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Section 1: 10-Q (10-Q)

Table of Contents

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

 

FORM 10-Q

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended

March 31, 2013

 

or

 

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number: 001-10253

 

TCF FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

 

Delaware

 

41-1591444

(State or other jurisdiction of

 

(I.R.S. Employer Identification No.)

incorporation or organization)

 

 

 

200 Lake Street East, Mail Code EX0-03-A,

Wayzata, Minnesota 55391-1693

(Address and Zip Code of principal executive offices)

 

(952) 745-2760

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

Yes [X]

 

 

No [ ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

 

Yes [X]

 

 

No [ ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer [X]

Accelerated filer                  [   ]

Non-accelerated filer   [   ]  (Do not check if a smaller reporting company)

Smaller reporting company [   ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

Yes [   ]

 

 

No [X]

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class

 

Outstanding at
April 19, 2013

Common Stock, $.01 par value

 

163,810,097 shares

 



Table of Contents

 

TCF FINANCIAL CORPORATION AND SUBSIDIARIES

 

INDEX

 

Part I. Financial Information

 

Pages

 

 

 

 

 

 

Item 1. Financial Statements

 

 

 

 

 

Consolidated Statements of Financial Condition
at March 31, 2013 and December 31, 2012

 

1

 

 

 

Consolidated Statements of Income for the
Three Months Ended March 31, 2013 and 2012

 

2

 

 

 

Consolidated Statements of Comprehensive Income for the
Three Months Ended March 31, 2013 and 2012

 

3

 

 

 

Consolidated Statements of Equity for the
Three Months Ended March 31, 2013 and 2012

 

4

 

 

 

Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 2013 and 2012

 

5

 

 

 

Notes to Consolidated Financial Statements

 

6

 

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

30

 

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

47

 

 

 

Item 4. Controls and Procedures

 

48

 

 

 

Part II. Other Information

 

 

 

 

 

Items 1-6

 

49

 

 

 

Signatures

 

51

 

 

 

Index to Exhibits

 

52

 



Table of Contents

 

PART 1 – FINANCIAL INFORMATION

Item 1. Financial Statements

TCF FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Financial Condition

 

 

 

At March 31,

 

At December 31,

 

(Dollars in thousands, except per-share data)

 

2013

 

2012

 

 

 

(Unaudited)

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

1,213,747

 

$

1,100,347

 

Investments

 

122,070

 

120,867

 

Securities available for sale

 

677,088

 

712,091

 

Loans and leases held for sale

 

20,217

 

10,289

 

Loans and leases:

 

 

 

 

 

Consumer real estate

 

6,418,666

 

6,674,501

 

Commercial

 

3,334,716

 

3,405,235

 

Leasing and equipment finance

 

3,185,234

 

3,198,017

 

Inventory finance

 

1,931,363

 

1,567,214

 

Auto finance

 

719,666

 

552,833

 

Other

 

23,701

 

27,924

 

Total loans and leases

 

15,613,346

 

15,425,724

 

Allowance for loan and lease losses

 

(263,596

)

(267,128

)

Net loans and leases

 

15,349,750

 

15,158,596

 

Premises and equipment, net

 

438,616

 

440,466

 

Goodwill

 

225,640

 

225,640

 

Other assets

 

456,898

 

457,621

 

Total assets

 

$

18,504,026

 

$

18,225,917

 

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

Checking

 

$

5,051,730

 

$

4,834,632

 

Savings

 

6,151,147

 

6,104,104

 

Money market

 

801,443

 

820,553

 

Certificates of deposit

 

2,295,784

 

2,291,497

 

Total deposits

 

14,300,104

 

14,050,786

 

Short-term borrowings

 

3,717

 

2,619

 

Long-term borrowings

 

1,926,794

 

1,931,196

 

Total borrowings

 

1,930,511

 

1,933,815

 

Accrued expenses and other liabilities

 

373,252

 

364,673

 

Total liabilities

 

16,603,867

 

16,349,274

 

Equity:

 

 

 

 

 

Preferred stock, par value $.01 per share, 30,000,000 shares authorized; and 4,006,900 shares issued

 

263,240

 

263,240

 

Common stock, par value $.01 per share, 280,000,000 shares authorized; 163,910,124 and 163,428,763 shares issued, respectively

 

1,639

 

1,634

 

Additional paid-in capital

 

757,346

 

750,040

 

Retained earnings, subject to certain restrictions

 

894,861

 

877,445

 

Accumulated other comprehensive income

 

3,536

 

12,443

 

Treasury stock at cost, 42,566 shares, and other

 

(41,396

)

(41,429

)

Total TCF Financial Corporation stockholders’ equity

 

1,879,226

 

1,863,373

 

Non-controlling interest in subsidiaries

 

20,933

 

13,270

 

Total equity

 

1,900,159

 

1,876,643

 

Total liabilities and equity

 

$

18,504,026

 

$

18,225,917

 

See accompanying notes to consolidated financial statements.

 

1



Table of Contents

 

TCF FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Income

(Unaudited)

 

 

 

 

Three Months Ended March 31,

(Dollars in thousands, except per-share data)

 

2013

 

2012

 

Interest income:

 

 

 

 

 

Loans and leases

 

$

204,905

 

$

205,984

 

Securities available for sale

 

4,795

 

19,112

 

Investments and other

 

5,850

 

2,433

 

Total interest income

 

215,550

 

227,529

 

Interest expense:

 

 

 

 

 

Deposits

 

9,681

 

9,061

 

Borrowings

 

6,778

 

38,295

 

Total interest expense

 

16,459

 

47,356

 

Net interest income

 

199,091

 

180,173

 

Provision for credit losses

 

38,383

 

48,542

 

Net interest income after provision for credit losses

 

160,708

 

131,631

 

Non-interest income:

 

 

 

 

 

Fees and service charges

 

39,323

 

41,856

 

Card revenue

 

12,417

 

13,207

 

ATM revenue

 

5,505

 

6,199

 

Subtotal

 

57,245

 

61,262

 

Leasing and equipment finance

 

16,460

 

22,867

 

Gain on sales of consumer real estate loans

 

8,126

 

-

 

Gains on sales of auto loans

 

7,146

 

2,250

 

Other

 

3,726

 

2,355

 

Fees and other revenue

 

92,703

 

88,734

 

Gains on securities, net

 

-

 

76,611

 

Total non-interest income

 

92,703

 

165,345

 

Non-interest expense:

 

 

 

 

 

Compensation and employee benefits

 

104,229

 

95,967

 

Occupancy and equipment

 

32,875

 

32,246

 

FDIC insurance

 

7,710

 

6,386

 

Advertising and marketing

 

5,732

 

2,617

 

Operating lease depreciation

 

5,635

 

6,731

 

Deposit account premiums

 

602

 

5,971

 

Other

 

37,939

 

37,296

 

Subtotal

 

194,722

 

187,214

 

Loss on termination of debt

 

-

 

550,735

 

Foreclosed real estate and repossessed assets, net

 

10,167

 

11,047

 

Other credit costs, net

 

(837

)

(288

)

Total non-interest expense

 

204,052

 

748,708

 

Income (loss) before income tax expense (benefit)

 

49,359

 

(451,732

)

Income tax expense (benefit)

 

17,559

 

(170,244

)

Income (loss) after income tax expense (benefit)

 

31,800

 

(281,488

)

Income attributable to non-controlling interest

 

1,826

 

1,406

 

Net income (loss) attributable to TCF Financial Corporation

 

29,974

 

(282,894

)

Preferred stock dividends

 

4,524

 

-

 

Net income (loss) available to common stockholders

 

$

25,450

 

$

(282,894

)

Net income (loss) per common share:

 

 

 

 

 

Basic

 

$

.16

 

$

(1.78

)

Diluted

 

$

.16

 

$

(1.78

)

See accompanying notes to consolidated financial statements.

 

2



Table of Contents

 

TCF FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

(Unaudited)

 

 

 

 

Three Months Ended
March 31,

(Dollars in thousands)

 

2013

 

2012

 

Net income (loss) attributable to TCF Financial Corporation

 

$

29,974

 

$

(282,894

)

Other comprehensive income (loss):

 

 

 

 

 

Reclassification adjustment for securities gains included in net income (loss)

 

-

 

(76,967

)

Unrealized holding losses arising during the period on securities available for sale

 

(13,829

)

(7,768

)

Foreign currency hedge

 

537

 

(404

)

Foreign currency translation adjustment

 

(622

)

385

 

Recognized postretirement prior service cost and transition obligation

 

(12

)

(7

)

Income tax benefit

 

5,019

 

31,208

 

Total other comprehensive loss

 

(8,907

)

(53,553

)

Comprehensive income (loss)

 

$

21,067

 

$

(336,447

)

See accompanying notes to consolidated financial statements.

 

3



Table of Contents

 

TCF FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Equity

(Unaudited)

 

 

 

TCF Financial Corporation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

Number of

 

 

 

 

 

Additional

 

 

 

Other

 

Treasury

 

 

 

Non-

 

 

 

 

 

Shares Issued

 

Preferred

 

Common

 

Paid-in

 

Retained

 

Comprehensive

 

Stock

 

 

 

controlling

 

Total

 

(Dollars in thousands)

 

Preferred

 

Common

 

Stock

 

Stock

 

Capital

 

Earnings

 

Income (Loss)

 

and Other

 

Total

 

Interests

 

Equity

 

Balance, December 31, 2011

 

-

 

160,366,380

 

$

-

 

$

1,604

 

$

715,247

 

$

1,127,823

 

$

56,826

 

$

(33,367

)

$

1,868,133

 

$

10,494

 

$

1,878,627

 

Net loss attributable to TCF Financial Corporation

 

-

 

-

 

-

 

-

 

-

 

(282,894

)

-

 

-

 

(282,894

)

1,406

 

(281,488

)

Other comprehensive loss

 

-

 

-

 

-

 

-

 

-

 

-

 

(53,553

)

-

 

(53,553

)

-

 

(53,553

)

Investment to non-controlling interest

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

6,406

 

6,406

 

Dividends on common stock

 

-

 

-

 

-

 

-

 

-

 

(7,934

)

-

 

-

 

(7,934

)

-

 

(7,934

)

Grants of restricted stock

 

-

 

1,367,325

 

-

 

14

 

(14

)

-

 

-

 

-

 

-

 

-

 

-

 

Common shares purchased by TCF employee benefit plans

 

-

 

567,918

 

-

 

5

 

6,178

 

-

 

-

 

-

 

6,183

 

-

 

6,183

 

Cancellation of shares of restricted stock

 

-

 

(6,580

)

-

 

-

 

(30

)

-

 

-

 

-

 

(30

)

-

 

(30

)

Cancellation of common shares for tax withholding

 

-

 

(120,497

)

-

 

(1

)

(1,247

)

-

 

-

 

-

 

(1,248

)

-

 

(1,248

)

Amortization of stock compensation

 

-

 

-

 

-

 

-

 

2,656

 

-

 

-

 

-

 

2,656

 

-

 

2,656

 

Stock compensation tax expense

 

-

 

-

 

-

 

-

 

(294

)

-

 

-

 

-

 

(294

)

-

 

(294

)

Change in shares held in trust for deferred compensation plans, at cost

 

-

 

-

 

-

 

-

 

13,792

 

-

 

-

 

(13,792

)

-

 

-

 

-

 

Balance, March 31, 2012

 

-

 

162,174,546

 

$

-

 

$

1,622

 

$

736,288

 

$

836,995

 

$

3,273

 

$

(47,159

)

$

1,531,019

 

$

18,306

 

$

1,549,325

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2012

 

4,006,900

 

163,428,763

 

$

263,240

 

$

1,634

 

$

750,040

 

$

877,445

 

$

12,443

 

$

(41,429

)

$

1,863,373

 

$

13,270

 

$

1,876,643

 

Net income attributable to TCF Financial Corporation

 

-

 

-

 

-

 

-

 

-

 

29,974

 

-

 

-

 

29,974

 

1,826

 

31,800

 

Other comprehensive loss

 

-

 

-

 

-

 

-

 

-

 

-

 

(8,907

)

-

 

(8,907

)

-

 

(8,907

)

Investment to non-controlling interest

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

5,837

 

5,837

 

Dividends on preferred stock

 

-

 

-

 

-

 

-

 

-

 

(4,524

)

-

 

-

 

(4,524

)

-

 

(4,524

)

Dividends on common stock

 

-

 

-

 

-

 

-

 

-

 

(8,035

)

-

 

-

 

(8,035

)

-

 

(8,035

)

Grants of restricted stock

 

-

 

77,411

 

-

 

1

 

(1

)

-

 

-

 

-

 

-

 

-

 

-

 

Common shares purchased by TCF employee benefit plans

 

-

 

430,490

 

-

 

4

 

5,886

 

-

 

-

 

-

 

5,890

 

-

 

5,890

 

Cancellation of shares of restricted stock

 

-

 

(14,950

)

-

 

-

 

(114

)

1

 

-

 

-

 

(113

)

-

 

(113

)

Cancellation of common shares for tax withholding

 

-

 

(11,590

)

-

 

-

 

(144

)

-

 

-

 

-

 

(144

)

-

 

(144

)

Amortization of stock compensation

 

-

 

-

 

-

 

-

 

2,021

 

-

 

-

 

-

 

2,021

 

-

 

2,021

 

Stock compensation tax expense

 

-

 

-

 

-

 

-

 

(309

)

-

 

-

 

-

 

(309

)

-

 

(309

)

Change in shares held in trust for deferred compensation plans, at cost

 

-

 

-

 

-

 

-

 

(33

)

-

 

-

 

33

 

-

 

-

 

-

 

Balance, March 31, 2013

 

4,006,900

 

163,910,124

 

$

263,240

 

$

1,639

 

$

757,346

 

$

894,861

 

$

3,536

 

$

(41,396

)

$

1,879,226

 

$

20,933

 

$

1,900,159

 

See accompanying notes to consolidated financial statements.

 

4



Table of Contents

 

TCF FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

 

 

Three Months Ended March 31,

 

(Dollars in thousands)

 

2013

 

2012

 

Cash flows from operating activities:

 

 

 

 

 

Net income (loss) attributable to TCF Financial Corporation

 

$

29,974

 

$

(282,894

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

Provision for credit losses

 

38,383

 

48,542

 

Depreciation and amortization

 

29,940

 

18,129

 

Proceeds from sales of loans and leases held for sale

 

330,333

 

15,828

 

Originations of loans held for sale, net of repayments

 

(62,072

)

(12,554

)

Net increase (decrease) in other assets and accrued expenses and other liabilities

 

11,672

 

(153,598

)

Gains on sales of assets, net

 

(15,564

)

(81,187

)

Loss on termination of debt

 

-

 

550,735

 

Net income attributable to non-controlling interest

 

1,826

 

1,406

 

Other, net

 

4,806

 

7,473

 

Total adjustments

 

339,324

 

394,774

 

Net cash provided by operating activities

 

369,298

 

111,880

 

Cash flows from investing activities:

 

 

 

 

 

Loan originations and purchases, net of principal collected on loans and leases

 

(487,128

)

(990,492

)

Purchases of equipment for lease financing

 

(196,996

)

(207,582

)

Purchase of inventory finance portfolios

 

(9,658

)

(37,526

)

Proceeds from sales of loans

 

127,127

 

62,350

 

Proceeds from sales of lease receivables

 

7,955

 

28,102

 

Proceeds from sales of securities available for sale

 

-

 

1,901,460

 

Purchases of securities available for sale

 

(10,216

)

(430,516

)

Proceeds from maturities of and principal collected on securities available for sale

 

31,247

 

116,267

 

Purchases of Federal Home Loan Bank stock

 

(223

)

(112,362

)

Redemption of Federal Home Loan Bank stock

 

226

 

101,238

 

Proceeds from sales of real estate owned

 

40,832

 

28,331

 

Purchases of premises and equipment

 

(9,683

)

(8,386

)

Other, net

 

5,921

 

10,736

 

Net cash (used in) provided by investing activities

 

(500,596

)

461,620

 

Cash flows from financing activities:

 

 

 

 

 

Net increase in deposits

 

249,318

 

542,073

 

Net increase in short-term borrowings

 

1,098

 

1,150,771

 

Proceeds from long-term borrowings

 

6,347

 

1,150,416

 

Payments on long-term borrowings

 

(10,924

)

(4,105,153

)

Net investment by non-controlling interest

 

5,837

 

6,406

 

Dividends paid on preferred stock

 

(4,524

)

-

 

Dividends paid on common stock

 

(8,035

)

(7,934

)

Stock compensation tax expense

 

(309

)

(238

)

Common shares sold to TCF employee benefit plans

 

5,890

 

6,097

 

Net cash provided by (used in) financing activities

 

244,698

 

(1,257,562

)

Net increase (decrease) in cash and due from banks

 

113,400

 

(684,062

)

Cash and due from banks at beginning of period

 

1,100,347

 

1,389,704

 

Cash and due from banks at end of period

 

$

1,213,747

 

$

705,642

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

Cash paid for:

 

 

 

 

 

Interest on deposits and borrowings

 

$

16,846

 

$

55,717

 

Income taxes, net

 

$

4,186

 

$

2,131

 

Transfer of loans to other assets

 

$

31,337

 

$

36,651

 

See accompanying notes to consolidated financial statements.

 

5



Table of Contents

 

TCF FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

 

(1) Basis of Presentation

 

TCF Financial Corporation, a Delaware corporation (“TCF” or the “Company”), is a national bank holding company based in Wayzata, Minnesota. Unless otherwise indicated, references herein to “TCF” include its direct and indirect subsidiaries.  Its principal subsidiary, TCF National Bank (“TCF Bank”), is headquartered in South Dakota.

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all of the information and notes necessary for complete financial statements in conformity with generally accepted accounting principles in the United States (“GAAP”). The information in this Quarterly Report on Form 10-Q is written with the presumption that the users of the interim financial statements have read or have access to the Company’s most recent Annual Report on Form 10-K, which contains the latest audited financial statements and notes thereto, together with Management’s Discussion and Analysis of Financial Condition and Results of Operations as of December 31, 2012, and for the year then ended. All significant intercompany accounts and transactions have been eliminated in consolidation. Certain reclassifications have been made to prior financial statements to conform to the current period presentation. For Consolidated Statements of Cash Flow purposes, cash and cash equivalents include cash and due from banks. Any policies in effect at December 31, 2012, remain unchanged and will be followed similarly as in previous periods.

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. These estimates are based on information available to management at the time the estimates are made. Actual results could differ from those estimates. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments, consisting of normal recurring items, considered necessary for fair presentation. The results of operations for interim periods are not necessarily indicative of the results to be expected for the entire year.

 

(2) Cash and Due from Banks

 

At March 31, 2013 and December 31, 2012, TCF Bank was required by Federal Reserve regulations to maintain reserves of $86.2 million and $79.7 million, respectively, in cash on hand or at the Federal Reserve.

 

TCF maintains cash balances that are restricted as to their use in accordance with certain contractual agreements related to the sale and servicing of auto loans and consumer real estate loans. Cash proceeds from loans serviced for third parties are held in separate accounts until remitted.  TCF also retains cash balances for potential loss recourse on certain sold auto loans. Restricted cash totaling $35.9 million and $28.8 million was included within cash and due from banks at March 31, 2013 and December 31, 2012, respectively.

 

(3)  Securities Available for Sale

 

Securities available for sale consist of the following.

 

 

 

At March 31, 2013

 

At December 31, 2012

 

 

 

 

Gross

 

Gross

 

 

 

 

 

Gross

 

Gross

 

 

 

 

Amortized

 

Unrealized

 

Unrealized

 

Fair

 

Amortized

 

Unrealized

 

Unrealized

 

Fair

(Dollars in thousands)

 

Cost

 

Gains

 

Losses

 

Value

 

Cost

 

Gains

 

Losses

 

Value

Mortgage-backed securities

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government sponsored enterprises and federal agencies

 

$

669,405

 

$

12,874

 

$

8,752

 

$

673,527

 

$

691,570

 

$

21,693

 

$

3,209

 

$

710,054

Other

 

118

 

-

 

-

 

118

 

127

 

-

 

-

 

127

U.S. Treasury securities

 

1,000

 

-

 

-

 

1,000

 

-

 

-

 

-

 

-

Other securities

 

1,642

 

801

 

-

 

2,443

 

1,642

 

268

 

-

 

1,910

Total

 

$

672,165

 

$

13,675

 

$

8,752

 

$

677,088

 

$

693,339

 

$

21,961

 

$

3,209

 

$

712,091

Weighted-average yield

 

2.71

%

 

 

 

 

 

 

2.70

%

 

 

 

 

 

 

6



Table of Contents

 

There were no sales of securities available for sale during the three months ended March 31, 2013. Gross realized gains of $77 million were recognized on sales of securities available for sale during the three months ended March 31, 2012.

 

Unrealized losses on securities available for sale are due to lower values for equity securities or changes in interest rates.  TCF has the ability and intent to hold these investments until a recovery of fair value occurs. TCF held no securities available for sale as of March 31, 2013 and December 31, 2012 that were in a net unrealized loss position.

 

The amortized cost and fair value of securities available for sale by contractual maturity, at March 31, 2013, are shown below. The remaining contractual principal maturities do not consider prepayments. Remaining expected maturities will differ from contractual maturities because borrowers may have the right to prepay.

 

 

 

At March 31, 2013

 

(Dollars in thousands)

 

Amortized Cost

 

Fair Value

 

Due in one year or less

 

$

1,000

 

$

1,000

 

Due in 1-5 years

 

90

 

93

 

Due in 5-10 years

 

106

 

106

 

Due after 10 years

 

669,327

 

673,446

 

No stated maturity

 

1,642

 

2,443

 

Total

 

$

672,165

 

$

677,088

 

 

(4)  Loans and Leases

 

 

 

 

At March 31,

 

At December 31,

 

Percent

 

 

(Dollars in thousands)

 

2013

 

2012

 

Change

 

 

Consumer real estate:

 

 

 

 

 

 

 

 

First mortgage lien

 

$

4,136,823

 

$

4,239,524

 

(2.4)

%

 

Junior lien

 

2,281,843

 

2,434,977

 

(6.3)

 

 

Total consumer real estate

 

6,418,666

 

6,674,501

 

(3.8)

 

 

Commercial:

 

 

 

 

 

 

 

 

Commercial real estate:

 

 

 

 

 

 

 

 

Permanent

 

2,867,169

 

2,934,849

 

(2.3)

 

 

Construction and development

 

161,185

 

146,093

 

10.3 

 

 

Total commercial real estate

 

3,028,354

 

3,080,942

 

(1.7)

 

 

Commercial business

 

306,362

 

324,293

 

(5.5)

 

 

Total commercial

 

3,334,716

 

3,405,235

 

(2.1)

 

 

Leasing and equipment finance: (1)

 

 

 

 

 

 

 

 

Equipment finance loans

 

1,330,388

 

1,306,423

 

1.8 

 

 

Lease financings:

 

 

 

 

 

 

 

 

Direct financing leases

 

1,863,951

 

1,905,532

 

(2.2)

 

 

Sales-type leases

 

25,462

 

24,371

 

4.5 

 

 

Lease residuals

 

101,321

 

103,207

 

(1.8)

 

 

Unearned income and deferred lease costs

 

(135,888

)

(141,516

)

4.0 

 

 

Total lease financings

 

1,854,846

 

1,891,594

 

(1.9)

 

 

Total leasing and equipment finance

 

3,185,234

 

3,198,017

 

(.4)

 

 

Inventory finance

 

1,931,363

 

1,567,214

 

23.2 

 

 

Auto finance

 

719,666

 

552,833

 

30.2 

 

 

Other

 

23,701

 

27,924

 

(15.1)

 

 

Total loans and leases

 

$

15,613,346

 

$

15,425,724

 

1.2 

%

N.M. Not Meaningful.

(1) Operating leases of $82.4 million and $82.9 million at March 31, 2013 and December 31, 2012, respectively, are included in other assets in the Consolidated Statements of Financial Condition.

 

At March 31, 2013, the consumer real estate junior lien portfolio was comprised of $2 billion of home equity lines of credit (“HELOCs”) and $307.7 million of amortizing junior lien mortgage loans.  $1.3 billion of the HELOCs are interest-only revolving draw programs with no defined amortization period and draw periods of 5 to 40 years.  As of March 31, 2013, $628

 

7



Table of Contents

 

million had a 10-year interest-only draw period and a 20-year amortization repayment period and all are within the 10-year initial draw period, and as such, none of the HELOCs have converted to amortizing loans.

 

From time to time, TCF sells loans and minimum lease payments to third-party financial institutions at fixed rates.  For those transactions which achieve sale treatment, the related loan and lease cash flow stream is derecognized.  During the three months ended March 31, 2013 and 2012, TCF sold $11.1 million and $32.7 million, respectively, of loans and minimum lease payment receivables, received cash of $11 million and $33.5 million, respectively, and recognized a net loss of $14 thousand and a net gain of $808 thousand, for those respective periods. At March 31, 2013 and December 31, 2012, TCF’s lease residuals include $15.1 million and $14.8 million, respectively, related to all historical sales of minimum lease payment receivables and are included in other assets.

 

During the three months ended March 31, 2013 and 2012, TCF sold $179.8 million and $72 million, respectively, of consumer auto loans with servicing retained and received cash of $174.9 million and $70.3 million, respectively, resulting in gains of $7.1 million and $2.3 million, respectively.  Related to these sales, TCF retained interest-only strips of $13.6 million and $4.6 million for the three months ended March 31, 2013 and 2012, respectively.  At March 31, 2013, interest-only strips and contractual recourse liabilities related to sales of auto loans totaled $54.3 million and $2.8 million, respectively.  At December 31, 2012, interest-only strips and contractual recourse liabilities related to sales of auto loans totaled $46.7 million and $3.6 million, respectively.  No servicing assets or liabilities related to consumer auto loans were recorded within TCF’s Consolidated Statements of Financial Condition, as the contractual servicing fees are adequate to compensate TCF for its servicing responsibilities.  TCF’s auto loan managed portfolio, which includes portfolio loans, loans held for sale, and loans sold and serviced for others, totaled $1.5 billion and $1.3 billion at March 31, 2013 and December 31, 2012, respectively.

 

During the three months ended March 31, 2013, TCF sold $279.2 million of consumer real estate loans, with limited representations, indemnifications and limited credit guarantees and received cash of $279.3 million, while recognizing a net gain of $8.1 million.  Related to the sale of these loans, TCF retained an interest-only strip of $9.5 million.  At March 31, 2013, interest-only strips and contractual recourse liabilities related to sales of consumer real estate loans totaled $10.6 million and $563 thousand, respectively. No servicing assets or liabilities related to consumer auto loans were recorded within TCF’s Consolidated Statements of Financial Condition, as the contractual servicing fees are adequate to compensate TCF for its servicing responsibilities.

 

(5) Allowance for Loan and Lease Losses and Credit Quality Information

 

The following tables provide the allowance for loan and lease losses. TCF’s key credit quality indicator is the receivable’s performance status, defined as accruing or non-accruing.

 

(Dollars in thousands)

 

Consumer
Real Estate

 

Commercial

 

Leasing and
Equipment
Finance

 

Inventory
Finance

 

Auto
Finance

 

Other

 

Total

 

At or For the Three Months Ended March 31, 2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, at beginning of quarter

 

$

182,013

 

$

51,575

 

$

21,037

 

$

7,569

 

$

4,136

 

$

798

 

$

267,128

 

Charge-offs

 

(32,880

)

(8,251

)

(2,063

)

(417

)

(940

)

(2,145

)

(46,696

)

Recoveries

 

2,433

 

402

 

853

 

62

 

104

 

1,838

 

5,692

 

Net charge-offs

 

(30,447

)

(7,849

)

(1,210

)

(355

)

(836

)

(307

)

(41,004

)

Provision for credit losses

 

31,957

 

4,830

 

(2,286

)

1,625

 

2,114

 

143

 

38,383

 

Other

 

(836

)

-

 

-

 

(51

)

(24

)

-

 

(911

)

Balance, at end of quarter

 

$

182,687

 

$

48,556

 

$

17,541

 

$

8,788

 

$

5,390

 

$

634

 

$

263,596

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At or For the Three Months Ended March 31, 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, at beginning of quarter

 

$

183,435

 

$

46,954

 

$

21,173

 

$

2,996

 

$

-

 

$

1,114

 

$

255,672

 

Charge-offs

 

(37,161

)

(1,650

)

(1,776

)

(670

)

(2

)

(3,416

)

(44,675

)

Recoveries

 

1,473

 

126

 

1,625

 

27

 

-

 

2,491

 

5,742

 

Net charge-offs

 

(35,688

)

(1,524

)

(151

)

(643

)

(2

)

(925

)

(38,933

)

Provision for credit losses

 

36,078

 

5,014

 

515

 

5,191

 

1,021

 

723

 

48,542

 

Other

 

-

 

-

 

-

 

12

 

-

 

-

 

12

 

Balance, at end of quarter

 

$

183,825

 

$

50,444

 

$

21,537

 

$

7,556

 

$

1,019

 

$

912

 

$

265,293

 

 

8



Table of Contents

 

The following tables provide other information regarding the allowance for loan and lease losses and balances by type of allowance methodology.

 

 

 

At March 31, 2013

(Dollars in thousands)

 

Consumer
Real Estate

 

Commercial

 

Leasing and
Equipment
Finance

 

Inventory
Finance

 

Auto
Finance

 

Other

 

Total

Allowance for loan and lease losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Collectively evaluated for impairment

 

$

90,507

 

$

37,197

 

$

15,589

 

$

8,714

 

$

5,390

 

$

633

 

$

158,030

Individually evaluated for impairment

 

92,180

 

11,359

 

1,952

 

74

 

-

 

1

 

105,566

Total

 

$

182,687

 

$

48,556

 

$

17,541

 

$

8,788

 

$

5,390

 

$

634

 

$

263,596

Loans and leases outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Collectively evaluated for impairment

 

$

5,715,958

 

$

3,078,098

 

$

3,169,781

 

$

1,929,883

 

$

718,615

 

$

23,649

 

$

14,635,984

Individually evaluated for impairment

 

702,708

 

256,618

 

13,255

 

1,480

 

106

 

52

 

974,219

Loans acquired with deteriorated credit quality

 

-

 

-

 

2,198

 

-

 

945

 

-

 

3,143

Total

 

$

6,418,666

 

$

3,334,716

 

$

3,185,234

 

$

1,931,363

 

$

719,666

 

$

23,701

 

$

15,613,346

 

 

 

At December 31, 2012

(Dollars in thousands)

 

Consumer
Real Estate

 

Commercial

 

Leasing and
Equipment
Finance

 

Inventory
Finance

 

Auto
Finance

 

Other

 

Total

Allowance for loan and lease losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Collectively evaluated for impairment

 

$

181,139

 

$

37,210

 

$

20,337

 

$

7,339

 

$

4,136

 

$

798

 

$

250,959

Individually evaluated for impairment

 

874

 

14,365

 

700

 

230

 

-

 

-

 

16,169

Total

 

$

182,013

 

$

51,575

 

$

21,037

 

$

7,569

 

$

4,136

 

$

798

 

$

267,128

Loans and leases outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Collectively evaluated for impairment

 

$

6,669,424

 

$

3,133,011

 

$

3,187,393

 

$

1,565,727

 

$

551,456

 

$

27,924

 

$

15,134,935

Individually evaluated for impairment

 

5,077

 

272,224

 

7,754

 

1,487

 

101

 

-

 

286,643

Loans acquired with deteriorated credit quality

 

-

 

-

 

2,870

 

-

 

1,276

 

-

 

4,146

Total

 

$

6,674,501

 

$

3,405,235

 

$

3,198,017

 

$

1,567,214

 

$

552,833

 

$

27,924

 

$

15,425,724

 

Performing and Non-accrual Loans and Leases  The following tables set forth information regarding TCF’s performing and non-accrual loans and leases. Performing loans and leases are considered to have a lower risk of loss and are on accruing status and are less than 60 days delinquent. Non-accrual loans and leases along with loans and leases that are 60 days or more delinquent are those which management believes have a higher risk of loss than performing loans and leases. Delinquent balances are determined based on the contractual terms of the loan or lease. TCF’s key credit quality indicator is the receivable’s status as accruing or non-accruing.

 

 

 

At March 31, 2013

(In thousands)

 

Performing

 

60-89 Days
Delinquent
 and Accruing

 

90 Days or More
Delinquent and
Accruing

 

Total
Accruing

 

Non-Accrual

 

Total

Consumer real estate:

 

 

 

 

 

 

 

 

 

 

 

 

First mortgage lien

 

$

3,884,441

 

$

21,395

 

$

44,769

 

$

3,950,605

 

$

186,218

 

$

4,136,823

Junior lien

 

2,238,262

 

4,092

 

5,582

 

2,247,936

 

33,907

 

2,281,843

Total consumer real estate

 

6,122,703

 

25,487

 

50,351

 

6,198,541

 

220,125

 

6,418,666

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

2,927,137

 

906

 

-

 

2,928,043

 

100,311

 

3,028,354

Commercial business

 

298,168

 

-

 

-

 

298,168

 

8,194

 

306,362

Total commercial

 

3,225,305

 

906

 

-

 

3,226,211

 

108,505

 

3,334,716

Leasing and equipment finance:

 

 

 

 

 

 

 

 

 

 

 

 

Middle market

 

1,730,060

 

973

 

-

 

1,731,033

 

8,187

 

1,739,220

Small ticket

 

792,483

 

931

 

349

 

793,763

 

3,376

 

797,139

Winthrop

 

363,454

 

180

 

-

 

363,634

 

35

 

363,669

Other

 

265,801

 

28

 

-

 

265,829

 

97

 

265,926

Total leasing and equipment finance

 

3,151,798

 

2,112

 

349

 

3,154,259

 

11,695

 

3,165,954

Inventory finance

 

1,929,727

 

140

 

16

 

1,929,883

 

1,480

 

1,931,363

Auto finance

 

718,031

 

394

 

191

 

718,616

 

106

 

718,722

Other

 

22,224

 

-

 

-

 

22,224

 

1,477

 

23,701

Subtotal

 

15,169,788

 

29,039

 

50,907

 

15,249,734

 

343,388

 

15,593,122

Portfolios acquired with deteriorated credit quality

 

20,062

 

109

 

53

 

20,224

 

-

 

20,224

Total

 

$

15,189,850

 

$

29,148

 

$

50,960

 

$

15,269,958

 

$

343,388

 

$

15,613,346

 

9



Table of Contents

 

 

 

At December 31, 2012

(In thousands)

 

Performing

 

60-89 Days
Delinquent
and Accruing

 

90 Days or More
Delinquent and
Accruing

 

Total
Accruing

 

Non-Accrual

 

Total

Consumer real estate:

 

 

 

 

 

 

 

 

 

 

 

 

First mortgage lien

 

$

3,963,873

 

$

28,132

 

$

47,888

 

$

4,039,893

 

$

199,631

 

$

4,239,524

Junior lien

 

2,386,567

 

6,170

 

6,971

 

2,399,708

 

35,269

 

2,434,977

Total consumer real estate

 

6,350,440

 

34,302

 

54,859

 

6,439,601

 

234,900

 

6,674,501

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

2,960,383

 

604

 

1,655

 

2,962,642

 

118,300

 

3,080,942

Commercial business

 

314,476

 

17

 

354

 

314,847

 

9,446

 

324,293

Total commercial

 

3,274,859

 

621

 

2,009

 

3,277,489

 

127,746

 

3,405,235

Leasing and equipment finance:

 

 

 

 

 

 

 

 

 

 

 

 

Middle market

 

1,725,252

 

796

 

16

 

1,726,064

 

9,446

 

1,735,510

Small ticket

 

795,881

 

1,844

 

518

 

798,243

 

3,989

 

802,232

Winthrop

 

372,933

 

22

 

-

 

372,955

 

116

 

373,071

Other

 

261,678

 

64

 

-

 

261,742

 

101

 

261,843

Total leasing and equipment finance

 

3,155,744

 

2,726

 

534

 

3,159,004

 

13,652

 

3,172,656

Inventory finance

 

1,565,608

 

109

 

10

 

1,565,727

 

1,487

 

1,567,214

Auto finance

 

550,923

 

228

 

304

 

551,455

 

101

 

551,556

Other

 

26,322

 

20

 

11

 

26,353

 

1,571

 

27,924

Subtotal

 

14,923,896

 

38,006

 

57,727

 

15,019,629

 

379,457

 

15,399,086

Portfolios acquired with deteriorated credit quality

 

26,348

 

221

 

69

 

26,638

 

-

 

26,638

Total

 

$

14,950,244

 

$

38,227

 

$

57,796

 

$

15,046,267

 

$

379,457

 

$

15,425,724

 

The following table provides interest income recognized on loans and leases in non-accrual status and contractual interest that would have been recorded had the loans and leases performed in accordance with their original contractual terms.

 

 

 

Three Months Ended

 

 

March 31,

(Dollars in thousands)

 

2013

 

2012

Contractual interest due on non-accrual loans and leases

 

$

9,700 

 

$

9,019 

Interest income recognized on loans and leases in non-accrual status

 

4,225 

 

1,924 

Foregone interest income

 

$

5,475 

 

$

7,095 

 

The following table provides information regarding consumer real estate loans to customers currently involved in Chapter 7 and Chapter 13 bankruptcy proceedings which have not yet been discharged or completed by the courts.

 

(Dollars in thousands)

 

At March 31, 2013

 

At December 31, 2012

Consumer real estate loans to customers in bankruptcy:

 

 

 

 

0-59 days delinquent and accruing

 

$

68,851

 

$

69,170 

60+ days delinquent and accruing

 

562

 

644 

Non-accrual

 

15,225

 

18,982 

Total consumer real estate loans to customers in bankruptcy

 

$

84,638

 

$

88,796 

 

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Table of Contents

 

Loan Modifications for Borrowers with Financial Difficulties    Included within the loans and leases in previous tables are certain loans that have been modified in order to maximize collection of loan balances. If, for economic or legal reasons related to the customer’s financial difficulties, TCF grants a concession, the modified loan is classified as a troubled debt restructuring (“TDR”).

 

The following tables provide a summary of accruing and non-accrual TDR loans by portfolio.

 

 

 

At March 31, 2013

 

(Dollars in thousands)

 

Accruing
TDR Loans

 

Non-Accrual
TDR Loans

 

Total TDR
Loans

 

Consumer real estate

 

$

507,402

 

$

167,178

 

$

674,580

 

Commercial

 

131,351

 

73,010

 

204,361

 

Leasing and equipment finance

 

989

 

2,780

 

3,769

 

Auto finance

 

-

 

106

 

106

 

Other

 

45

 

7

 

52

 

Total

 

$

639,787

 

$

243,081

 

$

882,868

 

 

 

 

At December 31, 2012

 

(Dollars in thousands)

 

Accruing
TDR Loans

 

Non-Accrual
TDR Loans

 

Total TDR
Loans

 

Consumer real estate

 

$

478,262

 

$

173,587

 

$

651,849

 

Commercial

 

144,508

 

92,311

 

236,819

 

Leasing and equipment finance

 

1,050

 

2,794

 

3,844

 

Auto finance

 

-

 

101

 

101

 

Other

 

38

 

-

 

38

 

Total

 

$

623,858

 

$

268,793

 

$

892,651

 

 

The amount of additional funds committed to consumer real estate and commercial borrowers in TDR status was $4.4 million and $8.6 million at March 31, 2013 and December 31, 2012, respectively. At March 31, 2013 and December 31, 2012, no additional funds were committed to leasing and equipment finance borrowers in TDR status.

 

When a loan is modified as a TDR, principal balances are generally not forgiven. Loan modifications are not reported as TDR loans in calendar years after modification if the loans were modified at an interest rate equal to the yields of new loan originations with comparable risk and the loans are performing based on the terms of the restructuring agreements. All loans classified as TDR loans are considered to be impaired. During the three months ended March 31, 2013, $17.1 million of commercial loans were removed from TDR status.

 

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Table of Contents

 

The financial effects of TDR loans are presented in the following tables and represent the difference between interest income recognized on accruing TDR loans and the contractual interest that would have been recorded under the original contractual terms.

 

 

 

Three Months Ended March 31,

 

 

2013

 

2012

(Dollars in thousands)

 

Original
Contractual
Interest Due
on TDR Loans

 

Interest Income
Recognized
on TDR Loans

 

Foregone
Interest
Income

 

Original
Contractual
Interest Due
on TDR Loans

 

Interest Income
Recognized
on TDR Loans

 

Foregone
Interest
Income

Consumer real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

First mortgage lien

 

$

7,787

 

$