TCF Financial Corp. said Friday its second-quarter interest income and margin grew but its profit fell slightly after accounting for a recent legal settlement with federal regulators.
TCF, which operates Minnesota's third-largest bank network after Wells Fargo and U.S. Bank, showed solid revenue growth and was helped by higher interest rates and lower taxes. The company also continued to reduce a portfolio of auto finance loans that had been a drag on its performance.
For the April-to-June period, TCF said it earned $58.8 million, down 2.8 percent from $60.4 million a year ago. Adjusted for one-time items, its profit amounted to 49 cents a share, beating analysts' consensus of 47 cents. The company's stock price rose 1.9 percent in reaction to the results. TCF shares are up more than 20 percent this year.
Revenue was $364.9 million, up nearly 7 percent in the latest quarter. Interest income was $250.8 million, up 10.4 percent while noninterest income slipped 0.5 percent. The company's net interest margin, the difference between what it pays depositors and what it charges borrowers, grew to 4.67 percent from 4.52 percent a year ago.
TCF's bottom line was affected by a $32 million one-time pretax charge to account for a settlement announced last week in a dispute with federal regulators over the way it portrayed overdraft rules in materials provided to customers from 2010 to 2013. The company said it will pay $25 million to customers, $5 million to two federal agencies and incur $2 million in expenses as a result of the settlement.
In a statement, CEO Craig Dahl said the settlement removed risk for TCF and "allows us to remain fully focused on executing our strategy and pursuing growth opportunities."
The company's loan portfolio grew 1.4 percent compared to a year ago, despite the ongoing reduction of its auto finance business that was down nearly 20 percent from a year ago. TCF reported a 6 percent gain in commercial loans and a nearly 20 percent jump in inventory financing.
TCF said its income tax expense fell 36 percent to $16.4 million.