Tough Love at TCF

SW: The loan spigot is open?

BC: The banking industry grew its loan portfolio considerably in the fourth quarter. But there are not as many loans being booked as before, because the banks are not making the loans that they sold off to the suckers. A lot of people used to feel they could get credit for anything. Now they can’t, and it’s somehow the banks’ fault.

On the Path Ahead for TCF

SW: In this period of financial upheaval, some survivors are growing aggressively by acquisition. Wells Fargo’s acquisition of Wachovia comes to mind. Do you see TCF growing this way?

BC: First, let me tell you about how acquisitions have worked in the banking business. The bank CEO gets paid based on how big the bank is. Not how good the bank is, but how big it is. The board brings in compensation consultants once a year and hears about how executives at $50 billion banks make this much, and executives at $10 billion banks make that much. So, what do you want to do? Get to $50 billion, whether it’s a good idea or not.

At TCF, we’ve never had goals about how big we want to be. We’re a big enough bank to compete successfully. Our results now are better than everybody’s. And before this crisis, they were far better.

SW: Comment on your branch system.

BC: We’ve opened 115 new branches since 2003—new branches because they’re more profitable. We haven’t found acquisitions we would do. In most cases, they’ve destroyed shareholder value. They made you bigger. But they didn’t make you better.

SW: But there is the need to grow deposits.

BC: Yes, we have to grow. Plus, in this environment, there may be some opportunities to buy branch systems. If I could buy another 25 branches in Chicago, I’d love to do that. Or another 25 branches in Denver, I’d love to do that.

On the other hand, with everyone wondering where the abyss is, do you want to blow your capital on an acquisition? Which a lot of people have done. We’re pretty careful. We own our stock. This is how it works at TCF: If we get an acquisition to look at, the first guys who have to be talked into it are management, because they want to know how it’s going to affect their stock. It ain’t how big we going to get. They want to know how it’s going to affect earnings per share.

SW: In November, TCF participated in the Troubled Asset Relief Program (TARP), receiving $361 million. Given the relative stability of TCF, why did you participate?

BC: We could have said no, but we were largely encouraged to do it. The way the program was set up, if you didn’t get the TARP money, you were now labeled as a failing bank—because they weren’t going to give the money to the banks that weren’t going to survive. If you didn’t take it, now you’re on everybody’s [bad] list, and that becomes a self-fulfilling prophecy.