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Press Release

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) 2Q 1Q 2Q 2Q16 vs     2Q16 vs YTD YTD Percent
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) 2Q 1Q 2Q 2Q16 vs 2Q16 vs YTD YTD Percent
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) 2Q 1Q 2Q 2Q16 vs   2Q16 vs YTD YTD Percent
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