TCF Financial Corporation (TCB)

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TCF Financial Corporation (TCB)

Q4 2008 Earnings Call

January 22, 2009 11:00 a.m. ET


William A. Cooper - Chairman, Chief Executive Officer

Neil W. Brown - President and Chief Operating Officer

Gregory J. Pulles - General Counsel and Executive VP

Jason Korstange - Director of IR

Thomas F. Jasper - Executive Vice President and Chief Financial Officer

Earl D. Stratton - Chief Information Officer


Andrew Boord - Fenimore Asset Management

Ben Crabtree - Stifel Nicolaus

David Rochester - FBR Capital Markets

Heather Wolf - Merrill Lynch

Jon Arfstrom - RBC Capital Markets

Ken Zerbe - Morgan Stanley

Philip King - Trufton Investment Management

Rob Rutschow - Deutsche Bank

Scott Siefers - Sandler

Steven Alexopoulos - JP Morgan

Todd Hagerman - Credit Suisse



Good morning and welcome to TCF’s 2008 year-end and fourth quarter earnings call. My name is Luray (ph) and I will be your conference operator today. (Operator instructions) At this time I would like to introduce Mr. Jason Korstange, Director of TCF Corporate Communications to begin the conference call. Please go ahead, sir.

Jason Korstange

Good morning. Mr. William Cooper, Chairman and CEO will host this conference. Joining Mr. Cooper will be Mr. Neil Brown, President and Chief Operating Officer; Mr. Tom Jasper, Chief Financial Officer; Mr. Earl Stratton, Chief Information Officer; and Mr. Barry Winslow, Vice Chairman.

During this presentation we may make projections and other forward-looking statements regarding future events or 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 2008 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 31st 2008, and we undertake no duty to update the information.

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

William A. Cooper

Good morning. Looks like at least in terms of today’s earnings report we’re maybe the best dog in the pound. We earned $1.01 for the year and $0.20 for the quarter. Net income was $129 million for the year, $27.7 million for the quarter. Our net interest margin was $391 for the year or $384 for the quarter. We grew our loans over 10% this year, $1.2 billion. Our reserve for loan losses stands at 1.29 and our charge-offs were about 1% for the quarter and 82 basis points for the year, which is a fraction of our competitors. We did buy TARP money to the degree of $360 million, which did have an impact in the fourth quarter because we had to accrue the dividend, which is at 5% after tax while we didn’t have the opportunity to play that money within that two month period. We’re extremely well-capitalized in every category including about a 6% tangible common equity level. We declared our $0.25 dividend payable February 27th and our Return on Equity for the year was 11.5% now, that’s not anywhere near what are standards have been in the past, but again not too bad.

As I’ve mentioned in the press release in my quote (00:07:32), I just like to mention a few things as to why TCF continues to be profitable. Tom, how many quarters, straight quarters we’ve been profitable now?

Thomas F. Jasper


William A. Cooper

This is the 55th consecutive quarter of profitability at TCF. And the reason for that in this very difficult time is that we didn’t engage in a lot of the activities that the rest of the business engaged in. We never made any subprime loans. We never bought mortgages from brokers. We have no option arms, teaser rates. And we don’t make loans out of our market. We don’t have any low-dock or (inaudible 00:08:16) loans, or all those other risky mortgages. We kept all in our balance sheet the loans that we originated so basically we ate what we chew. We have no auto or credit card portfolios, so we don’t have that creeping problem in our portfolio that many other banks do. We have no (inaudible 00:08:16) commercial paper. We don’t own, we’ve never owned any Fannie Mae or Freddie Mac preferreds, trust preferred securities or BOLI or bank owned life insurance. We don’t have any derivative contracts.

The higher charge-offs that we have at TCF are primarily due to the imprudent behavior of our competitors in the subprime market, which poked a hole in the housing bubble and what is in my judgment the ill-advised monetary policy that created these bubbles both in the oil and commodities in particular the housing markets. We remained profitable, solidly capitalized and we remained ready. I think we’re in the minority here to take advantage of prudent growth opportunities and all of our important categories of assets and liabilities continue to grow.

I mentioned early, we paid our dividend at $0.25 and our projections looking at of the future, we don’t project earnings in particular about our projections. Things could get worse, no question about it. But our projections are that we’ll be able to continue that dividend and as a matter of fact I believe we’ll be able to accumulate enough tangible capital on the TARP to pay the TARP off in five years without having to raise additional capital. That’s not a promise and it’s not even a projection. It’s what our number show.

In accordance with our compensation program, this isn’t anything new at TCF. In accordance with our compensation policy, our people receive no bonuses and as chairman and chief executive, I have neither a salary nor a bonus. Sometimes I think at least relative to 2008 I was over paid as of the performance of the bank. And to be frank with you, I’d be very happy if we stop talking about 2008 and start talking about 2009.

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