Magazine article American Banker

3Q Earnings: Nonperformers Aside, TCF Sees A Chance to Grow

Magazine article American Banker

3Q Earnings: Nonperformers Aside, TCF Sees A Chance to Grow

Article excerpt

Byline: Katie Kuehner-Hebert

TCF Financial Corp. reported lower-than-expected earnings, mostly because of higher credit costs in its home equity portfolio, but the Wayzata, Minn., company said it would continue to make such loans as others scale back.

William Cooper, the $16.5 billion-asset TCF's chief executive, said in an interview Wednesday that despite a rise in nonperforming assets in the third quarter, it wants loan growth of between 8% and 10% on an ongoing basis and would specifically focus on making more home equity loans.

"We don't have to compete anymore against illogical competitors like Wamu or IndyMac," which failed under the weight of bad mortgages, "so we can now make higher-quality loans with higher spreads," said Mr. Cooper, who retook the helm in July.

TCF can be more aggressive because it raised $115 million in a August trust-preferred offering, increasing its Tier 1 capital ratio to 9.03% and its total risk-based capital ratio to 11.93%. The company will also make more commercial mortgages to owners of office buildings and shopping centers, and it is doing more equipment financing and leasing.

Mr. Cooper contended that TCF can achieve its lending goals even though nonperforming assets more than doubled from a year earlier and rose 24.8% from the second quarter, to $200 million. Most of the increase came in its home equity portfolio.

Credit quality will improve next year as home prices stabilize, he said, and TCF can ramp up lending in the sector because it is adopting tougher underwriting standards, including lower loan-to-value ratios.

In an interview last month, Mr. Cooper said that he was "perfectly happy" to make a home equity loan "on a $70,000 house; it was a mistake to make it on a $120,000 house" when property values were inflated.

On Wednesday he said that he does not believe that credit deterioration will spread materially into the commercial and industrial loan portfolio. …

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