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Why Is TCF Financial (TCF) Down 6.4% Since Last Earnings Report?

Zacks Equity Research

A month has gone by since the last earnings report for TCF Financial (TCF). Shares have lost about 6.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is TCF Financial due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

TCF Financial Q4 Earnings Impressive, Revenues Improve

TCF Financial reported fourth-quarter 2019 adjusted earnings per share of $1.04, beating the Zacks Consensus Estimate as well as the prior-quarter figure of 98 cents.

Top-line strength and disciplined cost management drove the results. The company also witnessed continued rise in loans, while maintaining a solid capital position during the quarter. Furthermore, lower provisions were a positive factor. However, margin pressure and lower deposits were on the downside.

Including post-tax merger-related expenses and notable items, the company reported net income of $112.4 million or 72 cents compared with the $22.1 million or 15 cents recorded in the previous quarter.

The company’s prior quarter (three-month period ended Sep 30, 2019) results reflect Legacy TCF financial results for the period before Aug 1, 2019, and the post-merger combined TCF financial results on and after Aug 1, 2019.

Revenues Climb, Cost Declines

Total revenues came in at $566.8 million in the reported quarter, up 21.6% sequentially. Moreover, the top line surpassed the Zacks Consensus Estimate of $557.1 million.

Net interest income was up 9.9% sequentially to $408.8 million. This upswing can be mainly attributed to increased interest income on loans and leases, along with loans held for sale, partially mitigated by rise in total interest expense. NIM of 3.89% contracted 25 basis points (bps) sequentially.

Non-interest income came in at $158.1 million, up 67.7% on a sequential basis. Rise in almost all components of income mainly led to this increase, partly offset by lower net gains on investment securities.

TCF Financial reported non-interest expenses of $416.6 million, down 2.1% from the third quarter. This decrease primarily reflects lower merger-related expenses, partly mitigated by higher compensation and employee benefits, occupancy and equipment along with other expenses.

As of Dec 31, 2019, total deposits declined 2.3% sequentially to $34.5 billion. Yet, net loans and leases climbed 3% to $34.4 billion in the December-ended quarter.

Credit Quality: A Marked Improvement

Credit quality for TCF Financial reflected improved credit metrics. Non-accrual loans and leases, and other real estate owned slipped 2.6% sequentially to $203.9 million. Provisions for credit losses were $14.4 million, down 47% from the prior quarter.

Net charge-offs, as a percentage of average loans and leases, contracted 32 bps year over year to 0.07%. Non-performing assets as a percentage of total loans and leases and other real estate owned came in at 0.59%, down 3 bps sequentially.

Robust Capital Position

TCF Financial’s capital ratios remained strong. As of Dec 31, 2019, Common equity Tier 1 capital ratio was 10.99% compared with 10.88% as of Sep 30, 2019. Total risk-based capital ratio was 12.71% compared with 12.63% as of Sep 30, 2019. Tier 1 leverage capital ratio was 9.49%, down from 11.16% as of Sep 30, 2019.


The company remains optimistic about loan growth opportunities in 2020 and expects full-year growth in the mid- to high single-digit range.

Management expects deposit costs to decline in 2020 as it remains active in pricing down certain deposits and maturing CDs as market rates continue to move lower.

Net interest income is expected to be lower in first-quarter 2020 on account of seasonality. However, it is anticipated to grow in the second quarter. Reported NIM (excluding purchase account accretions) is expected to expand 21-25 bps in the first-quarter 2020.

Non-interest income is expected to decline in first-quarter 2020 due to seasonal fall in leasing fee revenues.

The company expects expenses to fall to about $321 million by fourth-quarter 2020.

Effective tax rate is expected between 21% and 23% for 2020, excluding any discrete tax items.

Allowance for credit losses is expected to increase between $200 million and $225 million as a result of CECL, with the majority of the increase related to acquired loans, which includes the Chemical portfolio.

Common equity Tier 1 capital ratio (fully-phased in) is expected to decline 40-50 bps from the impact of CECL. It expects to maintain a payout ratio of between 30% and 40%.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -5.62% due to these changes.

VGM Scores

Currently, TCF Financial has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.


Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, TCF Financial has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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