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TCF Reports Quarterly Net Income of $52.5 Million, or 29 Cents Per Share and Annual Net Income of $197.1 Million, or $1.07 Per Share

Company Release - 1/28/2016 8:00 AM ET

2015 HIGHLIGHTS

  • Loan and lease originations of $15.3 billion, up 13.1 percent from 2014
  • Period-end loans and leases of $17.4 billion, up 6.3 percent from 2014
  • Non-accrual loans and leases of $200.5 million, down 7.5 percent from 2014
  • Average deposits of $15.9 billion, up 6.7 percent from 2014
  • Revenue of $1.3 billion, up 1.1 percent from 2014
  • Provision for credit losses of $52.9 million, down 44.7 percent from 2014
  • Earnings per share of $1.07, up 13.8 percent from 2014

FOURTH QUARTER HIGHLIGHTS

  • Loan and lease originations of $3.8 billion, up 11.2 percent from the fourth quarter of 2014
  • Average deposits of $16.3 billion, up 6.4 percent from the fourth quarter of 2014
  • Revenue of $321.3 million, up 2.4 percent from the fourth quarter of 2014
  • Provision for credit losses of $17.6 million, down 68.3 percent from the fourth quarter of 2014
  • Earnings per share of 29 cents, up 141.7 percent from the fourth quarter of 2014

WAYZATA, Minn.--(BUSINESS WIRE)--

TCF Financial Corporation (NYSE:TCB):

                                     
Summary of Financial Results                                   Table 1
            Percent Change      
(Dollars in thousands, except per-share data) 4Q 3Q 4Q 4Q15 vs   4Q15 vs YTD YTD Percent
2015   2015   2014   3Q15   4Q14   2015   2014   Change
Net income attributable to TCF $ 52,492 $ 52,575 $ 23,988 (0.2 )% 118.8 % $ 197,123 $ 174,187 13.2 %
Net interest income 205,669 205,270 204,074 0.2 0.8 820,388 815,629 0.6
Diluted earnings per common share 0.29 0.29 0.12 141.7 1.07 0.94 13.8
 

Financial Ratios(1)

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

1.95 % 1.92 % 1.91 % 1.85 % 2.00 %
Return on average assets 1.08 1.10 0.53 1.03 0.96
Return on average common equity 9.53 9.76 4.15 9.19 8.71

Return on average tangible common equity(3)

10.82 11.12 4.80 10.48 10.08
Net interest margin 4.35 4.40 4.49 4.42 4.61

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

0.29 0.23 0.40 0.30 0.49
 
(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 $52.5 million for the fourth quarter of 2015, compared with net income of $24.0 million for the fourth quarter of 2014, and net income of $52.6 million for the third quarter of 2015. Diluted earnings per common share was 29 cents for the fourth quarter of 2015, compared with 12 cents for the fourth quarter of 2014, and 29 cents for the third quarter of 2015.

TCF reported net income of $197.1 million for the year ended December 31, 2015, compared with net income of $174.2 million for the same period in 2014. Diluted earnings per common share was $1.07 for the year ended December 31, 2015, compared with 94 cents for the same period in 2014.

"TCF experienced another successful year in 2015 as earnings per share increased 13.8 percent while return on average tangible common equity improved by 40 basis points," said Craig R. Dahl, chief executive officer. "Meanwhile, loan and lease originations increased 13.1 percent during the year which led to additional revenue growth and diversification. Fourth quarter results were highlighted by continued progress toward improving operating leverage and continued strong performance on credit results.

"As I begin my new role, I look forward to building on TCF's historical track record of delivering sustained growth and returns for our shareholders by executing against our four strategic pillars: diversification, profitable growth, operating leverage and core funding. As we entered the new year, we implemented several leadership changes that align the expertise of our senior management team with these core priorities. I am confident we have a strong team in place to execute our strategy and build on TCF's long history of delivering business results. With a well-positioned balance sheet and business model for rising interest rates, and continued strong credit performance, we are poised to drive shareholder value in 2016 and beyond."

                   
Revenue
                                   

 

Total Revenue                                

 

Table 2

Percent Change
(Dollars in thousands) 4Q 3Q 4Q 4Q15 vs 4Q15 vs YTD YTD Percent
2015   2015   2014   3Q15   4Q14   2015   2014   Change
Net interest income $ 205,669     $ 205,270     $ 204,074   0.2 % 0.8 % $ 820,388     $ 815,629   0.6 %
Non-interest income:
Fees and service charges 37,741 36,991 39,477 2.0 (4.4 ) 144,999 154,386 (6.1 )
Card revenue 13,781 13,803 12,830 (0.2 ) 7.4 54,387 51,323 6.0
ATM revenue 5,143     5,739     5,249   (10.4 ) (2.0 ) 21,544     22,225   (3.1 )
Subtotal 56,665 56,533 57,556 0.2 (1.5 ) 220,930 227,934 (3.1 )
Gains on sales of auto loans, net 3,136 10,423 12,962 (69.9 ) (75.8 ) 30,580 43,565 (29.8 )

Gains on sales of consumer real estate loans, net

13,104 7,143 6,175 83.5 112.2 40,964 34,794 17.7
Servicing fee income 8,622     8,049     6,365   7.1 35.5 31,229     21,444   45.6
Subtotal 24,862 25,615 25,502 (2.9 ) (2.5 ) 102,773 99,803 3.0
Leasing and equipment finance 32,355 27,165 24,367 19.1 32.8 108,129 93,799 15.3
Other 1,806     3,070     2,363   (41.2 ) (23.6 ) 10,463     10,704   (2.3 )
Fees and other revenue 115,688 112,383 109,788 2.9 5.4 442,295 432,240 2.3
Gains (losses) on securities, net (29 )   (131 )   (20 ) 77.9 (45.0 ) (297 )   1,027   N.M.
Total non-interest income 115,659     112,252     109,768   3.0 5.4 441,998     433,267   2.0
Total revenue $ 321,328     $ 317,522     $ 313,842   1.2 2.4 $ 1,262,386     $ 1,248,896   1.1
 
Net interest margin(1) 4.35 % 4.40 % 4.49 % 4.42 % 4.61 %
Total non-interest income as a percentage of total revenue 36.0 35.4 35.0 35.0 34.7
 
N.M. Not Meaningful.
 
(1) Annualized.                                    
 

Net Interest Income

  • Net interest income for the fourth quarter of 2015 increased $1.6 million, or 0.8 percent, compared with the fourth quarter of 2014 and increased $0.4 million, or 0.2 percent, compared with the third quarter of 2015. The increases from both periods were primarily due to higher average loan and lease balances in the auto finance, inventory finance and leasing and equipment finance portfolios, partially offset by the run-off of consumer real estate first mortgage lien balances and overall net margin compression.
  • Net interest margin for the fourth quarter of 2015 was 4.35 percent, compared with 4.49 percent for the fourth quarter of 2014 and 4.40 percent for the third quarter of 2015. The decreases from both periods were primarily due to margin compression resulting from the impact of the competitive low interest rate environment on the asset composition and higher rates on total deposits, driven primarily by certificates of deposits, acquired at market rates to fund asset growth.

Non-interest Income

  • Fees and service charges in the fourth quarter of 2015 were $37.7 million, down $1.7 million, or 4.4 percent, from the fourth quarter of 2014 and consistent with the third quarter of 2015. The decrease from the fourth quarter of 2014 was primarily due to consumer behavior changes, as well as higher average checking account balances per customer.
  • TCF sold $271.1 million, $367.0 million and $436.6 million of auto loans during the fourth quarters of 2015 and 2014, and the third quarter of 2015, respectively, resulting in net gains in each respective period. TCF executed another auto loan securitization in the four quarter of 2015.
  • TCF sold $389.1 million, $613.7 million and $246.0 million of consumer real estate loans during the fourth quarters of 2015 and 2014, and the third quarter of 2015, respectively, resulting in net gains in each respective period. TCF has two consumer real estate loan sale programs; one that sells nationally originated junior lien loans and the other that originates first mortgage lien loans in our primary banking markets and sells the loans through a correspondent relationship. Included in consumer real estate loans sold (servicing released) for the fourth quarter of 2014 is $405.9 million related to the portfolio sale of consumer real estate loans, primarily troubled debt restructuring ("TDR") loans, the proceeds of which were reinvested in our core businesses in 2015.
  • Servicing fee income was $8.6 million on $4.2 billion of average loans and leases serviced for others during the fourth quarter of 2015 compared with $6.4 million on $3.3 billion for the fourth quarter of 2014 and $8.0 million on $4.0 billion for the third quarter of 2015. The increases from both periods were 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) 4Q 3Q 4Q 4Q15 vs   4Q15 vs YTD YTD Percent
2015   2015   2014   3Q15   4Q14   2015   2014   Change
Period-End:
Consumer real estate:
First mortgage lien $ 2,624,956 $ 2,724,594 $ 3,139,152 (3.7 )% (16.4 )%
Junior lien 2,839,316     2,889,120     2,543,212   (1.7 ) 11.6
Total consumer real estate 5,464,272 5,613,714 5,682,364 (2.7 ) (3.8 )
Commercial 3,145,832 3,112,325 3,157,665 1.1 (0.4 )
Leasing and equipment finance 4,012,248 3,873,581 3,745,322 3.6 7.1
Inventory finance 2,146,754 2,153,385 1,877,090 (0.3 ) 14.4
Auto finance 2,647,596 2,427,367 1,915,061 9.1 38.3
Other 19,297     20,674     24,144   (6.7 ) (20.1 )
Total $ 17,435,999     $ 17,201,046     $ 16,401,646   1.4 6.3
 
Average:
Consumer real estate:
First mortgage lien $ 2,670,355 $ 2,793,129 $ 3,447,447 (4.4 )% (22.5 )% $ 2,867,948 $ 3,567,088 (19.6 )%
Junior lien 2,934,169     2,813,253     2,611,709   4.3 12.3 2,754,253     2,581,464   6.7
Total consumer real estate 5,604,524 5,606,382 6,059,156 (7.5 ) 5,622,201 6,148,552 (8.6 )
Commercial 3,117,983 3,118,024 3,143,614 (0.8 ) 3,134,428 3,135,367
Leasing and equipment finance 3,911,025 3,821,590 3,611,557 2.3 8.3 3,804,015 3,531,256 7.7
Inventory finance 2,180,534 2,036,054 1,891,504 7.1 15.3 2,154,357 1,888,080 14.1
Auto finance 2,514,923 2,361,057 1,817,024 6.5 38.4 2,278,617 1,567,904 45.3
Other 9,060     9,833     11,396   (7.9 ) (20.5 ) 10,303     12,071   (14.6 )
Total $ 17,338,049     $ 16,952,940     $ 16,534,251   2.3 4.9 $ 17,003,921     $ 16,283,230   4.4
 
  • Period-end loans and leases were $17.4 billion at December 31, 2015, an increase of $1.0 billion, or 6.3 percent, compared with December 31, 2014 and an increase of $0.2 billion, or 1.4 percent, compared with September 30, 2015. Average loans and leases were $17.3 billion for the fourth quarter of 2015, an increase of $0.8 billion, or 4.9 percent, compared with the fourth quarter of 2014 and an increase of $0.4 billion, or 2.3 percent, compared with the third quarter of 2015.

    The increases from both periods for period-end loans and leases and for 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, partially offset by run-off in the consumer real estate first mortgage lien portfolio. The increases from the fourth quarter of 2014 for period-end loans and leases and from both periods for average loans and leases were also due to increases in the inventory finance and the leasing and equipment finance portfolios. The increase from the third quarter of 2015 for period-end loans and leases was also due to an increase in the leasing and equipment finance portfolio due to strong fourth quarter originations.
  • Loan and lease originations were $3.8 billion for the fourth quarter of 2015, an increase of $0.4 billion, or 11.2 percent, compared with the fourth quarter of 2014 and a decrease of $0.1 billion, or 1.3 percent, compared with the third quarter of 2015. The increase in originations from the fourth quarter of 2014 was primarily due to an increase in commercial originations and continued growth in auto finance. The decrease in originations from the third quarter of 2015 was primarily due to seasonality of inventory finance originations and a decrease in consumer real estate originations, partially offset by an increase in commercial and leasing and equipment finance originations.
                   
Credit Quality
                                   
Credit Trends                                 Table 4
Change
(Dollars in thousands) 4Q 3Q 2Q 1Q 4Q 4Q15 vs 4Q15 vs
2015   2015   2015   2015   2014     3Q15   4Q14

Over 60-day delinquencies as a percentage of portfolio(1)

0.11

%

0.17

% 0.10 % 0.14 % 0.14 %

(6

) bps

(3

) bps

Net charge-offs as a percentage of portfolio(2)

0.29 0.23 0.41 0.28 0.40 6 (11 )

Non-accrual loans and leases and other real estate owned

$ 250,448 $ 264,694 $ 263,717 $ 284,541 $ 282,384 (5.4 )% (11.3 )%
Provision for credit losses 17,607 10,018 12,528 12,791 55,597 75.8 (68.3 )
 
(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 0.11 percent at December 31, 2015, down from 0.14 percent at December 31, 2014, and down from 0.17 percent at September 30, 2015. The decrease from December 31, 2014 was primarily a result of the stabilization of the consumer real estate portfolio as economic conditions improved in our markets. The decrease from September 30, 2015 was primarily driven by delinquencies in the commercial and leasing and equipment finance portfolios at September 30, 2015 that have been brought current.
  • The net charge-off rate was 0.29 percent for the fourth quarter of 2015, down from 0.40 percent for the fourth quarter of 2014, and up from 0.23 percent for the third quarter of 2015. The decrease from the fourth quarter of 2014 was primarily due to improved credit quality in the consumer real estate and commercial portfolios. The increase from the third quarter of 2015 was due to increased net charge-offs of loans in the auto finance portfolio as a result of seasonality, increased net charge-offs in the leasing and equipment finance portfolio and net recoveries in the commercial portfolio during the third quarter of 2015.
  • Non-accrual loans and leases and other real estate owned was $250.4 million at December 31, 2015, a decrease of $31.9 million, or 11.3 percent, from December 31, 2014, and a decrease of $14.2 million, or 5.4 percent, from September 30, 2015. The decreases from both periods were primarily due to the improving credit quality trends and continued efforts to actively work out problem loans in the commercial portfolio.
  • Provision for credit losses was $17.6 million for the fourth quarter of 2015, a decrease of $38.0 million, or 68.3 percent, from the fourth quarter of 2014, and an increase of $7.6 million, or 75.8 percent, from the third quarter of 2015. The decrease from the fourth quarter of 2014 was primarily due to provision expense recorded in the fourth quarter of 2014 related to the TDR loan sale in that period. The increase from the third quarter of 2015 was due to increased reserve requirements related to asset growth and increased net charge-offs of loans in the auto finance portfolio driven by seasonality.
                   
Deposits
                                     
Average Deposits                                   Table 5
Percent Change
(Dollars in thousands) 4Q 3Q 4Q 4Q15 vs 4Q15 vs YTD YTD Percent
2015   2015   2014   3Q15   4Q14   2015   2014   Change
 
Checking $ 5,412,454 $ 5,405,442 $ 5,109,465 0.1 % 5.9 % $ 5,387,112 $ 5,075,759 6.1 %
Savings 4,733,703 4,872,853 5,289,435 (2.9 ) (10.5 ) 4,952,680 5,713,389 (13.3 )
Money market 2,349,127 2,297,893 1,869,350 2.2 25.7 2,265,121 1,312,483 72.6
Certificates of deposit 3,793,653     3,400,282     3,041,722   11.6 24.7 3,340,341     2,840,922   17.6
Total average deposits $ 16,288,937     $ 15,976,470     $ 15,309,972   2.0 6.4 $ 15,945,254     $ 14,942,553   6.7
 
Average interest rate on deposits(1) 0.34 % 0.31 % 0.28 % 0.30 % 0.26 %
 
(1) Annualized.                                    
 
  • Total average deposits for the fourth quarter of 2015 increased $1.0 billion, or 6.4 percent, from the fourth quarter of 2014 and increased $0.3 billion, or 2.0 percent, from the third quarter of 2015. The increases from both periods were primarily due to special campaigns for certificates of deposit and money market accounts.
  • The average interest rate on deposits for the fourth quarter of 2015 was 0.34 percent, up 6 basis points from the fourth quarter of 2014 and up 3 basis points from the third quarter of 2015. The increases from both periods were primarily due to increased average interest rates resulting from promotions for certificates of deposit.
                   
Non-interest Expense
                                     
Non-interest Expense                                   Table 6
Percent Change
(Dollars in thousands) 4Q 3Q 4Q 4Q15 vs 4Q15 vs YTD YTD Percent
2015   2015   2014   3Q15   4Q14   2015   2014   Change
 
Compensation and employee benefits $ 109,061 $ 116,708 $ 115,796 (6.6 )% (5.8 )% $ 457,743 $ 452,942 1.1 %
Occupancy and equipment 37,824 34,159 35,747 10.7 5.8 144,962 139,023 4.3
FDIC insurance 5,173 4,832 2,643 7.1 95.7 20,262 25,123 (19.3 )
Advertising and marketing 5,316 5,793 5,146 (8.2 ) 3.3 22,782 22,943 (0.7 )
Other 46,441     45,750     48,063   1.5 (3.4 ) 186,211     179,904   3.5
Subtotal 203,815 207,242 207,395 (1.7 ) (1.7 ) 831,960 819,935 1.5
Operating lease depreciation 13,608 9,485 6,878 43.5 97.8 39,409 27,152 45.1
Foreclosed real estate and repossessed assets, net 4,940 5,680 7,441 (13.0 ) (33.6 ) 23,193 24,567 (5.6 )
Other credit costs, net 224     (123 )   44   N.M. N.M. 185     123   50.4
Total non-interest expense $ 222,587     $ 222,284     $ 221,758   0.1 0.4 $ 894,747     $ 871,777   2.6
 
N.M. Not Meaningful.                                    
 
  • Compensation and employee benefits expense decreased $6.7 million, or 5.8 percent, from the fourth quarter of 2014 and decreased $7.6 million, or 6.6 percent, from the third quarter of 2015. The decreases from both periods were primarily due to non-recurring items, including the annual pension plan valuation adjustment resulting from an increase to the discount rate.
  • FDIC insurance expense increased $2.5 million, or 95.7 percent, from the fourth quarter of 2014 and remained consistent with the third quarter of 2015. The increase from the fourth quarter of 2014 was primarily due to a non-recurring assessment rate catch-up in the fourth quarter of 2014.
  • Foreclosed real estate and repossessed assets, net expense decreased $2.5 million, or 33.6 percent, from the fourth quarter of 2014 and decreased $0.7 million, or 13.0 percent from the third quarter of 2015. The decreases from both periods were due to a reduction in write-downs of existing foreclosed commercial and consumer real estate properties. The other real estate owned balance was $50.0 million at December 31, 2015, the lowest level since the first quarter of 2008.
       
Capital
               
Capital Information           Table 7
 
(Dollars in thousands, except per-share data) 4Q 2015 4Q 2014
Total equity $ 2,306,917 $ 2,135,364
Book value per common share 11.94 11.10
Tangible book value per common share(1) 10.59 9.72
Tangible common equity to tangible assets(1) 8.79 % 8.50 %
Capital accumulation rate(2) 10.44 10.36
 
4Q 2015(3) 4Q 2014
Regulatory Capital: Under Basel III Under Basel I
Common equity Tier 1 capital $ 1,814,442 N.A.
Tier 1 capital 2,092,195 $ 1,919,887
Total capital 2,487,060 2,209,999
 
Regulatory Capital Ratios:
Common equity Tier 1 capital ratio 10.00 % N.A.
Tier 1 risk-based capital ratio 11.54 11.76 %
Total risk-based capital ratio 13.71 13.54
Tier 1 leverage ratio 10.46 10.07
 
N.A. Not Applicable.
(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 2015 are preliminary pending completion and filing of the Company's regulatory reports.
 
  • TCF maintained strong capital ratios as the Company accumulates capital through earnings. The decrease in the Tier 1 risk-based capital ratio from the fourth quarter of 2014 was primarily the result of strong asset growth.
  • On January 22, 2016, TCF's Board of Directors declared a regular quarterly cash dividend of 7.5 cents per common share, payable on March 1, 2016, to stockholders of record at the close of business on February 12, 2016. 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, 2016, to stockholders of record at the close of business on February 12, 2016.

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 28, 2016 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, 2015, TCF had $20.7 billion in total assets and 375 branches in Illinois, Minnesota, Michigan, Colorado, Wisconsin, Arizona, South Dakota and Indiana, 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, 2014, 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's fee revenue; changes to bankruptcy laws which would result in the loss of all or part of TCF's security interest due to collateral value declines; deficiencies in TCF's compliance under the Bank Secrecy Act in past or future periods, which may result in regulatory enforcement action including monetary penalties; increased health care costs resulting from Federal health care reform; 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 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 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 and the impact of consolidating facilities.

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
2015 2014 $ %
Interest income:
Loans and leases $ 212,346 $ 205,507 $ 6,839 3.3 %
Securities available for sale 4,864 3,053 1,811 59.3
Securities held to maturity 1,336 1,429 (93 ) (6.5 )
Investments and other 6,905   9,819   (2,914 ) (29.7 )
Total interest income 225,451   219,808   5,643   2.6
Interest expense:
Deposits 13,772 10,760 3,012 28.0
Borrowings 6,010   4,974   1,036   20.8
Total interest expense 19,782   15,734   4,048   25.7
Net interest income 205,669 204,074 1,595 0.8
Provision for credit losses 17,607   55,597   (37,990 ) (68.3 )

Net interest income after provision for credit losses

188,062   148,477   39,585   26.7
Non-interest income:
Fees and service charges 37,741 39,477 (1,736 ) (4.4 )
Card revenue 13,781 12,830 951 7.4
ATM revenue 5,143   5,249   (106 ) (2.0 )
Subtotal 56,665 57,556 (891 ) (1.5 )
Gains on sales of auto loans, net 3,136 12,962 (9,826 ) (75.8 )

Gains on sales of consumer real estate loans, net

13,104 6,175 6,929 112.2
Servicing fee income 8,622   6,365   2,257   35.5
Subtotal 24,862 25,502 (640 ) (2.5 )
Leasing and equipment finance 32,355 24,367 7,988 32.8

Other

1,806   2,363   (557 )

(23.6

)
Fees and other revenue 115,688 109,788 5,900 5.4
Gains (losses) on securities, net (29 ) (20 ) (9 ) (45.0 )
Total non-interest income 115,659   109,768   5,891   5.4
Non-interest expense:
Compensation and employee benefits 109,061 115,796 (6,735 ) (5.8 )
Occupancy and equipment 37,824 35,747 2,077 5.8
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