TCF Bank 2003 Annual Report Download - page 48

46 TCF Financial Corporation and Subsidiaries
income taxes, lease financings and pension liability and expenses.
See Note 1 of Notes to Consolidated Financial Statements for further
discussion of critical accounting estimates.
Recent Accounting Developments In January 2003, the
Financial Accounting Standards Board (“FASB”) issued FASB
Interpretation (“FIN”) No. 46 “Consolidation of Variable Interest
Entities,” which addresses consolidation and disclosure of interests
in variable interest entities (“VIEs”). See Note 1 of Notes to
Consolidated Financial Statements for information relating to
investments in affordable housing limited partnerships. There
was no impact on TCF’s financial statements upon adoption of
this interpretation.
In December 2003, the FASB issued a revised version of FIN No.46.
The revised FIN No.46 clarifies some of the provisions of the original
interpretation and adds new scope exceptions. TCF expects no sig-
nificant impact on TCF’s financial statements upon adoption of the
revised interpretation.
In April 2003, the FASB issued SFAS No. 149, “Amendment of
Statement 133 on Derivative Instruments and Hedging Activities.”
SFAS No.149 amends and clarifies financial accounting and reporting
for derivative instruments, including certain derivative instruments
embedded in other contracts and for hedging activities under
SFAS No.133, “Accounting for Derivative Instruments and Hedging
Activities.” This Statement is generally effective for contracts entered
into or modified and hedging relationships designated after June 30,
2003. There was no impact on TCF’s financial statements as a result
of the adoption of this Statement.
In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and
Equity.” SFAS No.150 establishes standards for how an issuer classi-
fies and measures certain financial instruments with characteristics
of both a liability and equity. It requires that an issuer classify certain
financial instruments as a liability, although the financial instrument
may previously have been classified as equity. This Statement was
effective for financial instruments entered into or modified after
May 31, 2003 and otherwise was effective at the beginning of the first
interim period beginning after June 15, 2003. There was no impact on
TCF’s financial statements upon adoption of this Statement.
On December 8,2003, the Medicare Prescription Drug,Improvement,
and Modernization Act of 2003 (the “Act”) was signed into law. This
Act includes a prescription drug benefit and a federal subsidy for
sponsors of retiree healthcare plans beginning in 2006. TCF offers a
prescription drug benefit to certain retirees in its post-retirement
medical plan. In January 2004, the FASB issued limited guidance
regarding the effects of the Act on the estimated costs of providing
this retirement benefit under SFAS No.106, “Employers’ Accounting
for Postretirement Benefits Other Than Pensions” with various
implementation options. The impact of the Act has not yet
been included in TCF’s determination of post retirement benefit
obligations or expense. TCF is currently reviewing the Act and
considering its options. However, the effects of this Act are not
expected to be significant.
Fourth Quarter Summary In the fourth quarter of 2003, TCF
reported net income of $59.5 million, compared with $59.8 million in
the fourth quarter of 2002. Diluted earnings per common share was
86 cents for the fourth quarter of 2003, compared with 82 cents for
the fourth quarter of 2002. TCF opened 10 new branches in the fourth
quarter of 2003, of which two were supermarket branches.
Net interest income was $119.1 million and $126.6 million for
the quarter ended December 31, 2003 and 2002 respectively. The
net interest margin was 4.68% and 4.59% for the fourth quarter of
2003 and 2002, respectively. TCF’s net interest income declined by
$7.5 million, or 5.9% over the fourth quarter of 2002. Of this decline
in net interest income $11.6 million was due to interest rate changes,
partially offset by an increase of $4 million due to volume changes.
TCF provided $4 million for credit losses in the fourth quarter
of 2003, compared with $4.1 million in the fourth quarter of 2002.
Net loan and lease charge-offs were $6.1 million, or .30% of average
loans and leases outstanding, compared with $3.2 million, or .16%
of average loans and leases outstanding during the same 2002
period. Included in net charge-offs was a $1.3 million charge-off
related to an office building that TCF took ownership of during the
fourth quarter of 2003. Included in leasing and equipment net
charge-offs in the fourth quarter of 2003 was a $1.3 million charge-
off related to the sale of $5.6 million of under-performing leases
from the transportation portfolio.
Non-interest income increased $5.7 million, or 5.2%, during the
fourth quarter of 2003 to $114.9 million. The increase was primarily
due to increased leasing and mortgage banking revenues and fees
and service charges.
Non-interest expense increased $993 thousand, or.7%, in the
fourth quarter of 2003 to $142.2 million. Increases from the fourth
quarter of 2002 in occupancy expense of $1.2 million due to branch
expansion and in advertising of $1 million to support checking
account promotions were mostly offset by a $1.9 million decrease in
other non-interest expense primarily due to lower mortgage banking
volumes and lower ATM and debit card processing expense.
In the fourth quarter of 2003, the effective income tax rate was
reduced to 32.14% of income before tax expense for the quarter due
to the increased investments in affordable housing limited partner-
ships and a reduction in state and local income taxes.
Earnings Teleconference and Website Information TCF
hosts quarterly conference calls to discuss its financial results.
Additional information regarding TCF’s conference calls can be
obtained from the investor relations section within TCF’s website at
www.tcfexpress.com or by contacting TCF’s Corporate Communications
Department at [phone]. The website also includes free access
to company news releases, TCF’s annual report, quarterly reports,