TCF Financial Earnings Call Insights: Consumer Loan Sale Outlook and Foreclosed OREO Costs

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TCF Financial Corporation (NYSE:TCB) recently reported its first quarter earnings and discussed the following topics in its earnings conference call.

Consumer Loan Sale Outlook

Jon Arfstrom – RBC Capital Markets: Probably a question for you, Craig, on the consumer loan sale gains. So obviously, a good number for the quarter, but I’m curious how you view that business going forward? How we should look at it, in terms of the gain levels in the future and I guess the reason I asked this is that there’s maybe a little more volatility in fees this quarter than we’re used to. I – Bill has warned us for years about the lumpiness of leasing. But it looks like auto is on a trajectory up and one of the lines that I think we’re all having trouble pegging is that consumer loan sale gain lines. So I’m just curious how you view that business and how you make the decisions in terms of when to sell the loans and what we can we expect for gains going forward?

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Craig R. Dahl – VC and EVP, Lending: This is Craig Dahl. John, the level of asset sales is really dependent there on a couple of factors. Number one, our overall hold position in consumer; number two, our geographic concentrations based on the originations that we’re getting; and then third, basically the level of infrastructure expansion that’s required to support that growth. Now inside our consumer business, there’s not as much expansion. We have a substantial factory, basically to support that origination. So, those are the three factors that would go into our level of sales. I would say – also, I guess the fourth factor would be the appetite of our buyers and in this quarter, there was a significant appetite. I would expect the second quarter to be slightly less than the first quarter.

William A. Cooper – Chairman and CEO: John, I’d really like to help you with your model on that, but unfortunately, it’s another one of those lumpy things. What we can say is that, particularly on the real estate side of finding markets to sell our real estate origination loans is really good news. Number one, it generates fee income; and number two, it allows us to increase origination because we can diversify by geographic risk. That means that we can grow in markets that we were going to slow because of the level of the risk in a certain geography and take a gain as opposed to margins that we would normally have. But, I would love to tell you, gee it’s going to grow 2% a year or something, but it is going to be lumpy. But what we do expect to happen is to continue to be a core earning capacity at the bank.

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Jon Arfstrom – RBC Capital Markets: And you expect quarterly gains here, it’s just perhaps the level or the amount that you sell that will be variable?

William A. Cooper – Chairman and CEO: Yes.

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