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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, 2014

 

or

 

[  ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

 

Commission File No. 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.

 

 

 

Outstanding at

Class

 

April 30, 2014

Common Stock, $.01 par value

 

166,627,912 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, 2014 and December 31, 2013

1

 

 

Consolidated Statements of Income for the
Three Months Ended March 31, 2014 and 2013

2

 

 

Consolidated Statements of Comprehensive Income for the
Three Months Ended March 31, 2014 and 2013

3

 

 

Consolidated Statements of Equity for the
Three Months Ended March 31, 2014 and 2013

4

 

 

Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 2014 and 2013

5

 

 

Notes to Consolidated Financial Statements

6

 

 

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

33

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

50

 

 

Item 4. Controls and Procedures

51

 

 

Part II. Other Information

 

 

 

Items 1 - 6

52

 

 

Signatures

54

 

 

Index to Exhibits

55

 



Table of Contents

 

PART I – 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)

 

2014

 

2013

 

 

 

(Unaudited)

 

 

 

Assets

 

 

 

 

 

Cash and due from banks

 

$

866,931

 

$

915,076

 

Investments

 

94,415

 

94,326

 

Securities held to maturity

 

216,868

 

19,912

 

Securities available for sale

 

391,882

 

551,064

 

Loans and leases held for sale

 

114,886

 

79,768

 

Loans and leases:

 

 

 

 

 

Consumer real estate:

 

 

 

 

 

First mortgage lien

 

3,668,245

 

3,766,421

 

Junior lien

 

2,407,286

 

2,572,905

 

Total consumer real estate

 

6,075,531

 

6,339,326

 

Commercial

 

3,136,421

 

3,148,352

 

Leasing and equipment finance

 

3,456,759

 

3,428,755

 

Inventory finance

 

2,123,808

 

1,664,377

 

Auto finance

 

1,400,527

 

1,239,386

 

Other

 

22,550

 

26,743

 

Total loans and leases

 

16,215,596

 

15,846,939

 

Allowance for loan and lease losses

 

(247,046

)

(252,230

)

Net loans and leases

 

15,968,550

 

15,594,709

 

Premises and equipment, net

 

440,840

 

437,602

 

Goodwill

 

225,640

 

225,640

 

Other assets

 

440,515

 

461,743

 

Total assets

 

$

18,760,527

 

$

18,379,840

 

Liabilities and Equity

 

 

 

 

 

Deposits:

 

 

 

 

 

Checking

 

$

5,234,092

 

$

4,980,451

 

Savings

 

6,145,676

 

6,194,003

 

Money market

 

810,148

 

831,910

 

Certificates of deposit

 

2,611,589

 

2,426,412

 

Total deposits

 

14,801,505

 

14,432,776

 

Short-term borrowings

 

180,583

 

4,918

 

Long-term borrowings

 

1,269,698

 

1,483,325

 

Total borrowings

 

1,450,281

 

1,488,243

 

Accrued expenses and other liabilities

 

486,916

 

494,062

 

Total liabilities

 

16,738,702

 

16,415,081

 

Equity:

 

 

 

 

 

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

 

263,240

 

263,240

 

Common stock, par value $.01 per share, 280,000,000 shares authorized; 166,170,236 and 165,164,861 shares issued, respectively

 

1,662

 

1,652

 

Additional paid-in capital

 

797,418

 

779,641

 

Retained earnings, subject to certain restrictions

 

1,009,611

 

977,846

 

Accumulated other comprehensive loss

 

(20,556

)

(27,213

)

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

 

(50,834

)

(42,198

)

Total TCF Financial Corporation stockholders’ equity

 

2,000,541

 

1,952,968

 

Non-controlling interest in subsidiaries

 

21,284

 

11,791

 

Total equity

 

2,021,825

 

1,964,759

 

Total liabilities and equity

 

$

18,760,527

 

$

18,379,840

 

 

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,

 

(In thousands, except per-share data)

 

2014

 

2013

 

Interest income:

 

 

 

 

 

Loans and leases

 

$

202,537

 

$

204,905

 

Securities available for sale

 

3,163

 

4,795

 

Securities held to maturity

 

964

 

64

 

Investments and other

 

7,963

 

5,786

 

Total interest income

 

214,627

 

215,550

 

Interest expense:

 

 

 

 

 

Deposits

 

8,037

 

9,681

 

Borrowings

 

5,316

 

6,778

 

Total interest expense

 

13,353

 

16,459

 

Net interest income

 

201,274

 

199,091

 

Provision for credit losses

 

14,492

 

38,383

 

Net interest income after provision for credit losses

 

186,782

 

160,708

 

Non-interest income:

 

 

 

 

 

Fees and service charges

 

36,619

 

39,323

 

Card revenue

 

12,250

 

12,417

 

ATM revenue

 

5,319

 

5,505

 

Subtotal

 

54,188

 

57,245

 

Leasing and equipment finance

 

22,288

 

16,460

 

Gains on sales of auto loans, net

 

8,470

 

7,146

 

Gains on sales of consumer real estate loans, net

 

11,706

 

8,126

 

Other

 

6,381

 

3,726

 

Fees and other revenue

 

103,033

 

92,703

 

Gains on securities, net

 

374

 

-

 

Total non-interest income

 

103,407

 

92,703

 

Non-interest expense:

 

 

 

 

 

Compensation and employee benefits

 

115,089

 

104,229

 

Occupancy and equipment

 

34,839

 

32,875

 

FDIC insurance

 

7,563

 

7,710

 

Operating lease depreciation

 

6,227

 

5,635

 

Advertising and marketing

 

5,478

 

5,732

 

Deposit account premiums

 

418

 

602

 

Other

 

41,335

 

37,939

 

Subtotal

 

210,949

 

194,722

 

Foreclosed real estate and repossessed assets, net

 

6,068

 

10,167

 

Other credit costs, net

 

119

 

(837

)

Total non-interest expense

 

217,136

 

204,052

 

Income before income tax expense

 

73,053

 

49,359

 

Income tax expense

 

26,579

 

17,559

 

Income after income tax expense

 

46,474

 

31,800

 

Income attributable to non-controlling interest

 

1,717

 

1,826

 

Net income attributable to TCF Financial Corporation

 

44,757

 

29,974

 

Preferred stock dividends

 

4,847

 

4,524

 

Net income available to common stockholders

 

$

39,910

 

$

25,450

 

Net income per common share:

 

 

 

 

 

Basic

 

$

.25

 

$

.16

 

Diluted

 

$

.24

 

$

.16

 

 

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,

 

(In thousands)

 

2014

 

2013

 

Net income attributable to TCF Financial Corporation

 

$

44,757

 

$

29,974

 

Other comprehensive income (loss):

 

 

 

 

 

Securities available for sale:

 

 

 

 

 

Unrealized gains (losses) arising during the period

 

11,492

 

(13,829

)

Reclassification of losses to net income

 

197

 

-

 

Foreign currency hedge:

 

 

 

 

 

Unrealized gains arising during the period

 

1,210

 

537

 

Foreign currency translation adjustment:

 

 

 

 

 

Unrealized losses arising during the period

 

(1,376

)

(622

)

Recognized postretirement prior service cost and transition obligation:

 

 

 

 

 

Net actuarial losses arising during the period

 

(12

)

(12

)

Income tax (expense) benefit

 

(4,854

)

5,019

 

Total other comprehensive income (loss)

 

6,657

 

(8,907

)

Comprehensive income

 

$

51,414

 

$

21,067

 

 

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

 

(Loss) Income

 

and Other

 

Total

 

Interests

 

Equity

 

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

)

Net investment by 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

)

Net 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2013

 

4,006,900

 

165,164,861

 

$

263,240

 

$

1,652

 

$

779,641

 

$

977,846

 

$

(27,213

)

$

(42,198

)

$

1,952,968

 

$

11,791

 

$

1,964,759

 

Net income attributable to TCF Financial Corporation

 

-

 

-

 

-

 

-

 

-

 

44,757

 

-

 

-

 

44,757

 

1,717

 

46,474

 

Other comprehensive income

 

-

 

-

 

-

 

-

 

-

 

-

 

6,657

 

-

 

6,657

 

-

 

6,657

 

Net investment by non-controlling interest

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

7,776

 

7,776

 

Dividends on preferred stock

 

-

 

-

 

-

 

-

 

-

 

(4,847

)

-

 

-

 

(4,847

)

-

 

(4,847

)

Dividends on common stock

 

-

 

-

 

-

 

-

 

-

 

(8,145

)

-

 

-

 

(8,145

)

-

 

(8,145

)

Grants of restricted stock

 

-

 

575,848

 

-

 

5

 

(5

)

-

 

-

 

-

 

-

 

-

 

-

 

Common shares purchased by TCF employee benefit plans

 

-

 

462,719

 

-

 

5

 

7,449

 

-

 

-

 

-

 

7,454

 

-

 

7,454

 

Cancellation of shares of restricted stock

 

-

 

(10,720

)

-

 

-

 

(62

)

-

 

-

 

-

 

(62

)

-

 

(62

)

Cancellation of common shares for tax withholding

 

-

 

(22,472

)

-

 

-

 

(365

)

-

 

-

 

-

 

(365

)

-

 

(365

)

Net amortization of stock compensation

 

-

 

-

 

-

 

-

 

1,663

 

-

 

-

 

-

 

1,663

 

-

 

1,663

 

Stock compensation tax benefit

 

-

 

-

 

-

 

-

 

461

 

-

 

-

 

-

 

461

 

-

 

461

 

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

 

-

 

-

 

-

 

-

 

8,636

 

-

 

-

 

(8,636

)

-

 

-

 

-

 

Balance, March 31, 2014

 

4,006,900

 

166,170,236

 

$

263,240

 

$

1,662

 

$

797,418

 

$

1,009,611

 

$

(20,556

)

$

(50,834

)

$

2,000,541

 

$

21,284

 

$

2,021,825

 

 

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,

 

(In thousands)

 

2014

 

2013

 

Cash flows from operating activities:

 

 

 

 

 

Net income attributable to TCF Financial Corporation

 

$

44,757

 

$

29,974

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Provision for credit losses

 

14,492

 

38,383

 

Depreciation and amortization

 

29,419

 

29,940

 

Proceeds from sales of loans and leases held for sale

 

98,253

 

51,049

 

Gains on sales of assets, net

 

(23,133

)

(15,476

)

Net income attributable to non-controlling interest

 

1,717

 

1,826

 

Originations of loans held for sale, net of repayments

 

(132,669

)

(62,072

)

Net increase in other assets and accrued expenses and other liabilities

 

20,101

 

11,433

 

Other, net

 

(7,521

)

4,806

 

Net cash provided by operating activities

 

45,416

 

89,863

 

Cash flows from investing activities:

 

 

 

 

 

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

 

(741,464

)

(487,128

)

Purchases of equipment for lease financing

 

(202,405

)

(196,996

)

Purchase of inventory finance portfolios

 

-

 

(9,658

)

Proceeds from sales of loans

 

527,892

 

406,304

 

Proceeds from sales of lease receivables

 

5,057

 

8,213

 

Proceeds from sales of securities

 

1,047

 

-

 

Purchases of securities

 

(36,571

)

(10,216

)

Proceeds from maturities of and principal collected on securities

 

9,523

 

31,247

 

Purchases of Federal Home Loan Bank stock

 

(29,000

)

(223

)

Redemption of Federal Home Loan Bank stock

 

28,922

 

226

 

Proceeds from sales of real estate owned

 

19,425

 

40,832

 

Purchases of premises and equipment

 

(12,573

)

(9,683

)

Other, net

 

6,559

 

5,921

 

Net cash used in investing activities

 

(423,588

)

(221,161

)

Cash flows from financing activities:

 

 

 

 

 

Net increase in deposits

 

365,362

 

249,318

 

Net increase in short-term borrowings

 

175,665

 

1,098

 

Proceeds from long-term borrowings

 

542,210

 

6,347

 

Payments on long-term borrowings

 

(705,909

)

(10,924

)

Redemption of subordinated debt

 

(50,000

)

-

 

Net investment by non-controlling interest

 

7,776

 

5,837

 

Dividends paid on preferred stock

 

(4,847

)

(4,524

)

Dividends paid on common stock

 

(8,145

)

(8,035

)

Stock compensation tax benefit (expense)

 

461

 

(309

)

Common shares sold to TCF employee benefit plans

 

7,454

 

5,890

 

Net cash provided by financing activities

 

330,027

 

244,698

 

Net (decrease) increase in cash and due from banks

 

(48,145

)

113,400

 

Cash and due from banks at beginning of period

 

915,076

 

1,100,347

 

Cash and due from banks at end of period

 

$

866,931

 

$

1,213,747

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

Cash paid for:

 

 

 

 

 

Interest on deposits and borrowings

 

$

12,119

 

$

16,846

 

Income taxes, net

 

$

6,156

 

$

4,186

 

Transfer of loans to other assets

 

$

20,248

 

$

31,337

 

Transfer of securities available for sale to securities held to maturity

 

$

191,665

 

$

-

 

 

See accompanying notes to consolidated financial statements.

 

5



Table of Contents

 

TCF FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

 

Note 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 at December 31, 2013, 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, 2013, remain unchanged and will be followed similarly as in previous periods. The Company’s securities held to maturity policy shown below became significant in the first quarter of 2014.

 

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.

 

Other Significant Accounting Policies

 

Securities Held to Maturity Securities held to maturity are carried at cost and adjusted for amortization of premiums or accretion of discounts using a level yield method; however, transfers of securities available for sale to securities held to maturity are made at fair value at the date of transfer. The unrealized holding gain or loss at the date of each transfer is retained in accumulated other comprehensive income (loss) and in the carrying value of the held to maturity investment security. Such amounts are then amortized over the remaining life of the transferred security as an adjustment of the yield on those securities. TCF periodically evaluates securities held to maturity for other than temporary impairment. Declines in value considered other than temporary, if any, would be recorded as non-interest income within gains on securities, net.

 

Note 2.  Cash and Due from Banks

 

At March 31, 2014 and December 31, 2013, TCF Bank was required by Federal Reserve regulations to maintain reserves of $90.2 million and $95.5 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 primarily related to the sale and servicing of auto loans and consumer real estate loans. Cash payments received on 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 as well as cash for collateral on certain borrowings and foreign exchange contracts. TCF maintained restricted cash totaling $60.2 million and $46.1 million at March 31, 2014 and December 31, 2013, respectively.

 

6



Table of Contents

 

Note 3.  Securities Available for Sale and Securities Held to Maturity

 

Securities consisted of the following.

 

 

 

At March 31, 2014

 

At December 31, 2013

 

 

 

 

 

Gross

 

Gross

 

 

 

 

 

Gross

 

Gross

 

 

 

 

 

Amortized

 

Unrealized

 

Unrealized

 

Fair

 

Amortized

 

Unrealized

 

Unrealized

 

Fair

 

(In thousands)

 

Cost

 

Gains

 

Losses

 

Value

 

Cost

 

Gains

 

Losses

 

Value

 

Securities available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government sponsored enterprises and federal agencies

 

$

405,570

 

$

408

 

$

16,033

 

$

389,945

 

$

592,283

 

$

1,131

 

$

45,377

 

$

548,037

 

Other

 

87

 

-

 

-

 

87

 

93

 

-

 

-

 

93

 

Other securities

 

969

 

888

 

7

 

1,850

 

1,642

 

1,292

 

-

 

2,934

 

Total securities available for sale

 

$

406,626

 

$

1,296

 

$

16,040

 

$

391,882

 

$

594,018

 

$

2,423

 

$

45,377

 

$

551,064

 

Weighted-average yield

 

2.77

 %

 

 

 

 

 

 

2.65

 %

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities held to maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government sponsored enterprises and federal agencies

 

$

211,694

 

$

88

 

$

2,394

 

$

209,388

 

$

14,610

 

$

-

 

$

-

 

$

14,610

 

Other securities

 

5,174

 

-

 

-

 

5,174

 

5,302

 

-

 

-

 

5,302

 

Total securities held to maturity

 

$

216,868

 

$

88

 

$

2,394

 

$

214,562

 

$

19,912

 

$

-

 

$

-

 

$

19,912

 

Weighted-average yield

 

2.65

 %

 

 

 

 

 

 

3.43

 %

 

 

 

 

 

 

 

Gross realized gains of $374 thousand were recognized on sales of securities available for sale during the three months ended March 31, 2014. There were no gains on sales of securities available for sale during the three months ended March 31, 2013. At March 31, 2014 and December 31, 2013, mortgage-backed securities available for sale of $13.8 million and $14.7 million, respectively, were pledged as collateral to secure certain deposits and borrowings. There were no impairment charges recognized on securities available for sale during the three months ended March 31, 2014 and 2013.

 

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.

 

During the three months ended March 31, 2014, TCF transferred $191.7 million of available for sale mortgage-backed securities to held to maturity, reflecting TCF’s intent to hold these securities to maturity. At March 31, 2014 and December 31, 2013, the unrealized holding loss on the transferred securities retained in accumulated other comprehensive income totaled $16.9 million and $331 thousand, respectively. These amounts are amortized over the remaining life of the transferred security. Other held to maturity securities primarily consist of non-trading mortgage-backed securities and other bonds which qualify for investment credit under the Community Reinvestment Act. There were no impairment charges recognized on held to maturity securities during the three months ended March 31, 2014 and 2013.

 

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Table of Contents

 

The following tables show the gross unrealized losses and fair value of securities available for sale and securities held to maturity that are in a loss position at March 31, 2014 and December 31, 2013, aggregated by investment category and length of time the securities were in a continuous loss position. There were no unrealized gains or losses for securities held to maturity at December 31, 2013.

 

 

 

At March 31, 2014

 

 

 

Less than 12 months

 

12 months or more

 

Total

 

 

 

 

 

Unrealized

 

 

 

Unrealized

 

 

 

Unrealized

 

(In thousands)

 

Fair Value

 

Losses

 

Fair Value

 

Losses

 

Fair Value

 

Losses

 

Securities available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government sponsored enterprises and federal agencies

 

$

355,396

 

$

16,033

 

$

-

 

$

-

 

$

355,396

 

$

16,033

 

Other securities

 

257

 

7

 

-

 

-

 

257

 

7

 

Total securities available for sale

 

$

355,653

 

$

16,040

 

$

-

 

$

-

 

$

355,653

 

$

16,040

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities held to maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government sponsored enterprises and federal agencies

 

$

195,681

 

$

2,394

 

$

-

 

$

-

 

$

195,681

 

$

2,394

 

Total securities held to maturity

 

$

195,681

 

$

2,394

 

$

-

 

$

-

 

$

195,681

 

$

2,394

 

 

 

 

At December 31, 2013

 

 

 

Less than 12 months

 

12 months or more

 

Total

 

 

 

 

 

Unrealized

 

 

 

Unrealized

 

 

 

Unrealized

 

(In thousands)

 

Fair Value

 

Losses

 

Fair Value

 

Losses

 

Fair Value

 

Losses

 

Securities available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government sponsored enterprises and federal agencies

 

$

353,449

 

$

22,678

 

$

156,472

 

$

22,699

 

$

509,921

 

$

45,377

 

Total securities available for sale

 

$

353,449

 

$

22,678

 

$

156,472

 

$

22,699

 

$

509,921

 

$

45,377

 

 

 

The amortized cost, fair value and yield of securities available for sale and securities held to maturity by contractual maturity, at March 31, 2014 and December 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, 2014

 

       At December 31, 2013

 

(Dollars in thousands)

 

Amortized Cost

 

Fair Value

 

Yield

 

Amortized Cost

 

Fair Value

 

Yield

 

Securities available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

Due in 1-5 years

 

$

128

 

$

129

 

5.11

  %

  $

138

 

$

140

 

5.24

%

Due in 5-10 years

 

33,623

 

33,985

 

2.06

 

24,328

 

24,543

 

2.17

 

Due after 10 years

 

371,906

 

355,918

 

2.83

 

567,910

 

523,447

 

2.67

 

No stated maturity

 

969

 

1,850

 

 

1,642

 

2,934

 

-

 

Total securities available for sale

 

$

406,626

 

$

391,882

 

2.77

  %

  $

594,018

 

$

551,064

 

2.65

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities held to maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

Due in 1-5 years

 

$

3,000

 

$

3,000

 

2.90

  %

  $

3,000

 

$

3,000

 

2.90

%

Due after 10 years

 

213,868

 

211,562

 

2.64

 

16,912

 

16,912

 

3.52

 

Total securities held to maturity

 

$

216,868

 

$

214,562

 

2.65

  %

  $

19,912

 

$

19,912

 

3.43

%

 

8



Table of Contents

 

Note 4.  Loans and Leases

 

Loans and leases consisted of the following.

 

 

 

At March 31,

 

At December 31,

 

 

Percent

 

(Dollars in thousands)

 

2014

 

2013

 

 

Change

 

Consumer real estate:

 

 

 

 

 

 

 

 

First mortgage lien

 

$

3,668,245

 

$

3,766,421

 

 

(2.6

) %

Junior lien

 

2,407,286

 

2,572,905

 

 

(6.4

)

Total consumer real estate

 

6,075,531

 

6,339,326

 

 

(4.2

)

Commercial:

 

 

 

 

 

 

 

 

Commercial real estate:

 

 

 

 

 

 

 

 

Permanent

 

2,512,067

 

2,604,673

 

 

(3.6

)

Construction and development

 

165,377

 

139,024

 

 

19.0

 

Total commercial real estate

 

2,677,444

 

2,743,697

 

 

(2.4

)

Commercial business

 

458,977

 

404,655

 

 

13.4

 

Total commercial

 

3,136,421

 

3,148,352

 

 

(.4

)

Leasing and equipment finance: (1)

 

 

 

 

 

 

 

 

Equipment finance loans

 

1,579,627

 

1,546,134

 

 

2.2

 

Lease financings:

 

 

 

 

 

 

 

 

Direct financing leases

 

1,837,220

 

1,846,829

 

 

(.5

)

Sales-type leases

 

63,157

 

61,125

 

 

3.3

 

Lease residuals

 

107,075

 

108,203

 

 

(1.0

)

Unearned income and deferred lease costs

 

(130,320

)

(133,536

)

 

2.4

 

Total lease financings

 

1,877,132

 

1,882,621

 

 

(.3

)

Total leasing and equipment finance

 

3,456,759

 

3,428,755

 

 

.8

 

Inventory finance

 

2,123,808

 

1,664,377

 

 

27.6

 

Auto finance

 

1,400,527

 

1,239,386

 

 

13.0

 

Other

 

22,550

 

26,743

 

 

(15.7

)

Total loans and leases

 

$

16,215,596

 

$

15,846,939

 

 

2.3

  %

(1)      Operating leases of $80.7 million and $77.7 million at March 31, 2014 and December 31, 2013, respectively, are included in other assets in the Consolidated Statements of Financial Condition.

 

At March 31, 2014 and December 31, 2013, the consumer real estate junior lien portfolio was comprised of $1.9 billion and $2.1 billion, respectively, of home equity lines of credit (“HELOCs”) and $492 million and $505.5 million, respectively, of amortizing junior lien mortgage loans. At March 31, 2014 and December 31, 2013, $933.5 million and $969.2 million, respectively, of the consumer real estate junior lien HELOCs were interest-only revolving draw programs with no defined amortization period and draw periods of 5 to 40 years. At March 31, 2014 and December 31, 2013, $981.8 million and $1.1 billion, respectively, had a 10-year interest-only draw period and a 20-year amortization repayment period and all were within the 10-year initial draw period, and have not yet converted to amortizing loans.

 

During the three months ended March 31, 2014 and 2013, TCF sold $261.7 million and $179.8 million, respectively, of consumer auto loans with servicing retained, received cash of $267.2 million and $174.9 million, respectively, and recognized gains of $8.8 million and $7.1 million, respectively. Related to these sales, TCF retained interest-only strips of $4.5 million and $13.6 million for the three months ended March 31, 2014 and 2013, respectively. At March 31, 2014, interest-only strips and contractual recourse liabilities related to sales of auto loans totaled $59.7 million and $953 thousand, respectively. At December 31, 2013, interest-only strips and contractual recourse liabilities related to sales of auto loans totaled $64.9 million and $1.1 million, respectively. TCF recorded impairment charges related to auto finance interest-only strips of $1.2 million and $437 thousand during the three months ended March 31, 2014 and 2013, respectively. These impairments were related to higher prepayments than originally assumed. 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 based on the amount demanded by the marketplace. TCF’s auto loan managed portfolio, which includes portfolio loans, loans held for sale, and loans sold and serviced for others, totaled $2.7 billion and $2.4 billion at March 31, 2014 and December 31, 2013, respectively.

 

9



Table of Contents

 

During the three months ended March 31, 2014 and 2013, TCF sold $347.4 million and $279.2 million, respectively, of consumer real estate loans, received cash of $353 million and $279.3 million, respectively, and recognized gains of $11.7 million and $8.1 million, respectively. Related to these sales, TCF retained interest-only strips of $8.2 million and $9.5 million for the three months ended March 31, 2014 and 2013, respectively. At March 31, 2014, interest-only strips and contractual recourse liabilities related to sales of consumer real estate loans totaled $25.8 million and $563 thousand, respectively. At December 31, 2013, interest-only strips and contractual recourse liabilities related to sales of consumer real estate loans totaled $19.6 million and $563 thousand, respectively. TCF had no impairment charges recorded during the three months ended March 31, 2014 and March 31, 2013. No servicing assets or liabilities related to consumer real estate 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 based on the amount demanded by the marketplace. TCF’s consumer real estate loan managed portfolio, which includes portfolio loans, loans held for sale, and loans sold and serviced for others, totaled $7 billion at both March 31, 2014 and December 31, 2013.

 

From time to time, TCF sells leasing and equipment finance loans and minimum lease payments to third-party financial institutions at fixed rates. During the three months ended March 31, 2014 and 2013, TCF sold $11 million and $11.1 million, respectively, of loans and minimum lease payment receivables, received cash of $11.1 million and $11.2 million, respectively, and recognized net losses of $110 thousand and $103 thousand, respectively. Related to these sales, TCF had servicing liabilities of $233 thousand and $239 thousand for the three months ended March 31, 2014 and 2013, respectively. At both March 31, 2014 and December 31, 2013, TCF had total servicing liabilities related to leasing and equipment finance of $1.7 million. At both March 31, 2014 and 2013, TCF had lease residuals related to sales of outstanding minimum lease payments receivable of $15.2 million. TCF’s leasing and equipment finance loan managed portfolio, which includes portfolio loans, loans held for sale, operating leases, and loans sold and serviced for others, totaled $3.7 billion and $3.6 billion at March 31, 2014 and December 31, 2013, respectively.

 

TCF’s agreements to sell consumer real estate and auto loans typically contain certain representations and warranties regarding the loans sold. These representations and warranties generally relate to, among other things, the ownership of the loan, the validity, priority and perfection of the lien securing the loan, accuracy of information supplied to the buyer, the loan’s compliance with the criteria set forth in the agreement, payment delinquency, and compliance with applicable laws and regulations. TCF may be required to repurchase loans in the event of an unremedied breach of these representations or warranties. During the three months ended March 31, 2014 and 2013, losses related to repurchases pursuant to such representations and warranties were immaterial. The majority of such repurchases were of consumer auto loans where TCF typically has contractual agreements with the automobile dealership that originated the loan requiring the dealer to repurchase such contracts from TCF.

 

10



Table of Contents

 

Note 5.  Allowance for Loan and Lease Losses and Credit Quality Information

 

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

 

(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, 2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, at beginning of quarter

 

$

176,030

 

$

37,467

 

$

18,733

 

$

8,592

 

$

10,623

 

$

785

 

$

252,230

Charge-offs

 

(14,555)

 

(1,645)

 

(1,535)

 

(167)

 

(2,533)

 

(1,902)

 

(22,337)

Recoveries

 

1,852

 

135

 

786

 

301

 

257

 

1,590

 

4,921

Net (charge-offs) recoveries

 

(12,703)

 

(1,510)

 

(749)

 

134

 

(2,276)

 

(312)

 

(17,416)

Provision for credit losses

 

7,079

 

120

 

639

 

1,677

 

4,827

 

150

 

14,492

Other

 

(1,039)

 

(15)

 

-

 

(94)

 

(1,112)

 

-

 

(2,260)

Balance, at end of quarter

 

$

169,367

 

$

36,062

 

$

18,623

 

$

10,309

 

$

12,062

 

$

623

 

$

247,046

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

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

 

 

 

At March 31, 2014

(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

 

$

46,130

 

$

27,072

 

$

17,074

 

$

10,144

 

$

11,894

 

$

619

 

$

112,933

Individually evaluated for impairment

 

123,237

 

8,990

 

1,549

 

165

 

168

 

4

 

134,113

Total

 

$

169,367

 

$

36,062

 

$

18,623

 

$

10,309

 

$

12,062

 

$

623

 

$

247,046

Loans and leases outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Collectively evaluated for impairment

 

$

5,415,368

 

$

2,970,405

 

$

3,440,661

 

$

2,122,867

 

$

1,399,398

 

$

22,463

 

$

15,371,162

Individually evaluated for impairment

 

660,163

 

166,016

 

15,494

 

941

 

856

 

87

 

843,557

Loans acquired with deteriorated credit quality

 

-

 

-

 

604

 

-

 

273

 

-

 

877

Total

 

$

6,075,531

 

$

3,136,421

 

$

3,456,759

 

$

2,123,808

 

$

1,400,527

 

$

22,550

 

$

16,215,596

 

 

 

At December 31, 2013

(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

 

$

54,449

 

$

28,994

 

$

17,093

 

$

8,308

 

$

10,528

 

$

781

 

$

120,153

Individually evaluated for impairment

 

121,581

 

8,473

 

1,640

 

284

 

95

 

4

 

132,077

Total

 

$

176,030

 

$

37,467

 

$

18,733

 

$

8,592

 

$

10,623

 

$

785

 

$

252,230

Loans and leases outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Collectively evaluated for impairment

 

$

5,673,518

 

$

2,971,308

 

$

3,412,769

 

$

1,657,636

 

$

1,238,556

 

$

26,649

 

$

14,980,436

Individually evaluated for impairment

 

665,808

 

177,044

 

15,139

 

6,741

 

470

 

94

 

865,296

Loans acquired with deteriorated credit quality

 

-

 

-

 

847

 

-

 

360

 

-

 

1,207

Total

 

$

6,339,326

 

$

3,148,352

 

$

3,428,755

 

$

1,664,377

 

$

1,239,386

 

$

26,743

 

$

15,846,939

 

11



Table of Contents

 

Accruing and Non-accrual Loans and Leases  The following tables set forth information regarding TCF’s accruing and non-accrual loans and leases. Non-accrual loans and leases are those which management believes have a higher risk of loss than accruing 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 payment performance status as accruing or non-accruing.

 

 

 

At March 31, 2014

(In thousands)

 

Current-59 Days
Delinquent and
Accruing

 

60-89 Days
Delinquent
and Accruing

 

90 Days or More
Delinquent and
Accruing

 

Total
Accruing

 

Non-accrual

 

Total

Consumer real estate:

 

 

 

 

 

 

 

 

 

 

 

 

First mortgage lien

 

$

3,471,353

 

$

19,071

 

$

980

 

$

3,491,404

 

$

176,841

 

$

3,668,245

Junior lien

 

2,364,015

 

4,049

 

-

 

2,368,064

 

39,222

 

2,407,286

Total consumer real estate

 

5,835,368

 

23,120

 

980

 

5,859,468

 

216,063

 

6,075,531

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

2,643,509

 

-

 

1,905

 

2,645,414

 

32,030

 

2,677,444

Commercial business

 

455,798

 

-

 

-

 

455,798

 

3,179

 

458,977

Total commercial

 

3,099,307

 

-

 

1,905

 

3,101,212

 

35,209

 

3,136,421

Leasing and equipment finance

 

3,434,145

 

2,360

 

737

 

3,437,242

 

13,908

 

3,451,150

Inventory finance

 

2,123,289

 

44

 

168

 

2,123,501

 

307

 

2,123,808

Auto finance

 

1,397,844

 

989

 

565

 

1,399,398

 

856

 

1,400,254

Other

 

22,211

 

3