As merger inches forward, TCF Financial holds expenses in line

TCF Financial Corp. executives are keeping their thumbs on expenses as they work to complete a merger with Michigan's biggest bank.

The company, which runs Minnesota's No. 3 bank, said Monday its profit fell 4% during the first three months of the year — in part due to expenses associated with the merger with Chemical Financial Corp., which was announced in January and is expected to close in September or October. Without that expense, TCF's per-share profit rose 18%.

Short-term growth prospects took a hit after the Federal Reserve recently tapped the brakes on its plan for raising interest rates.

"There does not appear to be a positive catalyst from interest rates or credit on the horizon," said Craig Dahl, TCF's chief executive. "As a result, we recognize that bank outperformance going forward will likely need to come from effectively managing expenses."

During the first quarter, TCF lowered its noninterest expenses by 1%, not counting those associated with the merger. Technically, Chemical shareholders are buying out TCF's, but the firms have billed the deal as a merger of equals since the two firms have nearly the same amount of assets.

After the merger is complete, the ongoing firm will take the TCF name but be based in Detroit. Shareholders from both firms are scheduled to vote on the $3.6 billion deal in June.

From January through March, TCF earned $70.5 million, down from $73.7 million a year ago. Revenue was up 0.7%, driven by a 3.2% jump in interest income that helped offset a 4.6% decline in noninterest income.

Dahl reiterated cost-saving targets he and Chemical executives previously touted. He noted that, in contrast to many bank mergers, the savings won't come from closing redundant branches since there's little overlap in operations.

Instead, more will come from being able to spread capital investments and other spending against a larger base of customers.

"When you think of our investments into digital banking over the past few years, we would not have spent any more dollars on development if we had launched the product and services over a customer base that was 30% to 40% larger," Dahl said.

He added: "This transaction accelerates the strategic plans of both banks by two years."

Evan Ramstad • 612-673-4241