TCF Financial Corporation (TCB)

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TCF Financial Corporation (TCB)

Q4 2012 Earnings Call

January 30, 2013, 9:00 a.m. ET


Jason Korstange - Director, Corporate Communications

William A. Cooper - Chairman and CEO

Craig R. Dahl - Vice Chairman and EVP, Lending

Michael Scott Jones - EVP and CFO

Thomas F. Jasper - Vice Chairman and EVP, Funding, Operations & Finance

Barry N. Winslow - Vice Chairman, Corporate Development

Earl D. Stratton - EVP and COO


Jon Arfstrom - RBC Capital Markets

Emlen Harmon - Jefferies & Company, Inc.

Stephen Scinicariello - UBS Securities

Paul Miller – FBR

Nick Karzon – Credit Suisse

Ken Zurbe – Morgan Stanley

Chris McGratty – KBW, Inc.

Kevin Barker – Compass Point

Andrew Marquardt - Evercore Partners Inc

Stephen Geyen - Stifel Nicolaus & Co.



Good morning, and welcome to TCF’s 2012 Year-End and Fourth Quarter Earnings Call. My name is Faron, I’ll be your conference operator today. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer period. (Operator Instructions).

At this time, I’d like to introduce Mr. Jason Korstange, Director of TCF Corporate Communications to begin the conference call. Please go ahead sir.

Jason Korstange 

Good morning. William Cooper, Chairman and CEO will host this conference. Joining Mr. Cooper will be Mr. Barry Winslow, Vice Chairman of Corporate Development; Tom Jasper, Vice Chairman of Funding, Operations and Finance; Mr. Craig Dahl, Vice Chairman of Lending; Mr. Mike Jones, Chief Financial Officer; and Mr. Earl Stratton, Chief Operations Officer.

During this presentation, we may make projections and other forward-looking statements regarding future events towards the future financial performance of the Company. We caution you that such statements are predictions, and that actual events or results may differ materially.

Please see the forward-looking statement disclosure contained in our 2012 year-end and fourth quarter earnings release for more information about risks and uncertainties which may affect us. The information we will provide today is accurate as of December 31, 2012, and we undertake no duty to update the information.

During our remarks today we will be referencing a slide presentation that is available on the Investor Relations section of TCF's website On today’s call Mr. Cooper will give begin with 2012 and fourth quarter highlights, Craig Dahl will then provide an overview of lending, Mike Jones will discuss credit and expense, Mr. Tom Jasper will review deposits, fee regeneration and capital. Mr. Cooper will wrap up with a summary and then we will open up for questions.

I will now turn the conference call over to TCF Chairman and CEO, William Cooper.

William A. Cooper 

Thank you, Jason. TCF had a pretty good fourth quarter and an eventful year. The net income recorded was 23.6 million, or $0.15 per share. That $0.15 per share is after a $0.06 per-share charge associated with a civil money penalty in connection with BSA.

Net interest margin remained strong at 4.79%, that’s one of the highest in our peers. That’s up 87 basis points from the fourth quarter last year. Our pre-provision profit of 87.2 million, was up 3.5% from the fourth quarter of 2011.

Deposits increased 1.7 million or 13.7% from a year ago. We had net growth in checking accounts for the second consecutive quarter, which is ratifying our strategy of pricing in our new checking products.

We had gains – core gains on sale of auto loans and commercial and consumer real estate, 6.9 million, and almost a million in the quarter and we completed $100 million stock offering in the quarter.

Credit quality continued to improve. We continue to be opportunistic of what’s happening with credit. Non-performing assets were 476 million, that’s down 65.8 million from the third quarter. Our provision expense was 48.5 million, and that’s down 47.8 million from the third quarter, which contained at bankruptcy adjustment, which was a change from prior quarters on consumer loans.

Net charge-offs were 45.5 million, that’s down 58.9 million with the same situation there. We recognized that civil money penalty that I mentioned of $10 million, which had a $0.06 per share impact on the quarter. We had previously disclosed we were going to have that penalty and we were able to book that up and put it behind us in the fourth quarter.

Something other of note that occurred in the quarter is Supervalu where we have supermarket branches in announced a definitive agreement to sell five of its retail grocery chain, including the Jewel-Osco. That has no impact on our grocery stores, and Cub, and we’re opportunistic that it won’t really have a significant impact on – we’ll maintain our good relationship that we have with Supervalu in connection with our Jewel operations.

For 2012, overall, we – of course, early in the year had our big restructuring where we canceled long-term high-cost debt and shrank our investment portfolio at a gain. That has become clearer and clearer a good trade as interest rates have stayed low, and TCF has endured a significantly improved net interest margin over that time.

For the year, our net interest margin is 465, that’s up 66 basis points from 2011. Total loans and leases, 15.4 billion, that’s a 9% increase. For prior year deposits, 13.2 billion, an increase of 10% from a year ago. The consumer real estate over 60 day delinquencies are now down 19% from a year ago, which is very good news. Total regulatory classified assets are down $198 million, almost 40% from a year ago; again, very good news.

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