TCF Financial Corporation
Q3 2017 Earnings Call Transcript

Published: 27 Oct 2017

[Operator:]

Good morning, and welcome to TCF’s 2017 Third Quarter Earnings Conference Call. My name is Jamie and I will be your conference operator today. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer period. [Operator Instructions] Please also note today’s conference call is being recorded. At this time, I’d like to introduce Mr. Jason Korstange, TCF Director of Investor Relations, to begin the conference call.

[Jason Korstange:]

Good morning, everyone. This is TCF's third quarter 2017 earnings call. Joining me today will be Mr. Craig Dahl, Chairman and Chief Executive Officer; Tom Jasper, Chief Operating Officer; Brian Maass, Chief Financial Officer; Mike Jones, EVP of Consumer Banking; Bill Henak, EVP of Wholesale Banking; and Jim Costa, Chief Risk Officer and Chief Credit Officer. In just a few moments, Craig, Brian and Jim will be providing an overview of our third quarter results. They will be referencing a slide presentation that sis available on our Investor Relations section of TCF's website ir.tcfbank.com. Following their remarks, we'll open it up for questions. During today's presentation, we may make projections and other forward-looking statements regarding future events or the future financial performance of the company. We caution that such statements are predictions and that actual events or results may differ materially. Please see the forward-looking statement disclosure in our 2017 third quarter earnings release for more information about risks and uncertainties, which may affect us. The information we will provide today is accurate as of September 30, 2017 and we undertake no duty to update the information. I will now turn the conference call over to TCF’s Chairman and CEO, Craig Dahl.

[Craig Dahl:]

Thank you, Jason. I'll start here on Slide 3, third quarter observations. As we move toward the end of 2017, we continue to operate with a focus on our four strategic pillars; diversification, profitable growth, operating leverage, and core funding. We're pleased with the actions that took place in the third quarter as we gained momentum in moving the company forward. We reported net income of $60.5 million, up 7.5% year-over-year with diluted EPS of $0.29. During the quarter, we announced redemption or our 7.5% Series A preferred stock, which impacted diluted EPS by $0.04 per share. We refinanced this debt at 5.7%. So, we expect to refinance the preferred stock to result in an annual after-tax savings of $3 million. Our net interest income growth continued to be driven by loan growth and net interest margin expansion to 4.61% as rate increases are resulting in higher yields in our variable and adjustable rate loan and lease portfolios. We continue to focus on improving our efficiency ratio, which has improved year-over-year. We had strong loan growth during the quarter led by a $445.5 million leasing and equipment finance portfolio purchase. We took another step toward improving our risk profile through a $22 million consumer real estate nonaccrual sale. We completed a similar sale in the first quarter. Finally, as previously announced during the quarter, the court issued a ruling in which it dismissed the CFPB's Reg E claims against TCF. In addition, the court dismissed the CFPB's other claims for periods prior to July 21, 2011, but did not dismiss these claims for periods after this date. Turning now to Slide 4, our auto finance update. Our auto portfolio balances remain flat on a linked quarter basis following our strategic shift in the first quarter as originations were down 44.5% year-over-year. Our auto yields moved slightly higher as the transition of the mix of the auto portfolio continued its to progress and pricing has improved. We have a limited amount of exposure in both Texas and Florida, but it is too early to predict the impact of hurricanes on this portfolio. Jim Costa will have some comments on the overall impact of this later in the presentation. Turning to Slide 5, leasing and equipment finance acquisitions; over the past several months, we have executed on two acquisitions within leasing business that align very well with our strategic pillar of probable growth. I'll turn over to Bill Henak, to provide some more details.

[Bill Henak:]

Thank you, Craig. Continuing on Slide 5, late in the second quarter, we purchased a leasing company platform that provides financing solutions for the acquisition of material handling equipment, primarily to Fortune 500 companies. The purchase included the addition of $52.3 million of leases, primarily made up of operating leases. This acquisition impacted the leasing and equipment finance noninterest income line as well as the operating lease depreciation line in the third quarter. The second acquisition was a loan and lease portfolio purchase of $445.5 million that was completed late in the third quarter. The assets acquired fit nicely into the existing segments within our portfolio and will provide opportunities for our sales teams to expand in those markets. Given the timing of this portfolio acquisition, the impact on the income statement will begin to be seen in the fourth quarter. I'll turn it back over to Craig Dahl.

[Craig Dahl:]

Thanks Bill. So, as you look to the fourth quarter, we would expect leasing and equipment finance, noninterest income run rate to increase to a quarterly range of $35 million to $40 million keeping in mind that these revenues tend to be customer driven. Similarly, for the fourth quarter, we would expect operating lease depreciation to increase to the $17 million to $18 million range going forward. Overall, we are very pleased about both acquisitions as we continue to utilize our industry expertise to focus on our niche markets within the leasing business. Turning to Slide 6, the revenue summary. We're continuing to see a more stable source of revenue as gain on sale and servicing revenue is being replaced with increased net interest income. The increase in net interest income is being driven by loan and lease growth and an expanding net interest margin, which increased 27 basis points year-over-year. This margin expansion further demonstrates the true asset sensitivity of our business model. Our noninterest income was positively impacted by elevated leasing and equipment finance revenue relating to the leasing company platform acquisition, which took place late in the second quarter. Turning to Slide 7, the loan and lease portfolio, year-over-year loan and lease growth was a very strong 9.2% led by the leasing portfolio purchase. We continued to see strong year-over-year growth across all of our wholesale businesses as inventory finance increased 13.9%, leasing and equipment finance increased 11.7%, and commercial increased 10.8%. As expected, the auto portfolio decreased to 17% of our total loan and lease portfolio as we continue to manage this concentration. Turning to Slide 8, loan and lease yields, you can see the increase in short-term rates and our pricing discipline continue to drive our strong yield performance. Loan yields increased 43 basis points year-over-year largely due to increasing yields in our variable and adjustable rate portfolios. Again, our yield performance further demonstrates the true asset sensitivity of our business model. I'll now turn it over to Brian Maass.

[Brian Maass:]

Thanks Craig. Turning to Slide 9, deposit generation, despite the rise in rates, our average rate on deposits is up only five basis points from the second quarter of 2017 and just one basis point compared to the third quarter of 2016. The majority of our deposits are consumer. Average deposits year-over-year are up approximately $500 million and about $370 million of that is checking. We did utilize some wholesale funding and retail CD promotions to fund our acquired loan and lease portfolio. We continue to be very pleased with the granularity of our retail deposit base and how it is performing with the rise in interest rates. Turning to Slide 10 on interest rates, the chart in the upper left shows rising interest rates are having a positive impact on our variable and adjustable rate assets. These portfolios specifically commercial, inventory finance, and portions of the consumer real estate have the yields that are now up 60 to 85 basis points compared to last year. In addition, the chart in the upper right shows the impact of seasonality of inventory finance yields in the third quarter. The linked quarter increase of 49 basis points is due to both the normal seasonality as well as the impact of the June rate hike. As you can see in 2016 and 2015, we did not have a June hike. We would expect inventory finance yields to decline slightly in the fourth quarter due to the mix of that portfolio, but overall net interest margin continues to increase primarily due to the impact of rising interest rates on the variable and adjustable rate portfolios and our ability to manage deposit cost which I covered on the last page. Absent rate hikes, we would expect margin to normalize around this level as we do expect some pressure in the fourth quarter due to the seasonality of inventory finance yields and marginally higher deposit costs from the funding that was added in the third quarter. However, regardless of the NIM rate and even if it's down a few basis points, we expect to see continued growth in net interest income in the fourth quarter. Turning to Slide 11, non-interest expense expenses were well-controlled in the third quarter, Combined compensation and other expenses were stable year-over-year. We did see an increase in operating lease depreciation during the quarter due to the leasing company platform acquisition in the second quarter of 2017. However, this was offset by an increase in leasing and equipment finance operating lease. As we have indicated, we expect increases in operating lease depreciation to be correlated to increases in leasing noninterest revenue. During the quarter, we also successfully completed the conversion of our retail customer base to a new digital platform as we continue to invest in technology. Overall, our focus remains on generating positive operating leverage and we expect to continue to drive our efficiency ratio down as we move forward. Our efficiency ratio has declined 54 basis points year-over-year and this will continue to be a focus as we move forward. Turning to Slide 12 on capital. As a result of our strong capital position, we're able to deploy capital during the quarter to execute a significant portfolio acquisition. Following the acquisition, our capital ratios remained strong from earnings accumulation. As Craig mentioned, we refinanced our preferred stock, which resulted in a one-time EPS impact of $0.04 per share. We expect this refinance to result in an annual dividend savings of $3 million. Now I'll turn it over to Jim Costa to give an update on credit.

[Jim Costa:]

All right. Thank you, Brian. So, if you turn your attention to Page 13, what you can see is overall we have a positive credit profile and our trends remain positive as it relates to delinquencies our over 60-day delinquencies were up only one basis point on a year-over-year basis. Given the national lending footprint we have, provision in the third quarter does reflect a $5.2 million hurricane-related reserve and that is based on our analysis of current exposure as well as our historical performance following similar disasters where we do have considerable experience. We saw another nice decline in nonperforming assets due to the sale of the $22 million commercial real estate -- consumer real estate nonaccrual loans. This resulted in a $4.6 million recovery, which favorably impacted both the provision in the quarter as well as the net charge-offs. Net charge-off came in at 18 basis points for the quarter. Excluding the nonaccrual loan sale, net charge-offs would have been 28 basis points, which is in line with the second quarter of 2017 and just two basis points increase year-over-year. If you turn to Page 14, we got net charge-offs little further. As I mentioned, the nonaccrual loan sale during the quarter, excluding that net charge offs would have been up just two basis points year-over-year and flat on a linked quarter basis. Net charge-offs in our wholesale portfolios, which is our primary growth portfolio, totaled just five basis points. This further demonstrates the value of our diversification strategy as the decline in commercial net charge-offs offset the seasonal increase in auto net charge-offs. Our current net charge-offs levels remain in the low end of our long-term expectations. Overall, we remain pleased with credit performance. I'll now turn it over to Craig.

[Craig Dahl:]

Turning to Slide 15, our strategic pillar summary, I think it's evident, we've continued to focus on these strategic pillars. The diversification strategy gives us flexibility and is showing its value in terms of our strong overall credit quality. We saw that clearly this quarter with our stable net charge-off ratio. We took steps towards continued profitable growth during the quarter with our leasing company activities. Our operating leverage remains a focus as our core expenses were lower in the quarter. From a core funding standpoint, we completed our digital banking conversion in the third quarter. We had strong execution from our team with this initiative and the customer response has been great so far. The new platform provides advanced functionality our customers expect and is critical for us given the change in how customers are utilizing their banking services. Our overall goal is to continue to improve the valuation of our organization and I'm confident that we are on the right track. There were a number of positives in the quarter and we look to build on them going forward. With that, I'll open it up for questions.

[Operator:]

Ladies and gentlemen, at this time, we'll begin the question-and-answer session. [Operator instructions] Our first question today comes from Jon Arfstrom from RBC Capital Markets. Please go ahead with your question.

[Jon Arfstrom:]

Hi. Thanks. Good morning, guys.

[Craig Dahl:]

Good morning, Jon.

[Jon Arfstrom:]

Maybe a question for you Brian or maybe Mike, just on -- appreciate the margin guidance, but wonder if you guys could maybe touch on what you're seeing on deposit pricing pressure? It sounds like maybe some of the pressure came from funding the acquisitions from wholesale and CDs and the rest is well-behaved, but give us an idea of what you're seeing there and what expectations you have for deposit growth and deposit costs?

[Brian Maass:]

Yeah, I'll make some comments and Mike can add to it if he wants, but we did see deposit cost move up five basis points in the quarter. Again, we think that's manageable, but that was related to as we did have some, we used some wholesale funding as well as we did use some promotional CDs to fund some of the portfolio purchase. So, you do see CDs are up probably 8% on a year-over-year basis, but I also don't want to lose sight that we're growing our checking account balances and they're up 7% on a year-over-year basis. I'd say in general, we're pleased with the performance of our books as interest rates, when you look at the first 100 basis points of move that we had, we feel really good about how our retail book has performed. I would say the non-CD portion of the book obviously as we add some CDs into that, we will see a little bit of pressure on the funding side. But the bottom line for us is that we're looking at the growth that we're able to produce from a net interest income perspective, and if you look either on a linked quarter basis or on a year-over-year basis just according to numbers, our interest expenses are up $3 million on a year-over-year basis and our interest income is up $25 million. So, we think we can continue growing net interest income.

[Jon Arfstrom:]

Okay. Maybe just a simple question here, but that does it feel like to you Brian the margin is topping out and I guess the reason I ask the question, it seems like we will likely have a fed funds rate increase in December and does that send your margin higher. Do you feel like there's some limits here on the higher end?

[Brian Maass:]

Absent a rate hike, it feels like it taps out somewhere around here and I know I've said that in the past, right, and we continue to see our performance play out like even this quarter we had better growth in inventory finance and in commercial, and really the portions of our book that have grown more than we even we expected happen to be the variable rate portions of our book. So, we've gotten benefit from that and we continue to see favorable pricing on the deposit side. As I look forward, we do have the seasonality [indiscernible]. So, when you look at the fourth quarter expectation for net interest margin rate, there is pressure on that because in the fourth quarter, the yields of that book will go down. We think that will be offset slightly by higher yields in equipment finance due to the portfolio purchase, but on the deposit side, we won't see again a marginal increase there. So, I think there is going to be some stability in that, but if we do get rate hikes, if we get one late in the fourth quarter, that not really going to have much impact on the fourth quarter. But I would expect that we would see some margin expansion as we get into 2018 as well.

[Jon Arfstrom:]

Okay. That helps. And then just one for Bill or Craig, you made a comment last quarter on portfolio acquisitions, and I don't think you intentionally tried to sneak it in there but if you kind of snuck it in there and now we have two portfolio purchases, just curious if this is something that you expect to be an ongoing opportunity for you? I think you mentioned as rates go up, these portfolios tend to come up for sale. Just curious what your thoughts are on more potential there?

[Craig Dahl:]

Well, I think that I've been saying for over a year about the uses of our capital and that both from an origination standpoint and from a portfolio acquisition standpoint that we were prepared to do that, and I just think that because we've looked at a lot of opportunities over that timeframe, and at the end of the day these didn't fit our return profile or they didn't fit our pricing profile. So, we're going to continue to -- just going to continue to be active and if it makes sense from a return on capital standpoint, we're going to continue to pursue them.

[Jon Arfstrom:]

Okay. All right. Thank you.

[Operator:]

Our next question comes from Ken Zerbe from Morgan Stanley. Please go ahead with your question.

[Ken Zerbe:]

Great. Thanks. Just in terms of the recent acquisitions that you've done in the leasing and equipment finance business, do those acquisitions increase the volatility as well around the sales-type revenue that you get serve in a proportional manner or should we see less volatility. Thanks?

[Bill Henak:]

This is Bill Henak. The volatility will remain the same it is because the operating lease components and the markets that we entered into with those transactions were all consistent with what we've done in the past. So, these are complementary to the market’s transaction structures and types of financing that we've done there. So, I don't see it as being any more volatile. It's just an opportunity for us to continue to grow.

[Ken Zerbe:]

Got it. Okay. And then another question in terms of the nonaccrual loan sales that you've been doing, I think you have about $120 million left of nonaccrual, do you have plans to make further sales and if you can just remind us why you've been selling those, and so the outlook? thanks.

[Mike Jones:]

Yes Ken, this is Mike Jones. We continue to look at where we can take advantage of it in the marketplace. A lot of these are loans that are sitting on our books, continue to pay, but based on prior credit deterioration, we took them and placed them on nonaccrual. So, it's basically an economic decision for us around what will it earn prospectively versus what can we garnish from the marketplace on there. And then additionally I would say that we're cognitive of the risk profile of TCF, and we believe the more nonaccrual loans that we can move off our sheet the better that it improves that risk profile.

[Ken Zerbe:]

All right. Thank you.

[Operator:]

Our next question comes from Emlen Harmon from JMP Securities. Please go ahead with your question.

[Emlen Harmon:]

Hey. Good morning. Given the dismissal of a portion of the CFPB's lawsuit have you guys identified the portion of the depositors that would now be subject to any actions from the trial as it currently stand and like how are you thinking about that in terms of how it reduces the risk of any action?

[Tom Jasper:]

Emlen, this is Tom Jasper. That's the detail that we're just not going to -- we don't talk about litigation in that matter. We're pleased with the outcome of the motion to dismiss. We think it's a favorable development for us as it relates to the case, but in terms of what it means for our customers and the like, we're not going to get into any of that as for today.

[Emlen Harmon:]

Got it. Okay. Thanks. And then just quickly hopping to auto when we think about the auto book overall have you guys pretty much -- do you have the mix of asset quality you see on a longer term basis in the auto book and barring any change in rates or kind of where we should expect to be from a yield perspective there?

[Craig Dahl:]

Yeah couple things Emlen, I think we are from a mix, I think the mix shift has kind of mainly happens. We might have slight changes that will impact the yields as we go forward, just based on the risk-adjusted performance of each of those different sections of you FICO ban or credit bans that we're originating and how it's performing out on our books. But we continue to garnish increases in the marketplace and if that continues, that will have a positive impact on the yield and then the other dynamic is that we have assets that are running off that are at lower yields than what we're currently originating today also having a positive impact on the yields on that book.

[Emlen Harmon:]

Great. Thanks, and thanks for taking the questions.

[Operator:]

Our next question comes from Chris McGratty from KBW. Please go ahead with your question.

[Chris McGratty:]

Hey. Good morning, everybody.

[Craig Dahl:]

Good morning.

[Chris McGratty:]

Craig, you talked about the preferred in your prepared remarks, I believe you've got a Series B that's potentially redeemable at the end of the year. I am interested given that you're talking more about capital deployment with the portfolio purchase if that might be something you look at and if so, are you in a position from a capital strength to redeem versus come in the market and issue more, thanks.

[Craig Dahl:]

Yeah Chris. I'll put that to Brian Maass.

[Brian Maass:]

I think we talked about every quarter we evaluate what our capital position is and what our capital stack is, so it's something that we'll continue to evaluate as we get into 2018. Series B does become callable starting in December of this year but it's really callable every day thereafter right. So even if don't call it in December, we retain that option to take it out whenever we want. From a refinancing that one perspective just as a reminder, it's not quite as attractive. So, refinance that one as it was for us on the Series A, but we'll continue to evaluate our options as we get into under this year and into 2018.

[Chris McGratty:]

Okay. That's helpful, thanks. And the expenses, I understand that the moving parts between the leasing revenues and the depreciation, but setting that aside, how should we be thinking obviously in the context of operating leverage, the overall level of expenses for Q4? Are there any notable items that we should be thinking about from a seasonal perspective?

[Brian Maass:]

I don't know if there is any notable items. We remain focused going back to April when I said we expect revenue to outpace operating expense growth for each of the last three quarters of 2017 on a year-over-year basis and today when you look at second quarter what we're able to do in the third quarter, we have seen the efficiency ratio improvement on year-over-year basis for each of those quarters. I do expect that for the fourth quarter, on an operating expense basis that we will see improvement again on a year-over-year basis. There is always going to be some movement in those lines. So, they might not be exactly flat. There was a few things that was a little lower. So, they might be up a little bit in the fourth quarter, but we're going to also have a lot of offsetting revenue that's going to grow faster. So, I expect he the efficiency ratio to continue seeing slight improvement as we get in the fourth quarter.

[Chris McGratty:]

That's great. And if I can just sneak one on the promotion on the CDs you talked about the -- did you disclose the term in the promotion that you're doing and maybe what it costs and then not sure if I heard what you've done with the purchases now that the portfolios -- that the promotion of the portfolio purchase is done.

[Craig Dahl:]

Yeah. So, we did do some promotional CDs from a regional perspective. We also did some in the wholesale markets. I would say the maturities of those CDs are anywhere between six months and 24 months. So, it's a variety and that was primarily used to help fund the acquisition, but we do expect to continue growing core deposits over time. And the reason we looked at the maturity of some of those promotional CDs and it matches well with the fact of this portfolio is somewhat of a runoff portfolio right. So, it will be we think it's we'll matched as well.

[Chris McGratty:]

Great. Thank you, Craig. Thank you very much.

[Operator:]

[Operator instructions] Our next question comes from Dave Rochester from Deutsche Bank. Please go ahead with your question.

[Dave Rochester:]

Hey. Good morning, guys.

[Craig Dahl:]

Good morning, Dave.

[Dave Rochester:]

Before that what was the yield on the portfolio you purchased?

[Brian Maass:]

This is Brian. We don't disclose the yield on any specific portfolio purchase, but I do expect it to be slightly accretive to the equipment finance yields that we report today.

[Craig Dahl:]

This is Craig, David and there was as we said, there was no impact in the third quarter. So, we have to close right at the end of the quarter.

[Dave Rochester:]

Sounds good. And then just bigger picture, what are you thinking about the ultimate NIM impact with the next rate hike? This one seems to be pretty meaningful, I think to your point it was more than what you'd expected in terms of expansion for 3Q, how are you thinking about the next one? And should we see a similar impact or more muted?

[Craig Dahl:]

We expect to see -- it depends on a lot of factors right. So, it depends on the composition of the book and how much of the book stays floating, what happens to spreads in the marketplace, what happens to the shape of the curve. But if we were to get a rate hike again I think when you look at our deposits in the whole composition of our deposits, a lot of it is retail and a lot of it is cost. And I think the fact that we've been able to outperform on that portion of the book to date, I think we're going to continue to be able to outperform as we go forward. So, I think in a rate hike environment, we will continue to see margin expansion. If all things stayed equal now, the hard part is that if you do add on, incremental assets or things like that, it's hard for all of them to be incremental and we have a 4.6% net interest margin right. So, it's hard for all additions to be accretive or to draw the margin higher. So, it depends on what other things happen, but from a static perspective if we got a rate hike, I would expect that our net interest margin would increase.

[Dave Rochester:]

Okay. Appreciate the color. And then on -- just on the charge-offs this quarter, auto charge-offs picked up a little bit, what's your outlook on that going forward post the storms and the impact those might have had on the space?

[Jim Costa:]

Sure Dave. This is Jim Costa. What we're seeing now is some seasonality in the auto book and so if you look back at over our prior year's performance, we're kind of tracking in line in terms of that seasonality curve and typically what you see is a little bit more of an uplift in charges in the fourth quarter. So, I wouldn't be surprised if that happens. What we really can't do well is how the loses would play out from the hurricane. So, what we've done is we've done our full scrub of the portfolio and the theme of affected areas in size where we think the exposure is and we think we've adequately reserved for that. Now we're hopeful that what plays out is a more favorable outcome, but really our attention first and foremost is around the hardship that our customers are experiencing. So that was the first priority. And secondarily, we're looking at the impact on the portfolio, but we do think the reserve is commensurate with the losses that we can see coming forward, more time will tell.

[Dave Rochester:]

Okay. Great. And just one last one real quick like you said on expenses. Appreciate the color on 4Q, I was just wondering how you were thinking about that expense trend next year if you had any preliminary goals on where you want to be efficiency ratio to go next year that you want to talk about will be great.

[Craig Dahl:]

Yeah, I don't have an specific targets for next year, maybe we'll have more to say on the next call. What I can say is we're really focused on making improvements in the efficiency ratio in 2018 as well as making improvements for our return on capital in 2018.

[Dave Rochester:]

All right. Great. Thanks guys.

[Operator:]

Our next question comes from Steven Alexopoulos from JPMorgan. Please go ahead with your question.

[Carolina:]

Yes. Good morning. This is Carolina for Steve. You talked about the new digital platform. Can you share what are some of the new upgrades and capabilities that are offered. Thank you.

[Mike Jones:]

Sure. This is Mike Jones. The digital implementation that we did over the last quarter. I think it puts us pretty close to market parity around the capabilities for that platform. It's a mobile first type platform that allows our customers to do mobile deposits, finger print ID application. We also did some planning and budgeting tools that allow them to better manage their finances as well as certain notifications that they can get vis-à-vis their mobile device. So, we are very happy with that and we've had positive responses from our customers and reactions. We've seen a significant amount of usage almost four times what we've had in the past around our platform. So, we're very pleased where we stand there. The thing I would say is that we'll continue to focus on bringing more and more features and functionality to our customers as we move forward and this platform, allows us to have the flexibility to do that.

[Carolina:]

Great. Thank you.

[Operator:]

And our next question comes from Jared Shaw from Wells Fargo Securities. Please go ahead with your follow-up.

[Unidentified Analyst:]

Hi, good morning. This is actually [indiscernible] filling in for Jared. I appreciate the color you provided around some of the credit from the recent weather patterns. Looking more from a demand standpoint is there a way to maybe quantify or talk through what the potential implication could be from a demand standpoint for some of your seasonally higher growing businesses in the back end of the year here?

[Craig Dahl:]

This is Craig. First of all, if someone has been damage a new acquisition is only going to replace something that's going to be resolved through the insurance process. So that doesn't necessarily by itself create any left, but seasonally the summer is usually one of the months of the summer we have a little bit of decline in originations and that happened again this year. I would expect seasonally most of our businesses especially on the wholesale side have good pick up in the fourth quarter. So that would only augment that as a positive.

[Jim Costa:]

I might add. This is Jim Costa, I think what we're seeing in the industry is that the hurricanes will probably affect the auto industry from a demand standpoint temporarily and so that will put some positive pressure on valuations on secondary market although that will be short-lived. So, I think you might see a little bit of lift in terms of credit performance on the valuation side, which will largely be hurricane driven and that's consistent with what's happening in prior hurricanes.

[Unidentified Analyst:]

Okay. Thank you very much.

[Operator:]

And our next question comes from David Chiaverini from Wedbush Securities. Please go ahead with your question.

[David Chiaverini:]

Hi thanks. I wanted to ask you about loan growth. You've spoken in the past about a mid-single-digit growth organically. Is that still what your outlook is as we look towards 2018?

[Brian Maass:]

Yeah, I would say the answer is mid-single-digits on a full-year basis taking into account what we've acquired is probably better than it right. So, I think now we're going to be a mid to high-single digits for the full year including all those.

[David Chiaverini:]

And then as we look out to 2018, would you say that it would fall back into the mid-single-digit range since the acquisition will already be in there?

[Brian Maass:]

We don't have a lot of guidance on 2018 yet. Obviously, we're still optimistic that we could see faster growth in the economy or some fiscal policy changes, but we like the growth that we've seen in our wholesale businesses to date. You can see year-over-year these businesses are growing between 11% and 14% and when think those are going to continue to provide growth into 2018 so we're optimistic around 2018.

[David Chiaverini:]

Great. And then shifting back to auto, are you prepared to disclose what the combined FICO is on that portfolio?

[Brian Maass:]

Yeah, we do that in our Investor Relations deck that we typically send out and go to conferences on. Last quarter it was disclosed at 716 and I would expect that to remain relatively flat in the third quarter once we disclose that.

[David Chiaverini:]

Thank you very much.

[Operator:]

[Operator instructions] Ladies and gentlemen, at this time we thank you for your questions today. Should any investors have further questions, Jason Korstange, Director of Investor Relations will be available for the remainder of the day at the phone number listed on the earnings release. I would now like to turn the conference call back over to Mr. Craig Dahl for any closing remarks.

[Craig Dahl:]

Well, thank you for listening this morning. We appreciate your interest and investment in TCF. I just want to make a comment about the hurricanes. We've got a lot of experience with that. We have both employees and customers that were impacted. When you think about our business model, we have a lot of niche businesses and a lot of repeat customers. So, when we're calling those customers around this time, our call start with how are you doing, not when are you going to pay. And I think making sure that they know that we're not going anywhere is important as we deal with then. And I wanted to point out on the digital role out, our IT product and branch-making teams did a great job in the design and creation and the rollout of our digital account and we think that this change is playing field for TCF right now. We believe we've got good momentum for the rest of '17 and into '18 and that's our job to show you. So, thank you very much and have a good day.

[Operator:]

Ladies and gentleman, that does conclude today's conference call. We thank you for attending. You may now disconnect your lines.