Company Website: http://www.tcfbank.com
WAYZATA, Minn. -- (Business Wire)

TCF Financial Corporation (NYSE:TCB):

THIRD QUARTER HIGHLIGHTS

-Revenue of $320.3 million, up 4.7 percent from the third quarter of 2013

-Loan and lease originations of $3.6 billion, up 14.9 percent from the third quarter of 2013

-Average deposits of $15.2 billion, up 5.9 percent from the third quarter of 2013

-Provision for credit losses of $15.7 million, down 36.0 percent from the third quarter of 2013

-Non-accrual loans and leases of $275.1 million, down 2.7 percent from the third quarter of 2013

-Return on average assets of 1.15 percent, up 18 basis points from the third quarter of 2013

-Return on average tangible common equity of 12.11 percent, up 120 basis points from the third quarter of 2013

TCF Financial Corporation (“TCF” or the “Company”) (NYSE:TCB) today reported net income of $52.3 million for the third quarter of 2014, compared with net income of $42.8 million for the third quarter of 2013, and net income of $53.1 million for the second quarter of 2014. Diluted earnings per common share was 29 cents for the third quarter of 2014, compared with 23 cents for the third quarter of 2013, and 29 cents for the second quarter of 2014.

TCF reported net income of $150.2 million for the first nine months of 2014, compared with net income of $111.7 million for the same period in 2013. Diluted earnings per common share was 83 cents for the first nine months of 2014, compared with 60 cents for the same period in 2013.

Chairman’s Statement

“TCF reported another steady quarter of profitability, with earnings of 29 cents per share and a strong return on average assets of 1.15 percent and return on average tangible common equity of 12.11 percent, while maintaining an industry-leading net interest margin of 4.60 percent,” said William A. Cooper, Chairman and Chief Executive Officer.

“TCF’s growth is driven by a unique loan and lease origination capability funded by an increasing, low-cost deposit base. Strong loan and lease originations during the quarter continued to provide a growing source of non-interest income through loan sales and servicing revenue, as well as TCF’s first auto loan securitization completed in July. I believe TCF’s ability to generate national loan and lease growth while developing a diversified revenue base positions us to deliver long-term shareholder value.”

Net Interest Income

• Net interest income for the third quarter of 2014 increased $4.6 million, or 2.3 percent, compared with the third quarter of 2013. The increase was primarily driven by higher average loan and lease balances in the auto finance, inventory finance and leasing and equipment finance businesses as well as a reduced cost of borrowings. This increase was partially offset by downward pressure on yields across the lending businesses in this increasingly competitive low interest rate environment, as well as lower average balances of higher yielding fixed-rate loans of that type in the commercial and consumer real estate portfolios due to run-off exceeding originations.
• Net interest income for the third quarter of 2014 decreased $1.9 million, or 0.9 percent, compared with the second quarter of 2014. The decrease was primarily due to lower average loan and lease balances in the inventory finance portfolio due to seasonality as well as higher rates on various deposit products as asset growth was funded with deposits at incremental market rates. The decrease was partially offset by higher average loan balances in the auto finance and leasing and equipment finance businesses.
• Net interest margin in the third quarter of 2014 was 4.60 percent, compared with 4.62 percent in the third quarter of 2013 and 4.65 percent in the second quarter of 2014. The decreases from both periods were primarily due to continued margin compression resulting from the increasingly competitive low interest rate environment.

Non-interest Income

• Fees and service charges in the third quarter of 2014 were $40.3 million, down $2.2 million, or 5.2 percent, from the third quarter of 2013 and up $2.2 million, or 5.8 percent, from the second quarter of 2014. The decrease from the third quarter of 2013 was primarily due to customer behavior changes, as well as higher average checking account balances per customer. The increase from the second quarter of 2014 was primarily due to seasonal differences in customer activity.
• Leasing and equipment finance revenue was $24.4 million during the third quarter of 2014, down $4.4 million, or 15.3 percent, from the third quarter of 2013 and up$1.3 million, or 5.7 percent, from the second quarter of 2014. The decrease from the third quarter of 2013 and the increase from the second quarter of 2014 were primarily due to customer-driven events impacting sales-type lease revenue.
• TCF sold $484.4 million, $182.5 million and $220.2 million of auto loans during the third quarters of 2014 and 2013, and the second quarter of 2014, respectively, resulting in net gains in the same respective periods. Included in auto loans sold for the third quarter of 2014 is $256.3 million related to the execution of the Company's inaugural auto loan securitization.
• TCF sold $233.6 million, $142.4 million and $224.2 million of consumer real estate loans during the third quarters of 2014 and 2013, and the second quarter of 2014, respectively, resulting in net gains in the same respective periods.
• Servicing fee income was $5.9 million on $3.1 billion of period-end loans and leases serviced for others during the third quarter of 2014 compared to $3.6 million on $1.7 billion of period-end loans and leases serviced for others during the third quarter of 2013 and $4.9 million on $2.6 billion of period-end loans and leases serviced for others during the second quarter of 2014.

• Period-end loans and leases were $16.4 billion at September 30, 2014, an increase of $0.7 billion, or 4.6 percent, compared with September 30, 2013 and a increase of $0.3 billion, or 2.0 percent, compared with June 30, 2014. Average loans and leases were $16.2 billion for the third quarter of 2014, an increase of $0.7 billion, or 4.3 percent, compared with the third quarter of 2013 and a decrease of $0.1 billion, or 0.5 percent, compared with the second quarter of 2014.
  
  The increase in period-end loans and leases from both periods and the increase in average loans and leases from the third quarter of 2013 were primarily due to the continued growth of the auto finance portfolio as TCF expands the number of active dealers and sales force in its network and further penetrates existing territories, as well as an increase in the leasing and equipment finance portfolio.

• Loan and lease originations were $3.6 billion for the third quarter of 2014, an increase of $461.3 million, or 14.9 percent, compared with the third quarter of 2013 and an increase of $92.8 million, or 2.7 percent, compared with the second quarter of 2014. The increase from the third quarter of 2013 was primarily due to the continued growth in auto finance and an increase in leasing and equipment finance and commercial originations. The increase from the second quarter of 2014 was primarily due to increased fundings in the commercial business and continued growth in auto finance, partially offset by seasonality within the inventory finance business.
• Period-end and average loan and lease balances were impacted by $484.4 million of auto finance loan sales and $233.6 million of consumer real estate loan sales during the third quarter of 2014.

• Non-accrual loans and leases and other real estate owned totaled $342.7 million at September 30, 2014, a decrease of $5.7 million, or 1.6 percent, from September 30, 2013, and an increase of $17.4 million, or 5.3 percent, from June 30, 2014. The decrease from September 30, 2013 was primarily due to improving credit quality trends and continued efforts to actively work out problem loans in the commercial portfolio. The increase from June 30, 2014 was driven by the migration of two commercial loans to non-accrual and an increase in the consumer loan portfolio.
• The over 60-day delinquency rate, excluding acquired portfolios and non-accrual loans and leases, was 0.17 percent at September 30, 2014, down from 0.25 percent at September 30, 2013, and down slightly from 0.18 percent at June 30, 2014. The decrease from September 30, 2013 was primarily a result of the stabilization of the consumer real estate portfolio as economic conditions improved in our markets.
• Net charge-offs were $26.9 million for the third quarter of 2014, a decrease of $0.7 million, or 2.5 percent, from the third quarter of 2013, and an increase of $8.6 million, or 46.8 percent, from the second quarter of 2014. The decrease from the third quarter of 2013 was primarily due to improved credit quality in the commercial portfolio resulting in net recoveries for the third quarter of 2014. The increase from the second quarter of 2014 was primarily due to increased charge-offs in the consumer loan portfolio as a result of a more conservative approach on credit. The over 60-day delinquent consumer real estate loan balance and delinquency rate, excluding acquired portfolios and non-accrual loans, were $17.1 million and 0.3 percent at September 30, 2014, compared to $23.1 million and 0.4 percent at June 30, 2014.
• Provision for credit losses was $15.7 million for the third quarter of 2014, a decrease of $8.9 million, or 36.0 percent, from the third quarter of 2013, and an increase of $5.8 million, or 58.8 percent, from the second quarter of 2014. The decrease from the third quarter of 2013 was primarily due to reduced reserve requirements in the consumer real estate portfolio. The increase from the second quarter of 2014 was primarily due to increased charge-offs in the consumer loan portfolio as a result of a more conservative approach on credit. The over 60-day delinquent consumer real estate loan balance and delinquency rate, excluding acquired portfolios and non-accrual loans, were $17.1 million and 0.3 percent at September 30, 2014, compared to $23.1 million and 0.4 percent at June 30, 2014.

• Total average deposits for the third quarter of 2014 increased $842.3 million, or 5.9 percent, from the third quarter of 2013 and increased $389.0 million, or 2.6 percent, from the second quarter of 2014. The increases from both periods were primarily due to special campaigns for certificates of deposit and money market accounts. The increase from the third quarter of 2013 was further driven by higher average checking account balances per customer.
• The average interest rate on deposits for the third quarter of 2014 was 0.28 percent, up 1 basis point from the third quarter of 2013 and up 4 basis points from the second quarter of 2014. The increases from both periods were primarily due to increased average interest rates resulting from promotions for money market accounts. The increase from the second quarter of 2014 was further driven by certificates of deposit promotions.

• Compensation and employee benefits expense increased $1.6 million, or 1.4 percent, from the third quarter of 2013 and increased $2.7 million, or 2.5 percent, from the second quarter of 2014. The increase from the third quarter of 2013 was primarily due to increased staff levels to support the growth of auto finance and risk management. The increase from the second quarter of 2014 was primarily due to increased expenses related to higher commissions based on production results and performance incentives, as well as increased staff levels to support the growth of the auto finance business.
• Foreclosed real estate and repossessed assets expense increased $1.2 million, or 27.7 percent, from the third quarter of 2013 and decreased $0.4 million, or 7.5 percent, compared to the second quarter of 2014. The increase from the third quarter of 2013 was primarily due to fewer gains on the sales of foreclosed consumer real estate properties and an increase in maintenance expense related to commercial properties. The decrease from the second quarter of 2014 was primarily due to a reduction in write-downs of existing foreclosed commercial properties as a result of improved exit values.

• Capital ratios continue to improve as the Company accumulates capital through earnings.
• On October 20, 2014, TCF’s Board of Directors declared a regular quarterly cash dividend of 5 cents per common share, payable on December 1, 2014, to stockholders of record at the close of business on November 14, 2014. TCF also declared dividends on the 7.50% Series A and 6.45% Series B Non-Cumulative Perpetual Preferred Stock, both payable on December 1, 2014, to stockholders of record at the close of business on November 14, 2014.

Webcast Information

A live webcast of TCF’s conference call to discuss the third quarter earnings will be hosted at TCF’s website, http://ir.tcfbank.com, on October 24, 2014 at 8:00 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 at 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.

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, 2013, 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 in TCF’s primary banking markets; adverse economic, business and competitive developments such as shrinking interest margins, reduced demand for financial services and loan and lease products, deposit outflows, 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 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 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 as a result of the Dodd-Frank Act, or other legislative or regulatory developments such as mortgage foreclosure moratorium laws, further regulation of financial institution campus banking programs, use by municipalities of eminent domain on underwater mortgages, or imposition of underwriting or other limitations that impact the ability to use 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 legislation; 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 economic impact on banks of the Dodd-Frank Act and other regulatory reform legislation; the impact of financial regulatory reform, including additional capital, leverage, liquidity and risk management requirements or changes in the composition of qualifying regulatory capital (including those resulting from U.S. implementation of Basel III requirements); 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 and 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 programs or new 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.

Litigation Risks. Results of litigation, including class action litigation concerning TCF’s lending or deposit activities including account servicing processes or fees or charges, or employment practices; the effect of interchange rate litigation against the Federal Reserve on debit card interchange fees; and possible increases in indemnification obligations for certain litigation against Visa U.S.A. and potential reductions in card revenues resulting from such litigation or other litigation against Visa.

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.