TCF Restructures Debt, Sells Mortgage-Backed Securities

The bank-holding company said the move reflects its shift away from longer-term loans and investments, including residential loans, commercial loans, and mortgage-backed securities, and toward shorter-duration variable-rate loans, such as auto loans and equipment financing.

TCF Financial Corporation announced Tuesday that it has repositioned its balance sheet by prepaying $3.6 billion of long-term debt and selling $1.9 billion of mortgage-backed securities.

The Wayzata-based bank holding company expects the move will increase its net interest margin while also reducing interest rate risk.

TCF said it paid off $3.6 billion in long-term, fixed-rate borrowings that had an average interest rate of 4.3 percent. The company refinanced $2.1 billion of that with floating and fixed-rate loans that had an average interest rate of about 0.5 percent, and it paid off off the remaining $1.5 billion. TCF also sold $1.9 billion in mortgage-backed securities that it held, which resulted in a $77 million ($48 million after tax) gain for the company.

TCF expects the restructuring to add about $74 million in pre-tax profits over the course of the year. However, the company will also take a one-time net after-tax charge of $293 million, or a loss of about $1.85 per common share, in the first quarter of this year.

TCF said the move reflects its shift away from longer-term loans and investments, including residential loans, commercial loans, and mortgage-backed securities, and toward shorter-duration variable-rate loans, such as auto loans and equipment financing.

The restructuring also gives TCF the ability to reduce its loan-to-deposit ratio and enables it to fund a larger part of its balance sheet with deposits from its 430 branches.

TCF Chairman and CEO Bill Cooper said in a Tuesday morning conference call that the move is “capstone to the reinvention of TCF” and reflects the fact that it is “no longer a long-term fixed-rate residential lender.” He added that the bank's auto finance, inventory finance, and leasing and equipment finance businesses have been growing.

Shares of TCF's stock rose about 7 percent and were trading at $11.40 mid-afternoon Tuesday after the restructuring announcement, which was made before the markets opened Tuesday.

TCF, which had $19 billion in total assets as of December 31, provides retail and commercial banking services. It has branches in Minnesota, Illinois, Michigan, Colorado, Wisconsin, Indiana, Arizona, and South Dakota. It conducts commercial leasing and equipment financing in all 50 states, commercial inventory financing in all 50 states and Canada, and indirect auto financing in more than 30 states.