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Section 1: 10-Q (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
September 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
October 28, 2015
Common Stock, $.01 par value
169,574,268 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 September 30, 2015
 
At December 31, 2014
 
(Unaudited)
 
 
Assets:
 

 
 

Cash and due from banks
$
786,064

 
$
1,115,250

Investments
76,543

 
85,492

Securities held to maturity
204,129

 
214,454

Securities available for sale
782,995

 
463,294

Loans and leases held for sale
116,155

 
132,266

Loans and leases:
 

 
 

Consumer real estate:
 

 
 

First mortgage lien
2,724,594

 
3,139,152

Junior lien
2,889,120

 
2,543,212

Total consumer real estate
5,613,714

 
5,682,364

Commercial
3,112,325

 
3,157,665

Leasing and equipment finance
3,873,581

 
3,745,322

Inventory finance
2,153,385

 
1,877,090

Auto finance
2,427,367

 
1,915,061

Other
20,674

 
24,144

Total loans and leases
17,201,046

 
16,401,646

Allowance for loan and lease losses
(153,962
)
 
(164,169
)
Net loans and leases
17,047,084

 
16,237,477

Premises and equipment, net
445,041

 
436,361

Goodwill
225,640

 
225,640

Other assets
442,285

 
484,377

Total assets
$
20,125,936

 
$
19,394,611

Liabilities and Equity:
 

 
 

Deposits:
 

 
 

Checking
$
5,378,024

 
$
5,195,243

Savings
4,774,766

 
5,212,320

Money market
2,293,390

 
1,993,130

Certificates of deposit
3,612,253

 
3,049,189

Total deposits
16,058,433

 
15,449,882

Short-term borrowings
36,509

 
4,425

Long-term borrowings
1,184,166

 
1,232,065

Total borrowings
1,220,675

 
1,236,490

Accrued expenses and other liabilities
573,681

 
572,875

Total liabilities
17,852,789

 
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;
 
 
 
169,473,142 and 167,503,568 shares issued, respectively
1,695

 
1,675

Additional paid-in capital
846,243

 
817,130

Retained earnings, subject to certain restrictions
1,205,179

 
1,099,914

Accumulated other comprehensive income (loss)
(11,267
)
 
(10,910
)
Treasury stock at cost, 42,566 shares, and other
(50,443
)
 
(49,400
)
Total TCF Financial Corporation stockholders' equity
2,254,647

 
2,121,649

Non-controlling interest in subsidiaries
18,500

 
13,715

Total equity
2,273,147

 
2,135,364

Total liabilities and equity
$
20,125,936

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

 
 

 
 
 
 
Loans and leases
$
207,250

 
$
205,604

 
$
620,390

 
$
614,929

Securities available for sale
4,161

 
2,973

 
10,784

 
8,941

Securities held to maturity
1,361

 
1,445

 
4,150

 
3,852

Investments and other
10,832

 
9,681

 
31,155

 
26,699

Total interest income
223,604

 
219,703

 
666,479

 
654,421

Interest expense:
 

 
 

 
 
 
 
Deposits
12,302

 
10,711

 
34,454

 
27,625

Borrowings
6,032

 
4,812

 
17,306

 
15,241

Total interest expense
18,334

 
15,523

 
51,760

 
42,866

Net interest income
205,270

 
204,180

 
614,719

 
611,555

Provision for credit losses
10,018

 
15,739

 
35,337

 
40,140

Net interest income after provision for credit losses
195,252

 
188,441

 
579,382

 
571,415

Non-interest income:
 

 
 

 
 
 
 
Fees and service charges
36,991

 
40,255

 
107,258

 
114,909

Card revenue
13,803

 
12,994

 
40,606

 
38,493

ATM revenue
5,739

 
5,863

 
16,401

 
16,976

Subtotal
56,533

 
59,112

 
164,265

 
170,378

Gains on sales of auto loans, net
10,423

 
14,863

 
27,444

 
30,603

Gains on sales of consumer real estate loans, net
7,143

 
8,762

 
27,860

 
28,619

Servicing fee income
8,049

 
5,880

 
22,607

 
15,079

Subtotal
25,615

 
29,505

 
77,911

 
74,301

Leasing and equipment finance
27,165

 
24,383

 
75,774

 
69,432

Other
3,070

 
3,170

 
8,657

 
8,341

Fees and other revenue
112,383

 
116,170

 
326,607

 
322,452

Gains (losses) on securities, net
(131
)
 
(94
)
 
(268
)
 
1,047

Total non-interest income
112,252

 
116,076

 
326,339

 
323,499

Non-interest expense:
 

 
 

 
 
 
 
Compensation and employee benefits
116,708

 
112,393

 
348,682

 
337,146

Occupancy and equipment
34,159

 
34,121

 
107,138

 
103,276

FDIC insurance
4,832

 
7,292

 
15,089

 
22,480

Operating lease depreciation
9,485

 
7,434

 
25,801

 
20,274

Advertising and marketing
5,793

 
5,656

 
17,466

 
17,797

Other
45,750

 
47,888

 
139,770

 
131,841

Subtotal
216,727

 
214,784

 
653,946

 
632,814

Foreclosed real estate and repossessed assets, net
5,680

 
5,315

 
18,253

 
17,126

Other credit costs, net
(123
)
 
(411
)
 
(39
)
 
79

Total non-interest expense
222,284

 
219,688

 
672,160

 
650,019

Income before income tax expense
85,220

 
84,829

 
233,561

 
244,895

Income tax expense
30,528

 
30,791

 
82,258

 
88,755

Income after income tax expense
54,692

 
54,038

 
151,303

 
156,140

Income attributable to non-controlling interest
2,117

 
1,721

 
6,672

 
5,941

Net income attributable to TCF Financial Corporation
52,575

 
52,317

 
144,631

 
150,199

Preferred stock dividends
4,847

 
4,847

 
14,541

 
14,541

Net income available to common stockholders
$
47,728

 
$
47,470

 
$
130,090

 
$
135,658

Net income per common share:
 

 
 

 
 
 
 
Basic
$
0.29

 
$
0.29

 
$
0.79

 
$
0.83

Diluted
$
0.29

 
$
0.29

 
$
0.78

 
$
0.83

 
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 September 30,
 
Nine Months Ended September 30,
(In thousands)
2015
 
2014
 
2015
 
2014
Net income attributable to TCF Financial Corporation
$
52,575

 
$
52,317

 
$
144,631

 
$
150,199

Other comprehensive income (loss):
 

 
 

 
 

 
 

Securities available for sale:
 

 
 

 
 

 
 

Unrealized gains (losses) arising during the period
9,972

 
(862
)
 
2,971

 
19,652

Reclassification of net (gains) losses to net income
281

 
254

 
871

 
(375
)
Net investment hedges:
 

 
 

 
 

 
 

Unrealized gains (losses) arising during the period
2,858

 
1,849

 
5,772

 
1,677

Foreign currency translation adjustment:
 

 
 

 
 

 
 

Unrealized gains (losses) arising during the period
(3,049
)
 
(2,066
)
 
(6,318
)
 
(2,043
)
Recognized postretirement prior service cost:
 

 
 

 
 

 
 

Reclassification of net (gains) losses to net income
(12
)
 
(12
)
 
(35
)
 
(35
)
Income tax (expense) benefit
(4,947
)
 
(464
)
 
(3,618
)
 
(7,879
)
Total other comprehensive income (loss)
5,103

 
(1,301
)
 
(357
)
 
10,997

Comprehensive income
$
57,678

 
$
51,016

 
$
144,274

 
$
161,196

 
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





150,199



150,199

5,941

156,140

Other comprehensive income (loss)






10,997


10,997


10,997

Net investment by (distribution to) non-controlling interest









(2,887
)
(2,887
)
Dividends on preferred stock





(14,541
)


(14,541
)

(14,541
)
Dividends on common stock





(24,512
)


(24,512
)

(24,512
)
Grants of restricted stock

1,110,706


11

(11
)






Common shares purchased by TCF employee benefit plans

1,109,887


11

17,791




17,802


17,802

Cancellation of shares of restricted stock

(70,790
)

(1
)
(326
)



(327
)

(327
)
Cancellation of common shares for tax withholding

(200,943
)

(2
)
(3,260
)



(3,262
)

(3,262
)
Net amortization of stock compensation




7,141




7,141


7,141

Exercise of stock options

47,000


1

739




740


740

Stock compensation tax (expense) benefit




1,382




1,382


1,382

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




6,681



(6,681
)



Balance, September 30, 2014
4,006,900

167,160,721

$
263,240

$
1,672

$
809,778

$
1,088,992

$
(16,216
)
$
(48,879
)
$
2,098,587

$
14,845

$
2,113,432

 
 
 
 
 
 
 
 
 
 
 
 
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





144,631



144,631

6,672

151,303

Other comprehensive income (loss)






(357
)

(357
)

(357
)
Net investment by (distribution to) non-controlling interest









(1,887
)
(1,887
)
Dividends on preferred stock





(14,541
)


(14,541
)

(14,541
)
Dividends on common stock





(24,825
)


(24,825
)

(24,825
)
Grants of restricted stock

753,054


8

(8
)






Common shares purchased by TCF employee benefit plans

1,219,012


12

19,261




19,273


19,273

Cancellation of shares of restricted stock

(133,822
)

(1
)
(540
)



(541
)

(541
)
Cancellation of common shares for tax withholding

(68,670
)

(1
)
(1,093
)



(1,094
)

(1,094
)
Net amortization of stock compensation




7,520




7,520


7,520

Exercise of stock options

200,000


2

2,568




2,570


2,570

Stock compensation tax (expense) benefit




362




362


362

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




1,043



(1,043
)



Balance, September 30, 2015
4,006,900

169,473,142

$
263,240

$
1,695

$
846,243

$
1,205,179

$
(11,267
)
$
(50,443
)
$
2,254,647

$
18,500

$
2,273,147

See accompanying notes to consolidated financial statements.

4


Table of Contents


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

 
 

Net income attributable to TCF Financial Corporation
$
144,631

 
$
150,199

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

 
 

Provision for credit losses
35,337

 
40,140

Depreciation and amortization
111,284

 
95,428

Proceeds from sales of loans and leases held for sale
751,200

 
373,429

Gains on sales of assets, net
(62,256
)
 
(60,784
)
Net income attributable to non-controlling interest
6,672

 
5,941

Originations of loans held for sale, net of repayments
(704,018
)
 
(451,304
)
Net change in other assets and accrued expenses and other liabilities
72,747

 
66,434

Other, net
(22,915
)
 
(24,007
)
Net cash provided by (used in) operating activities
332,682

 
195,476

Cash flows from investing activities:
 

 
 

Loan originations and purchases, net of principal collected on loans and leases
(1,529,968
)
 
(1,485,383
)
Purchases of equipment for lease financing
(752,536
)
 
(654,671
)
Proceeds from sales of loans
1,297,979

 
1,469,077

Proceeds from sales of lease receivables
21,016

 
22,590

Proceeds from sales of securities
177

 
2,813

Purchases of securities
(377,432
)
 
(136,341
)
Proceeds from maturities of and principal collected on securities
70,485

 
42,377

Purchases of Federal Home Loan Bank stock
(107,000
)
 
(71,000
)
Redemption of Federal Home Loan Bank stock
116,004

 
80,928

Proceeds from sales of real estate owned
51,017

 
42,935

Purchases of premises and equipment
(38,455
)
 
(32,988
)
Other, net
24,346

 
21,248

Net cash provided by (used in) investing activities
(1,224,367
)
 
(698,415
)
Cash flows from financing activities:
 

 
 

Net change in deposits
599,238

 
737,299

Net change in short-term borrowings
32,298

 
(1,534
)
Proceeds from long-term borrowings
3,656,133

 
1,840,008

Payments on long-term borrowings
(3,706,122
)
 
(2,075,047
)
Redemption of subordinated debt

 
(50,000
)
Net investment by (distribution to) non-controlling interest
(1,887
)
 
(2,887
)
Dividends paid on preferred stock
(14,541
)
 
(14,541
)
Dividends paid on common stock
(24,825
)
 
(24,512
)
Stock compensation tax (expense) benefit
362

 
1,382

Common shares sold to TCF employee benefit plans
19,273

 
17,802

Exercise of stock options
2,570

 
740

Net cash provided by (used in) financing activities
562,499

 
428,710

Net change in cash and due from banks
(329,186
)
 
(74,229
)
Cash and due from banks at beginning of period
1,115,250

 
915,076

Cash and due from banks at end of period
$
786,064

 
$
840,847

Supplemental disclosures of cash flow information:
 

 
 

Cash paid (received) for:
 

 
 

Interest on deposits and borrowings
$
46,881

 
$
39,864

Income taxes, net
43,119

 
89,132

Transfer of loans to other assets
80,233

 
65,704

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 have been 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 September 30, 2015 and December 31, 2014, TCF Bank was required by Federal Reserve regulations to maintain reserves of $93.3 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. 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 $69.7 million and $67.8 million at September 30, 2015 and December 31, 2014, respectively.

TCF had cash held in interest-bearing accounts of $521.2 million and $842.1 million at September 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 September 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
$
615,798

 
$
3,318

 
$
886

 
$
618,230

 
$
461,575

 
$
2,405

 
$
741

 
$
463,239

Other
38

 

 

 
38

 
55

 

 

 
55

Obligations of states and political subdivisions
162,524

 
2,207

 
4

 
164,727

 

 

 

 

Total securities available for sale
$
778,360

 
$
5,525

 
$
890

 
$
782,995

 
$
461,630

 
$
2,405

 
$
741

 
$
463,294

Weighted-average yield
2.36
%
 
 

 
 

 
 

 
2.62
%
 
 

 
 

 
 

Securities held to maturity:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Mortgage-backed securities:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

U.S. Government sponsored enterprises and federal agencies
$
199,552

 
$
8,011

 
$
131

 
$
207,432

 
$
209,538

 
$
7,988

 
$
109

 
$
217,417

Other securities
4,577

 

 

 
4,577

 
4,916

 

 

 
4,916

Total securities held to maturity
$
204,129

 
$
8,011

 
$
131

 
$
212,009

 
$
214,454

 
$
7,988

 
$
109

 
$
222,333

Weighted-average yield
2.65
%
 
 

 
 

 
 

 
2.64
%
 
 

 
 

 
 

 
During the three and nine months ended September 30, 2015, TCF sold $0.2 million of securities available for sale and received cash proceeds of $0.2 million. Gross realized gains of $29 thousand and $1.2 million were recognized on sales of securities available for sale during the third quarter and first nine months of 2014, respectively. At September 30, 2015 and December 31, 2014, mortgage-backed securities with a carrying value of $42.4 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 nine 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 nine months ended September 30, 2015. During the nine months ended September 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 September 30, 2015 and December 31, 2014, the unrealized holding loss on the transferred securities retained in accumulated other comprehensive income (loss) totaled $15.1 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 nine months ended September 30, 2015 and 2014, TCF recorded an impairment charge of $0.3 million and $0.1 million, respectively, on held to maturity securities, which had a carrying value of $4.6 million and $5.0 million, respectively.


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 September 30, 2015 and December 31, 2014, aggregated by investment category and the length of time the securities were in a continuous loss position.
 
 
At September 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
$
230,174

 
$
886

 
$

 
$

 
$
230,174

 
$
886

Obligations of states and political subdivisions
841

 
4

 

 

 
841

 
4

Total securities available for sale
$
231,015

 
$
890

 
$

 
$

 
$
231,015

 
$
890

 
 
 
 
 
 
 
 
 
 
 
 
Securities held to maturity:
 

 
 

 
 

 
 

 
 

 
 

Mortgage-backed securities:
 

 
 

 
 

 
 

 
 

 
 

U.S. Government sponsored enterprises and federal agencies
$
4,055

 
$
38

 
$
1,855

 
$
93

 
$
5,910

 
$
131

Total securities held to maturity
$
4,055

 
$
38

 
$
1,855

 
$
93

 
$
5,910

 
$
131

 
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 September 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 September 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
$
2

 
$
2

 
9.00
%
 
$
4

 
$
4

 
11.63
%
Due in 1-5 years
43

 
43

 
3.24

 
76

 
76

 
4.53

Due in 5-10 years
220,673

 
223,617

 
2.05

 
86,806

 
87,594

 
1.93

Due after 10 years
557,642

 
559,333

 
2.48

 
374,744

 
375,620

 
2.78

Total securities available for sale
$
778,360

 
$
782,995

 
2.36

 
$
461,630

 
$
463,294

 
2.62

 
 
 
 
 
 
 
 
 
 
 
 
Securities held to maturity:
 

 
 

 
 

 
 

 
 

 
 

Due in one year or less
$
100

 
$
100

 
2.00
%
 
$
500

 
$
500

 
2.00
%
Due in 1-5 years
1,700

 
1,700

 
2.65

 
2,500

 
2,500

 
3.08

Due in 5-10 years
1,600

 
1,600

 
3.25

 
400

 
400

 
3.00

Due after 10 years
200,729

 
208,609

 
2.64

 
211,054

 
218,933

 
2.64

Total securities held to maturity
$
204,129

 
$
212,009

 
2.65

 
$
214,454

 
$
222,333

 
2.64



9


Table of Contents


Note 4Loans and Leases

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

 
 

 
 

First mortgage lien
$
2,724,594

 
$
3,139,152

 
(13.2
)%
Junior lien
2,889,120

 
2,543,212

 
13.6

Total consumer real estate
5,613,714

 
5,682,364

 
(1.2
)
Commercial:
 

 
 

 
 

Commercial real estate:
 

 
 

 
 

Permanent
2,233,722

 
2,382,144

 
(6.2
)
Construction and development
328,106

 
242,111

 
35.5

Total commercial real estate
2,561,828

 
2,624,255

 
(2.4
)
Commercial business
550,497

 
533,410

 
3.2

Total commercial
3,112,325

 
3,157,665

 
(1.4
)
Leasing and equipment finance
3,873,581

 
3,745,322

 
3.4

Inventory finance
2,153,385

 
1,877,090

 
14.7

Auto finance
2,427,367

 
1,915,061

 
26.8

Other
20,674

 
24,144

 
(14.4
)
Total loans and leases(1)
$
17,201,046

 
$
16,401,646

 
4.9

(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 $55.1 million and $43.4 million at September 30, 2015 and December 31, 2014, respectively.
 
The consumer real estate junior lien portfolio was comprised of $2.5 billion of home equity lines of credit ("HELOCs") and $363.0 million of amortizing junior lien mortgage loans at September 30, 2015, compared with $2.1 billion and $424.4 million at December 31, 2014, respectively. At September 30, 2015 and December 31, 2014, $1.8 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 September 30, 2015 and December 31, 2014, $697.9 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 September 30, 2015, 18.3% of these loans mature prior to 2021.

The following table summarizes the carrying value of consumer real estate loans and consumer auto loans sold with servicing retained, the cash received, retained interest-only strips and the recognized net gains for the nine months ended September 30, 2015 and 2014. No servicing assets or liabilities related to consumer real estate or 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.
 
For the Nine Months Ended September 30,
(In thousands)
2015
2014
 
Consumer Real Estate Loans
Consumer Auto Loans
Consumer Real Estate Loans
Consumer Auto Loans
Sales proceeds, net(1)
$
898,387

$
1,113,036

$
827,831

$
989,811

Recorded investment in loans sold, including accrued interest
(878,468
)
(1,084,348
)
(808,627
)
(970,444
)
Interest-only strips, initial value
6,948


9,135

12,137

Net gains(2)
$
26,867

$
28,688

$
28,339

$
31,504

(1)
Includes transaction fees and other sales related costs.
(2)
Excludes subsequent adjustments and valuation adjustments while held for sale.


10


Table of Contents


TCF has two consumer real estate loan sale programs; one that sells nationally originated junior lien loans and the other that originates first mortgage lien loans in our primary banking markets and sells the loans through a correspondent relationship. Included in the consumer real estate recognized net gains was $4.7 million on the recorded investment of first mortgage lien loans sold related to the correspondent lending program, including accrued interest, of $212.9 million during the first nine months of 2015. There were no loans sold related to the correspondent lending program during the first nine months of 2014.

Included in the consumer auto loans sold in the table above are amounts related to the execution of securitizations. During the nine months ended September 30, 2015 and 2014, TCF transferred the recorded investment in consumer auto loans, including accrued interest, totaling $880.8 million and $258.6 million, respectively, with servicing retained, to trusts in securitization transactions, received net sales proceeds of $902.8 million and $266.0 million, respectively, and recognized gains of $22.0 million and $7.4 million, respectively, which qualified for sale accounting. These trusts are considered variable interest entities due to their limited capitalization and special purpose nature, however TCF does not have a variable interest in the trusts. Therefore, TCF is not the primary beneficiary of the trusts and they are not consolidated.

Total interest-only strips and the contractual liabilities related to loan sales are shown below.
(In thousands)
At September 30, 2015
At December 31, 2014
Interest-only strips attributable to:
 
 
Consumer real estate loan sales
$
21,138

$
21,198

Consumer auto loan sales
29,561

48,591

Contractual liabilities attributable to:
 
 
Consumer real estate loan sales
$
723

$
563

Consumer auto loan sales
365

699


TCF had no impairment charges on consumer real estate loan interest-only strips for the nine months ended September 30, 2015 and 2014. TCF recorded impairment charges on the consumer auto loan interest-only strips of $0.9 million and $1.6 million for the nine months ended September 30, 2015 and 2014, respectively, primarily as a result of higher prepayments than originally assumed.

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 nine months ended September 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.


11


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 September 30, 2015:
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
74,687

 
$
30,205

 
$
17,669

 
$
10,879

 
$
22,061

 
$
614

 
$
156,115

Charge-offs
(6,310
)
 
(487
)
 
(1,583
)
 
(463
)
 
(4,594
)
 
(1,901
)
 
(15,338
)
Recoveries
1,832

 
514

 
702

 
319

 
915

 
1,115

 
5,397

Net (charge-offs) recoveries
(4,478
)
 
27

 
(881
)
 
(144
)
 
(3,679
)
 
(786
)
 
(9,941
)
Provision for credit losses
780

 
(226
)
 
1,389

 
546

 
6,750

 
779

 
10,018

Other
(660
)
 

 

 
(160
)
 
(1,410
)
 

 
(2,230
)
Balance, end of period
$
70,329

 
$
30,006

 
$
18,177

 
$
11,121

 
$
23,722

 
$
607

 
$
153,962

 
 
 
 
 
 
 
 
 
 
 
 
 
 
At or For the Three Months Ended September 30, 2014:
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
161,349

 
$
31,361

 
$
19,184

 
$
9,539

 
$
13,865

 
$
783

 
$
236,081

Charge-offs
(24,072
)
 
(262
)
 
(2,350
)
 
(548
)
 
(2,958
)
 
(2,448
)
 
(32,638
)
Recoveries
1,912

 
406

 
1,157

 
284

 
494

 
1,448

 
5,701

Net (charge-offs) recoveries
(22,160
)
 
144

 
(1,193
)
 
(264
)
 
(2,464
)
 
(1,000
)
 
(26,937
)
Provision for credit losses
6,636

 
1,785

 
(391
)
 
411

 
6,302

 
996

 
15,739

Other
(700
)
 

 

 
(130
)
 
(1,395
)
 

 
(2,225
)
Balance, end of period
$
145,125

 
$
33,290

 
$
17,600

 
$
9,556

 
$
16,308

 
$
779

 
$
222,658

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

 
$
31,367

 
$
18,446

 
$
10,020

 
$
18,230

 
$
745

 
$
164,169

Charge-offs
(27,074
)
 
(3,944
)
 
(5,447
)
 
(1,812
)
 
(12,943
)
 
(5,226
)
 
(56,446
)
Recoveries
5,626

 
2,878

 
2,205

 
626

 
2,253

 
3,902

 
17,490

Net (charge-offs) recoveries
(21,448
)
 
(1,066
)
 
(3,242
)
 
(1,186
)
 
(10,690
)
 
(1,324
)
 
(38,956
)
Provision for credit losses
8,660

 
(295
)
 
2,973

 
2,627

 
20,186

 
1,186

 
35,337

Other
(2,244
)
 

 

 
(340
)
 
(4,004
)
 

 
(6,588
)
Balance, end of period
$
70,329

 
$
30,006

 
$
18,177

 
$
11,121

 
$
23,722

 
$
607

 
$
153,962

 
 
 
 
 
 
 
 
 
 
 
 
 
 
At or For the Nine Months Ended September 30, 2014:
 
 
 

 
 

 
 

 
 

 
 

 
 

Balance, beginning of period
$
176,030

 
$
37,467

 
$
18,733

 
$
8,592

 
$
10,623

 
$
785

 
$
252,230

Charge-offs
(51,639
)
 
(5,628
)
 
(5,760
)
 
(898
)
 
(7,682
)
 
(6,343
)
 
(77,950
)
Recoveries
5,319

 
785

 
2,845

 
661

 
1,109

 
4,523

 
15,242

Net (charge-offs) recoveries
(46,320
)
 
(4,843
)
 
(2,915
)
 
(237
)
 
(6,573
)
 
(1,820
)
 
(62,708
)
Provision for credit losses
17,821

 
737

 
1,782

 
1,336

 
16,650

 
1,814

 
40,140

Other
(2,406
)
 
(71
)
 

 
(135
)
 
(4,392
)
 

 
(7,004
)
Balance, end of period
$
145,125

 
$
33,290

 
$
17,600

 
$
9,556

 
$
16,308

 
$
779

 
$
222,658



12


Table of Contents


The following tables provide information regarding the allowance for loan and lease losses and balances by type of allowance methodology.
 
At September 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
$
45,884

 
$
29,497

 
$
16,363

 
$
10,910

 
$
21,410

 
$
604

 
$
124,668

Individually evaluated for impairment
24,445

 
509

 
1,814

 
211

 
2,312

 
3

 
29,294

Total
$
70,329

 
$
30,006

 
$
18,177

 
$
11,121

 
$
23,722

 
$
607

 
$
153,962

Loans and leases outstanding:
 

 
 

 
 

 
 

 
 

 
 

 
 

Collectively evaluated for impairment
$
5,393,919

 
$
3,035,004

 
$
3,861,455

 
$
2,151,551

 
$
2,419,230

 
$
20,656

 
$
16,881,815

Individually evaluated for impairment
219,795

 
77,321

 
12,076

 
1,834

 
8,098

 
18

 
319,142

Loans acquired with deteriorated credit quality

 

 
50

 

 
39

 

 
89

Total
$
5,613,714

 
$
3,112,325

 
$
3,873,581

 
$
2,153,385

 
$
2,427,367

 
$
20,674

 
$
17,201,046


 
At December 31, 2014
(In thousands)
Consumer
Real Estate
 
Commercial