TCF Reports Quarterly Net Income of $56.3 Million, or 31 Cents Per Share

TCF Financial Corporation (NYSE: TCB):

TCF Financial Corporation ("TCF" or the "Company") (NYSE:TCB) today reported net income of $56.3 million for the third quarter of 2016, compared with $52.6 million for the third quarter of 2015 and $57.7 million for the second quarter of 2016. Diluted earnings per common share was 31 cents for the third quarter of 2016, compared with 29 cents for the third quarter of 2015 and 31 cents for the second quarter of 2016.

TCF reported net income of $162.0 million for the first nine months of 2016, compared with $144.6 million for the same period in 2015. Diluted earnings per common share was 88 cents for the first nine months of 2016, compared with 78 cents for the same period in 2015.

"TCF reported another good quarter of financial results demonstrating consistent performance and revenue growth year-over-year," said Craig R. Dahl, president and chief executive officer. "During the third quarter, loan and lease originations remained strong, credit stabilization continued, deposit costs remained flat and capital levels increased – all of which position us for consistent profitability and continued value creation for shareholders.

"Despite a slow growth economy and persistent rate headwinds, we successfully achieved profitable growth and positive operating leverage, while at the same time reinvesting in our businesses to enhance our ability to meet the evolving needs of our customers. I am encouraged by the enterprise-wide commitment TCF has shown toward serving our customers while executing on our four strategic pillars of diversification, profitable growth, operating leverage and core funding."

Net Interest Income

• Net interest income for the third quarter of 2016 increased $6.7 million, or 3.3 percent, compared with the third quarter of 2015. The increase was primarily due to higher interest income from inventory finance loans and higher average balances of loans and leases held for sale, securities available for sale, auto finance loans, and leasing and equipment finance loans and leases. These increases were partially offset by lower interest income from consumer real estate first mortgage lien loan balances and higher interest expense on certificates of deposit.
• Net interest margin for the third quarter of 2016 was 4.34 percent, compared with 4.40 percent for the third quarter of 2015. The decrease was primarily due to higher average interest rates resulting from promotions for certificates of deposit.

Non-interest Income

• Fees and service charges for the third quarter of 2016 were $35.1 million, down $1.9 million, or 5.1 percent, from the third quarter of 2015. The decrease was primarily due to ongoing consumer behavior changes, as well as higher average checking account balances per customer.
• Gains on sales of auto loans, net for the third quarter of 2016 were $11.6 million, up $1.2 million, or 11.5 percent, from the third quarter of 2015 and up $1.5 million, or 14.6 percent, from the second quarter of 2016. TCF sold $614.9 million, $436.6 million and $533.4 million of auto loans during the third quarters of 2016 and 2015 and the second quarter of 2016, respectively.
• Gains on sales of consumer real estate loans, net for the third quarter of 2016 were $13.5 million, up $6.4 million, or 89.4 percent, from the third quarter of 2015 and up $2.7 million, or 24.8 percent, from the second quarter of 2016. TCF sold $437.1 million, $246.0 million and $344.6 million of consumer real estate loans during the third quarters of 2016 and 2015 and the second quarter of 2016, respectively.
• Servicing fee income was $10.4 million on $5.1 billion of average loans and leases serviced for others for the third quarter of 2016, compared with $8.0 million on $4.0 billion for the third quarter of 2015 and $9.5 million on $4.7 billion for the second quarter of 2016. The increases from both periods were primarily due to the cumulative effect of the increase in the portfolio of auto and consumer real estate loans sold with servicing retained by TCF.

• Period-end loans and leases were $17.4 billion at September 30, 2016, an increase of $0.2 billion, or 1.1 percent, compared with September 30, 2015 and a decrease of $0.1 billion, or 0.5 percent, compared with June 30, 2016. Average loans and leases were $17.3 billion for the third quarter of 2016, an increase of $0.4 billion, or 2.2 percent, compared with the third quarter of 2015 and a decrease of $0.4 billion, or 2.3 percent, compared with the second quarter of 2016.
  
  The increases from September 30, 2015 were primarily due to an increase in the leasing and equipment finance portfolio due to strong originations, the maturation of the business model in auto finance and the expansion of the number of active dealers in inventory finance, partially offset by run-off in the consumer real estate first mortgage lien portfolio. The decrease from the second quarter of 2016 for average loans and leases was primarily due to the seasonal decrease in the inventory finance portfolio and run-off in the consumer real estate first mortgage lien portfolio, partially offset by an increase in the leasing and equipment finance portfolio due to strong originations.
• Loan and lease originations were $4.2 billion for the third quarter of 2016, an increase of $0.3 billion, or 8.7 percent, compared with the third quarter of 2015 and consistent with the second quarter of 2016. The increase from the third quarter of 2015 was primarily due to increased originations in auto finance, inventory finance and consumer real estate.

• The over 60-day delinquency rate, excluding acquired portfolios and non-accrual loans and leases, was 0.11 percent at September 30, 2016, down from 0.17 percent at September 30, 2015, and down from 0.12 percent at June 30, 2016. The decreases from both periods were primarily driven by improved delinquencies in the commercial real estate portfolio, partially offset by an increase in delinquencies in the auto finance portfolio.
• The net charge-off rate was 0.26 percent for the third quarter of 2016, up from 0.23 percent for both the third quarter of 2015 and the second quarter of 2016. The increases from both periods were primarily due to increased net charge-offs in the auto finance portfolio, partially offset by improved credit quality in the consumer real estate portfolio.
• Non-accrual loans and leases and other real estate owned was $223.8 million at September 30, 2016, a decrease of $40.9 million, or 15.5 percent, from September 30, 2015, and a decrease of $8.6 million, or 3.7 percent, from June 30, 2016. The decreases from both periods were primarily due to improving credit quality trends in the consumer and commercial real estate portfolios and sales of other real estate owned outpacing additions. Total non-accrual loans and leases and other real estate owned at September 30, 2016 was the lowest balance since the third quarter of 2008.
• Provision for credit losses was $13.9 million for the third quarter of 2016, an increase of $3.9 million, or 38.7 percent, from the third quarter of 2015, and an increase of $0.6 million, or 4.9 percent, from the second quarter of 2016. The increase from the third quarter of 2015 was primarily due to increased reserve requirements related to growth and higher net charge-offs in the auto finance and leasing and equipment finance portfolios. The increase from the second quarter of 2016 was primarily due to higher net charge-offs and growth in the leasing and equipment finance portfolio.

• Total average deposits for the third quarter of 2016 increased $1.2 billion, or 7.3 percent, from the third quarter of 2015, primarily due to special campaigns for certificates of deposit as well as growth in checking and money market balances.
• The average interest rate on deposits for the third quarter of 2016 was 0.37 percent, up 6 basis points from the third quarter of 2015, primarily due to higher average interest rates resulting from promotions for certificates of deposit.

• Total non-interest expense for the third quarter of 2016 increased $6.6 million, or 3.0 percent, compared with the third quarter of 2015 and increased $1.6 million, or 0.7 percent compared with the second quarter of 2016. The increase from the third quarter of 2015 was primarily due to increases in other non-interest expense and occupancy and equipment expense, partially offset by a decrease in foreclosed real estate and repossessed assets, net expense. The increase from the second quarter of 2016 was primarily due to increases in foreclosed real estate and repossessed assets, net expense and occupancy and equipment expense, partially offset by a decrease in compensation and employee benefits expense.
• Net expenses related to foreclosed real estate and repossessed assets decreased $1.4 million, or 25.3 percent, from the third quarter of 2015 and increased $1.1 million, or 35.3 percent, from the second quarter of 2016. The decrease from the third quarter of 2015 was primarily due to lower operating costs associated with maintaining fewer consumer and commercial properties and lower write-downs on existing foreclosed consumer properties, partially offset by lower gains on sales of consumer and commercial properties and higher repossessed asset expense. The increase from the second quarter of 2016 was primarily due to lower gains on sales of consumer and commercial properties.

• TCF maintained strong capital ratios as the Company accumulates capital through earnings.
• On October 19, 2016, TCF's Board of Directors declared a regular quarterly cash dividend of 7.5 cents per common share, payable on December 1, 2016, to stockholders of record at the close of business on November 15, 2016. TCF also declared dividends on the 7.50% Series A and 6.45% Series B Non-Cumulative Perpetual Preferred Stock, both payable on December 1, 2016, to stockholders of record at the close of business on November 15, 2016.

Webcast Information

A live webcast of TCF's conference call to discuss the third quarter earnings will be hosted at TCF's website, http://ir.tcfbank.com, on October 21, 2016 at 9:00 a.m. CDT. 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 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 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 cross-selling opportunities; 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.