Lower Loan Losses Boost TCF

Improved credit quality pushed up quarterly profit at TCF Financial Corp. (TCB) in Wayzata, Minn., despite declines in interest and fee revenue.

The $18.3 billion-asset company reported a second-quarter profit of $34.1 million, 8% higher than the second quarter of 2012. Per-share earnings were 21 cents, meeting the expectations of analysts polled by Bloomberg. TCF announced the results Tuesday.

Net interest income rose by 2%, to $202 million, as lower borrowing and deposit costs offset shrinking loan revenue. Net interest margin tightened by 14 basis points, to 4.72%.

TCF's reintroduction last year of free checking contributed to a 12% decline in noninterest income, to $99.8 million. Fee and service charge revenue dropped 14%, to $41.6 million, and card and ATM revenue also slid. Increased loan sales partly made up for the decline in deposit-related fee income.

Provision for loan losses fell by 40%, to $32.6 million, and net chargeoffs dropped 38%, to $27.7 million. The company attributed both declines largely to lower losses on consumer real estate and commercial loans.

Noninterest expenses rose 3%, to $208.5 million, led by an 8% rise in compensation costs, to $105.5 million.