If you're a hard-core Seth Jayson/Stephen Simpson-esque value pervert, you can actually come to look at a bad quarter or two as good news. After all, it shakes out the weak hands and drives the stock price to an even better level. Of course, the trick in doing this is separating out the little potholes that jostle you from the sinkholes that'll swallow your car.
In the case of Minnesota-based TCF Financial (NYSE: TCB), this was a tough quarter in what is a tough overall environment for bank stocks. Net income was down about 3%, and while the earnings per share actually beat the average estimate, nobody seems to be going out of their way to show love for this mid-sized bank.
I'll certainly grant that the income numbers were nothing to get excited about. Net interest income was up just 2%, as the company once again saw its cost of funds outstrip what it could charge for loans. That's reflected clearly in the net interest margin, which dropped to 4.31% from 4.56% a year ago and 4.43% last quarter. That said, 4.31% isn't exactly bad -- of the other banks operating in the upper-Midwest that have reported so far, only Wells Fargo (NYSE: WFC) did better. Both Motley Fool Income Investor pick U.S. Bancorp (NYSE: USB) and Marshall & Ilsley (NYSE: MI) fared worse, although the difference in size with those first two makes comparisons a little bit unfair.
Non-interest income was also no great shakes -- dropping more than 5%. Some of the trouble was a tough year-ago comparison in leasing (where business was particularly strong last year), but service revenue constitutes the majority of this category, and that was anemic, too (down almost 1%).
Other metrics were so-so. Credit quality remains solid, but average loan balances grew just over 9%, while deposits grew 13%. Likewise, although both return on assets and equity dropped both annually and sequentially, they remain at pretty impressive levels.
I readily acknowledge that TCF is facing some challenges. Deposit competition is intense, expenses are somewhat high, and the company is gradually moving away from its original core strategy of targeting less affluent customers. Still, I think the company deserves the benefit of the doubt, and today's price looks interesting enough to merit a closer look.
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
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