TCF Financial Corporation(TCB) announced it has priced its public offering of $200 million aggregate principal amount of 13,114,755 shares of its common stock at a price of $15.25 per share.
TCF Financial allowed the underwriters a 30-day option to cover over-allotments, if any. The option includes purchase of an additional 1,967,213 shares of common stock at the same price for additional gross proceeds of $30 million.
The proceeds from the offering, which is expected to close on March 15, 2011, is intended to be used for general corporate purposes. Moreover, TCF Financial may use the proceeds for the repayment of its senior unsecured notes and redemption of trust preferred securities.
J.P. Morgan Securities LLC, a division of JPMorgan Chase & Co. (JPM) and Morgan Stanley (MS), are acting as joint book-running managers, while RBC Capital Markets will act as a co-manager.
As of December, 2010, TCF Financial’s debt consisted of $90 million senior unsecured notes maturing in July 2012 and $111 million of trust preferred securities. The securities will mature on August 15, 2068 and are callable beginning August 15, 2013.
TCF Financial’s cash position showed a balance of $663.9 million as of December 31, 2010, up on a yearly basis. Cash position improved mainly due to an increase in purchases of investments.
The latest capital raising initiative will help the company reduce its total debt burden to some extent. On the other side, this capital raising will help TCF Financial to enhance capital ratios and therefore pursue growth and acquisition opportunities.
Earnings Recap
In January, TCF Financial’s fourth-quarter 2010 earnings came in at 22 cents per share, a penny short of the Zacks Consensus Estimate of 23 cents. This compares unfavorably with the earnings of 26 cents in the prior quarter and favorably with 15 cents in the prior-year quarter. Decreased non-interest income, net interest margin, sluggish economic recovery and increased regulatory trouble have affected the quarter results. These negatives were offset by a fall in non-interest expenses and decline in non-performing assets.
Despite sluggish economic recovery and regulatory issues, TCF Financial reported positive net income. Further, many banks have suspended their foreclosures due to paperwork flaws. TCF Financial having no such issues continues to process foreclosures, which acts as a positive catalyst for the company.
We expect TCF Financial to maintain its superior position in the market based on its positive approach to market conditions. However, the regulatory reform and low interest rate environment might affect the company’s near-term results to some extent. Further, the uncertainty related to Durbin Amendment could act as a negative catalyst for the company.
TCF Financial currently retains its Zacks #4 rank, which translates into a short-term ‘Sell’ rating. Considering the fundamentals, we are maintaining our ‘Underperform’ recommendation on the stock.
JPMORGAN CHASE (JPM): Free Stock Analysis Report
MORGAN STANLEY (MS): Free Stock Analysis Report
TCF FINL CORP (TCB): Free Stock Analysis Report
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