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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
March 31, 2016
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 incorporation or organization)
(I.R.S. Employer Identification No.)
 
200 Lake Street East
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 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, 2016
Common Stock, $.01 par value
171,050,970 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 March 31, 2016
 
At December 31, 2015
 
(Unaudited)
 
 
Assets:
 

 
 

Cash and due from banks
$
870,153

 
$
889,337

Investments
71,586

 
70,537

Securities held to maturity
198,178

 
201,920

Securities available for sale
1,135,890

 
888,885

Loans and leases held for sale
211,151

 
157,625

Loans and leases:
 

 
 

Consumer real estate:
 

 
 

First mortgage lien
2,521,492

 
2,624,956

Junior lien
2,729,075

 
2,839,316

Total consumer real estate
5,250,567

 
5,464,272

Commercial
3,114,594

 
3,145,832

Leasing and equipment finance
4,005,934

 
4,012,248

Inventory finance
2,676,675

 
2,146,754

Auto finance
2,786,731

 
2,647,596

Other
18,940

 
19,297

Total loans and leases
17,853,441

 
17,435,999

Allowance for loan and lease losses
(160,074
)
 
(156,054
)
Net loans and leases
17,693,367

 
17,279,945

Premises and equipment, net
439,507

 
445,934

Goodwill
225,640

 
225,640

Other assets
475,630

 
529,786

Total assets
$
21,321,102

 
$
20,689,609

Liabilities and Equity:
 

 
 

Deposits:
 

 
 

Checking
$
5,764,392

 
$
5,690,559

Savings
4,741,850

 
4,717,457

Money market
2,539,124

 
2,408,180

Certificates of deposit
4,267,003

 
3,903,793

Total deposits
17,312,369

 
16,719,989

Short-term borrowings
2,426

 
5,381

Long-term borrowings
1,003,168

 
1,034,557

Total borrowings
1,005,594

 
1,039,938

Accrued expenses and other liabilities
634,298

 
622,765

Total liabilities
18,952,261

 
18,382,692

Equity:
 

 
 

Preferred stock, par value $0.01 per share, 30,000,000 shares authorized;
 
 
 
4,006,900 shares issued
263,240

 
263,240

Common stock, par value $0.01 per share, 280,000,000 shares authorized;
 
 
 
170,647,255 and 169,887,030 shares issued, respectively
1,707

 
1,699

Additional paid-in capital
860,307

 
851,836

Retained earnings, subject to certain restrictions
1,271,031

 
1,240,347

Accumulated other comprehensive income (loss)
(1,927
)
 
(15,346
)
Treasury stock at cost, 42,566 shares, and other
(51,445
)
 
(50,860
)
Total TCF Financial Corporation stockholders' equity
2,342,913

 
2,290,916

Non-controlling interest in subsidiaries
25,928

 
16,001

Total equity
2,368,841

 
2,306,917

Total liabilities and equity
$
21,321,102

 
$
20,689,609

 
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)
2016
 
2015
Interest income:
 
 
 
Loans and leases
$
214,805

 
$
205,976

Securities available for sale
5,498

 
3,080

Securities held to maturity
1,319

 
1,405

Investments and other
10,720

 
9,333

Total interest income
232,342

 
219,794

Interest expense:
 
 
 
Deposits
14,991

 
11,072

Borrowings
5,693

 
5,302

Total interest expense
20,684

 
16,374

Net interest income
211,658

 
203,420

Provision for credit losses
18,842

 
12,791

Net interest income after provision for credit losses
192,816

 
190,629

Non-interest income:
 
 
 
Fees and service charges
32,817

 
33,972

Card revenue
13,363

 
12,901

ATM revenue
5,021

 
5,122

Subtotal
51,201

 
51,995

Gains on sales of auto loans, net
11,920

 
6,265

Gains on sales of consumer real estate loans, net
9,384

 
8,763

Servicing fee income
8,883

 
7,342

Subtotal
30,187

 
22,370

Leasing and equipment finance
28,487

 
22,224

Other
2,843

 
4,127

Fees and other revenue
112,718

 
100,716

Gains (losses) on securities, net
(116
)
 
(78
)
Total non-interest income
112,602

 
100,638

Non-interest expense:
 
 
 
Compensation and employee benefits
124,473

 
115,815

Occupancy and equipment
37,008

 
36,827

FDIC insurance
4,113

 
5,393

Advertising and marketing
5,887

 
6,523

Other
43,348

 
48,133

Subtotal
214,829

 
212,691

Operating lease depreciation
9,573

 
7,734

Foreclosed real estate and repossessed assets, net
3,920

 
6,196

Other credit costs, net
12

 
146

Total non-interest expense
228,334

 
226,767

Income before income tax expense
77,084

 
64,500

Income tax expense
26,803

 
22,828

Income after income tax expense
50,281

 
41,672

Income attributable to non-controlling interest
2,235

 
1,871

Net income attributable to TCF Financial Corporation
48,046

 
39,801

Preferred stock dividends
4,847

 
4,847

Net income available to common stockholders
$
43,199

 
$
34,954

Net income per common share:
 
 
 
Basic
$
0.26

 
$
0.21

Diluted
$
0.26

 
$
0.21

 
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)
2016
 
2015
Net income attributable to TCF Financial Corporation
$
48,046

 
$
39,801

Other comprehensive income (loss):
 

 
 

Securities available for sale:
 

 
 

Unrealized gains (losses) arising during the period
19,135

 
4,139

Reclassification of net (gains) losses to net income
274

 
304

Net investment hedges:
 

 
 

Unrealized gains (losses) arising during the period
(3,257
)
 
3,588

Foreign currency translation adjustment:
 

 
 

Unrealized gains (losses) arising during the period
3,409

 
(3,886
)
Recognized postretirement prior service cost:
 

 
 

Reclassification of net (gains) losses to net income
(12
)
 
(12
)
Income tax (expense) benefit
(6,130
)
 
(3,029
)
Total other comprehensive income (loss)
13,419

 
1,104

Comprehensive income
$
61,465

 
$
40,905

 
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, 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
—

—

—

—

—

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

 
 
 
 
 
 
 
 
 
 
 
 
Balance, December 31, 2015
4,006,900

169,887,030

$
263,240

$
1,699

$
851,836

$
1,240,347

$
(15,346
)
$
(50,860
)
$
2,290,916

$
16,001

$
2,306,917

Net income
—

—

—

—

—

48,046

—

—

48,046

2,235

50,281

Other comprehensive income (loss)
—

—

—

—

—

—

13,419

—

13,419

—

13,419

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

—

—

—

—

—

—

—

—

7,692

7,692

Dividends on preferred stock
—

—

—

—

—

(4,847
)
—

—

(4,847
)
—

(4,847
)
Dividends on common stock
—

—

—

—

—

(12,515
)
—

—

(12,515
)
—

(12,515
)
Grants of restricted stock
—

295,057

—

3

(3
)
—

—

—

—

—

—

Common shares purchased by TCF employee benefit plans
—

511,420

—

5

5,833

—

—

—

5,838

—

5,838

Cancellation of shares of restricted stock
—

(21,150
)
—

—

(132
)
—

—

—

(132
)
—

(132
)
Cancellation of common shares for tax withholding
—

(25,102
)
—

—

(357
)
—

—

—

(357
)
—

(357
)
Net amortization of stock compensation
—

—

—

—

2,594

—

—

—

2,594

—

2,594

Stock compensation tax (expense) benefit
—

—

—

—

(49
)
—

—

—

(49
)
—

(49
)
Change in shares held in trust for deferred compensation plans, at cost
—

—

—

—

585

—

—

(585
)
—

—

—

Balance, March 31, 2016
4,006,900

170,647,255

$
263,240

$
1,707

$
860,307

$
1,271,031

$
(1,927
)
$
(51,445
)
$
2,342,913

$
25,928

$
2,368,841

See accompanying notes to consolidated financial statements.

4

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TCF FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
 
Three Months Ended March 31,
(In thousands)
2016
 
2015
Cash flows from operating activities:
 

 
 

Net income attributable to TCF Financial Corporation
$
48,046

 
$
39,801

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

 
 

Provision for credit losses
18,842

 
12,791

Depreciation and amortization
45,979

 
36,804

Proceeds from sales of loans and leases held for sale
300,610

 
123,689

Gains on sales of assets, net
(24,599
)
 
(17,202
)
Net income attributable to non-controlling interest
2,235

 
1,871

Originations of loans held for sale, net of repayments
(296,726
)
 
(218,630
)
Net change in other assets and accrued expenses and other liabilities
49,821

 
(35,314
)
Other, net
(6,507
)
 
(7,080
)
Net cash provided by (used in) operating activities
137,701

 
(63,270
)
Cash flows from investing activities:
 

 
 

Loan originations and purchases, net of principal collected on loans and leases
(779,800
)
 
(866,211
)
Purchases of equipment for lease financing
(223,380
)
 
(199,117
)
Proceeds from sales of loans
489,869

 
364,386

Proceeds from sales of lease receivables
3,802

 
7,375

Proceeds from sales of lease equipment
4,265

 
2,025

Purchases of securities
(240,789
)
 
(88,067
)
Proceeds from maturities of and principal collected on securities
24,603

 
19,468

Purchases of Federal Home Loan Bank stock
(36,000
)
 
(27,000
)
Redemption of Federal Home Loan Bank stock
34,963

 
33,004

Proceeds from sales of real estate owned
20,504

 
16,938

Purchases of premises and equipment
(7,661
)
 
(8,414
)
Other, net
5,354

 
6,683

Net cash provided by (used in) investing activities
(704,270
)
 
(738,930
)
Cash flows from financing activities:
 

 
 

Net change in deposits
592,380

 
603,007

Net change in short-term borrowings
(3,231
)
 
4,083

Proceeds from long-term borrowings
1,249,037

 
1,212,244

Payments on long-term borrowings
(1,286,920
)
 
(1,208,871
)
Net investment by (distribution to) non-controlling interest
7,692

 
6,304

Dividends paid on preferred stock
(4,847
)
 
(4,847
)
Dividends paid on common stock
(12,515
)
 
(8,241
)
Stock compensation tax (expense) benefit
(49
)
 
134

Common shares sold to TCF employee benefit plans
5,838

 
8,283

Net cash provided by (used in) financing activities
547,385

 
612,096

Net change in cash and due from banks
(19,184
)
 
(190,104
)
Cash and due from banks at beginning of period
889,337

 
1,115,250

Cash and due from banks at end of period
$
870,153

 
$
925,146

Supplemental disclosures of cash flow information:
 

 
 

Cash paid (received) for:
 

 
 

Interest on deposits and borrowings
$
20,613

 
$
13,442

Income taxes, net
(37,483
)
 
(38,068
)
Transfer of loans to other assets
26,016

 
23,921

See accompanying notes to consolidated financial statements.

5

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TCF FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)

Note 1. Basis of Presentation
 
TCF Financial Corporation (together with its direct and indirect subsidiaries, "we," "us," "our," "TCF" or the "Company"), a Delaware corporation, is a national bank holding company based in Wayzata, Minnesota. References herein to "TCF Financial" or the "Holding Company" refer to TCF Financial Corporation on an unconsolidated basis. TCF's principal subsidiary, TCF National Bank ("TCF Bank"), is headquartered in Sioux Falls, South Dakota.
 
The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore do not include all of the information and notes necessary for complete financial statements in conformity with U.S. generally accepted accounting principles ("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, 2015, and for the year then ended. All significant intercompany accounts and transactions have been eliminated in consolidation. Accounting policies in effect at December 31, 2015 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 the 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.

Effective January 1, 2016, the Company retrospectively adopted Accounting Standards Update ("ASU") No. 2015-03, Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, which required that debt issuance costs be presented as a direct deduction from debt. Accordingly, the Company reclassified unamortized debt issuance costs of $2.1 million from Other assets to a reduction in Long-term borrowings on the Consolidated Statement of Financial Condition as of December 31, 2015. The adoption of this ASU did not impact results of operations, retained earnings or cash flows.

Effective January 1, 2016, the Company changed its reportable segments to align with the way the Company is now managed. The revised presentation of previously reported segment data has been applied retroactively to all periods presented in these financial statements. The new segments are Consumer Banking, Wholesale Banking and Enterprise Services. Prior to this change the Company's segments were Lending, Funding and Support Services. The business segments follow GAAP as described in Note 1, Summary of Significant Accounting Policies, in Item 8 of TCF's 2015 Annual Report on Form 10-K, except for the accounting for intercompany interest income and interest expense, which are eliminated in consolidation. See Note 15, Business Segments for a description of the new segments.


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Note 2.  Cash and Due from Banks
 
At March 31, 2016 and December 31, 2015, TCF Bank was required by Federal Reserve regulations to maintain reserves of $106.5 million and $101.6 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 may also retain cash balances for collateral on certain borrowings, forward foreign exchange contracts, interest rate contracts and other contracts. TCF maintained restricted cash totaling $57.6 million and $58.3 million at March 31, 2016 and December 31, 2015, respectively.

TCF had cash held in interest-bearing accounts of $620.2 million and $609.5 million at March 31, 2016 and December 31, 2015, respectively.

Note 3.  Securities Available for Sale and Securities Held to Maturity
 
Securities consisted of the following.
 
At March 31, 2016
 
At December 31, 2015
(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
$
687,347

 
$
8,394

 
$
345

 
$
695,396

 
$
627,521

 
$
655

 
$
6,246

 
$
621,930

Other
28

 
—

 
—

 
28

 
34

 
—

 
—

 
34

Obligations of states and political subdivisions
430,239

 
10,420

 
193

 
440,466

 
262,189

 
4,732

 
—

 
266,921

Total securities available for sale
$
1,117,614

 
$
18,814

 
$
538

 
$
1,135,890

 
$
889,744

 
$
5,387

 
$
6,246

 
$
888,885

Securities held to maturity:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Mortgage-backed securities:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

U.S. Government sponsored enterprises and federal agencies
$
193,818

 
$
10,341

 
$
121

 
$
204,038

 
$
197,410

 
$
5,247

 
$
214

 
$
202,443

Other
960

 
—

 
—

 
960

 
1,110

 
—

 
—

 
1,110

Other securities
3,400

 
—

 
—

 
3,400

 
3,400

 
—

 
—

 
3,400

Total securities held to maturity
$
198,178

 
$
10,341

 
$
121

 
$
208,398

 
$
201,920

 
$
5,247

 
$
214

 
$
206,953

 
There were no sales of securities available for sale during the three months ended March 31, 2016 and 2015. At March 31, 2016 and December 31, 2015, mortgage-backed securities with a carrying value of $10.2 million and $17.1 million, respectively, were pledged as collateral to secure certain deposits and borrowings. There were no impairment charges recognized on securities available for sale during the three months ended March 31, 2016 and 2015. 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 between securities available for sale and securities held to maturity during the three months ended March 31, 2016 and 2015. Other held to maturity securities consist of bonds which qualify for investment credit under the Community Reinvestment Act. TCF recorded impairment charges of $0.1 million during each of the three month periods ended March 31, 2016 and 2015, on held to maturity mortgage-backed securities with a carrying value of $1.0 million and $1.4 million, respectively.


7

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The following tables show the gross unrealized losses and fair value of securities available for sale and securities held to maturity at March 31, 2016 and December 31, 2015, aggregated by investment category and the length of time the securities were in a continuous loss position.
 
 
At March 31, 2016
 
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
$
41,387

 
$
198

 
$
20,201

 
$
147

 
$
61,588

 
$
345

Obligations of states and political subdivisions
35,226

 
193

 
—

 
—

 
35,226

 
193

Total securities available for sale
$
76,613

 
$
391

 
$
20,201

 
$
147

 
$
96,814

 
$
538

 
 
 
 
 
 
 
 
 
 
 
 
Securities held to maturity:
 

 
 

 
 

 
 

 
 

 
 

Mortgage-backed securities:
 

 
 

 
 

 
 

 
 

 
 

U.S. Government sponsored enterprises and federal agencies
$
889

 
$
16

 
$
1,635

 
$
105

 
$
2,524

 
$
121

Total securities held to maturity
$
889

 
$
16

 
$
1,635

 
$
105

 
$
2,524

 
$
121

 
At December 31, 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
$
552,127

 
$
6,246

 
$
—

 
$
—

 
$
552,127

 
$
6,246

Total securities available for sale
$
552,127

 
$
6,246

 
$
—

 
$
—

 
$
552,127

 
$
6,246

 
 
 
 
 
 
 
 
 
 
 
 
Securities held to maturity:
 

 
 

 
 

 
 

 
 

 
 

Mortgage-backed securities:
 

 
 

 
 

 
 

 
 

 
 

U.S. Government sponsored enterprises and federal agencies
$
12,333

 
$
100

 
$
1,732

 
$
114

 
$
14,065

 
$
214

Total securities held to maturity
$
12,333

 
$
100

 
$
1,732

 
$
114

 
$
14,065

 
$
214



8

Table of Contents



The amortized cost and fair value of securities available for sale and securities held to maturity by final contractual maturity at March 31, 2016 and December 31, 2015 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, 2016
 
At December 31, 2015
(In thousands)
Amortized Cost
 
Fair Value
 
Amortized Cost
 
Fair Value
Securities available for sale:
 

 
 

 
 

 
 

Due in one year or less
$
2

 
$
2

 
$
1

 
$
1

Due in 1-5 years
29

 
29

 
38

 
38

Due in 5-10 years
281,020

 
289,137

 
268,638

 
272,511

Due after 10 years
836,563

 
846,722

 
621,067

 
616,335

Total securities available for sale
$
1,117,614

 
$
1,135,890

 
$
889,744

 
$
888,885

 
 
 
 
 
 
 
 
Securities held to maturity:
 

 
 

 
 

 
 

Due in one year or less
$
100

 
$
100

 
$
100

 
$
100

Due in 1-5 years
1,900

 
1,900

 
1,900

 
1,900

Due in 5-10 years
1,400

 
1,400

 
1,400

 
1,400

Due after 10 years
194,778

 
204,998

 
198,520

 
203,553

Total securities held to maturity
$
198,178

 
$
208,398

 
$
201,920

 
$
206,953


Note 4.  Loans and Leases

Loans and leases consisted of the following.
(Dollars in thousands)
At March 31, 2016
 
At December 31, 2015
 
Percent Change
Consumer real estate:
 

 
 

 
 

First mortgage lien
$
2,521,492

 
$
2,624,956

 
(3.9
)%
Junior lien
2,729,075

 
2,839,316

 
(3.9
)
Total consumer real estate
5,250,567

 
5,464,272

 
(3.9
)
Commercial:
 

 
 

 
 

Commercial real estate:
 

 
 

 
 

Permanent
2,269,582

 
2,267,218

 
0.1

Construction and development
283,065

 
326,211

 
(13.2
)
Total commercial real estate
2,552,647

 
2,593,429

 
(1.6
)
Commercial business
561,947

 
552,403

 
1.7

Total commercial
3,114,594

 
3,145,832

 
(1.0
)
Leasing and equipment finance
4,005,934

 
4,012,248

 
(0.2
)
Inventory finance
2,676,675

 
2,146,754

 
24.7

Auto finance
2,786,731

 
2,647,596

 
5.3

Other
18,940

 
19,297

 
(1.9
)
Total loans and leases(1)
$
17,853,441

 
$
17,435,999

 
2.4

(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 $72.1 million and $73.7 million at March 31, 2016 and December 31, 2015, respectively.
 

9

Table of Contents



The consumer real estate junior lien portfolio was comprised of $2.4 billion of home equity lines of credit ("HELOCs") and $330.8 million of amortizing consumer real estate junior lien mortgage loans at March 31, 2016, compared with $2.5 billion and $345.3 million at December 31, 2015, respectively. At both March 31, 2016 and December 31, 2015, $1.8 billion 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, 2016 and December 31, 2015, $631.6 million and $664.5 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, 2016, 18.2% 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, interest-only strips received and the recognized net gains for the three months ended March 31, 2016 and 2015. 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.
 
Three Months Ended March 31,
(In thousands)
2016
2015
 
Consumer Real Estate Loans
Consumer Auto Loans
Consumer Real Estate Loans
Consumer Auto Loans
Sales proceeds, net(1)
$
326,961

$
453,747

$
270,777

$
210,187

Recorded investment in loans sold, including accrued interest
(322,501
)
(446,365
)
(265,273
)
(203,506
)
Interest-only strips, initial value
5,661

4,841

2,659

—

Net gains(2)
$
10,121

$
12,223

$
8,163

$
6,681

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

TCF has two consumer real estate loan sale programs; one that sells nationally originated consumer real estate 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. The consumer real estate recognized net gains included $1.8 million and $1.4 million on the recorded investments of $79.1 million and $61.8 million in first mortgage lien loans sold related to the correspondent lending program, including accrued interest, for the three months ended March 31, 2016 and 2015, respectively.

Total interest-only strips and the contractual liabilities related to loan sales are shown below.
(In thousands)
At March 31, 2016
At December 31, 2015
Interest-only strips attributable to:
 
 
Consumer real estate loan sales
$
22,650

$
19,182

Consumer auto loan sales
26,077

25,150

Contractual liabilities attributable to:
 
 
Consumer real estate loan sales
$
655

$
702

Consumer auto loan sales
184

185


TCF had no impairment charges on consumer real estate loan interest-only strips for the three months ended March 31, 2016 and 2015, respectively. TCF recorded impairment charges on the consumer auto loan interest-only strips of $0.0 million and $0.5 million for the three months ended March 31, 2016 and 2015, respectively, primarily as a result of higher prepayments than originally assumed.
 

10

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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, 2016 and 2015, 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.

Note 5.  Allowance for Loan and Lease Losses and Credit Quality Information
 
The following tables provide the allowance for loan and lease losses and other 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, 2016:
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
67,992

 
$
30,185

 
$
19,018

 
$
11,128

 
$
26,486

 
$
1,245

 
$
156,054

Charge-offs
(6,061
)
 
(28
)
 
(1,972
)
 
(641
)
 
(6,330
)
 
(1,635
)
 
(16,667
)
Recoveries
1,290

 
219

 
681

 
385

 
883

 
1,303

 
4,761

Net (charge-offs) recoveries
(4,771
)
 
191

 
(1,291
)
 
(256
)
 
(5,447
)
 
(332
)
 
(11,906
)
Provision for credit losses
5,025

 
1,171

 
1,727

 
2,263

 
9,065

 
(409
)
 
18,842

Other
(1,518
)
 
—

 
—

 
171

 
(1,569
)
 
—

 
(2,916
)
Balance, end of period
$
66,728

 
$
31,547

 
$
19,454

 
$
13,306

 
$
28,535

 
$
504

 
$
160,074

 
 
 
 
 
 
 
 
 
 
 
 
 
 
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



11

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The following tables provide information regarding the allowance for loan and lease losses and balances by type of allowance methodology.
 
At March 31, 2016
(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
$
40,002

 
$
31,172

 
$
16,897

 
$
13,027

 
$
26,090

 
$
502

 
$
127,690

Individually evaluated for impairment
26,726

 
375

 
2,557

 
279

 
2,445

 
2

 
32,384

Total
$
66,728

 
$
31,547

 
$
19,454

 
$
13,306

 
$
28,535

 
$
504

 
$
160,074

Loans and leases outstanding:
 

 
 

 
 

 
 

 
 

 
 

 
 

Collectively evaluated for impairment
$
5,036,309

 
$
3,064,588

 
$
3,990,600

 
$
2,674,227

 
$
2,776,624

 
$
18,926

 
$
17,561,274

Individually evaluated for impairment
214,258

 
50,006

 
15,307

 
2,448

 
10,099

 
14

 
292,132

Loans acquired with deteriorated credit quality
—

 
—

 
27

 
—

 
8

 
—

 
35

Total
$
5,250,567

 
$
3,114,594

 
$
4,005,934

 
$
2,676,675

 
$
2,786,731

 
$
18,940

 
$
17,853,441


 
At December 31, 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
$
38,819

 
$
30,170

 
$
16,994

 
$
10,929

 
$
23,471

 
$
1,243

 
$
121,626

Individually evaluated for impairment
29,173

 
15

 
2,024

 
199

 
3,015

 
2

 
34,428

Total
$
67,992

 
$
30,185

 
$
19,018

 
$
11,128

 
$
26,486

 
$
1,245

 
$
156,054

Loans and leases outstanding:
 

 
 

 
 

 
 

 
 

 
 
 
 
Collectively evaluated for impairment
$
5,248,829

 
$
3,092,398

 
$
3,997,544

 
$
2,145,605

 
$
2,637,269

 
$
19,286

 
$
17,140,931

Individually evaluated for impairment
215,443

 
53,434

 
14,669

 
1,149

 
10,308

 
11

 
295,014

Loans acquired with deteriorated credit quality
—

 
—

 
35

 
—

 
19

 
—

 
54

Total
$
5,464,272

 
$
3,145,832

 
$
4,012,248

 
$
2,146,754

 
$
2,647,596

 
$
19,297

 
$
17,435,999



12

Table of Contents



Accruing and Non-accrual Loans and Leases  The following tables set forth information regarding TCF's accruing and non-accrual loans and leases. Non-accrual loans and leases are those which management believes have a higher risk of loss. Delinquent balances are determined based on the contractual terms of the loan or lease.
 
At March 31, 2016
(In thousands)
Current-59 Days
Delinquent and
Accruing
 
60-89 Days
 Delinquent
 and Accruing
 
90 Days or More
Delinquent and
Accruing
 
Total
 Accruing
 
Non-accrual
 
Total
Consumer real estate:
 

 
 

 
 

 
 

 
 

 
 

First mortgage lien
$
2,390,399

 
$
8,133

 
$
1,236

 
$
2,399,768

 
$
121,724

 
$
2,521,492

Junior lien
2,682,273

 
1,380

 
—

 
2,683,653

 
45,422

 
2,729,075

Total consumer real estate
5,072,672

 
9,513

 
1,236

 
5,083,421

 
167,146

 
5,250,567

Commercial:
 

 
 

 
 

 
 
 
 

 
 
Commercial real estate
2,548,752

 
—

 
114

 
2,548,866

 
3,781

 
2,552,647

Commercial business
557,771

 
—

 
—

 
557,771

 
4,176

 
561,947

Total commercial
3,106,523

 
—

 
114

 
3,106,637

 
7,957

 
3,114,594

Leasing and equipment finance
3,989,194

 
3,026

 
1,586

 
3,993,806

 
11,947

 
4,005,753

Inventory finance
2,674,138

 
55

 
34

 
2,674,227

 
2,448

 
2,676,675

Auto finance
2,775,165

 
1,747

 
667

 
2,777,579

 
9,143

 
2,786,722

Other
18,908

 
18

 
6

 
18,932

 
8

 
18,940

Subtotal
17,636,600

 
14,359

 
3,643

 
17,654,602

 
198,649

 
17,853,251

Portfolios acquired with deteriorated credit quality
187

 
2

 
1

 
190

 
—

 
190

Total
$
17,636,787

 
$
14,361

 
$
3,644

 
$
17,654,792

 
$
198,649

 
$
17,853,441


 
At December 31, 2015
(In thousands)
Current-59 Days
Delinquent and
Accruing
 
60-89 Days
 Delinquent
 and Accruing
 
90 Days or More
Delinquent and
Accruing
 
Total
 Accruing
 
Non-accrual
 
Total
Consumer real estate:
 

 
 

 
 

 
 

 
 

 
 

First mortgage lien
$
2,489,235

 
$
8,649

 
$
2,916

 
$
2,500,800

 
$
124,156

 
$
2,624,956

Junior lien
2,793,684

 
1,481

 
38

 
2,795,203

 
44,113

 
2,839,316

Total consumer real estate
5,282,919

 
10,130

 
2,954

 
5,296,003

 
168,269

 
5,464,272

Commercial:
 

 
 

 
 

 
 
 
 

 
 
Commercial real estate
2,586,692

 
—

 
—

 
2,586,692

 
6,737

 
2,593,429

Commercial business
548,814

 
1

 
—

 
548,815

 
3,588

 
552,403

Total commercial
3,135,506

 
1

 
—

 
3,135,507

 
10,325

 
3,145,832

Leasing and equipment finance
3,998,469

 
1,728

 
564

 
4,000,761

 
11,262

 
4,012,023

Inventory finance
2,145,538

 
87

 
31

 
2,145,656

 
1,098

 
2,146,754

Auto finance
2,634,496

 
2,343

 
1,230

 
2,638,069

 
9,509

 
2,647,578

Other
19,274

 
13

 
7

 
19,294

 
3

 
19,297

Subtotal
17,216,202

 
14,302

 
4,786

 
17,235,290

 
200,466

 
17,435,756

Portfolios acquired with deteriorated credit quality
242

 
1

 
—

 
243

 
—

 
243

Total
$
17,216,444

 
$
14,303

 
$
4,786

 
$
17,235,533

 
$
200,466

 
$
17,435,999

 
The following table provides interest income recognized on loans and leases in non-accrual status and contractual interest that would have been recorded had the loans and leases performed in accordance with their original contractual terms.
 
Three Months Ended March 31,
(In thousands)
2016
 
2015
Contractual interest due on non-accrual loans and leases
$
5,267

 
$
5,223

Interest income recognized on non-accrual loans and leases
966

 
1,312

Unrecognized interest income
$
4,301

 
$
3,911



13

Table of Contents



The following table provides information regarding consumer real estate loans to customers currently involved in ongoing Chapter 7 or Chapter 13 bankruptcy proceedings which have not yet been discharged or completed. 
(In thousands)
At March 31, 2016
 
At December 31, 2015
Consumer real estate loans to customers in bankruptcy:
 

 
 

0-59 days delinquent and accruing
$
22,007

 
$
26,020

Non-accrual
22,691

 
20,264

Total consumer real estate loans to customers in bankruptcy
$
44,698

 
$
46,284

 
Loan Modifications for Borrowers with Financial Difficulties  Included within loans and leases in the previous tables are certain loans that have been modified in order to maximize collection of loan balances. If, for economic or legal reasons related to the customer's financial difficulties, TCF grants a concession, the modified loan is classified as a troubled debt restructuring ("TDR") loan. TDR loans consist primarily of consumer real estate and commercial loans.
 
Total TDR loans at March 31, 2016 and December 31, 2015 were $224.5 million and $230.6 million, respectively, of which $131.2 million and $135.3 million, respectively, were accruing. TCF held consumer real estate TDR loans of $183.6 million and $185.8 million at March 31, 2016 and December 31, 2015, respectively, of which $103.6 million and $106.8 million, respectively, were accruing. TCF also held $28.4 million and $31.7 million of commercial TDR loans at March 31, 2016 and December 31, 2015, respectively, of which $23.7 million an