TCF Posts First Quarterly Loss Since the Mid '90s

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  • Continuing in its quest to reinvent itself as a specialty-finance lender, TCF Financial Corp. of Wayzata, Minn., has launched a new division that will specialize in asset-based and cash-flow lending to smaller middle-market companies across the U.S.
    March 20

TCF Financial (TCB) reported its first quarterly loss in 17 years Thursday after it restructured its balance sheet to eliminate high-cost debt.

The Wayzata, Minn., parent of TCF Bank lost $282.9 million in the quarter, compared to a profit of $30.3 million in the same period last year and $16.4 million in last year's fourth quarter. The company attributed the loss to a $295.8 million after-tax charge resulting from the previously announced repositioning of Federal Home Loan Bank borrowings and the sale of certain securities.

Chairman and Chief Executive William A. Cooper said in news release that while the restructuring resulted in a massive loss "it was absolutely the right thing to do. Through the elimination of much of the high-cost, long-term debt and the sale of lower-yielding, long-term mortgage-backed securities that were significantly limiting our net interest margin, we increased the transparency for the market to see the true franchise value of TCF in future periods."

Outside of the restructuring charge, TCF enjoyed a relatively strong quarter. Total loans and leases increased 7.5% from the prior quarter, to $15.2 billion, due primarily to growth in its specialty lending operations. Total loans in its inventory finance unit increased 162% from Dec. 31, to $1.6 billion, and loans in its newly acquired auto finance unit increased by more than 3,700%, to $139 million.

The surge of new loans helped boost the net interest margin by eight basis points year over year and 22 basis points from the prior quarter, to 4.14%.

Fees from the specialty finance businesses also partially offset sharp decline in banking fees stemming from new caps on interchange fees and restrictions on how banks cover overdrafts. Overall, though, total fee income was down 22% from the prior year, to $88.7 million.

TCF's shares were trading at $10.99 late Thursday, down a penny from Wednesday's closing price.

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