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TCF Reports Quarterly Net Income of $57.7 Million, or 31 Cents Per Share

Company Release - 7/22/2016 8:00 AM ET

SECOND QUARTER HIGHLIGHTS

- Revenue of $330.9 million, up 3.6 percent from the second quarter of 2015

- Non-interest expense of $227.3 million, up 1.9 percent from the second quarter of 2015

- Efficiency ratio of 68.7 percent, down 115 basis points from the second quarter of 2015

- Period-end loans and leases of $17.5 billion, up 3.5 percent from June 30, 2015

- Loan and lease originations of $4.3 billion, up 8.4 percent from the second quarter of 2015

- Average deposits of $17.3 billion, up 9.0 percent from the second quarter of 2015

- Non-accrual loans and leases of $195.5 million, down 4.9 percent from June 30, 2015

- Net charge-offs as a percentage of average loans and leases of 0.23 percent, down 18 basis points from the second quarter of 2015

- Earnings per share of 31 cents, up 6.9 percent from the second 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) 2Q1Q2Q2Q16 vs     2Q16 vsYTDYTDPercent
2016     2016     2015     1Q16     2Q15     2016     2015     Change
Net income attributable to TCF $ 57,694 $ 48,046 $ 52,255 20.1 % 10.4 % $ 105,740 $ 92,056 14.9 %
Net interest income 212,984 211,658 206,029 0.6 3.4 424,642 409,449 3.7
Diluted earnings per common share 0.31 0.26 0.29 19.2 6.9 0.57 0.50 14.0
 

Financial Ratios(1)

Pre-tax pre-provision return on average assets(2) 1.95 % 1.83 % 1.94 % 1.89 % 1.76 %
Return on average assets 1.14 0.96 1.11 1.05 0.98
Return on average common equity 10.09 8.45 9.93 9.28 8.71
Return on average tangible common equity(3) 11.38 9.57 11.34 10.49 9.98
Net interest margin 4.35 4.37 4.44 4.36 4.47
Net charge-offs as a percentage of average loans and leases 0.23 0.27 0.41 0.25 0.34
 
(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 $57.7 million for the second quarter of 2016, compared with net income of $52.3 million for the second quarter of 2015, and net income of $48.0 million for the first quarter of 2016. Diluted earnings per common share was 31 cents for the second quarter of 2016, compared with 29 cents for the second quarter of 2015, and 26 cents for the first quarter of 2016.

TCF reported net income of $105.7 million for the first six months of 2016, compared with net income of $92.1 million for the same period in 2015. Diluted earnings per common share was 57 cents for the first six months of 2016, compared with 50 cents for the same period in 2015.

"TCF had a strong second quarter as year-over-year revenue growth continued to outpace expense growth," said Craig R. Dahl, president and chief executive officer. "Operating leverage, one of TCF’s four strategic pillars, remained in focus during the quarter as we generated strong non-interest income from our national lending businesses while continuing to manage our overall expense base. Despite the ongoing headwinds from the rate environment, we managed to sustain our loan yields and manage our deposit costs during the quarter. Our diversification strategy continues to drive good outcomes with strong loan and lease originations taking place while maintaining stable credit quality across all business units.

"Our business results indicate true progress against our four strategic pillars: diversification, profitable growth, operating leverage and core funding. As we move to the second half of 2016 and beyond, the team at TCF is focused on improving the experience of our customer and accelerating value creation for our shareholders."

                               
Revenue
                                                 
Total Revenue                                         Table 2
Percent Change
(Dollars in thousands) 2Q1Q2Q2Q16 vs2Q16 vsYTDYTDPercent
2016     2016     2015     1Q16     2Q15     2016     2015     Change
Net interest income $ 212,984       $ 211,658       $ 206,029   0.6 % 3.4 % $ 424,642       $ 409,449   3.7 %
Non-interest income:
Fees and service charges 34,622 32,817 36,295 5.5 (4.6 ) 67,439 70,267 (4.0 )
Card revenue 14,083 13,363 13,902 5.4 1.3 27,446 26,803 2.4
ATM revenue 5,288       5,021       5,540   5.3 (4.5 ) 10,309       10,662   (3.3 )
Subtotal 53,993 51,201 55,737 5.5 (3.1 ) 105,194 107,732 (2.4 )
Gains on sales of auto loans, net 10,143 11,920 10,756 (14.9 ) (5.7 ) 22,063 17,021 29.6
Gains on sales of consumer real estate loans, net 10,839 9,384 11,954 15.5 (9.3 ) 20,223 20,717 (2.4 )
Servicing fee income 9,502       8,883       7,216   7.0 31.7 18,385       14,558   26.3
Subtotal 30,484 30,187 29,926 1.0 1.9 60,671 52,296 16.0
Leasing and equipment finance 31,074 28,487 26,385 9.1 17.8 59,561 48,609 22.5
Other 2,405       2,843       1,460   (15.4 ) 64.7 5,248       5,587   (6.1 )
Fees and other revenue 117,956 112,718 113,508 4.6 3.9 230,674 214,224 7.7
Gains (losses) on securities, net       (116 )     (59 ) (100.0 ) (100.0 ) (116 )     (137 ) 15.3
Total non-interest income 117,956       112,602       113,449   4.8 4.0 230,558       214,087   7.7
Total revenue $ 330,940       $ 324,260       $ 319,478   2.1 3.6 $ 655,200       $ 623,536   5.1
 
Net interest margin(1) 4.35 % 4.37 % 4.44 % 4.36 % 4.47 %
Total non-interest income as a percentage of total revenue 35.6 34.7 35.5 35.2 34.3
 
(1) Annualized.
 

Net Interest Income

  • Net interest income for the second quarter of 2016 increased $7.0 million, or 3.4 percent, compared with the second quarter of 2015. The increase was primarily due to higher average loan and lease balances in the auto finance and inventory finance portfolios and higher average balances of securities available for sale and loans and leases held for sale. The increase was partially offset by the run-off of consumer real estate first mortgage lien loan balances, overall net margin compression and higher promotional rates paid on certificates of deposit.
  • Net interest income for the second quarter of 2016 increased $1.3 million, or 0.6 percent, compared with the first quarter of 2016. The increase was primarily due to higher average loan balances in the inventory finance portfolio driven by peak seasonality balances during the first two months of the second quarter of 2016 and higher average balances of loans and leases held for sale, securities available for sale from growth of the municipal securities portfolio and loans in the auto finance portfolio due to maturation of the business model. The increase was partially offset by lower average consumer real estate loan balances due to the run-off of consumer real estate first mortgage lien loan balances and a net decrease in consumer real estate junior lien loan balances.
  • Net interest margin for the second quarter of 2016 was 4.35 percent, compared with 4.44 percent for the second quarter of 2015 and 4.37 percent for the first quarter of 2016. The decrease compared with the second quarter of 2015 was primarily due to higher rates paid on certificates of deposit and margin compression resulting from the impact of the ongoing low interest rate environment. The decrease compared with the first quarter of 2016 was primarily due to the run-off of consumer real estate first mortgage lien loan balances and higher rates paid on certificates of deposit.

Non-interest Income

  • Fees and service charges in the second quarter of 2016 were $34.6 million, down $1.7 million, or 4.6 percent, from the second quarter of 2015 and up $1.8 million, or 5.5 percent, from the first quarter of 2016. The decrease compared with the second quarter of 2015 was primarily due to ongoing consumer behavior changes, as well as higher average checking account balances per customer. The increase compared with the first quarter of 2016 was primarily due to seasonality resulting in an increase in transaction activity.
  • TCF sold $533.4 million, $436.4 million and $444.3 million of auto loans during the second quarters of 2016 and 2015, and the first quarter of 2016, respectively, resulting in net gains in each period.
  • TCF sold $344.6 million, $364.9 million and $321.4 million of consumer real estate loans during the second quarters of 2016 and 2015, and the first quarter of 2016, respectively, resulting in net gains in each 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.
  • Servicing fee income was $9.5 million on $4.7 billion of average loans and leases serviced for others during the second quarter of 2016, compared with $7.2 million on $3.7 billion for the second quarter of 2015 and $8.9 million on $4.4 billion for the first quarter of 2016. The increases from both periods were primarily due to the cumulative effect of the 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) 2Q1Q2Q2Q16 vs   2Q16 vsYTDYTDPercent
2016     2016     2015     1Q16     2Q15     2016     2015     Change
Period-End:
Consumer real estate:
First mortgage lien $ 2,409,320 $ 2,521,492 $ 2,865,911 (4.4 )% (15.9 )%
Junior lien 2,677,522       2,729,075       2,678,118   (1.9 )
Total consumer real estate 5,086,842 5,250,567 5,544,029 (3.1 ) (8.2 )
Commercial 3,096,046 3,114,594 3,112,344 (0.6 ) (0.5 )
Leasing and equipment finance 4,120,359 4,005,934 3,791,215 2.9 8.7
Inventory finance 2,334,893 2,676,675 2,106,087 (12.8 ) 10.9
Auto finance 2,812,807 2,786,731 2,301,714 0.9 22.2
Other 20,890       18,940       21,852   10.3 (4.4 )
Total $ 17,471,837       $ 17,853,441       $ 16,877,241   (2.1 ) 3.5
 
Average:
Consumer real estate:
First mortgage lien $ 2,464,692 $ 2,573,915 $ 2,936,793 (4.2 )% (16.1 )% $ 2,519,303 $ 3,006,411 (16.2 )%
Junior lien 2,794,035       2,884,859       2,650,894   (3.1 ) 5.4 2,839,448       2,632,816   7.8
Total consumer real estate 5,258,727 5,458,774 5,587,687 (3.7 ) (5.9 ) 5,358,751 5,639,227 (5.0 )
Commercial 3,109,946 3,158,101 3,148,272 (1.5 ) (1.2 ) 3,134,023 3,151,124 (0.5 )
Leasing and equipment finance 4,032,112 3,992,678 3,751,776 1.0 7.5 4,012,395 3,740,691 7.3
Inventory finance 2,564,648 2,433,534 2,292,481 5.4 11.9 2,499,091 2,201,183 13.5
Auto finance 2,751,679 2,703,880 2,211,014 1.8 24.5 2,727,779 2,116,604 28.9
Other 9,585       10,018       10,734   (4.3 ) (10.7 ) 9,802       11,173   (12.3 )
Total $ 17,726,697       $ 17,756,985       $ 17,001,964   (0.2 ) 4.3 $ 17,741,841       $ 16,860,002   5.2
                                                                           
 
  • Period-end loans and leases were $17.5 billion at June 30, 2016, an increase of $0.6 billion, or 3.5 percent, compared with June 30, 2015 and a decrease of $0.4 billion, or 2.1 percent, compared with March 31, 2016. Average loans and leases were $17.7 billion for the second quarter of 2016, an increase of $0.7 billion, or 4.3 percent, compared with the second quarter of 2015 and consistent with the first quarter of 2016.

    The increases from June 30, 2015 were primarily due to the maturation of the business model in auto finance and an increase in the leasing and equipment finance portfolio due to strong originations, as well as expansion of the lawn and garden segment of inventory finance, partially offset by run-off in the consumer real estate first mortgage lien portfolio. The decrease from March 31, 2016 for period-end loans and leases was primarily due to seasonal decreases in the inventory finance portfolio and run-off in the consumer real estate first mortgage lien portfolio, partially offset by an increase in the leasing and equipment finance portfolio due to strong originations.
  • Loan and lease originations were $4.3 billion for the second quarter of 2016, an increase of $0.3 billion, or 8.4 percent, compared with the second quarter of 2015 and an increase of $0.2 billion, or 6.1 percent, compared with the first quarter of 2016. The increase from the second quarter of 2015 was primarily due to strong growth in the lawn and garden segment of inventory finance and increases in auto finance and leasing and equipment finance originations, partially offset by a decrease in consumer real estate originations. The increase from the first quarter of 2016 was primarily due to increases in consumer real estate and leasing and equipment finance originations, partially offset by a decrease in inventory finance originations.
                           
Credit Quality
                                           
Credit Trends                                   Table 4
Change
(Dollars in thousands) 2Q1Q4Q3Q2Q2Q16 vs2Q16 vs
2016     2016     2015     2015     2015     1Q16     2Q15
Over 60-day delinquencies as a percentage of period-end loans and leases(1) 0.12 % 0.10 % 0.11 % 0.17 % 0.10 % 2 bps 2 bps
Net charge-offs as a percentage of average loans and leases(2) 0.23 0.27 0.29 0.23 0.41 (4 ) (18 )
Non-accrual loans and leases and other real estate owned $ 232,334 $ 241,090 $ 250,448 $ 264,694 $ 263,717 (3.6 )% (11.9 )%
Provision for credit losses 13,250 18,842 17,607 10,018 12,528 (29.7 ) 5.8
 
(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 0.12 percent at June 30, 2016, up from 0.10 percent at both June 30, 2015 and March 31, 2016. The increases from both periods were primarily driven by delinquencies in the commercial real estate portfolio.
  • The net charge-off rate was 0.23 percent for the second quarter of 2016, down from 0.41 percent for the second quarter of 2015, and down from 0.27 percent for the first quarter of 2016. The decreases from both periods were primarily due to improved credit quality in the consumer real estate portfolio.
  • Non-accrual loans and leases and other real estate owned was $232.3 million at June 30, 2016, a decrease of $31.4 million, or 11.9 percent, from June 30, 2015, and a decrease of $8.8 million, or 3.6 percent, from March 31, 2016. The decrease from June 30, 2015 was primarily due to sales of consumer real estate and commercial properties, improving credit quality trends and continued efforts to actively work out problem loans in the commercial real estate portfolio. The decrease from March 31, 2016 was primarily due to sales of consumer real estate properties outpacing additions and improving credit quality trends in the consumer real estate portfolio. Non-accrual loans and leases and other real estate owned at June 30, 2016 was the lowest balance since the third quarter of 2008.
  • Provision for credit losses was $13.3 million for the second quarter of 2016, an increase of $0.7 million, or 5.8 percent, from the second quarter of 2015, and a decrease of $5.6 million, or 29.7 percent, from the first quarter of 2016. The increase from the second quarter of 2015 was primarily due to increased reserve requirements related to growth in the auto finance, leasing and equipment finance and inventory finance portfolios as well as increased reserve requirements related to changes in economic outlook, partially offset by decreased net charge-offs and improved credit quality in the consumer real estate and commercial portfolios. The decrease from the first quarter of 2016 was primarily due to lower net charge-offs and reduced reserve requirements in the consumer real estate portfolio.
                               
Deposits
                                                 
Average Deposits                                         Table 5
Percent Change
(Dollars in thousands) 2Q1Q2Q2Q16 vs2Q16 vsYTDYTDPercent
2016     2016     2015     1Q16     2Q15     2016     2015     Change
 
Checking $ 5,727,147 $ 5,593,300 $ 5,428,419 2.4 % 5.5 % $ 5,660,223 $ 5,364,911 5.5 %
Savings 4,690,376 4,713,765 5,048,053 (0.5 ) (7.1 ) 4,702,072 5,104,561 (7.9 )
Money market 2,557,897 2,472,751 2,261,567 3.4 13.1 2,515,324 2,205,764 14.0
Certificates of deposit 4,308,367       4,104,951       3,116,718   5.0 38.2 4,206,659       3,079,461   36.6
Total average deposits $ 17,283,787       $ 16,884,767       $ 15,854,757   2.4 9.0 $ 17,084,278       $ 15,754,697   8.4
 
Average interest rate on deposits(1) 0.37 % 0.36 % 0.28 % 0.36 % 0.28 %
 
(1) Annualized.
 
  • Total average deposits for the second quarter of 2016 increased $1.4 billion, or 9.0 percent, from the second quarter of 2015 and increased $0.4 billion, or 2.4 percent, from the first quarter of 2016. The increases from both periods were primarily due to special campaigns for certificates of deposit as well as growth in checking and money market balances.
  • The average interest rate on deposits for the second quarter of 2016 was 0.37 percent, up 9 basis points from the second quarter of 2015 and up 1 basis point from the first quarter of 2016. 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
                Change            
(Dollars in thousands) 2Q1Q2Q2Q16 vs     2Q16 vsYTDYTDPercent
2016     2016     2015     1Q16     2Q15     2016     2015     Change
 
Compensation and employee benefits $ 118,093 $ 124,473 $ 116,159 (5.1 )% 1.7 % $ 242,566 $ 231,974 4.6 %
Occupancy and equipment 36,884 37,008 36,152 (0.3 ) 2.0 73,892 72,979 1.3
FDIC insurance 3,751 4,113 4,864 (8.8 ) (22.9 ) 7,864 10,257 (23.3 )
Advertising and marketing 5,678 5,887 5,150 (3.6 ) 10.3 11,565 11,673 (0.9 )
Other 49,987       43,348       45,887   15.3 8.9 93,335       94,020   (0.7 )
Subtotal 214,393 214,829 208,212 (0.2 ) 3.0 429,222 420,903 2.0
Operating lease depreciation 9,842 9,573 8,582 2.8 14.7 19,415 16,316 19.0
Foreclosed real estate and repossessed assets, net 3,135 3,920 6,377 (20.0 ) (50.8 ) 7,055 12,573 (43.9 )
Other credit costs, net (54 )     12       (62 ) N.M. 12.9 (42 )     84   N.M.
Total non-interest expense $ 227,316       $ 228,334       $ 223,109   (0.4 ) 1.9 $ 455,650       $ 449,876   1.3
 
Efficiency ratio 68.69 % 70.42 % 69.84 % (173 ) bps (115 ) bps 69.54 % 72.15 % (261 ) bps
 
N.M. Not Meaningful.
 
  • Compensation and employee benefits expense increased $1.9 million, or 1.7 percent, from the second quarter of 2015 and decreased $6.4 million, or 5.1 percent, from the first quarter of 2016. The increase from the second quarter of 2015 was primarily due to higher incentives based on production results. The decrease from the first quarter of 2016 was primarily due to seasonality of payroll taxes.
  • Branch realignment expense of $2.9 million during the second quarter of 2016 relating to the pending closure of two traditional branches was included within other non-interest expense. There was no branch realignment expense during 2015.
  • Operating lease depreciation is a transactional cost that is typically more than offset by increases in leasing and equipment finance non-interest income.
  • Foreclosed real estate and repossessed assets, net, decreased $3.2 million, or 50.8 percent from the second quarter of 2015 and decreased $0.8 million, or 20.0 percent, from the first quarter of 2016. The decrease from the second quarter of 2015 was primarily due to lower write-downs on existing foreclosed commercial properties and lower operating costs associated with maintaining fewer consumer and commercial properties, partially offset by higher repossessed asset expense. The decrease from the first quarter of 2016 was primarily due to lower write-downs on existing foreclosed consumer and commercial properties and lower operating costs associated with maintaining fewer consumer properties.
       
Capital
             
Capital Information     Table 7
 
(Dollars in thousands, except per-share data) 2Q 20164Q 2015
Total equity $ 2,419,758 $ 2,306,917
Book value per common share 12.48 11.94
Tangible book value per common share(1) 11.15 10.59
Common equity to assets 10.13 % 9.80 %
Tangible common equity to tangible assets(1) 9.15 8.79
Capital accumulation rate(2) 8.98 10.44
 
Regulatory Capital:2Q 2016(3)4Q 2015
Common equity Tier 1 capital $ 1,895,936 $ 1,814,442
Tier 1 capital 2,177,700 2,092,195
Total capital 2,563,277 2,487,060
 
Regulatory Capital Ratios:
Common equity Tier 1 capital ratio 10.16 % 10.00 %
Tier 1 risk-based capital ratio 11.67 11.54
Total risk-based capital ratio 13.73 13.71
Tier 1 leverage ratio 10.38 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 2Q 2016 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 leverage ratio from the fourth quarter of 2015 was primarily the result of asset growth.
  • On July 20, 2016, TCF's Board of Directors declared a regular quarterly cash dividend of 7.5 cents per common share, payable on September 1, 2016, to stockholders of record at the close of business on August 15, 2016. TCF also declared dividends on the 7.50% Series A and 6.45% Series B Non-Cumulative Perpetual Preferred Stock, both payable on September 1, 2016, to stockholders of record at the close of business on August 15, 2016.

Webcast Information
A live webcast of TCF's conference call to discuss the second quarter earnings will be hosted at TCF's website, http://ir.tcfbank.com, on July 22, 2016 at 9:00 a.m. CDT. 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 June 30, 2016, TCF had $21.1 billion in total assets and 342 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 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; 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 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.

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 June 30,Change
20162015$%
Interest income:
Loans and leases $ 214,128 $ 207,164 $ 6,964 3.4 %
Securities available for sale 6,396 3,543 2,853 80.5
Securities held to maturity 1,116 1,384 (268 ) (19.4 )
Investments and other 12,364   10,990   1,374   12.5
Total interest income 234,004   223,081   10,923   4.9
Interest expense:
Deposits 15,893 11,080 4,813 43.4
Borrowings 5,127   5,972   (845 ) (14.1 )
Total interest expense 21,020   17,052   3,968   23.3
Net interest income 212,984 206,029 6,955 3.4
Provision for credit losses 13,250   12,528   722   5.8
Net interest income after provision for credit losses 199,734   193,501   6,233   3.2
Non-interest income:
Fees and service charges 34,622 36,295 (1,673 ) (4.6 )
Card revenue 14,083 13,902 181 1.3
ATM revenue 5,288   5,540   (252 ) (4.5 )
Subtotal 53,993 55,737 (1,744 ) (3.1 )
Gains on sales of auto loans, net 10,143 10,756 (613 ) (5.7 )
Gains on sales of consumer real estate loans, net 10,839 11,954 (1,115 ) (9.3 )
Servicing fee income 9,502   7,216   2,286   31.7
Subtotal 30,484 29,926 558 1.9
Leasing and equipment finance 31,074 26,385 4,689 17.8
Other 2,405   1,460   945   64.7
Fees and other revenue 117,956 113,508 4,448 3.9
Gains (losses) on securities, net   (59 ) 59   (100.0 )
Total non-interest income 117,956   113,449   4,507   4.0
Non-interest expense:
Compensation and employee benefits 118,093 116,159 1,934 1.7
Occupancy and equipment 36,884 36,152 732 2.0
FDIC insurance 3,751 4,864 (1,113 ) (22.9 )
Advertising and marketing 5,678 5,150 528 10.3
Other 49,987   45,887   4,100   8.9

Subtotal

214,393 208,212 6,181 3.0
Operating lease depreciation 9,842 8,582 1,260 14.7
Foreclosed real estate and repossessed assets, net 3,135 6,377 (3,242 ) (50.8 )
Other credit costs, net (54 ) (62 ) 8   12.9
Total non-interest expense 227,316   223,109   4,207   1.9
Income before income tax expense 90,374 83,841 6,533 7.8
Income tax expense 29,706   28,902   804   2.8
Income after income tax expense 60,668 54,939 5,729 10.4
Income attributable to non-controlling interest 2,974   2,684   290   10.8
Net income attributable to TCF Financial Corporation 57,694   52,255   5,439   10.4
Preferred stock dividends 4,847   4,847    
Net income available to common stockholders $ 52,847   $ 47,408   $ 5,439   11.5
 
Net income per common share:
Basic $ 0.32 $ 0.29 $ 0.03 10.3 %
Diluted 0.31 0.29 0.02 6.9
 
Dividends declared per common share $ 0.075 $ 0.05 $ 0.025 50.0 %
 

Average common and common equivalent shares outstanding (in thousands):

Basic 167,334 165,589 1,745 1.1 %
Diluted 167,849 166,118 1,731 1.0
 
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per-share data)
(Unaudited)
               
Six Months Ended June 30,Change
20162015$%
Interest income:
Loans and leases $ 428,933 $ 413,140 $ 15,793 3.8 %
Securities available for sale 11,894 6,623 5,271 79.6
Securities held to maturity 2,435 2,789 (354 ) (12.7 )
Investments and other 23,084   20,323   2,761   13.6
Total interest income 466,346   442,875   23,471   5.3
Interest expense:
Deposits 30,884 22,152 8,732 39.4
Borrowings 10,820   11,274   (454 ) (4.0 )
Total interest expense 41,704   33,426   8,278   24.8
Net interest income 424,642 409,449 15,193 3.7
Provision for credit losses 32,092   25,319   6,773   26.8
Net interest income after provision for credit losses 392,550   384,130   8,420   2.2
Non-interest income:
Fees and service charges 67,439 70,267 (2,828 ) (4.0 )
Card revenue 27,446 26,803 643 2.4
ATM revenue 10,309   10,662   (353 ) (3.3 )
Subtotal 105,194 107,732 (2,538 ) (2.4 )
Gains on sales of auto loans, net 22,063 17,021 5,042 29.6
Gains on sales of consumer real estate loans, net 20,223 20,717 (494 ) (2.4 )
Servicing fee income 18,385   14,558   3,827   26.3
Subtotal 60,671 52,296 8,375 16.0
Leasing and equipment finance 59,561 48,609 10,952 22.5
Other 5,248   5,587   (339 ) (6.1 )
Fees and other revenue 230,674 214,224 16,450 7.7
Gains (losses) on securities, net (116 ) (137 ) 21   15.3
Total non-interest income 230,558   214,087   16,471   7.7
Non-interest expense:
Compensation and employee benefits 242,566 231,974 10,592 4.6
Occupancy and equipment 73,892 72,979 913 1.3
FDIC insurance 7,864 10,257 (2,393 ) (23.3 )
Advertising and marketing 11,565 11,673 (108 ) (0.9 )
Other 93,335   94,020   (685 ) (0.7 )
Subtotal 429,222 420,903 8,319 2.0
Operating lease depreciation 19,415 16,316 3,099 19.0
Foreclosed real estate and repossessed assets, net 7,055 12,573 (5,518 ) (43.9 )
Other credit costs, net (42 ) 84   (126 ) N.M.
Total non-interest expense 455,650   449,876   5,774   1.3
Income before income tax expense 167,458 148,341 19,117 12.9
Income tax expense 56,509   51,730   4,779   9.2
Income after income tax expense 110,949 96,611 14,338 14.8
Income attributable to non-controlling interest 5,209   4,555   654   14.4
Net income attributable to TCF Financial Corporation 105,740   92,056   13,684   14.9
Preferred stock dividends 9,694   9,694    
Net income available to common stockholders $ 96,046   $ 82,362   $ 13,684   16.6
 
Net income per common share:
Basic $ 0.57 $ 0.50 $ 0.07 14.0 %
Diluted 0.57 0.50 0.07 14.0
 
Dividends declared per common share $ 0.15 $ 0.10 $ 0.05 50.0 %
 

Average common and common equivalent shares outstanding (in thousands):

Basic 167,111 165,219 1,892 1.1 %
Diluted 167,638 165,744 1,894 1.1
 

N.M. Not Meaningful.

 
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
(Unaudited)
               
Three Months Ended June 30,Change
20162015$%
Net income attributable to TCF Financial Corporation $ 57,694   $ 52,255   $ 5,439   10.4 %
Other comprehensive income (loss):
Securities available for sale:
Unrealized gains (losses) arising during the period 21,128 (11,140 ) 32,268 N.M.
Reclassification of net (gains) losses to net income 749 286 463 161.9
Net investment hedges:
Unrealized gains (losses) arising during the period (338 ) (674 ) 336 49.9
Foreign currency translation adjustment:
Unrealized gains (losses) arising during the period 339 617 (278 ) (45.1 )
Recognized postretirement prior service cost:
Reclassification of net (gains) losses to net income (11 ) (11 )
Income tax (expense) benefit (8,177 ) 4,358   (12,535 ) N.M.
Total other comprehensive income (loss) 13,690   (6,564 ) 20,254   N.M.
Comprehensive income $ 71,384   $ 45,691   $ 25,693   56.2
 
 
Six Months Ended June 30,Change
20162015$%
Net income attributable to TCF Financial Corporation $ 105,740   $ 92,056   $ 13,684   14.9 %
Other comprehensive income (loss):
Securities available for sale:
Unrealized gains (losses) arising during the period 40,263 (7,001 ) 47,264 N.M.
Reclassification of net (gains) losses to net income 1,023 590 433 73.4
Net investment hedges:
Unrealized gains (losses) arising during the period (3,595 ) 2,914 (6,509 ) N.M.
Foreign currency translation adjustment:
Unrealized gains (losses) arising during the period 3,748 (3,269 ) 7,017 N.M.
Recognized postretirement prior service cost:
Reclassification of net (gains) losses to net income (23 ) (23 )
Income tax (expense) benefit (14,307 ) 1,329   (15,636 ) N.M.
Total other comprehensive income (loss) 27,109   (5,460 ) 32,569   N.M.
Comprehensive income $ 132,849   $ 86,596   $ 46,253   53.4
 

N.M. Not Meaningful.

 
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except per-share data)
(Unaudited)
               
At Jun. 30,At Dec. 31,Change
20162015$%
ASSETS:
Cash and due from banks $ 667,994 $ 889,337 $ (221,343 ) (24.9 )%
Investments 61,644 70,537 (8,893 ) (12.6 )
Securities held to maturity 192,662 201,920 (9,258 ) (4.6 )
Securities available for sale 1,338,638 888,885 449,753 50.6
Loans and leases held for sale 358,806 157,625 201,181 127.6
Loans and leases:
Consumer real estate:
First mortgage lien 2,409,320 2,624,956 (215,636 ) (8.2 )
Junior lien 2,677,522   2,839,316   (161,794 ) (5.7 )
Total consumer real estate 5,086,842 5,464,272 (377,430 ) (6.9 )
Commercial 3,096,046 3,145,832 (49,786 ) (1.6 )
Leasing and equipment finance 4,120,359 4,012,248 108,111 2.7
Inventory finance 2,334,893 2,146,754 188,139 8.8
Auto finance 2,812,807 2,647,596 165,211 6.2
Other 20,890   19,297   1,593   8.3
Total loans and leases 17,471,837 17,435,999 35,838 0.2
Allowance for loan and lease losses (158,572 ) (156,054 ) (2,518 ) (1.6 )
Net loans and leases 17,313,265 17,279,945 33,320 0.2
Premises and equipment, net 428,490 445,934 (17,444 ) (3.9 )
Goodwill 225,640 225,640
Other assets 482,371   529,786   (47,415 ) (8.9 )
Total assets $ 21,069,510   $ 20,689,609   $ 379,901   1.8
 
LIABILITIES AND EQUITY:
Deposits:
Checking $ 5,644,518 $ 5,690,559 $ (46,041 ) (0.8 )%
Savings 4,676,715 4,717,457 (40,742 ) (0.9 )
Money market 2,534,034 2,408,180 125,854 5.2
Certificates of deposit 4,337,094   3,903,793   433,301   11.1
Total deposits 17,192,361   16,719,989   472,372   2.8
Short-term borrowings 4,695 5,381 (686 ) (12.7 )
Long-term borrowings 743,733   1,034,557   (290,824 ) (28.1 )
Total borrowings 748,428 1,039,938 (291,510 ) (28.0 )
Accrued expenses and other liabilities 708,963   622,765   86,198   13.8
Total liabilities 18,649,752   18,382,692   267,060   1.5
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; 171,048,518 and 169,887,030 shares issued, respectively

1,710 1,699 11 0.6
Additional paid-in capital 862,226 851,836 10,390 1.2
Retained earnings, subject to certain restrictions 1,311,325 1,240,347 70,978 5.7
Accumulated other comprehensive income (loss) 11,763 (15,346 ) 27,109 N.M.
Treasury stock at cost, 42,566 shares, and other (52,166 ) (50,860 ) (1,306 ) (2.6 )
Total TCF Financial Corporation stockholders' equity 2,398,098 2,290,916 107,182 4.7
Non-controlling interest in subsidiaries 21,660   16,001   5,659   35.4
Total equity 2,419,758   2,306,917   112,841   4.9
Total liabilities and equity $ 21,069,510   $ 20,689,609   $ 379,901   1.8
 

N.M. Not Meaningful.

 
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
SUMMARY OF CREDIT QUALITY DATA
(Dollars in thousands)
(Unaudited)
 

Over 60-Day Delinquencies as a Percentage of Portfolio(1)

                         
AtAtAtAtAtChange from
Jun. 30,Mar. 31,Dec. 31,Sep. 30,Jun. 30,Mar. 31,Jun. 30,
2016201620152015201520162015
Consumer real estate:
First mortgage lien 0.34 % 0.38 % 0.46 % 0.36 % 0.38 % (4 ) bps (4 ) bps
Junior lien 0.03 0.05 0.05 0.08 0.08 (2 ) (5 )
Total consumer real estate 0.17 0.20 0.23 0.21 0.22 (3 ) (5 )
Commercial 0.11 0.25 11 11
Leasing and equipment finance 0.13 0.12 0.06 0.19 0.06 1 7
Inventory finance 0.01 0.01
Auto finance 0.13 0.09 0.14 0.11 0.11 4 2
Other 0.40 0.16 0.13 0.17 0.11 24 29
Subtotal 0.12 0.10 0.11 0.17 0.10 2 2
Acquired portfolios 0.41 0.41 0.41 0.37 0.28 13
Total delinquencies 0.12 0.10 0.11 0.17 0.10 2 2
 

(1) Excludes non-accrual loans and leases.

 

Net Charge-Offs as a Percentage of Average Loans and Leases

       
Quarter Ended(1)Change from
Jun. 30,     Mar. 31,     Dec. 31,     Sep. 30,     Jun. 30,Mar. 31,   Jun. 30,
2016201620152015201520162015
Consumer real estate:
First mortgage lien 0.35 % 0.55 % 0.54 % 0.53 % 0.79 % (20 ) bps (44 ) bps
Junior lien 0.05 0.17 0.17 0.11 0.59 (12 ) (54 )
Total consumer real estate 0.19 0.35 0.34 0.32 0.69 (16 ) (50 )
Commercial 0.08 (0.02 ) 0.05 0.21 10 (13 )
Leasing and equipment finance 0.11 0.13 0.16 0.09 0.16 (2 ) (5 )
Inventory finance 0.09 0.04 0.05 0.03 0.11 5 (2 )
Auto finance 0.69 0.81 0.75 0.62 0.66 (12 ) 3
Other N.M. N.M. N.M. N.M. N.M. N.M. N.M.
Total 0.23 0.27 0.29 0.23 0.41 (4 ) (18 )
 
N.M. Not Meaningful.
(1) Annualized.
 

Non-Accrual Loans and Leases Rollforward

                           
Quarter EndedChange from
Jun. 30,Mar. 31,Dec. 31,Sep. 30,Jun. 30,Mar. 31,Jun. 30,
2016201620152015201520162015
Balance, beginning of period $ 198,649 $ 200,466 $ 206,110 $ 205,710 $ 222,143 $ (1,817 ) $ (23,494 )
Additions 35,280 38,029 44,387 48,505 40,846 (2,749 ) (5,566 )
Charge-offs (5,475 ) (7,436 ) (9,002 ) (7,055 ) (14,050 ) 1,961 8,575
Transfers to other assets (10,310 ) (12,342 ) (13,612 ) (16,400 ) (17,738 ) 2,032 7,428
Return to accrual status (6,687 ) (7,698 ) (9,282 ) (10,190 ) (10,298 ) 1,011 3,611
Payments received (17,774 ) (15,551 ) (20,103 ) (14,721 ) (15,543 ) (2,223 ) (2,231 )
Sales (900 ) (775 ) (705 ) (353 ) (900 ) (547 )
Other, net 2,759   3,181   2,743   966   703   (422 ) 2,056  
Balance, end of period $ 195,542   $ 198,649   $ 200,466   $ 206,110   $ 205,710   $ (3,107 ) $ (10,168 )
 
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
SUMMARY OF CREDIT QUALITY DATA, CONTINUED
(Dollars in thousands)
(Unaudited)
 

Other Real Estate Owned Rollforward

                           
Quarter EndedChange from
Jun. 30,Mar. 31,Dec. 31,Sep. 30,Jun. 30,Mar. 31,Jun. 30,
2016201620152015201520162015
Balance, beginning of period $ 42,441 $ 49,982 $ 58,584 $ 58,007 $ 62,398 $ (7,541 ) $ (19,957 )
Transferred in 9,661 10,575 12,626 15,087 15,359 (914 ) (5,698 )
Sales (16,058 ) (18,885 ) (19,174 ) (13,442 ) (17,164 ) 2,827 1,106
Writedowns (2,027 ) (2,744 ) (2,130 ) (2,868 ) (4,003 ) 717 1,976
Other, net 2,775   3,513   76   1,800   1,417   (738 ) 1,358  
Balance, end of period $ 36,792   $ 42,441   $ 49,982   $ 58,584   $ 58,007   $ (5,649 ) $ (21,215 )
 

Allowance for Loan and Lease Losses

                                       
AtAtAtAtAt
Jun. 30,Mar. 31,Dec. 31,Sep. 30,Jun. 30,
20162016201520152015
% of% of% of% of% of
BalancePortfolioBalancePortfolioBalancePortfolioBalancePortfolioBalancePortfolio
Consumer real estate $ 64,765 1.27 % $ 66,728 1.27 % $ 67,992 1.24 % $ 70,329 1.25 % $ 74,687 1.35 %
Commercial 31,161 1.01 31,547 1.01 30,185 0.96 30,006 0.96 30,205 0.97
Leasing and equipment finance 20,124 0.49 19,454 0.49 19,018 0.47 18,177 0.47 17,669 0.47
Inventory finance 12,084 0.52 13,306 0.50 11,128 0.52 11,121 0.52 10,879 0.52
Auto finance 29,772 1.06 28,535 1.02 26,486 1.00 23,722 0.98 22,061 0.96
Other 666   3.19 504   2.66 1,245   6.45 607   2.94 614   2.81
Total $ 158,572   0.91 $ 160,074   0.90 $ 156,054   0.90 $ 153,962   0.90 $ 156,115   0.93
 

Changes in Allowance for Loan and Lease Losses

                           
Quarter EndedChange from
Jun. 30,Mar. 31,Dec. 31,Sep. 30,Jun. 30,Mar. 31,Jun. 30,
2016201620152015201520162015
Balance, beginning of period $ 160,074 $ 156,054 $ 153,962 $ 156,115 $ 163,799 $ 4,020 $ (3,725 )
Charge-offs (14,723 ) (16,667 ) (18,101 ) (15,338 ) (22,984 ) 1,944 8,261
Recoveries 4,592   4,761   5,523   5,397   5,506   (169 ) (914 )
Net (charge-offs) recoveries (10,131 ) (11,906 ) (12,578 ) (9,941 ) (17,478 ) 1,775 7,347
Provision for credit losses 13,250 18,842 17,607 10,018 12,528 (5,592 ) 722
Other (4,621 ) (2,916 ) (2,937 ) (2,230 ) (2,734 ) (1,705 ) (1,887 )
Balance, end of period $ 158,572   $ 160,074   $ 156,054   $ 153,962   $ 156,115   $ (1,502 ) $ 2,457  
 
 
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES
(Dollars in thousands)
(Unaudited)
                       
Three Months Ended June 30,
20162015
AverageYields andAverageYields and
BalanceInterest(1)Rates(1)(2)BalanceInterest(1)Rates(1)(2)
ASSETS:
Investments and other $ 322,477 $ 2,396 2.99 % $ 551,630 $ 3,216 2.34 %
Securities held to maturity 194,693 1,116 2.29 209,834 1,384 2.64
Securities available for sale(3)
Taxable 697,902 3,853 2.21 566,499 3,501 2.47
Tax-exempt(4) 481,246 3,912 3.25 7,420 65 3.50
Loans and leases held for sale 497,797 9,968 8.05 340,912 7,774 9.15
Loans and leases:(5)
Consumer real estate:
Fixed-rate 2,327,409 33,143 5.73 2,776,177 39,696 5.73
Variable-rate 2,931,318   38,773   5.32 2,811,510   35,973   5.13
Total consumer real estate 5,258,727 71,916 5.50 5,587,687 75,669 5.43
Commercial:
Fixed-rate 982,914 12,129 4.96 1,193,011 14,954 5.03
Variable- and adjustable-rate 2,127,032   21,143   4.00 1,955,261   18,765   3.85
Total commercial 3,109,946 33,272 4.30 3,148,272 33,719 4.30
Leasing and equipment finance 4,032,112 44,824 4.45 3,751,776 43,738 4.66
Inventory finance 2,564,648 36,598 5.74 2,292,481 32,064 5.61
Auto finance 2,751,679 28,660 4.19 2,211,014 22,633 4.11
Other 9,585   135   5.77 10,734   185   6.92
Total loans and leases 17,726,697   215,405   4.88 17,001,964   208,008   4.90
Total interest-earning assets 19,920,812 236,650 4.77 18,678,259 223,948 4.81
Other assets(6) 1,286,506   1,209,514  
Total assets $ 21,207,318   $ 19,887,773  
LIABILITIES AND EQUITY:
Non-interest bearing deposits:
Retail $ 1,817,734 $ 1,699,668
Small business 861,394 822,683
Commercial and custodial 582,041   497,883  
Total non-interest bearing deposits 3,261,169 3,020,234
Interest-bearing deposits:
Checking 2,478,673 92 0.02 2,422,909 137 0.02
Savings 4,677,681 336 0.03 5,033,329 800 0.06
Money market 2,557,897 4,033 0.63 2,261,567 3,450 0.61
Certificates of deposit 4,308,367   11,432   1.07 3,116,718   6,693   0.86
Total interest-bearing deposits 14,022,618   15,893   0.46 12,834,523   11,080   0.35
Total deposits 17,283,787   15,893   0.37 15,854,757   11,080   0.28
Borrowings:
Short-term borrowings 9,100 16 0.71 8,246 12 0.63
Long-term borrowings 840,739   5,111   2.43 1,234,205   5,960   1.93
Total borrowings 849,839   5,127   2.42 1,242,451   5,972   1.92
Total interest-bearing liabilities 14,872,457   21,020   0.57 14,076,974   17,052   0.49
Total deposits and borrowings 18,133,626 21,020 0.47 17,097,208 17,052 0.40
Other liabilities 690,363   594,352  
Total liabilities 18,823,989   17,691,560  
Total TCF Financial Corp. stockholders' equity 2,357,509 2,173,699
Non-controlling interest in subsidiaries 25,820   22,514  
Total equity 2,383,329   2,196,213  
Total liabilities and equity $ 21,207,318   $ 19,887,773  
Net interest income and margin $ 215,630   4.35 $ 206,896   4.44
 
(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 $131.9 million and $96.0 million for the second quarter of 2016 and 2015, respectively.