Toggle SGML Header (+)


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, 2015

 

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 29, 2015

 

 

 

Common Stock, $.01 par value

 

168,920,969 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, 2015 and December 31, 2014

 

1

 

 

 

Consolidated Statements of Income for the
Three Months Ended March 31, 2015 and 2014

 

2

 

 

 

Consolidated Statements of Comprehensive Income for the
Three Months Ended March 31, 2015 and 2014

 

3

 

 

 

Consolidated Statements of Equity for the
Three Months Ended March 31, 2015 and 2014

 

4

 

 

 

Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 2015 and 2014

 

5

 

 

 

Notes to Consolidated Financial Statements

 

6

 

 

 

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

 

36

 

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

54

 

 

 

Item 4. Controls and Procedures

 

55

 

 

 

Part II. Other Information

 

 

 

 

 

Items 1 - 6

 

56

 

 

 

Signatures

 

58

 

 

 

Index to Exhibits

 

59

 



Table of Contents

 

PART I – FINANCIAL INFORMATION

Item 1.  Financial Statements

TCF FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Financial Condition

 

(Dollars in thousands, except per-share data)

 

At March 31,
2015

 

At December 31,
2014

 

 

 

(Unaudited)

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

925,146

 

$

1,115,250

 

 

 

 

 

 

 

Investments

 

79,495

 

85,492

 

 

 

 

 

 

 

Securities held to maturity

 

211,061

 

214,454

 

 

 

 

 

 

 

Securities available for sale

 

556,151

 

463,294

 

 

 

 

 

 

 

Loans and leases held for sale

 

223,787

 

132,266

 

 

 

 

 

 

 

Loans and leases:

 

 

 

 

 

 

 

 

 

 

 

Consumer real estate:

 

 

 

 

 

 

 

 

 

 

 

First mortgage lien

 

3,011,166

 

3,139,152

 

 

 

 

 

 

 

Junior lien

 

2,597,895

 

2,543,212

 

Total consumer real estate

 

5,609,061

 

5,682,364

 

 

 

 

 

 

 

Commercial

 

3,205,599

 

3,157,665

 

 

 

 

 

 

 

Leasing and equipment finance

 

3,729,386

 

3,745,322

 

 

 

 

 

 

 

Inventory finance

 

2,336,518

 

1,877,090

 

 

 

 

 

 

 

Auto finance

 

2,156,139

 

1,915,061

 

 

 

 

 

 

 

Other

 

20,448

 

24,144

 

 

 

 

 

 

 

Total loans and leases

 

17,057,151

 

16,401,646

 

 

 

 

 

 

 

Allowance for loan and lease losses

 

(163,799

)

(164,169

)

 

 

 

 

 

 

Net loans and leases

 

16,893,352

 

16,237,477

 

 

 

 

 

 

 

Premises and equipment, net

 

433,984

 

436,361

 

 

 

 

 

 

 

Goodwill

 

225,640

 

225,640

 

 

 

 

 

 

 

Other assets

 

435,957

 

484,377

 

 

 

 

 

 

 

Total assets

 

$

19,984,573

 

$

19,394,611

 

 

 

 

 

 

 

Liabilities and Equity:

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

 

Checking

 

$

5,487,311

 

$

5,195,243

 

 

 

 

 

 

 

Savings

 

5,148,993

 

5,212,320

 

 

 

 

 

 

 

Money market

 

2,261,761

 

1,993,130

 

 

 

 

 

 

 

Certificates of deposit

 

3,055,328

 

3,049,189

 

 

 

 

 

 

 

Total deposits

 

15,953,393

 

15,449,882

 

 

 

 

 

 

 

Short-term borrowings

 

8,348

 

4,425

 

 

 

 

 

 

 

Long-term borrowings

 

1,236,636

 

1,232,065

 

 

 

 

 

 

 

Total borrowings

 

1,244,984

 

1,236,490

 

 

 

 

 

 

 

Accrued expenses and other liabilities

 

604,514

 

572,875

 

 

 

 

 

 

 

Total liabilities

 

17,802,891

 

17,259,247

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

 

 

 

 

Preferred stock, par value $0.01 per share, 30,000,000 shares authorized;

 

 

 

 

 

 

 

 

 

 

 

4,006,900 issued

 

263,240

 

263,240

 

 

 

 

 

 

 

Common stock, par value $0.01 per share, 280,000,000 shares authorized;

 

 

 

 

 

 

 

 

 

 

 

168,141,710 and 167,503,568 shares issued, respectively

 

1,681

 

1,675

 

 

 

 

 

 

 

Additional paid-in capital

 

828,128

 

817,130

 

 

 

 

 

 

 

Retained earnings, subject to certain restrictions

 

1,126,627

 

1,099,914

 

 

 

 

 

 

 

Accumulated other comprehensive loss

 

(9,806

)

(10,910

)

 

 

 

 

 

 

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

 

(50,078

)

(49,400

)

 

 

 

 

 

 

Total TCF Financial Corporation stockholders’ equity

 

2,159,792

 

2,121,649

 

 

 

 

 

 

 

Non-controlling interest in subsidiaries

 

21,890

 

13,715

 

 

 

 

 

 

 

Total equity

 

2,181,682

 

2,135,364

 

 

 

 

 

 

 

Total liabilities and equity

 

$

19,984,573

 

$

19,394,611

 

 

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)

 

2015

 

2014

 

 

 

 

 

 

 

Interest income:

 

 

 

 

 

 

 

 

 

 

 

Loans and leases

 

$

205,976

 

$

202,537

 

 

 

 

 

 

 

Securities available for sale

 

3,080

 

3,163

 

 

 

 

 

 

 

Securities held to maturity

 

1,405

 

964

 

 

 

 

 

 

 

Investments and other

 

9,333

 

7,963

 

 

 

 

 

 

 

Total interest income

 

219,794

 

214,627

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

11,072

 

8,037

 

 

 

 

 

 

 

Borrowings

 

5,302

 

5,316

 

 

 

 

 

 

 

Total interest expense

 

16,374

 

13,353

 

 

 

 

 

 

 

Net interest income

 

203,420

 

201,274

 

 

 

 

 

 

 

Provision for credit losses

 

12,791

 

14,492

 

 

 

 

 

 

 

Net interest income after provision for credit losses

 

190,629

 

186,782

 

 

 

 

 

 

 

Non-interest income:

 

 

 

 

 

 

 

 

 

 

 

Fees and service charges

 

33,972

 

36,619

 

 

 

 

 

 

 

Card revenue

 

12,901

 

12,250

 

 

 

 

 

 

 

ATM revenue

 

5,122

 

5,319

 

 

 

 

 

 

 

Subtotal

 

51,995

 

54,188

 

 

 

 

 

 

 

Gains on sales of auto loans, net

 

6,265

 

8,470

 

 

 

 

 

 

 

Gains on sales of consumer real estate loans, net

 

8,763

 

11,706

 

 

 

 

 

 

 

Servicing fee income

 

7,342

 

4,307

 

 

 

 

 

 

 

Subtotal

 

22,370

 

24,483

 

 

 

 

 

 

 

Leasing and equipment finance

 

22,224

 

21,980

 

 

 

 

 

 

 

Other

 

4,127

 

2,382

 

 

 

 

 

 

 

Fees and other revenue

 

100,716

 

103,033

 

 

 

 

 

 

 

Gains (losses) on securities, net

 

(78

)

374

 

 

 

 

 

 

 

Total non-interest income

 

100,638

 

103,407

 

 

 

 

 

 

 

Non-interest expense:

 

 

 

 

 

 

 

 

 

 

 

Compensation and employee benefits

 

115,815

 

115,089

 

 

 

 

 

 

 

Occupancy and equipment

 

36,827

 

34,839

 

 

 

 

 

 

 

FDIC insurance

 

5,393

 

7,563

 

 

 

 

 

 

 

Operating lease depreciation

 

7,734

 

6,227

 

 

 

 

 

 

 

Advertising and marketing

 

6,523

 

5,896

 

 

 

 

 

 

 

Other

 

48,133

 

41,335

 

 

 

 

 

 

 

Subtotal

 

220,425

 

210,949

 

 

 

 

 

 

 

Foreclosed real estate and repossessed assets, net

 

6,196

 

6,068

 

 

 

 

 

 

 

Other credit costs, net

 

146

 

119

 

 

 

 

 

 

 

Total non-interest expense

 

226,767

 

217,136

 

 

 

 

 

 

 

Income before income tax expense

 

64,500

 

73,053

 

 

 

 

 

 

 

Income tax expense

 

22,828

 

26,579

 

 

 

 

 

 

 

Income after income tax expense

 

41,672

 

46,474

 

 

 

 

 

 

 

Income attributable to non-controlling interest

 

1,871

 

1,717

 

 

 

 

 

 

 

Net income attributable to TCF Financial Corporation

 

39,801

 

44,757

 

 

 

 

 

 

 

Preferred stock dividends

 

4,847

 

4,847

 

 

 

 

 

 

 

Net income available to common stockholders

 

$

34,954

 

$

39,910

 

 

 

 

 

 

 

Net income per common share:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.21

 

$

0.25

 

 

 

 

 

 

 

Diluted

 

$

0.21

 

$

0.24

 

 

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)

 

2015

 

2014

 

 

 

 

 

 

 

Net income attributable to TCF Financial Corporation

 

$

39,801

 

$

44,757

 

 

 

 

 

 

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

Securities available for sale:

 

 

 

 

 

 

 

 

 

 

 

Unrealized gains (losses) arising during the period

 

4,139

 

11,866

 

 

 

 

 

 

 

Reclassification of net (gains) losses to net income

 

304

 

(177

)

 

 

 

 

 

 

Net investment hedges:

 

 

 

 

 

 

 

 

 

 

 

Unrealized gains (losses) arising during the period

 

3,588

 

1,210

 

 

 

 

 

 

 

Foreign currency translation adjustment:

 

 

 

 

 

 

 

 

 

 

 

Unrealized gains (losses) arising during the period

 

(3,886

)

(1,376

)

 

 

 

 

 

 

Recognized postretirement prior service cost:

 

 

 

 

 

 

 

 

 

 

 

Reclassification of net (gains) losses to net income

 

(12

)

(12

)

 

 

 

 

 

 

Income tax (expense) benefit

 

(3,029

)

(4,854

)

 

 

 

 

 

 

 

 

 

 

 

 

Total other comprehensive income (loss)

 

1,104

 

6,657

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income (loss)

 

$

40,905

 

$

51,414

 

 

 

 

 

 

 

 

See accompanying notes to consolidated financial statements.

 

3



Table of Contents

 

TCF FINANCIAL CORPORATION AND SUBSIDIARIES

 

Consolidated Statements of Equity

 

(Unaudited)

 

 

 

 

TCF Financial Corporation

 

 

 

 

 

 

 

 

 

Number of
Shares Issued

 

 

Preferred

 

Common

 

Additional
Paid-in

 

Retained

 

Accumulated
Other
Comprehensive

 

Treasury
Stock

 

 

 

 

Non-
controlling

 

Total

 

(Dollars in thousands)

 

 

Preferred

 

Common

 

 

Stock

 

Stock

 

Capital

 

Earnings

 

Income (Loss)

 

and Other

 

Total

 

 

Interests

 

Equity

 

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 (loss)

 

 

 

 

 

 

 

 

 

6,657

 

 

6,657

 

 

 

6,657

 

Net investment by (distribution to) 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 (expense) 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2014

 

 

4,006,900

 

167,503,568

 

 

$

263,240

 

$

1,675

 

$

817,130

 

$

1,099,914

 

$

(10,910

)

$

(49,400

)

$

2,121,649

 

 

$

13,715

 

$

2,135,364

 

Net income attributable to TCF Financial Corporation

 

 

 

 

 

 

 

 

39,801

 

 

 

39,801

 

 

1,871

 

41,672

 

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

1,104

 

 

1,104

 

 

 

1,104

 

Net investment by (distribution to) non-controlling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

6,304

 

6,304

 

Dividends on preferred stock

 

 

 

 

 

 

 

 

(4,847

)

 

 

(4,847

)

 

 

(4,847

)

Dividends on common stock

 

 

 

 

 

 

 

 

(8,241

)

 

 

(8,241

)

 

 

(8,241

)

Grants of restricted stock

 

 

 

136,979

 

 

 

1

 

(1

)

 

 

 

 

 

 

 

Common shares purchased by TCF employee benefit plans

 

 

 

532,838

 

 

 

5

 

8,278

 

 

 

 

8,283

 

 

 

8,283

 

Cancellation of shares of restricted stock

 

 

 

(19,309

)

 

 

 

(51

)

 

 

 

(51

)

 

 

(51

)

Cancellation of common shares for tax withholding

 

 

 

(12,366

)

 

 

 

(192

)

 

 

 

(192

)

 

 

(192

)

Net amortization of stock compensation

 

 

 

 

 

 

 

2,152

 

 

 

 

2,152

 

 

 

2,152

 

Stock compensation tax (expense) benefit

 

 

 

 

 

 

 

134

 

 

 

 

134

 

 

 

134

 

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

 

 

 

 

 

 

 

678

 

 

 

(678

)

 

 

 

 

Balance, March 31, 2015

 

 

4,006,900

 

168,141,710

 

 

$

263,240

 

$

1,681

 

$

828,128

 

$

1,126,627

 

$

(9,806

)

$

(50,078

)

$

2,159,792

 

 

$

21,890

 

$

2,181,682

 

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)

 

 

2015

 

2014

 

 Cash flows from operating activities:

 

 

 

 

 

 

Net income attributable to TCF Financial Corporation

 

 

$

39,801

 

$

44,757

 

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

 

 

 

 

 

 

Provision for credit losses

 

 

12,791

 

14,492

 

Depreciation and amortization

 

 

36,804

 

29,419

 

Proceeds from sales of loans and leases held for sale

 

 

123,689

 

98,253

 

Gains on sales of assets, net

 

 

(17,202

)

(23,133

)

Net income attributable to non-controlling interest

 

 

1,871

 

1,717

 

Originations of loans held for sale, net of repayments

 

 

(218,630

)

(132,669

)

Net change in other assets and accrued expenses and other liabilities

 

 

(35,314

)

20,101

 

Other, net

 

 

(7,080

)

(7,521

)

Net cash provided by (used in) operating activities

 

 

(63,270

)

45,416

 

 Cash flows from investing activities:

 

 

 

 

 

 

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

 

 

(866,211

)

(741,464

)

Purchases of equipment for lease financing

 

 

(199,117

)

(202,405

)

Proceeds from sales of loans

 

 

364,386

 

527,892

 

Proceeds from sales of lease receivables

 

 

7,375

 

5,057

 

Proceeds from sales of securities

 

 

 

1,047

 

Purchases of securities

 

 

(88,067

)

(36,571

)

Proceeds from maturities of and principal collected on securities

 

 

19,468

 

9,523

 

Purchases of Federal Home Loan Bank stock

 

 

(27,000

)

(29,000

)

Redemption of Federal Home Loan Bank stock

 

 

33,004

 

28,922

 

Proceeds from sales of real estate owned

 

 

16,938

 

19,425

 

Purchases of premises and equipment

 

 

(8,414

)

(12,573

)

Other, net

 

 

8,708

 

6,559

 

Net cash provided by (used in) investing activities

 

 

(738,930

)

(423,588

)

 Cash flows from financing activities:

 

 

 

 

 

 

Net change in deposits

 

 

603,007

 

365,362

 

Net change in short-term borrowings

 

 

4,083

 

175,665

 

Proceeds from long-term borrowings

 

 

1,212,244

 

542,210

 

Payments on long-term borrowings

 

 

(1,208,871

)

(705,909

)

Redemption of subordinated debt

 

 

 

(50,000

)

Net investment by (distribution to) non-controlling interest

 

 

6,304

 

7,776

 

Dividends paid on preferred stock

 

 

(4,847

)

(4,847

)

Dividends paid on common stock

 

 

(8,241

)

(8,145

)

Stock compensation tax (expense) benefit

 

 

134

 

461

 

Common shares sold to TCF employee benefit plans

 

 

8,283

 

7,454

 

Net cash provided by (used in) financing activities

 

 

612,096

 

330,027

 

 Net change in cash and due from banks

 

 

(190,104

)

(48,145

)

 Cash and due from banks at beginning of period

 

 

1,115,250

 

915,076

 

 Cash and due from banks at end of period

 

 

$

925,146

 

$

866,931

 

 Supplemental disclosures of cash flow information:

 

 

 

 

 

 

Cash paid (received) for:

 

 

 

 

 

 

Interest on deposits and borrowings

 

 

$

13,442

 

$

12,119

 

Income taxes, net

 

 

(38,068

)

6,156

 

Transfer of loans to other assets

 

 

23,921

 

20,248

 

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 (“we,” “us,” “our,” “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. References herein to “TCF Financial” refer to TCF Financial Corporation on an unconsolidated basis.

 

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, 2014, and for the year then ended. All significant intercompany accounts and transactions have been eliminated in consolidation. Certain reclassifications have been made to prior period financial statements to conform to the current period presentation. Accounting policies in effect at December 31, 2014 remain significantly 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 significant 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.

 

Note 2.  Cash and Due from Banks

 

At March 31, 2015 and December 31, 2014, TCF Bank was required by Federal Reserve regulations to maintain reserves of $95.0 million and $98.7 million, respectively, in cash on hand or at the Federal Reserve Bank.

 

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 generally held in separate accounts until remitted. TCF also retains cash balances for collateral on certain borrowings, forward foreign exchange contracts and interest rate contracts. TCF maintained restricted cash totaling $91.9 million and $67.8 million at March 31, 2015 and December 31, 2014, respectively.

 

TCF had cash held in interest-bearing accounts of $628.6 million and $842.1 million at March 31, 2015 and December 31, 2014, respectively.

 

6



Table of Contents

 

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

 

Securities consisted of the following.

 

 

 

At March 31, 2015

 

At December 31, 2014

 

 

 

 

 

Gross

 

Gross

 

 

 

 

 

Gross

 

Gross

 

 

 

 

 

Amortized

 

Unrealized

 

Unrealized

 

Fair

 

Amortized

 

Unrealized

 

Unrealized

 

Fair

 

(Dollars 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

 

$

550,297

 

$

6,131

 

$

327

 

$

556,101

 

$

461,575

 

$

2,405

 

$

741

 

$

463,239

 

Other

 

50

 

 

 

50

 

55

 

 

 

55

 

Total securities available for sale

 

$

550,347

 

$

6,131

 

$

327

 

$

556,151

 

$

461,630

 

$

2,405

 

$

741

 

$

463,294

 

Weighted-average yield

 

2.50%

 

 

 

 

 

 

 

2.62%

 

 

 

 

 

 

 

Securities held to maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government sponsored enterprises and federal agencies

 

$

206,251

 

$

10,116

 

$

98

 

$

216,269

 

$

209,538

 

$

7,988

 

$

109

 

$

217,417

 

Other securities

 

4,810

 

 

 

4,810

 

4,916

 

 

 

4,916

 

Total securities held to maturity

 

$

211,061

 

$

10,116

 

$

98

 

$

 221,079

 

$

214,454

 

$

7,988

 

$

109

 

$

 222,333

 

Weighted-average yield

 

2.65%

 

 

 

 

 

 

 

2.64%

 

 

 

 

 

 

 

 

There were no sales of securities available for sale during the three months ended March 31, 2015. Gross realized gains of $0.4 million were recognized on sales of securities available for sale during the three months ended March 31, 2014. At March 31, 2015 and December 31, 2014, mortgage-backed securities with a carrying value of $8.0 million and $8.2 million, respectively, were pledged as collateral to secure certain deposits and borrowings. There were no impairment charges recognized on securities available for sale during both the three months ended March 31, 2015 and 2014. Unrealized losses on securities available for sale are due to changes in interest rates. TCF has the ability and intent to hold these investments until a recovery of fair value occurs.

 

There were no transfers from available for sale mortgage-backed securities to held to maturity during the three months ended March 31, 2015. 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 and ability to hold these securities to maturity. At March 31, 2015 and December 31, 2014, the unrealized holding loss on the transferred securities retained in accumulated other comprehensive loss totaled $15.7 million and $16.0 million, respectively. These amounts are amortized over the remaining lives of the transferred securities. Other held to maturity securities consist primarily of non-trading mortgage-backed securities and other bonds which qualify for investment credit under the Community Reinvestment Act. During the three months ended March 31, 2015, TCF recorded an impairment charge of $0.1 million on held to maturity securities, which had a carrying value of $4.8 million. There were no impairment charges recognized on held to maturity securities during the three months ended March 31, 2014.

 

7



Table of Contents

 

The following tables show the gross unrealized losses and fair value of securities available for sale and securities held to maturity at March 31, 2015 and December 31, 2014, aggregated by investment category and the length of time the securities were in a continuous loss position.

 

 

 

 

At March 31, 2015

 

 

 

 

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

 

 

$

56,688

 

$

327

 

$

 

$

 

$

56,688

 

$

327

 

Total securities available for sale

 

 

$

56,688

 

$

327

 

$

 

$

 

$

56,688

 

$

327

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities held to maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government sponsored enterprises and federal agencies

 

 

$

1,264

 

$

24

 

$

1,042

 

$

74

 

$

2,306

 

$

98

 

Total securities held to maturity

 

 

$

1,264

 

$

24

 

$

1,042

 

$

74

 

$

2,306

 

$

98

 

 

 

 

 

At December 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

 

 

$

 

$

 

$

198,550

 

$

741

 

$

198,550

 

$

741

 

Total securities available for sale

 

 

$

 

$

 

$

198,550

 

$

741

 

$

198,550

 

$

741

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities held to maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government sponsored enterprises and federal agencies

 

 

$

2,602

 

$

109

 

$

 

$

 

$

2,602

 

$

109

 

Total securities held to maturity

 

 

$

2,602

 

$

109

 

$

 

$

 

$

2,602

 

$

109

 

 

8



Table of Contents

 

The amortized cost, fair value and yield of securities available for sale and securities held to maturity by contractual maturity at March 31, 2015 and December 31, 2014 are shown below. The remaining contractual principal maturities do not consider possible prepayments. Remaining expected maturities will differ from contractual maturities because borrowers may have the right to prepay.

 

 

 

 

At March 31, 2015

 

 

At December 31, 2014

 

(Dollars in thousands)

 

Amortized
Cost

 

Fair Value

 

 

Yield

 

 

Amortized
Cost

 

Fair Value

 

 

Yield

 

Securities available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Due in one year or less

 

$

11

 

$

11

 

 

9.69

%

 

$

4

 

$

4

 

 

11.63

%

Due in 1-5 years

 

58

 

58

 

 

3.59

 

 

76

 

76

 

 

4.53

 

Due in 5-10 years

 

82,944

 

84,339

 

 

1.93

 

 

86,806

 

87,594

 

 

1.93

 

Due after 10 years

 

467,334

 

471,743

 

 

2.60

 

 

374,744

 

375,620

 

 

2.78

 

Total securities available for sale

 

$

550,347

 

$

556,151

 

 

2.50

 

 

$

461,630

 

$

463,294

 

 

2.62

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities held to maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Due in one year or less

 

$

 

$

 

 

%

 

$

500

 

$

500

 

 

2.00

%

Due in 1-5 years

 

1,500

 

1,500

 

 

2.80

 

 

2,500

 

2,500

 

 

3.08

 

Due in 5-10 years

 

1,900

 

1,900

 

 

3.00

 

 

400

 

400

 

 

3.00

 

Due after 10 years

 

207,661

 

217,679

 

 

2.65

 

 

211,054

 

218,933

 

 

2.64

 

Total securities held to maturity

 

$

211,061

 

$

221,079

 

 

2.65

 

 

$

214,454

 

$

222,333

 

 

2.64

 

 

Note 4.  Loans and Leases

 

Loans and leases consisted of the following.

 

(Dollars in thousands)

 

At March 31, 2015

 

At December 31, 2014

 

 

Percent Change

Consumer real estate:

 

 

 

 

 

 

 

 

First mortgage lien

 

$

3,011,166

 

$

3,139,152

 

 

(4.1

)%

Junior lien

 

2,597,895

 

2,543,212

 

 

2.2

 

Total consumer real estate

 

5,609,061

 

5,682,364

 

 

(1.3

)

Commercial:

 

 

 

 

 

 

 

 

Commercial real estate:

 

 

 

 

 

 

 

 

Permanent

 

2,338,202

 

2,382,144

 

 

(1.8

)

Construction and development

 

298,230

 

242,111

 

 

23.2

 

Total commercial real estate

 

2,636,432

 

2,624,255

 

 

0.5

 

Commercial business

 

569,167

 

533,410

 

 

6.7

 

Total commercial

 

3,205,599

 

3,157,665

 

 

1.5

 

Leasing and equipment finance

 

3,729,386

 

3,745,322

 

 

(0.4

)

Inventory finance

 

2,336,518

 

1,877,090

 

 

24.5

 

Auto finance

 

2,156,139

 

1,915,061

 

 

12.6

 

Other

 

20,448

 

24,144

 

 

(15.3

)

Total loans and leases(1)

 

$

17,057,151

 

$

16,401,646

 

 

4.0

 

 

(1)  Loans and leases are reported at historical cost including net direct fees and costs associated with originating and acquiring loans and leases, lease residuals, unearned income and unamortized purchase premiums and discounts. The aggregate amount of these loan and lease adjustments was $48.6 million and $43.4 million at March 31, 2015 and December 31, 2014, respectively.

 

9



Table of Contents

 

The consumer real estate junior lien portfolio was comprised of $2.2 billion of home equity lines of credit (“HELOCs”) and $404.9 million of amortizing junior lien mortgage loans at March 31, 2015, compared with $2.1 billion and $424.4 million at December 31, 2014, respectively. At March 31, 2015 and December 31, 2014, $1.4 billion and $1.3 billion, respectively, of the consumer real estate junior lien HELOCs had a 10-year interest-only draw period and a 20-year amortization repayment period and all were within the 10-year interest-only draw period and will not convert to amortizing loans until 2021 or later. At March 31, 2015 and December 31, 2014, $778.2 million and $816.0 million, respectively, of the consumer real estate junior lien HELOCs were interest-only revolving draw loans with no defined amortization period and original draw periods of 5 to 40 years. As of March 31, 2015, 18.2% of these loans mature prior to 2021.

 

During the three months ended March 31, 2015 and 2014, TCF sold $203.5 million and $261.7 million, respectively, of consumer auto loans with servicing retained, received cash of $210.5 million and $267.2 million, respectively, and recognized net gains of $6.7 million and $8.8 million, respectively. Related to these sales, TCF retained interest-only strips of $0 and $4.5 million for the three months ended March 31, 2015 and 2014, respectively. Total interest-only strips related to sales of auto loans totaled $41.1 million and $48.6 million at March 31, 2015 and December 31, 2014, respectively. TCF recorded impairment charges on these interest-only strips of $0.5 million and $1.2 million during the three months ended March 31, 2015 and 2014, respectively, primarily as a result of higher prepayments than originally assumed. Contractual recourse liabilities related to sales of auto loans totaled $0.4 million and $0.7 million at March 31, 2015 and December 31, 2014, 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 based on the amount demanded by the marketplace. TCF’s managed auto loan portfolio, which includes portfolio loans, loans held for sale and loans sold and serviced for others, totaled $4.2 billion and $3.8 billion at March 31, 2015 and December 31, 2014, respectively.

 

During the three months ended March 31, 2015 and 2014, TCF sold $264.3 million and $347.4 million, respectively, of consumer real estate loans, received cash of $271.0 million and $353.0 million, respectively, and recognized net gains of $8.2 million and $11.7 million, respectively. Related to these sales, TCF retained interest-only strips of $2.7 million and $8.2 million for the three months ended March 31, 2015 and 2014, respectively. Total interest-only strips related to sales of consumer real estate loans totaled $21.4 million and $21.2 million at March 31, 2015 and December 31, 2014, respectively. TCF had no impairment charges on these interest-only strips for the three months ended March 31, 2015 and 2014. Contractual recourse liabilities related to sales of consumer real estate loans totaled $0.6 million at both March 31, 2015 and December 31, 2014. 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 managed consumer real estate loan portfolio, which includes portfolio loans, loans held for sale and loans sold and serviced for others, totaled $7.1 billion at both March 31, 2015 and December 31, 2014.

 

TCF’s agreements to sell auto and consumer real estate 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, 2015 and 2014, 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 dealerships that originated the loans requiring the dealers to repurchase such contracts from TCF.

 

10



Table of Contents

 

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

 

The following table provides the allowance for loan and lease losses and other related information. 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, 2015:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, beginning of period

 

$

85,361

 

$

31,367

 

$

18,446

 

$

10,020

 

$

18,230

 

$

745

 

$

164,169

 

Charge-offs

 

(9,206

)

(876

)

(1,876

)

(528

)

(3,961

)

(1,677

)

(18,124

)

Recoveries

 

1,925

 

1,397

 

985

 

109

 

610

 

1,561

 

6,587

 

Net (charge-offs) recoveries

 

(7,281

)

521

 

(891

)

(419

)

(3,351

)

(116

)

(11,537

)

Provision for credit losses

 

2,819

 

233

 

366

 

3,032

 

6,340

 

1

 

12,791

 

Other

 

(607

)

 

 

(224

)

(793

)

 

(1,624

)

Balance, end of period

 

$

80,292

 

$

32,121

 

$

17,921

 

$

12,409

 

$

20,426

 

$

630

 

$

163,799

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At or For the Three Months Ended March 31, 2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, beginning of period

 

$

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, end of period

 

$

169,367

 

$

36,062

 

$

18,623

 

$

10,309

 

$

12,062

 

$

623

 

$

247,046

 

 

11



Table of Contents