TCF Financial Corporation (NYSE: TCF):

TCF Financial Corporation (NYSE: TCF):

3rd-Quarter Highlights

  • Quarterly net income of $22.10M, or $0.150 for each diluted share
  • Adjusted diluted earnings for each common share of $0.980(1), apart from $106.20M, or $0.830 for each share, after-tax impact of merger-related costs and non-core items
  • Successfully closed merger of equals between Legacy TCF Financial Corporation (Legacy TCF) and Chemical Financial Corporation (Chemical) on August 1, 2k19
  • Purchase accounting fair value credit mark of $183.00M and interest rate mark of $66.00M on the Chemical loans
  • Efficiency ratio of 91.320 percent; adjusted efficiency ratio of 58.740 percent(1)
  • Return on average common equity (“ROACE”) of 1.750 percent; return on average tangible common equity (“ROATCE”) of 2.680 percent(1); adjusted ROATCE of 14.960 percent(1)
  • Repositioned assets through investment securities sales and termination of interest rate swap to lower the risk profile, reduce asset sensitivity and enhance capital efficiency and liquidity
  • Transferred Legacy TCF auto finance portfolio to held-for-sale ($1.20B at September 30, 2k19), resulting in a $19.30M pre-tax loss, or $14.70M after tax
  • Net charge-off rate as a percentage of average loans and leases of 0.390 percent, annualized
  • Common equity Tier 1 capital ratio of 10.880 percent
  • Declared $150.00M share repurchase authorization on October 28, 2k19
  • Declared quarterly cash dividends on the common stock of $0.350 for each share on October 28, 2k19

Merger-related Costs and Non-core Items in the 3rd-Quarter(1)

  • Pre-tax merger-related costs of $111.30M, $82.90M net of tax, or 64.0 cents for each diluted common share
  • Pre-tax loss of $41.10M, $23.30M net of tax, or 19.0 cents for each diluted common share related to non-core items, see summary of non-core adjustments below

Net Interest Income and Net Interest Margin

Net interest income was $371.80M for the 3rd-quarter of 2k19. Purchase accounting accretion and amortization included in net interest income was $28.40M. Net interest income, apart from purchase accounting accretion and amortization, was $343.40M. Net interest margin on a fully tax-equivalent basis (FTE) was 4.140 percent for the 3rd-quarter of 2k19. Net interest margin FTE, apart from purchase accounting accretion and amortization, was 3.830 percent (see “Reconciliation of GAAP to Non-GAAP Financial Measures” tables).

Noninterest Income

Noninterest income was $94.30M for the 3rd-quarter of 2k19. Noninterest income included the following balance sheet repositioning actions considered to be non-core items: a $19.30M loss related to the transfer of the Legacy TCF auto finance portfolio to held-for-sale, a $17.30M loss related to the termination of interest rate swaps, and a gain of $5.90M related to the sale of $1.60B of certain investment securities. Noninterest income in addition to included $4.50M of loan servicing rights impairment, also considered a non-core item. Adjusted noninterest income for the 3rd-quarter of 2k19 was $129.50M (see “Reconciliation of GAAP to Non-GAAP Financial Measures” tables). The 3rd-quarter of 2k19 also included a $2.10M unrealized loss related to interest rate swaps mark-to-market adjustments resulting from changes in the interest rate environment. Noninterest income, apart from the interest rate swap mark-to-market adjustment and non-core items talked about formerly, was $131.60M for the 3rd-quarter of 2k19.

Noninterest Cost

Noninterest cost was $425.60M for the 3rd-quarter of 2k19 and included $111.30M of merger-related costs. Noninterest cost also included $5.90M of cost, included within other noninterest cost, related to the write-down of company-owned vacant land parcels, considered a non-core item. Apart From merger-related costs and the write-down of company-owned vacant land parcels, the adjusted noninterest cost was $308.50M (see “Reconciliation of GAAP to Non-GAAP Financial Measures” tables).

Income Tax (Benefit) Cost

Income tax benefit for the 3rd-quarter of 2k19 was $11.70M. The 3rd-quarter of 2k19 included an $8.00M tax basis adjustment benefit. The 3rd-quarter of 2k19 also included a $5.70M benefit offered by the repricing of TCF’s net deferred tax position in conjunction with the completion of the merger and is reflected in the after-tax impact of merger-related costs.

Credit Quality

Provision for credit losses Provision for credit losses was $27.20M for the 3rd-quarter of 2k19.

Net charge-off rate The annualized net charge-offs as a percentage of average loans and leases was 0.390 percent for the 3rd-quarter of 2k19.

Allowance for Loan and Lease Losses Allowance for loan and lease losses was $121.20M, or 0.360 percent of total loans and leases, at September 30, 2k19. Loans attained in the Merger were recorded at their fair value as of the merger date without a carryover of the related allowance, and as of September 30, 2k19, the determination was made that no allowance was needed for this population of loans. Allowance for loan and lease losses and the credit discount on attained loans was $297.00M, or 0.890 percent of total loans and leases at September 30, 2k19.

Nonaccrual loans and leases Nonaccrual loans and leases were $181.80M on September 30, 2k19 and represented 0.540 percent of total loans and leases.

Balance Sheet

Loans and leases Loans and leases were $33.50B at September 30, 2k19, contrast to $19.20B at June 30, 2k19. Loan and lease balances were influenced by the addition of Chemical’s $15.70B loan and lease portfolio, partially offset by the transfer of the Legacy TCF auto finance portfolio to held-for-sale ($1.20B at September 30, 2k19).

Investment securities The investment securities portfolio was $5.70B on September 30, 2k19, a contrast to $3.30B at June 30, 2k19. Portfolio balances were influenced by the addition of Chemical’s $3.80B investment securities portfolio and the subsequent sale of $1.60B of these investment securities throughout the 3rd-quarter of 2k19.

Deposits Deposits were $35.30B on September 30, 2k19, a contrast to $19.10B on June 30, 2k19. Deposit balances were influenced by the addition of $16.80B of Chemical deposits throughout the 3rd-quarter of 2k19.

Capital The common equity Tier 1 capital ratio was 10.880 percent at September 30, 2k19.

TCF’s board of directors approved an authorization to repurchase up to $150.00M of TCF common stock.

TCF’s board of directors also declared a regular quarterly cash dividend of $0.350 for each common share payable on December 2, 2k19 to shareholders of record at the close of business on November 15, 2k19. In addition, the board of directors declared a quarterly cash dividend of $0.35625 for each depositary share payable on December 2, 2k19 to shareholders of record of the depositary shares, representing a 1/1,000th interest in a share of the 5.70 percent Series C Non-Cumulative Perpetual Preferred Stock, at the close of business on November 15, 2k19.

Conference Call Details TCF will host a conference call to discuss 3rd-quarter 2k19 results on Tuesday, October 29, 2k19 at 10:00 a.m. Eastern Daylight Time. The conference call will be available via a live webcast on the Shareholder Relations section of TCF’s website, ir.tcfbank.com, and archived for replay. The conference call can also be accessed by dialing (844) 512-2926 and entering access code 3865677. To listen to the replay via phone, please dial (877) 344-7529 and enter access code 10135947. The replay begins about one hour after the call is accomplished on Tuesday, October 29, 2k19 and will be available through Tuesday, November 5, 2k19.