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

Oct 22, 2018 • 10:00 am ET


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


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James Costa

third quarter, driven by higher consumer real estate non-accrual loan balances, again resulting from the sale, and an increase in other real estate owned balances. The increase in REO was primarily due to the addition of one of our corporate operation centers we are now marketing for sale. 60-day delinquencies remain stable at just 12 basis points, down 1 basis point from a year ago.

You will note delinquencies, excluding auto, have remained at 10 basis points or lower for the last nine quarters. Provision for credit losses came in at $2.3 million for the quarter. This reflected a $6.6 million recovery related to the consumer real estate non-accrual loan sale as well as the continued run-off and maturation of the auto finance portfolio. Lastly, we are seeing improved liquidity at balance sheet remix progresses as well as a loan to deposit ratio which now stands at 100% as of September 30. Turn to slide 11.

We are continuing to see favorable impact that our diversification model is having on our credit losses. Net charge-offs, excluding the consumer real estate non-accrual loan sales and the auto portfolio, were just 10 basis points. As you can see, the majority of our net charge-off dollars are coming from the run-off of the auto portfolio, with just $14 million coming from non-auto portfolios.

Overall, we remain very pleased with our credit performance and don't see any story from a credit quality perspective. With that, I'll turn it back to Craig.

Brian Maass

Thank you, Jim. I'll bring it to slide 12 here, our return -- improved return on capital. We talked a lot this morning about our focus on improving our return on capital and not only have we been successful in increasing it in 2018, we've done so with a higher capital ratio and a lower risk profile. In addition, as I mentioned earlier, we did repurchase over 900,000 shares of stock during the quarter, and have a $141 million of our share repurchase authorization remaining as of quarter-end.

Craig Dahl

Turning to slide 13. I want to draw your attention to the 2018 targets we provided earlier this year for adjusted ROATCE and efficiency ratio. The purpose of providing these targets was to highlight the metrics we are managing toward and those we feel are important to driving shareholder value going forward.

For the full year '18, we have been targeting ROATCE of 11.5% to 13.5%, adjusted for the CFPB settlement, and we are exceeding this year-to-date at 14.5%. We have also been targeting a 2018 adjusted efficiency ratio of 66% to 68%, and our results are in line with this range at 67.5% year-to-date. I continue to be pleased with our execution against these targets and I look forward to updating you again next quarter. With that, I will open it up for questions.