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TCF Bank to Grow Powersports Floorplan Unit Despite Exit From Auto

TCF Bank’s powersports floorplan operation has been unaffected by the company’s decision to stop originating indirect auto loans, a TCF spokesman told Powersports Finance.

“Floorplan lending is handled through TCF Inventory Finance, a completely separate business unit,” he said. “[TCF Inventory Finance’s] operations and lending remain unchanged.”

The bank stopped originating auto loans through indirect finance arm Gateway One Lending and Finance on Dec. 1, and will instead reinvest the capital into other divisions of the bank. TCF Inventory Finance has been growing in the space, as dealers and manufacturers welcome the competition to drive down rates, Powersports Finance previously reported.

The floorplan lender grew its portfolio to $2.6 billion in the third quarter, compared with $2.3 billion i n the year-prior period. TCF’s inventory finance customers included 10,800 active dealers, and the company increased originations 18.8% year over year to $1.9 billion in the third quarter.

Floorplan delinquencies were negligible as a percentage of the overall portfolio, compared with the bank’s auto portfolio, which experienced a 60% year-over-year rise in delinquencies during the third quarter. “That loss rate pretty much was eating into t he revenues,” said David Chiaverini, equity research analyst of mid-cap banks for Wedbush Securities, despite the company claiming there was no change in its loss expectations.

“We expected to see an increase in charge-offs as the number of loans on our balance sheet increased,” the TCF spokesman said. “We also expected the yields on the portfolio to go up more than charge-offs, which also happened. … Ultimately, even with that higher risk-adjusted yield, we still determined that other uses of the capital will generate a higher rate of return.”

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