TCF hits the mark, but CEO Bill Cooper still cautious

TCF Financial Corp. reported Thursday that it had a strong first quarter, meeting analysts' expectations with a 27 percent rise in quarterly profits. But William Cooper, the bank's chairman and CEO, cautioned that the recession is not over for the financial industry.

Cooper boasted in a conference call with analysts that his Wayzata-based bank had its 60th consecutive profitable quarter, with earnings of 26 cents a share, a rise of 53 percent over the same period in 2008. The bank will pay stockholders a nickel a share on May 28, marking 88 consecutive quarters that it's paid a dividend.

Cooper said the recession lingers, however, "particularly on the commercial side" of the ledger. "I don't want to declare victory on that," he said.

"To kind of summarize it all, it's nowhere near our prior standards of performance and it's not the end -- by any means -- of the credit issues," Cooper said. "In general, I think we can see the end of the tunnel."

The market liked the news, driving TCF's stock up $1.94 Thursday to close at $18.29, a rise of nearly 12 percent.

On the revenue side, the bank reported strong growth in the first quarter, up 14.5 percent from a year ago. Banking fees were up $10.6 million, or 12 percent. And while still a small part of overall earnings, leasing and equipment finance were up 61 percent, largely because of an acquisition in the third quarter of 2009.

Cooper said he expects equipment and inventory finance to grow as businesses emerge from the recession. "I'm not dropping any shoes, but we continue to look at those portfolio acquisitions," he said.

TCF has a loan portfolio of $14.58 billion, split about evenly between consumer and wholesale debts. That's up 8.1 percent over 2009. Although consumer real estate loans were flat, Cooper said, "there's been a significant change in the mix with more variable-rate and less fixed-rate loans."

"When you look back in the history of the banking industry in the last few years, most of the banks -- including us -- missed this bubble in housing," said Cooper, who expressed concern that higher interest rates are a looming risk. With that in mind, Cooper said, he's not interested in 30-year fixed-rate mortgages, but in variable-rate mortgages that reset after a couple of years.

TCF restructured $41.1 million in faltering consumer real estate loans in the first quarter, bringing its total accruing restructured loans to $285.6 million, up from $260.7 million a year earlier. Reserves to cover losses on those loans were $30 million, or just 10.5 percent of the outstanding balance; 4.3 percent were delinquent for 60 days or more. Cooper said that nationally, half of all restructured loans are more than 60 days behind.

TCF's borrowers differed from many other banks, Cooper said, in that "we never made any subprime loans." Though some TCF borrowers fell behind when they lost a job, they want to stay in their homes, he said. "Our experience with this kind of borrower is that even when economies don't get a lot better, eventually they find other employment, they get their lives straightened out. We don't want to kick these people out of their homes," Cooper said. "It wouldn't be right."