Same as the old boss at TCF

Coop is back.

Bill Cooper, the longtime TCF Financial Corp. leader known for his shoot-from-the-hip rhetoric and combative personality, is returning to the Wayzata-based bank as its chief executive. He replaces Lynn Nagorske, a longtime TCF insider who succeeded Cooper as CEO in 2005.

In a conference call with analysts and reporters, Cooper said Nagorske was "burnt out" and wanted to resign. It didn't take much to persuade Cooper to end his retirement, even though he moved to Florida last year to escape what he regarded as Minnesota's high income taxes.

"It's amazing, I have a real emotional attachment to this company," said Cooper, who will move back to Minnesota. "It's like one of my children. I also have a real economic attachment, which may be a stronger attachment."

Cooper is one of the company's largest investors, owning 3.8 million shares, or nearly 3 percent, of TCF stock -- a stake now worth about $45.6 million. He will earn no salary or bonus for the job, but will get additional stock options.

Just as he did when he first joined TCF in 1985, the ex-Detroit cop faces a difficult environment for banks. Back then, TCF, like hundreds of savings and loans nationwide, ran into trouble when interest rates soared in the 1980s. It was stuck paying customers more for short-term deposits, and it was earning less on its long-term loans.

Today, TCF is a victim of another financial crisis. Although TCF avoided making risky subprime loans to consumers with weak credit histories, the company, like most banks, has been hurt by the resulting collapse in the nation's housing markets.

In the second quarter this year, TCF wrote off $30 million in bad loans, mostly in home equity loans and residential home construction, a 178.2 percent jump from the same quarter a year ago. Non-performing assets, or overdue unpaid loans, now account for 1.25 percent of all TCF loans, compared with 0.74 percent in the second quarter of 2007.

As a result, TCF doubled the amount of money it sets aside for bad loans to $133 million, a figure that will likely rise, according to Fitch Ratings, which has downgraded TCF's credit rating to "negative" from "stable."

"Given the economic condition in the Midwest and TCF's sizable home equity portfolio, provisioning needs will likely remain elevated in the near term," a Fitch report says. "The company's capital position remains lower than most peers and is no longer counterbalanced by strong earnings performance."

TCF stock now trades at around $12 a share, compared with $25 a share a year ago.

Still, analysts say TCF is in better shape than most banks and that its problems are mostly related to broader economic problems. Because TCF already boasts considerable management talent, Cooper's likely impact is an open question. He already serves as TCF chairman.

"I'm still not completely sure what it means," said Bill Frels, CEO and lead portfolio manager of St. Paul-based Mairs and Power, which owns 3.2 million shares of TCF stock. "Cooper, being the ambitious person he is, was probably itching for one more shot at running the bank."

If anything, Cooper's return signals more of a change in style than strategy: While Nagorske was a well-regarded if cautious executive who excelled at number crunching, Cooper is known for his marketing and communication skills in the form of colorful yet candid banter with investors.

"The calls will be more fun now," said Ben Crabtree, an analyst with Stifel Nicolaus.

Those skills were on full display during Monday's conference call. Less than 24 hours after accepting the CEO job, Cooper flatly stated that TCF would not cut its dividend. He said he now favors acquisitions over new branches [Chicago is an especially attractive market], and declared that credit problems plaguing banks have peaked, suggesting a recovery by year's end.

The last statement was particularly noteworthy because investors "right now want to get a sense of when [the problems] will end," said Jon Arfstrom, an analyst with RBC Capital Markets.

Cooper says he does not envision staying at TCF more than five years. Although he is returning to Minnesota, Cooper, a onetime chairman of the state Republican Party, says he won't get involved in politics.

"Lynn was burnt out in banking," he said of the outgoing CEO. "I'm burnt out in politics."

Thomas Lee • 612-673-7744