On July 15, TCF Financial Corporation’s (TCB) second-quarter 2010 earnings came in at 32 cents per share, 5 cents ahead of the Zacks Consensus Estimate of 27 cents. This also compares favorably with the earnings of 8 cents in the prior-year quarter.
Increased revenue and decreased expenses, including a decrease in credit costs, were primarily responsible for the better-than-expected results. Though slow growth and high unemployment has affected the economy badly, TCF’s credit quality remains stable.
Net income came in at $45.0 million, up 91.2% from $23.5 million in the year-ago quarter. Total revenue was $312.4 million, up 5.2% from $296.8 million year over year.
Behind the Headlines
Net interest income was $176.5 million, up 12.8% from $156.5 million in the year-ago quarter. Decreased rates paid on deposits and growth in loans and leases led to increase in income, which was partially offset by increased non-accrual and restructured loans and leases.
Decreased rates paid on deposits attributed for net interest margin of 4.18%, up 38 basis points year over year. Non-interest income came in at $135.9 million, down 3.2% from $140.4 million in the prior-year quarter. Non-interest expense was $189.1 million, down 3.8% from $196.5 million in the prior-year quarter. The decrease in non-interest income reflects lower core operating expenses, lower compensation and employee benefits costs, partially offset by increased foreclosed real estate and repossessed asset expenses.
Evaluation of Credit Quality
Overall credit costs declined for the quarter. Provisions for credit losses decreased 2.9% sequentially and 20.8% year over year to $49.0 million. Decrease in reserves for restructured consumer real estate loans and lower levels of provision in excess of net charge-offs in the consumer real estate portfolio as the rate of increase in losses slowed attributed to significant year-over-year decrease.
Net loan and lease charge-offs were $47.8 million, down 3.7% from $49.7 million year over year. The decrease was primarily due to decrease in commercial real estate net charge-offs, partially offset by increase in consumer real estate net charge-offs. Allowance for loan and lease losses was $251.6 million, up 30.0% from $193.4 million year over year. Non-accrual loans and leases increased 37.6% to $330.2 million year over year.
Capital Ratios
At the end of the reported quarter, the company’s total risk-based capital was $1.7 billion, or 12.71% of risk-weighted assets, up from $1.5 billion, or 11.12% of risk-weighted assets at the end of 2009. Tier 1 common capital was $1.3 billion, or 9.38% of risk-weighted assets, increased from $1.0 billion, or 7.65% of risk-weighted assets at the end of 2009. Due to the current economic environment including high unemployment and underemployment, it is expected that restructured loans will continue to increase throughout 2010.
TCF has reported positive results and we believe it will continue to maintain the position in the next few quartets based on the company’s fundamentals and principles. Major competitors of TCF, Wells Fargo & Company (WFC) and US Bancorp (USB), will be releasing their second quarter earnings on July 21, 2010.
Read the full analyst report on “TCB”
Read the full analyst report on “WFC”
Read the full analyst report on “USB”
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