TCF Misses 1Q Estimates on Revenue Challenges
TCF Financial took $44 million in charges to rid itself of mortgages made before the housing collapse. A distressed-asset investor purchased more than $400 million in loans from the company, and another pool of bad mortgages may be marked for sale soon.
Banks have made progress cutting their exposure to risky home equity lines of credit, ahead of a key 10-year threshold when billions of dollars of them will reset to higher monthly payments. But there are some prominent exceptions, especially among regional banks.
TCF Financial in Wayzata, Minn., reported lower profits because of a decline in fee income and flat performance in its loan book.
The $20 billion-asset company earned $34.9 million first quarter, down 12% from a year earlier. Earnings per share were 21 cents, falling 5 cents short of an estimate of analysts polled by Bloomberg.
Interest income remained unchanged, despite strong growth in auto loans and inventory financing. Net interest income edged up 1%, to $203.4 million, while total loans grew 4%, to $17.1 billion. The net interest margin shrank 16 basis points, to 4.5%, because of lower yields.
Credit quality improved, following the sale of financial crisis-era mortgages in the fourth quarter. The company's provision for problem loans declined 12%, to $12.8 million.
Fee income fell 3%, to $100.6 million. The company attributed the decline to "customer behavior changes," as well as higher average checking account balances.
Noninterest expenses increased 4%, to $226.8 million, from a combination of lease depreciation and advertising costs.
In the coming year, TCF is planning "significant" organizational changes, said William Cooper, the company's chairman and chief executive, during a conference call Tuesday morning.
The company last month named Craig Dahl as president. Dahl, who had been a vice chairman, is viewed as a possible successor to Cooper, who has said he plans to step down as CEO before the end of the year.
The planned changes are not part of a targeted cost-cutting effort, Cooper said. "I would say they are more organizational, in terms of Craig's perception of the way he'd like to see things organized," he said.