What's behind the leadership shake-up at TCF
The coronavirus pandemic is leaving its mark on TCF Financial by spurring a CEO change and prompting the Detroit company’s new leaders to take a fresh look at expenses.
The $48 billion-asset TCF may be moving ahead under its own brand, but its top two posts are now held by former executives of Chemical Financial, the other company involved in the $3.6 billion merger that closed last year.
David Provost, Chemical’s former CEO, has succeeded Craig Dahl as the company’s chief. Tom Shafer, who was Chemical’s vice chairman, will run TCF National Bank and become the public face of the company.
Provost and Shafer, who also worked at Talmer Bancorp when it was sold to Chemical in 2016, will spend the next two months reviewing ways to add revenue, including an expansion of commercial lending around Minneapolis and Chicago, and cut costs.
A review of the branch network, which includes more than 500 locations, is part of the process.
But don’t expect the executives to stray drastically from the existing strategy at TCF, Shafer said in an interview Tuesday.
“With changes in the COVID economy, we think it’s important to make sure the organization is balanced between revenue and expenses for the economy we see today,” Shafer said.
The merger integration and subsequent pandemic seemed to take a toll on Dahl, who pointed to the demands of his job and a distaste for working at home as reasons for abruptly stepping aside.
“I’ve been involved in this seven days a week for two years,” Dahl said during a conference call to discuss quarterly results.
“There isn’t really any time that would be better than the others” to retire, Dahl added. Working from home “doesn’t necessarily play to my strengths, which is more in the markets, in the businesses and running town halls. I’ve had significant family considerations as well. It just seemed like the right time.”
The timing of Dahl’s retirement was a “natural stepping-off point” now that the merger integration is complete, Shafer said.
Those who cover the bank found no fault in the change.
“We have great respect for both [Provost and Shafer] having known them since Talmer's IPO in 2014 and believe they are very well-suited to successfully lead TCF into its next chapter,” Robert Shone, an analyst at Piper Sandler, wrote in a note to clients.
Provost “has a long history of maximizing shareholder value with the companies he's led,” Chris McGratty, an analyst at Keefe, Bruyette & Woods, observed in his note after the announcement.
The shake-up at TCF mirrors what happened at Chemical, when Provost unexpectedly replaced David Ramaker as CEO in 2017, roughly a year after that $1.1 billion deal closed.
But there is a pandemic this time around that will force Provost at Shafer to find ways for TCF to become more efficient. TCF’s efficiency ratio on Sept. 30 was 75.2%, a level that is higher than the 61.7% average for banking companies with $40 billion to $60 billion of assets.
Banks should also brace for continued social distancing measures and potential shutdowns from state and local governments to control the spread of coronavirus, Shafer said.
“We need to get our behavior centered to get past this,” he said. “If the local economies are shut down it will have an impact.”
TCF did report a higher profit. Its third-quarter net income more than doubled from the second quarter to $55.7 million. The loan-loss provision fell by 11% to $69.7 million, while revenue decreased by 3% to $496 million.
About $47 million in loans to motorcoach lines and shuttle bus companies migrated to nonaccrual status as travel and schools shuttered. Almost a tenth of TCF’s loans, totaling more than $3.1 billion, has been affected by the pandemic.
Shafer said he remains “bullish” about the company’s prospects because of growth in its mortgage business and its inventory financing unit, though he acknowledged that the review and planning for 2021 will be informed by the path of COVID-19.
“There will be a return to normal, but it’s important that we not misunderstand the reality of the current economy,” Shafer said.
Paul Davis contributed to this report.