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TCF Financial Q3 Earnings in Line, Loans & Deposits Up

TCF Financial Corporation 's TCB third-quarter 2015 per share of 29 cents came in line with the Zacks Consensus Estimate. Also, the bottom line remained stable with the prior-year quarter earnings.

TCF Financial Corporation - Earnings Surprise | FindTheBest

Results reflect lower revenues and higher expenses. However, on a positive note, the quarter witnessed reduced provisions for credit losses and continued rise in loans and deposits, while maintaining a strong capital position.

The company reported net income of $52.6 million, increasing slightly from the prior-year quarter.

Performance in Detail

TCF Financial reported total revenue of $317.5 million in the third quarter, reflecting a decrease of nearly 1% year over year. Also, the top line missed the Zacks Consensus Estimate of $321.0 million.

Net interest income increased slightly year over year to $205.3 million. The rise was mainly due to higher average loan and lease balances in several portfolios including auto finance, inventory finance and leasing and equipment finance, partially offset by reduced consumer real estate first mortgage lien balances. Net interest margin of 4.44% declined 20 basis points (bps) year over year due to the persistent low rate environment and higher total deposit rate.

Non-interest income came in at $112.3 million, down 3.3% year over year. The decline was primarily attributable to lower gains on sales of auto loans, consumer real estate loans along with reduced fees and service charges, reflecting consumer behavior changes, as well as higher average checking account balances per customer. These were, however, partially offset by

increase in card revenues, servicing fee income and equipment & lease financing income.

TCF Financial reported non-interest expenses of $222.3 million, up 1.2% from the prior-year quarter. The rise was due to an increase in several overheads including compensation and employee benefits, advertising and marketing and operating lease depreciation, partly offset by fall in FDIC insurance expenses and other expenses.

As of Sep 30, 2015, average deposits improved 5.4% year over year to $16.0 billion. Average loans and leases climbed 4.3% year over year to $17.0 billion in the quarter.

Credit Quality

Credit quality for TCF Financial reflected improvement in the reported quarter. Net charge-offs, as a percentage of average loans and leases, declined 43 bps year over year to 0.23% in the quarter. The decline, compared with the prior-year period, was mainly attributable to an improved credit quality in the commercial and consumer real estate portfolios.

Moreover, non-accrual loans and leases and other real estate owned fell 22.8% year over year to $264.7 million, mainly driven by the sale of troubled debt restructuring ("TDR") loans, enhanced credit quality trends, and initiatives undertaken to resolve problem loans in the commercial portfolio.

Further, provisions for credit losses were $10.0 million, down 36.3% year over year, driven by improvement in credit quality in the commercial and consumer real estate portfolios.

Capital Position

TCF Financial's capital ratios remained strong. As of Sep 30, 2015, Common equity Tier 1 capital ratio stood at 10.04%. Total risk-based capital ratio was 13.84% compared to 13.54% as of Dec 31, 2014. Tier 1 leverage capital ratio was 10.43%, up from 10.07% as of Dec 31, 2014.

Our Viewpoint

While results do not reflect a strong quarter, we believe consistent improvement in the company's credit metrics, along with steady growth in loan and deposit balances, will likely enhance TCF Financial's long-term prospects. Further, the recent 50% increase in its quarterly dividend, which marked the company's first common stock dividend raise after 2008, reflects that the company has come a long way since the crisis and strengthened its financials and is well positioned to enhance shareholders value.

However, we remain apprehensive about the expanding cost base, the persistent low rate environment and regulatory issues.

TCF Financial currently carries a Zacks Rank #3 (Hold).

Performance of Other Midwest Banks

Commerce Bancshares, Inc. CBSH reported earnings of 66 cents per share for third-quarter 2015, which considerably lagged the Zacks Consensus Estimate of 71 cents. Moreover, the bottom line was down 4.3% from the year-ago tally of 69 cents.

Associated Banc-Corp ASB delivered a positive earnings surprise in the third quarter of 2015. The company's earnings per share of 31 cents beat the Zacks Consensus Estimate of 30 cents, but remained flat year over year.

Huntington Bancshares Inc. HBAN reported third-quarter 2015 earnings per share of 18 cents, which lagged the Zacks Consensus Estimate of 20 cents. However, the bottom line remained stable year over year.

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TCF FINL CORP (TCB): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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