Magazine article American Banker

1Q Earnings: Margin Slippage Hurts Results at TCF in Minnesota

Magazine article American Banker

1Q Earnings: Margin Slippage Hurts Results at TCF in Minnesota

Article excerpt

The inverted yield curve claimed another victim Tuesday as TCF Financial Corp. reported weaker-than-expected first-quarter results.

The $14.9 billion-asset Wayzata, Minn., banking company said its net interest margin slipped 25 basis points, to 4%, from the year earlier. It was off seven basis points from the fourth quarter.

"Like other financial institutions, [TCF was] negatively impacted by the inverted yield curve and the slow housing markets," Lynn A. Nagorske, the chief executive, said in a statement.

Operating per-share profit of 42 cents fell two cents short of the average analyst estimate, according to Thomson Financial.

On the basis of generally accepted accounting principles, net income was $82.7 million, up 42% from a year earlier. However, the profit included about $40 million in one-time gains from branch sales and a tax settlement.

Noninterest income, excluding the sale of branches, was $112 million, down 2% from a year earlier and 5.6% from the fourth quarter. Noninterest expense totaled $164.2 million, up 2.4% from a year earlier but down just a basis point from the fourth quarter.

Average loans totaled $11.3 billion, an increase of 1.3% from the fourth quarter. Credit quality deteriorated in the period; nonperforming assets were $82.3 million, or 0.55% of total assets, up from $65.6 million, or 0.45%, in the preceding quarter.

TCF attributed the spike to a $13.8 million commercial real estate credit in Minnesota that is no longer performing. It said it is "comfortable" with a reserve level of 0.53% of assets, up one basis point from the fourth quarter.

Lana Chan, an analyst at BMO Capital Markets, cited credit quality as a concern in an interview Tuesday; TCF's loan-loss reserves are a bit lower than its peers', she said.

Ms. Chan mentioned expense control as a positive. …

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