Profit at TCF Financial Corp. jumped 43 percent in the fourth quarter, capping a rocky year for the lender that started with a major financial restructuring and ended with a $10 million fine that chopped earnings.

The Wayzata-based lender earned $23.6 million, or 15 cents per share, in the fourth quarter. For the year, it lost $218.5 million, or $1.37 per share, reflecting a $296 million charge TCF took early last year when it shifted gears and repositioned its balance sheet.

Analysts had expected 18 cents per share for the quarter, but that was before a $10 million civil penalty announced Friday, which the bank said it would book in the fourth quarter. The penalty shaved off 6 cents per share. Minus the penalty, earnings would have been 21 cents per share.

Investors liked what they saw, sending TCF shares up more than 3 percent during the day to close at $13.50, the highest level in more than a year.

"It's one of the better quarters from TCF in a long time as the noise of the past couple of years is fading and the core bank results are improving," said Jon Arfstrom, a bank analyst with RBC Capital Markets in Minneapolis.

TCF saw solid loan growth across the board and net interest income on loans rose nearly 16 percent from a year ago.

The growth was partly because of TCF's restructuring, which involved the acquisition near the end of 2011 of Gateway One, a privately held Southern California lender of money for used cars. But it also resulted partly from higher average loan balances in national specialty lending operations: leasing and equipment finance, inventory financing and auto finance, the company said.

The bank doubled the amount of new loans and leases originated in the fourth quarter from a year ago, to $2.8 billion, reflecting expansion of its national lending businesses.

"TCF continues to be a revenue generator," Chairman and CEO Bill Cooper said on a conference call with analysts.

The bank's net interest margin -- a key industry benchmark showing the difference between what a bank earns on assets and what it pays out in interest -- slipped 0.06 of a percentage point from the third quarter, but it was still 4.79 percent, significantly better than most major banks.

The other half of the bank's operations showed a modest gain. Total non-interest income, which includes income from various fees and service charges, such as on ATM transactions and cards, grew nearly 2 percent from a year earlier. The driver in that category was strong growth in leasing and equipment finance, which offset declines in fees and service charges.

TCF's stash of moldering consumer loans has been an ongoing issue. Last fall it had to charge off $43.9 million related to guidance from regulators on the consumer loans banks made to borrowers who have gone through Chapter 7 bankruptcy.

The bank said Wednesday that net charge-offs of consumer real estate loans have been falling for five consecutive quarters, even excluding the effect of charging off the loans from borrowers who went through bankruptcy. The level of non-performing assets dropped 4.7 percent from third-quarter levels.

The bank has been under a consent order from its primary regulator, the Office of the Comptroller of the Currency (OCC), since 2010 related to violations of the Bank Secrecy Act (BSA). The act requires banks to make sure they aren't facilitating illegal transactions, such as money laundering or financing terrorists, and regulators have stepped up surveillance.

On Friday, the OCC announced it was fining TCF $10 million for violating the act. The violations included 13 instances in which the bank inadequately filled out mandatory reports about suspicious activity involving possible terrorist financing, the OCC said. There were no findings of actual terrorist activity, a TCF spokesman said in an interview at the time.

Responding to analysts Wednesday, Cooper called the fine a milepost, but not the end of the consent order. He said he expects it to be resolved soon.

"The OCC has some more work to do, he said. "We believe we have accomplished what we need to accomplish with the lifting of that consent order. We'll have to continue to do a lot of other things to keep up with the evolving nature of what's going on with that."

"We were among the early recipients of that BSA pressure," Cooper told analysts. "It's likely that we're going to see similar happenings at other banks as pressure on that issue continues."

Jennifer Bjorhus • 612-673-4683


(TCB) National financial bank holding company with offices in Minnesota, Michigan, Illinois, Wisconsin, Colorado, Indiana, Arizona and South Dakota.

4th quarter FY2012, 12/31

2012 2011 % chg. Inter. inc. $219.0 $230.3 -4.9 Nonint. inc. 100.1 98.3 +1.9 Income 23.6 16.4 +43.2 Earn/share 0.15 0.10 +50.0

12 months

Inter. inc. $884.6 $938.0 -5.7 Nonint. inc. 490.4 444.4 +10.3 Income -218.5 109.4 -- Earn/share -1.37 0.71 --

Figures in millions except for earnings per share.