TCF Financial Corporation (NYSE:TCB) Q3 2018 Earnings Conference Call - Preliminary Transcript

Oct 22, 2018 • 10:00 am ET

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TCF Financial Corporation (NYSE:TCB) Q3 2018 Earnings Conference Call - Preliminary Transcript

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Q & A
Operator
Operator

(Operator Instructions) And your first question will be from Jon Arfstrom of RBC Capital Markets. Please go ahead.

Analyst
Jon Arfstrom

Thanks. Good morning. Brian, maybe a question for you on the margin. Can you give us an idea of some of your near term and longer term thoughts on the margin? There's lot of moving parts here but you're talking about obviously maybe a little less asset sensitive going forward. But at the same time, some good growth in core checking and savings on one side and then you have the asset mix shift on the other side. So give us an idea of how you want us to think about the margin trends.

Executive
Brian Maass

Yes. Appreciate the question, John. This is Brian. What I'd say is the margins really outperformed from where we thought it. Would have started at the beginning of the year -- there has just been a lot of positive things as far as rate increases that have helped in the extra growth that we had in inventory finance earlier in the first half that have really helped kind of maintain the NIM at I'd say a really high level. We have -- we are seeing deposit costs increase like everybody else. Ours has been very, I'd say, muted, was up 7 basis points this quarter. As we go forward, we're going to continue to see the mix shift in balances right from auto and so the securities portfolio, so that continues to be a headwind.

The rest of our portfolio -- we do -- we don't really have sequential growth in our loan balances, as you know with inventory finance. So now we're going to get into the period where inventory finance balances start to grow again in fourth quarter and into Q1. So that obviously has impacts on the net interest margin.

As Craig mentioned, we are trying to manage to a specific outcome on the net interest margin. It really is a combination of all of the other things. But that being said, we're only down 1 basis point in the third quarter. I don't know if we can maintain it at this exact level. When you think about some of the incremental growth that goes on the balance sheet, it's now all accretive to the net interest margin yield that we have. So I do think that our net interest margin will come down a little bit over time, but I don't think that says that we are not asset sensitive.

If we just stayed in the things that we have and we continued to reprice, we would -- can see -- we would see positives impacts on the margin.

Analyst
Jon Arfstrom

Okay, good. That helps. And then obviously you had the seasonal headwinds on inventory finance and obviously auto. But it feels like you're saying the pipelines are stronger going into Q4. And maybe Craig, I'm just wondering if you're seeing the typical inventory finance lift, and then maybe touch a bit on the -- some of