )%
Junior lien 2,791,756       2,674,280       2,839,316   4.4 (1.7 )
Total consumer real estate 5,084,352 4,987,324 5,464,272 1.9 (7.0 )
Commercial 3,286,478 3,150,199 3,145,832 4.3 4.5
Leasing and equipment finance 4,336,310 4,236,224 4,012,248 2.4 8.1
Inventory finance 2,470,175 2,261,086 2,146,754 9.2 15.1
Auto finance 2,647,741 2,731,900 2,647,596 (3.1 )
Other 18,771       17,886       19,297   4.9 (2.7 )
Total $ 17,843,827       $ 17,384,619       $ 17,435,999   2.6 2.3
 
Average:
Consumer real estate:
First mortgage lien $ 2,306,421 $ 2,353,097 $ 2,670,355 (2.0 )% (13.6 )% $ 2,424,013 $ 2,867,948 (15.5 )%
Junior lien 2,779,725       2,782,479       2,934,169   (0.1 ) (5.3 ) 2,810,116       2,754,253   2.0
Total consumer real estate 5,086,146 5,135,576 5,604,524 (1.0 ) (9.2 ) 5,234,129 5,622,201 (6.9 )
Commercial 3,147,517 3,092,115 3,117,983 1.8 0.9 3,126,881 3,134,428 (0.2 )
Leasing and equipment finance 4,252,543 4,147,488 3,911,025 2.5 8.7 4,106,718 3,804,015 8.0
Inventory finance 2,389,980 2,272,409 2,180,534 5.2 9.6 2,414,684 2,154,357 12.1
Auto finance 2,647,088 2,670,272 2,514,923 (0.9 ) 5.3 2,693,041 2,278,617 18.2
Other 9,307       9,252       9,060   0.6 2.7 9,538       10,303   (7.4 )
Total $ 17,532,581       $ 17,327,112       $ 17,338,049   1.2 1.1 $ 17,584,991       $ 17,003,921   3.4
                                                                           
  • Period-end loans and leases were $17.8 billion at December 31, 2016, an increase of $0.4 billion, or 2.3 percent, compared with December 31, 2015 and an increase of $0.5 billion, or 2.6 percent, compared with September 30, 2016. Average loans and leases were $17.5 billion for the fourth quarter of 2016, an increase of $0.2 billion, or 1.1 percent, compared with the fourth quarter of 2015 and an increase of $0.2 billion, or 1.2 percent, compared with the third quarter of 2016.The increases from December 31, 2015 were primarily due to increases in the leasing and equipment finance portfolio and in the inventory finance portfolio due to strong originations and the expansion of the number of active dealers, partially offset by run-off in the consumer real estate first mortgage lien portfolio. The increase from September 30, 2016 for period-end loans and leases was primarily due to increases in the inventory finance, commercial, consumer real estate junior lien, and leasing and equipment finance portfolios. The increase from the third quarter of 2016 for average loans and leases was primarily due to increases in the inventory finance and leasing and equipment finance portfolios.
  • Loan and lease originations were $4.3 billion for the fourth quarter of 2016, an increase of $0.4 billion, or 11.4 percent, compared with the fourth quarter of 2015 and consistent with the third quarter of 2016. The increase from the fourth quarter of 2015 was primarily due to increased originations in inventory finance and consumer real estate.
                           
Credit Quality
                                           
Credit Trends                                         Table 4
Change
(Dollars in thousands) 4Q 3Q 2Q 1Q 4Q 4Q16 vs 4Q16 vs
2016     2016     2016     2016     2015     3Q16     4Q15
Over 60-day delinquencies as a percentage of period-end loans and leases (1) 0.12 % 0.12 % 0.12 % 0.10 % 0.11 % —bps 1bps
Net charge-offs as a percentage of average loans and leases (2) 0.27 0.26 0.23 0.27 0.29 1 (2 )
Non-accrual loans and leases and other real estate owned $ 228,242 $ 223,759 $ 232,334 $ 241,090 $ 250,448 2.0 % (8.9 )%
Provision for credit losses 19,888 13,894 13,250 18,842 17,607 43.1 13.0
 
(1) Excludes portfolios acquired with deteriorated credit quality and non-accrual loans and leases.
(2) Annualized.
  • The net charge-off rate was 0.27 percent for the fourth quarter of 2016, down from 0.29 percent for the fourth quarter of 2015, and up from 0.26 percent for the third quarter of 2016. The decrease from the fourth quarter of 2015 was primarily due to improved credit quality in the consumer real estate portfolio, partially offset by increased net charge-offs in the auto finance portfolio. The increase from the third quarter of 2016 was primarily due to increased net charge-offs in the auto finance portfolio, partially offset by decreased net charge-offs in the leasing and equipment finance portfolio.
  • Non-accrual loans and leases and other real estate owned was $228.2 million at December 31, 2016, a decrease of $22.2 million, or 8.9 percent, from December 31, 2015, and an increase of $4.5 million, or 2.0 percent, from September 30, 2016. Non-accrual loans and leases were $181.4 million at December 31, 2016, a decrease of $19.0 million, or 9.5 percent, from December 31, 2015 and a decrease of $8.6 million, or 4.5 percent, from September 30, 2016. The decreases were primarily due to improving credit quality trends in the consumer real estate and commercial portfolios and lower non-accrual loans in the auto finance portfolio, partially offset by an increase in non-accrual loans in the inventory finance portfolio.
  • Provision for credit losses was $19.9 million for the fourth quarter of 2016, an increase of $2.3 million, or 13.0 percent, from the fourth quarter of 2015, and an increase of $6.0 million, or 43.1 percent, from the third quarter of 2016. The increase from the fourth quarter of 2015 was primarily due to growth in the overall loan and lease portfolio, partially offset by a decrease in net charge-offs. The increase from the third quarter of 2016 was primarily due to growth in the overall loan and lease portfolio.
Deposits                                
                                                 
Average Deposits                                               Table 5
Percent Change
(Dollars in thousands) 4Q 3Q 4Q 4Q16 vs 4Q16 vs YTD YTD Percent
2016     2016     2015     3Q16     4Q15     2016     2015     Change
 
Checking $ 5,759,806 $ 5,673,888 $ 5,412,454 1.5 % 6.4 % $ 5,688,690 $ 5,387,112 5.6 %
Savings 4,681,662 4,672,642 4,733,703 0.2 (1.1 ) 4,689,543 4,952,680 (5.3 )
Money market 2,429,239 2,496,590 2,349,127 (2.7 ) 3.4 2,488,977 2,265,121 9.9
Certificates of deposit 4,198,190       4,304,990       3,793,653   (2.5 ) 10.7 4,229,247       3,340,341   26.6
Total average deposits $ 17,068,897       $ 17,148,110       $ 16,288,937   (0.5 ) 4.8 $ 17,096,457       $ 15,945,254   7.2
 
Average interest rate on deposits (1) 0.35 % 0.37 % 0.34 % 0.36 % 0.30 %
 
(1) Annualized.                                                
  • Total average deposits for the fourth quarter of 2016 increased $0.8 billion, or 4.8 percent, from the fourth quarter of 2015 and were consistent with the third quarter of 2016. The increase from the fourth quarter of 2015 was primarily due to special campaigns for certificates of deposit during the first three quarters of 2016, as well as growth in checking and money market balances.
Non-interest Expense                          
                                                       
Non-interest Expense                                                   Table 6
    Change
(Dollars in thousands) 4Q 3Q 4Q 4Q16 vs 4Q16 vs YTD YTD Percent
2016     2016     2015     3Q16     4Q15     2016     2015     Change
 
Compensation and employee benefits $ 115,001 $ 117,155 $ 109,061 (1.8 )% 5.4 % $ 474,722 $ 457,743 3.7 %
Occupancy and equipment 38,150 37,938 37,824 0.6 0.9 149,980 144,962 3.5
Other 59,235       59,421       56,930   (0.3 ) 4.0 231,420       229,255   0.9
Subtotal 212,386 214,514 203,815 (1.0 ) 4.2 856,122 831,960 2.9
Operating lease depreciation 10,906 10,038 13,608 8.6 (19.9 ) 40,359 39,409 2.4
Foreclosed real estate and repossessed assets, net 1,889 4,243 4,940 (55.5 ) (61.8 ) 13,187 23,193 (43.1 )
Other credit costs, net 178       83       224   114.5

(20.5

)
219     185   18.4
Total non-interest expense $ 225,359       $ 228,878       $ 222,587   (1.5 ) 1.2 $ 909,887       $ 894,747   1.7
 
Efficiency ratio 68.89 % 69.00 % 69.27 % (11 ) bps (38 ) bps 69.25 % 70.88 % (163 ) bps
                                                                 
  • Compensation and employee benefits expense increased $5.9 million, or 5.4 percent, from the fourth quarter of 2015 and decreased $2.2 million, or 1.8 percent, from the third quarter of 2016. The increase from the fourth quarter of 2015 was primarily due to higher other compensation and health insurance expenses, partially offset by the annual pension plan valuation adjustment. The decrease from the third quarter of 2016 was primarily due to the annual pension plan valuation adjustment and lower salaries, partially offset by higher health insurance expenses.
  • Net expenses related to foreclosed real estate and repossessed assets decreased $3.1 million, or 61.8 percent, from the fourth quarter of 2015 and decreased $2.4 million, or 55.5 percent, from the third quarter of 2016. The decrease from the fourth quarter of 2015 was primarily due to higher gains on sales of commercial properties, lower write-downs on existing foreclosed consumer and commercial properties and lower operating costs associated with maintaining fewer consumer properties, partially offset by higher repossessed assets expense. The decrease from the third quarter of 2016 was primarily due to higher gains on sales of commercial properties and lower write-downs on existing foreclosed consumer properties, partially offset by higher repossessed assets expense.
Capital        
             
Capital Information           Table 7
At Dec. 31, At Dec. 31,
(Dollars in thousands, except per-share data) 2016 2015
Total equity $ 2,444,645 $ 2,306,917
Book value per common share 12.66 11.94
Tangible book value per common share (1) 11.33 10.59
Common equity to assets 10.09 % 9.80 %
Tangible common equity to tangible assets (1) 9.13 8.79
Capital accumulation rate (2) 8.59 10.44
 
At Dec. 31, At Dec. 31,
Regulatory Capital: 2016 (3) 2015
Common equity Tier 1 capital $ 1,970,323 $ 1,814,442
Tier 1 capital 2,248,221 2,092,195
Total capital 2,635,925 2,487,060
 
Regulatory Capital Ratios:
Common equity Tier 1 capital ratio 10.24 % 10.00 %
Tier 1 risk-based capital ratio 11.68 11.54
Total risk-based capital ratio 13.69 13.71
Tier 1 leverage ratio 10.73 10.46
 
(1) See "Reconciliation of GAAP to Non-GAAP Financial Measures" table.
(2) Calculated as the change in annualized year-to-date common equity Tier 1 capital as a percentage of prior year end common equity Tier 1 capital.
(3) The regulatory capital ratios for 4Q 2016 are preliminary pending completion and filing of the Company's regulatory reports.
  • TCF maintained strong capital ratios as the Company accumulated capital through earnings.
  • TCF increased book value per common share 6.0 percent in 2016. TCF also increased tangible book value per common share 7.0 percent in 2016.
  • On January 25, 2017, TCF's Board of Directors declared a regular quarterly cash dividend of 7.5 cents per common share, payable on March 1, 2017, to stockholders of record at the close of business on February 15, 2017. TCF also declared dividends on the 7.50% Series A and 6.45% Series B Non-Cumulative Perpetual Preferred Stock, both payable on March 1, 2017, to stockholders of record at the close of business on February 15, 2017.

Webcast Information

A live webcast of TCF's conference call to discuss the fourth quarter earnings will be hosted at TCF's website, http://ir.tcfbank.com, on January 27, 2017 at 9:00 a.m. CST. A slide presentation for the call will be available on the website prior to the call. Additionally, the webcast will be available for replay on 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, 2016, TCF had $21.4 billion in total assets and 339 branches in Illinois, Minnesota, Michigan, Colorado, Wisconsin, Arizona and South Dakota providing retail and commercial banking services. TCF, through its subsidiaries, also conducts commercial leasing, equipment finance, and auto finance business in all 50 states and commercial inventory finance business in all 50 states and Canada. 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 herein. 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, 2015 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 increases in unemployment; adverse economic, business and competitive developments such as shrinking interest margins, reduced demand for financial services and loan and lease products, deposit outflows, increased deposit costs due to competition for deposit growth and evolving payment system developments, 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, securities held to maturity 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 the 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 deposit, lending, loan collection and other business activities such as mortgage foreclosure moratorium laws, further regulation of financial institution campus banking programs, use by municipalities of eminent domain on property securing troubled residential mortgage loans, or imposition of underwriting or other limitations that impact the ability to offer certain variable-rate products; changes affecting customer account charges and fee income, including changes to interchange rates; regulatory actions or changes in customer opt-in preferences with respect to overdrafts, which may have an adverse impact on TCF; 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 programs, including 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; regulatory criticism and resulting enforcement actions or other adverse consequences such as increased capital requirements, higher deposit insurance assessments or monetary damages or penalties; heightened regulatory practices, requirements or expectations, including, but not limited to, requirements related to enterprise risk management, 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 impact on banks of regulatory reform, including additional capital, leverage, liquidity and risk management requirements or changes in the composition of qualifying regulatory capital; 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 or 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 future retail deposit account changes, including limitations on TCF's ability to predict customer behavior and the impact on TCF's fee revenues.

Branching Risk; Growth Risks.  Adverse developments affecting TCF's supermarket banking relationships or any of the primary supermarket chains in which TCF maintains supermarket branches; costs related to closing underperforming branches; inability to timely close underperforming branches due to long-term lease obligations; slower than anticipated growth in existing or acquired businesses; inability to successfully execute on TCF's growth strategy through acquisitions or expanding existing business relationships; failure to expand or diversify TCF's balance sheet through new or expanded programs or 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, including the failure to develop and maintain technology necessary to satisfy customer demands; ability to attract and retain employees given competitive conditions.

Litigation Risks. Results of litigation or government enforcement actions, including class action litigation or enforcement actions concerning TCF's lending or deposit activities, including account opening/origination, servicing practices, fees or charges, employment practices, or checking account overdraft program "opt in" requirements; and possible increases in indemnification obligations for certain litigation against Visa U.S.A.

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
2016     2015 $     %
Interest income:
Loans and leases $ 210,848 $ 212,346 $ (1,498 ) (0.7 )%
Securities available for sale 7,553 4,864 2,689 55.3
Securities held to maturity 1,165 1,336 (171 ) (12.8 )
Loans held for sale and other 12,092   6,905   5,187   75.1
Total interest income 231,658   225,451   6,207   2.8
Interest expense:
Deposits 15,053 13,772 1,281 9.3
Borrowings 5,159   6,010   (851 ) (14.2 )
Total interest expense 20,212   19,782   430   2.2
Net interest income 211,446 205,669 5,777 2.8
Provision for credit losses 19,888   17,607   2,281   13.0
Net interest income after provision for credit losses 191,558   188,062   3,496   1.9
Non-interest income:
Fees and service charges 35,132 37,741 (2,609 ) (6.9 )
Card revenue 13,689 13,781 (92 ) (0.7 )
ATM revenue 4,806   5,143   (337 ) (6.6 )
Subtotal 53,627 56,665 (3,038 ) (5.4 )
Gains on sales of auto loans, net 1,145 3,136 (1,991 ) (63.5 )
Gains on sales of consumer real estate loans, net 16,676 13,104 3,572 27.3
Servicing fee income 11,404   8,622   2,782   32.3
Subtotal 29,225 24,862 4,363 17.5
Leasing and equipment finance 31,316 32,355 (1,039 ) (3.2 )
Other 1,365   1,806   (441 ) (24.4 )
Fees and other revenue 115,533 115,688 (155 ) (0.1 )
Gains (losses) on securities, net 135   (29 ) 164   N.M.
Total non-interest income 115,668   115,659   9  
Non-interest expense:
Compensation and employee benefits 115,001 109,061 5,940 5.4
Occupancy and equipment 38,150 37,824 326 0.9
Other 59,235   56,930   2,305   4.0
Subtotal 212,386 203,815 8,571 4.2
Operating lease depreciation 10,906 13,608 (2,702 ) (19.9 )
Foreclosed real estate and repossessed assets, net 1,889 4,940 (3,051 ) (61.8 )
Other credit costs, net 178   224   (46 ) (20.5 )
Total non-interest expense 225,359   222,587   2,772   1.2
Income before income tax expense 81,867 81,134 733 0.9
Income tax expense 29,762   26,614   3,148   11.8
Income after income tax expense 52,105 54,520 (2,415 ) (4.4 )
Income attributable to non-controlling interest 2,013   2,028   (15 ) (0.7 )
Net income attributable to TCF Financial Corporation 50,092 52,492 (2,400 ) (4.6 )
Preferred stock dividends 4,847   4,847    
Net income available to common stockholders $ 45,245   $ 47,645   $ (2,400 ) (5.0 )
 
Earnings per common share:
Basic $ 0.27 $ 0.29 $ (0.02 ) (6.9 )%
Diluted 0.27 0.29 (0.02 ) (6.9 )
 
Dividends declared per common share $ 0.075 $ 0.075 $ %
 
Average common and common equivalent shares
outstanding (in thousands):
Basic 167,412 166,343 1,069 0.6 %
Diluted 168,049 166,942 1,107 0.7
 

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
2016     2015 $     %
Interest income:
Loans and leases $ 850,546 $ 832,736 $ 17,810 2.1 %
Securities available for sale 26,573 15,648 10,925 69.8
Securities held to maturity 4,649 5,486 (837 ) (15.3 )
Loans held for sale and other 48,962   38,060   10,902   28.6
Total interest income 930,730   891,930   38,800   4.4
Interest expense:
Deposits 61,788 48,226 13,562 28.1
Borrowings 20,836   23,316   (2,480 ) (10.6 )
Total interest expense 82,624   71,542   11,082   15.5
Net interest income 848,106 820,388 27,718 3.4
Provision for credit losses 65,874   52,944   12,930   24.4
Net interest income after provision for credit losses 782,232   767,444   14,788   1.9
Non-interest income:
Fees and service charges 137,664 144,999 (7,335 ) (5.1 )
Card revenue 54,882 54,387 495 0.9
ATM revenue 20,445   21,544   (1,099 ) (5.1 )
Subtotal 212,991 220,930 (7,939 ) (3.6 )
Gains on sales of auto loans, net 34,832 30,580 4,252 13.9
Gains on sales of consumer real estate loans, net 50,427 40,964 9,463 23.1
Servicing fee income 40,182   31,229   8,953   28.7
Subtotal 125,441 102,773 22,668 22.1
Leasing and equipment finance 119,166 108,129 11,037 10.2
Other 8,883   10,463   (1,580 ) (15.1 )
Fees and other revenue 466,481 442,295 24,186 5.5
Gains (losses) on securities, net (581 ) (297 ) (284 ) (95.6 )
Total non-interest income 465,900   441,998   23,902   5.4
Non-interest expense:
Compensation and employee benefits 474,722 457,743 16,979 3.7
Occupancy and equipment 149,980 144,962 5,018 3.5
Other 231,420   229,255   2,165   0.9
Subtotal 856,122 831,960 24,162 2.9
Operating lease depreciation 40,359 39,409 950 2.4
Foreclosed real estate and repossessed assets, net 13,187 23,193 (10,006 ) (43.1 )
Other credit costs, net 219   185   34   18.4
Total non-interest expense 909,887   894,747   15,140   1.7
Income before income tax expense 338,245 314,695 23,550 7.5
Income tax expense 116,528   108,872   7,656   7.0
Income after income tax expense 221,717 205,823 15,894 7.7
Income attributable to non-controlling interest 9,593   8,700   893   10.3
Net income attributable to TCF Financial Corporation 212,124 197,123 15,001 7.6
Preferred stock dividends 19,388   19,388    
Net income available to common stockholders $ 192,736   $ 177,735   $ 15,001   8.4
 
Earnings per common share:
Basic $ 1.15 $ 1.07 $ 0.08 7.5 %
Diluted 1.15 1.07 0.08 7.5
 
Dividends declared per common share $ 0.300 $ 0.225 $ 0.075 33.3 %
 

Average common and common equivalent shares outstanding (in thousands):
Basic 167,220 165,697 1,523 0.9 %
Diluted 167,807 166,242 1,565 0.9
 
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
(Unaudited)
 
    Three Months Ended December 31,     Change
2016     2015 $     %
Net income attributable to TCF Financial Corporation $ 50,092   $ 52,492   $ (2,400 ) (4.6 )%
Other comprehensive income (loss), net of tax:
Net unrealized gains (losses) on securities available for sale and interest-only strips (40,035 ) (3,207 ) (36,828 ) N.M.
Net unrealized gains (losses) on net investment hedges 913 1,121 (208 ) (18.6 )
Foreign currency translation adjustment (1,491 ) (1,986 ) 495 24.9
Recognized postretirement prior service cost (7 ) (7 )  
Total other comprehensive income (loss), net of tax (40,620 ) (4,079 ) (36,541 ) N.M.
Comprehensive income $ 9,472   $ 48,413   $ (38,941 ) (80.4 )
 
 
Year Ended December 31, Change
2016 2015 $ %
Net income attributable to TCF Financial Corporation $ 212,124   $ 197,123   $ 15,001   7.6 %
Other comprehensive income (loss), net of tax:
Net unrealized gains (losses) on securities available for sale and interest-only strips (18,894 ) (816 ) (18,078 ) N.M.
Net unrealized gains (losses) on net investment hedges (756 ) 4,713 (5,469 ) N.M.
Foreign currency translation adjustment 1,300 (8,304 ) 9,604 N.M.
Recognized postretirement prior service cost (29 ) (29 )  
Total other comprehensive income (loss), net of tax (18,379 ) (4,436 ) (13,943 ) N.M.
Comprehensive income $ 193,745   $ 192,687   $ 1,058   0.5
 

N.M. Not Meaningful.
 
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except per-share data)
(Unaudited)
 
    At December 31,     Change
2016     2015 $     %
ASSETS:
Cash and due from banks $ 609,603 $ 889,337 $ (279,734 ) (31.5 )%
Investments 74,714 70,537 4,177 5.9
Securities held to maturity 181,314 201,920 (20,606 ) (10.2 )
Securities available for sale 1,423,435 888,885 534,550 60.1
Loans and leases held for sale 268,832 157,625 111,207 70.6
Loans and leases:
Consumer real estate:
First mortgage lien 2,292,596 2,624,956 (332,360 ) (12.7 )
Junior lien 2,791,756   2,839,316   (47,560 ) (1.7 )
Total consumer real estate 5,084,352 5,464,272 (379,920 ) (7.0 )
Commercial 3,286,478 3,145,832 140,646 4.5
Leasing and equipment finance 4,336,310 4,012,248 324,062 8.1
Inventory finance 2,470,175 2,146,754 323,421 15.1
Auto finance 2,647,741 2,647,596 145
Other 18,771   19,297   (526 ) (2.7 )
Total loans and leases 17,843,827 17,435,999 407,828 2.3
Allowance for loan and lease losses (160,269 ) (156,054 ) (4,215 ) (2.7 )
Net loans and leases 17,683,558 17,279,945 403,613 2.3
Premises and equipment, net 418,372 445,934 (27,562 ) (6.2 )
Goodwill 225,640 225,640
Other assets 555,858   529,786   26,072   4.9
Total assets $ 21,441,326   $ 20,689,609   $ 751,717   3.6
 
LIABILITIES AND EQUITY:
Deposits:
Checking $ 6,009,151 $ 5,690,559 $ 318,592 5.6 %
Savings 4,719,481 4,717,457 2,024
Money market 2,421,467 2,408,180 13,287 0.6
Certificates of deposit 4,092,423   3,903,793   188,630   4.8
Total deposits 17,242,522   16,719,989   522,533   3.1
Short-term borrowings 4,391 5,381 (990 ) (18.4 )
Long-term borrowings 1,073,181   1,034,557   38,624   3.7
Total borrowings 1,077,572 1,039,938 37,634 3.6
Accrued expenses and other liabilities 676,587   622,765   53,822   8.6
Total liabilities 18,996,681   18,382,692   613,989   3.3
Equity:

Preferred stock, par value $0.01 per share, 30,000,000 shares authorized; 4,006,900 shares issued
263,240 263,240

Common stock, par value $0.01 per share, 280,000,000 shares authorized; 171,034,506 and 169,887,030 shares issued, respectively
1,710 1,699 11 0.6
Additional paid-in capital 862,776 851,836 10,940 1.3
Retained earnings, subject to certain restrictions 1,382,901 1,240,347 142,554 11.5
Accumulated other comprehensive income (loss) (33,725 ) (15,346 ) (18,379 ) (119.8 )
Treasury stock at cost, 42,566 shares, and other (49,419 ) (50,860 ) 1,441   2.8
Total TCF Financial Corporation stockholders' equity 2,427,483 2,290,916 136,567 6.0
Non-controlling interest in subsidiaries 17,162   16,001   1,161   7.3
Total equity 2,444,645   2,306,917   137,728   6.0
Total liabilities and equity $ 21,441,326   $ 20,689,609   $ 751,717   3.6
 
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
SUMMARY OF CREDIT QUALITY DATA
(Dollars in thousands)
(Unaudited)
 

Over 60-Day Delinquencies as a Percentage of Portfolio (1)
 
    At     At     At     At     At     Change from
Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30,     Dec. 31,
2016 2016 2016 2016 2015 2016 2015
Consumer real estate:
First mortgage lien 0.40 % 0.36 % 0.36 % 0.39 % 0.46 % 4 bps (6 )bps
Junior lien 0.05 0.03 0.03 0.05 0.05 2
Total consumer real estate 0.21 0.18 0.18 0.21 0.25 3 (4 )
Commercial 0.01 0.11 (1 )
Leasing and equipment finance 0.10 0.14 0.13 0.12 0.06 (4 ) 4
Inventory finance 0.01 0.01 (1 ) (1 )
Auto finance 0.23 0.20 0.13 0.09 0.14 3 9
Other 0.10 0.05 0.33 0.13 0.10 5
Subtotal 0.12 0.12 0.12 0.10 0.11 1
Portfolios acquired with deteriorated credit quality 3.06 0.02 1.51 0.43 (306 ) (43 )
Total delinquencies 0.12 0.12 0.12 0.10 0.11 1
 

(1)  Excludes non-accrual loans and leases.

Net Charge-Offs as a Percentage of Average Loans and Leases
       
Quarter Ended (1) Change from
Dec. 31,     Sep. 30,     Jun. 30,     Mar. 31,     Dec. 31, Sep. 30,     Dec. 31,
2016 2016 2016 2016 2015 2016 2015
Consumer real estate:
First mortgage lien 0.26 % 0.34 % 0.35 % 0.55 % 0.54 % (8 )bps (28 )bps
Junior lien 0.08 0.04 0.05 0.17 0.17 4 (9 )
Total consumer real estate 0.17 0.17 0.19 0.35 0.34 (17 )
Commercial 0.01 (0.01 ) 0.08 (0.02 ) 0.05 2 (4 )
Leasing and equipment finance 0.10 0.18 0.11 0.13 0.16 (8 ) (6 )
Inventory finance 0.07 0.10 0.09 0.04 0.05 (3 ) 2
Auto finance 1.09 0.86 0.69 0.81 0.75 23 34
Other N.M. N.M. N.M. N.M. N.M. N.M. N.M.
Total 0.27 0.26 0.23 0.27 0.29 1 (2 )
 

N.M. Not Meaningful.

(1)  Annualized.

Non-Accrual Loans and Leases Rollforward
 
    Quarter Ended     Change from
Dec. 31,     Sep. 30,     Jun. 30,     Mar. 31,     Dec. 31, Sep. 30,     Dec. 31,
2016 2016 2016 2016 2015 2016 2015
Balance, beginning of period $ 190,047 $ 195,542 $ 198,649 $ 200,466 $ 206,110 $ (5,495 ) $ (16,063 )
Additions 32,398 28,697 35,280 38,029 44,387 3,701 (11,989 )
Charge-offs (4,158 ) (5,670 ) (5,475 ) (7,436 ) (9,002 ) 1,512 4,844
Transfers to other assets (17,118 ) (11,687 ) (10,310 ) (12,342 ) (13,612 ) (5,431 ) (3,506 )
Return to accrual status (4,546 ) (5,447 ) (6,687 ) (7,698 ) (9,282 ) 901 4,736
Payments received (14,351 ) (13,845 ) (17,774 ) (15,551 ) (20,103 ) (506 ) 5,752
Sales (2,764 ) (900 ) (775 ) (2,764 ) (1,989 )
Other, net 1,937   2,457   2,759   3,181   2,743   (520 ) (806 )
Balance, end of period $ 181,445   $ 190,047   $ 195,542   $ 198,649   $ 200,466   $ (8,602 ) $ (19,021 )
 
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
SUMMARY OF CREDIT QUALITY DATA, CONTINUED
(Dollars in thousands)
(Unaudited)
 

Other Real Estate Owned Rollforward
 
    Quarter Ended     Change from
Dec. 31,     Sep. 30,     Jun. 30,     Mar. 31,     Dec. 31, Sep. 30,     Dec. 31,
2016 2016 2016 2016 2015 2016 2015
Balance, beginning of period $ 33,712 $ 36,792 $ 42,441 $ 49,982 $ 58,584 $ (3,080 ) $ (24,872 )
Transferred in 13,865 10,124 9,661 10,575 12,626 3,741 1,239
Sales (8,655 ) (12,997 ) (16,058 ) (18,885 ) (19,174 ) 4,342 10,519
Writedowns (1,281 ) (1,984 ) (2,027 ) (2,744 ) (2,130 ) 703 849
Other, net (1) 9,156   1,777   2,775   3,513   76   7,379   9,080  
Balance, end of period $ 46,797   $ 33,712   $ 36,792   $ 42,441   $ 49,982   $ 13,085   $ (3,185 )
 

(1) Includes transfers from premises and equipment.
 
 

Allowance for Loan and Lease Losses
                               
At At At At At
Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31,
2016 2016 2016 2016 2015
% of     % of     % of % of % of
Balance

 

Portfolio
Balance

 

Portfolio
Balance

 

Portfolio
Balance

 

Portfolio
Balance Portfolio
Consumer real estate $ 59,448 1.17 % $ 62,092 1.24 % $ 64,765 1.27 % $ 66,728 1.27 % $ 67,992 1.24 %
Commercial 32,695 0.99 31,648 1.00 31,161 1.01 31,547 1.01 30,185 0.96
Leasing and equipment finance 21,350 0.49 20,649 0.49 20,124 0.49 19,454 0.49 19,018 0.47
Inventory finance 13,932 0.56 11,807 0.52 12,084 0.52 13,306 0.50 11,128 0.52
Auto finance 32,310 1.22 29,115 1.07 29,772 1.06 28,535 1.02 26,486 1.00
Other 534   2.84 530   2.96 666   3.19 504   2.66 1,245   6.45
Total $ 160,269   0.90 $ 155,841   0.90 $ 158,572   0.91 $ 160,074   0.90 $ 156,054   0.90
 
 

Changes in Allowance for Loan and Lease Losses
 
    Quarter Ended     Change from
Dec. 31,     Sep. 30,     Jun. 30,     Mar. 31,     Dec. 31, Sep. 30,     Dec. 31,
2016 2016 2016 2016 2015 2016 2015
Balance, beginning of period $ 155,841 $ 158,572 $ 160,074 $ 156,054 $ 153,962 $ (2,731 ) $ 1,879
Charge-offs (16,451 ) (16,244 ) (14,723 ) (16,667 ) (18,101 ) (207 ) 1,650
Recoveries 4,718   4,779   4,592   4,761   5,523   (61 ) (805 )
Net (charge-offs) recoveries (11,733 ) (11,465 ) (10,131 ) (11,906 ) (12,578 ) (268 ) 845
Provision for credit losses 19,888 13,894 13,250 18,842 17,607 5,994 2,281
Other (3,727 ) (5,160 ) (4,621 ) (2,916 ) (2,937 ) 1,433   (790 )
Balance, end of period $ 160,269   $ 155,841   $ 158,572   $ 160,074   $ 156,054   $ 4,428   $ 4,215  
 
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES
(Dollars in thousands)
(Unaudited)
 
    Three Months Ended December 31,
2016     2015
Average         Yields and Average         Yields and
Balance Interest (1) Rates (1)(2) Balance Interest (1) Rates (1)(2)
ASSETS:
Investments and other $ 276,018 $ 2,322 3.35 % $ 405,252 $ 2,644 2.59 %
Securities held to maturity 182,177 1,165 2.56 201,944 1,336 2.64
Securities available for sale: (3)
Taxable 791,289 4,400 2.22 611,816 3,691 2.41
Tax-exempt (4) 610,070 4,851 3.18 221,113 1,804 3.26
Loans and leases held for sale 492,457 9,770 7.89 180,278 4,261 9.38
Loans and leases: (5)
Consumer real estate:
Fixed-rate 2,169,493 30,367 5.57 2,520,567 36,384 5.73
Variable- and adjustable-rate 2,916,653   39,294   5.36 3,083,957   40,294   5.18
Total consumer real estate 5,086,146 69,661 5.45 5,604,524 76,678 5.43
Commercial:
Fixed-rate 948,856 11,212 4.70 1,090,001 13,869 5.05
Variable- and adjustable-rate 2,198,661   22,395   4.05 2,027,982   20,705   4.05
Total commercial 3,147,517 33,607 4.25 3,117,983 34,574 4.40
Leasing and equipment finance 4,252,543 47,129 4.43 3,911,025 44,479 4.55
Inventory finance 2,389,980 34,820 5.80 2,180,534 31,128 5.66
Auto finance 2,647,088 26,903 4.04 2,514,923 26,422 4.17
Other 9,307   135   5.72 9,060   157   6.88
Total loans and leases 17,532,581   212,255   4.82 17,338,049   213,438   4.89
Total interest-earning assets 19,884,592 234,763 4.70 18,958,452 227,174 4.76
Other assets (6) 1,253,002   1,245,751  
Total assets $ 21,137,594   $ 20,204,203  
LIABILITIES AND EQUITY:
Non-interest bearing deposits:
Retail $ 1,773,673 $ 1,639,550
Small business 926,388 874,892
Commercial and custodial 615,686   525,692  
Total non-interest bearing deposits 3,315,747 3,040,134
Interest-bearing deposits:
Checking 2,454,815 85 0.01 2,384,452 124 0.02
Savings 4,670,906 429 0.04 4,721,571 466 0.04
Money market 2,429,239 3,451 0.57 2,349,127 3,649 0.62
Certificates of deposit 4,198,190   11,088   1.05 3,793,653   9,533   1.00
Total interest-bearing deposits 13,753,150   15,053   0.44 13,248,803   13,772   0.41
Total deposits 17,068,897   15,053   0.35 16,288,937   13,772   0.34
Borrowings:
Short-term borrowings 5,063 9 0.77 28,364 6 0.09
Long-term borrowings 931,720   5,150   2.21 1,009,591   6,004   2.37
Total borrowings 936,783   5,159   2.20 1,037,955   6,010   2.31
Total interest-bearing liabilities 14,689,933   20,212   0.55 14,286,758   19,782   0.55
Total deposits and borrowings 18,005,680 20,212 0.45 17,326,892 19,782 0.45
Other liabilities 695,778   595,317  
Total liabilities 18,701,458   17,922,209  
Total TCF Financial Corp. stockholders' equity 2,417,222 2,263,018
Non-controlling interest in subsidiaries 18,914   18,976  
Total equity 2,436,136   2,281,994  
Total liabilities and equity $ 21,137,594   $ 20,204,203  
Net interest income and margin $ 214,551   4.30 $ 207,392   4.35
 
(1)     Interest and yields are presented on a fully tax-equivalent basis.
(2) Annualized.
(3) Average balances and yields of securities available for sale are based upon historical amortized cost and exclude equity securities.
(4) The yield on tax-exempt securities available for sale is computed on a tax-equivalent basis using a statutory federal income tax rate of 35% for all periods presented.
(5) Average balances of loans and leases include non-accrual loans and leases and are presented net of unearned income.
(6) Includes leased equipment and related initial direct costs under operating leases of $157.2 million and $123.8 million for the fourth quarters of 2016 and 2015, respectively.
 
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES
(Dollars in thousands)
(Unaudited)
 
    Year Ended December 31,
2016     2015
Average         Yields and Average         Yields and
Balance Interest (1) Rates (1) Balance Interest (1) Rates (1)
ASSETS:
Investments and other $ 319,582 $ 9,314 2.91 % $ 520,577 $ 12,294 2.36 %
Securities held to maturity 190,863 4,649 2.44 207,140 5,486 2.65
Securities available for sale: (2)
Taxable 719,743 16,238 2.26 564,205 13,930 2.47
Tax-exempt (3) 495,708 15,900 3.21 80,894 2,643 3.27
Loans and leases held for sale 479,401 39,648 8.27 286,295 25,766 9.00
Loans and leases: (4)
Consumer real estate:
Fixed-rate 2,285,647 130,753 5.72 2,710,512 157,428 5.81
Variable- and adjustable-rate 2,948,482   156,919   5.32 2,911,689   149,770   5.14
Total consumer real estate 5,234,129 287,672 5.50 5,622,201 307,198 5.46
Commercial:
Fixed-rate 972,107 47,445 4.88 1,173,039 59,037 5.03
Variable- and adjustable-rate 2,154,774   85,996   3.99 1,961,389   76,677   3.91
Total commercial 3,126,881 133,441 4.27 3,134,428 135,714 4.33
Leasing and equipment finance 4,106,718 183,029 4.46 3,804,015 175,565 4.62
Inventory finance 2,414,684 140,453 5.82 2,154,357 122,799 5.70
Auto finance 2,693,041 110,651 4.11 2,278,617 94,463 4.15
Other 9,538   548   5.74 10,303   712   6.91
Total loans and leases 17,584,991   855,794   4.87 17,003,921   836,451   4.92
Total interest-earning assets 19,790,288 941,543 4.76 18,663,032 896,570 4.80
Other assets (5) 1,285,127   1,226,645  
Total assets $ 21,075,415   $ 19,889,677  
LIABILITIES AND EQUITY:
Non-interest bearing deposits:
Retail $ 1,778,707 $ 1,658,951
Small business 884,192 838,758
Commercial and custodial 585,611   507,446  
Total non-interest bearing deposits 3,248,510 3,005,155
Interest-bearing deposits:
Checking 2,452,206 346 0.01 2,396,334 547 0.02
Savings 4,677,517 1,510 0.03 4,938,303 3,005 0.06
Money market 2,488,977 15,114 0.61 2,265,121 14,237 0.63
Certificates of deposit 4,229,247   44,818   1.06 3,340,341   30,437   0.91
Total interest-bearing deposits 13,847,947   61,788   0.45 12,940,099   48,226   0.37
Total deposits 17,096,457   61,788   0.36 15,945,254   48,226   0.30
Borrowings:
Short-term borrowings 7,051 51 0.73 18,822 53 0.28
Long-term borrowings 890,846   20,785   2.33 1,119,175   23,263   2.08
Total borrowings 897,897   20,836   2.32 1,137,997   23,316   2.05
Total interest-bearing liabilities 14,745,844   82,624   0.56 14,078,096   71,542   0.51
Total deposits and borrowings 17,994,354 82,624 0.46 17,083,251 71,542 0.42
Other liabilities 686,360   589,222  
Total liabilities 18,680,714   17,672,473  
Total TCF Financial Corp. stockholders' equity 2,373,176 2,197,690
Non-controlling interest in subsidiaries 21,525   19,514  
Total equity 2,394,701   2,217,204  
Total liabilities and equity $ 21,075,415   $ 19,889,677  
Net interest income and margin $ 858,919   4.34 $ 825,028   4.42
(1)     Interest and yields are presented on a fully tax-equivalent basis.
(2) Average balances and yields of securities available for sale are based upon historical amortized cost and exclude equity securities.
(3) The yield on tax-exempt securities available for sale is computed on a tax-equivalent basis using a statutory federal income tax rate of 35% for all periods presented.
(4) Average balances of loans and leases include non-accrual loans and leases and are presented net of unearned income.
(5) Includes leased equipment and related initial direct costs under operating leases of $140.3 million and $104.1 million for the year ended December 31, 2016 and 2015, respectively.
 
 
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,
2016 2016 2016 2016 2015
Interest income:
Loans and leases $ 210,848 $ 210,765 $ 214,128 $ 214,805 $ 212,346
Securities available for sale 7,553 7,126 6,396 5,498 4,864
Securities held to maturity 1,165 1,049 1,116 1,319 1,336
Loans held for sale and other 12,092   13,786   12,364   10,720   6,905  
Total interest income 231,658   232,726   234,004   232,342   225,451  
Interest expense:
Deposits 15,053 15,851 15,893 14,991 13,772
Borrowings 5,159   4,857   5,127   5,693   6,010  
Total interest expense 20,212   20,708   21,020   20,684   19,782  
Net interest income 211,446 212,018 212,984 211,658 205,669
Provision for credit losses 19,888   13,894   13,250   18,842   17,607  
Net interest income after provision for credit losses 191,558   198,124   199,734   192,816   188,062  
Non-interest income:
Fees and service charges 35,132 35,093 34,622 32,817 37,741
Card revenue 13,689 13,747 14,083 13,363 13,781
ATM revenue 4,806   5,330   5,288   5,021   5,143  
Subtotal 53,627 54,170 53,993 51,201 56,665
Gains on sales of auto loans, net 1,145 11,624 10,143 11,920 3,136
Gains on sales of consumer real estate loans, net 16,676 13,528 10,839 9,384 13,104
Servicing fee income 11,404   10,393   9,502   8,883   8,622  
Subtotal 29,225 35,545 30,484 30,187 24,862
Leasing and equipment finance 31,316 28,289 31,074 28,487 32,355
Other 1,365   2,270   2,405   2,843   1,806  
Fees and other revenue 115,533 120,274 117,956 112,718 115,688
Gains (losses) on securities, net 135   (600 )   (116 ) (29 )
Total non-interest income 115,668   119,674   117,956   112,602   115,659  
Non-interest expense:
Compensation and employee benefits 115,001 117,155 118,093 124,473 109,061
Occupancy and equipment 38,150 37,938 36,884 37,008 37,824
Other 59,235   59,421   59,416   53,348   56,930  
Subtotal 212,386 214,514 214,393 214,829 203,815
Operating lease depreciation 10,906 10,038 9,842 9,573 13,608
Foreclosed real estate and repossessed assets, net 1,889 4,243 3,135 3,920 4,940
Other credit costs, net 178   83   (54 ) 12   224  
Total non-interest expense 225,359   228,878   227,316   228,334   222,587  
Income before income tax expense 81,867 88,920 90,374 77,084 81,134
Income tax expense 29,762   30,257   29,706   26,803   26,614  
Income after income tax expense 52,105 58,663 60,668 50,281 54,520
Income attributable to non-controlling interest 2,013   2,371   2,974   2,235   2,028  
Net income attributable to TCF Financial Corporation 50,092 56,292 57,694 48,046 52,492
Preferred stock dividends 4,847   4,847   4,847   4,847   4,847  
Net income available to common stockholders $ 45,245   $ 51,445   $ 52,847   $ 43,199   $ 47,645  
 
Earnings per common share:
Basic $ 0.27 $ 0.31 $ 0.32 $ 0.26 $ 0.29
Diluted 0.27 0.31 0.31 0.26 0.29
 
Dividends declared per common share $ 0.075 $ 0.075 $ 0.075 $ 0.075 $ 0.075
 
Financial highlights: (1)
Return on average assets 0.99 % 1.12 % 1.14 % 0.96 % 1.08 %
Return on average common equity 8.40 9.59 10.09 8.45 9.53
Net interest margin 4.30 4.34 4.35 4.37 4.35
 

(1) Annualized.
 
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED QUARTERLY AVERAGE BALANCE SHEETS
(In thousands)
(Unaudited)
 
    Dec. 31,     Sep. 30,     Jun. 30,     Mar. 31,     Dec. 31,
2016 2016 2016 2016 2015
ASSETS:
Investments and other $ 276,018 $ 331,107 $ 322,477 $ 349,079 $ 405,252
Securities held to maturity 182,177 187,414 194,693 199,303 201,944
Securities available for sale: (1)
Taxable 791,289 747,890 697,902 640,796 611,816
Tax-exempt 610,070 570,013 481,246 319,427 221,113
Loans and leases held for sale 492,457 558,649 497,797 367,686 180,278
Loans and leases: (2)
Consumer real estate:
Fixed-rate 2,169,493 2,216,945 2,327,409 2,430,773 2,520,567
Variable- and adjustable-rate 2,916,653   2,918,631   2,931,318   3,028,001   3,083,957
Total consumer real estate 5,086,146 5,135,576 5,258,727 5,458,774 5,604,524
Commercial:
Fixed-rate 948,856 944,347 982,914 1,012,870 1,090,001
Variable- and adjustable-rate 2,198,661   2,147,768   2,127,032   2,145,231   2,027,982
Total commercial 3,147,517 3,092,115 3,109,946 3,158,101 3,117,983
Leasing and equipment finance 4,252,543 4,147,488 4,032,112 3,992,678 3,911,025
Inventory finance 2,389,980 2,272,409 2,564,648 2,433,534 2,180,534
Auto finance 2,647,088 2,670,272 2,751,679 2,703,880 2,514,923
Other 9,307   9,252   9,585   10,018   9,060
Total loans and leases 17,532,581   17,327,112   17,726,697   17,756,985   17,338,049
Total interest-earning assets 19,884,592 19,722,185 19,920,812 19,633,276 18,958,452
Other assets (3) 1,253,002   1,303,670   1,286,506   1,297,479   1,245,751
Total assets $ 21,137,594   $ 21,025,855   $ 21,207,318   $ 20,930,755   $ 20,204,203
 
LIABILITIES AND EQUITY:
Non-interest-bearing deposits:
Retail $ 1,773,673 $ 1,771,840 $ 1,817,734 $ 1,751,710 $ 1,639,550
Small business 926,388 894,761 861,394 853,645 874,892
Commercial and custodial 615,686   583,430   582,041   560,983   525,692
Total non-interest bearing deposits 3,315,747 3,250,031 3,261,169 3,166,338 3,040,134
Interest-bearing deposits:
Checking 2,454,815 2,434,934 2,478,673 2,440,563 2,384,452
Savings 4,670,906 4,661,565 4,677,681 4,700,164 4,721,571
Money market 2,429,239 2,496,590 2,557,897 2,472,751 2,349,127
Certificates of deposit 4,198,190   4,304,990   4,308,367   4,104,951   3,793,653
Total interest-bearing deposits 13,753,150   13,898,079   14,022,618   13,718,429   13,248,803
Total deposits 17,068,897   17,148,110   17,283,787   16,884,767   16,288,937
Borrowings:
Short-term borrowings 5,063 8,485 9,100 5,562 28,364
Long-term borrowings 931,720   729,737   840,739   1,062,513   1,009,591
Total borrowings 936,783   738,222   849,839   1,068,075   1,037,955
Total interest-bearing liabilities 14,689,933   14,636,301   14,872,457   14,786,504   14,286,758
Total deposits and borrowings 18,005,680 17,886,332 18,133,626 17,952,842 17,326,892
Other liabilities 695,778   708,048   690,363   650,908   595,317
Total liabilities 18,701,458   18,594,380   18,823,989   18,603,750   17,922,209
Total TCF Financial Corporation stockholders' equity 2,417,222 2,409,312 2,357,509 2,307,781 2,263,018
Non-controlling interest in subsidiaries 18,914   22,163   25,820   19,224   18,976
Total equity 2,436,136   2,431,475   2,383,329   2,327,005   2,281,994
Total liabilities and equity $ 21,137,594   $ 21,025,855   $ 21,207,318   $ 20,930,755   $ 20,204,203
 
(1)     Average balances of securities available for sale are based upon historical amortized cost and exclude equity securities.
(2) Average balances of loans and leases include non-accrual loans and leases and are presented net of unearned income.
(3) Includes leased equipment and related initial direct costs under operating leases of $157.2 million, $138.2 million, $131.9 million, $133.6 million and $123.8 million for the fourth quarter, third quarter, second quarter and first quarter of 2016, and for the fourth quarter of 2015, respectively.
 
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED QUARTERLY YIELDS AND RATES (1)(2)
(Unaudited)
 
    Dec. 31,     Sep. 30,     Jun. 30,     Mar. 31,    

Dec. 31,
2016 2016 2016 2016

2015
ASSETS:
Investments and other 3.35 % 2.86 % 2.99 % 2.55 % 2.59 %
Securities held to maturity 2.56 2.24 2.29 2.65 2.64
Securities available for sale: (3)
Taxable 2.22 2.23 2.21 2.38 2.41
Tax-exempt (4) 3.18 3.19 3.25 3.24 3.26
Loans and leases held for sale 7.89 8.12 8.05 9.30 9.38
Loans and leases:
Consumer real estate:
Fixed-rate 5.57 5.75 5.73 5.82 5.73
Variable- and adjustable rate 5.36 5.29 5.32 5.32 5.18
Total consumer real estate 5.45 5.49 5.50 5.54 5.43
Commercial:
Fixed-rate 4.70 4.92 4.96 4.94 5.05
Variable- and adjustable-rate 4.05 3.91 4.00 4.00 4.05
Total commercial 4.25 4.22 4.30 4.30 4.40
Leasing and equipment finance 4.43 4.48 4.45 4.47 4.55
Inventory finance 5.80 6.07 5.74 5.68 5.66
Auto finance 4.04 4.06 4.19 4.14 4.17
Other 5.72 5.85 5.77 5.63 6.88
Total loans and leases 4.82 4.88 4.88 4.89 4.89
 
Total interest-earning assets 4.70 4.76 4.77 4.80 4.76
 
LIABILITIES:
Interest-bearing deposits:
Checking 0.01 0.01 0.02 0.01 0.02
Savings 0.04 0.03 0.03 0.03 0.04
Money market 0.57 0.61 0.63 0.62 0.62
Certificates of deposit 1.05 1.07 1.07 1.05 1.00
Total interest-bearing deposits 0.44 0.45 0.46 0.44 0.41
Total deposits 0.35 0.37 0.37 0.36 0.34
Borrowings:
Short-term borrowings 0.77 0.86 0.71 0.53 0.09
Long-term borrowings 2.21 2.65 2.43 2.14 2.37
Total borrowings 2.20 2.63 2.42 2.13 2.31
 
Total interest-bearing liabilities 0.55 0.56 0.57 0.56 0.55
 
Net interest margin 4.30 4.34 4.35 4.37 4.35
(1)     Annualized.
(2) Yields are presented on a fully tax-equivalent basis.
(3) Average yields of securities available for sale are based upon historical amortized cost and exclude equity securities.
(4) The yield on tax-exempt securities available for sale is computed on a tax-equivalent basis using a statutory federal income tax rate of 35% for all periods presented.
 
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (1)
(Dollars in thousands)
(Unaudited)
        At Dec. 31,     At Dec. 31,
2016 2015

Computation of tangible common equity to tangible assets and tangible book value per common share:
Total equity $ 2,444,645 $ 2,306,917
Less: Non-controlling interest in subsidiaries 17,162   16,001  
Total TCF Financial Corporation stockholders' equity 2,427,483 2,290,916
Less: Preferred stock 263,240   263,240  
Total common stockholders' equity (a) 2,164,243 2,027,676
Less:
Goodwill 225,640 225,640
Other intangibles 1,738   3,126  
Tangible common equity (b) $ 1,936,865   $ 1,798,910  
 
Total assets (c) $ 21,441,326 $ 20,689,609
Less:
Goodwill 225,640 225,640
Other intangibles 1,738   3,126  
Tangible assets (d) $ 21,213,948   $ 20,460,843  
 
Common stock shares outstanding (e) 170,991,940 169,844,464
 
Common equity to assets (a) / (c) 10.09 % 9.80 %
Tangible common equity to tangible assets (b) / (d) 9.13 % 8.79 %
 
Book value per common share (a) / (e) $ 12.66 $ 11.94
Tangible book value per common share (b) / (e) $ 11.33 $ 10.59
        Three Months Ended     Year Ended
Dec. 31,     Sep. 30,     Dec. 31, Dec. 31,     Dec. 31,
2016 2016 2015 2016 2015

Computation of return on average tangible common equity:
Net income available to common stockholders (f) $ 45,245 $ 51,445 $ 47,645 $ 192,736 $ 177,735
Plus: Other intangibles amortization 290 366 392 1,388 1,562
Less: Income tax expense attributable to other intangibles amortization 103   128   141   493   562  
Adjusted net income available to common stockholders (g) $ 45,432   $ 51,683   $ 47,896   $ 193,631   $ 178,735  
 
Average balances:
Total equity $ 2,436,136 $ 2,431,475 $ 2,281,994 $ 2,394,701 $ 2,217,204
Less: Non-controlling interest in subsidiaries 18,914   22,163   18,976   21,525   19,514  
Total TCF Financial Corporation stockholders' equity 2,417,222 2,409,312 2,263,018 2,373,176 2,197,690
Less: Preferred stock 263,240   263,240   263,240   263,240   263,240  
Average total common stockholders' equity (h) 2,153,982 2,146,072 1,999,778 2,109,936 1,934,450
Less:
Goodwill 225,640 225,640 225,640 225,640 225,640
Other intangibles 1,872   2,233   3,342   2,414   3,913  
Average tangible common equity (i) $ 1,926,470   $ 1,918,199   $ 1,770,796   $ 1,881,882   $ 1,704,897  
 
Return on average common equity (2) (f) / (h) 8.40 % 9.59 % 9.53 % 9.13 % 9.19 %
Return on average tangible common equity (2) (g) / (i) 9.43 % 10.78 % 10.82 % 10.29 % 10.48 %
(1)     When evaluating capital adequacy and utilization, management considers financial measures such as tangible common equity to tangible assets, tangible book value per common share and return on average tangible common equity. 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.
(2) Annualized.
 

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