Why Is TCF (TCF) Down 4.4% Since Last Earnings Report?

A month has gone by since the last earnings report for TCF Financial (TCF). Shares have lost about 4.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is TCF due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

TCF Financial Q1 Earnings Beat on Higher Revenues

TCF Financial delivered a positive earnings surprise of 2.2% in first-quarter 2019. Adjusted earnings per share of 46 cents surpassed the Zacks Consensus Estimate by a penny. Further, the bottom line compares favorably with the prior-year figure of 39 cents.

The company witnessed solid top-line growth in the reported quarter. Moreover, lower provision for credit losses supported the bottom line. Also, loan and deposit balances displayed improvement. Nevertheless, rising expenses, lower non-interest income and net interest margin were headwinds.

TCF Financial reported net income of $70.5 million for the first quarter compared with $73.8 million in the year-ago quarter.

Revenues Improve, Costs Flare Up

Total revenues for the first quarter came in at $357.9 million, up nearly 1% year over year. The top line, however, missed the Zacks Consensus Estimate of $363.9 million.

Net interest income for the quarter climbed 3.2% year over year to $250.9 million. The upside stemmed from increased interest income on loans and leases held for investment, along with and debt securities available for sale. This was partially offset by rise in interest expenses.

Net interest margin of 4.56% contracted 3 basis points (bps) year over year due to higher average rates on deposits. This was partly offset by higher average yields on the variable and adjustable-rate loan portfolios.

Non-interest income came in at $107 million, down 4.6% on a year-over-year basis. This decrease primarily resulted from fall in almost all components of income, partially mitigated by higher fees and service charges, card revenues and net gains on debt securities.

TCF Financial reported non-interest expenses of $253.1 million for the March-end quarter, up 2.9% from the year-earlier quarter. The upswing primarily resulted from merger-related expenses, higher lease financing equipment depreciation, and occupancy and equipment expenses.

As of Mar 31, 2019, average deposits came in at $18.7 billion, up 1.5% from the prior quarter’s end. Average loans and leases climbed 3.4% sequentially to $19.2 billion.

Credit Quality: A Mixed Bag

Non-accrual loans and leases, and other real estate owned slipped 15.3% year over year to $121.6 million in the quarter. Further, provisions for credit losses were $10.1 million, down 11%.

However, net charge-offs, as a percentage of average loans and leases, expanded 10 bps year over year to 0.39%. The upsurge chiefly resulted from elevated net charge-offs in the commercial, inventory finance, and leasing and equipment finance portfolios.

Capital Position

As of Mar 31, 2019, Common equity Tier 1 capital ratio was 10.79% compared with 10.57% as of Mar 31, 2018. As of Mar 31, 2019 total risk-based capital ratio was 13.30% compared with 13.26% as of Mar 31, 2018. Tier 1 leverage capital ratio was 10.26% on Mar 31, 2019, down from 10.52% as of the end of March 2018.


The company expects modest margin pressure to continue throughout the year on account of auto loan portfolio run-off ($800 million to $1 billion in 2019) and redeployment of cash flow into securities and other loans, including select longer duration assets.

Deposit costs are likely to trend higher in the coming quarters primarily due to CD renewals at current market rates.

It expects second and third quarter leasing non-interest income to be more in line with the prior-year quarter figure.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, TCF has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.


Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, TCF has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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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.

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