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Section 1: 10-Q (10-Q)

TCF Financial 6.30.15 10Q
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
June 30, 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
July 29, 2015
Common Stock, $.01 par value
169,214,437 shares


Table of Contents


TCF FINANCIAL CORPORATION AND SUBSIDIARIES
 
INDEX
 
Pages
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



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 June 30, 2015
 
At December 31, 2014
 
(Unaudited)
 
 
Assets:
 

 
 

Cash and due from banks
$
912,461

 
$
1,115,250

Investments
78,518

 
85,492

Securities held to maturity
208,911

 
214,454

Securities available for sale
629,848

 
463,294

Loans and leases held for sale
200,034

 
132,266

Loans and leases:
 

 
 

Consumer real estate:
 

 
 

First mortgage lien
2,865,911

 
3,139,152

Junior lien
2,678,118

 
2,543,212

Total consumer real estate
5,544,029

 
5,682,364

Commercial
3,112,344

 
3,157,665

Leasing and equipment finance
3,791,215

 
3,745,322

Inventory finance
2,106,087

 
1,877,090

Auto finance
2,301,714

 
1,915,061

Other
21,852

 
24,144

Total loans and leases
16,877,241

 
16,401,646

Allowance for loan and lease losses
(156,115
)
 
(164,169
)
Net loans and leases
16,721,126

 
16,237,477

Premises and equipment, net
435,600

 
436,361

Goodwill
225,640

 
225,640

Other assets
414,212

 
484,377

Total assets
$
19,826,350

 
$
19,394,611

Liabilities and Equity:
 

 
 

Deposits:
 

 
 

Checking
$
5,375,818

 
$
5,195,243

Savings
4,968,398

 
5,212,320

Money market
2,286,773

 
1,993,130

Certificates of deposit
3,196,230

 
3,049,189

Total deposits
15,827,219

 
15,449,882

Short-term borrowings
7,305

 
4,425

Long-term borrowings
1,210,736

 
1,232,065

Total borrowings
1,218,041

 
1,236,490

Accrued expenses and other liabilities
559,068

 
572,875

Total liabilities
17,604,328

 
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;
 
 
 
169,144,261 and 167,503,568 shares issued, respectively
1,691

 
1,675

Additional paid-in capital
838,755

 
817,130

Retained earnings, subject to certain restrictions
1,165,753

 
1,099,914

Accumulated other comprehensive income (loss)
(16,370
)
 
(10,910
)
Treasury stock at cost, 42,566 shares, and other
(50,558
)
 
(49,400
)
Total TCF Financial Corporation stockholders' equity
2,202,511

 
2,121,649

Non-controlling interest in subsidiaries
19,511

 
13,715

Total equity
2,222,022

 
2,135,364

Total liabilities and equity
$
19,826,350

 
$
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 
 June 30,
 
Six Months Ended 
 June 30,
(In thousands, except per-share data)
2015
 
2014
 
2015
 
2014
Interest income:
 

 
 

 
 
 
 
Loans and leases
$
207,164

 
$
206,788

 
$
413,140

 
$
409,325

Securities available for sale
3,543

 
2,805

 
6,623

 
5,968

Securities held to maturity
1,384

 
1,443

 
2,789

 
2,407

Investments and other
10,990

 
9,055

 
20,323

 
17,018

Total interest income
223,081

 
220,091

 
442,875

 
434,718

Interest expense:
 

 
 

 
 
 
 
Deposits
11,080

 
8,877

 
22,152

 
16,914

Borrowings
5,972

 
5,113

 
11,274

 
10,429

Total interest expense
17,052

 
13,990

 
33,426

 
27,343

Net interest income
206,029

 
206,101

 
409,449

 
407,375

Provision for credit losses
12,528

 
9,909

 
25,319

 
24,401

Net interest income after provision for credit losses
193,501

 
196,192

 
384,130

 
382,974

Non-interest income:
 

 
 

 
 
 
 
Fees and service charges
36,295

 
38,035

 
70,267

 
74,654

Card revenue
13,902

 
13,249

 
26,803

 
25,499

ATM revenue
5,540

 
5,794

 
10,662

 
11,113

Subtotal
55,737

 
57,078

 
107,732

 
111,266

Gains on sales of auto loans, net
10,756

 
7,270

 
17,021

 
15,740

Gains on sales of consumer real estate loans, net
11,954

 
8,151

 
20,717

 
19,857

Servicing fee income
7,216

 
4,892

 
14,558

 
9,199

Subtotal
29,926

 
20,313

 
52,296

 
44,796

Leasing and equipment finance
26,385

 
23,069

 
48,609

 
45,049

Other
1,460

 
2,789

 
5,587

 
5,171

Fees and other revenue
113,508

 
103,249

 
214,224

 
206,282

Gains (losses) on securities, net
(59
)
 
767

 
(137
)
 
1,141

Total non-interest income
113,449

 
104,016

 
214,087

 
207,423

Non-interest expense:
 

 
 

 
 
 
 
Compensation and employee benefits
116,159

 
109,664

 
231,974

 
224,753

Occupancy and equipment
36,152

 
34,316

 
72,979

 
69,155

FDIC insurance
4,864

 
7,625

 
10,257

 
15,188

Operating lease depreciation
8,582

 
6,613

 
16,316

 
12,840

Advertising and marketing
5,150

 
6,245

 
11,673

 
12,141

Other
45,887

 
42,618

 
94,020

 
83,953

Subtotal
216,794

 
207,081

 
437,219

 
418,030

Foreclosed real estate and repossessed assets, net
6,377

 
5,743

 
12,573

 
11,811

Other credit costs, net
(62
)
 
371

 
84

 
490

Total non-interest expense
223,109

 
213,195

 
449,876

 
430,331

Income before income tax expense
83,841

 
87,013

 
148,341

 
160,066

Income tax expense
28,902

 
31,385

 
51,730

 
57,964

Income after income tax expense
54,939

 
55,628

 
96,611

 
102,102

Income attributable to non-controlling interest
2,684

 
2,503

 
4,555

 
4,220

Net income attributable to TCF Financial Corporation
52,255

 
53,125

 
92,056

 
97,882

Preferred stock dividends
4,847

 
4,847

 
9,694

 
9,694

Net income available to common stockholders
$
47,408

 
$
48,278

 
$
82,362

 
$
88,188

Net income per common share:
 

 
 

 
 
 
 
Basic
$
0.29

 
$
0.30

 
$
0.50

 
$
0.54

Diluted
$
0.29

 
$
0.29

 
$
0.50

 
$
0.54

 
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 June 30,
 
Six Months Ended June 30,
(In thousands)
2015
 
2014
 
2015
 
2014
Net income attributable to TCF Financial Corporation
$
52,255

 
$
53,125

 
$
92,056

 
$
97,882

Other comprehensive income (loss):
 

 
 

 
 

 
 

Securities available for sale:
 

 
 

 
 

 
 

Unrealized gains (losses) arising during the period
(11,140
)
 
8,648

 
(7,001
)
 
20,514

Reclassification of net (gains) losses to net income
286

 
(452
)
 
590

 
(629
)
Net investment hedges:
 

 
 

 
 

 
 

Unrealized gains (losses) arising during the period
(674
)
 
(1,382
)
 
2,914

 
(172
)
Foreign currency translation adjustment:
 

 
 

 
 

 
 

Unrealized gains (losses) arising during the period
617

 
1,399

 
(3,269
)
 
23

Recognized postretirement prior service cost:
 

 
 

 
 

 
 

Reclassification of net (gains) losses to net income
(11
)
 
(11
)
 
(23
)
 
(23
)
Income tax (expense) benefit
4,358

 
(2,561
)
 
1,329

 
(7,415
)
Total other comprehensive income (loss)
(6,564
)
 
5,641

 
(5,460
)
 
12,298

Comprehensive income
$
45,691

 
$
58,766

 
$
86,596

 
$
110,180

 
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
Stock
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Treasury
Stock
and Other
Total
Non-
controlling
Interests
Total
Equity
(Dollars in thousands)
Preferred
Common
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





97,882



97,882

4,220

102,102

Other comprehensive income (loss)






12,298


12,298


12,298

Net investment by (distribution to) non-controlling interest









794

794

Dividends on preferred stock





(9,694
)


(9,694
)

(9,694
)
Dividends on common stock





(16,309
)


(16,309
)

(16,309
)
Grants of restricted stock

1,052,898


10

(10
)






Common shares purchased by TCF employee benefit plans

816,570


8

13,100




13,108


13,108

Cancellation of shares of restricted stock

(52,020
)


(219
)



(219
)

(219
)
Cancellation of common shares for tax withholding

(58,283
)

(1
)
(964
)



(965
)

(965
)
Net amortization of stock compensation




5,074




5,074


5,074

Stock compensation tax (expense) benefit




763




763


763

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




9,260



(9,260
)



Balance, June 30, 2014
4,006,900

166,924,026

$
263,240

$
1,669

$
806,645

$
1,049,725

$
(14,915
)
$
(51,458
)
$
2,054,906

$
16,805

$
2,071,711

 
 
 
 
 
 
 
 
 
 
 
 
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





92,056



92,056

4,555

96,611

Other comprehensive income (loss)






(5,460
)

(5,460
)

(5,460
)
Net investment by (distribution to) non-controlling interest









1,241

1,241

Dividends on preferred stock





(9,694
)


(9,694
)

(9,694
)
Dividends on common stock





(16,523
)


(16,523
)

(16,523
)
Grants of restricted stock

722,304


7

(7
)






Common shares purchased by TCF employee benefit plans

915,632


9

14,430




14,439


14,439

Cancellation of shares of restricted stock

(132,937
)

(1
)
(532
)



(533
)

(533
)
Cancellation of common shares for tax withholding

(64,306
)

(1
)
(1,022
)



(1,023
)

(1,023
)
Net amortization of stock compensation




4,743




4,743


4,743

Exercise of stock options

200,000


2

2,568




2,570


2,570

Stock compensation tax (expense) benefit




287




287


287

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




1,158



(1,158
)



Balance, June 30, 2015
4,006,900

169,144,261

$
263,240

$
1,691

$
838,755

$
1,165,753

$
(16,370
)
$
(50,558
)
$
2,202,511

$
19,511

$
2,222,022

See accompanying notes to consolidated financial statements.

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Table of Contents


TCF FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
 
Six Months Ended June 30,
(In thousands)
2015
 
2014
Cash flows from operating activities:
 

 
 

Net income attributable to TCF Financial Corporation
$
92,056

 
$
97,882

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

 
 

Provision for credit losses
25,319

 
24,401

Depreciation and amortization
74,816

 
62,122

Proceeds from sales of loans and leases held for sale
412,752

 
207,456

Gains on sales of assets, net
(42,573
)
 
(38,350
)
Net income attributable to non-controlling interest
4,555

 
4,220

Originations of loans held for sale, net of repayments
(451,836
)
 
(286,182
)
Net change in other assets and accrued expenses and other liabilities
52,928

 
31,816

Other, net
(12,087
)
 
(15,764
)
Net cash provided by (used in) operating activities
155,930

 
87,601

Cash flows from investing activities:
 

 
 

Loan originations and purchases, net of principal collected on loans and leases
(1,064,822
)
 
(897,681
)
Purchases of equipment for lease financing
(451,625
)
 
(441,792
)
Proceeds from sales of loans
915,865

 
886,715

Proceeds from sales of lease receivables
15,893

 
10,289

Proceeds from sales of securities

 
2,519

Purchases of securities
(204,007
)
 
(70,479
)
Proceeds from maturities of and principal collected on securities
43,500

 
25,255

Purchases of Federal Home Loan Bank stock
(75,000
)
 
(47,000
)
Redemption of Federal Home Loan Bank stock
82,004

 
55,928

Proceeds from sales of real estate owned
35,998

 
33,524

Purchases of premises and equipment
(20,646
)
 
(22,864
)
Other, net
15,534

 
13,412

Net cash provided by (used in) investing activities
(707,306
)
 
(452,174
)
Cash flows from financing activities:
 

 
 

Net change in deposits
371,216

 
600,621

Net change in short-term borrowings
2,969

 
3,345

Proceeds from long-term borrowings
2,653,143

 
1,104,999

Payments on long-term borrowings
(2,671,061
)
 
(1,316,734
)
Redemption of subordinated debt

 
(50,000
)
Net investment by (distribution to) non-controlling interest
1,241

 
794

Dividends paid on preferred stock
(9,694
)
 
(9,694
)
Dividends paid on common stock
(16,523
)
 
(16,309
)
Stock compensation tax (expense) benefit
287

 
763

Common shares sold to TCF employee benefit plans
14,439

 
13,108

Exercise of stock options
2,570

 

Net cash provided by (used in) financing activities
348,587

 
330,893

Net change in cash and due from banks
(202,789
)
 
(33,680
)
Cash and due from banks at beginning of period
1,115,250

 
915,076

Cash and due from banks at end of period
$
912,461

 
$
881,396

Supplemental disclosures of cash flow information:
 

 
 

Cash paid (received) for:
 

 
 

Interest on deposits and borrowings
$
28,440

 
$
25,553

Income taxes, net
(2,181
)
 
58,640

Transfer of loans to other assets
51,638

 
42,371

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 2Cash and Due from Banks
 
At June 30, 2015 and December 31, 2014, TCF Bank was required by Federal Reserve regulations to maintain reserves of $102.2 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 $78.7 million and $67.8 million at June 30, 2015 and December 31, 2014, respectively.

TCF had cash held in interest-bearing accounts of $622.5 million and $842.1 million at June 30, 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 June 30, 2015
 
At December 31, 2014
(Dollars in thousands)
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
Securities available for sale:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Mortgage-backed securities:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

U.S. Government sponsored enterprises and federal agencies
$
597,166

 
$
1,142

 
$
6,401

 
$
591,907

 
$
461,575

 
$
2,405

 
$
741

 
$
463,239

Other
45

 

 

 
45

 
55

 

 

 
55

Obligations of states and political subdivisions
37,796

 
40

 
118

 
37,718

 

 

 

 

Other securities
178

 

 

 
178

 

 

 

 

Total securities available for sale
$
635,185

 
$
1,182

 
$
6,519

 
$
629,848

 
$
461,630

 
$
2,405

 
$
741

 
$
463,294

Weighted-average yield
2.43
%
 
 

 
 

 
 

 
2.62
%
 
 

 
 

 
 

Securities held to maturity:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Mortgage-backed securities:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

U.S. Government sponsored enterprises and federal agencies
$
204,179

 
$
4,596

 
$
160

 
$
208,615

 
$
209,538

 
$
7,988

 
$
109

 
$
217,417

Other securities
4,732

 

 

 
4,732

 
4,916

 

 

 
4,916

Total securities held to maturity
$
208,911

 
$
4,596

 
$
160

 
$
213,347

 
$
214,454

 
$
7,988

 
$
109

 
$
222,333

Weighted-average yield
2.64
%
 
 

 
 

 
 

 
2.64
%
 
 

 
 

 
 

 
There were no sales of securities available for sale during the six months ended June 30, 2015. Gross realized gains of $0.8 million and $1.1 million were recognized on sales of securities available for sale during the second quarter and first six months of 2014, respectively. At June 30, 2015 and December 31, 2014, mortgage-backed securities with a carrying value of $7.6 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 the first six months of 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 securities available for sale to securities held to maturity during the six months ended June 30, 2015. During the six months ended June 30, 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 June 30, 2015 and December 31, 2014, the unrealized holding loss on the transferred securities retained in accumulated other comprehensive income (loss) totaled $15.4 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 six months ended June 30, 2015, TCF recorded an impairment charge of $0.1 million on held to maturity securities, which had a carrying value of $4.7 million. There were no impairment charges recognized on held to maturity securities during the six months ended June 30, 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 June 30, 2015 and December 31, 2014, aggregated by investment category and the length of time the securities were in a continuous loss position.
 
 
At June 30, 2015
 
Less than 12 months
 
12 months or more
 
Total
(In thousands)
Fair Value
 
Unrealized Losses
 
Fair Value
 
Unrealized Losses
 
Fair Value
 
Unrealized Losses
Securities available for sale:
 

 
 

 
 

 
 

 
 

 
 

Mortgage-backed securities:
 

 
 

 
 

 
 

 
 

 
 

U.S. Government sponsored enterprises and federal agencies
$
455,069

 
$
6,401

 
$

 
$

 
$
455,069

 
$
6,401

Obligations of states and political subdivisions
24,132

 
118

 

 

 
24,132

 
118

Total securities available for sale
$
479,201

 
$
6,519

 
$

 
$

 
$
479,201

 
$
6,519

 
 
 
 
 
 
 
 
 
 
 
 
Securities held to maturity:
 

 
 

 
 

 
 

 
 

 
 

Mortgage-backed securities:
 

 
 

 
 

 
 

 
 

 
 

U.S. Government sponsored enterprises and federal agencies
$
5,521

 
$
83

 
$
987

 
$
77

 
$
6,508

 
$
160

Total securities held to maturity
$
5,521

 
$
83

 
$
987

 
$
77

 
$
6,508

 
$
160

 
At December 31, 2014
 
Less than 12 months
 
12 months or more
 
Total
(In thousands)
Fair Value
 
Unrealized Losses
 
Fair Value
 
Unrealized Losses
 
Fair Value
 
Unrealized 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 June 30, 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. Yields on securities have not been adjusted for tax exempt status.

 
At June 30, 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
$
7

 
$
7

 
9.65
%
 
$
4

 
$
4

 
11.63
%
Due in 1-5 years
51

 
51

 
3.30

 
76

 
76

 
4.53

Due in 5-10 years
116,458

 
116,849

 
2.03

 
86,806

 
87,594

 
1.93

Due after 10 years
518,491

 
512,763

 
2.52

 
374,744

 
375,620

 
2.78

No stated maturity
178

 
178

 

 

 

 

Total securities available for sale
$
635,185

 
$
629,848

 
2.43

 
$
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
205,511

 
209,947

 
2.64

 
211,054

 
218,933

 
2.64

Total securities held to maturity
$
208,911

 
$
213,347

 
2.64

 
$
214,454

 
$
222,333

 
2.64


Note 4Loans and Leases

Loans and leases consisted of the following.
(Dollars in thousands)
At June 30, 2015
 
At December 31, 2014
 
Percent Change
Consumer real estate:
 

 
 

 
 

First mortgage lien
$
2,865,911

 
$
3,139,152

 
(8.7
)%
Junior lien
2,678,118

 
2,543,212

 
5.3

Total consumer real estate
5,544,029

 
5,682,364

 
(2.4
)
Commercial:
 

 
 

 
 

Commercial real estate:
 

 
 

 
 

Permanent
2,230,554

 
2,382,144

 
(6.4
)
Construction and development
305,240

 
242,111

 
26.1

Total commercial real estate
2,535,794

 
2,624,255

 
(3.4
)
Commercial business
576,550

 
533,410

 
8.1

Total commercial
3,112,344

 
3,157,665

 
(1.4
)
Leasing and equipment finance
3,791,215

 
3,745,322

 
1.2

Inventory finance
2,106,087

 
1,877,090

 
12.2

Auto finance
2,301,714

 
1,915,061

 
20.2

Other
21,852

 
24,144

 
(9.5
)
Total loans and leases(1)
$
16,877,241

 
$
16,401,646

 
2.9

(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 $50.7 million and $43.4 million at June 30, 2015 and December 31, 2014, respectively.
 

9


Table of Contents


The consumer real estate junior lien portfolio was comprised of $2.3 billion of home equity lines of credit ("HELOCs") and $383.2 million of amortizing junior lien mortgage loans at June 30, 2015, compared with $2.1 billion and $424.4 million at December 31, 2014, respectively. At June 30, 2015 and December 31, 2014, $1.6 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 June 30, 2015 and December 31, 2014, $733.7 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 June 30, 2015, 18.3% of these loans mature prior to 2021.
 
During the six months ended June 30, 2015 and 2014, TCF sold $639.9 million and $481.9 million, respectively, of consumer auto loans with servicing retained, received cash of $664.3 million and $492.1 million, respectively, and recognized net gains of $17.9 million and $16.2 million, respectively. Related to these sales, TCF retained interest-only strips of $0 and $8.2 million for the six months ended June 30, 2015 and 2014, respectively. Total interest-only strips related to sales of auto loans totaled $35.2 million and $48.6 million at June 30, 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 six months ended June 30, 2015 and 2014, respectively, primarily as a result of higher prepayments than originally assumed. Contractual liabilities related to sales of auto loans totaled $0.4 million and $0.7 million at June 30, 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 $4.4 billion and $3.8 billion at June 30, 2015 and December 31, 2014, respectively.

In June 2015, TCF transferred consumer auto loans totaling $436.4 million with servicing retained to a trust in a securitization transaction, received cash proceeds of $453.8 million and recognized gains of $11.2 million, which qualified for sale accounting and is included in the amounts above. This trust is considered a variable interest entity due to its limited capitalization and special purpose nature, however TCF does not have a variable interest in the trust. Therefore, TCF is not the primary beneficiary of the trust and it is not consolidated.

During the six months ended June 30, 2015 and 2014, TCF sold $629.3 million and $571.6 million, respectively, of consumer real estate loans, received cash of $647.9 million and $585.4 million, respectively, and recognized net gains of $20.0 million and $19.7 million, respectively. Included in the consumer real estate loans sold was $136.3 million of first mortgage loans related to the correspondent lending program during the first six months of 2015, resulting in net gains of $3.0 million during the same period. There were no loans sold related to the correspondent lending program during the first six months of 2014. The majority of consumer real estate loans sold are junior lien loans. Related to the sales of consumer real estate loans, TCF retained interest-only strips of $4.2 million and $9.1 million for the six months ended June 30, 2015 and 2014, respectively. Total interest-only strips related to sales of consumer real estate loans totaled $20.7 million and $21.2 million at June 30, 2015 and December 31, 2014, respectively. TCF had no impairment charges on these interest-only strips for the six months ended June 30, 2015 and 2014. Contractual liabilities related to sales of consumer real estate loans totaled $0.8 million and $0.6 million at June 30, 2015 and December 31, 2014, respectively. 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 $7.2 billion and $7.1 billion at June 30, 2015 and December 31, 2014, respectively.

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 six months ended June 30, 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 5Allowance for Loan and Lease Losses and Credit Quality Information
 
The following tables provide 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 June 30, 2015:
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
80,292

 
$
32,121

 
$
17,921

 
$
12,409

 
$
20,426

 
$
630

 
$
163,799

Charge-offs
(11,558
)
 
(2,581
)
 
(1,988
)
 
(821
)
 
(4,388
)
 
(1,648
)
 
(22,984
)
Recoveries
1,869

 
967

 
518

 
198

 
728

 
1,226

 
5,506

Net (charge-offs) recoveries
(9,689
)
 
(1,614
)
 
(1,470
)
 
(623
)
 
(3,660
)
 
(422
)
 
(17,478
)
Provision for credit losses
5,061

 
(302
)
 
1,218

 
(951
)
 
7,096

 
406

 
12,528

Other
(977
)
 

 

 
44

 
(1,801
)
 

 
(2,734
)
Balance, end of period
$
74,687

 
$
30,205

 
$
17,669

 
$
10,879

 
$
22,061

 
$
614

 
$
156,115

 
 
 
 
 
 
 
 
 
 
 
 
 
 
At or For the Three Months Ended June 30, 2014:
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
169,367

 
$
36,062

 
$
18,623

 
$
10,309

 
$
12,062

 
$
623

 
$
247,046

Charge-offs
(13,012
)
 
(3,721
)
 
(1,875
)
 
(183
)
 
(2,191
)
 
(1,993
)
 
(22,975
)
Recoveries
1,555

 
244

 
902

 
76

 
358

 
1,485

 
4,620

Net (charge-offs) recoveries
(11,457
)
 
(3,477
)
 
(973
)
 
(107
)
 
(1,833
)
 
(508
)
 
(18,355
)
Provision for credit losses
4,106

 
(1,168
)
 
1,534

 
(752
)
 
5,521

 
668

 
9,909

Other
(667
)
 
(56
)
 

 
89

 
(1,885
)
 

 
(2,519
)
Balance, end of period
$
161,349

 
$
31,361

 
$
19,184

 
$
9,539

 
$
13,865

 
$
783

 
$
236,081

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
Consumer
Real Estate
 
Commercial
 
Leasing and
Equipment
Finance
 
Inventory
Finance
 
Auto
Finance
 
Other
 
Total
At or For the Six Months Ended June 30, 2015:
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
85,361

 
$
31,367

 
$
18,446

 
$
10,020

 
$
18,230

 
$
745

 
$
164,169

Charge-offs
(20,764
)
 
(3,457
)
 
(3,864
)
 
(1,349
)
 
(8,349
)
 
(3,325
)
 
(41,108
)
Recoveries
3,794

 
2,364

 
1,503

 
307

 
1,338

 
2,787

 
12,093

Net (charge-offs) recoveries
(16,970
)
 
(1,093
)
 
(2,361
)
 
(1,042
)
 
(7,011
)
 
(538
)
 
(29,015
)
Provision for credit losses
7,880

 
(69
)
 
1,584

 
2,081

 
13,436

 
407

 
25,319

Other
(1,584
)
 

 

 
(180
)
 
(2,594
)
 

 
(4,358
)
Balance, end of period
$
74,687

 
$
30,205

 
$
17,669

 
$
10,879

 
$
22,061

 
$
614

 
$
156,115

 
 
 
 
 
 
 
 
 
 
 
 
 
 
At or For the Six Months Ended June 30, 2014:
 
 
 

 
 

 
 

 
 

 
 

 
 

Balance, beginning of period
$
176,030

 
$
37,467

 
$
18,733

 
$
8,592

 
$
10,623

 
$
785

 
$
252,230

Charge-offs
(27,567
)
 
(5,366
)
 
(3,410
)
 
(350
)
 
(4,724
)
 
(3,895
)
 
(45,312
)
Recoveries
3,407

 
379

 
1,688

 
377

 
615

 
3,075

 
9,541

Net (charge-offs) recoveries
(24,160
)
 
(4,987
)
 
(1,722
)
 
27

 
(4,109
)
 
(820
)
 
(35,771
)
Provision for credit losses
11,185

 
(1,048
)
 
2,173

 
925

 
10,348

 
818

 
24,401

Other
(1,706
)
 
(71
)
 

 
(5
)
 
(2,997
)
 

 
(4,779
)
Balance, end of period
$
161,349

 
$
31,361

 
$
19,184

 
$
9,539

 
$
13,865

 
$
783

 
$
236,081



11


Table of Contents


The following tables provide information regarding the allowance for loan and lease losses and balances by type of allowance methodology.
 
At June 30, 2015
(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
$
48,378

 
$
29,725

 
$
16,196

 
$
10,653

 
$
20,313

 
$
610

 
$
125,875

Individually evaluated for impairment
26,309

 
480

 
1,473

 
226

 
1,748

 
4

 
30,240

Total
$
74,687

 
$
30,205

 
$
17,669

 
$
10,879

 
$
22,061

 
$
614

 
$
156,115

Loans and leases outstanding:
 

 
 

 
 

 
 

 
 

 
 

 
 

Collectively evaluated for impairment
$
5,325,743

 
$
3,028,092

 
$
3,778,547

 
$
2,103,188

 
$
2,295,235

 
$
21,833

 
$
16,552,638

Individually evaluated for impairment
218,286

 
84,252

 
12,590

 
2,899

 
6,438

 
19

 
324,484

Loans acquired with deteriorated credit quality

 

 
78

 

 
41

 

 
119

Total
$
5,544,029

 
$
3,112,344

 
$
3,791,215

 
$
2,106,087

 
$
2,301,714

 
$
21,852

 
$
16,877,241


 
At December 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
$
57,167

 
$
27,594

 
$
16,310

 
$
9,627

 
$
17,046

 
$
741

 
$
128,485

Individually evaluated for impairment
28,194

 
3,773