Regional bank holding company TCF Financial Corp. said Wednesday its second-quarter profit fell 62 percent as the number of bad loans it wrote off nearly quadrupled, and it increased the amount it set aside to cover loan losses almost fivefold.
The parent of TCF bank said net income fell to $23.7 million, or 19 cents per share, from $62.1 million, or 49 cents per share, for the second quarter of 2007. The latest quarter included a gain of $1.1 million related to the sale of securities and $5 million to reflect increased state income taxes, for a total charge of 3 cents per share.
The year-ago period included a gain of 3 cents per share on the sale of real estate and favorable income tax adjustments.
Analysts polled by Thomson Financial, on average, expected a profit of 34 cents per share. Analyst estimates typically exclude one-time gains and charges.
Net interest income, or the difference between how much it costs a bank to borrow money and how much it receives from lending money to customers, rose 10 percent to $151.6 million, from $137.4 million a year ago.
Non-interest income, or income derived from fees and other charges, fell 5 percent to $122.6 million, from $129.6 million last year.
TCF's provision for credit losses, or money set aside to cover bad loans, shot up to $62.9 million in the 2008 quarter, from $13.3 million in the second quarter of 2007. "The continuing deterioration in the housing markets and economic conditions makes these actions prudent at this time," the bank said in a statement.
Net charge-offs, or loans written off as being unpaid, rose almost fourfold, to $26.6 million, from $7 million last year. Home equity and other consumer loans charged off rose 70 percent to $15.4 million, while commercial real estate loans charged off nearly tripled to $5.7 million and commercial business charge-offs rose more than five times, to $2.3 million.
Nonperforming assets shot up 88 percent to $160.4 million, from $85.2 million a year ago.
TCF Financial operates more than 450 bank branches in Illinois, Minnesota, Michigan, Wisconsin, Indiana, Colorado and Arizona.
Analysts said the bank's huge increase in its loan loss provision accounted for missing Wall Street's expectations.
"While the magnitude of the increase was surprising, this move will strengthen TCF's balance sheet," said RBC Capital Markets analyst Jon Arfstrom, in a note to clients. "Aside from that item, fundamentals looked strong with a materially higher margin, good loan and core deposit growth, higher core fees and controlled expenses."
In morning trading, shares dipped 44 cents, or 3 percent, to $13.82.
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