Lenders of merged Chemical-TCF will ‘hit the ground running,’ CEO-to-be vows

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A certain other merger of equals (BB&T-SunTrust) is dominating news coverage lately, but TCF Financial's earnings report Monday gave the bank a chance to get its deal with Chemical Financial back on the collective radar.

Chemical-TCF is still the second-largest bank M&A agreement announced this year, and TCF executives said it is proceeding according to schedule.

The two companies have already settled on the brand, headquarters city, regulators and executive leadership team for the combined institution.

And as far as prospects for loan growth? It should be able to jump-start lending from day one, TCF Chairman and CEO Craig Dahl said.

“Our objective is going to be to hit the ground running from the merger point and to have loan growth immediately upon the consolidation of the company,” said Dahl, who would be president and CEO of the new company. “We're not going to be taking sales teams away from their customers. We're not going to be changing bankers' territories. Those kinds of things are not going to be happening in our deal.”

TCF, in Wayzata, Minn., and Chemical Financial, in Detroit, announced in January that they had agreed to a merger of equals to form a $45 billion-asset institution with more than 500 branches across nine states. Under the terms of the deal, TCF would merge into Chemical and the new company would be based in Detroit and operate under the TCF name.

Last month the two companies announced the leadership slate for the combined bank. The merger is expected to be completed late in the third quarter or early in the fourth, TCF said Monday, repeating earlier forecasts.

On Monday’s earnings call with analysts, TCF’s leaders reiterated the progress made toward closing the deal. They also emphasized that they expect limited disruption and branch closings associated with the merger, as the two companies have very little overlap between their markets.

“One of the really unique benefits of this deal is that we operate in largely adjacent markets with slightly different business models and product sets that allows us to truly be complementary to each other,” Dahl said.

First quarter net income for the $24.4 billion-asset TCF was $70.5 million, down 4.4% from the year-ago quarter. Earnings per share of 42 cents came in 3 cents lower than the mean estimate of analysts surveyed by FactSet Research Systems.

Net interest income increased 3.2% to $250.9 million, but the net interest margin narrowed 3 basis points to 4.56%. Though TCF benefited from higher average yields and balances on its variable-rate loans, rising deposit costs and a seasonally higher balance of fixed-rate consumer real estate loans compressed the net interest margin, the company said.

Average loans and leases declined slightly on a year-over-year basis to $19.2 billion.

Without the continued runoff of its auto finance portfolio, however, loans and leases would have risen 6.8% from last year, as the company grew commercial lending and inventory finance, TCF said.

Average deposits increased 2.4% to $18.7 billion.

Noninterest income declined 4.6% to $107 million, led by a decrease in servicing fee income associated with the rundown of its auto loan portfolio.

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