Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 - TCF FINANCIAL CORP | exhibit9912017q1.htm |
| 8-K - 8-K - TCF FINANCIAL CORP | chfc8-k2017q18k.htm |
2017 First Quarter
Earnings Release
David B. Ramaker
Chief Executive Officer
Dennis L. Klaeser
Chief Financial Officer
April 26, 2017
This presentation and the accompanying presentation by management may contain forward-looking statements that are based on
management's beliefs, assumptions, current expectations, estimates and projections about the financial services industry, the
economy and Chemical Financial Corporation ("Chemical"). Words and phrases such as "anticipates," "believes," "continue,"
"estimates," "expects," "forecasts," "future," "intends," "is likely," "judgment," "look ahead," "look forward," "on schedule," “on track,”
"opinion," "opportunity," "plans," "potential," "predicts," "probable," "projects," "should," "strategic," "trend," "will," and variations of
such words and phrases or similar expressions are intended to identify such forward-looking statements. Such statements are
based upon current beliefs and expectations and involve substantial risks and uncertainties that could cause actual results to differ
materially from those expressed or implied by such forward-looking statements. These statements include, among others,
statements related to future levels of loan charge-offs, future levels of provisions for loan losses, real estate valuation, future levels
of nonperforming assets, the rate of asset dispositions, future capital levels, future dividends, future growth and funding sources,
future liquidity levels, future profitability levels, future deposit insurance premiums, future asset levels, the effects on earnings of
future changes in interest rates, the future level of other revenue sources, future economic trends and conditions, future initiatives
to expand Chemical’s market share, expected performance and cash flows from acquired loans, future effects of new or changed
accounting standards, future opportunities for acquisitions, opportunities to increase top line revenues, Chemical’s ability to grow
its core franchise, future cost savings, Chemical’s ability to maintain adequate liquidity and capital based on the requirements
adopted by the Basel Committee on Banking Supervision and U.S. regulators and future changes in laws and regulations
applicable to Chemical and the financial services industry in general. All statements referencing future time periods are forward-
looking.
Management's determination of the provision and allowance for loan losses; the carrying value of acquired loans, goodwill and
mortgage servicing rights; the fair value of investment securities (including whether any impairment on any investment security is
temporary or other-than-temporary and the amount of any impairment); and management's assumptions concerning pension and
other postretirement benefit plans involve judgments that are inherently forward-looking. There can be no assurance that future
loan losses will be limited to the amounts estimated. All of the information concerning interest rate sensitivity is forward-looking.
The future effect of changes in the financial and credit markets and the national and regional economies on the banking industry,
generally, and on Chemical, specifically, are also inherently uncertain. These statements are not guarantees of future performance
and involve certain risks, uncertainties and assumptions ("risk factors") that are difficult to predict with regard to timing, extent,
likelihood and degree of occurrence. Therefore, actual results and outcomes may materially differ from what may be expressed or
forecasted in such forward-looking statements. Chemical undertakes no obligation to update, amend or clarify forward-looking
statements, whether as a result of new information, future events or otherwise.
Forward-Looking Statements & Other
Information
2
In addition, risk factors include, but are not limited to, the risk factors described in Item 1A of Chemical’s Annual Report on Form
10-K for the year ended December 31, 2016. These and other factors are representative of the risk factors that may emerge and
could cause a difference between an ultimate actual outcome and a preceding forward-looking statement.
Non-GAAP Financial Measures
This presentation and the accompanying presentation by management contain certain non-GAAP financial disclosures that are not
in accordance with U.S. generally accepted accounting principles ("GAAP"). Such non-GAAP financial measures include
Chemical’s tangible equity to tangible assets ratio, tangible book value per share, presentation of net interest income and net
interest margin on a fully taxable equivalent basis, and information presented excluding significant items, including net income,
diluted earnings per share, return on average assets, return on average shareholders’ equity, operating expenses and efficiency
ratio. Chemical uses non-GAAP financial measures to provide meaningful, supplemental information regarding its operational
results and to enhance investors’ overall understanding of Chemical’s financial performance. The limitations associated with non-
GAAP financial measures include the risk that persons might disagree as to the appropriateness of items comprising these
measures and that different companies might calculate these measures differently. These disclosures should not be considered an
alternative to Chemical’s GAAP results. See the Supplemental Financial Information included with this presentation for a
reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures.
Forward-Looking Statements & Other
Information
3
Q1 2017 Highlights
Diluted earnings per share of $0.67, compared to $0.66 in the 4th qtr. 2016 and $0.60 in the 1st qtr. 2016
Diluted earnings per share, excluding significant items(1) of $0.71; up 1% from 4th qtr. 2016, and up 9% from 1st
qtr. 2016(2)
Return on average assets and return on average equity of 1.09% and 7.4%, respectively, in 1st qtr. 2017 (1.16%
and 7.8%, respectively, excluding significant items(1)(2))
Loan Growth
$283 million in 1st qtr. 2017 (13% commercial, 62% commercial real estate, 16% residential mortgage and 9%
consumer loans)
Asset quality ratios
Nonperforming loans/total loans of 0.36% at 3/31/2017; up slightly from 0.34% at 12/31/2016, and down from
0.73% at 3/31/2016
Net loan charge-offs/average loans of 0.11%
Lower than normal tax rate primarily due to tax benefit from certain stock option exercises
(1)Significant items include transaction expenses, net gain on the sale of branches and the change in fair value in loan servicing rights.
(2)Denotes a non-GAAP financial measure. Refer to the Appendix for a reconciliation of non-GAAP financial measures.
4
(in thousands except per share data)
2017
1st Qtr.
2016
4th Qtr.
2016
1st Qtr.
Net interest income $130,097 $132,447 $74,330
Provision for loan losses 4,050 6,272 1,500
Noninterest income 38,010 54,264 19,419
Operating expenses 104,196 114,302 58,887
Operating expenses, excl. transaction expenses(1) 100,029 96,286 56,293
Transaction expenses 4,167 18,016 2,594
Net income 47,604 47,168 23,605
Net Income, excl. significant items(1) 50,650 49,949 25,291
Diluted EPS 0.67 0.66 0.60
Diluted EPS, excl. significant items(1) 0.71 0.70 0.65
Return on Avg. Assets 1.09% 1.09% 1.02%
Return on Avg. Shareholders’ Equity 7.4% 7.4% 9.3%
Efficiency Ratio 62.0% 61.2% 62.8%
Efficiency Ratio - Adjusted(1) 57.4% 53.7% 57.6%
Equity/Total Assets 14.7% 14.9% 11.1%
Tangible Equity/Total Assets(1) 8.8% 8.8% 8.2%
Book Value/Share $36.56 $36.57 $26.99
Tangible Book Value/Share(1) $20.32 $20.20 $19.20
Prior Quarter Comparison
Lower net interest income due to two
less days in Q1 compared to Q4 and
lower loan interest accretion−partially
offset by organic loan growth
Lower noninterest income due to Q4
branch sales and MSR fair value
adjustments
Operating expenses reflect increases
in credit-related expenses and payroll
taxes due to stock option exercises
Decrease in provision for loan losses
Favorable tax credits
Prior-Year Quarter Comparison
Impact of merger
Significant increase in net interest
income, attributable to Talmer merger
and $1.02 billion, or 13.9%, organic
growth in total loans during the twelve
months ended March 31, 2017
(1)Denotes a non-GAAP financial measure. Refer to the Appendix for a reconciliation of non-GAAP financial measures.
Income Statement Highlights
Financial Highlights
5
$17.8 $19.0
$24.5 $25.5 $23.6
$25.8
$11.5
$47.1 $47.6$26.0
$2.8 $3.1
$0.00
$0.50
$1.00
$0.0
$20.0
$40.0
$60.0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
E
P
S
N
e
t
I
n
c
o
m
e
Significant items (after-tax)
Net Income
Diluted EPS, excluding significant items (non-GAAP)(3)
$25.3(2)(3)
2015 2016 2017
(1)Net Income
(2)Net Income, excluding significant items.
(3)Denotes a non-GAAP financial measure. Please refer to the Appendix for a reconciliation of non-GAAP
financial measures.
2016 Total: $108.0(1); $140.5(2)(3)2015 Total: $86.8(1); $92.3(2)(3) 2017
$49.9(2)(3) $50.7
(2)(3)
Net Income
Net Income Trending Upward ($ Millions, except EPS data)
$0.71(3)
6
$0.57(3)
$3,254
$4,551
$3,133
$2,335
$1,332
$2,165
$1,672
$737
$1,922
$2,386
$1,461
$1,598
Commercial CRE/C&D Residential Consumer
Loan Portfolio Composition ($ Millions)
$109
$409
$140
$366Commercial
CRE/C&D
Residential
Consumer
$1,223
$1,756
$1,532
$371
Talmer Merger
Aug. 31, 2016
$1,024 $4,882
$5,906
Total Loan Growth,
Excluding Talmer Merger,
Twelve Months Ended
March 31, 2017
Growth – Twelve months ended March 31, 2017
March 31, 2016, $7,367 Total Loan Growth twelve months ended March 31, 2017 March 31, 2017, $13,273
7
$88
$277
$125
$347
$36
$175
$47
$25
Commercial
CRE/C&D
Residential
Consumer
$0
$100
$200
$300
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2015 - $476 2016 - $837 2017 - $283
$15
$224
$181
$280
$56
$283$837
$96
$186
Loan Growth* ($ Millions)
Quarterly Loan Growth Trends
Loan Growth – 2016 Total* Loan Growth – 2017 Q1
$275
*Excludes the impact of the $4.88 billion of loans acquired in the Talmer merger.
$283
8
1Q 2017 4Q 2016 2016 Total
Originated Loan Portfolio
Commercial $ 88 $177 $ 380
CRE/C&D 239 307 594
Residential 119 104 258
Consumer 56 114 418
Total Originated Loan Portfolio Growth $ 502 $702 $1,650
Acquired Loan Portfolio
Commercial $ (52) $ (159) $(292)
CRE/C&D (64) (164) (317)
Residential (72) (65) (133)
Consumer (31) (39) (71)
Total Acquired Loan Portfolio Run-off $(219) $ (427) $(813)
Total Loan Portfolio
Commercial $ 36 $ 18 $ 88
CRE/C&D 175 143 277
Residential 47 39 125
Consumer 25 75 347
Total Loan Portfolio Growth $ 283 $275 $ 837
Loan Growth* – Originated v. Acquired
Loan Growth (Run-off) ($ Millions)
*Excludes the impact of the $4.88 billion of loans acquired in the Talmer merger. 9
$2.0
$2.0
$2.0
$1.4
$0.2
(1)Comprised of $621 million of growth in customer deposits offset by a $433 million decrease in brokered deposits.
(2)Cost of deposits based on period averages.
Total Deposits – March 31, 2016
$7.65
Total Deposits – March 31, 2017
$13.13
Organic
$0.2, 2.4%(1)
$1.3
$0.9
$1.2
$1.5
$0.4
Talmer Merger
$5.3
$0.1
$0.7
($0.2) ($0.4)
Deposit Composition
Total Deposits ($ Billions)
$7,535 $7,528 $9,484 $13,003 $12,999
0.22% 0.23% 0.24%
0.27% 0.28%
0.00%
0.25%
0.50%
$4,000
$9,000
$14,000
Q1 Q2 Q3 Q4 Q1
I
n
t
e
r
e
s
t
R
a
t
e
P
a
i
d
T
o
t
a
l
A
v
e
r
a
g
e
D
e
p
o
s
i
t
s
(
$
M
i
l
l
i
o
n
s
)
Deposits Cost of Deposits(2)
Average Deposits ($ Millions) & Cost of Deposits (%)
2016 2017
$3.4
$2.9 $3.9
$2.7
$0.2
Noninterest-bearing Demand Deposits Interest-bearing Demand Deposits Savings Deposits Time Deposits Brokered Deposits
10
$10.2
$2.8
$1.5
Deposits:
Time Deposits
Customer Repurchase
Agreements
Wholesale borrowings (at Mar.
31, 2017: brokered deposits -
$0.2, short and long term
borrowings - $1.3)
$0.4
Average Cost of Funds Q1 2017 – 0.35%Average Cost of Funds Q4 2016 – 0.33%
$14.6 Billion $14.9 Billion
$9.9
$2.8
$0.3 $1.6
Interest and
noninterest-bearing,
demand, savings,
money market
Average cost of wholesale
borrowings – 1.06%
Average cost of wholesale
borrowings – 1.11%
Funding Breakdown ($ Billions)
December 31, 2016 March 31, 2017
11
$1.5 $1.5 $1.5 $2.0 $1.5 $3.0 $4.1 $6.3 $4.1
$1.9 $1.8
$0.8
$4.3 $4.5
$1.8 $1.8 $1.8
$3.5
$0.0
$3.5
$7.0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Provision for Loan Losses Net Loan Losses
$78 $71 $62 $51 $62 $44 $48
$0
$60
$120
YE 2011 YE 2012 YE 2013 YE 2014 YE 2015 YE 2016 2017 Q1
ALL
NPLs
2015 2016 2017
Originated Loans ($ billions) $3.3 $3.8 $4.3 $5.0 $5.8 $7.5 $8.0
Acquired Loans ($ billions) 0.5 0.4 0.3 0.7 1.5 5.5 5.3
Total Loans ($ billions) $3.8 $4.2 $4.6 $5.7 $7.3 $13.0 $13.3
ALL $88 $84 $79 $76 $73 $78 $79
ALL/ Originated Loans 2.60% 2.22% 1.81% 1.51% 1.26% 1.05% 0.99%
NPLs/ Total Loans 2.05% 1.71% 1.33% 0.89% 0.86% 0.34% 0.36%
Credit Mark as a % of Unpaid
Principal on Acquired Loans 6.6% 6.0% 7.8% 5.4% 4.4% 3.1% 3.2%
Credit Quality ($ Millions, unless otherwise noted)
Provision for Loan Losses vs. Net Loan Losses
Nonperforming Loans (NPLs) and Allowance for Loan Losses (ALL)
12
$74.3
$77.5
$96.8
$132.4
$130.1
$40
$60
$80
$100
$120
$140
Q1 Q2 Q3 Q4 Q1
N
e
t
I
n
t
e
r
e
s
t
I
n
c
o
m
e
(
$
M
i
l
l
i
o
n
s
)
Net Interest Income
3.60% 3.70% 3.58% 3.56% 3.49%
0.03% 0.11% 0.11% 0.14% 0.12%
4.13% 4.19% 4.12% 4.18% 4.11%
0.00%
2.50%
5.00%
Q1 Q2 Q3 Q4 Q1
Net Interest Margin(1) and Loan Yields
Net Interest Margin(1)
Purchase Accounting Accretion on Loans
Loan Yields
2016 2017
2016 2017
Net Interest Income
Net Interest Income, Net Interest Margin
and Loan Yields
(Quarterly Trend)
(1)Computed on a fully taxable equivalent basis (non-GAAP) using a federal income tax rate of 35%. Please refer to the Appendix for a
reconciliation of non-GAAP financial measures.
13
$7.1 $7.2 $10.1
$25.4
$15.0
$5.2 $5.8
$5.6
$6.0
$5.8
$5.7 $6.3
$7.7
$8.4
$8.0
$1.4 $1.6
$4.4
$14.4
$9.2
$0.0
$30.0
$60.0
Q1 Q2 Q3 Q4 Q1
Other Wealth Management Service Charges Mortgage Banking Revenue
2016 2017
(
$
M
i
l
l
i
o
n
s
)
$19.4
$54.3*
Non-Interest Income
Quarterly
*Significant items: $(0.5) million change in fair value in loan servicing rights in 2017 Q1 and $13.7 million (branch
sales of $7.4 million and change in fair value in loan servicing rights of $6.3 million) in 2016 Q4
$38.0*
$20.9
$27.8
14
$13.1 $12.5 $16.1
$22.3 $23.9
$33.9 $33.1
$40.6
$57.7 $60.2$4.9 $5.5
$5.5
$7.6
$7.4
$4.4 $4.9
$6.4
$8.7
$8.5
$2.6 $3.1
$37.5
$18.0 $4.2
$0.0
$60.0
$120.0
Q1 Q2 Q3 Q4 Q1
Other Compensation Occupancy Equipment Transaction Expenses
$114.3
$104.2
2016 2017
(
$
M
i
l
l
i
o
n
s
)
$56.0
$59.1
$56.3
$58.9
$68.6
$106.1
Operating Expenses
Quarterly
$100.0$96.3
15
Peer Average
12/31/2016(1)
CHFC
12/31/2016
CHFC
3/31/2017
Tangible Book Value / Share(2) NA $20.20 $20.32
Tangible Common Equity / Total Assets(2) 8.1% 8.8% 8.8%
Tier 1 Capital(3) 10.8% 10.7% 10.6%
Total Risk-Based Capital(3) 12.6% 11.5% 11.4%
$20.32
$1.07 $1.04
$19.20
$2.87 $0.36
$0
$5
$10
$15
$20
$25
TBV @ 3/31/2016 Net Income
(Excl. Transaction
Expenses)
Dividends Talmer AOCI Adj.
& Other
TBV @ 3/31/2017
Capital
Tangible Book Value and Capital Ratios
Tangible Book Value(2) (TBV) Roll Forward
(1)Source SNL Financial – ASB, WTFC, CBSH, TCB, UMBF, PVTB, MBFI, ONB, FMBI and FFBC (ordered by asset size).
(2)Denotes a non-GAAP financial measure. Refer to the Appendix for a reconciliation of non-GAAP financial measures.
(3)Estimated at March 31, 2017 16
Evolving macroeconomic environment suggests combination of headwinds
and tailwinds; too early to predict outcome
Emphasize our strategy of being the Preeminent Midwest Community Bank
Focus on what we can control
• Organic revenue growth and cost discipline
• Concentrate on achieving cost savings and exploiting business synergy
opportunities
• Continue to build out and enhance risk management practices
Closing Comments
17
Full Year
1Q 2017 4Q 2016 1Q 2016 2016 2015
Shareholders’ equity $ 2,600,051 $ 2,581,526 $ 1,032,291
Goodwill, CDI and non-compete agreements, net of tax (1,154,915) (1,155,617) (297,821)
Tangible shareholders’ equity $ 1,445,136 $ 1,425,909 $ 734,470
Common shares outstanding 71,118 70,599 38,248
Tangible book value per share $20.32 $20.20 $19.20
Total assets $ 17,636,973 $17,355,179 $ 9,303,632
Goodwill, CDI and non-compete agreements, net of tax (1,154,915) (1,155,617) (297,821)
Tangible assets $ 16,482,058 $16,199,562 $ 9,005,811
Tangible shareholders’ equity to tangible assets 8.8% 8.8% 8.2%
Net income $47,604 $47,168 $23,605 $108,032 $86,830
Significant items, net of tax 3,046 2,781 1,686 32,373 5,484
Net income, excl. significant items $50,650 $49,949 $25,291 $140,405 $92,314
Diluted earnings per share $0.67 $0.66 $0.60
Effect of significant items, net of tax 0.04 0.04 0.05
Diluted earnings per share, excl. significant items $0.71 $0.70 $0.65
Average assets $ 17,474,019 $17,264,688 $9,241,034
Return on average assets 1.09% 1.09% 1.02%
Effect of significant items, net of tax 0.07% 0.07% 0.07%
Return on average assets, excl. significant items 1.16% 1.16% 1.09%
Average shareholders’ equity $ 2,584,501 $ 2,564,943 $1,017,929
Return on average shareholders’ equity 7.4% 7.4% 9.3%
Effect of significant items, net of tax 0.4% 0.4% 0.6%
Return on average shareholders’ equity, excl. significant items 7.8% 7.8% 9.9%
Appendix: Non-GAAP Reconciliation
(Dollars in thousands, except per share data)
18
1Q 2017 4Q 2016 1Q 2016
Efficiency Ratio:
Total revenue – GAAP $ 168,107 $ 186,711 $93,749
Net interest income FTE adjustment 3,068 2,945 2,133
Significant items 429 (13,815) (169)
Total revenue – Non-GAAP $ 171,604 $175,841 $95,713
Operating expenses – GAAP $ 104,196 $114,302 $58,887
Transaction expenses (4,167) (18,016) (2,594)
Amortization of intangibles (1,513) (1,843) (1,194)
Operating expenses – Non-GAAP $ 98,516 $ 94,443 $55,099
Efficiency ratio – GAAP 62.0% 61.2% 62.8%
Efficiency ratio – adjusted 57.4% 53.7% 57.6%
Net Interest Margin:
Net interest income – GAAP $ 130,097 $132,447 $74,330
Adjustments for tax equivalent interest:
Loans 808 838 698
Investment securities 2,260 2,107 1,435
Total taxable equivalent adjustments 3,068 2,945 2,133
Net interest income (on a tax equivalent basis) $133,165 $135,392 $76,463
Average interest-earning assets $15,395,465 $15,156,107 $8,526,711
Net interest margin – GAAP 3.41% 3.48% 3.50%
Net interest margin (on a tax-equivalent basis) 3.49% 3.56% 3.60%
Appendix: Non-GAAP Reconciliation
(Dollars in thousands, except per share data)
19
