TCF Financial Corp.'s first-quarter profit rose nearly 60 percent, lifted by higher interest income and lower taxes, and the company's stock on Monday staged its biggest one-day jump since November.
The Plymouth-based banking firm, which runs Minnesota's third-largest bank after Wells Fargo and U.S. Bank, reported a stronger than expected jump in its net interest margin, the difference between what it pays to depositors and what it charges to borrowers.
TCF also began to see a payoff from executives' decision last year to begin to reduce its exposure to the volatile auto finance business, its most costly in terms of loans going bad. "Eliminating the portfolio with the highest net charge-off and reserve levels will reduce our overall risk, all else being equal," Craig Dahl, the company's chief executive, told analysts Monday.
He said TCF is also gaining more liquidity by running off its auto finance portfolio, which in turn reduces the pressure on the firm to pull in more deposits with higher interest rates or other incentives.
Inventory financing drove much of the growth in TCF's interest income, which rose 9.5 percent in the quarter. Its inventory-related loans grew 21 percent.
In addition to the added volume, TCF experienced a 13 basis-point jump in net interest margin to 4.59 percent, helped by a rising rate climate created by the Federal Reserve. "We have a very strong deposit franchise that has become more valuable in the current rising rate environment," Dahl said.
TCF said its income tax rate was 22.1 percent in the quarter, down from 30 percent a year ago. Its income before tax was up 41 percent, but its after-tax income rose an even steeper 57 percent.
Non-interest income grew 8.4 percent, led by the company's equipment finance and leasing business. Credit card revenue grew 4.6 percent.
TCF's net income was $66.2 million, or 39 cents a diluted share, in the January-to-March period. That's up from $24.7 million a year ago. Revenue was $355.4 million, up 9 percent.
TCF shares rose 7 percent to close at $24.34, their highest level since mid-2007. The jump was the biggest since last Nov. 28, when TCF shares rose 9.3 percent in one day.