An Encore, and Sudden Exit, at TCF

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TCF Financial Corp. announced a surprise leadership change Monday, reinstalling its iconic former chief executive less than a week after reporting disappointing earnings plagued by deteriorating credit.

The Wayzata, Minn., company said William A. Cooper has returned to the CEO post after Lynn A. Nagorske's abrupt retirement Friday. Mr. Cooper, who is credited with rescuing TCF from near-collapse in 1985, made it his mission upon retaking the reins to emphasize that his company was in no such peril this time around.

Mr. Nagorske, a 22-year veteran of TCF, had been the $16.5 billion-asset company's CEO since succeeding Mr. Cooper in January 2006.

Mr. Cooper will remain TCF's chairman. He had been both the chairman and the CEO from 1985 to 2005. He said during a conference call Monday that Mr. Nagorske, a former protege of his, had worked in "a very difficult environment" over the last few years, dealing with challenges that ranged from worsening credit quality to fighting the yield curve.

"He basically expressed to me that he was burned out, that he didn't want to be fighting these battles," Mr. Cooper said.

Mr. Nagorske, 51, did not participate in the conference call, and Mr. Cooper, 65, quickly sought to quell any speculation about the abrupt change. He said investors should not be looking for significant issues related to credit quality, a sale, or other problems.

In fact, he said the banking industry's chargeoffs may have peaked.

TCF is examining the sale of trust-preferred securities, Mr. Cooper said, but there are no plans to cut the dividend or sell common stock. He also said his company could eye acquisitions in the current environment, possibly in Chicago.

"We've never had a loss quarter, and I don't think we will," he said.

Mr. Cooper, who owns roughly 4 million common shares of TCF, said he had asked the board for stock-based compensation. "I'm in a situation where I don't need a salary, frankly."

He plans to move back to Minnesota from Florida, and he said he "wouldn't be surprised" if he remained the CEO for at least five years.

In 2004, American Banker named Mr. Cooper its Innovator of the Year for his persistence over the years in pushing into the payment business controlled by the nation's biggest banking companies.

When he took over TCF in 1985, it was a mutual that was facing many issues and was weighed down by risky commercial real estate loans and an unstable investment portfolio. He fired all but one executive, keeping only the retail head.

In 2005, he was involved in a banking start-up, founding Cooper State Bank in Columbus, Ohio, along with his son, the Columbus-area real estate investor William A. Cooper Jr.

Despite the CEO's assurances, the abrupt change led some analysts to speculate Monday about whether more surprises are in store.

Sean Ryan, an analyst at Sterne, Agee & Leach Inc., said in an interview that Mr. Cooper is well regarded by TCF investors after leaving the company in "excellent condition," though the veteran banking executive will have considerable challenges.

"He can't unmake the bad loans on the books," Mr. Ryan said.

Scott Siefers, an analyst at Sandler O'Neill & Partners LP, wrote in a note to clients that Mr. Cooper's age may lead some to question the intentions behind his return.

"Investors may perceive that he will remain CEO to help steer the company to better days and then look to find a suitor," Mr. Siefers wrote. TCF's shares rose 1.5% Monday in a declining market.

Last week TCF reported earnings fell by half from the first quarter and 62% from a year earlier, to $23.7 million, or 19 cents a share, because of rising loan losses and credit costs. The results were 15 cents below the average analyst estimate, according to Thomson Reuters. The loan-loss provision jumped 110% from the first quarter and nearly fivefold from a year earlier, to $62.9 million.

Mr. Nagorske had warned during an earnings conference call that TCF likely would continue building reserves for an indefinite period. He also said its once-aggressive branch expansion would be "very modest, if any" next year. Last quarter TCF closed a dozen supermarket branches in Colorado, laying off 88 employees.

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