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Press Release

TCF Reports Quarterly Net Income of $52.3 Million, or 29 Cents Per Share

Company Release - 7/23/2015 8:00 AM ET

SECOND QUARTER HIGHLIGHTS

  • Revenue of $319.5 million, up 3.0 percent from the second quarter of 2014
  • Loan and lease originations of $3.9 billion, up 14.5 percent from the second quarter of 2014
  • Average deposits of $15.9 billion, up 7.3 percent from the second quarter of 2014
  • Non-accrual loans and leases of $205.7 million, down 21.0 percent from the second quarter of 2014
  • Earnings per share of 29 cents, flat to the second quarter of 2014, up 38.1 percent from the first quarter of 2015

WAYZATA, Minn.--(BUSINESS WIRE)-- TCF Financial Corporation (NYSE:TCB):

                                                 
Summary of Financial Results                                         Table 1
                Percent Change            
(Dollars in thousands, except per-share data) 2Q 1Q 2Q 2Q15 vs     2Q15 vs YTD YTD Percent
2015     2015     2014     1Q15     2Q14     2015     2014     Change
Net income attributable to TCF $ 52,255 $ 39,801 $ 53,125 31.3 % (1.6 )% $ 92,056 $ 97,882 (6.0 )%
Net interest income 206,029 203,420 206,101 1.3 409,449 407,375 0.5
Diluted earnings per common share 0.29 0.21 0.29 38.1 0.50 0.54 (7.4 )
 

Financial Ratios(1)

Pre-tax pre-provision return on average assets(2)

1.94 % 1.58 % 2.05 % 1.76 % 1.96 %
Return on average assets 1.10 0.85 1.17 0.98 1.09
Return on average common equity 9.93 7.47 10.99 8.71 10.18

Return on average tangible common equity(3)

11.34 8.58 12.72 9.98 11.82
Net interest margin 4.44 4.50 4.65 4.47 4.66

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

0.41 0.28 0.45 0.34 0.44
 
(1) Annualized.
(2) Pre-tax pre-provision profit is calculated as total revenues less non-interest expense.
(3) See "Reconciliation of GAAP to Non-GAAP Financial Measures" table.
 

TCF Financial Corporation ("TCF" or the "Company") (NYSE: TCB) today reported net income of $52.3 million for the second quarter of 2015, compared with net income of $53.1 million for the second quarter of 2014, and net income of $39.8 million for the first quarter of 2015. Diluted earnings per common share was 29 cents for the second quarter of 2015, compared with 29 cents for the second quarter of 2014, and 21 cents for the first quarter of 2015.

TCF reported net income of $92.1 million for the first six months of 2015, compared with net income of $97.9 million for the same period in 2014. Diluted earnings per common share was 50 cents for the first six months of 2015, compared with 54 cents for the same period in 2014.

Chairman's Statement

"TCF's second quarter was highlighted by increased fee revenue, reduced expenses and continued strong loan and lease originations,” said William A. Cooper, chairman and chief executive officer. "Banking fees experienced a seasonal rebound while our second auto loan securitization helped gains on sales of loans return to a more normalized level. Expenses declined from the prior quarter as we focus on improving operating leverage moving forward.

"Meanwhile, our continued strong originations, along with loan sale and securitization capabilities, are driving growth and diversification of both the balance sheet and revenue base. With credit issues largely behind us, an asset sensitive balance sheet and opportunities on the horizon, there is much to look forward to at TCF."

                               
Revenue
                                                 
Total Revenue                                         Table 2
Percent Change
(Dollars in thousands) 2Q 1Q 2Q 2Q15 vs 2Q15 vs YTD YTD Percent
2015     2015     2014     1Q15     2Q14     2015     2014     Change
Net interest income $ 206,029       $ 203,420       $ 206,101   1.3 % % $ 409,449       $ 407,375   0.5 %
Fees and other revenue:
Fees and service charges 36,295 33,972 38,035 6.8 (4.6 ) 70,267 74,654 (5.9 )
Card revenue 13,902 12,901 13,249 7.8 4.9 26,803 25,499 5.1
ATM revenue   5,540         5,122         5,794   8.2 (4.4 )   10,662         11,113   (4.1 )
Total banking fees 55,737 51,995 57,078 7.2 (2.3 ) 107,732 111,266 (3.2 )
Gains on sales of auto loans, net 10,756 6,265 7,270 71.7 48.0 17,021 15,740 8.1

Gains on sales of consumer real estate loans, net

11,954 8,763 8,151 36.4 46.7 20,717 19,857 4.3
Servicing fee income   7,216         7,342         4,892   (1.7 ) 47.5   14,558         9,199   58.3
Subtotal 29,926 22,370 20,313 33.8 47.3 52,296 44,796 16.7
Leasing and equipment finance 26,385 22,224 23,069 18.7 14.4 48,609 45,049 7.9
Other   1,460         4,127         2,789   (64.6 ) (47.7 )   5,587         5,171   8.0
Total fees and other revenue 113,508 100,716 103,249 12.7 9.9 214,224 206,282 3.9
Gains (losses) on securities, net   (59 )       (78 )       767   24.4 N.M.   (137 )       1,141   N.M.
Total non-interest income   113,449         100,638         104,016   12.7 9.1   214,087         207,423   3.2
Total revenue $ 319,478       $ 304,058       $ 310,117   5.1 3.0 $ 623,536       $ 614,798   1.4
 
Net interest margin(1) 4.44 % 4.50 % 4.65 % 4.47 % 4.66 %
Total non-interest income as a percentage of total revenue 35.5 33.1 33.5 34.3 33.7
 
N.M. Not Meaningful.
(1) Annualized.
 

Net Interest Income

  • Net interest income for the second quarter of 2015 remained consistent compared with the second quarter of 2014 and increased $2.6 million, or 1.3 percent, compared with the first quarter of 2015. The increase from the first quarter of 2015 was primarily due to higher average loan and lease balances in the auto finance and inventory finance portfolios, partially offset by lower first mortgage consumer real estate loan balances due to run-off.
  • Net interest margin in the second quarter of 2015 was 4.44 percent, compared with 4.65 percent in the second quarter of 2014 and 4.50 percent in the first quarter of 2015. The decreases from both periods were primarily due to margin compression resulting from the competitive low interest rate environment. The decrease from the second quarter of 2014 was further driven by a higher total deposit rate.

Non-interest Income

  • Fees and service charges in the second quarter of 2015 were $36.3 million, down $1.7 million, or 4.6 percent, from the second quarter of 2014 and up $2.3 million, or 6.8 percent, from the first quarter of 2015. The decrease from the second quarter of 2014 was primarily due to consumer behavior changes, as well as higher average checking account balances per customer. The increase from the first quarter of 2015 was primarily due to seasonality resulting in an increase in transaction activity and lower average checking account balances per customer.
  • TCF sold $436.4 million, $220.2 million and $203.5 million of auto loans during the second quarters of 2015 and 2014, and the first quarter of 2015, respectively, resulting in net gains in each respective period. The auto loans sold for the second quarter of 2015 related to the execution of the Company's second auto loan securitization.
  • TCF sold $364.9 million, $224.2 million and $264.3 million of consumer real estate loans during the second quarters of 2015 and 2014, and the first quarter of 2015, respectively, resulting in net gains in each respective period. The majority of the consumer real estate loans sold are junior lien loans. Included in consumer real estate loans sold was $74.5 million and $61.8 million of first mortgage loans related to the correspondent lending program for the second quarter of 2015 and the first quarter of 2015, respectively, resulting in net gains in each respective period.
  • Servicing fee income was $7.2 million on $3.7 billion of average loans and leases serviced for others during the second quarter of 2015 compared with $4.9 million on $2.5 billion for the second quarter of 2014 and $7.3 million on $3.5 billion for the first quarter of 2015. The increase from the second quarter of 2014 was primarily due to the cumulative effect of an increase in the portfolio of auto and consumer real estate loans sold with servicing retained by TCF.
 
Loans and Leases
                                                 
Period-End and Average Loans and Leases               Table 3
                Percent Change            
(Dollars in thousands) 2Q 1Q 2Q 2Q15 vs   2Q15 vs YTD YTD Percent
2015     2015     2014     1Q15     2Q14     2015     2014     Change
Period-End:
Consumer real estate:
First mortgage lien $ 2,865,911 $ 3,011,166 $ 3,542,324 (4.8 )% (19.1 )%
Junior lien   2,678,118       2,597,895       2,480,763 3.1 8.0
Total consumer real estate 5,544,029 5,609,061 6,023,087 (1.2 ) (8.0 )
Commercial 3,112,344 3,205,599 3,093,161 (2.9 ) 0.6
Leasing and equipment finance 3,791,215 3,729,386 3,526,264 1.7 7.5
Inventory finance 2,106,087 2,336,518 1,880,667 (9.9 ) 12.0
Auto finance 2,301,714 2,156,139 1,502,860 6.8 53.2
Other   21,852       20,448       24,486 6.9 (10.8 )
Total $ 16,877,241     $ 17,057,151     $ 16,050,525 (1.1 ) 5.2
 
Average:
Consumer real estate:
First mortgage lien $ 2,936,793 $ 3,076,802 $ 3,606,635 (4.6 )% (18.6 )% $ 3,006,411 $ 3,662,985 (17.9 )%
Junior lien   2,650,894       2,614,538       2,498,151 1.4 6.1   2,632,816       2,552,698 3.1
Total consumer real estate 5,587,687 5,691,340 6,104,786 (1.8 ) (8.5 ) 5,639,227 6,215,683 (9.3 )
Commercial 3,148,272 3,154,008 3,131,320 (0.2 ) 0.5 3,151,124 3,126,718 0.8
Leasing and equipment finance 3,751,776 3,729,481 3,500,647 0.6 7.2 3,740,691 3,467,851 7.9
Inventory finance 2,292,481 2,108,871 2,061,437 8.7 11.2 2,201,183 1,968,431 11.8
Auto finance 2,211,014 2,021,144 1,518,194 9.4 45.6 2,116,604 1,423,240 48.7
Other   10,734       11,616       12,040 (7.6 ) (10.8 )   11,173       12,654 (11.7 )
Total $ 17,001,964     $ 16,716,460     $ 16,328,424 1.7 4.1 $ 16,860,002     $ 16,214,577 4.0
                                                                 
 
  • Period-end loans and leases were $16.9 billion at June 30, 2015, an increase of $0.8 billion, or 5.2 percent, compared with June 30, 2014 and a decrease of $0.2 billion, or 1.1 percent, compared with March 31, 2015. Average loans and leases were $17.0 billion for the second quarter of 2015, an increase of $0.7 billion, or 4.1 percent, compared with the second quarter of 2014 and an increase of $0.3 billion, or 1.7 percent, compared with the first quarter of 2015.

    The increases from the second quarter of 2014 for period-end loans and leases 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 in its network, as well as increases in the leasing and equipment finance and inventory finance portfolios. These increases were partially offset by a decrease in the consumer real estate portfolio as a result of the troubled debt restructuring ("TDR") loan sale that occurred in the fourth quarter of 2014, run-off in the first mortgage consumer real estate portfolio and increased loan sales in the auto finance and consumer real estate portfolios.

    The decrease from the first quarter of 2015 for period-end loans and leases was primarily due to seasonality in the inventory finance portfolio and a decrease in the commercial portfolio, partially offset by the growth in the auto finance portfolio. The increase from the first quarter of 2015 for average loans and leases was due to the growth in the auto finance portfolio and further driven by peak seasonality balances in the inventory finance portfolio during the first two months of the second quarter of 2015, partially offset by a decrease in the first mortgage consumer real estate portfolio due to run-off.
  • Loan and lease originations were $3.9 billion for the second quarter of 2015, an increase of $0.5 billion, or 14.5 percent, compared with the second quarter of 2014 and an increase of $0.4 billion, or 10.7 percent, compared with the first quarter of 2015. The increase in originations from the second quarter of 2014 was primarily due to an increase in consumer real estate junior lien originations and growth in the lawn and garden segment of inventory finance. The increase from the first quarter of 2015 was primarily due to an increase in consumer real estate junior lien and leasing and equipment finance originations.
 
Credit Quality
                                           
Credit Trends                                   Table 4
                        Percent Change
(Dollars in thousands) 2Q 1Q 4Q 3Q 2Q 2Q15 vs     2Q15 vs
2015     2015     2014     2014     2014     1Q15     2Q14
Over 60-day delinquencies as a percentage of portfolio(1) 0.10 % 0.14 % 0.14 % 0.17 % 0.18 % (4 ) bps (8 ) bps
Net charge-offs as a percentage of portfolio(2) 0.41 0.28 0.40 0.66 0.45 13 (4 )
Non-accrual loans and leases and other real estate owned $ 263,717 $ 284,541 $ 282,384 $ 342,725 $ 325,374 (7.3 )% (18.9 )%
Provision for credit losses 12,528 12,791 55,597 15,739 9,909 (2.1 ) 26.4
 
(1) Excludes acquired portfolios and non-accrual loans and leases.
(2) Annualized.
 
  • The over 60-day delinquency rate, excluding acquired portfolios and non-accrual loans and leases, was 0.10 percent at June 30, 2015, down from 0.18 percent at June 30, 2014, and down from 0.14 percent at March 31, 2015. The decreases from both periods were primarily a result of the stabilization of the consumer real estate portfolio as economic conditions improved in our markets.
  • The net charge-off rate was 0.41 percent for the second quarter of 2015, down from 0.45 percent for the second quarter of 2014, and up from 0.28 percent for the first quarter of 2015. The decrease from the second quarter of 2014 was primarily due to improved credit quality in the commercial and consumer real estate portfolios. The increase from the first quarter of 2015 was driven by increased charge-offs of loans in the consumer real estate first mortgage lien portfolio and net recoveries in the commercial portfolio during the first quarter of 2015.
  • Non-accrual loans and leases and other real estate owned totaled $263.7 million at June 30, 2015, a decrease of $61.7 million, or 18.9 percent, from June 30, 2014, and a decrease of $20.8 million, or 7.3 percent, from March 31, 2015. The decrease from June 30, 2014 was primarily due to the TDR loan sale that occurred in the fourth quarter of 2014, which included $40.1 million of non-accrual loans, as well as improving credit quality trends and continued efforts to actively work out problem loans in the commercial portfolio. The decrease from March 31, 2015 was driven by improved credit quality in the commercial portfolio.
  • Provision for credit losses was $12.5 million for the second quarter of 2015, an increase of $2.6 million, or 26.4 percent, from the second quarter of 2014, and a decrease of $0.3 million, or 2.1 percent, from the first quarter of 2015. The increase from the second quarter of 2014 was driven by growth in the auto finance and consumer real estate junior lien portfolios.
 
Deposits
                                                 
Average Deposits                                         Table 5
                Percent Change            
(Dollars in thousands) 2Q 1Q 2Q 2Q15 vs     2Q15 vs YTD YTD Percent
2015     2015     2014     1Q15     2Q14     2015     2014     Change
 
Checking $ 5,428,419 $ 5,300,699 $ 5,098,650 2.4 % 6.5 % $ 5,364,911 $ 5,057,612