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TCF Financial (TCF) Q1 Earnings Beat Estimates on Lower Costs

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TCF Financial Corporation reported first-quarter 2021 adjusted earnings per share of 84 cents, beating the Zacks Consensus Estimate of 78 cents. Also, the figure increased 47.4% from the prior-year quarter.

Disciplined cost management aided the bank’s quarterly performance. Also, the company witnessed growth in loans and deposits balance. Moreover, lower provisions were on the upside. However, margin pressure and lower fee income were undermining factors.

Including post-tax merger-related expenses and notable items, the company reported net income of $123.3 million or 79 cents per share compared with the $51.9 million or 33 cents recorded in the previous-year quarter.

Revenues Down, Cost Declines, Loans & Deposits Up

Total revenues came in at $513.9 million in the reported quarter, down 4.6% year over year. The top-line figure, however, outpaced the Zacks Consensus Estimate of $495 million.

Net interest income was down 4.9% year on year to $381.8 million during the first quarter. This decline resulted from decreased interest, partially mitigated by a fall in interest expense. Net interest margin of 3.45% contracted 28 basis points (bps) year on year.

Non-interest income came in at $132.1 million, down 3.6% on a year-over-year basis. Fall in fees and service charges on deposit accounts, lower net gains on sales of loans and leases and other resulted in this decrease.

TCF Financial reported non-interest expenses of $348.7 million, down 6.9% from the prior-year quarter. This decrease primarily underlines the lower occupancy and equipment costs, fall in net foreclosed real estate and repossessed assets, merger-related expenses and other expenses.

Adjusted efficiency ratio was 62.7%, up from the prior-year quarter’s 58.2%. A rise in ratio indicates fall in profitability.

As of Mar 31, 2021, total deposits increased 2.4% sequentially to $39.8 billion. Further, total loans and leases increased 5.1% to $36.2 billion during the March-end quarter.

Credit Quality: A Mixed Bag

Credit quality for TCF Financial reflects mixed credit metrics. Total non-performing assets increased significantly from $289.4 million to $710 million on a year-over-year basis. Also, non-performing assets as a percentage of total loans and leases and other real estate owned came in at 1.96%, up 116 bps year on year. The first quarter witnessed net charge-offs as a percentage of average loans and leases of 0.49% from the prior-year quarter’s 0.06%.

Nonetheless, provision for loan losses was a benefit of $20.6 million as against the provision of $96.9 million seen in the prior-year quarter.

Robust Capital Position

TCF Financial’s capital ratios remained strong. As of Mar 31, 2021, Common equity Tier 1 capital ratio was 11.06% compared with 10.44% as of Mar 31, 2020. Total risk-based capital ratio was 13.47% compared with 12.31% as of Mar 31, 2020. Tier 1 leverage capital ratio was 9.09%, down from 9.27% as of Mar 31, 2020.

Our Viewpoint

TCF Financial put up a decent performance during the January-March quarter. Continued expense management highlights the company’s cost-control initiatives. Nevertheless, reduction in revenues is a concern. Apart from this, low rates are expected to keep straining margins.

TCF Financial Corporation Price, Consensus and EPS Surprise

TCF Financial Corporation Price, Consensus and EPS Surprise

TCF Financial Corporation price-consensus-eps-surprise-chart | TCF Financial Corporation Quote

TCF Financial currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Banks

First Republic Bank (FRC - Free Report) delivered an earnings surprise of 16.2% in first-quarter 2021 on solid top-line strength. Earnings per share of $1.79 surpassed the Zacks Consensus Estimate of $1.54. Additionally, the bottom line climbed 53.1% from the year-ago quarter.

Zions Bancorporation’s (ZION - Free Report) first-quarter net earnings per share of $1.90 beat the Zacks Consensus Estimate of $1.15. Also, the bottom line marked a significant improvement from the 4 cents earned in the year-ago quarter.

Webster Financial (WBS - Free Report) recorded first-quarter 2021 adjusted earnings per share of $1.25, which topped the Zacks Consensus Estimate of 89 cents. The figure excluded noteworthy items such as charges related to strategic optimization initiatives.

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