Incoming Chief Outlines TCF's Plan to Stay Relevant in New Era

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When Craig Dahl becomes chief executive of TCF Financial next year, he will take the reins of a company that he has already helped reinvent.

The Wayzata, Minn., company was mostly known for decades as a midsize lender that focused on local markets and generating noninterest income. When a wave of regulation cut into TCF's fees, the company shifted its business model, expanding commercial lending on a national scale.

Dahl, 61, played a key role in that transformation. He joined the $20 billion-asset company 16 years ago as head of what was then a "very little" equipment leasing unit — a business that now houses TCF's largest portfolio, with $3.8 billion in assets.

The expansion has paid off so far. More than half of TCF's spread income comes from niche industries, such as auto lending and asset-based lending. Gains from loan sales and servicing have also offset lower fees from debit cards and deposit charges.

All of those business lines "have historically been [local] bank models that have been broken up with a more … national view," Dahl, TCF's president, said in a wide-ranging interview Tuesday from the company's headquarters.

"What we do today has traditionally been done by banks," Dahl added. "Think of your hometown. Who financed your car dealer? Your local bank did … When your parents bought a fridge, who was financing the local appliance store?"

Dahl — a former women's hockey coach at Princeton University — was appointed in August to succeed veteran banker Bill Cooper, who will retire at the end of December. In recent months, the executives have been laying the groundwork for a smooth transition.

Here is an edited transcript.

During TCF's recent investor day, Cooper introduced you as "Coach." Tell me more about your nickname.

CRAIG DAHL: I have a sports background. I coached a lot as well, and I think that I probably copied some of the presentation items you use in coaching. … One of the things I always try to make sure of is that I'm not micro-managing, and that I'm not trying to do [an employee's] job. I'm trying to help them in a way that allows them to do their job.

A growing share of TCF's revenue in recent years has come from specialty finance and national lending. Will that continue?

We've been bringing businesses from basically a startup to a more mature state. So we've gotten more than our share of growth from those. For example, in the first year of auto [financing], every auto loan I do is purely incremental because we have zero. Then the next year, every second auto loan was incremental. And now we've been at it for a while, so it has a different growth plane that it did in the past.

So will we continue to get more income out of the national lending business? Yes, I think we will, because we'll get growth in businesses we're targeting to grow. And we'll improve our scale in those that have been providing growth, but now they're going to catch up on the earnings stream.

TCF has performed poorly on consumer satisfaction surveys, including scoring last in JD Power's 2015 ranking of Midwestern banks. Are there any plans to address that?

I think there was a lot of what I'd say noise that came out of our move to a different structure on our checking account. There was still a lot of disruption in that. Everything we've done since the middle of 2012 we've done to make the customer experience better … and so I think that now, with our new brand, there's a renewed energy with branch banking team members.

In TCF's first quarter earnings call, Cooper mentioned plans for "significant" organizational changes. Can you share any details about those changes?

We're close on that. It's not ready for publication yet, but we're very close. It's interesting to note that I've managed all of the lending businesses, so I have good working relations with all of those players.

I'm going to put in place an organization that will be productive immediately on Jan. 2. It will include the same names, but the roles will be specific for what I want and need them to do.

When will those changes be announced?

They'll be announced probably before year end, but Bill is here until the end of the year, and I have a lot of respect for his sort of mentorship and leadership. So I'll make sure it is a smooth transition.

What will TCF look like in five years?

I think the platforms we have will still be our leading platforms. How we deliver those services through those platforms will be different. There's no question that we have to make sure we're moving forward on that. We've hired a new [chief information officer] who started at the end of March, so he's still in his first year. He's learning a lot, retooling the team, prioritizing. He's brought a real passion for prioritization. … So how will we look? I think we'll have a more robust digital platform certainly in five years.

I don't know if you can try to predict where the branches will be. They'll be smaller and have fewer people. They'll be more interactive.

Physically smaller or fewer locations?

Probably both. We have a great branch prioritization exercise that's been going on for over a year. We're talking about the micro markets where we're going to want to be. Where are the people going to be tomorrow, not today? What are their needs going to be?

Has Bill Cooper offered you any advice?

Yeah. He said this is the most fun you'll ever have … but he also said you're all alone. So you've just got to deal with that. There's only one CEO.

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