Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 - TCF FINANCIAL CORP | tcf33118form8-kexhibit991r.htm |
| 8-K - 8-K - TCF FINANCIAL CORP | tcf33118form8-kearningsrel.htm |
2018 First Quarter Earnings Presentation
April 23, 2018
Agenda
FIRST QUARTER THEMES
• Craig Dahl (Chief Executive Officer)
REVENUE / LOANS AND LEASES / DIGITAL BANKING
• 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
First Quarter Themes
3
Net income of $73.8 million and diluted EPS of 39 cents
Impacted by one-time reduction in net income available to common stockholders of $3.5 million,
or 2 cents per share, related to redemption of Series B Preferred Stock
• Run-off being reinvested into other loan and lease
portfolios and debt securities
• Pace of run-off meeting expectations
• Credit quality of the auto finance portfolio meeting
expectations
RUN-OFF OF THE AUTO FINANCE
PORTFOLIO IS PROGRESSING
AS EXPECTED
• Interest rate increases continue to positively impact loan
and lease yields
• Year-over-year loan and lease yield expansion exceeding
deposit cost expansion
• Maintaining a strong net interest margin with increasing
capital efficiency and lower credit risk
CONTINUE TO BENEFIT FROM ASSET
SENSITIVE BALANCE SHEET
• Revenue growth exceeded non-interest expense growth,
which resulted in an improved efficiency ratio
• Decline in compensation and other non-interest expenses
(excluding operating lease depreciation)
PROGRESS IN DRIVING IMPROVED
EFFICIENCIES YEAR-OVER-YEAR
• Continued to repurchase shares via our $150 million share repurchase authorization
• Completed redemption of Series B Preferred Stock, resulting in reduced dividend expense beginning in 2Q18
• Opportunities for additional capital initiatives over time as risk profile improves
EXECUTION OF CAPITAL INITIATIVES
• Year-over-year decline in net charge-offs as a percent of
average loans (excluding consumer real estate non-
accrual loan sale in 1Q17)1
• Reducing risk profile of balance sheet highlighted by run-
off of the auto finance portfolio
• Net charge-offs excluding auto finance portfolio of 9 bps1
STRONG CREDIT QUALITY
PERFORMANCE CONTINUES3
1 2
5
4
1 Refer to Slide 13 "Net Charge-off Ratio" for further information.
Other 3%
Fees and
service
charges 28%
ATM
revenue
4%
Card
revenue
12%
Leasing &
equipment
finance 37%
Gains on sales of consumer
real estate loans, net 8%
Servicing fee income 8%
NET LEASING AND EQUIPMENT FINANCE
NON-INTEREST INCOME
NIM up 13 bps YoY
400
350
300
250
200
150
100
50
0
5.25%
5.00%
4.75%
4.50%
4.25%
4.00%
1Q17 2Q17 3Q17 4Q17 1Q18
$104
$326
$115
$342
$109
$343
$121
$363
$112
$355
4.46% 4.52%
4.61% 4.57% 4.59%
Net interest margin1
1Q18 vs. 1Q17 revenue impacted
by the following 1Q18 items:
• Higher net interest income driven by a combination
of higher yields and growth in the loan and lease
portfolio
• Higher levels of leasing and equipment finance
revenue (non-interest income) primarily due to
purchase of a leasing company in June 2017 and
growth
• Reduction in gains on sales and servicing fee
income
1 Annualized
Revenue Summary
NON-INTEREST INCOME DIVERSIFICATION
($ millions)
Non-interest income
Net interest income
Strategic Pillars
Diversification 1
Profitable Growth 2
4
$222 $227 $234
$242 $243
($ millions) 1Q17 1Q18
Leasing and equipment
finance non-interest income $28 $42
Operating lease depreciation $(11) $(17)
Net leasing and equipment
finance non-interest income $17 $25
$112 million
NET INCREASE OF $8M YoY
• Strategic investments resulting in strong operating
lease growth, creating more consistent net
leasing revenue
3/17 6/17 9/17 12/17 3/18
$17,975 $18,367
$18,988 $19,104
14%
18%
25%
17%
16%
10%
14%
19%
23%
18%
15%
11%
14%
19%
25%
17%
15%
10%
• Year-over-year loan and lease growth in
wholesale businesses:
• Inventory finance up 20.7%
• Leasing and equipment finance up 9.1%
• Commercial up 8.9%
• Strong loan and lease diversification by
asset class, geography, rate, average loan
and lease size, estimated weighted average
life and collateral type
• Auto finance portfolio run-off of
$360.3 million in 1Q18
• Loan and lease growth of 8.9% year-over-
year excluding auto finance
Loan and Lease Portfolio
($ millions)
16%
19%
24%
15%
14%
12%
Inventory finance
Leasing and equipment finance
Commercial
Auto finance
Consumer real estate - Junior lien
Consumer real estate & Other - First mortgage lien
18%
19%
24%
14%
15%
10%
Loan and lease growth of
7.8% YoY
5
$17,975
$19,383
Strategic Pillars
Diversification 1
Profitable Growth 2
• Balance sheet asset
sensitivity and continued
pricing discipline resulting
in strong yield
performance
• Year-over-year increase in
yields across all loan and
lease portfolios
• Year-over-year expansion
in loan and lease yields,
excluding auto finance,
of 43 bps
1Q17 4Q17 1Q18
Consumer real estate:
First mortgage lien 5.33% 5.36% 5.37%
Junior lien 5.82 6.13 6.34
Commercial 4.43 4.90 4.93
Leasing and equipment finance 4.48 4.90 4.81
Inventory finance 5.93 6.01 6.64
Auto finance 4.15 5.23 5.28
Total loans and leases 4.95 5.35 5.49
Total excluding auto
finance 5.10 5.38 5.53
Peer group2 average 4.45 4.66 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 December 31, 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
6
A Focus on Digital Banking
TCF's SHIFT TOWARDS DIGITAL
AND SELF SERVICE
• Since beginning of 2012:
• Reduced branch count
• Increased number of ATMs including
284 image-enabled
• $6.5 billion of deposit growth
• 1Q18 vs. 1Q17:
• 119% increase in digital and ATM
deposit transactions
• 51% increase in digital account
openings
• 264 bps decline in checking account
attrition
Strategic Pillars
Profitable Growth 2
Core Funding 4
IN 2017, TCF LAUNCHED AN ENHANCED DIGITAL
BANKING PLATFORM TO MEET THE EVOLVING
NEEDS OF OUR CUSTOMERS...
• Enhanced digital features include thumbprint and
facial recognition, mobile deposit capture and
advanced budgeting tools
• Continue to shift investment from branch to
self-service channels to align with customer
preferences
...AND THE RESPONSE EXCEEDED
EXPECTATIONS
• Four times as many concurrent users on digital
platform since the launch
• A digital offering with functionality on par with
larger peers helps to reduce attrition and create
new customer relationships
MORE DIGITAL ENHANCEMENTS TO COME
• New digital platform allows for quicker and more
efficient rollout of future enhancements
7
20,000
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
1Q17 2Q17 3Q17 4Q17 1Q18
$17,106 $17,323 $17,649
$18,139 $18,299
• 87% of average deposit balances
are consumer
• Relative value of retail deposits
increasing as short-term interest
rates rise
• Total average deposits increased
$1.2 billion, or 7.0%, year-over-
year
• Average interest rate on deposits
up 4 basis points on a linked
quarter basis with growth in
average savings and checking
balances and declines in money
market and CD balances
Deposit Generation
Average Balances
($ millions)
Certificates of deposit
Money market
Savings
Checking
Strategic Pillars
Profitable Growth 2
Core Funding 4
24%
14%
28%
34%
24%
13%
28%
35%
26%
12%
28%
34%
28%
10%
28%
34%
27%
9%
30%
34%
8
Average
interest cost: 0.33% 0.33% 0.38% 0.46% 0.50%
Variable-and adjustable-rate portfolios are 46% of total
average loans and leases, up from 44% at 1Q17
4.70
4.60
4.50
4.40
4.30
4.20
1Q 2Q 3Q 4Q
4.37 4.35 4.34
4.30
4.46
4.52
4.61
4.574.59
Positive Impact of Rising
Interest Rates
• Additional interest rate hikes
• Reinvestment of auto finance portfolio run-off
into loan and lease and investment portfolios
• Seasonality of inventory finance
• Loan and lease portfolio growth and mix
changes
• Composition of deposit base
• Continued pricing discipline on both loans and
leases and deposits
Strategic Pillars
Diversification 1
Profitable Growth 2
NET INTEREST MARGIN TRENDS1
2017 (FY17: 4.54%)
2018 (1Q18: 4.59%)
9
WELL-MANAGED DEPOSIT COSTSIMPACT ON VARIABLE- AND
ADJUSTABLE-RATE PORTFOLIOS
(Percent)
Average
Balances Yields1
1Q18 1Q17 1Q18 Change
Consumer real estate $3.0B 5.54% 6.18% 64 bps
Commercial 2.7B 4.30 5.04 74
Inventory finance 3.1B 5.93 6.64 71
Total variable $8.8B
1 Annualized and presented on a fully tax-equivalent basis
2016 (FY16: 4.34%)
FUTURE NET INTEREST MARGIN DRIVERS
Average
Balances Deposit Rate Change
1Q18
1Q18 vs.
1Q17
1Q18 vs.
1Q15
Deposits, excluding CDs $13.3B 6 bps 2 bps
Certificates of deposit 5.0B 34 53
Total deposits $18.3B 17 21
Federal funds rate change 75 150
Despite 150 basis point increase in federal funds rates
in past three years, the cost of total deposits increased
21 basis points
• Compensation and employee
benefits and other non-interest
expenses declined 1.7% year-over-
year
• Other non-interest expenses year-
over-year decrease primarily due to
lower severance expense, loan and
lease processing expense and
professional fees
• Operating lease depreciation year-
over-year increase driven by
increase in operating lease
balances
• Efficiency ratio improved 572 basis
points year-over-year
1 Includes Occupancy and equipment, Other non-interest expense, Foreclosed real estate and repossessed assets, and Other credit costs, net
Non-interest Expense
350
300
250
200
150
100
50
0
1Q17 2Q17 3Q17 4Q17 1Q18
$124 $116 $115 $128 $124
$109 $105 $104
$204
$105
$11
$244
$12
$233
$16
$235
$16
$348
$17
$246
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
Other1
Compensation and employee benefits
Strategic Pillars
Profitable Growth 2
Operating Leverage 3
10
Compensation
and employee
benefits and
Other NIE: $233 $221 $219 $332 $229
Efficiency
ratio: 74.93% 68.19% 68.46% 95.88% 69.21%
4Q17 1Q18
Common equity Tier 1 capital ratio1 10.79% 10.57%
Tier 1 risk-based capital ratio1 12.14% 11.49%
Total risk-based capital ratio1 13.90% 13.26%
Tier 1 leverage ratio1 11.12% 10.52%
Common equity ratio 10.42% 10.06%
Tangible common equity ratio2 9.72% 9.37%
Book value per common share $ 13.96 $ 13.89
Tangible book value per common share2 $ 12.92 $ 12.84
Return on average common equity3 16.95% 11.23%
Return on average tangible common
equity3, 4 32.87% 12.26%
• Maintained strong capital ratios
after recent capital actions
• Common stock dividend of
15 cents per share declared on
April 19, 2018
• Repurchased 2,567,171 shares
of common stock during first
quarter 2018 at a cost of
approximately $57.6 million
• 6.45% Series B non-cumulative
perpetual preferred stock
redeemed on March 1, 2018
Capital and Return
1 The regulatory capital ratios for 1Q18 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
11
NET CHARGE-OFFS
20
10
0
1Q17 2Q17 3Q17 4Q17 1Q18
$13
$18
$14$14 $13
$9
300
200
100
0
3.00%
2.00%
1.00%
0.00%
3/17 6/17 9/17 12/17 3/18
$171 $158 $146 $137 $143
0.95% 0.86% 0.77% 0.72% 0.74%
30
20
10
0
1Q17 2Q17 3Q17 4Q17 1Q18
$12
$19
$15
$22
$11
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
3 Excluding the $4.6 million recovery from the consumer real estate non-accrual loan sale, provision for credit losses was $19.1 million
4 Excludes the $8.7 million recovery from the consumer real estate non-accrual loan sale
5 Excludes the $4.6 million recovery from the consumer real estate non-accrual loan sale
($ millions)
Credit Quality Trends
($ millions)
60+ DAY DELINQUENCIES1 NON-PERFORMING ASSETS
Other real estate owned
Non-accrual loans and leases
NPAs/Loans and leases and Other real estate owned
Strategic Pillar
Diversification 1
($ millions)
Net charge-offs
2
2
3
0.15%
0.12%
0.09%
0.06%
0.03%
0.00%
3/17 6/17 9/17 12/17 3/18
0.09%
0.11%
0.13%
0.12%
0.10%
12
$144
$5
$5
Recovery from non-accrual loan sales
$8
4
5
Quarter Ended1
Change from
Quarter Ended
Mar. 31, 2017 Jun. 30, 2017 Sep. 30, 2017 Dec. 31, 2017 Mar. 31, 2018 Mar. 31, 2017
Consumer:
Consumer real estate:
First mortgage lien (0.18)% 0.15% (0.16)% 0.18% 0.16% 34 bps
Junior lien (0.89) 0.05 (0.38) (0.03) 0.05 94
Total consumer real estate (0.58) 0.09 (0.29) 0.05 0.09 67
Auto finance 1.12 0.83 1.13 1.36 1.41 29
Consumer 2 0.05 0.42 0.34 0.62 0.63 58
Wholesale:
Commercial 0.32 0.29 (0.02) (0.04) — (32)
Leasing and equipment finance 0.13 0.14 0.10 0.41 0.11 (2)
Inventory finance 0.01 0.09 0.08 0.15 0.05 4
Wholesale 0.16 0.18 0.05 0.20 0.06 (10)
Total 2 0.11 0.28 0.18 0.38 0.29 18
Total excluding consumer real
estate non-accrual loan sales2 0.31 0.28 0.28 0.38 0.29 (2)
Total excluding consumer real
estate non-accrual loan sales
and auto finance2
0.16 0.17 0.09 0.18 0.09 (7)
1 Annualized
2 Includes Other
3 Excluding the $8.7 million recovery from the consumer real estate non-accrual loan sale, consumer net charge-off ratio was 0.49%
4 Excluding the $4.6 million recovery from the consumer real estate non-accrual loan sale, consumer net charge-off ratio was 0.56%
5 Excludes the $8.7 million recovery from the consumer real estate non-accrual loan sale
6 Excludes the $4.6 million recovery from the consumer real estate non-accrual loan sale
Net Charge-off Ratio
Strategic Pillar
Diversification 1
13
3 4
5 6
5 6
2018 Strategic Themes
REDUCING RISK PROFILE OF THE BALANCE SHEET
• Auto finance portfolio run-off resulting in lower credit, operational and liquidity risks
• Portfolio has the highest net charge-off and reserve levels
• Reducing exposure to volatile auto finance market, including loan sales and securitizations
• Increased liquidity driven by auto finance portfolio run-off
POSITIVE OUTLOOK FOR NON-AUTO FINANCE BUSINESS
• Expect continued strong loan and lease growth in commercial, leasing and equipment finance and inventory
finance portfolios
• Potential for increased consumer real estate originations as TCF Home Loans business matures, resulting in
incremental gains on sales revenue and balance sheet growth
• Expect mid-single digit growth (excluding auto finance) in 2018 as well as continued investment portfolio
expansion
• Digital banking platform continues to have a positive impact on the customer experience
FOCUS ON IMPROVING RETURN ON CAPITAL
• Improving ROATCE with a more efficient use of capital and reduced risk profile
• Continue to execute on share repurchase strategy
FY18 ROATCE1 TARGET: 11.5%-13.5% FY18 EFFICIENCY RATIO TARGET: 66%-68%
1
2
3
14
1 ROATCE is a non-GAAP financial measure. A reconciliation of the FY18 ROATCE Target 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.
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, 2017
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, debt securities held to
maturity and debt 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)
16
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, 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 (from fraudulent checks, stolen debit card information, etc.) may increase; failure to keep
pace with technological change, such as by failing to develop and maintain technology necessary to satisfy customer demands and prevent cyber-attacks,
costs and possible disruptions related to upgrading systems or cyber-attacks; 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.
17
Reconciliation of GAAP to Non-GAAP Financial
Measures – Tangible Common Equity Ratio and
Tangible Book Value Per Common Share1
At At
Dec. 31, 2017 Mar. 31, 2018
Total equity $ 2,680,584 $ 2,550,950
Less: Non-controlling interest in subsidiaries 17,827 28,437
Total TCF Financial Corporation stockholders' equity 2,662,757 2,522,513
Less: Preferred stock 265,821 169,302
Total common stockholders' equity (a) 2,396,936 2,353,211
Less:
Goodwill, net 154,757 154,757
Other intangibles, net 23,687 23,112
Tangible common equity (b) $ 2,218,492 $ 2,175,342
Total assets (c) $ 23,002,159 $ 23,385,052
Less:
Goodwill, net 154,757 154,757
Other intangibles, net 23,687 23,112
Tangible assets (d) $ 22,823,715 $ 23,207,183
Common stock shares outstanding (e) 171,669,419 169,415,834
Common equity ratio (a) / (c) 10.42% 10.06%
Tangible common equity ratio (b) / (d) 9.72% 9.37%
Book value per common share (a) / (e) $ 13.96 $ 13.89
Tangible book value per common share (b) / (e) $ 12.92 $ 12.84
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)
18
Reconciliation of GAAP to Non-GAAP Financial
Measures – Return on Average Tangible Common
Equity1
QTD QTD
Dec. 31, 2017 Mar. 31, 2018
Net income available to common stockholders (a) $ 97,653 $ 66,174
Plus: Goodwill impairment 73,041 —
Plus: Other intangibles amortization and impairment 1,187 831
Less: Income tax expense attributable to other intangibles amortization
and impairment 530 199
Adjusted net income available to common stockholders (b) $ 171,351 $ 66,806
Average balances:
Total equity $ 2,591,012 $ 2,580,920
Less: Non-controlling interest in subsidiaries 20,399 23,191
Total TCF Financial Corporation stockholders' equity 2,570,613 2,557,729
Less: Preferred stock 265,821 200,404
Average total common stockholders' equity (c) 2,304,792 2,357,325
Less:
Goodwill, net 197,734 154,757
Other intangibles, net 21,901 23,274
Average tangible common equity (d) $ 2,085,157 $ 2,179,294
Return on average common equity2 (a) / (c) 16.95% 11.23%
Return on average tangible common equity2 (b) / (d) 32.87% 12.26%
($ 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
19