Strong gains in leasing and equipment finance and from selling off bundles of auto and home loans propelled TCF Financial Corp. profits in the first quarter.
The bank’s earnings jumped more than 50 percent to $40 million, or 24 cents per share, beating Wall Street’s consensus estimate by a penny a share. TCF shares rose just over 2 percent to close at $16.36.
“TCF pretty much hit on all pistons in this quarter,” TCF Chief Executive William Cooper told analysts.
It’s been two years now since the Wayzata-based lender overhauled its balance sheet and changed course, a strategy to diversify that involved adding a national auto finance business and building specialty finance operations, shifting from its historical reliance on consumer banking fees.
Unlike its larger Twin Cities rivals, both sides of TCF’s business grew. Net interest income generated by loans and investments rose 1.1 percent from a year ago. Strong gains in leasing and equipment finance and from selling multiple bundles of auto loans and consumer real estate loans powered total noninterest income, which jumped nearly 12 percent from a year ago.
The bank said it’s been adding about 500 car dealers a quarter for the past year as it builds up its auto finance business, a pace it expects will continue for several more quarters. As a result, the bank nearly doubled its average volume of auto finance loans from a year ago to $1.3 billion in the first quarter.
The loan-selling strategy may not last forever, “but in the near term to medium term it looks pretty good,” said Jon Arfstrom, a bank analyst with RBC Capital Markets in Minneapolis.
“The reinvented business model is showing through,” Arfstrom said.
With its supermarket branches, TCF remains a checking account king and, in the latest quarter, those accounts grew 4.8 percent from a year ago, hitting $5 billion.
Earlier this month, the bank announced that it was exiting the TCF Tower and Bank Building in downtown Minneapolis and moving about 1,500 employees to a new campus in Plymouth. The exit will shrink TCF’s presence in downtown Minneapolis to a single branch.
The bank is the state’s third-largest by deposits, and the consolidation isn’t expected to reduce TCF’s Minnesota head count of about 3,000 people.