Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

TCF Financial Corporation (TCB): Should We Follow the CEO Sale of This Banking Stock?

TCF Financial Corporation (NYSE:TCB)Several days ago, William Allen Copper, Chairman and CEO of TCF Financial Corporation (NYSE:TCB), sold around 500,000 shares of the company at an average price of $15 per share, with the total transaction worth $7.5 million. $15 a share price is just 2% lower than the company’s 52-week high. Should investors follow his move to sell the stock? Let’s find out.

Most of TCF’s loan is for real estate

TCF Financial Corporation (NYSE:TCB), incorporated in 1987, is a national bank holding company, providing both retail and commercial banking products in the U.S. It operates in three main business segments: Lending, Funding and Support Services. Most of its revenue, $981.23 million, or 71.4% of the total 2012 revenue, was generated from the Lending segment. The Funding segment ranked second, with $380.76 million in revenue, while the revenue of the Support Services segment was only $13 million. Most of its deposits, $11.76 billion, or 83.7% of total deposits, were checking, savings and money market deposits, which were considered to be low-cost funds for the bank, while the certificates of deposit were nearly $2.3 billion.

TCF Financial Corporation (NYSE:TCB) loans mostly to the consumer real estate field, with total outstanding loans of more than $6.67 billion. The commercial loan ranked second with $3.4 billion in total loans outstanding. In addition, TCF Financial Corporation (NYSE:TCB) also does leasing and equipment financing, with an outstanding amount of $3.2 billion in 2012.

What makes me attracted to the company is its high net interest margin in the past five years. Since 2008, TCF Financial Corporation (NYSE:TCB)’s net interest margin has stayed in the range of 3.87%-4.65%. In 2012, its net interest margin was 4.65%. However, TCF Financial Corporation (NYSE:TCB) booked a loss of $218.5 million, or a loss of $1.37 per share, mainly due to the $550.74 million in loss on termination of debt.

In the period of 2003-2007, TCF Financial Corporation (NYSE:TCB)’s loan loss reserve ratio was quite low, decreasing from 0.89% to 0.65%. However, since 2008, TCF seems to have a more conservative estimate for the loan default, bringing up the loan loss reserve ratio in the range of 1.67% to 2.88%. In 2012, its loan loss reserve accounted for 1.73% of its gross loan. At $14.50 per share, TCF is worth more than $2.3 billion on the market. The market values TCF Financial Corporation (NYSE:TCB) at 12.9 times its forward earnings and 1.5 times its book value.

Associated Banc Corp (NASDAQ:ASBC) with impressive first quarter earnings results

Compared to its peers Associated Banc Corp (NASDAQ:ASBC) and U.S. Bancorp (NYSE:USB), TCF Financial Corporation (NYSE:TCB) is the smallest company among the three. Associated Banc Corp (NASDAQ:ASBC) is trading at $14.80 per share, with a total market cap of nearly $2.5 billion. The market values this bank at 14.1 times its forward earnings and only 86% of its book value. What I like about Associated Banc Corp (NASDAQ:ASBC) is its heavy lending to commercial and business lending, accounting for 38% of its total loans, while the commercial real estate lending, including construction, represented 23% of the total loans. Residential mortgage loans ranked third, accounting for 17% of the total loans.

Recently, Associated Banc Corp (NASDAQ:ASBC) reported impressive earnings results for the first quarter of 2013. Its total interest income decreased 2.9% to $175.35 million, but because of the lower interest expense, its net interest income experienced a 1.9% growth to $157.65 million. Its net income came in at $47.4 million, or $0.27 EPS, 11.2% higher than the net income in the first quarter last year. Its net interest margin was a bit lower than that of TCF at 3.17%. Its loan loss reserve ratio is higher than that of  TCF Financial Corporation (NYSE:TCB). In 2012, the loan loss reserve represented around 1.9% of the gross loan.