TCF Financial Corporation (TCB)

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TCF Financial Corporation (TCB)

Q4 2009 Earnings Call Transcript

January 21, 2009 11:00 am ET


Jason Korstange – Director of TCF Corporate Communications

William Cooper – Chairman and CEO

Neil Brown – President and COO

Barry Winslow – Vice Chairman

Tim Bailey – Chief Credit Officer

Tom Jasper – EVP and CFO


Jon Arfstrom – RBC Capital Markets

Craig Siegenthaler – Credit Suisse

Todd Hagerman – Collins Stewart

Ken Zerbe – Morgan Stanley

Dave Rochester – FBR Capital Markets

Terry McEvoy – Oppenheimer

Erika Penala – UBS

Tony Davis – Stifel Nicolaus

Ken Usdin – Bank of America/Merrill Lynch

Steven Alexopoulos – J.P. Morgan

Lana Chan – BMO Capital Markets



Good morning, and welcome to TCF's 2009 year-end and fourth quarter earnings call. My name is Celeste, and I will be your conference operator today. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer period. (Operator instructions) At this time, I would like to introduce Mr. Jason Korstange, Director of TCF Corporate Communications to begin the conference.

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. Barry Winslow, Vice Chairman; Mr. Tom Jasper, Chief Financial Officer, Mr. Earl Stratton, Chief Information Officer; Mr. Tim Bailey, Chief Credit Officer; and, Mr. Craig Dahl, Executive Vice President of TCF Finance Corporation and Head of the Specialty Finance Division.

During this presentation, we will make – 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 2009 year-end and fourth quarter earnings release for more information about risks and uncertainties, which may affect us. The information that we will provide today is accurate as of December 31st, 2009. And we will 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 Cooper

Thank you, Jason. TCF announced today earnings for the – earnings per share for the quarter of $0.15 for the fourth quarter of 2009, compared with $0.14 in the third quarter – third quarter of 2009. Net income was $19.5 million as compared to $17.5 million in the third quarter. This is the 59th consecutive quarter that TCF has had positive earnings. It’s actually the 85th quarter, approximately I think, that other than a restructuring charge we had on mortgage-backed securities a year ago. But it’s the 85th quarter, I believe, of operating earnings.

In general, what I can say about the quarter, it appears that we have an improving economy and this may be signaling some improvements in connection with credit, which has been a major impediment in terms of the entire banking business. I can say in general, our banking philosophy and banking model has proven to be superior in this in that we’ve outperformed, particularly from our credit point of view, most of our peers.

Net interest income for the quarter was good. It was a $169 million, up $22.5 million or 15% from the fourth quarter of 2008, and up to $8.5 million or 5% with the third quarter. Net interest margin was 4.07, compared with 3.84 a year ago, and 3.92. So our net interest margin is improving with the falling deposit rates and better margins on our loans, which is I think a key parameter for the banking business in general.

Our non-interest income banking fees and service charges in the fourth quarter of 2009 were $108.7 million, up $8.3 million or 8.3% from the fourth quarter of 2008, and down slightly from the third quarter of 2009, which is seasonal in nature. Typically, the fourth quarter banking fees are weaker than the third quarter. A better measure is how it compared to a year ago.

Card revenue in the fourth quarter of 2009 was $26.8 million, up $1.6 million or 6.2% from the fourth quarter of 2008, and up $0.5 a million at 1.6% from the third quarter of 2009. We’ve seen improvements in our debit card revenues, which is probably a reflection of an improving economy. Volumes are picking up a little, dollar amount per purchase is picking up a little.

Leasing equipment finance revenues in the fourth quarter were very strong at $24.4 million, up $8.1 million or 49% from the fourth quarter of 2008, and $9.2 million or up 60% from the third quarter. Our specialty finance area in general has had significant growth in our inventory finance area, in particular which was a start-up has had very significant growth.

Loans and leases average consumer loans have basically been flat. And what we’ve seen is continuing run off of the older vintages, which have had higher charge offs and delinquencies offset by a growth of newer vintages of 2008-'09 vintages, which have experienced substantially better delinquency and charge off data. But on the whole, they’ve been flat. There has been a switch between variable rate and fixed rate, which is good and is an improvement in the margin.

December 31, ’09, 68% of our consumer real estate loans were first mortgages.

Average commercial loans in the fourth quarter were – increased $265.7 million or 7.8% from the fourth quarter of 2008 and were essentially flat from the third quarter. In general, I can say our commercial business, demand is pretty good and we’re putting loans on at better margins and better terms and conditions than we’ve had in the past.

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