TCF Financial Corporation
) rallied more than 2% following the release of its first-quarter
2014 results that reflected 50% year-over-year rise in earnings
per share. However, earnings of 24 cents per share came just in
line with the Zacks Consensus Estimate. Notably, results for the
quarter figure included an amortization charge.
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Results reflected higher net interest income as well as non
interest income and lower provision for credit losses. Further,
deposits and loans growth and an improving credit quality were
among the positives. However, increase in non-interest expenses
was the downside.
Net income available to common shareholders stood at $39.9
million, up 56.8% from $14.5 million in the prior-year quarter.
Quarter in Detail
TCF Financial reported total revenue of $304.7 million, up 4.4%
year over year, driven by higher net interest as well as
non-interest income. However, this compared unfavorably with the
Zacks Consensus Estimate of $307.0 million.
Net interest income inched up 1.1% year over year to $201.3
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
positives were partly offset by lower yields throughout the
lending businesses mainly due to the persistent low interest rate
scenario and declining average balances in consumer real estate
and higher yielding commercial fixed-rate loan portfolios.
Net interest margin was down 6 basis points year over year to
4.66%, primarily due to lower origination yields in the leasing
and equipment finance and consumer businesses.
Non-interest income came in at $103.4 million, up 11.5% year over
year. The increase was primarily attributable to higher leasing
and equipment finance revenues and gains on sales of auto loans
as well as consumer real estate loans, partially offset by lower
fees and service charges and declining revenues from card and
TCF Financial reported non-interest expenses of $217.1 million,
up 6.4% year over year. Elevated compensation and employee
benefits, occupancy and equipment costs and higher operating
lease depreciation mainly led to the rise in expenses.
As of Mar 31, 2014, total deposits improved 3.4% year over year
to $14.5 billion. Total loans and leases increased 3.9% year over
year to $16.2 billion at the end of the quarter.
Credit quality continued to improve at TCF Financial. Provisions
for credit losses decreased 62.2% year over year to $14.5
Net charge-offs were $17.4 million in the quarter, down 57.5%
year over year. The year-over-year fall was mainly attributable
to an improved credit quality in the consumer real estate
portfolio. Also, total non-accrual loans and leases declined
22.3% year over year to $266.7 million.
TCF Financial exhibited a strong capital position in the quarter.
As of Mar 31, 2014, the company's Tier 1 risk-based capital ratio
was 11.37% compared with 11.41% as of Dec 31, 2013. The tier 1
common capital ratio was 9.59% compared with 9.63% in the
prior-quarter. Moreover, Tier 1 leverage capital ratio was 9.84%,
up from 9.71% in the prior- quarter.
Results of TCF Financial look decent and we remain encouraged
owing to its continued efforts in improving top-line growth,
maintaining a better asset quality as well as enhancing its
organic growth strategy through continued rise in loan and
deposit balances. If the company can sustain this trend, it will
continue to drive earnings in the upcoming quarters.
However, continuous increase in expenses, the low interest-rate
environment and regulatory pressure remain looming concerns.
Performance of Other Midwest Banks
Huntington Bancshares Incorporated
) reported adjusted earnings per share of 19 cents in
first-quarter 2014, beating the Zacks Consensus Estimate of 17
cents. Results were driven by top-line growth and lower provision
for credit losses, partly offset by higher expenses. Further,
loan and deposit balances exhibited growth.
Wintrust Financial Corporation
) reported earnings per share of 68 cents in first-quarter 2014,
beating the Zacks Consensus Estimate of 66 cents per share.
Results primarily reflected higher net interest margin, robust
growth in loans and deposits, and an increase in non-performing
Commerce Bancshares, Inc.
) first-quarter 2014 earnings per share of 67 cents missed the
Zacks Consensus Estimate by a penny. Results reflected higher
operating expenses, partially offset by a slight rise in
revenues. However, growth in loans and deposits as well as strong
capital and profitability ratios acted as the tailwinds.