Riding on higher revenues,
TCF Financial Corporation
) reported fourth-quarter 2013 adjusted net income of 25 cents
per share, beating the Zacks Consensus Estimate by 2 cents.
Moreover, results improved significantly by 10 cents on a
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Deposits and loans growth coupled with top-line improvement were
the tailwinds for the quarter. Moreover, strong capital ratios
and an improving credit quality were the positives. However,
increase in non-interest expenses reflected undisciplined expense
Net income was $40.7 million, up 72.5% from $23.6 million in the
prior-year quarter. Including net after-tax charge of $5.6
million or 3 cents per share, associated with the realignment of
46 branches, net income came in at $35.1 million or 22 cents per
For full-year 2013, net income reached $132.6 million or 82 cents
per share, compared with a net loss of $218.5 million or $1.37
per share in the prior-year period. The full-year earnings per
share missed the Zacks Consensus Estimate by a penny. Notably,
prior-year results include net after-tax charge of $295.8 million
or $1.87 per share, associated with the balance sheet
repositioning in first-quarter 2012.
Performance in Detail
For full-year 2013, total revenue was $1.21 billion, down 5% from
$1.27 billion in the prior year. Revenue results were in line
with the Zacks Consensus Estimate.
TCF Financial reported total revenue of $307 million in the final
quarter, up 2% year over year, driven by higher net interest as
well as non-interest income. Moreover, the results outpaced the
Zacks Consensus Estimate of $305 million.
Net interest income inched up 0.4% year over year to $202
million. The rise was primarily driven by elevated average loan
and lease balances in the auto finance and inventory finance
businesses along with reduced rates on deposit products. These
positive were partially offset by a downward pressure on yields
across the lending businesses mainly due to the persistent low
interest rate environment. Net interest margin was 4.67%, down 12
basis points year over year.
Non-interest income came in at $104 million, up 3.7% year over
year. The increase was primarily attributable to gains on sales
of auto loans and higher other non-interest income, partially
offset by lower leasing and equipment finance revenues.
TCF Financial reported non-interest expenses of $220 million, up
3% year over year. Higher occupancy and equipment costs, elevated
operating lease depreciation and increased compensation and
employee benefits mainly led to the rise in expenses.
Evaluation of Credit Quality
Overall, credit quality improved for TCF Financial. Provisions
for credit losses decreased 53% year over year to $22.8 million,
owing to the decline in net charge-offs in the consumer real
Net charge-offs were $30.1 million in the quarter, down 33.8%
year over year. The fall compared to the prior-year period was
mainly attributable to an improved credit quality in the consumer
real estate portfolio.
Moreover, non-accrual loans and leases declined 27% year over
year to $277 million, driven by reduced non-accrual commercial
and consumer real estate loans.
TCF Financial exhibited a strong capital position in the quarter.
As of Dec 31, 2013, the company's Tier 1 risk-based capital ratio
was 11.41% compared with 11.09% as of Dec 31, 2012. The tier 1
common capital ratio was 9.63% compared with 9.21% in the
prior-year quarter. Moreover, Tier 1 leverage capital ratio was
9.71%, up from 9.21% in the prior-year quarter.
As of Dec 31, 2013, total average deposits improved 4.4% year
over year to $14.4 billion. Total loans and leases increased 2.7%
year over year to $15.8 billion in the quarter.
Among other Midwest banks,
Huntington Bancshares Incorporated
) fourth-quarter 2013 earnings beat the Zacks Consensus Estimate,
) results were in line, while results at
Commerce Bancshares, Inc.
) lagged the Zacks Consensus Estimate.
We expect the company to maintain its superior position in the
market based on its positive approach to market conditions and
top-line growth. Moreover, a healthy capital position along with
strong capital deployment activities is indicative of the
company's robust standing. However, the regulatory pressure and
increase in expenses remain looming concerns. TCF Financial
currently carries a Zacks Rank #3 (Hold).