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6 Banks Actually Growing Their Banking Business

3. TCF Financial

Shares of TCF Financial (TCB - Get Report) of Wayzata, Minn., closed at $11.30 Tuesday, returning 10% year-to-date, following a 30% decline during 2011.

Based on a five-cent quarterly payout, the shares have a dividend yield of 1.77%.

TCF reported first-quarter net interest income of $180.2 million, increasing 4% from the previous quarter and 3.5% year-over-year. The first-quarter net interest margin was 4.11%, according to HighlineFI, increasing from 3.94% in the second quarter, and 4.02% in the first quarter of 2011.

The company on March 13 announced it would prepay $3.6 billion in wholesale borrowings and sell $1.9 billion in mortgage-backed securities, as part of its strategy of moving away from longer-term residential and commercial real estate loans and MBS investments, to a focus on "originating high-yielding, low-risk, secured loans and leases funded by a low-cost, core deposit base," according to CEO William Cooper.

TCF said it had "replaced $2.1 billion of 4 percent weighted average fixed-rate, Federal Home Loan Bank advances with a mix of floating and fixed-rate borrowings with a current rate of .5 percent," while terminating "$1.5 billion of 4 percent weighted average fixed-rate repurchase agreement borrowings." The company expects its net interest income to improve by $74 million, annualized, and for its net interest margin to increase by 96 basis points on an annual basis.

The balance sheet repositioning led to one-time charges totaling $295.8 million, leading to a first-quarter net loss of $282.9 million, or $1.78 a share, compared to fourth-quarter earnings of $16.4 million, or 10 cents a share, and first-quarter 2011 earnings of $30.3 million, or 21 cents a share.

On a positive note, TCF reported very strong sequential growth in average loans during the first quarter of 7%, to $15.2 billion, primarily through its inventory finance business.

The shares trade for 1.4 times tangible book value, according to HighlineFI, and for 10 times the consensus 2013 EPS estimate of $1.15. The consensus 2012 EPS estimate is for a loss of $1.20.

Deutsche Bank analyst Matt O'Connor last Thursday reiterated his "Buy" rating for TCF Financial, with a $13 price target, saying that "from here, EPS should accelerate nicely given strong loan growth, a full quarter's impact of the balance sheet restructuring and an eventual decline in credit costs."

Interested in more on TCF Financial? See TheStreet Ratings' report card for this stock.
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