TCF Reports Quarterly Net Income of $50.1 Million, or 27 Cents Per Share and Annual Net Income of $212.1 Million, or $1.15 Per Share

TCF Financial Corporation (NYSE:TCB):

TCF Financial Corporation ("TCF" or the "Company") (NYSE:TCB) today reported net income of $50.1 million for the fourth quarter of 2016, compared with $52.5 million for the fourth quarter of 2015 and $56.3 million for the third quarter of 2016. Diluted earnings per common share was 27 cents for the fourth quarter of 2016, compared with 29 cents for the fourth quarter of 2015 and 31 cents for the third quarter of 2016.

TCF reported net income of $212.1 million for the year ended December 31, 2016, compared with $197.1 million for the same period in 2015. Diluted earnings per common share was $1.15 for the year ended December 31, 2016, compared with $1.07 for the same period in 2015.

"I am proud of the progress we have made and the successes we have achieved during 2016," said Craig R. Dahl, president and chief executive officer. "We took significant strides toward driving the Company forward in ways that align with our four strategic pillars. Execution of our diversification philosophy has resulted in strong performance from a credit quality perspective. Our unique loan and lease origination capabilities allow us to grow profitably in a variety of markets. We generated positive operating leverage throughout the year as revenue growth steadily outpaced expense growth. We also continued to expand our deposit base which will be very beneficial should interest rates continue to increase.

"While our long term results will continue to be driven by these four strategic pillars, market volatility and softness in the auto lending industry provided some near term headwinds. As we move forward into 2017, there is much to be excited about. Our focus will be on taking the next step in creating superior and sustainable financial performance. We can do this by optimizing our diverse loan and lease origination platforms to grow in areas that will continue to drive profitability. In addition, we will look to create new efficiencies throughout the organization while offering product and service solutions that meet the financial needs of our customers."

Net Interest Income

• Net interest income for the fourth quarter of 2016 increased $5.8 million, or 2.8 percent, compared with the fourth quarter of 2015 and was consistent with the third quarter of 2016. The increase from the fourth quarter of 2015 was primarily due to higher average balances of loans and leases held for sale, leasing and equipment finance loans and leases, inventory finance loans and securities available for sale. These increases were partially offset by lower average consumer real estate loan balances and a lower average yield on the overall loan and lease portfolio. Net interest income for the fourth quarter of 2016 was consistent with the third quarter of 2016 due to growth in the inventory finance and leasing and equipment finance portfolios, offset by a lower average yield on the overall loan and lease portfolio.
• Net interest margin for the fourth quarter of 2016 was 4.30 percent, compared with 4.35 percent for the fourth quarter of 2015 and 4.34 percent for the third quarter of 2016. The decrease from the fourth quarter of 2015 was primarily due to lower yields on commercial loans, leasing and equipment finance loans and leases, auto finance loans and loans and leases held for sale. The decrease from the third quarter of 2016 was primarily due to lower yields on inventory finance loans.

Non-interest Income

• Fees and service charges for the fourth quarter of 2016 were $35.1 million, down $2.6 million, or 6.9 percent, from the fourth quarter of 2015 and consistent with the third quarter of 2016. The decrease from the fourth quarter of 2015 was primarily due to ongoing consumer behavior changes, as well as higher average checking account balances per customer.
• TCF sold $516.0 million, $271.1 million and $614.9 million of auto loans during the fourth quarters of 2016 and 2015 and the third quarter of 2016, respectively, resulting in net gains in each respective period.
• TCF sold $520.8 million, $389.1 million and $437.1 million of consumer real estate loans during the fourth quarters of 2016 and 2015 and the third quarter of 2016, respectively, resulting in net gains in each respective period.
• Servicing fee income was $11.4 million on $5.5 billion of average loans and leases serviced for others for the fourth quarter of 2016, compared with $8.6 million on $4.2 billion for the fourth quarter of 2015 and $10.4 million on $5.1 billion for the third quarter of 2016.

• Period-end loans and leases were $17.8 billion at December 31, 2016, an increase of $0.4 billion, or 2.3 percent, compared with December 31, 2015 and an increase of $0.5 billion, or 2.6 percent, compared with September 30, 2016. Average loans and leases were $17.5 billion for the fourth quarter of 2016, an increase of $0.2 billion, or 1.1 percent, compared with the fourth quarter of 2015 and an increase of $0.2 billion, or 1.2 percent, compared with the third quarter of 2016.
  
  The increases from December 31, 2015 were primarily due to increases in the leasing and equipment finance portfolio and in the inventory finance portfolio due to strong originations and the expansion of the number of active dealers, partially offset by run-off in the consumer real estate first mortgage lien portfolio. The increase from September 30, 2016 for period-end loans and leases was primarily due to increases in the inventory finance, commercial, consumer real estate junior lien, and leasing and equipment finance portfolios. The increase from the third quarter of 2016 for average loans and leases was primarily due to increases in the inventory finance and leasing and equipment finance portfolios.

• Loan and lease originations were $4.3 billion for the fourth quarter of 2016, an increase of $0.4 billion, or 11.4 percent, compared with the fourth quarter of 2015 and consistent with the third quarter of 2016. The increase from the fourth quarter of 2015 was primarily due to increased originations in inventory finance and consumer real estate.

• The net charge-off rate was 0.27 percent for the fourth quarter of 2016, down from 0.29 percent for the fourth quarter of 2015, and up from 0.26 percent for the third quarter of 2016. The decrease from the fourth quarter of 2015 was primarily due to improved credit quality in the consumer real estate portfolio, partially offset by increased net charge-offs in the auto finance portfolio. The increase from the third quarter of 2016 was primarily due to increased net charge-offs in the auto finance portfolio, partially offset by decreased net charge-offs in the leasing and equipment finance portfolio.
• Non-accrual loans and leases and other real estate owned was $228.2 million at December 31, 2016, a decrease of $22.2 million, or 8.9 percent, from December 31, 2015, and an increase of $4.5 million, or 2.0 percent, from September 30, 2016. Non-accrual loans and leases were $181.4 million at December 31, 2016, a decrease of $19.0 million, or 9.5 percent, from December 31, 2015 and a decrease of $8.6 million, or 4.5 percent, from September 30, 2016. The decreases were primarily due to improving credit quality trends in the consumer real estate and commercial portfolios and lower non-accrual loans in the auto finance portfolio, partially offset by an increase in non-accrual loans in the inventory finance portfolio.
• Provision for credit losses was $19.9 million for the fourth quarter of 2016, an increase of $2.3 million, or 13.0 percent, from the fourth quarter of 2015, and an increase of $6.0 million, or 43.1 percent, from the third quarter of 2016. The increase from the fourth quarter of 2015 was primarily due to growth in the overall loan and lease portfolio, partially offset by a decrease in net charge-offs. The increase from the third quarter of 2016 was primarily due to growth in the overall loan and lease portfolio.

• Total average deposits for the fourth quarter of 2016 increased $0.8 billion, or 4.8 percent, from the fourth quarter of 2015 and were consistent with the third quarter of 2016. The increase from the fourth quarter of 2015 was primarily due to special campaigns for certificates of deposit during the first three quarters of 2016, as well as growth in checking and money market balances.

• Compensation and employee benefits expense increased $5.9 million, or 5.4 percent, from the fourth quarter of 2015 and decreased $2.2 million, or 1.8 percent, from the third quarter of 2016. The increase from the fourth quarter of 2015 was primarily due to higher other compensation and health insurance expenses, partially offset by the annual pension plan valuation adjustment. The decrease from the third quarter of 2016 was primarily due to the annual pension plan valuation adjustment and lower salaries, partially offset by higher health insurance expenses.
• Net expenses related to foreclosed real estate and repossessed assets decreased $3.1 million, or 61.8 percent, from the fourth quarter of 2015 and decreased $2.4 million, or 55.5 percent, from the third quarter of 2016. The decrease from the fourth quarter of 2015 was primarily due to higher gains on sales of commercial properties, lower write-downs on existing foreclosed consumer and commercial properties and lower operating costs associated with maintaining fewer consumer properties, partially offset by higher repossessed assets expense. The decrease from the third quarter of 2016 was primarily due to higher gains on sales of commercial properties and lower write-downs on existing foreclosed consumer properties, partially offset by higher repossessed assets expense.

• TCF maintained strong capital ratios as the Company accumulated capital through earnings.
• TCF increased book value per common share 6.0 percent in 2016. TCF also increased tangible book value per common share 7.0 percent in 2016.
• On January 25, 2017, TCF's Board of Directors declared a regular quarterly cash dividend of 7.5 cents per common share, payable on March 1, 2017, to stockholders of record at the close of business on February 15, 2017. TCF also declared dividends on the 7.50% Series A and 6.45% Series B Non-Cumulative Perpetual Preferred Stock, both payable on March 1, 2017, to stockholders of record at the close of business on February 15, 2017.

Webcast Information

A live webcast of TCF's conference call to discuss the fourth quarter earnings will be hosted at TCF's website, http://ir.tcfbank.com, on January 27, 2017 at 9:00 a.m. CST. A slide presentation for the call will be available on the website prior to the call. Additionally, the webcast will be available for replay on TCF's website after the conference call. The website also includes free access to company news releases, TCF's annual report, investor presentations and SEC filings.

Cautionary Statements for Purposes of the Safe Harbor Provisions of the Securities Litigation Reform Act

Any statements contained in this earnings release regarding the outlook for the Company's businesses and their respective markets, such as projections of future performance, 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, 2015 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.

Legislative and Regulatory Requirements. New consumer protection and supervisory requirements and regulations, including those resulting from action by the Consumer Financial Protection Bureau 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, use by municipalities of eminent domain on property securing troubled residential mortgage loans, or imposition of underwriting or other limitations that impact the ability to offer certain variable-rate products; changes affecting customer account charges and fee income, including changes to interchange rates; regulatory actions or changes in customer opt-in preferences with respect to overdrafts, which may have an adverse impact on TCF; changes to bankruptcy laws which would result in the loss of all or part of TCF's security interest due to collateral value declines; 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 resulting from Federal 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 pay dividends or to 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 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 any 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 successfully attract and retain new customers, including the failure to attract and retain manufacturers and dealers to expand the inventory finance business; failure to effectuate, and risks of claims related to, sales and securitizations 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, including the failure to develop and maintain technology necessary to satisfy customer demands; ability to attract and retain employees given competitive conditions.

Litigation Risks. Results of litigation or government enforcement actions, 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; and 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 adoption of state legislation that would increase 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.