Higher yields, equipment finance fees boost TCF's 3Q earnings

Register now

Higher loan yields and fee income from equipment finance boosted third-quarter profits at TCF Financial as the Wayzata, Minn., company continues to wind down its auto loan portfolio.

Net income for the $22.9 billion-asset TCF increased 42% to $86.2 million in the third quarter from the year-ago period. Earnings per share totaled 51 cents and were 3 cents higher than the mean estimate of analysts polled by FactSet Research Systems.

"We produced strong revenue growth with disciplined expense management while continuing to lower the risk profile of the company,” Chairman and CEO Craig Dahl said in a press release. “Credit trends remained stable, the auto finance portfolio run-off performed as expected and our mix of interest-earning assets improved as we continued to shift toward increasingly more capital efficient assets.”

Revenue rose 6.5% year over year to $365.6 million. Net interest income increased 6.4% to $249.1 million, and the net interest margin widened 5 basis points to 4.66%.

Noninterest income rose 6.6% to $116.4 million. Rising fee income from TCF’s leasing and equipment finance business helped to offset declining servicing fees resulting from its decision to exit the auto finance business.

At $2.3 billion, TCF’s auto finance portfolio has declined by about 30% from the third quarter last year. TCF also increased its commercial lending 7% to $3.7 billion and grew inventory finance by about 12% to $2.9 billion. Total loans declined 3% to $18.4 billion.

Deposits increased 2% to $18.5 billion.

Noninterest expenses increased 4.8% to $246.4 million, driven mainly by a 7% increase in employee compensation and benefits, which totaled $123.1 million.

TCF’s provision for credit losses was $2.3 million in the third quarter, or about 84% lower than it was a year ago. That was due to both the run off of its auto portfolio, as well as a $6.6 million recovery on previous charge-offs in consumer real estate.

Net charge-offs declined 3 basis points to 0.15%, and nonperforming assets declined 25% to $109.4 million, mostly because TCF sold off $34.7 million of nonaccrual consumer real estate loans in the quarter.

For reprint and licensing requests for this article, click here.