TCF Financial Corporation (TCB)

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TCF Financial (TCB)

Q1 2013 Earnings Call

April 19, 2013 9:00 am ET


James E. Korstange - Executive Officer

William A. Cooper - Chairman, Chief Executive Officer and Member of Executive Committee

Michael Scott Jones - Chief Financial Officer and Executive Vice President

Craig R. Dahl - Vice Chairman and Executive Vice President of Lending

Thomas F. Jasper - Vice Chairman and Executive Vice President of Funding, Operations & Finance


Jon G. Arfstrom - RBC Capital Markets, LLC, Research Division

R. Scott Siefers - Sandler O'Neill + Partners, L.P., Research Division

Christopher McGratty - Keefe, Bruyette, & Woods, Inc., Research Division

Erika Penala - BofA Merrill Lynch, Research Division

Preeti S. Dixit - JP Morgan Chase & Co, Research Division

Lana Chan - BMO Capital Markets U.S.

Jessica Ribner - FBR Capital Markets & Co., Research Division

David J. Long - Raymond James & Associates, Inc., Research Division

Peyton N. Green - Sterne Agee & Leach Inc., Research Division

Andrew Marquardt - Evercore Partners Inc., Research Division



Good morning, and welcome to TCF First Quarter Earnings Conference Call. My name is Sarah, and I'll be your conference operator today. [Operator Instructions] At this time, I would like to introduce Mr. Jason Korstange, Director of TCF Corporate Communications, to begin the conference call.

James E. Korstange

Good morning. Mr. William Cooper, Chairman and CEO, will host this conference. Joining Mr. Cooper will be Mr. Barry Winslow, Vice Chairman of Corporate Development; Mr. Tom Jasper, Vice Chairman of Funding, Operations and Finance; Mr. Craig Dahl, Vice Chairman of Lending; Mr. Mike Jones, Chief Financial Officer; and Mr. Earl Stratton, Chief Operations Officer.

During this presentation, we may make projections and other forward-looking statements regarding future events or the future financial performance of the company. We caution you that such statements are predictions and that actual events or results may differ materially. Please see the forward-looking statement disclosure contained in our 2013 first quarter earnings release for more information about risks and uncertainties which may affect us. Information we will provide today is accurate as of March 31, 2013, and we will undertake no duty to update the information.

During our remarks today, we will be referencing a slide presentation that is available on our Investor Relations section of TCF's website,

On today's call, Mr. Cooper will begin with first quarter highlights; Mike Jones will discuss credit and expenses; Craig Dahl will then provide an overview of lending; Tom Jasper will review deposits, fee generations and capital; Mr. Cooper will wrap up with a summary; and we will then open up for questions.

I will now turn the conference call over to TCF Chairman and CEO, William Cooper.

William A. Cooper

Thank you, Jason. First of all, I'd like to just give our condolences to the people of Boston for the terror they had to deal with. Makes all of this somewhat -- sound somewhat unimportant, but life does go on.

TCF reported income of $25.5 million for the quarter. It is compared to a loss last year of $308 million, which included a restructuring charge, if you all recall, of some $295 million.

Earnings per share were $0.16. That would compare to a core earnings of $0.08 last year, up 100% from prior year, before the balance sheet restructuring charge.

The net interest margin is 4.72%, up 58 basis points from the first quarter last year, largely reflects the benefit that we got from the restructuring, as well as the growth of strong margin assets.

Our pre-provision profit of $87.7 million is up 24% from last year, which shows a very strong improvement in core earnings.

Provision for credit loss is at $38 million. It's down 20% -- 21% from last year, showing what I will talk about more in a few minutes, a consistent improvement in our credit.

Over 60-day accruing delinquent loans decreased by $15.5 million; that's a 16% decrease. Nonaccrual loans and leases and other real estate owned decreased $61 million, which is a 13% decrease from a year ago. All -- those are all leading edges of credit showing consistent improvement.

Average loans and leases increased $792 million; that's a 5.5% increase from a year ago. And deposits increased $1.8 billion, which is a 14.5% increase from a year ago. All very core strong improvements.

Our revenue at $292 million was about flat with previous quarters. The revenue was impacted by the somewhat seasonal and lumpy nature of our fee income in our equipment finance area. It tends to go up and down quarter-by-quarter. There doesn't appear to be any real trend in that big change, and we would expect, on an annual basis, to see that number be more normalized. Seasonality of deposit account fees that the first quarter is usually the weakest quarter. But also, there's been a significant decrease in the number of transactions per account, as people appear to have cut back on their spending as a result of the fiscal crisis, the higher tax rates or what. We're not really sure what's caused it. We've seen it in our -- performance of our retailers as well, but there is something going on there in the first quarter relative to the buying transactions. And from a positive point of view, the sale of our consumer real estate loans and auto loans, which are reoccurring transactions that contribute to fee income.

The net interest margin was impacted by, as happening in all banks is the continuing very low interest rates, which is -- puts a margin compression on loans, as loans reprice, new loans come in at lower rates. And we had a higher amount of liquidity at the end of the quarter than we normally had, which has some impact on that number as well.

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