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TCF Financial defends growing capital levels as analysts press for a draw-down

TCF Financial Corp.will continue to protect its capital levels in order to prepare for organic andstrategic opportunities, management said during the bank's second-quarter earningscall July 22.

TCF Financial reported net income available to common stockholdersof $52.8 million for the second quarter, compared to $47.4 million a year ago and$43.2 million a quarter ago. Diluted EPS was 31 cents for the second quarter, comparedto 29 cents a year ago and 26 cents a quarter ago.

Management's plans for the bank's growing capital level werea focus of the call. Executives said they are comfortable with the bank's capitallevels, even as analysts pressed about opportunities to lower them. The bank's commonequity Tier 1 capital ratio, or CET1, ratiogrew to 10.16% for the second quarter, up from 9.98% the quarter prior. The bankdeclared a 7.5 cent dividend on common stock July 20, keeping it at the same levelas it had in October 2015.

President and CEO Craig Dahl said capital levels will remainwhere they are as long as there are profitable growth activities available to thebank and that TCF Financial's transition to an asset generator has required morecapital. If those opportunities disappeared, management would re-evaluate thoselevels and weigh options including a dividend, buyback or other corporate developmentopportunities.

"We still think that there are profitable opportunities,profitable asset growth opportunities out there, either through organic or throughcorporate development. And until we stop seeing those, we really don't want to tradecapital for something else," he said.

The chief executive said the bank has not ruled out acquisitionsas an option. He said the bank is interested in those prospects but has yet to find"the right opportunity." When pressed, he specified the bank would lookfor opportunities for asset acquisition in the short run, but would not rule outbuying a depository in the long run.