Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 - TCF FINANCIAL CORP | tcf123117form8-kexhibit991.htm |
| EX-99.3 - EXHIBIT 99.3 - TCF FINANCIAL CORP | tcf123117form8-kexhibit993.htm |
| 8-K - 8-K - TCF FINANCIAL CORP | tcf123117form8-kearningsre.htm |
2017 Fourth Quarter Earnings Presentation
January 30, 2018
Agenda
2017 OBSERVATIONS
• Craig Dahl (Chief Executive Officer)
REVENUE / LOANS AND LEASES
• Craig Dahl
DEPOSITS / INTEREST RATES / EXPENSES / CAPITAL
• Brian Maass (Chief Financial Officer)
CREDIT
• Jim Costa (Chief Risk Officer & Chief Credit Officer)
CLOSING COMMENTS
• Craig Dahl
Q&A
2
CONTINUED FOCUS ON EXECUTING ON OUR STRATEGIC PILLARS
IN 2017
2017 Observations
Diversification 1 Profitable Growth 2 Operating Leverage 3 Core Funding 4
3
• Announced discontinuation of auto finance loan
originations, effective December 1, 2017
• Net income of $101.4 million, up 102.4% year-
over-year and diluted EPS of 57 cents, up
111.1% year-over-year, impacted by the
following items:
• $130.7 million estimated net tax benefit
related to tax reform (77 cents EPS)
• $88.2 million pre-tax charge related to
discontinuation of auto finance loan
originations (48 cents EPS)
• $13.1 million pre-tax impact related to
additional TCF Foundation contribution,
one-time team member bonuses, planned
closure of five branches and inventory
finance program extension (5 cents EPS)
• Completed various portfolio purchases, acquired
two businesses, launched a new share
repurchase program and refinanced Series A
preferred stock
• Improved risk profile as non-accrual loans and
leases decreased 34.6%, other real estate
owned decreased 61.1% and credit performance
was stable
• Revenue growth of 4.5% including the planned
reduction in gains on sales income
• Strong loan and lease growth of 7.1%
• Successfully introduced new digital platform to
retail banking customers
FOURTH QUARTER 2017 FULL YEAR 2017
TCF Discontinues
Auto Finance Loan Originations
• Effective December 1, 2017, TCF discontinued auto finance loan originations
• Continue to service existing auto finance portfolio (owned and serviced for others)
• Capital being deployed via various capital optimization strategies, including the
previously announced $150.0 million share repurchase program
• Cash from run-off of auto finance balances also being reinvested into investment
portfolio and used to fund loan and lease growth
4
• Pre-tax charge with two components:
• $73.4 million charge related to goodwill and
other intangible assets ($73.3 million after-
tax)
• $14.8 million restructuring charge for items
such as severance, asset impairment and
lease termination write-offs ($9.1 million
after-tax)
• Approximately one-third of Gateway's
workforce was immediately impacted by the
decision, primarily in the sales and
originations functions
• Meaningful earnings improvement in 2018
• Reduction of auto finance operating revenue
and expense
• Reinvestment of cash into investment and
loan and lease portfolios
• Auto finance portfolio run-off of
approximately $1.0 billion to $1.5 billion in
2018
• Reduced risk profile over time
4Q17 IMPACT EXPECTED 2018 IMPACT
Impact of Tax Reform
5
• Driven by large net deferred tax liability
(DTL) of $227.9 million at December 31,
2017
• Net DTL position primarily generated from
accelerated tax depreciation on leasing
portfolio
• One-time bonuses of $4.6 million to eligible
team members earning under $100,000 in
2017
• Donation of $5.0 million to TCF Foundation
to increase grants to nonprofit organizations
in the communities we service
ESTIMATED NET TAX BENEFIT GIVING BACK TO TEAM MEMBERS & COMMUNITIES
• Estimated net tax benefit of $130.7 million in 4Q17
• Estimated normalized effective tax rate of 23%-25% in 2018 (reduction of approximately 11%
compared to corporate tax rate reduction of 14%)
• Generation of additional capital that can potentially be used to support organic loan and lease
growth, additional stock buybacks, dividend increases, corporate development or investments in
the business
POSITIVE IMPACT OF TAX REFORM LEGISLATION ENACTED IN 2017
• Previously announced share repurchase
program with authorization to purchase up to
$150.0 million of common stock
• Repurchased 446,464 shares in 4Q17 at a
cost of approximately $9.2 million
CONTINUED FOCUS ON ALLOCATING CAPITAL IN A
PRUDENT MANNER TO DRIVE SHAREHOLDER VALUE
Recent Capital Actions
6
• TCF Board of Directors declared a quarterly
common stock dividend of 15 cents per
share
• Increase of 100% compared to the previous
quarterly common stock dividend of 7.5
cents per share
• 6.45% Series B non-cumulative perpetual preferred stock to be redeemed on March 1, 2018
• One-time reduction in net income available to common stockholders of approximately $3.5 million
in 1Q18
• Annual after-tax expense savings of approximately $6.5 million beginning 2Q18
DIVIDEND INCREASE
PREFERRED STOCK REDEMPTION
SHARE REPURCHASE PROGRAM
Investments and other 1%
Consumer real estate & other
(first mortgage lien) 10%
Consumer
real estate
(junior lien)
17%
Auto finance
16%Leasing &
equipment
finance 21%
Commercial
15%
Inventory
finance 15%
Loans and leases held for sale 1%
Securities 4%
Other 3%
Fees and
service
charges 28%
ATM
revenue
4%
Card
revenue
12%
Leasing &
equipment
finance 35%
Gains on sales of consumer
real estate loans, net 9%
Gains on sales of auto loans, net
2%
Servicing fee income 7%
NIM up 27 bps YoY
400
350
300
250
200
150
100
50
0
5.25%
5.00%
4.75%
4.50%
4.25%
4.00%
4Q16 1Q17 2Q17 3Q17 4Q17
$116
$327
$104
$326
$115
$342
$109
$343
$121
$363
4.30%
4.46% 4.52%
4.61% 4.57%
Net Interest Margin1
4Q17 vs. 4Q16 revenue and net interest
margin impacted by the following 4Q17 items:
• Higher net interest income driven by a combination
of higher average yields on loans and leases and
loan and lease growth
• Higher levels of leasing and equipment finance non-
interest income due to the second quarter of 2017
leasing and equipment finance acquisition
• Reduction in gains on sales and servicing fee
income
1 Annualized
Revenue Summary
REVENUE DIVERSIFICATION
$271 million
Non-interest Income
Interest Income
($ millions)
Non-interest Income
Net Interest Income
$121 million
Strategic Pillars
Diversification 1
Profitable Growth 2
7
$211 $222 $227
$234 $242
12/16 3/17 6/17 9/17 12/17
$17,844 $17,975 $18,367
$18,988
14%
19%
23%
18%
15%
11%
16%
19%
24%
15%
14%
12%
14%
18%
25%
17%
16%
10%
• Year-over-year loan and lease growth
in wholesale businesses:
• Inventory Finance up 10.9%
• Leasing & Equipment Finance up
9.8%
• Commercial up 8.4%
• Discontinued auto finance loan
originations effective December 1,
2017
• Strong loan and lease diversification
by asset class, geography, rate,
average loan and lease size, estimated
weighted average life and collateral
type
Loan and Lease Portfolio
($ millions)
14%
18%
24%
15%
16%
13%
Inventory Finance
Leasing & Equipment Finance
Commercial
Auto Finance
Consumer Real Estate - Junior Lien
Consumer Real Estate & Other - First Mortgage Lien
14%
19%
25%
17%
15%
10%
Strategic Pillar
Diversification 1
Loan and lease growth of
7.1% YoY
8
$17,84
$19,104
BALANCE SHEET ASSET SENSITIVITY AND CONTINUED PRICING
DISCIPLINE RESULTING IN STRONG YIELD PERFORMANCE
4Q16 1Q17 2Q17 3Q17 4Q17
Consumer Real Estate:
First Mortgage Lien 5.22% 5.33% 5.35% 5.33% 5.36%
Junior Lien 5.64 5.82 6.01 6.13 6.13
Commercial 4.25 4.43 4.50 4.72 4.90
Leasing & Equipment Finance 4.43 4.48 4.48 4.53 4.90
Inventory Finance 5.80 5.93 6.22 6.71 6.01
Auto Finance 4.04 4.15 5.01 5.17 5.23
Total Loans and Leases 4.82 4.95 5.15 5.31 5.35
Peer Group2 Average 4.45 4.43 4.55 4.62 N.A.
1 Annualized and presented on a fully tax-equivalent basis
2 All U.S. publicly-traded banks and thrifts, excluding TCF, with total assets between $10 and $50 billion as of September 30, 2017 that have
reported loan and lease yields for the past four quarters, includes loans held for sale (source: S&P Global Market Intelligence)
N.A. Not Available
Loan and Lease Yields1
Strategic Pillars
Diversification 1
Profitable Growth 2
9
20,000
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
4Q16 1Q17 2Q17 3Q17 4Q17
$17,069 $17,106 $17,323 $17,649
$18,139
• 87% of average deposit balances
are consumer
• Relative value of retail deposits
increasing as short-term interest
rates rise
• Average checking balances
increased $338.7 million, or 5.9%,
year-over-year
• Average interest rate on deposits
up 11 basis points year-over-year
primarily due to higher rates on
promotional deposits
• Planned closure of five branches
Deposit Generation
Average Balances
($ millions)
Certificates of Deposit
Money Market
Savings
Checking
Strategic Pillars
Profitable Growth 2
Core Funding 4
25%
14%
27%
34%
24%
14%
28%
34%
24%
13%
28%
35%
26%
12%
28%
34%
28%
10%
28%
34%
10
Average
interest cost: 0.35% 0.33% 0.33% 0.38% 0.46%
4.65
4.55
4.45
4.35
4.25
1Q 2Q 3Q 4Q
4.37 4.35 4.34
4.30
4.46
4.52
4.61
4.57
Positive Impact of Rising
Interest Rates
• Strong yield expansion in variable- and
adjustable-rate portfolios due to rising interest
rates
• Inventory finance yields impacted by both
seasonality and rising interest rates
• Net interest margin increase of 27 basis points
year-over-year due to overall margin expansion
on loans and leases, primarily impacted by
interest rate increases
Strategic Pillars
Diversification 1
Profitable Growth 2
NET INTEREST MARGIN TRENDS1
2016 FY16: 4.34% 2017 FY17: 4.54%
11
7.20
6.80
6.40
6.00
5.60
5.20
1Q 2Q 3Q 4Q
5.71
5.61
5.83
5.665.68
5.74
6.07
5.80
5.93
6.22
6.71
6.01
INVENTORY FINANCE YIELD TRENDS1
(Percent)
IMPACT ON VARIABLE- AND
ADJUSTABLE-RATE PORTFOLIOS1
(Percent)
2015 2016 2017
Quarter ended
4Q16 4Q17 Change
Consumer Real Estate 5.36% 5.95% 59 bps
Commercial 4.05 4.68 63
Inventory Finance 5.80 6.01 21
1 Annualized and presented on a fully tax-equivalent basis
• Operating lease depreciation year-over-
year increase offset by an increase in
leasing and equipment finance operating
lease revenue
• Other non-interest expense impacted by
charges related to the discontinuation of
auto finance loan originations of
$88.2 million, as well as the donation to
TCF Foundation of $5.0 million
• Compensation and employee benefits
expense year-over-year increase due to
higher incentive compensation and one-
time employee bonuses, partially offset
by reduced headcount in auto finance
• Efficiency ratio impacted by fourth
quarter charges
1 Includes Occupancy & Equipment, Other Non-interest Expense, Foreclosed Real Estate & Repossessed Assets and Other Credit Costs
Non-interest Expense
350
300
250
200
150
100
50
0
4Q16 1Q17 2Q17 3Q17 4Q17
$115 $124 $116 $115 $128
$99
$109 $105 $104
$204$11
$225 $11
$244
$12
$233
$16
$235
$16
$348
Compensation & Employee Benefits
Foreclosed Real Estate and Other Credit Cost
Compensation & Employee Benefits
350
300
250
200
150
100
50
0
$
(M
ill
io
ns
)
6/14 9/14 12/14 3/15 6/15
($ millions)
Operating Lease Depreciation
Other 1
Compensation & Employee Benefits
Strategic Pillars
Profitable Growth 2
Operating Leverage 3
12
Efficiency
Ratio: 68.89% 74.93% 68.19% 68.46% 95.88%
4Q16 4Q17
Common equity Tier 1 capital ratio1 10.24% 10.79%
Tier 1 risk-based capital ratio1 11.68% 12.14%
Total risk-based capital ratio1 13.69% 13.90%
Tier 1 leverage ratio1 10.73% 11.12%
Common equity ratio 10.09% 10.42%
Tangible common equity ratio2 9.13% 9.72%
Book value per common share $ 12.66 $ 13.96
Tangible book value per common share2 $ 11.33 $ 12.92
Return on average common equity3 8.40% 16.95%
Return on average tangible common
equity3, 4 9.43% 32.87%
• Maintained strong capital ratios
with earnings accumulation as
well as the impact of tax reform
• Common stock dividend of
15 cents per share declared on
January 30, 2018
• Repurchased 446,464 shares of
common stock during fourth
quarter 2017 at a cost of
approximately $9.2 million
• 6.45% Series B non-cumulative
perpetual preferred stock to be
redeemed on March 1, 2018
Capital and Return
1 The regulatory capital ratios for 4Q17 are preliminary pending completion and filing of the Company’s regulatory reports
2 See “Reconciliation of GAAP to Non-GAAP Financial Measures – Tangible Common Equity Ratio and Tangible Book Value Per Common Share” slide
3 Annualized
4 See “Reconciliation of GAAP to Non-GAAP Financial Measures – Return on Average Tangible Common Equity” slide
13
300
200
100
0
3.00%
2.00%
1.00%
0.00%
12/16 3/17 6/17 9/17 12/17
$228
$171 $158 $146 $137
1.28%
0.95% 0.86% 0.77% 0.72%
30
20
10
0
4Q16 1Q17 2Q17 3Q17 4Q17
$20
$12
$19
$15
$22
30
20
10
0
2.00%
1.50%
1.00%
0.50%
0.00%
4Q16 1Q17 2Q17 3Q17 4Q17
$12
$5
$13
$8
$18
0.27%
0.11%
0.28% 0.18%
0.38%
PROVISION FOR CREDIT LOSSES
1 Excludes non-accrual loans and leases
2 Excluding the $8.7 million recovery from the consumer real estate non-accrual loan sale, provision for credit losses was $20.9 million, net charge-offs were
$13.8 million and the net charge-off ratio was 0.31%
3 Excluding the $4.6 million recovery from the consumer real estate non-accrual loan sale, provision for credit losses was $19.1 million, net charge-offs were
$12.8 million and the net charge-off ratio was 0.28%
4 Annualized
($ millions)
Credit Quality Trends
($ millions)
60+ DAY DELINQUENCIES1
NET CHARGE-OFFS
NON-PERFORMING ASSETS
Other Real Estate Owned
Non-accrual Loans & Leases
NPAs/Loans & Leases and Other Real Estate Owned
Strategic Pillar
Diversification 1
($ millions)
Net charge-offs
Net charge-offs ratio
2
2
3
4
32
0.15%
0.12%
0.09%
0.06%
0.03%
0.00%
12/16 3/17 6/17 9/17 12/17
0.12%
0.09%
0.11%
0.13%
0.12%
14
Quarter Ended1
Change from
Quarter Ended
Dec. 31, 2016 Mar. 31, 2017 Jun. 30, 2017 Sep. 30, 2017 Dec. 31, 2017 Dec. 31, 2016
Consumer:
Consumer Real Estate:
First Mortgage Lien 0.26% (0.18)% 0.15% (0.16)% 0.18% (8) bps
Junior Lien 0.08 (0.89) 0.05 (0.38) (0.03) (11)
Total Consumer Real Estate 0.17 (0.58) 0.09 (0.29) 0.05 (12)
Auto Finance 1.09 1.12 0.83 1.13 1.36 27
Consumer 4 0.53 0.05 0.42 0.34 0.62 9
Wholesale:
Commercial 0.01 0.32 0.29 (0.02) (0.04) (5)
Leasing & Equipment Finance 0.10 0.13 0.14 0.10 0.41 31
Inventory Finance 0.07 0.01 0.09 0.08 0.15 8
Wholesale 0.06 0.16 0.18 0.05 0.20 14
Total 4 0.27 0.11 0.28 0.18 0.38 11
Total excluding consumer real
estate non-accrual loan sales4 0.27 0.31 0.28 0.28 0.38 11
1 Annualized
2 Excluding the $8.7 million recovery from the consumer real estate non-accrual loan sale, consumer net charge-off ratio was 0.49% and total net charge-off ratio was 0.31%
3 Excluding the $4.6 million recovery from the consumer real estate non-accrual loan sale, consumer net charge-off ratio was 0.56% and total net charge-off ratio was 0.28%
4 Includes Other
Net Charge-off Ratio
Strategic Pillar
Diversification 1
15
2 3
• Net charge-off ratio increased 11 basis points year-over-year primarily due to increased net charge-offs in
the leasing and equipment finance and auto finance portfolios, partially offset by decreased net charge-
offs in the consumer real estate portfolio
16
2018 Operating Outlook
• Redeploy run-off from auto finance portfolio into
investment portfolio and/or existing loan and
lease portfolios
• Continued organic loan and lease growth in
wholesale businesses
• Opportunities for additional loan and lease
portfolio purchases
• Moderating certificates of deposit growth with
additional core deposit growth
• Reduce loan-to-deposit ratio
• Continued revenue growth
• Stable or slightly declining expenses
• Reduction of auto finance operating revenue
and expense
• Higher leasing and equipment finance revenue,
partially offset by increased operating lease
depreciation
OPERATING PERFORMANCEBALANCE SHEET
2018 Targets1
ROATCE
Previous 5-Year Approx. Average: 10%
2018 Full Year Target: 11.5%-13.5%
Efficiency Ratio
Previous 5-Year Approx. Average: 70%
2018 Full Year Target: 66%-68%
1 ROATCE is a non-GAAP financial measure. A reconciliation of the projected 2018 ROATCE to the most directly comparable GAAP measure is not provided because the Company
is unable to provide such reconciliation without unreasonable effort, however it is expected to be consistent with the historical non-GAAP reconciliation of ROATCE included in the
appendix. This target range does not include any estimate of the potential impacts of certain types of event-specific charges such as those related to acquisitions, changes in
regulations, or the resolution of litigation. See the Cautionary Statements at the end of this presentation for further information regarding some of the items that could cause our
actual results to differ from these estimates.
Strategic Pillar Summary
STRATEGIC PILLARS 2018 OUTLOOK
DIVERSIFICATION
• Continued stable credit quality driven by
diversification philosophy
• Origination opportunities in multiple asset classes
provide flexibility to adjust asset composition based
on market conditions
PROFITABLE GROWTH
• Shift in earning assets primarily from auto finance
loans to investment portfolio
• Balance sheet composition provides a competitive
advantage in the current rising rate environment
• Reduced risk profile of the balance sheet
OPERATING LEVERAGE
• Continued revenue growth with stable or slightly
declining expenses
• Improved efficiency ratio driven by the
discontinuation of auto finance loan originations
CORE FUNDING
• Focus on retail deposits which provide a competitive
pricing advantage in a rising rate environment
• Continued emphasis on providing convenience to
retail customers through enhanced delivery channels
1
2
3
4
17
Appendix
Cautionary Statements for Purposes of the Safe
Harbor Provisions of the Securities Litigation
Reform Act
Any statements contained in this presentation regarding the outlook for the Company's businesses and their respective markets, such as projections of
future performance, targets, 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,
2016 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; the effects of man-made and natural disasters, including fires, floods, tornadoes, hurricanes, acts of terrorism, civil
disturbances and environmental damage, which may negatively affect our operations and/or our customers.
Legislative and Regulatory Requirements. New consumer protection and supervisory requirements and regulations, including those resulting from action
by the Consumer Financial Protection Bureau ("CFPB") 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, restrictions on arbitration, or new
restrictions on loan and lease products; changes affecting customer account charges and fee income, including changes to interchange rates; (continued)
19
Cautionary Statements for Purposes of the Safe
Harbor Provisions of the Securities Litigation
Reform Act (cont.)
regulatory actions or changes in customer opt-in preferences with respect to overdrafts, which may have an adverse impact on TCF; governmental regulations
or judicial actions affecting the security interests of creditors; deficiencies in TCF's compliance programs, including under the Bank Secrecy Act in past or
future periods, which may result in regulatory enforcement action including monetary penalties; increased health care costs including those resulting from
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 carry out its share repurchase program, pay dividends or 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 including those 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 either of the primary 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 expanding existing business relationships; failure to expand or diversify TCF's balance sheet through new or expanded programs
or opportunities; failure to effectuate, and risks of claims related to, sales 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,
such as by failing to develop and maintain technology necessary to satisfy customer demands, costs and possible disruptions related to upgrading systems;
the failure to attract and retain key employees.
Litigation Risks. Results of litigation or government enforcement actions such as TCF's pending litigation with the CFPB and related matters, 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; 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 the impact of the Tax Cuts and Jobs Act tax reform legislation and adoption of federal or state legislation that would increase federal
or 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.
20
Reconciliation of GAAP to Non-GAAP Financial
Measures – Tangible Common Equity Ratio and
Tangible Book Value Per Common Share1
At At
Dec. 31, 2016 Dec. 31, 2017
Total equity $ 2,444,645 $ 2,680,584
Less: Non-controlling interest in subsidiaries 17,162 17,827
Total TCF Financial Corporation stockholders' equity 2,427,483 2,662,757
Less: Preferred stock 263,240 265,821
Total common stockholders' equity (a) 2,164,243 2,396,936
Less:
Goodwill, net 225,640 154,757
Other intangibles, net 1,738 23,687
Tangible common equity (b) $ 1,936,865 $ 2,218,492
Total assets (c) $ 21,441,326 $ 23,002,159
Less:
Goodwill, net 225,640 154,757
Other intangibles, net 1,738 23,687
Tangible assets (d) $ 21,213,948 $ 22,823,715
Common stock shares outstanding (e) 170,991,940 171,669,419
Common equity ratio (a) / (c) 10.09% 10.42%
Tangible common equity ratio (b) / (d) 9.13% 9.72%
Book value per common share (a) / (e) $ 12.66 $ 13.96
Tangible book value per common share (b) / (e) $ 11.33 $ 12.92
1 When evaluating capital adequacy and utilization, management considers financial measures such as the tangible common equity ratio and tangible
book value per common share. These measures are non-GAAP financial measures and are viewed by management as useful indicators of capital
levels available to withstand unexpected market or economic conditions, and also provide investors, regulators and other users with information to be
viewed in relation to other banking institutions.
($ thousands, except per share data)
21
Reconciliation of GAAP to Non-GAAP Financial
Measures – Return on Average Tangible Common
Equity1
QTD QTD
Dec. 31, 2016 Dec. 31, 2017
Net income available to common stockholders (a) $ 45,245 $ 97,653
Plus: Goodwill impairment — 73,041
Plus: Other intangibles amortization and impairment 290 1,187
Less: Income tax expense attributable to other intangibles amortization
and impairment 103 530
Adjusted net income available to common stockholders (b) $ 45,432 $ 171,351
Average balances:
Total equity $ 2,436,136 $ 2,591,012
Less: Non-controlling interest in subsidiaries 18,914 20,399
Total TCF Financial Corporation stockholders' equity 2,417,222 2,570,613
Less: Preferred stock 263,240 265,821
Average total common stockholders' equity (c) 2,153,982 2,304,792
Less:
Goodwill, net 225,640 197,734
Other intangibles, net 1,872 21,901
Average tangible common equity (d) $ 1,926,470 $ 2,085,157
Return on average common equity2 (a) / (c) 8.40% 16.95%
Return on average tangible common equity2 (b) / (d) 9.43% 32.87%
($ thousands)
1 When evaluating capital adequacy and utilization, management considers financial measures such as return on average tangible common equity. This
measure is a non-GAAP financial measure and is viewed by management as a useful indicator of capital levels available to withstand unexpected
market or economic conditions, and also provide investors, regulators and other users with information to be viewed in relation to other banking
institutions.
2 Annualized
22