TCF Financial Corporation
) reported second-quarter 2013 net income of 21 cents per share,
in line with the Zacks Consensus Estimate. However, results
improved by a nickel on a sequential basis.
FIRST INTST MT (FIBK): Free Stock Analysis
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Deposits growth coupled with improving credit quality were the
tailwinds for the quarter. Moreover, a rise in total revenue
driven by increased interest as well non-interest income was a
positive. However, increase in non-interest expenses reflects
undisciplined expense management.
Net income was $34.1 million, up 33.8% from $25.5 million in the
Performance in Detail
TCF Financial reported total revenue of $302 million in the
quarter, up 3.4% sequentially, driven by higher non-interest and
net interest income. Moreover, the results outpaced the Zacks
Consensus Estimate of $300 million.
Net interest income surged 1.5% sequentially to $202 million. The
rise was driven by elevated average loan balances, partially
offset by reduced interest income from lower average balances of
consumer real estate loans. Net interest margin was 4.72%, in
line with the prior quarter.
Non-interest income came in at $100 million, up 7.6%
sequentially. The increase was primarily attributable to higher
banking fees and elevated leasing and equipment finance revenues.
On the flip side, TCF Financial reported non-interest expenses of
$209 million, up 2.2% sequentially. Higher FDIC insurance,
elevated operating lease depreciation and increased compensation
and employee benefits led to the rise in expenses.
Evaluation of Credit Quality
Overall, credit quality improved for TCF Financial. Provisions
for credit losses decreased 15.1% sequentially to $32.6 million,
owing to the decline in net charge-offs in the consumer real
Net charge-offs were $27.7 million in the quarter, down 32.4%
sequentially. The fall compared to the prior period was mainly
attributable to improved credit quality in the consumer real
estate and commercial portfolios.
Moreover, non-accrual loans and leases declined 18.9%
sequentially to $278.5 million, driven by the sale of loans
during the reported quarter.
TCF Financial exhibited a strong capital position in the quarter.
As of Jun 30, 2013, the company's Tier 1 risk-based capital ratio
was 11.27% compared with 11.14% as of Mar 31, 2013. The tier 1
common capital ratio was 9.41% compared with 9.24% in the prior
quarter. Moreover, Tier 1 leverage capital ratio was 9.34%, up
from 9.23% in the prior quarter.
As of Jun 30, 2013, total average deposits improved 0.6%
sequentially to $14.1 billion. Period end loans and leases
decreased modestly to $15.6 billion in the quarter.
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 #4 (Sell). However,
some Midwest banks that are worth considering include
Mercantile Bank Corp.
First Interstate Bancsystem Inc.
First Merchants Corporation
). All these 3 carry a Zacks Rank #1 (Strong Buy).