Item 1. Financial Statements
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Financial Condition
|
|
|
|
|
|
|
|
|
(Dollars in thousands, except per-share data)
|
At June 30, 2017
|
|
At December 31, 2016
|
|
(Unaudited)
|
|
|
Assets:
|
|
|
|
|
|
Cash and due from banks
|
$
|
551,463
|
|
|
$
|
609,603
|
|
Investments
|
82,737
|
|
|
74,714
|
|
Securities held to maturity
|
171,320
|
|
|
181,314
|
|
Securities available for sale
|
1,554,951
|
|
|
1,423,435
|
|
Loans and leases held for sale
|
172,583
|
|
|
268,832
|
|
Loans and leases:
|
|
|
|
|
|
Consumer real estate:
|
|
|
|
|
|
First mortgage lien
|
2,070,385
|
|
|
2,292,596
|
|
Junior lien
|
2,701,592
|
|
|
2,791,756
|
|
Total consumer real estate
|
4,771,977
|
|
|
5,084,352
|
|
Commercial
|
3,488,725
|
|
|
3,286,478
|
|
Leasing and equipment finance
|
4,333,735
|
|
|
4,336,310
|
|
Inventory finance
|
2,509,485
|
|
|
2,470,175
|
|
Auto finance
|
3,243,144
|
|
|
2,647,741
|
|
Other
|
19,459
|
|
|
18,771
|
|
Total loans and leases
|
18,366,525
|
|
|
17,843,827
|
|
Allowance for loan and lease losses
|
(165,620
|
)
|
|
(160,269
|
)
|
Net loans and leases
|
18,200,905
|
|
|
17,683,558
|
|
Premises and equipment, net
|
423,745
|
|
|
418,372
|
|
Goodwill
|
227,072
|
|
|
225,640
|
|
Other assets
|
669,875
|
|
|
555,858
|
|
Total assets
|
$
|
22,054,651
|
|
|
$
|
21,441,326
|
|
Liabilities and Equity:
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
Checking
|
$
|
6,147,423
|
|
|
$
|
6,009,151
|
|
Savings
|
4,823,552
|
|
|
4,719,481
|
|
Money market
|
2,128,709
|
|
|
2,421,467
|
|
Certificates of deposit
|
4,419,120
|
|
|
4,092,423
|
|
Total deposits
|
17,518,804
|
|
|
17,242,522
|
|
Short-term borrowings
|
8,534
|
|
|
4,391
|
|
Long-term borrowings
|
1,266,748
|
|
|
1,073,181
|
|
Total borrowings
|
1,275,282
|
|
|
1,077,572
|
|
Accrued expenses and other liabilities
|
710,734
|
|
|
676,587
|
|
Total liabilities
|
19,504,820
|
|
|
18,996,681
|
|
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;
|
|
|
|
171,532,487 and 171,034,506 shares issued, respectively
|
1,715
|
|
|
1,710
|
|
Additional paid-in capital
|
858,451
|
|
|
862,776
|
|
Retained earnings, subject to certain restrictions
|
1,453,355
|
|
|
1,382,901
|
|
Accumulated other comprehensive income (loss)
|
(17,503
|
)
|
|
(33,725
|
)
|
Treasury stock at cost, 42,566 shares, and other
|
(32,193
|
)
|
|
(49,419
|
)
|
Total TCF Financial Corporation stockholders' equity
|
2,527,065
|
|
|
2,427,483
|
|
Non-controlling interest in subsidiaries
|
22,766
|
|
|
17,162
|
|
Total equity
|
2,549,831
|
|
|
2,444,645
|
|
Total liabilities and equity
|
$
|
22,054,651
|
|
|
$
|
21,441,326
|
|
See accompanying notes to consolidated financial statements.
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)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Interest income:
|
|
|
|
|
|
|
|
|
|
Loans and leases
|
$
|
234,092
|
|
|
$
|
214,128
|
|
|
$
|
453,640
|
|
|
$
|
428,933
|
|
Securities available for sale
|
8,052
|
|
|
6,396
|
|
|
16,032
|
|
|
11,894
|
|
Securities held to maturity
|
1,035
|
|
|
1,116
|
|
|
2,315
|
|
|
2,435
|
|
Loans held for sale and other
|
5,338
|
|
|
12,364
|
|
|
18,837
|
|
|
23,084
|
|
Total interest income
|
248,517
|
|
|
234,004
|
|
|
490,824
|
|
|
466,346
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
|
Deposits
|
14,436
|
|
|
15,893
|
|
|
28,151
|
|
|
30,884
|
|
Borrowings
|
6,920
|
|
|
5,127
|
|
|
13,398
|
|
|
10,820
|
|
Total interest expense
|
21,356
|
|
|
21,020
|
|
|
41,549
|
|
|
41,704
|
|
Net interest income
|
227,161
|
|
|
212,984
|
|
|
449,275
|
|
|
424,642
|
|
Provision for credit losses
|
19,446
|
|
|
13,250
|
|
|
31,639
|
|
|
32,092
|
|
Net interest income after provision for credit losses
|
207,715
|
|
|
199,734
|
|
|
417,636
|
|
|
392,550
|
|
Non-interest income:
|
|
|
|
|
|
|
|
|
|
Fees and service charges
|
32,733
|
|
|
34,622
|
|
|
64,015
|
|
|
67,439
|
|
Card revenue
|
14,154
|
|
|
14,083
|
|
|
27,304
|
|
|
27,446
|
|
ATM revenue
|
5,061
|
|
|
5,288
|
|
|
9,736
|
|
|
10,309
|
|
Subtotal
|
51,948
|
|
|
53,993
|
|
|
101,055
|
|
|
105,194
|
|
Gains on sales of auto loans, net
|
380
|
|
|
10,143
|
|
|
3,244
|
|
|
22,063
|
|
Gains on sales of consumer real estate loans, net
|
8,980
|
|
|
10,839
|
|
|
17,871
|
|
|
20,223
|
|
Servicing fee income
|
10,730
|
|
|
9,502
|
|
|
22,381
|
|
|
18,385
|
|
Subtotal
|
20,090
|
|
|
30,484
|
|
|
43,496
|
|
|
60,671
|
|
Leasing and equipment finance
|
39,830
|
|
|
31,074
|
|
|
68,128
|
|
|
59,561
|
|
Other
|
2,795
|
|
|
2,405
|
|
|
5,498
|
|
|
5,248
|
|
Fees and other revenue
|
114,663
|
|
|
117,956
|
|
|
218,177
|
|
|
230,674
|
|
Gains (losses) on securities, net
|
—
|
|
|
—
|
|
|
—
|
|
|
(116
|
)
|
Total non-interest income
|
114,663
|
|
|
117,956
|
|
|
218,177
|
|
|
230,558
|
|
Non-interest expense:
|
|
|
|
|
|
|
|
|
|
Compensation and employee benefits
|
115,918
|
|
|
118,093
|
|
|
240,395
|
|
|
242,566
|
|
Occupancy and equipment
|
38,965
|
|
|
36,884
|
|
|
78,565
|
|
|
73,892
|
|
Other
|
61,075
|
|
|
59,416
|
|
|
125,112
|
|
|
112,764
|
|
Subtotal
|
215,958
|
|
|
214,393
|
|
|
444,072
|
|
|
429,222
|
|
Operating lease depreciation
|
12,466
|
|
|
9,842
|
|
|
23,708
|
|
|
19,415
|
|
Foreclosed real estate and repossessed assets, net
|
4,639
|
|
|
3,135
|
|
|
9,188
|
|
|
7,055
|
|
Other credit costs, net
|
24
|
|
|
(54
|
)
|
|
125
|
|
|
(42
|
)
|
Total non-interest expense
|
233,087
|
|
|
227,316
|
|
|
477,093
|
|
|
455,650
|
|
Income before income tax expense
|
89,291
|
|
|
90,374
|
|
|
158,720
|
|
|
167,458
|
|
Income tax expense
|
25,794
|
|
|
29,706
|
|
|
46,637
|
|
|
56,509
|
|
Income after income tax expense
|
63,497
|
|
|
60,668
|
|
|
112,083
|
|
|
110,949
|
|
Income attributable to non-controlling interest
|
3,065
|
|
|
2,974
|
|
|
5,373
|
|
|
5,209
|
|
Net income attributable to TCF Financial Corporation
|
60,432
|
|
|
57,694
|
|
|
106,710
|
|
|
105,740
|
|
Preferred stock dividends
|
4,847
|
|
|
4,847
|
|
|
9,694
|
|
|
9,694
|
|
Net income available to common stockholders
|
$
|
55,585
|
|
|
$
|
52,847
|
|
|
$
|
97,016
|
|
|
$
|
96,046
|
|
Earnings per common share:
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.33
|
|
|
$
|
0.32
|
|
|
$
|
0.58
|
|
|
$
|
0.57
|
|
Diluted
|
$
|
0.33
|
|
|
$
|
0.31
|
|
|
$
|
0.58
|
|
|
$
|
0.57
|
|
See accompanying notes to consolidated financial statements.
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
(In thousands)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Net income attributable to TCF Financial Corporation
|
$
|
60,432
|
|
|
$
|
57,694
|
|
|
$
|
106,710
|
|
|
$
|
105,740
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized gains (losses) on securities available for sale and interest-only strips
|
12,341
|
|
|
13,568
|
|
|
15,110
|
|
|
25,605
|
|
Net unrealized gains (losses) on net investment hedges
|
(1,149
|
)
|
|
(210
|
)
|
|
(1,462
|
)
|
|
(2,230
|
)
|
Foreign currency translation adjustment
|
2,007
|
|
|
339
|
|
|
2,588
|
|
|
3,748
|
|
Recognized postretirement prior service cost
|
(7
|
)
|
|
(7
|
)
|
|
(14
|
)
|
|
(14
|
)
|
Total other comprehensive income (loss), net of tax
|
13,192
|
|
|
13,690
|
|
|
16,222
|
|
|
27,109
|
|
Comprehensive income
|
$
|
73,624
|
|
|
$
|
71,384
|
|
|
$
|
122,932
|
|
|
$
|
132,849
|
|
See accompanying notes to consolidated financial statements.
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
Interest
|
Total
Equity
|
(Dollars in thousands)
|
Preferred
|
Common
|
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
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
105,740
|
|
—
|
|
—
|
|
105,740
|
|
5,209
|
|
110,949
|
|
Other comprehensive income (loss), net of tax
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
27,109
|
|
—
|
|
27,109
|
|
—
|
|
27,109
|
|
Net investment by (distribution to) non-controlling interest
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
450
|
|
450
|
|
Dividends on preferred stock
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(9,694
|
)
|
—
|
|
—
|
|
(9,694
|
)
|
—
|
|
(9,694
|
)
|
Dividends on common stock
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(25,068
|
)
|
—
|
|
—
|
|
(25,068
|
)
|
—
|
|
(25,068
|
)
|
Common shares purchased by TCF employee benefit plans
|
—
|
|
511,420
|
|
—
|
|
5
|
|
5,833
|
|
—
|
|
—
|
|
—
|
|
5,838
|
|
—
|
|
5,838
|
|
Stock compensation plans, net of tax
|
—
|
|
650,068
|
|
—
|
|
6
|
|
3,251
|
|
—
|
|
—
|
|
—
|
|
3,257
|
|
—
|
|
3,257
|
|
Change in shares held in trust for deferred compensation plans, at cost
|
—
|
|
—
|
|
—
|
|
—
|
|
1,306
|
|
—
|
|
—
|
|
(1,306
|
)
|
—
|
|
—
|
|
—
|
|
Balance, June 30, 2016
|
4,006,900
|
|
171,048,518
|
|
$
|
263,240
|
|
$
|
1,710
|
|
$
|
862,226
|
|
$
|
1,311,325
|
|
$
|
11,763
|
|
$
|
(52,166
|
)
|
$
|
2,398,098
|
|
$
|
21,660
|
|
$
|
2,419,758
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2016
|
4,006,900
|
|
171,034,506
|
|
$
|
263,240
|
|
$
|
1,710
|
|
$
|
862,776
|
|
$
|
1,382,901
|
|
$
|
(33,725
|
)
|
$
|
(49,419
|
)
|
$
|
2,427,483
|
|
$
|
17,162
|
|
$
|
2,444,645
|
|
Change in accounting principle
|
—
|
|
—
|
|
—
|
|
—
|
|
1,319
|
|
(1,319
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Net income
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
106,710
|
|
—
|
|
—
|
|
106,710
|
|
5,373
|
|
112,083
|
|
Other comprehensive income (loss), net of tax
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
16,222
|
|
—
|
|
16,222
|
|
—
|
|
16,222
|
|
Net investment by (distribution to) non-controlling interest
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
231
|
|
231
|
|
Dividends on preferred stock
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(9,694
|
)
|
—
|
|
—
|
|
(9,694
|
)
|
—
|
|
(9,694
|
)
|
Dividends on common stock
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(25,243
|
)
|
—
|
|
—
|
|
(25,243
|
)
|
—
|
|
(25,243
|
)
|
Common shares purchased by TCF employee benefit plans
|
—
|
|
752,177
|
|
—
|
|
8
|
|
12,586
|
|
—
|
|
—
|
|
—
|
|
12,594
|
|
—
|
|
12,594
|
|
Stock compensation plans, net of tax
|
—
|
|
(254,196
|
)
|
—
|
|
(3
|
)
|
(1,004
|
)
|
—
|
|
—
|
|
—
|
|
(1,007
|
)
|
—
|
|
(1,007
|
)
|
Change in shares held in trust for deferred compensation plans, at cost
|
—
|
|
—
|
|
—
|
|
—
|
|
(17,226
|
)
|
—
|
|
—
|
|
17,226
|
|
—
|
|
—
|
|
—
|
|
Balance, June 30, 2017
|
4,006,900
|
|
171,532,487
|
|
$
|
263,240
|
|
$
|
1,715
|
|
$
|
858,451
|
|
$
|
1,453,355
|
|
$
|
(17,503
|
)
|
$
|
(32,193
|
)
|
$
|
2,527,065
|
|
$
|
22,766
|
|
$
|
2,549,831
|
|
See accompanying notes to consolidated financial statements.
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
(In thousands)
|
2017
|
|
2016
|
Cash flows from operating activities:
|
|
|
|
|
|
Net income
|
$
|
112,083
|
|
|
$
|
110,949
|
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
|
|
|
|
|
|
Provision for credit losses
|
31,639
|
|
|
32,092
|
|
Depreciation and amortization
|
94,919
|
|
|
91,851
|
|
Provision for deferred income taxes
|
4,567
|
|
|
15,059
|
|
Proceeds from sales of loans and leases held for sale
|
120,929
|
|
|
579,590
|
|
Originations of loans and leases held for sale, net of repayments
|
(289,094
|
)
|
|
(598,127
|
)
|
Gains on sales of assets, net
|
(26,112
|
)
|
|
(49,438
|
)
|
Net change in other assets and accrued expenses and other liabilities
|
(80,440
|
)
|
|
110,376
|
|
Other, net
|
(22,909
|
)
|
|
(16,317
|
)
|
Net cash provided by (used in) operating activities
|
(54,418
|
)
|
|
276,035
|
|
Cash flows from investing activities:
|
|
|
|
|
|
Proceeds from maturities of and principal collected on securities
|
66,774
|
|
|
57,712
|
|
Purchases of securities
|
(153,131
|
)
|
|
(414,157
|
)
|
Redemption of Federal Home Loan Bank stock
|
137,001
|
|
|
70,966
|
|
Purchases of Federal Home Loan Bank stock
|
(145,000
|
)
|
|
(62,040
|
)
|
Proceeds from sales of loans and leases
|
891,838
|
|
|
1,118,492
|
|
Loan and lease originations and purchases, net of principal collected on loans and leases
|
(754,427
|
)
|
|
(875,878
|
)
|
Acquisition of Equipment Financing & Leasing Corporation, net of cash acquired
|
(8,120
|
)
|
|
—
|
|
Proceeds from sales of lease equipment
|
3,959
|
|
|
7,396
|
|
Purchases of lease equipment
|
(508,624
|
)
|
|
(556,489
|
)
|
Proceeds from sales of real estate owned
|
28,205
|
|
|
40,514
|
|
Purchases of premises and equipment
|
(21,863
|
)
|
|
(13,888
|
)
|
Other, net
|
14,528
|
|
|
11,913
|
|
Net cash provided by (used in) investing activities
|
(448,860
|
)
|
|
(615,459
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
Net change in deposits
|
272,729
|
|
|
448,111
|
|
Net change in short-term borrowings
|
3,966
|
|
|
(909
|
)
|
Proceeds from long-term borrowings
|
5,799,831
|
|
|
2,204,207
|
|
Payments on long-term borrowings
|
(5,609,219
|
)
|
|
(2,504,467
|
)
|
Net investment by (distribution to) non-controlling interest
|
231
|
|
|
450
|
|
Dividends paid on preferred stock
|
(9,694
|
)
|
|
(9,694
|
)
|
Dividends paid on common stock
|
(25,243
|
)
|
|
(25,068
|
)
|
Stock compensation tax (expense) benefit
|
—
|
|
|
(387
|
)
|
Common shares sold to TCF employee benefit plans
|
12,594
|
|
|
5,838
|
|
Exercise of stock options
|
(57
|
)
|
|
—
|
|
Net cash provided by (used in) financing activities
|
445,138
|
|
|
118,081
|
|
Net change in cash and due from banks
|
(58,140
|
)
|
|
(221,343
|
)
|
Cash and due from banks at beginning of period
|
609,603
|
|
|
889,337
|
|
Cash and due from banks at end of period
|
$
|
551,463
|
|
|
$
|
667,994
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
Cash paid (received) for:
|
|
|
|
|
|
Interest on deposits and borrowings
|
$
|
38,715
|
|
|
$
|
40,224
|
|
Income taxes, net
|
51,010
|
|
|
(21,732
|
)
|
Transfer of loans and leases to other assets
|
47,935
|
|
|
49,096
|
|
Transfer of loans and leases from held for investment to held for sale, net
|
628,438
|
|
|
1,298,685
|
|
See accompanying notes to consolidated financial statements.
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, 2016
, and for the year then ended. All significant intercompany accounts and transactions have been eliminated in consolidation. Accounting policies in effect at
December 31, 2016
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.
During the second quarter of 2017, the Company adopted Accounting Standards Update ("ASU") No. 2017-08:
Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities
, which clarifies the premium amortization period on purchased callable debt securities should be to the earliest call date, rather than the contractual maturity date. The adoption of this ASU was on a modified retrospective basis and required any adjustments as a result of the adoption during an interim period to be reflected as of January 1, 2017. The adoption of this ASU did not impact results of operations, retained earnings or cash flows.
Effective January 1, 2017, the Company adopted ASU No. 2016-09,
Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting
, which simplified several aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. As a result of the adoption, the Company recorded a cumulative effect reduction to the opening balance of retained earnings of
$1.3 million
and a corresponding increase to additional paid-in capital. This cumulative effect adjustment to retained earnings was related to a policy election to account for forfeitures as they occur, thereby eliminating the need for an estimated forfeiture reserve against future cancellations. The adoption of this ASU on a prospective basis requires that tax benefits related to stock compensation be recorded to income tax expense, instead of to additional paid-in capital. The Company elected the prospective basis regarding the presentation of stock compensation tax (expense) benefit in the Consolidated Statement of Cash Flows as an operating activity, and as a result prior periods were not adjusted.
Note 2
.
Cash and Due from Banks
At
June 30, 2017
and
December 31, 2016
, TCF Bank was required by Federal Reserve regulations to maintain reserves of
$103.2 million
and
$103.7 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 finance 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
$49.0 million
and
$51.3 million
at
June 30, 2017
and
December 31, 2016
, respectively.
TCF had cash held in interest-bearing accounts of
$267.8 million
and
$326.5 million
at
June 30, 2017
and
December 31, 2016
, respectively.
Note 3
.
Securities Available for Sale and Securities Held to Maturity
Securities were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2017
|
|
At December 31, 2016
|
(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
|
$
|
838,701
|
|
|
$
|
685
|
|
|
$
|
12,246
|
|
|
$
|
827,140
|
|
|
$
|
827,722
|
|
|
$
|
423
|
|
|
$
|
17,254
|
|
|
$
|
810,891
|
|
Other
|
11
|
|
|
—
|
|
|
—
|
|
|
11
|
|
|
18
|
|
|
—
|
|
|
—
|
|
|
18
|
|
Obligations of states and political subdivisions
|
726,141
|
|
|
8,473
|
|
|
6,814
|
|
|
727,800
|
|
|
628,972
|
|
|
394
|
|
|
16,840
|
|
|
612,526
|
|
Total securities available for sale
|
$
|
1,564,853
|
|
|
$
|
9,158
|
|
|
$
|
19,060
|
|
|
$
|
1,554,951
|
|
|
$
|
1,456,712
|
|
|
$
|
817
|
|
|
$
|
34,094
|
|
|
$
|
1,423,435
|
|
Securities held to maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government sponsored enterprises and federal agencies
|
$
|
168,520
|
|
|
$
|
4,610
|
|
|
$
|
344
|
|
|
$
|
172,786
|
|
|
$
|
178,514
|
|
|
$
|
3,072
|
|
|
$
|
440
|
|
|
$
|
181,146
|
|
Other securities
|
2,800
|
|
|
—
|
|
|
—
|
|
|
2,800
|
|
|
2,800
|
|
|
—
|
|
|
—
|
|
|
2,800
|
|
Total securities held to maturity
|
$
|
171,320
|
|
|
$
|
4,610
|
|
|
$
|
344
|
|
|
$
|
175,586
|
|
|
$
|
181,314
|
|
|
$
|
3,072
|
|
|
$
|
440
|
|
|
$
|
183,946
|
|
There were
no
sales of securities available for sale or impairment charges recognized during the
second quarter and first six months
of
2017
and
2016
, respectively. At
June 30, 2017
and
December 31, 2016
, mortgage-backed securities with a carrying value of
$8.8 million
and
$7.5 million
, respectively, were pledged as collateral to secure certain deposits and borrowings. Unrealized losses on securities available for sale were due to changes in interest rates. TCF has the ability and intent to hold these investments until a recovery of fair value occurs.
TCF recorded
no
impairment charges on securities held to maturity for the
second quarter and first six months
of
2017
and for the
second
quarter of
2016
and
$0.1 million
for the first
six
months of
2016
.
Gross unrealized losses and fair value of securities available for sale and securities held to maturity aggregated by investment category and the length of time the securities were in a continuous loss position were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2017
|
|
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
|
$
|
706,691
|
|
|
$
|
12,246
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
706,691
|
|
|
$
|
12,246
|
|
Obligations of states and political subdivisions
|
302,930
|
|
|
6,198
|
|
|
13,008
|
|
|
616
|
|
|
315,938
|
|
|
6,814
|
|
Total securities available for sale
|
$
|
1,009,621
|
|
|
$
|
18,444
|
|
|
$
|
13,008
|
|
|
$
|
616
|
|
|
$
|
1,022,629
|
|
|
$
|
19,060
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities held to maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government sponsored enterprises and federal agencies
|
$
|
25,450
|
|
|
$
|
323
|
|
|
$
|
489
|
|
|
$
|
21
|
|
|
$
|
25,939
|
|
|
$
|
344
|
|
Total securities held to maturity
|
$
|
25,450
|
|
|
$
|
323
|
|
|
$
|
489
|
|
|
$
|
21
|
|
|
$
|
25,939
|
|
|
$
|
344
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 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
|
$
|
732,724
|
|
|
$
|
17,254
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
732,724
|
|
|
$
|
17,254
|
|
Obligations of states and political subdivisions
|
501,620
|
|
|
16,840
|
|
|
—
|
|
|
—
|
|
|
501,620
|
|
|
16,840
|
|
Total securities available for sale
|
$
|
1,234,344
|
|
|
$
|
34,094
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,234,344
|
|
|
$
|
34,094
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities held to maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government sponsored enterprises and federal agencies
|
$
|
27,090
|
|
|
$
|
440
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
27,090
|
|
|
$
|
440
|
|
Total securities held to maturity
|
$
|
27,090
|
|
|
$
|
440
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
27,090
|
|
|
$
|
440
|
|
The amortized cost and fair value of securities available for sale and securities held to maturity by final contractual maturity were as follows. 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 June 30, 2017
|
|
At December 31, 2016
|
(In thousands)
|
Amortized Cost
|
|
Fair Value
|
|
Amortized Cost
|
|
Fair Value
|
Securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
Due in one year or less
|
$
|
3
|
|
|
$
|
3
|
|
|
$
|
1
|
|
|
$
|
1
|
|
Due in 1-5 years
|
5,591
|
|
|
5,714
|
|
|
18
|
|
|
18
|
|
Due in 5-10 years
|
384,638
|
|
|
390,545
|
|
|
331,430
|
|
|
329,005
|
|
Due after 10 years
|
1,174,621
|
|
|
1,158,689
|
|
|
1,125,263
|
|
|
1,094,411
|
|
Total securities available for sale
|
$
|
1,564,853
|
|
|
$
|
1,554,951
|
|
|
$
|
1,456,712
|
|
|
$
|
1,423,435
|
|
|
|
|
|
|
|
|
|
Securities held to maturity:
|
|
|
|
|
|
|
|
|
|
|
|
Due in one year or less
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Due in 1-5 years
|
1,400
|
|
|
1,400
|
|
|
1,400
|
|
|
1,400
|
|
Due in 5-10 years
|
1,400
|
|
|
1,400
|
|
|
1,400
|
|
|
1,400
|
|
Due after 10 years
|
168,520
|
|
|
172,786
|
|
|
178,514
|
|
|
181,146
|
|
Total securities held to maturity
|
$
|
171,320
|
|
|
$
|
175,586
|
|
|
$
|
181,314
|
|
|
$
|
183,946
|
|
Interest income attributable to securities available for sale was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
(In thousands)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Taxable interest income
|
$
|
4,434
|
|
|
$
|
3,853
|
|
|
$
|
9,088
|
|
|
$
|
7,671
|
|
Tax-exempt interest income
|
3,618
|
|
|
2,543
|
|
|
6,944
|
|
|
4,223
|
|
Total interest income
|
$
|
8,052
|
|
|
$
|
6,396
|
|
|
$
|
16,032
|
|
|
$
|
11,894
|
|
Note 4
.
Loans and Leases
Loans and leases were as follows:
|
|
|
|
|
|
|
|
|
(In thousands)
|
At June 30, 2017
|
|
At December 31, 2016
|
Consumer real estate:
|
|
|
|
|
|
First mortgage lien
|
$
|
2,070,385
|
|
|
$
|
2,292,596
|
|
Junior lien
|
2,701,592
|
|
|
2,791,756
|
|
Total consumer real estate
|
4,771,977
|
|
|
5,084,352
|
|
Commercial:
|
|
|
|
|
|
Commercial real estate:
|
|
|
|
|
|
Permanent
|
2,381,937
|
|
|
2,356,287
|
|
Construction and development
|
340,363
|
|
|
277,904
|
|
Total commercial real estate
|
2,722,300
|
|
|
2,634,191
|
|
Commercial business
|
766,425
|
|
|
652,287
|
|
Total commercial
|
3,488,725
|
|
|
3,286,478
|
|
Leasing and equipment finance
|
4,333,735
|
|
|
4,336,310
|
|
Inventory finance
|
2,509,485
|
|
|
2,470,175
|
|
Auto finance
|
3,243,144
|
|
|
2,647,741
|
|
Other
|
19,459
|
|
|
18,771
|
|
Total loans and leases
(1)
|
$
|
18,366,525
|
|
|
$
|
17,843,827
|
|
|
|
(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
$59.5 million
and
$54.1 million
at
June 30, 2017
and
December 31, 2016
, respectively.
|
The following table summarizes the net sales proceeds for consumer real estate and auto finance loans sold, the securitization receivable recorded, the interest-only strips received, the recorded investment in loans sold, including accrued interest, and the net gains. TCF generally retains servicing on loans sold. Included in consumer real estate loans sold in the six months ended
June 30, 2017
were
$49.4 million
of non-accrual loans, which were sold servicing released in the first quarter of 2017. The auto finance securitizations included in the three and six months ended June 30, 2016 qualify for sale accounting and are executed by transferring the recorded investment to trusts. These trusts are considered variable interest entities due to their limited capitalization and special purpose nature. TCF has concluded it is not the primary beneficiary of the trusts and therefore, they are not consolidated.
No
servicing assets or liabilities related to consumer real estate or auto finance 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 June 30, 2017
|
(In thousands)
|
Consumer Real Estate Loans
|
|
Auto Finance Loans
|
|
Auto Finance Securitizations
|
|
Total Auto Finance Loans
|
Sales proceeds, net
(1)
|
$
|
283,027
|
|
|
$
|
48,452
|
|
|
$
|
—
|
|
|
$
|
48,452
|
|
Interest-only strips, initial value
|
569
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Recorded investment in loans sold, including accrued interest
|
(274,706
|
)
|
|
(47,993
|
)
|
|
—
|
|
|
(47,993
|
)
|
Net gains
(2)
|
$
|
8,890
|
|
|
$
|
459
|
|
|
$
|
—
|
|
|
$
|
459
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2016
|
(In thousands)
|
Consumer Real Estate Loans
|
|
Auto Finance Loans
|
|
Auto Finance Securitizations
|
|
Total Auto Finance Loans
|
Sales proceeds, net
(1)
|
$
|
351,624
|
|
|
$
|
128,714
|
|
|
$
|
400,241
|
|
|
$
|
528,955
|
|
Securitization receivable
|
—
|
|
|
—
|
|
|
18,620
|
|
|
18,620
|
|
Interest-only strips, initial value
|
5,252
|
|
|
854
|
|
|
—
|
|
|
854
|
|
Recorded investment in loans sold, including accrued interest
|
(345,926
|
)
|
|
(123,401
|
)
|
|
(414,323
|
)
|
|
(537,724
|
)
|
Net gains
(2)
|
$
|
10,950
|
|
|
$
|
6,167
|
|
|
$
|
4,538
|
|
|
$
|
10,705
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2017
|
(In thousands)
|
Consumer Real Estate Loans
|
|
Auto Finance Loans
|
|
Auto Finance Securitizations
|
|
Total Auto Finance Loans
|
Sales proceeds, net
(1)
|
$
|
671,717
|
|
|
$
|
302,616
|
|
|
$
|
—
|
|
|
$
|
302,616
|
|
Interest-only strips, initial value
|
1,916
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Recorded investment in loans sold, including accrued interest
|
(655,468
|
)
|
|
(298,581
|
)
|
|
—
|
|
|
(298,581
|
)
|
Net gains
(2)
|
$
|
18,165
|
|
|
$
|
4,035
|
|
|
$
|
—
|
|
|
$
|
4,035
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2016
|
(In thousands)
|
Consumer Real Estate Loans
|
|
Auto Finance Loans
|
|
Auto Finance Securitizations
|
|
Total Auto Finance Loans
|
Sales proceeds, net
(1)
|
$
|
678,585
|
|
|
$
|
582,461
|
|
|
$
|
400,241
|
|
|
$
|
982,702
|
|
Securitization receivable
|
—
|
|
|
—
|
|
|
18,620
|
|
|
18,620
|
|
Interest-only strips, initial value
|
10,913
|
|
|
5,695
|
|
|
—
|
|
|
5,695
|
|
Recorded investment in loans sold, including accrued interest
|
(668,427
|
)
|
|
(569,766
|
)
|
|
(414,323
|
)
|
|
(984,089
|
)
|
Net gains
(2)
|
$
|
21,071
|
|
|
$
|
18,390
|
|
|
$
|
4,538
|
|
|
$
|
22,928
|
|
(1) Includes transaction fees and other sales related adjustments
(2) Excludes subsequent adjustments and valuation adjustments while held for sale
|
|
|
|
|
Total interest-only strips and the contractual liabilities related to loan sales were as follows:
|
|
|
|
|
|
|
|
(In thousands)
|
At June 30, 2017
|
At December 31, 2016
|
Interest-only strips attributable to:
|
|
|
Consumer real estate loan sales
|
$
|
24,501
|
|
$
|
27,260
|
|
Auto finance loan sales
|
8,081
|
|
12,892
|
|
Contractual liabilities attributable to:
|
|
|
Consumer real estate loan sales
|
$
|
818
|
|
$
|
701
|
|
Auto finance loan sales
|
—
|
|
168
|
|
TCF recorded
$296 thousand
and
$875 thousand
of impairment charges on the consumer real estate interest-only strips for the
three and six
months ended
June 30, 2017
, respectively, compared with
$623 thousand
for each of the same periods in
2016
. TCF recorded
$141 thousand
and
$165 thousand
of impairment charges on the auto finance interest-only strips for the
three and six
months ended
June 30, 2017
, respectively, compared with
$3 thousand
and
$8 thousand
for the same periods in
2016
.
TCF's agreements to sell auto and consumer real estate loans typically contain certain representations, warranties and covenants regarding the loans sold or securitized. These representations, warranties and covenants 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 or investor, the loan's compliance with the criteria set forth in the agreement, the manner in which the loans will be serviced, payment delinquency and compliance with applicable laws and regulations. These agreements generally require the repurchase of loans or indemnification in the event TCF breaches these representations, warranties or covenants and such breaches are not cured. In addition, some agreements contain a requirement to repurchase loans as a result of early payoffs by the borrower, early payment default of the borrower, or the failure to obtain valid title. During the
six
months ended
June 30, 2017
and
2016
, losses related to repurchases pursuant to such representations, warranties and covenants were immaterial. The majority of such repurchases were of auto finance 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 rollforwards of the allowance for loan and lease losses were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period
|
$
|
53,851
|
|
|
$
|
33,697
|
|
|
$
|
21,257
|
|
|
$
|
15,816
|
|
|
$
|
35,108
|
|
|
$
|
437
|
|
|
$
|
160,166
|
|
Charge-offs
|
(2,813
|
)
|
|
(2,699
|
)
|
|
(2,244
|
)
|
|
(887
|
)
|
|
(8,204
|
)
|
|
(1,479
|
)
|
|
(18,326
|
)
|
Recoveries
|
1,699
|
|
|
194
|
|
|
746
|
|
|
275
|
|
|
1,667
|
|
|
831
|
|
|
5,412
|
|
Net (charge-offs) recoveries
|
(1,114
|
)
|
|
(2,505
|
)
|
|
(1,498
|
)
|
|
(612
|
)
|
|
(6,537
|
)
|
|
(648
|
)
|
|
(12,914
|
)
|
Provision for credit losses
|
253
|
|
|
3,477
|
|
|
2,167
|
|
|
(3,108
|
)
|
|
15,847
|
|
|
810
|
|
|
19,446
|
|
Other
|
(582
|
)
|
|
—
|
|
|
(4
|
)
|
|
33
|
|
|
(525
|
)
|
|
—
|
|
|
(1,078
|
)
|
Balance, end of period
|
$
|
52,408
|
|
|
$
|
34,669
|
|
|
$
|
21,922
|
|
|
$
|
12,129
|
|
|
$
|
43,893
|
|
|
$
|
599
|
|
|
$
|
165,620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At or For the Three Months Ended June 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period
|
$
|
66,728
|
|
|
$
|
31,547
|
|
|
$
|
19,454
|
|
|
$
|
13,306
|
|
|
$
|
28,535
|
|
|
$
|
504
|
|
|
$
|
160,074
|
|
Charge-offs
|
(4,431
|
)
|
|
(636
|
)
|
|
(1,640
|
)
|
|
(746
|
)
|
|
(5,597
|
)
|
|
(1,673
|
)
|
|
(14,723
|
)
|
Recoveries
|
1,966
|
|
|
31
|
|
|
482
|
|
|
182
|
|
|
861
|
|
|
1,070
|
|
|
4,592
|
|
Net (charge-offs) recoveries
|
(2,465
|
)
|
|
(605
|
)
|
|
(1,158
|
)
|
|
(564
|
)
|
|
(4,736
|
)
|
|
(603
|
)
|
|
(10,131
|
)
|
Provision for credit losses
|
2,536
|
|
|
219
|
|
|
1,828
|
|
|
(673
|
)
|
|
8,575
|
|
|
765
|
|
|
13,250
|
|
Other
|
(2,034
|
)
|
|
—
|
|
|
—
|
|
|
15
|
|
|
(2,602
|
)
|
|
—
|
|
|
(4,621
|
)
|
Balance, end of period
|
$
|
64,765
|
|
|
$
|
31,161
|
|
|
$
|
20,124
|
|
|
$
|
12,084
|
|
|
$
|
29,772
|
|
|
$
|
666
|
|
|
$
|
158,572
|
|
|
|
(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, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period
|
$
|
59,448
|
|
|
$
|
32,695
|
|
|
$
|
21,350
|
|
|
$
|
13,932
|
|
|
$
|
32,310
|
|
|
$
|
534
|
|
|
$
|
160,269
|
|
Charge-offs
|
(6,265
|
)
|
|
(5,431
|
)
|
|
(4,290
|
)
|
|
(1,106
|
)
|
|
(17,017
|
)
|
|
(3,119
|
)
|
|
(37,228
|
)
|
Recoveries
|
12,391
|
|
|
259
|
|
|
1,360
|
|
|
394
|
|
|
2,900
|
|
|
1,921
|
|
|
19,225
|
|
Net (charge-offs) recoveries
|
6,126
|
|
|
(5,172
|
)
|
|
(2,930
|
)
|
|
(712
|
)
|
|
(14,117
|
)
|
|
(1,198
|
)
|
|
(18,003
|
)
|
Provision for credit losses
|
(7,884
|
)
|
|
7,146
|
|
|
3,553
|
|
|
(1,143
|
)
|
|
28,704
|
|
|
1,263
|
|
|
31,639
|
|
Other
|
(5,282
|
)
|
|
—
|
|
|
(51
|
)
|
|
52
|
|
|
(3,004
|
)
|
|
—
|
|
|
(8,285
|
)
|
Balance, end of period
|
$
|
52,408
|
|
|
$
|
34,669
|
|
|
$
|
21,922
|
|
|
$
|
12,129
|
|
|
$
|
43,893
|
|
|
$
|
599
|
|
|
$
|
165,620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At or For the Six Months Ended June 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period
|
$
|
67,992
|
|
|
$
|
30,185
|
|
|
$
|
19,018
|
|
|
$
|
11,128
|
|
|
$
|
26,486
|
|
|
$
|
1,245
|
|
|
$
|
156,054
|
|
Charge-offs
|
(10,492
|
)
|
|
(664
|
)
|
|
(3,612
|
)
|
|
(1,387
|
)
|
|
(11,927
|
)
|
|
(3,308
|
)
|
|
(31,390
|
)
|
Recoveries
|
3,256
|
|
|
250
|
|
|
1,163
|
|
|
567
|
|
|
1,744
|
|
|
2,373
|
|
|
9,353
|
|
Net (charge-offs) recoveries
|
(7,236
|
)
|
|
(414
|
)
|
|
(2,449
|
)
|
|
(820
|
)
|
|
(10,183
|
)
|
|
(935
|
)
|
|
(22,037
|
)
|
Provision for credit losses
|
7,561
|
|
|
1,390
|
|
|
3,555
|
|
|
1,590
|
|
|
17,640
|
|
|
356
|
|
|
32,092
|
|
Other
|
(3,552
|
)
|
|
—
|
|
|
—
|
|
|
186
|
|
|
(4,171
|
)
|
|
—
|
|
|
(7,537
|
)
|
Balance, end of period
|
$
|
64,765
|
|
|
$
|
31,161
|
|
|
$
|
20,124
|
|
|
$
|
12,084
|
|
|
$
|
29,772
|
|
|
$
|
666
|
|
|
$
|
158,572
|
|
The allowance for loan and lease losses and loans and leases outstanding by type of allowance methodology were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2017
|
(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
|
$
|
31,923
|
|
|
$
|
34,546
|
|
|
$
|
19,194
|
|
|
$
|
11,806
|
|
|
$
|
43,285
|
|
|
$
|
598
|
|
|
$
|
141,352
|
|
Individually evaluated for impairment
|
20,485
|
|
|
123
|
|
|
2,728
|
|
|
323
|
|
|
608
|
|
|
1
|
|
|
24,268
|
|
Total
|
$
|
52,408
|
|
|
$
|
34,669
|
|
|
$
|
21,922
|
|
|
$
|
12,129
|
|
|
$
|
43,893
|
|
|
$
|
599
|
|
|
$
|
165,620
|
|
Loans and leases outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collectively evaluated for impairment
|
$
|
4,609,950
|
|
|
$
|
3,451,052
|
|
|
$
|
4,315,718
|
|
|
$
|
2,505,997
|
|
|
$
|
3,233,712
|
|
|
$
|
19,455
|
|
|
$
|
18,135,884
|
|
Individually evaluated for impairment
|
162,027
|
|
|
37,673
|
|
|
18,006
|
|
|
3,488
|
|
|
9,432
|
|
|
4
|
|
|
230,630
|
|
Loans acquired with deteriorated credit quality
|
—
|
|
|
—
|
|
|
11
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
Total
|
$
|
4,771,977
|
|
|
$
|
3,488,725
|
|
|
$
|
4,333,735
|
|
|
$
|
2,509,485
|
|
|
$
|
3,243,144
|
|
|
$
|
19,459
|
|
|
$
|
18,366,525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 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
|
$
|
36,103
|
|
|
$
|
31,430
|
|
|
$
|
19,093
|
|
|
$
|
13,304
|
|
|
$
|
31,106
|
|
|
$
|
533
|
|
|
$
|
131,569
|
|
Individually evaluated for impairment
|
23,345
|
|
|
1,265
|
|
|
2,257
|
|
|
628
|
|
|
1,204
|
|
|
1
|
|
|
28,700
|
|
Total
|
$
|
59,448
|
|
|
$
|
32,695
|
|
|
$
|
21,350
|
|
|
$
|
13,932
|
|
|
$
|
32,310
|
|
|
$
|
534
|
|
|
$
|
160,269
|
|
Loans and leases outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collectively evaluated for impairment
|
$
|
4,884,653
|
|
|
$
|
3,242,389
|
|
|
$
|
4,320,129
|
|
|
$
|
2,465,041
|
|
|
$
|
2,638,380
|
|
|
$
|
18,765
|
|
|
$
|
17,569,357
|
|
Individually evaluated for impairment
|
199,699
|
|
|
44,089
|
|
|
16,165
|
|
|
5,134
|
|
|
9,360
|
|
|
6
|
|
|
274,453
|
|
Loans acquired with deteriorated credit quality
|
—
|
|
|
—
|
|
|
16
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
17
|
|
Total
|
$
|
5,084,352
|
|
|
$
|
3,286,478
|
|
|
$
|
4,336,310
|
|
|
$
|
2,470,175
|
|
|
$
|
2,647,741
|
|
|
$
|
18,771
|
|
|
$
|
17,843,827
|
|
Accruing and Non-accrual Loans and Leases
TCF's key credit quality indicator is the receivable's payment performance status, defined as accruing or non-accruing. 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. TCF's accruing and non-accrual loans and leases were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2017
|
(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
|
$
|
1,989,695
|
|
|
$
|
4,777
|
|
|
$
|
1,377
|
|
|
$
|
1,995,849
|
|
|
$
|
74,536
|
|
|
$
|
2,070,385
|
|
Junior lien
|
2,675,760
|
|
|
1,382
|
|
|
—
|
|
|
2,677,142
|
|
|
24,450
|
|
|
2,701,592
|
|
Total consumer real estate
|
4,665,455
|
|
|
6,159
|
|
|
1,377
|
|
|
4,672,991
|
|
|
98,986
|
|
|
4,771,977
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
2,715,386
|
|
|
—
|
|
|
—
|
|
|
2,715,386
|
|
|
6,914
|
|
|
2,722,300
|
|
Commercial business
|
766,069
|
|
|
2
|
|
|
—
|
|
|
766,071
|
|
|
354
|
|
|
766,425
|
|
Total commercial
|
3,481,455
|
|
|
2
|
|
|
—
|
|
|
3,481,457
|
|
|
7,268
|
|
|
3,488,725
|
|
Leasing and equipment finance
|
4,314,807
|
|
|
5,361
|
|
|
738
|
|
|
4,320,906
|
|
|
12,798
|
|
|
4,333,704
|
|
Inventory finance
|
2,505,844
|
|
|
79
|
|
|
74
|
|
|
2,505,997
|
|
|
3,488
|
|
|
2,509,485
|
|
Auto finance
|
3,230,097
|
|
|
4,517
|
|
|
1,797
|
|
|
3,236,411
|
|
|
6,733
|
|
|
3,243,144
|
|
Other
|
19,400
|
|
|
5
|
|
|
54
|
|
|
19,459
|
|
|
—
|
|
|
19,459
|
|
Subtotal
|
18,217,058
|
|
|
16,123
|
|
|
4,040
|
|
|
18,237,221
|
|
|
129,273
|
|
|
18,366,494
|
|
Portfolios acquired with deteriorated credit quality
|
31
|
|
|
—
|
|
|
—
|
|
|
31
|
|
|
—
|
|
|
31
|
|
Total
|
$
|
18,217,089
|
|
|
$
|
16,123
|
|
|
$
|
4,040
|
|
|
$
|
18,237,252
|
|
|
$
|
129,273
|
|
|
$
|
18,366,525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 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
|
$
|
2,177,746
|
|
|
$
|
6,581
|
|
|
$
|
2,144
|
|
|
$
|
2,186,471
|
|
|
$
|
106,125
|
|
|
$
|
2,292,596
|
|
Junior lien
|
2,744,006
|
|
|
1,404
|
|
|
—
|
|
|
2,745,410
|
|
|
46,346
|
|
|
2,791,756
|
|
Total consumer real estate
|
4,921,752
|
|
|
7,985
|
|
|
2,144
|
|
|
4,931,881
|
|
|
152,471
|
|
|
5,084,352
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
2,628,627
|
|
|
—
|
|
|
—
|
|
|
2,628,627
|
|
|
5,564
|
|
|
2,634,191
|
|
Commercial business
|
651,932
|
|
|
—
|
|
|
—
|
|
|
651,932
|
|
|
355
|
|
|
652,287
|
|
Total commercial
|
3,280,559
|
|
|
—
|
|
|
—
|
|
|
3,280,559
|
|
|
5,919
|
|
|
3,286,478
|
|
Leasing and equipment finance
|
4,320,795
|
|
|
3,478
|
|
|
1,045
|
|
|
4,325,318
|
|
|
10,880
|
|
|
4,336,198
|
|
Inventory finance
|
2,464,986
|
|
|
16
|
|
|
39
|
|
|
2,465,041
|
|
|
5,134
|
|
|
2,470,175
|
|
Auto finance
|
2,634,600
|
|
|
3,785
|
|
|
2,317
|
|
|
2,640,702
|
|
|
7,038
|
|
|
2,647,740
|
|
Other
|
18,748
|
|
|
14
|
|
|
6
|
|
|
18,768
|
|
|
3
|
|
|
18,771
|
|
Subtotal
|
17,641,440
|
|
|
15,278
|
|
|
5,551
|
|
|
17,662,269
|
|
|
181,445
|
|
|
17,843,714
|
|
Portfolios acquired with deteriorated credit quality
|
113
|
|
|
—
|
|
|
—
|
|
|
113
|
|
|
—
|
|
|
113
|
|
Total
|
$
|
17,641,553
|
|
|
$
|
15,278
|
|
|
$
|
5,551
|
|
|
$
|
17,662,382
|
|
|
$
|
181,445
|
|
|
$
|
17,843,827
|
|
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 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
(In thousands)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Contractual interest due on non-accrual loans and leases
|
$
|
3,579
|
|
|
$
|
5,210
|
|
|
$
|
8,077
|
|
|
$
|
10,477
|
|
Interest income recognized on non-accrual loans and leases
|
637
|
|
|
1,083
|
|
|
1,693
|
|
|
2,049
|
|
Unrecognized interest income
|
$
|
2,942
|
|
|
$
|
4,127
|
|
|
$
|
6,384
|
|
|
$
|
8,428
|
|
Consumer real estate loans to customers currently involved in ongoing Chapter 7 or Chapter 13 bankruptcy proceedings which have not yet been discharged, dismissed or completed were as follows:
|
|
|
|
|
|
|
|
|
(In thousands)
|
At June 30, 2017
|
|
At December 31, 2016
|
Consumer real estate loans to customers in bankruptcy:
|
|
|
|
|
|
0-59 days delinquent and accruing
|
$
|
11,078
|
|
|
$
|
13,675
|
|
Non-accrual
|
15,004
|
|
|
21,372
|
|
Total consumer real estate loans to customers in bankruptcy
|
$
|
26,082
|
|
|
$
|
35,047
|
|
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. All loans classified as TDR loans are considered to be impaired. TDR loans consist primarily of consumer real estate and commercial loans.
Total TDR loans at
June 30, 2017
and
December 31, 2016
were
$168.1 million
and
$207.4 million
, respectively, of which
$114.7 million
and
$126.0 million
, respectively, were accruing. TCF held consumer real estate TDR loans of
$137.6 million
and
$170.6 million
at
June 30, 2017
and
December 31, 2016
, respectively, of which
$94.4 million
and
$98.6 million
, respectively, were accruing. TCF also held
$16.7 million
and
$22.5 million
of commercial TDR loans at
June 30, 2017
and
December 31, 2016
, respectively, of which
$12.8 million
and
$20.3 million
, respectively, were accruing. TDR loans for the remaining classes of finance receivables were not material at
June 30, 2017
or
December 31, 2016
.
Unfunded commitments to consumer real estate and commercial loans classified as TDRs were
$0.6 million
and
$0.4 million
at
June 30, 2017
and
December 31, 2016
, respectively. At
June 30, 2017
and
December 31, 2016
, no additional funds were committed to leasing and equipment finance, inventory finance or auto finance loans classified as TDRs.
Unrecognized interest represents the difference between interest income recognized on accruing TDR loans and the contractual interest that would have been recorded under the original contractual terms. For both the three months ended
June 30, 2017
and
2016
, unrecognized interest income for consumer real estate first mortgage lien accruing TDR loans and consumer real estate junior lien accruing TDR loans was
$0.5 million
and
$0.2 million
, respectively. The average yield for the same periods on consumer real estate accruing TDR loans was
4.2%
, which compares to the original contractual average rate of
6.7%
. The unrecognized interest income for the remaining classes of finance receivables was not material for the three months ended
June 30, 2017
and
2016
.
For the
six
months ended
June 30, 2017
, unrecognized interest income for consumer real estate first mortgage lien accruing TDR loans and consumer real estate junior lien accruing TDR loans was
$0.9 million
and
$0.3 million
, respectively. The average yield for the same period on consumer real estate accruing TDR loans was
4.2%
, which compares to the original contractual average rate of
6.7%
. For the
six
months ended
June 30, 2016
, unrecognized interest income for consumer real estate first mortgage lien accruing TDR loans and consumer real estate junior lien accruing TDR loans was
$1.0 million
and
$0.4 million
, respectively. The average yield for the same period on consumer real estate accruing TDR loans was
4.1%
, which compares to the original contractual average rate of
6.7%
. The unrecognized interest income for the remaining classes of finance receivables was not material for the
six
months ended
June 30, 2017
and
2016
.
TCF considers a loan to have defaulted when under the modified terms it becomes
90
or more days delinquent, has been transferred to non-accrual status, has been charged down or has been transferred to other real estate owned or repossessed and returned assets. The following table summarizes the TDR loans that defaulted during the
three and six
months ended
June 30, 2017
and
2016
, which were modified during the respective reporting period or within one year of the beginning of the respective reporting period. The increase in commercial loans that defaulted during the
six
months ended
June 30, 2017
was primarily due to the transfer of three commercial loans to non-accrual status during the first quarter of 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
(In thousands)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Defaulted TDR loan balances modified during the applicable period:
(1)
|
|
|
|
|
|
|
|
Consumer real estate:
|
|
|
|
|
|
|
|
|
|
|
|
First mortgage lien
|
$
|
1,104
|
|
|
$
|
2,755
|
|
|
$
|
1,472
|
|
|
$
|
4,482
|
|
Junior lien
|
67
|
|
|
237
|
|
|
180
|
|
|
497
|
|
Total consumer real estate
|
1,171
|
|
|
2,992
|
|
|
1,652
|
|
|
4,979
|
|
Commercial:
|
|
|
|
|
|
|
|
Commercial real estate
|
—
|
|
|
—
|
|
|
6,681
|
|
|
—
|
|
Commercial business
|
—
|
|
|
—
|
|
|
3,353
|
|
|
—
|
|
Total commercial
|
—
|
|
|
—
|
|
|
10,034
|
|
|
—
|
|
Leasing and equipment finance
|
164
|
|
|
—
|
|
|
321
|
|
|
—
|
|
Auto finance
|
225
|
|
|
370
|
|
|
546
|
|
|
835
|
|
Defaulted TDR loan balances modified during the applicable period
|
$
|
1,560
|
|
|
$
|
3,362
|
|
|
$
|
12,553
|
|
|
$
|
5,814
|
|
|
|
(1)
|
The loan balances presented are not materially different than the pre-modification loan balances as TCF's loan modifications generally do not forgive principal amounts.
|
Consumer real estate TDR loans are evaluated separately in TCF's allowance methodology. Impairment is generally based upon the present value of the expected future cash flows discounted at the loan's initial effective interest rate, unless the loans are collateral dependent, in which case loan impairment is based upon the fair value of the collateral less selling expenses. The allowance on accruing consumer real estate TDR loans was
$18.5 million
, or
19.6%
of the outstanding balance, at
June 30, 2017
, and
$19.3 million
, or
19.6%
of the outstanding balance, at
December 31, 2016
. In determining impairment for consumer real estate accruing TDR loans, TCF utilized remaining re-default rates ranging from
9%
to
33%
in
2017
and
10%
to
33%
in
2016
, depending on modification type and actual experience. At
June 30, 2017
,
0.5%
of accruing consumer real estate TDR loans were more than
60
days delinquent, compared with
1.5%
at
December 31, 2016
.
Consumer real estate TDR loans generally remain on accruing status following modification if they are less than
90
days past due and payment in full under the modified terms of the loan is expected based on a current credit evaluation and historical payment performance. Of the non-accrual TDR balance at
June 30, 2017
,
$27.0 million
, or
62.5%
, were loans discharged in Chapter 7 bankruptcy that were not reaffirmed by the borrower, of which
70.1%
were current. Of the non-accrual TDR balance at
December 31, 2016
,
$47.4 million
, or
65.9%
, were loans discharged in Chapter 7 bankruptcy that were not reaffirmed, of which
82.2%
were current. All eligible loans are re-aged to current delinquency status upon modification.
Commercial TDR loans are individually evaluated for impairment based upon the present value of the expected future cash flows discounted at the loan's initial effective interest rate, unless the loans are collateral dependent, in which case impairment is based upon the fair value of collateral less estimated selling costs; however if payment or satisfaction of the loan is dependent on the operation, rather than the sale of the collateral, the impairment does not include selling costs. The allowance on accruing commercial TDR loans was less than
$0.1 million
, or less than
0.1%
of the outstanding balance, at
June 30, 2017
, and
$1.1 million
, or
5.6%
of the outstanding balance, at
December 31, 2016
. No accruing commercial TDR loans were
60
days or more delinquent at
June 30, 2017
and
December 31, 2016
.
Impaired Loans
TCF considers impaired loans to include non-accrual commercial loans, non-accrual equipment finance loans and non-accrual inventory finance loans, as well as all TDR loans. Non-accrual impaired loans, including non-accrual TDR loans, are included in non-accrual loans and leases within the previous tables. Accruing TDR loans have been disclosed by delinquency status within the previous tables of accruing and non-accrual loans and leases. In the following tables, the loan balance of impaired loans represents the amount recorded within loans and leases on the Consolidated Statements of Financial Condition, whereas the unpaid contractual balance represents the balances legally owed by the borrowers.
Information on impaired loans was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2017
|
|
At December 31, 2016
|
(In thousands)
|
Unpaid
Contractual
Balance
|
|
Loan
Balance
|
|
Related
Allowance
Recorded
|
|
Unpaid
Contractual
Balance
|
|
Loan
Balance
|
|
Related
Allowance
Recorded
|
Impaired loans with an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgage lien
|
$
|
100,796
|
|
|
$
|
87,872
|
|
|
$
|
15,425
|
|
|
$
|
122,704
|
|
|
$
|
104,601
|
|
|
$
|
16,835
|
|
Junior lien
|
40,429
|
|
|
36,119
|
|
|
4,720
|
|
|
62,481
|
|
|
51,410
|
|
|
5,829
|
|
Total consumer real estate
|
141,225
|
|
|
123,991
|
|
|
20,145
|
|
|
185,185
|
|
|
156,011
|
|
|
22,664
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
3,393
|
|
|
3,393
|
|
|
120
|
|
|
10,083
|
|
|
10,075
|
|
|
1,262
|
|
Commercial business
|
13
|
|
|
13
|
|
|
3
|
|
|
14
|
|
|
14
|
|
|
3
|
|
Total commercial
|
3,406
|
|
|
3,406
|
|
|
123
|
|
|
10,097
|
|
|
10,089
|
|
|
1,265
|
|
Leasing and equipment finance
|
10,298
|
|
|
10,298
|
|
|
1,206
|
|
|
9,900
|
|
|
9,900
|
|
|
1,044
|
|
Inventory finance
|
2,275
|
|
|
2,281
|
|
|
323
|
|
|
4,357
|
|
|
4,365
|
|
|
628
|
|
Auto finance
|
4,649
|
|
|
4,329
|
|
|
555
|
|
|
5,801
|
|
|
5,419
|
|
|
1,126
|
|
Other
|
4
|
|
|
4
|
|
|
1
|
|
|
6
|
|
|
6
|
|
|
1
|
|
Total impaired loans with an allowance recorded
|
161,857
|
|
|
144,309
|
|
|
22,353
|
|
|
215,346
|
|
|
185,790
|
|
|
26,728
|
|
Impaired loans without an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgage lien
|
16,524
|
|
|
11,886
|
|
|
—
|
|
|
18,539
|
|
|
12,674
|
|
|
—
|
|
Junior lien
|
18,560
|
|
|
1,722
|
|
|
—
|
|
|
26,915
|
|
|
1,882
|
|
|
—
|
|
Total consumer real estate
|
35,084
|
|
|
13,608
|
|
|
—
|
|
|
45,454
|
|
|
14,556
|
|
|
—
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
20,042
|
|
|
16,239
|
|
|
—
|
|
|
21,601
|
|
|
15,780
|
|
|
—
|
|
Commercial business
|
454
|
|
|
454
|
|
|
—
|
|
|
354
|
|
|
354
|
|
|
—
|
|
Total commercial
|
20,496
|
|
|
16,693
|
|
|
—
|
|
|
21,955
|
|
|
16,134
|
|
|
—
|
|
Inventory finance
|
1,203
|
|
|
1,207
|
|
|
—
|
|
|
767
|
|
|
769
|
|
|
—
|
|
Auto finance
|
4,935
|
|
|
2,980
|
|
|
—
|
|
|
3,919
|
|
|
2,408
|
|
|
—
|
|
Other
|
87
|
|
|
—
|
|
|
—
|
|
|
85
|
|
|
—
|
|
|
—
|
|
Total impaired loans without an allowance recorded
|
61,805
|
|
|
34,488
|
|
|
—
|
|
|
72,180
|
|
|
33,867
|
|
|
—
|
|
Total impaired loans
|
$
|
223,662
|
|
|
$
|
178,797
|
|
|
$
|
22,353
|
|
|
$
|
287,526
|
|
|
$
|
219,657
|
|
|
$
|
26,728
|
|
The average loan balance of impaired loans and interest income recognized on impaired loans were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
(In thousands)
|
Average Loan Balance
|
|
Interest Income Recognized
|
|
Average Loan Balance
|
|
Interest Income Recognized
|
|
Average Loan Balance
|
|
Interest Income Recognized
|
|
Average Loan Balance
|
|
Interest Income Recognized
|
Impaired loans with an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgage lien
|
$
|
87,932
|
|
|
$
|
693
|
|
|
$
|
121,766
|
|
|
$
|
983
|
|
|
$
|
96,236
|
|
|
$
|
1,418
|
|
|
$
|
122,379
|
|
|
$
|
1,818
|
|
Junior lien
|
36,182
|
|
|
381
|
|
|
56,863
|
|
|
688
|
|
|
43,764
|
|
|
827
|
|
|
57,193
|
|
|
1,318
|
|
Total consumer real estate
|
124,114
|
|
|
1,074
|
|
|
178,629
|
|
|
1,671
|
|
|
140,000
|
|
|
2,245
|
|
|
179,572
|
|
|
3,136
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
3,393
|
|
|
—
|
|
|
12,041
|
|
|
97
|
|
|
6,734
|
|
|
16
|
|
|
6,695
|
|
|
130
|
|
Commercial business
|
1,051
|
|
|
—
|
|
|
15
|
|
|
—
|
|
|
13
|
|
|
48
|
|
|
15
|
|
|
—
|
|
Total commercial
|
4,444
|
|
|
—
|
|
|
12,056
|
|
|
97
|
|
|
6,747
|
|
|
64
|
|
|
6,710
|
|
|
130
|
|
Leasing and equipment finance
|
10,820
|
|
|
15
|
|
|
9,674
|
|
|
5
|
|
|
10,100
|
|
|
18
|
|
|
9,139
|
|
|
18
|
|
Inventory finance
|
3,468
|
|
|
106
|
|
|
1,326
|
|
|
15
|
|
|
3,323
|
|
|
158
|
|
|
620
|
|
|
31
|
|
Auto finance
|
4,563
|
|
|
45
|
|
|
6,448
|
|
|
21
|
|
|
4,874
|
|
|
91
|
|
|
7,049
|
|
|
39
|
|
Other
|
5
|
|
|
—
|
|
|
9
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
10
|
|
|
—
|
|
Total impaired loans with an allowance recorded
|
147,414
|
|
|
1,240
|
|
|
208,142
|
|
|
1,809
|
|
|
165,049
|
|
|
2,576
|
|
|
203,100
|
|
|
3,354
|
|
Impaired loans without an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgage lien
|
11,948
|
|
|
206
|
|
|
2,789
|
|
|
56
|
|
|
12,280
|
|
|
524
|
|
|
2,972
|
|
|
108
|
|
Junior lien
|
1,803
|
|
|
69
|
|
|
489
|
|
|
167
|
|
|
1,802
|
|
|
321
|
|
|
499
|
|
|
315
|
|
Total consumer real estate
|
13,751
|
|
|
275
|
|
|
3,278
|
|
|
223
|
|
|
14,082
|
|
|
845
|
|
|
3,471
|
|
|
423
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
18,165
|
|
|
169
|
|
|
16,192
|
|
|
185
|
|
|
16,009
|
|
|
343
|
|
|
23,527
|
|
|
436
|
|
Commercial business
|
479
|
|
|
1
|
|
|
4,162
|
|
|
—
|
|
|
404
|
|
|
1
|
|
|
3,867
|
|
|
—
|
|
Total commercial
|
18,644
|
|
|
170
|
|
|
20,354
|
|
|
185
|
|
|
16,413
|
|
|
344
|
|
|
27,394
|
|
|
436
|
|
Inventory finance
|
857
|
|
|
30
|
|
|
221
|
|
|
23
|
|
|
988
|
|
|
74
|
|
|
278
|
|
|
34
|
|
Auto finance
|
2,876
|
|
|
—
|
|
|
2,086
|
|
|
—
|
|
|
2,694
|
|
|
—
|
|
|
1,661
|
|
|
—
|
|
Total impaired loans without an allowance recorded
|
36,128
|
|
|
475
|
|
|
25,939
|
|
|
431
|
|
|
34,177
|
|
|
1,263
|
|
|
32,804
|
|
|
893
|
|
Total impaired loans
|
$
|
183,542
|
|
|
$
|
1,715
|
|
|
$
|
234,081
|
|
|
$
|
2,240
|
|
|
$
|
199,226
|
|
|
$
|
3,839
|
|
|
$
|
235,904
|
|
|
$
|
4,247
|
|
Note 6
.
Goodwill and Other Intangible Assets
Goodwill and other intangible assets were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2017
|
|
At December 31, 2016
|
(In thousands)
|
Gross
Amount
|
|
Accumulated
Amortization
|
|
Net
Amount
|
|
Gross
Amount
|
|
Accumulated
Amortization
|
|
Net
Amount
|
Unamortizable intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill related to consumer banking segment
|
$
|
214,286
|
|
|
|
|
$
|
214,286
|
|
|
$
|
214,286
|
|
|
|
|
$
|
214,286
|
|
Goodwill related to wholesale banking segment
|
12,786
|
|
|
|
|
12,786
|
|
|
11,354
|
|
|
|
|
11,354
|
|
Total
|
$
|
227,072
|
|
|
|
|
$
|
227,072
|
|
|
$
|
225,640
|
|
|
|
|
$
|
225,640
|
|
Amortizable intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
Program agreement
|
$
|
14,700
|
|
|
$
|
4
|
|
|
$
|
14,696
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Non-compete agreement
|
10,590
|
|
|
4,671
|
|
|
5,919
|
|
|
4,590
|
|
|
4,590
|
|
|
—
|
|
Customer base intangibles
|
3,330
|
|
|
2,163
|
|
|
1,167
|
|
|
2,730
|
|
|
2,002
|
|
|
728
|
|
Deposit base intangibles
|
3,049
|
|
|
2,179
|
|
|
870
|
|
|
3,049
|
|
|
2,069
|
|
|
980
|
|
Tradename
|
300
|
|
|
300
|
|
|
—
|
|
|
300
|
|
|
300
|
|
|
—
|
|
Total
|
$
|
31,969
|
|
|
$
|
9,317
|
|
|
$
|
22,652
|
|
|
$
|
10,669
|
|
|
$
|
8,961
|
|
|
$
|
1,708
|
|
On June 16, 2017, TCF Bank acquired
100%
of the outstanding shares of Equipment Financing & Leasing Corporation ("EFLC"). EFLC provides operating leases and direct financing leases of material handling equipment to primarily Fortune 500 customers. TCF Bank paid
$9.0 million
in cash upon closing, recorded a liability of
$5.9 million
to be paid within
three
years and assumed
$64.2 million
of EFLC's debt. Assets acquired consisted of
$47.2 million
of operating lease equipment,
$5.9 million
of direct financing leases,
$21.3 million
of amortizable intangible assets,
$1.4 million
related to goodwill and approximately
$3.3 million
of cash, other assets and other liabilities, net. All of the goodwill was allocated to the wholesale banking segment. The weighted-average amortization periods of the acquired program agreement, non-compete agreement and customer base intangibles were
15
years,
five
years and
three
years, respectively. The amortizable intangible assets are amortized on an expected benefit basis over their estimated useful lives.
Amortization expense for intangible assets was
$0.2 million
and
$0.4 million
for the second quarter and first six months of
2017
, respectively, compared with
$0.4 million
and
$0.7 million
for the same periods in
2016
. There was
no
impairment of goodwill or the intangible assets during the second quarter or first six months of
2017
and
2016
. Amortization expense for intangible assets is estimated to be
$1.6 million
for the remainder of
2017
,
$2.7 million
for
2018
,
$2.3 million
for
2019
,
$2.0 million
for
2020
and
$2.0 million
for
2021
.
Note 7
.
Long-term Borrowings
Long-term borrowings were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2017
|
|
At December 31, 2016
|
(Dollars in thousands)
|
Stated
Maturity
|
|
Amount
|
|
Stated Rate
|
|
Amount
|
|
Stated Rate
|
Federal Home Loan Bank advances
|
2018
|
|
$
|
—
|
|
|
|
|
—
|
%
|
|
$
|
375,000
|
|
|
0.72
|
%
|
-
|
0.81
|
%
|
|
2019
|
|
875,000
|
|
|
1.34
|
%
|
-
|
1.36
|
|
|
300,000
|
|
|
0.78
|
|
-
|
0.81
|
|
Subtotal
|
|
|
875,000
|
|
|
|
|
|
|
675,000
|
|
|
|
|
|
Subordinated bank notes
|
2022
|
|
108,759
|
|
|
|
|
6.25
|
|
|
108,654
|
|
|
|
|
6.25
|
|
|
2025
|
|
148,151
|
|
|
|
|
4.60
|
|
|
148,052
|
|
|
|
|
4.60
|
|
Hedge-related basis adjustment
(1)
|
|
|
(602
|
)
|
|
|
|
|
|
(1,349
|
)
|
|
|
|
|
Subtotal
|
|
|
256,308
|
|
|
|
|
|
|
255,357
|
|
|
|
|
|
Discounted lease rentals
|
2017
|
|
30,024
|
|
|
2.45
|
|
-
|
7.85
|
|
|
57,081
|
|
|
2.45
|
|
-
|
7.88
|
|
|
2018
|
|
48,886
|
|
|
2.55
|
|
-
|
7.95
|
|
|
42,132
|
|
|
2.55
|
|
-
|
7.95
|
|
|
2019
|
|
30,983
|
|
|
2.53
|
|
-
|
6.00
|
|
|
24,671
|
|
|
2.53
|
|
-
|
6.00
|
|
|
2020
|
|
16,214
|
|
|
2.64
|
|
-
|
6.90
|
|
|
11,753
|
|
|
2.64
|
|
-
|
6.90
|
|
|
2021
|
|
7,947
|
|
|
2.88
|
|
-
|
5.00
|
|
|
4,423
|
|
|
2.88
|
|
-
|
4.57
|
|
|
2022
|
|
1,386
|
|
|
3.04
|
|
-
|
5.24
|
|
|
—
|
|
|
|
|
—
|
|
Subtotal
|
|
|
135,440
|
|
|
|
|
|
|
140,060
|
|
|
|
|
|
Other long-term borrowings
|
2017
|
|
—
|
|
|
|
|
—
|
|
|
2,764
|
|
|
|
|
1.36
|
|
Total long-term borrowings
|
|
|
$
|
1,266,748
|
|
|
|
|
|
|
$
|
1,073,181
|
|
|
|
|
|
|
|
(1)
|
Related to subordinated bank notes with a stated maturity of 2025.
|
At
June 30, 2017
, TCF Bank had pledged loans secured by consumer and commercial real estate and Federal Home Loan Bank ("FHLB") stock with an aggregate carrying value of
$4.4 billion
as collateral for FHLB advances. At
June 30, 2017
,
$875.0 million
of the FHLB advances outstanding were prepayable at TCF's option.
Note 8
.
Regulatory Capital Requirements
TCF and TCF Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possible additional discretionary, actions by the federal banking agencies that could have a material adverse effect on TCF. In general, TCF Bank may not declare or pay a dividend to TCF Financial in excess of
100%
of its net retained earnings for the current year combined with its net retained earnings for the preceding
two
calendar years, which was
$411.7 million
at
June 30, 2017
, without prior approval of the Office of the Comptroller of the Currency ("OCC"). The OCC also has the authority to prohibit the payment of dividends by a national bank when it determines such payments would constitute an unsafe and unsound banking practice. TCF Bank's ability to make capital distributions in the future may require regulatory approval and may be restricted by its regulatory authorities. TCF Bank's ability to make any such distributions will also depend on its earnings and ability to meet minimum regulatory capital requirements in effect during future periods. In the future, these capital adequacy standards may be higher than existing minimum regulatory capital requirements.
Regulatory capital information for TCF and TCF Bank was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TCF
|
|
TCF Bank
|
|
|
|
|
|
At June 30,
|
|
At December 31,
|
|
At June 30,
|
|
At December 31,
|
|
Well-capitalized Standard
|
|
Minimum Capital Requirement
(1)
|
(Dollars in thousands)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
Regulatory Capital:
|
|
|
|
|
|
|
|
|
|
|
|
Common equity Tier 1 capital
|
$
|
2,036,369
|
|
|
$
|
1,970,323
|
|
|
$
|
2,215,610
|
|
|
$
|
2,144,966
|
|
|
|
|
|
Tier 1 capital
|
2,317,915
|
|
|
2,248,221
|
|
|
2,238,376
|
|
|
2,162,128
|
|
|
|
|
|
Total capital
|
2,683,319
|
|
|
2,635,925
|
|
|
2,643,143
|
|
|
2,583,512
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulatory Capital Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
Common equity Tier 1 capital ratio
|
10.24
|
%
|
|
10.24
|
%
|
|
11.14
|
%
|
|
11.14
|
%
|
|
6.50
|
%
|
|
4.50
|
%
|
Tier 1 risk-based capital ratio
|
11.66
|
|
|
11.68
|
|
|
11.26
|
|
|
11.23
|
|
|
8.00
|
|
|
6.00
|
|
Total risk-based capital ratio
|
13.49
|
|
|
13.69
|
|
|
13.29
|
|
|
13.42
|
|
|
10.00
|
|
|
8.00
|
|
Tier 1 leverage ratio
|
10.76
|
|
|
10.73
|
|
|
10.39
|
|
|
10.32
|
|
|
5.00
|
|
|
4.00
|
|
|
|
(1)
|
Excludes capital conservation buffer of
1.25%
and
0.625%
as of
June 30, 2017
and
December 31, 2016
.
|
Note 9
.
Stock Compensation
TCF's restricted stock award and stock option transactions under the TCF Financial 2015 Omnibus Incentive Plan ("Omnibus Incentive Plan") and the TCF Financial Incentive Stock Program ("Incentive Stock Program") during the
six
months ended
June 30, 2017
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock Awards
|
|
Stock Options
|
|
Shares
|
|
Grant Date Fair Value Range
|
|
Weighted-
average
Grant Date
Fair Value
|
|
Shares
|
|
Weighted-
average
Remaining
Contractual
Life in Years
|
|
Weighted-
average
Exercise
Price
|
Outstanding at December 31, 2016
|
3,536,175
|
|
|
$
|
7.73
|
|
|
-
|
|
$
|
16.28
|
|
|
$
|
12.81
|
|
|
404,000
|
|
|
1.06
|
|
|
$
|
15.75
|
|
Granted
|
457,371
|
|
|
15.38
|
|
|
-
|
|
18.58
|
|
|
16.43
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Exercised
|
—
|
|
|
—
|
|
|
-
|
|
—
|
|
|
—
|
|
|
(38,000
|
)
|
|
—
|
|
|
15.75
|
|
Forfeited/canceled
|
(457,791
|
)
|
|
7.73
|
|
|
-
|
|
15.87
|
|
|
10.77
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Vested
|
(872,875
|
)
|
|
9.36
|
|
|
-
|
|
16.02
|
|
|
13.62
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Outstanding at June 30, 2017
|
2,662,880
|
|
|
7.73
|
|
|
-
|
|
18.58
|
|
|
13.52
|
|
|
366,000
|
|
|
0.56
|
|
|
15.75
|
|
Exercisable at June 30, 2017
|
N.A.
|
|
|
|
|
|
|
|
|
N.A.
|
|
|
366,000
|
|
|
|
|
|
15.75
|
|
N.A. Not Applicable.
At
June 30, 2017
, there were
350,000
shares of performance-based restricted stock awards outstanding that will vest only if certain performance goals and service conditions are achieved. Failure to achieve the performance goals and service conditions will result in all or a portion of the shares being forfeited.
Unrecognized stock compensation expense for restricted stock awards was
$24.4 million
with a weighted-average remaining amortization period of
2.0
years at
June 30, 2017
.
At
June 30, 2017
, there were
360,988
performance-based restricted stock units granted under the Omnibus Incentive Plan that will vest only if certain performance goals are achieved. The number of restricted stock units granted was at target and the actual restricted stock units granted will depend on actual performance with a maximum total payout of
150%
of target. Failure to achieve the performance goals will result in all or a portion of the restricted stock units being forfeited.
None
of the performance-based restricted stock units have vested. The remaining weighted-average performance period of the restricted stock units was
2.2
years at
June 30, 2017
.
Compensation expense for restricted stock awards and restricted stock units was
$2.3 million
and
$4.1 million
for the
three and six
months ended
June 30, 2017
, respectively, and
$2.5 million
and
$4.8 million
for the same periods in
2016
.
The valuation assumptions for stock options granted in 2008 under the Incentive Stock Program have not changed significantly from
December 31, 2016
and
no
stock options have subsequently been granted under the Incentive Stock Program. TCF also has the ability to grant stock options under the Omnibus Incentive Plan. As of
June 30, 2017
,
no
stock options had been granted under the Omnibus Incentive Plan.
Note 10
.
Employee Benefit Plans
The net periodic benefit plan (income) cost included in compensation and employee benefits expense for the TCF Cash Balance Pension Plan (the "Pension Plan") and health care benefits for eligible retired employees (the "Postretirement Plan") for the
three and six
months ended
June 30, 2017
and
2016
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Plan
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
(In thousands)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Interest cost
|
$
|
285
|
|
|
$
|
320
|
|
|
$
|
570
|
|
|
$
|
640
|
|
(Gain) loss on plan assets
|
(142
|
)
|
|
(147
|
)
|
|
(284
|
)
|
|
(293
|
)
|
Net periodic benefit plan (income) cost
|
$
|
143
|
|
|
$
|
173
|
|
|
$
|
286
|
|
|
$
|
347
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Postretirement Plan
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
(In thousands)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Interest cost
|
$
|
33
|
|
|
$
|
38
|
|
|
$
|
67
|
|
|
$
|
76
|
|
Amortization of prior service cost
|
(11
|
)
|
|
(11
|
)
|
|
(23
|
)
|
|
(23
|
)
|
Net periodic benefit plan (income) cost
|
$
|
22
|
|
|
$
|
27
|
|
|
$
|
44
|
|
|
$
|
53
|
|
TCF made
no
cash contributions to the Pension Plan in either of the
six
months ended
June 30, 2017
or
2016
. During the
three and six
months ended
June 30, 2017
and
2016
, TCF contributed
$0.1 million
and
$0.2 million
, respectively, to the Postretirement Plan.
Note 11
.
Derivative Instruments
Derivative instruments were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2017
|
(In thousands)
|
Notional
Amount
|
|
Gross Amounts
Recognized
|
|
Gross Amounts
Offset
|
|
Net Amount
Presented
|
Derivative Assets:
|
|
|
|
|
|
|
|
Derivatives not designated as hedges:
|
|
|
|
|
|
|
|
Interest rate contracts
|
$
|
356,732
|
|
|
$
|
2,300
|
|
|
$
|
(242
|
)
|
|
$
|
2,058
|
|
Interest rate lock commitments
|
34,010
|
|
|
515
|
|
|
—
|
|
|
515
|
|
Total derivative assets
|
|
|
|
$
|
2,815
|
|
|
$
|
(242
|
)
|
|
$
|
2,573
|
|
Derivative Liabilities:
|
|
|
|
|
|
|
|
Derivatives designated as hedges:
|
|
|
|
|
|
|
|
Forward foreign exchange contracts
|
$
|
70,429
|
|
|
$
|
2,806
|
|
|
$
|
(2,806
|
)
|
|
$
|
—
|
|
Interest rate contracts
|
150,000
|
|
|
238
|
|
|
—
|
|
|
238
|
|
Derivatives not designated as hedges:
|
|
|
|
|
|
|
|
Forward foreign exchange contracts
|
282,487
|
|
|
6,596
|
|
|
(4,317
|
)
|
|
2,279
|
|
Interest rate contracts
|
74,365
|
|
|
1,165
|
|
|
(242
|
)
|
|
923
|
|
Other contracts
|
13,804
|
|
|
462
|
|
|
(462
|
)
|
|
—
|
|
Interest rate lock commitments
|
63
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total derivative liabilities
|
|
|
|
$
|
11,267
|
|
|
$
|
(7,827
|
)
|
|
$
|
3,440
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2016
|
(In thousands)
|
Notional
Amount
|
|
Gross Amounts
Recognized
|
|
Gross Amounts
Offset
|
|
Net Amount
Presented
|
Derivative Assets:
|
|
|
|
|
|
|
|
Derivatives designated as hedges:
|
|
|
|
|
|
|
|
Forward foreign exchange contracts
|
$
|
61,760
|
|
|
$
|
1,082
|
|
|
$
|
—
|
|
|
$
|
1,082
|
|
Derivatives not designated as hedges:
|
|
|
|
|
|
|
|
Forward foreign exchange contracts
|
250,018
|
|
|
2,995
|
|
|
(1,439
|
)
|
|
1,556
|
|
Interest rate contracts
|
149,499
|
|
|
1,925
|
|
|
(633
|
)
|
|
1,292
|
|
Interest rate lock commitments
|
27,954
|
|
|
318
|
|
|
—
|
|
|
318
|
|
Total derivative assets
|
|
|
|
$
|
6,320
|
|
|
$
|
(2,072
|
)
|
|
$
|
4,248
|
|
Derivative Liabilities:
|
|
|
|
|
|
|
|
Derivatives designated as hedges:
|
|
|
|
|
|
|
|
Interest rate contracts
|
$
|
150,000
|
|
|
$
|
1,320
|
|
|
$
|
(1,320
|
)
|
|
$
|
—
|
|
Derivatives not designated as hedges:
|
|
|
|
|
|
|
|
Forward foreign exchange contracts
|
115,336
|
|
|
469
|
|
|
(445
|
)
|
|
24
|
|
Interest rate contracts
|
149,499
|
|
|
1,936
|
|
|
(1,332
|
)
|
|
604
|
|
Other contracts
|
13,804
|
|
|
619
|
|
|
(619
|
)
|
|
—
|
|
Interest rate lock commitments
|
2,947
|
|
|
21
|
|
|
—
|
|
|
21
|
|
Total derivative liabilities
|
|
|
|
$
|
4,365
|
|
|
$
|
(3,716
|
)
|
|
$
|
649
|
|
The pre-tax impact of derivative activity within the Consolidated Statements of Income and the Consolidated Statements of Comprehensive Income was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
(In thousands)
|
Income Statement Location
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Consolidated Statements of Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value hedges:
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
Other non-interest income
|
$
|
1,449
|
|
|
$
|
3,286
|
|
|
$
|
948
|
|
|
$
|
10,539
|
|
Non-derivative hedged items
|
Other non-interest income
|
(1,260
|
)
|
|
(2,830
|
)
|
|
(747
|
)
|
|
(9,201
|
)
|
Not designated as hedges:
|
|
|
|
|
|
|
|
|
Forward foreign exchange contracts
|
Other non-interest expense
|
(6,374
|
)
|
|
(2,866
|
)
|
|
(9,633
|
)
|
|
(29,438
|
)
|
Interest rate lock commitments
|
Gains on sales of consumer
real estate loans, net
|
51
|
|
|
413
|
|
|
218
|
|
|
237
|
|
Interest rate contracts
|
Other non-interest income
|
(99
|
)
|
|
(28
|
)
|
|
(108
|
)
|
|
(119
|
)
|
Other contracts
|
Other non-interest expense
|
—
|
|
|
(234
|
)
|
|
—
|
|
|
(319
|
)
|
Net gain (loss) recognized
|
|
$
|
(6,233
|
)
|
|
$
|
(2,259
|
)
|
|
$
|
(9,322
|
)
|
|
$
|
(28,301
|
)
|
Consolidated Statements of Comprehensive Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward foreign exchange contracts
|
Other comprehensive income (loss)
|
$
|
(1,855
|
)
|
|
$
|
(338
|
)
|
|
$
|
(2,359
|
)
|
|
$
|
(3,595
|
)
|
Net unrealized gain (loss)
|
|
$
|
(1,855
|
)
|
|
$
|
(338
|
)
|
|
$
|
(2,359
|
)
|
|
$
|
(3,595
|
)
|
TCF executes all of its forward foreign exchange contracts in the over-the-counter market with large financial institutions pursuant to International Swaps and Derivatives Association, Inc. agreements. These agreements include credit risk-related features that enhance the creditworthiness of these instruments as compared with other obligations of the respective counterparty with whom TCF has transacted by requiring that additional collateral be posted under certain circumstances. The amount of collateral required depends on the contract and is determined daily based on market and currency exchange rate conditions.
At June 30, 2017
, credit risk-related contingent features existed on forward foreign exchange contracts with a notional value of
$46.3 million
. In the event TCF is rated less than BB- by Standard and Poor's, the contracts could be terminated or TCF may be required to provide approximately
$0.9 million
in additional collateral. There were
$0.9 million
of forward foreign exchange contracts containing credit risk-related features in a net liability position at
June 30, 2017
.
At June 30, 2017
, TCF had posted
$7.7 million
,
$6.3 million
and
$1.4 million
of cash collateral related to its forward foreign exchange contracts, interest rate contracts and other contracts, respectively.
Note 12
.
Fair Value Disclosures
TCF uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The Company's fair values are based on the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Securities available for sale, certain loans held for sale, interest-only strips, forward foreign exchange contracts, interest rate contracts, interest rate lock commitments, forward loan sales commitments, assets and liabilities held in trust for deferred compensation plans and other contracts are recorded at fair value on a recurring basis. From time to time we may be required to record at fair value other assets on a non-recurring basis, such as certain securities held to maturity, loans, other real estate owned, repossessed and returned assets and the securitization receivable. These non-recurring fair value adjustments typically involve application of lower of cost or fair value accounting or write-downs of individual assets.
TCF groups its assets and liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the degree and reliability of estimates and assumptions used to determine fair value as follows: Level 1, which includes valuations that are based on prices obtained from independent pricing sources for the same instruments traded in active markets; Level 2, which includes valuations that are based on prices obtained from independent pricing sources that are based on observable transactions of similar instruments, but not quoted markets; and Level 3, for which valuations are generated from Company model-based techniques that use significant unobservable inputs. Such unobservable inputs reflect estimates of assumptions that market participants would use in pricing the asset or liability.
The following is a discussion of the valuation methodologies used to record assets and liabilities at fair value on a recurring or non-recurring basis and for estimating fair value of financial instruments not recorded at fair value.
Investments
The carrying value of investments in FHLB stock and Federal Reserve Bank stock, categorized as Level 2, approximates fair value based on redemption at par value.
Securities Held to Maturity
Securities held to maturity consist primarily of securities of U.S. Government sponsored enterprises and federal agencies. The fair value of securities of U.S. Government sponsored enterprises and federal agencies, categorized as Level 2, is estimated using prices obtained from independent asset pricing services that are based on observable transactions, but not quoted markets. Management reviews the prices obtained from independent asset pricing services for unusual fluctuations and comparisons to current market trading activity. The fair value of other securities, categorized as Level 3, is estimated using probability of loss based on risk rating definitions. There is no observable secondary market for these securities.
Securities Available for Sale
Securities available for sale consist primarily of securities of U.S. Government sponsored enterprises and federal agencies, and obligations of states and political subdivisions. The fair value of these securities, categorized as Level 2, is recorded using prices obtained from independent asset pricing services that are based on observable transactions, but not quoted markets. Management reviews the prices obtained from independent asset pricing services for unusual fluctuations and comparisons to current market trading activity.
Loans Held for Sale
Loans held for sale are generally carried at the lower of cost or fair value. Estimated fair values are based on recent loan sale transactions and any available price quotes on loans with similar coupons, maturities and credit quality. Certain other loans held for sale are recorded at fair value under the elected fair value option. TCF relies on internal valuation models which utilize quoted investor prices to estimate the fair value of these loans. Loans held for sale are categorized as Level 3.
Loans
The fair value of loans, categorized as Level 3, is estimated based on discounted expected cash flows and recent sales of similar loans. The discounted cash flows include assumptions for prepayment estimates over each loan's remaining life, consideration of the current interest rate environment compared with the weighted-average rate of each portfolio, a credit risk component based on the historical and expected performance of each portfolio and a liquidity adjustment related to the current market environment. TCF also uses pricing data from recent sales of loans with similar risk characteristics as data points to validate the assumptions used in estimating the fair value of certain loans.
Loans for which repayment is expected to be provided solely by the value of the underlying collateral, categorized as Level 3 and recorded at fair value on a non-recurring basis, are valued based on the fair value of that collateral less estimated selling costs. Such loans include non-accrual impaired loans as well as certain delinquent non-accrual consumer real estate and auto finance loans. The fair value of the collateral is determined based on internal estimates and assessments provided by third-party appraisers.
Interest-only Strips
The fair value of interest-only strips, categorized as Level 3, represents the present value of future cash flows expected to be received by TCF on certain assets. TCF uses available market data, along with its own empirical data and discounted cash flow models, to arrive at the estimated fair value of its interest-only strips. The present value of the estimated expected future cash flows to be received is determined by using discount, loss and prepayment rates that TCF believes are commensurate with the risks associated with the cash flows and what a market participant would use. These assumptions are inherently subject to volatility and uncertainty and, as a result, the estimated fair value of the interest-only strips may fluctuate significantly from period to period.
Forward Foreign Exchange Contracts
TCF's forward foreign exchange contracts are currency contracts executed in over-the-counter markets and are recorded at fair value using a cash flow model that includes key inputs such as foreign exchange rates and an assessment of the risk of counterparty non-performance. The risk of counterparty non-performance is based on external assessments of credit risk. The fair value of these contracts, categorized as Level 2, is based on observable transactions, but not quoted markets.
Interest Rate Contracts
TCF executes interest rate swap agreements with commercial banking customers to facilitate the customer's risk management strategy. These interest rate swaps are simultaneously hedged by offsetting interest rate swaps TCF executes with a third party, minimizing TCF's net interest rate risk exposure resulting from such transactions. TCF also has an interest rate swap agreement to convert its
$150.0 million
of fixed-rate subordinated notes to floating rate debt. These derivative instruments are recorded at fair value. The fair value of these swap agreements, categorized as Level 2, is determined using a cash flow model which considers the forward curve, the discount curve and credit valuation adjustments related to counterparty and/or borrower non-performance risk.
Interest Rate Lock Commitments and Forward Loan Sales Commitments
TCF's interest rate lock commitments are derivative instruments that are carried at fair value. The related forward loan sales commitments to sell the resulting loans held for sale are also recorded at fair value under the elected fair value option. TCF relies on internal valuation models to estimate the fair value of these instruments. The valuation models utilize estimated rates of successful loan closings and quoted investor prices. While these models use both Level 2 and 3 inputs, TCF has determined that the inputs significant in the valuation of these commitments fall within Level 3 and therefore they are categorized as Level 3.
Other Real Estate Owned and Repossessed and Returned Assets
The fair value of other real estate owned, categorized as Level 3, is based on independent appraisals, real estate brokers' price opinions or automated valuation methods, less estimated selling costs. Certain properties require assumptions that are not observable in an active market in the determination of fair value. The fair value of repossessed and returned assets is based on available pricing guides, auction results or price opinions, less estimated selling costs. Assets acquired through foreclosure, repossession or returned to TCF are initially recorded at the lower of the loan or lease carrying amount or fair value less estimated selling costs at the time of transfer to other real estate owned or repossessed and returned assets. Other real estate owned at
June 30, 2017
and
December 31, 2016
was
$28.7 million
and
$46.8 million
, respectively. Repossessed and returned assets at
June 30, 2017
and
December 31, 2016
was
$9.3 million
and
$10.0 million
, respectively. Other real estate owned and repossessed and returned assets were written down
$1.7 million
and
$3.4 million
, which was included in foreclosed real estate and repossessed assets, net expense for the
three and six
months ended
June 30, 2017
, respectively, compared with
$2.1 million
and
$5.0 million
for the same periods in
2016
.
Securitization Receivable
TCF executed an auto finance loan securitization during the second quarter of 2016 with a related receivable representing a cash reserve account posted at the inception of the securitization. The fair value of the securitization receivable, categorized as Level 3, is estimated based on discounted cash flows using interest rates for borrowings of similar remaining maturities plus a spread based on management's judgment.
Assets and Liabilities Held in Trust for Deferred Compensation Plans
Assets held in trust for deferred compensation plans include investments in publicly traded securities, excluding TCF common stock reported in treasury and other equity, and U.S. Treasury notes. The fair value of these assets, categorized as Level 1, is based on prices obtained from independent asset pricing services based on active markets. The fair value of the liabilities equals the fair value of the assets.
Other Contracts
TCF has a swap agreement related to the sale of TCF's Visa Class B stock, categorized as Level 3. The fair value of the swap agreement is based on TCF's estimated exposure related to the Visa covered litigation through a probability analysis of the funding and estimated settlement amounts.
Deposits
The fair value of checking, savings and money market deposits, categorized as Level 1, is deemed equal to the amount payable on demand. The fair value of certificates of deposit, categorized as Level 2, is estimated based on discounted cash flows using currently offered market rates. The intangible value of long-term relationships with depositors is not taken into account in the fair values disclosed.
Long-term Borrowings
The fair value of TCF's long-term borrowings, categorized as Level 2, is estimated based on observable market prices and discounted cash flows using interest rates for borrowings of similar remaining maturities and characteristics. The fair value of other long-term borrowings, categorized as Level 3, is based on unobservable inputs determined at the time of origination.
Financial Instruments with Off-Balance Sheet Risk
The fair value of TCF's commitments to extend credit and standby letters of credit, categorized as Level 2, is estimated using fees currently charged to enter into similar agreements. Substantially all commitments to extend credit and standby letters of credit have floating interest rates and do not expose TCF to interest rate risk; therefore fair value is approximately equal to carrying value.
The balances of assets and liabilities measured at fair value on a recurring and non-recurring basis were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at June 30, 2017
|
(In thousands)
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Recurring Fair Value Measurements:
|
|
|
|
|
|
|
|
Securities available for sale:
|
|
|
|
|
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
U.S. Government sponsored enterprises and federal agencies
|
$
|
—
|
|
|
$
|
827,140
|
|
|
$
|
—
|
|
|
$
|
827,140
|
|
Other
|
—
|
|
|
—
|
|
|
11
|
|
|
11
|
|
Obligations of states and political subdivisions
|
—
|
|
|
727,800
|
|
|
—
|
|
|
727,800
|
|
Loans held for sale
|
—
|
|
|
—
|
|
|
5,238
|
|
|
5,238
|
|
Interest-only strips
|
—
|
|
|
—
|
|
|
32,582
|
|
|
32,582
|
|
Interest rate contracts
(1)
|
—
|
|
|
2,300
|
|
|
—
|
|
|
2,300
|
|
Interest rate lock commitments
(1)
|
—
|
|
|
—
|
|
|
515
|
|
|
515
|
|
Forward loan sales commitments
|
—
|
|
|
—
|
|
|
13
|
|
|
13
|
|
Assets held in trust for deferred compensation plans
|
26,208
|
|
|
—
|
|
|
—
|
|
|
26,208
|
|
Total assets
|
$
|
26,208
|
|
|
$
|
1,557,240
|
|
|
$
|
38,359
|
|
|
$
|
1,621,807
|
|
Forward foreign exchange contracts
(1)
|
$
|
—
|
|
|
$
|
9,402
|
|
|
$
|
—
|
|
|
$
|
9,402
|
|
Interest rate contracts
(1)
|
—
|
|
|
1,403
|
|
|
—
|
|
|
1,403
|
|
Forward loan sales commitments
|
—
|
|
|
—
|
|
|
80
|
|
|
80
|
|
Liabilities held in trust for deferred compensation plans
|
26,208
|
|
|
—
|
|
|
—
|
|
|
26,208
|
|
Other contracts
(1)
|
—
|
|
|
—
|
|
|
462
|
|
|
462
|
|
Total liabilities
|
$
|
26,208
|
|
|
$
|
10,805
|
|
|
$
|
542
|
|
|
$
|
37,555
|
|
Non-recurring Fair Value Measurements:
|
|
|
|
|
|
|
|
Loans
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
79,422
|
|
|
$
|
79,422
|
|
Other real estate owned:
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
—
|
|
|
—
|
|
|
17,744
|
|
|
17,744
|
|
Commercial
|
—
|
|
|
—
|
|
|
3,600
|
|
|
3,600
|
|
Repossessed and returned assets
|
—
|
|
|
4,136
|
|
|
2,229
|
|
|
6,365
|
|
Total non-recurring fair value measurements
|
$
|
—
|
|
|
$
|
4,136
|
|
|
$
|
102,995
|
|
|
$
|
107,131
|
|
|
|
(1)
|
As permitted under GAAP, TCF has elected to net derivative assets and derivative liabilities when a legally enforceable master netting agreement exists as well as the related cash collateral received and paid. For purposes of this table, the derivative assets and derivative liabilities are presented gross of this netting adjustment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at December 31, 2016
|
(In thousands)
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Recurring Fair Value Measurements:
|
|
|
|
|
|
|
|
Securities available for sale:
|
|
|
|
|
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
U.S. Government sponsored enterprises and federal agencies
|
$
|
—
|
|
|
$
|
810,891
|
|
|
$
|
—
|
|
|
$
|
810,891
|
|
Other
|
—
|
|
|
—
|
|
|
18
|
|
|
18
|
|
Obligations of states and political subdivisions
|
—
|
|
|
612,526
|
|
|
—
|
|
|
612,526
|
|
Loans held for sale
|
—
|
|
|
—
|
|
|
6,498
|
|
|
6,498
|
|
Interest-only strips
|
—
|
|
|
—
|
|
|
40,152
|
|
|
40,152
|
|
Forward foreign exchange contracts
(1)
|
—
|
|
|
4,077
|
|
|
—
|
|
|
4,077
|
|
Interest rate contracts
(1)
|
—
|
|
|
1,925
|
|
|
—
|
|
|
1,925
|
|
Interest rate lock commitments
(1)
|
—
|
|
|
—
|
|
|
318
|
|
|
318
|
|
Forward loan sales commitments
|
—
|
|
|
—
|
|
|
374
|
|
|
374
|
|
Assets held in trust for deferred compensation plans
|
23,363
|
|
|
—
|
|
|
—
|
|
|
23,363
|
|
Total assets
|
$
|
23,363
|
|
|
$
|
1,429,419
|
|
|
$
|
47,360
|
|
|
$
|
1,500,142
|
|
Forward foreign exchange contracts
(1)
|
$
|
—
|
|
|
$
|
469
|
|
|
$
|
—
|
|
|
$
|
469
|
|
Interest rate contracts
(1)
|
—
|
|
|
3,256
|
|
|
—
|
|
|
3,256
|
|
Interest rate lock commitments
(1)
|
—
|
|
|
—
|
|
|
21
|
|
|
21
|
|
Forward loan sales commitments
|
—
|
|
|
—
|
|
|
13
|
|
|
13
|
|
Liabilities held in trust for deferred compensation plans
|
23,363
|
|
|
—
|
|
|
—
|
|
|
23,363
|
|
Other contracts
(1)
|
—
|
|
|
—
|
|
|
619
|
|
|
619
|
|
Total liabilities
|
$
|
23,363
|
|
|
$
|
3,725
|
|
|
$
|
653
|
|
|
$
|
27,741
|
|
Non-recurring Fair Value Measurements:
|
|
|
|
|
|
|
|
|
|
|
|
Securities held to maturity
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,400
|
|
|
$
|
2,400
|
|
Loans
|
—
|
|
|
—
|
|
|
113,954
|
|
|
113,954
|
|
Other real estate owned:
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
—
|
|
|
—
|
|
|
25,751
|
|
|
25,751
|
|
Commercial
|
—
|
|
|
—
|
|
|
3,874
|
|
|
3,874
|
|
Repossessed and returned assets
|
—
|
|
|
2,767
|
|
|
2,800
|
|
|
5,567
|
|
Total non-recurring fair value measurements
|
$
|
—
|
|
|
$
|
2,767
|
|
|
$
|
148,779
|
|
|
$
|
151,546
|
|
|
|
(1)
|
As permitted under GAAP, TCF has elected to net derivative assets and derivative liabilities when a legally enforceable master netting agreement exists as well as the related cash collateral received and paid. For purposes of this table, the derivative assets and derivative liabilities are presented gross of this netting adjustment.
|
Management assesses the appropriate classification of financial assets and liabilities within the fair value hierarchy by monitoring the level of available observable market information. Changes in markets or economic conditions, as well as changes to Company valuation models, may require the transfer of financial instruments from one fair value level to another. Such transfers, if any, are recorded at the fair values as of the beginning of the quarter in which the transfer occurred. TCF had no transfers in the
six
months ended
June 30, 2017
and
2016
.
The changes in Level 3 assets and liabilities measured at fair value on a recurring basis were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Securities
Available
for Sale
|
|
Loans
Held for Sale
|
|
Interest-only Strips
|
|
Interest
Rate Lock
Commitments
|
|
Forward
Loan Sales
Commitments
|
|
Other Contracts
|
At or For the Three Months Ended June 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
Asset (liability) balance, beginning of period
|
$
|
14
|
|
|
$
|
3,362
|
|
|
$
|
35,783
|
|
|
$
|
464
|
|
|
$
|
(92
|
)
|
|
$
|
(541
|
)
|
Total net gains (losses) included in:
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
—
|
|
|
34
|
|
|
1,100
|
|
|
51
|
|
|
25
|
|
|
—
|
|
Other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
927
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Sales
|
—
|
|
|
(45,160
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Originations
|
—
|
|
|
47,005
|
|
|
569
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Principal paydowns / settlements
|
(3
|
)
|
|
(3
|
)
|
|
(5,797
|
)
|
|
—
|
|
|
—
|
|
|
79
|
|
Asset (liability) balance, end of period
|
$
|
11
|
|
|
$
|
5,238
|
|
|
$
|
32,582
|
|
|
$
|
515
|
|
|
$
|
(67
|
)
|
|
$
|
(462
|
)
|
At or For the Three Months Ended June 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
Asset (liability) balance, beginning of period
|
$
|
28
|
|
|
$
|
5,567
|
|
|
$
|
48,727
|
|
|
$
|
540
|
|
|
$
|
31
|
|
|
$
|
(311
|
)
|
Total net gains (losses) included in:
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
—
|
|
|
60
|
|
|
1,051
|
|
|
413
|
|
|
(348
|
)
|
|
(233
|
)
|
Sales
|
—
|
|
|
(82,509
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Originations
|
—
|
|
|
84,447
|
|
|
6,106
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Principal paydowns / settlements
|
(3
|
)
|
|
—
|
|
|
(7,473
|
)
|
|
—
|
|
|
—
|
|
|
78
|
|
Asset (liability) balance, end of period
|
$
|
25
|
|
|
$
|
7,565
|
|
|
$
|
48,411
|
|
|
$
|
953
|
|
|
$
|
(317
|
)
|
|
$
|
(466
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Securities
Available
for Sale
|
|
Loans
Held for Sale
|
|
Interest-only Strips
|
|
Interest
Rate Lock
Commitments
|
|
Forward
Loan Sales
Commitments
|
|
Other Contracts
|
At or For the Six Months Ended June 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
Asset (liability) balance, beginning of period
|
$
|
18
|
|
|
$
|
6,498
|
|
|
$
|
40,152
|
|
|
$
|
297
|
|
|
$
|
361
|
|
|
$
|
(619
|
)
|
Total net gains (losses) included in:
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
—
|
|
|
138
|
|
|
2,213
|
|
|
218
|
|
|
(428
|
)
|
|
—
|
|
Other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
599
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Sales
|
—
|
|
|
(91,874
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Originations
|
—
|
|
|
90,484
|
|
|
1,916
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Principal paydowns / settlements
|
(7
|
)
|
|
(8
|
)
|
|
(12,298
|
)
|
|
—
|
|
|
—
|
|
|
157
|
|
Asset (liability) balance, end of period
|
$
|
11
|
|
|
$
|
5,238
|
|
|
$
|
32,582
|
|
|
$
|
515
|
|
|
$
|
(67
|
)
|
|
$
|
(462
|
)
|
At or For the Six Months Ended June 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
Asset (liability) balance, beginning of period
|
$
|
34
|
|
|
$
|
10,568
|
|
|
$
|
44,332
|
|
|
$
|
716
|
|
|
$
|
265
|
|
|
$
|
(305
|
)
|
Total net gains (losses) included in:
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
—
|
|
|
198
|
|
|
2,516
|
|
|
237
|
|
|
(582
|
)
|
|
(318
|
)
|
Sales
|
—
|
|
|
(161,740
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Originations
|
—
|
|
|
158,539
|
|
|
16,608
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Principal paydowns / settlements
|
(9
|
)
|
|
—
|
|
|
(15,045
|
)
|
|
—
|
|
|
—
|
|
|
157
|
|
Asset (liability) balance, end of period
|
$
|
25
|
|
|
$
|
7,565
|
|
|
$
|
48,411
|
|
|
$
|
953
|
|
|
$
|
(317
|
)
|
|
$
|
(466
|
)
|
Fair Value Option
TCF Bank originates first mortgage lien loans in its primary banking markets and sells the loans through a correspondent relationship. TCF elected the fair value option for these loans. This election facilitates the offsetting of changes in fair values of the loans held for sale and the derivative financial instruments used to economically hedge them. The difference between the aggregate fair value and aggregate unpaid principal balance of these loans held for sale was as follows:
|
|
|
|
|
|
|
|
|
(In thousands)
|
At June 30, 2017
|
|
At December 31, 2016
|
Fair value carrying amount
|
$
|
5,238
|
|
|
$
|
6,498
|
|
Aggregate unpaid principal amount
|
5,109
|
|
|
6,563
|
|
Fair value carrying amount less aggregate unpaid principal
|
$
|
129
|
|
|
$
|
(65
|
)
|
Differences between the fair value carrying amount and the aggregate unpaid principal balance include changes in fair value recorded at and subsequent to funding and gains and losses on the related loan commitment prior to funding.
No
loans recorded under the fair value option were delinquent or on non-accrual status at
June 30, 2017
or
December 31, 2016
. The net gain from initial measurement of the correspondent lending loans held for sale, any subsequent changes in fair value while the loans are outstanding and any actual adjustment to the gains realized upon sales of the loans totaled
$1.0 million
and
$2.2 million
for the
three and six
months ended
June 30, 2017
, respectively, compared with
$1.9 million
and
$3.8 million
for the same periods in
2016
, and are included in gains on sales of consumer real estate loans, net. This amount excludes the impact from the interest rate lock commitments and forward loan sales commitments which are also included in gains on sales of consumer real estate loans, net.
Disclosures About Fair Value of Financial Instruments
Management discloses the estimated fair value of financial instruments, both assets and liabilities on and off the balance sheet, for which it is practicable to estimate fair value. These fair value estimates were made at
June 30, 2017
and
December 31, 2016
, based on relevant market information and information about the financial instruments. Fair value estimates are intended to represent the price at which an asset could be sold or a liability could be settled. However, given there is no active market or observable market transactions for many of the Company's financial instruments, the estimates of fair values are subjective in nature, involve uncertainties and include matters of significant judgment. Changes in assumptions could significantly affect the estimated values.
The carrying amounts and estimated fair values of the Company's financial instruments, excluding short-term financial assets and liabilities as their carrying amounts approximate fair value, and excluding financial instruments recorded at fair value on a recurring basis, were as follows. This information represents only a portion of TCF's balance sheet and not the estimated value of the Company as a whole. Non-financial instruments such as the intangible value of TCF's branches and core deposits, leasing operations, goodwill, premises and equipment and the future revenues from TCF's customers are not reflected in this disclosure. Therefore, this information is of limited use in assessing the value of TCF.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying
Amount
|
|
Estimated Fair Value at June 30, 2017
|
(In thousands)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Financial instrument assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
|
$
|
82,737
|
|
|
$
|
—
|
|
|
$
|
82,737
|
|
|
$
|
—
|
|
|
$
|
82,737
|
|
Securities held to maturity
|
171,320
|
|
|
—
|
|
|
172,786
|
|
|
2,800
|
|
|
175,586
|
|
Loans held for sale
|
171,869
|
|
|
—
|
|
|
—
|
|
|
177,686
|
|
|
177,686
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer real estate
|
4,771,977
|
|
|
—
|
|
|
—
|
|
|
4,867,143
|
|
|
4,867,143
|
|
Commercial real estate
|
2,722,300
|
|
|
—
|
|
|
—
|
|
|
2,674,158
|
|
|
2,674,158
|
|
Commercial business
|
766,425
|
|
|
—
|
|
|
—
|
|
|
735,078
|
|
|
735,078
|
|
Equipment finance
|
2,023,086
|
|
|
—
|
|
|
—
|
|
|
1,997,941
|
|
|
1,997,941
|
|
Inventory finance
|
2,509,485
|
|
|
—
|
|
|
—
|
|
|
2,494,293
|
|
|
2,494,293
|
|
Auto finance
|
3,243,144
|
|
|
—
|
|
|
—
|
|
|
3,252,167
|
|
|
3,252,167
|
|
Other
|
19,459
|
|
|
—
|
|
|
—
|
|
|
18,620
|
|
|
18,620
|
|
Allowance for loan losses
(1)
|
(165,620
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Securitization receivable
(2)
|
19,022
|
|
|
—
|
|
|
—
|
|
|
19,022
|
|
|
19,022
|
|
Total financial instrument assets
|
$
|
16,335,204
|
|
|
$
|
—
|
|
|
$
|
255,523
|
|
|
$
|
16,238,908
|
|
|
$
|
16,494,431
|
|
Financial instrument liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
$
|
17,518,804
|
|
|
$
|
13,099,684
|
|
|
$
|
4,441,605
|
|
|
$
|
—
|
|
|
$
|
17,541,289
|
|
Long-term borrowings
|
1,266,748
|
|
|
—
|
|
|
1,273,234
|
|
|
—
|
|
|
1,273,234
|
|
Total financial instrument liabilities
|
$
|
18,785,552
|
|
|
$
|
13,099,684
|
|
|
$
|
5,714,839
|
|
|
$
|
—
|
|
|
$
|
18,814,523
|
|
Financial instruments with off-balance sheet risk:
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments to extend credit
|
$
|
20,591
|
|
|
$
|
—
|
|
|
$
|
20,591
|
|
|
$
|
—
|
|
|
$
|
20,591
|
|
Standby letters of credit
|
(42
|
)
|
|
—
|
|
|
(42
|
)
|
|
—
|
|
|
(42
|
)
|
Total financial instruments with off-balance sheet risk
|
$
|
20,549
|
|
|
$
|
—
|
|
|
$
|
20,549
|
|
|
$
|
—
|
|
|
$
|
20,549
|
|
|
|
(1)
|
Expected credit losses are included in the estimated fair values.
|
|
|
(2)
|
Carrying amounts are included in other assets.
|
|
|
(3)
|
Positive amounts represent assets, negative amounts represent liabilities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying
Amount
|
|
Estimated Fair Value at December 31, 2016
|
(In thousands)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Financial instrument assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
|
$
|
74,714
|
|
|
$
|
—
|
|
|
$
|
74,714
|
|
|
$
|
—
|
|
|
$
|
74,714
|
|
Securities held to maturity
|
181,314
|
|
|
—
|
|
|
181,146
|
|
|
2,800
|
|
|
183,946
|
|
Loans held for sale
|
268,832
|
|
|
—
|
|
|
—
|
|
|
282,786
|
|
|
282,786
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer real estate
|
5,084,352
|
|
|
—
|
|
|
—
|
|
|
5,165,062
|
|
|
5,165,062
|
|
Commercial real estate
|
2,634,191
|
|
|
—
|
|
|
—
|
|
|
2,583,775
|
|
|
2,583,775
|
|
Commercial business
|
652,287
|
|
|
—
|
|
|
—
|
|
|
631,215
|
|
|
631,215
|
|
Equipment finance
|
2,016,732
|
|
|
—
|
|
|
—
|
|
|
1,983,237
|
|
|
1,983,237
|
|
Inventory finance
|
2,470,175
|
|
|
—
|
|
|
—
|
|
|
2,453,184
|
|
|
2,453,184
|
|
Auto finance
|
2,647,741
|
|
|
—
|
|
|
—
|
|
|
2,656,266
|
|
|
2,656,266
|
|
Other
|
18,771
|
|
|
—
|
|
|
—
|
|
|
17,780
|
|
|
17,780
|
|
Allowance for loan losses
(1)
|
(160,269
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Securitization receivable
(2)
|
18,835
|
|
|
—
|
|
|
—
|
|
|
18,835
|
|
|
18,835
|
|
Total financial instrument assets
|
$
|
15,907,675
|
|
|
$
|
—
|
|
|
$
|
255,860
|
|
|
$
|
15,794,940
|
|
|
$
|
16,050,800
|
|
Financial instrument liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
$
|
17,242,522
|
|
|
$
|
13,150,099
|
|
|
$
|
4,112,685
|
|
|
$
|
—
|
|
|
$
|
17,262,784
|
|
Long-term borrowings
|
1,073,181
|
|
|
—
|
|
|
1,073,875
|
|
|
2,764
|
|
|
1,076,639
|
|
Total financial instrument liabilities
|
$
|
18,315,703
|
|
|
$
|
13,150,099
|
|
|
$
|
5,186,560
|
|
|
$
|
2,764
|
|
|
$
|
18,339,423
|
|
Financial instruments with off-balance sheet risk:
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments to extend credit
|
$
|
21,681
|
|
|
$
|
—
|
|
|
$
|
21,681
|
|
|
$
|
—
|
|
|
$
|
21,681
|
|
Standby letters of credit
|
(29
|
)
|
|
—
|
|
|
(29
|
)
|
|
—
|
|
|
(29
|
)
|
Total financial instruments with off-balance sheet risk
|
$
|
21,652
|
|
|
$
|
—
|
|
|
$
|
21,652
|
|
|
$
|
—
|
|
|
$
|
21,652
|
|
|
|
(1)
|
Expected credit losses are included in the estimated fair values.
|
|
|
(2)
|
Carrying amounts are included in other assets.
|
|
|
(3)
|
Positive amounts represent assets, negative amounts represent liabilities.
|
Note 13
.
Earnings Per Common Share
The computations of basic and diluted earnings per common share were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
(Dollars in thousands, except per share data)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Basic Earnings Per Common Share:
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders
|
$
|
55,585
|
|
|
$
|
52,847
|
|
|
$
|
97,016
|
|
|
$
|
96,046
|
|
Less: Earnings allocated to participating securities
|
9
|
|
|
14
|
|
|
17
|
|
|
25
|
|
Earnings allocated to common stock
|
$
|
55,576
|
|
|
$
|
52,833
|
|
|
$
|
96,999
|
|
|
$
|
96,021
|
|
Weighted-average common shares outstanding for basic earnings per common share
|
168,593,739
|
|
|
167,334,476
|
|
|
168,250,086
|
|
|
167,110,884
|
|
Basic earnings per common share
|
$
|
0.33
|
|
|
$
|
0.32
|
|
|
$
|
0.58
|
|
|
$
|
0.57
|
|
|
|
|
|
|
|
|
|
Diluted Earnings Per Common Share:
|
|
|
|
|
|
|
|
|
|
|
|
Earnings allocated to common stock
|
$
|
55,576
|
|
|
$
|
52,833
|
|
|
$
|
96,999
|
|
|
$
|
96,021
|
|
Weighted-average common shares outstanding used in basic earnings per common share calculation
|
168,593,739
|
|
|
167,334,476
|
|
|
168,250,086
|
|
|
167,110,884
|
|
Net dilutive effect of:
|
|
|
|
|
|
|
|
|
|
|
|
Non-participating restricted stock
|
255,681
|
|
|
427,782
|
|
|
339,975
|
|
|
459,716
|
|
Stock options
|
7,798
|
|
|
86,929
|
|
|
25,376
|
|
|
67,780
|
|
Weighted-average common shares outstanding for diluted earnings per common share
|
168,857,218
|
|
|
167,849,187
|
|
|
168,615,437
|
|
|
167,638,380
|
|
Diluted earnings per common share
|
$
|
0.33
|
|
|
$
|
0.31
|
|
|
$
|
0.58
|
|
|
$
|
0.57
|
|
For the
three and six
months ended
June 30, 2017
, there were
4.1 million
and
4.0 million
, respectively, of outstanding shares related to warrants and non-participating restricted stock that were not included in the computation of diluted earnings per share because they were anti-dilutive. For the
three and six
months ended
June 30, 2016
, there were
5.1 million
and
5.2 million
, respectively, of outstanding shares related to non-participating restricted stock, stock options and warrants that were not included in the computation of diluted earnings per share because they were anti-dilutive.
Note 14
.
Other Non-interest Expense
Other non-interest expense was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
(In thousands)
|
2017
|
|
2016
|
2017
|
|
2016
|
Professional fees
|
$
|
7,575
|
|
|
$
|
4,242
|
|
$
|
14,768
|
|
|
$
|
7,844
|
|
Advertising and marketing
|
7,212
|
|
|
5,678
|
|
13,618
|
|
|
11,565
|
|
Loan and lease processing
|
5,773
|
|
|
6,531
|
|
11,954
|
|
|
12,491
|
|
Outside processing
|
4,754
|
|
|
3,568
|
|
9,235
|
|
|
7,213
|
|
Card processing and issuance costs
|
4,706
|
|
|
3,962
|
|
8,815
|
|
|
7,682
|
|
Severance
|
1,285
|
|
|
261
|
|
7,918
|
|
|
1,028
|
|
FDIC insurance
|
3,824
|
|
|
3,751
|
|
7,783
|
|
|
7,864
|
|
Other
|
25,946
|
|
|
31,423
|
|
51,021
|
|
|
57,077
|
|
Total other non-interest expense
|
$
|
61,075
|
|
|
$
|
59,416
|
|
$
|
125,112
|
|
|
$
|
112,764
|
|
Note 15
.
Business Segments
The Company's reportable segments are Consumer Banking, Wholesale Banking and Enterprise Services. Consumer Banking is comprised of all of the Company's consumer-facing businesses and includes retail banking, consumer real estate and auto finance. Wholesale Banking is comprised of commercial real estate and business lending, leasing and equipment finance and inventory finance. Enterprise Services is comprised of (i) corporate treasury, which includes TCF's investment and borrowing portfolios and management of capital, debt and market risks; (ii) corporate functions, such as information technology, risk and credit management, bank operations, finance, investor relations, corporate development, legal and human resources, that provide services to the operating segments; (iii) the Holding Company; and (iv) eliminations.
TCF evaluates performance and allocates resources based on each reportable segment's net income or loss. The reportable business segments follow GAAP as described in
Note 1
,
Basis of Presentation
, in Item 8 of TCF's 2016 Annual Report on Form 10-K, except for the accounting for intercompany interest income and interest expense, which are eliminated in consolidation, and presenting net interest income on a fully tax-equivalent basis. TCF generally accounts for inter-segment sales and transfers at cost.
Certain information for each of TCF's reportable segments, including reconciliations of TCF's consolidated totals, was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Consumer Banking
|
|
Wholesale Banking
|
|
Enterprise Services
|
|
Consolidated
|
At or For the Three Months Ended June 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
$
|
143,104
|
|
|
$
|
88,166
|
|
|
$
|
(4,109
|
)
|
|
$
|
227,161
|
|
Provision for credit losses
|
16,731
|
|
|
2,715
|
|
|
—
|
|
|
19,446
|
|
Non-interest income
|
71,458
|
|
|
42,939
|
|
|
266
|
|
|
114,663
|
|
Non-interest expense
|
161,098
|
|
|
66,941
|
|
|
5,048
|
|
|
233,087
|
|
Income tax expense (benefit)
|
13,253
|
|
|
20,539
|
|
|
(7,998
|
)
|
|
25,794
|
|
Income (loss) after income tax expense (benefit)
|
23,480
|
|
|
40,910
|
|
|
(893
|
)
|
|
63,497
|
|
Income attributable to non-controlling interest
|
—
|
|
|
3,065
|
|
|
—
|
|
|
3,065
|
|
Preferred stock dividends
|
—
|
|
|
—
|
|
|
4,847
|
|
|
4,847
|
|
Net income (loss) available to common stockholders
|
$
|
23,480
|
|
|
$
|
37,845
|
|
|
$
|
(5,740
|
)
|
|
$
|
55,585
|
|
Total assets
|
$
|
8,812,046
|
|
|
$
|
10,756,905
|
|
|
$
|
2,485,700
|
|
|
$
|
22,054,651
|
|
Revenues from external customers:
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
$
|
111,214
|
|
|
$
|
127,227
|
|
|
$
|
10,076
|
|
|
$
|
248,517
|
|
Non-interest income
|
71,458
|
|
|
42,939
|
|
|
266
|
|
|
114,663
|
|
Total
|
$
|
182,672
|
|
|
$
|
170,166
|
|
|
$
|
10,342
|
|
|
$
|
363,180
|
|
At or For the Three Months Ended June 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
$
|
140,656
|
|
|
$
|
86,527
|
|
|
$
|
(14,199
|
)
|
|
$
|
212,984
|
|
Provision for credit losses
|
11,883
|
|
|
1,367
|
|
|
—
|
|
|
13,250
|
|
Non-interest income
|
83,696
|
|
|
33,788
|
|
|
472
|
|
|
117,956
|
|
Non-interest expense
|
165,444
|
|
|
60,730
|
|
|
1,142
|
|
|
227,316
|
|
Income tax expense (benefit)
|
16,626
|
|
|
19,105
|
|
|
(6,025
|
)
|
|
29,706
|
|
Income (loss) after income tax expense (benefit)
|
30,399
|
|
|
39,113
|
|
|
(8,844
|
)
|
|
60,668
|
|
Income attributable to non-controlling interest
|
—
|
|
|
2,974
|
|
|
—
|
|
|
2,974
|
|
Preferred stock dividends
|
—
|
|
|
—
|
|
|
4,847
|
|
|
4,847
|
|
Net income (loss) available to common stockholders
|
$
|
30,399
|
|
|
$
|
36,139
|
|
|
$
|
(13,691
|
)
|
|
$
|
52,847
|
|
Total assets
|
$
|
8,919,354
|
|
|
$
|
9,787,325
|
|
|
$
|
2,362,831
|
|
|
$
|
21,069,510
|
|
Revenues from external customers:
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
$
|
112,119
|
|
|
$
|
113,733
|
|
|
$
|
8,152
|
|
|
$
|
234,004
|
|
Non-interest income
|
83,696
|
|
|
33,788
|
|
|
472
|
|
|
117,956
|
|
Total
|
$
|
195,815
|
|
|
$
|
147,521
|
|
|
$
|
8,624
|
|
|
$
|
351,960
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Consumer Banking
|
|
Wholesale Banking
|
|
Enterprise Services
|
|
Consolidated
|
At or For the Six Months Ended June 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
$
|
283,421
|
|
|
$
|
175,808
|
|
|
$
|
(9,954
|
)
|
|
$
|
449,275
|
|
Provision for credit losses
|
22,082
|
|
|
9,557
|
|
|
—
|
|
|
31,639
|
|
Non-interest income
|
144,220
|
|
|
73,658
|
|
|
299
|
|
|
218,177
|
|
Non-interest expense
|
330,387
|
|
|
132,503
|
|
|
14,203
|
|
|
477,093
|
|
Income tax expense (benefit)
|
26,763
|
|
|
35,607
|
|
|
(15,733
|
)
|
|
46,637
|
|
Income (loss) after income tax expense (benefit)
|
48,409
|
|
|
71,799
|
|
|
(8,125
|
)
|
|
112,083
|
|
Income attributable to non-controlling interest
|
—
|
|
|
5,373
|
|
|
—
|
|
|
5,373
|
|
Preferred stock dividends
|
—
|
|
|
—
|
|
|
9,694
|
|
|
9,694
|
|
Net income (loss) available to common stockholders
|
$
|
48,409
|
|
|
$
|
66,426
|
|
|
$
|
(17,819
|
)
|
|
$
|
97,016
|
|
Total assets
|
$
|
8,812,046
|
|
|
$
|
10,756,905
|
|
|
$
|
2,485,700
|
|
|
$
|
22,054,651
|
|
Revenues from external customers:
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
$
|
221,047
|
|
|
$
|
249,592
|
|
|
$
|
20,185
|
|
|
$
|
490,824
|
|
Non-interest income
|
144,220
|
|
|
73,658
|
|
|
299
|
|
|
218,177
|
|
Total
|
$
|
365,267
|
|
|
$
|
323,250
|
|
|
$
|
20,484
|
|
|
$
|
709,001
|
|
At or For the Six Months Ended June 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
$
|
279,999
|
|
|
$
|
172,196
|
|
|
$
|
(27,553
|
)
|
|
$
|
424,642
|
|
Provision for credit losses
|
25,558
|
|
|
6,534
|
|
|
—
|
|
|
32,092
|
|
Non-interest income
|
164,757
|
|
|
64,401
|
|
|
1,400
|
|
|
230,558
|
|
Non-interest expense
|
325,964
|
|
|
122,835
|
|
|
6,851
|
|
|
455,650
|
|
Income tax expense (benefit)
|
33,457
|
|
|
35,511
|
|
|
(12,459
|
)
|
|
56,509
|
|
Income (loss) after income tax expense (benefit)
|
59,777
|
|
|
71,717
|
|
|
(20,545
|
)
|
|
110,949
|
|
Income attributable to non-controlling interest
|
—
|
|
|
5,209
|
|
|
—
|
|
|
5,209
|
|
Preferred stock dividends
|
—
|
|
|
—
|
|
|
9,694
|
|
|
9,694
|
|
Net income (loss) available to common stockholders
|
$
|
59,777
|
|
|
$
|
66,508
|
|
|
$
|
(30,239
|
)
|
|
$
|
96,046
|
|
Total assets
|
$
|
8,919,354
|
|
|
$
|
9,787,325
|
|
|
$
|
2,362,831
|
|
|
$
|
21,069,510
|
|
Revenues from external customers:
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
$
|
225,069
|
|
|
$
|
225,627
|
|
|
$
|
15,650
|
|
|
$
|
466,346
|
|
Non-interest income
|
164,757
|
|
|
64,401
|
|
|
1,400
|
|
|
230,558
|
|
Total
|
$
|
389,826
|
|
|
$
|
290,028
|
|
|
$
|
17,050
|
|
|
$
|
696,904
|
|
Note 16
.
Litigation Contingencies
From time to time TCF is a party to legal proceedings arising out of its lending, leasing and deposit operations, including foreclosure proceedings and other collection actions as part of its lending and leasing collections activities. TCF may also be subject to regulatory examinations and enforcement actions brought by federal regulators, including the Securities and Exchange Commission, the Federal Reserve, the OCC and the Consumer Financial Protection Bureau ("CFPB") and TCF's regulatory authorities may impose sanctions on TCF for failures related to regulatory compliance. From time to time borrowers and other customers, and employees and former employees have also brought actions against TCF, in some cases claiming substantial damages. TCF and other financial services companies are subject to the risk of class action litigation. Litigation is often unpredictable and the actual results of litigation cannot be determined and therefore the ultimate resolution of a matter and the possible range of loss associated with certain potential outcomes cannot be established. Except as discussed below, based on our current understanding of TCF's pending legal proceedings, management does not believe that judgments or settlements arising from pending or threatened legal matters, individually or in the aggregate, would have a material adverse effect on the consolidated financial position, operating results or cash flows of TCF.
On January 19, 2017, the CFPB filed a civil lawsuit against TCF Bank in the United States District Court for the District of Minnesota, captioned Consumer Financial Protection Bureau v. TCF National Bank, alleging violations of the Consumer Financial Protection Act and Regulation E, §1005.17 in connection with TCF Bank's practices administering checking account overdraft program "opt-in" requirements from 2010 to early 2014. In its complaint, the CFPB seeks, among other relief, redress for consumers, injunctive relief and unspecified penalties. TCF Bank rejects the claims made by the CFPB in its complaint and intends to vigorously defend against the CFPB’s allegations. TCF has not accrued any amounts with respect to this matter because (i) TCF does not believe a loss is probable, (ii) believes the Company has meritorious defenses to the claims made and (iii) the damages sought are unspecified and uncertain. Therefore, TCF is currently unable to reasonably estimate a range of potential loss, if any, relating to this matter. There is no assurance that the ultimate resolution of this lawsuit will not have a material adverse effect on the consolidated financial position, operating results or cash flows of TCF.
Note 17
.
Accumulated Other Comprehensive Income (Loss)
The components of other comprehensive income (loss) and the related tax effects were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
2017
|
|
2016
|
(In thousands)
|
Before Tax
|
|
Tax Effect
|
|
Net of Tax
|
|
Before Tax
|
|
Tax Effect
|
|
Net of Tax
|
Net unrealized gains (losses) on securities available for sale and interest-only strips:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains (losses) arising during the period
|
$
|
19,426
|
|
|
$
|
(7,385
|
)
|
|
$
|
12,041
|
|
|
$
|
21,128
|
|
|
$
|
(8,024
|
)
|
|
$
|
13,104
|
|
Reclassification of net (gains) losses to net income
|
485
|
|
|
(185
|
)
|
|
300
|
|
|
749
|
|
|
(285
|
)
|
|
464
|
|
Net unrealized gains (losses)
|
19,911
|
|
|
(7,570
|
)
|
|
12,341
|
|
|
21,877
|
|
|
(8,309
|
)
|
|
13,568
|
|
Net unrealized gains (losses) on net investment hedges
|
(1,855
|
)
|
|
706
|
|
|
(1,149
|
)
|
|
(338
|
)
|
|
128
|
|
|
(210
|
)
|
Foreign currency translation adjustment
(1)
|
2,007
|
|
|
—
|
|
|
2,007
|
|
|
339
|
|
|
—
|
|
|
339
|
|
Recognized postretirement prior service cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification of net (gains) losses to net income
|
(11
|
)
|
|
4
|
|
|
(7
|
)
|
|
(11
|
)
|
|
4
|
|
|
(7
|
)
|
Total other comprehensive income (loss)
|
$
|
20,052
|
|
|
$
|
(6,860
|
)
|
|
$
|
13,192
|
|
|
$
|
21,867
|
|
|
$
|
(8,177
|
)
|
|
$
|
13,690
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
2017
|
|
2016
|
(In thousands)
|
Before Tax
|
|
Tax Effect
|
|
Net of Tax
|
|
Before Tax
|
|
Tax Effect
|
|
Net of Tax
|
Net unrealized gains (losses) on securities available for sale and interest-only strips:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains (losses) arising during the period
|
$
|
23,588
|
|
|
$
|
(8,967
|
)
|
|
$
|
14,621
|
|
|
$
|
40,263
|
|
|
$
|
(15,292
|
)
|
|
$
|
24,971
|
|
Reclassification of net (gains) losses to net income
|
790
|
|
|
(301
|
)
|
|
489
|
|
|
1,023
|
|
|
(389
|
)
|
|
634
|
|
Net unrealized gains (losses)
|
24,378
|
|
|
(9,268
|
)
|
|
15,110
|
|
|
41,286
|
|
|
(15,681
|
)
|
|
25,605
|
|
Net unrealized gains (losses) on net investment hedges
|
(2,359
|
)
|
|
897
|
|
|
(1,462
|
)
|
|
(3,595
|
)
|
|
1,365
|
|
|
(2,230
|
)
|
Foreign currency translation adjustment
(1)
|
2,588
|
|
|
—
|
|
|
2,588
|
|
|
3,748
|
|
|
—
|
|
|
3,748
|
|
Recognized postretirement prior service cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification of net (gains) losses to net income
|
(23
|
)
|
|
9
|
|
|
(14
|
)
|
|
(23
|
)
|
|
9
|
|
|
(14
|
)
|
Total other comprehensive income (loss)
|
$
|
24,584
|
|
|
$
|
(8,362
|
)
|
|
$
|
16,222
|
|
|
$
|
41,416
|
|
|
$
|
(14,307
|
)
|
|
$
|
27,109
|
|
|
|
(1)
|
Foreign investments are deemed to be permanent in nature and therefore TCF does not provide for taxes on foreign currency translation adjustments.
|
Reclassifications of net (gains) losses to net income for securities available for sale and interest-only strips were recorded in the Consolidated Statements of Income in interest income for those securities that were previously transferred to held to maturity and in other non-interest expense for interest-only strips. During 2014, TCF transferred
$191.7 million
of available for sale mortgage-backed securities to held to maturity. At
June 30, 2017
and
December 31, 2016
, the unrealized holding loss on the transferred securities retained in accumulated other comprehensive income (loss) totaled
$12.6 million
and
$13.0 million
, respectively. These amounts are amortized over the remaining lives of the transferred securities. See
Note 10
,
Employee Benefit Plans
, for additional information regarding TCF's recognized postretirement prior service cost. The tax effect of these reclassifications was recorded in income tax expense in the Consolidated Statements of Income.
The components of accumulated other comprehensive income (loss) were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Securities Available for Sale and Interest-only Strips
|
|
Net
Investment
Hedges
|
|
Foreign
Currency
Translation
Adjustment
|
|
Recognized
Postretirement Prior
Service Cost
|
|
Total
|
At or For the Three Months Ended June 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period
|
$
|
(25,832
|
)
|
|
$
|
6,180
|
|
|
$
|
(11,183
|
)
|
|
$
|
140
|
|
|
$
|
(30,695
|
)
|
Other comprehensive income (loss)
|
12,041
|
|
|
(1,149
|
)
|
|
2,007
|
|
|
—
|
|
|
12,899
|
|
Amounts reclassified from accumulated other comprehensive income (loss)
|
300
|
|
|
—
|
|
|
—
|
|
|
(7
|
)
|
|
293
|
|
Net other comprehensive income (loss)
|
12,341
|
|
|
(1,149
|
)
|
|
2,007
|
|
|
(7
|
)
|
|
13,192
|
|
Balance, end of period
|
$
|
(13,491
|
)
|
|
$
|
5,031
|
|
|
$
|
(9,176
|
)
|
|
$
|
133
|
|
|
$
|
(17,503
|
)
|
At or For the Three Months Ended June 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period
|
$
|
2,330
|
|
|
$
|
5,229
|
|
|
$
|
(9,655
|
)
|
|
$
|
169
|
|
|
$
|
(1,927
|
)
|
Other comprehensive income (loss)
|
13,104
|
|
|
(210
|
)
|
|
339
|
|
|
—
|
|
|
13,233
|
|
Amounts reclassified from accumulated other comprehensive income (loss)
|
464
|
|
|
—
|
|
|
—
|
|
|
(7
|
)
|
|
457
|
|
Net other comprehensive income (loss)
|
13,568
|
|
|
(210
|
)
|
|
339
|
|
|
(7
|
)
|
|
13,690
|
|
Balance, end of period
|
$
|
15,898
|
|
|
$
|
5,019
|
|
|
$
|
(9,316
|
)
|
|
$
|
162
|
|
|
$
|
11,763
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Securities Available for Sale and Interest-only Strips
|
|
Net
Investment
Hedges
|
|
Foreign
Currency
Translation
Adjustment
|
|
Recognized
Postretirement Prior
Service Cost
|
|
Total
|
At or For the Six Months Ended June 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period
|
$
|
(28,601
|
)
|
|
$
|
6,493
|
|
|
$
|
(11,764
|
)
|
|
$
|
147
|
|
|
$
|
(33,725
|
)
|
Other comprehensive income (loss)
|
14,621
|
|
|
(1,462
|
)
|
|
2,588
|
|
|
—
|
|
|
15,747
|
|
Amounts reclassified from accumulated other comprehensive income (loss)
|
489
|
|
|
—
|
|
|
—
|
|
|
(14
|
)
|
|
475
|
|
Net other comprehensive income (loss)
|
15,110
|
|
|
(1,462
|
)
|
|
2,588
|
|
|
(14
|
)
|
|
16,222
|
|
Balance, end of period
|
$
|
(13,491
|
)
|
|
$
|
5,031
|
|
|
$
|
(9,176
|
)
|
|
$
|
133
|
|
|
$
|
(17,503
|
)
|
At or For the Six Months Ended June 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period
|
$
|
(9,707
|
)
|
|
$
|
7,249
|
|
|
$
|
(13,064
|
)
|
|
$
|
176
|
|
|
$
|
(15,346
|
)
|
Other comprehensive income (loss)
|
24,971
|
|
|
(2,230
|
)
|
|
3,748
|
|
|
—
|
|
|
26,489
|
|
Amounts reclassified from accumulated other comprehensive income (loss)
|
634
|
|
|
—
|
|
|
—
|
|
|
(14
|
)
|
|
620
|
|
Net other comprehensive income (loss)
|
25,605
|
|
|
(2,230
|
)
|
|
3,748
|
|
|
(14
|
)
|
|
27,109
|
|
Balance, end of period
|
$
|
15,898
|
|
|
$
|
5,019
|
|
|
$
|
(9,316
|
)
|
|
$
|
162
|
|
|
$
|
11,763
|
|
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Overview
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. Its principal subsidiary, TCF National Bank ("TCF Bank"), is headquartered in Sioux Falls, South Dakota.
At June 30, 2017
, TCF had
321
bank branches in Illinois, Minnesota, Michigan, Colorado, Wisconsin, Arizona and South Dakota (TCF's primary banking markets).
TCF's common stock trades on the New York Stock Exchange under the symbol "TCF".
TCF provides convenient financial services through multiple channels in its primary banking markets. TCF has developed products and services designed to meet the specific needs of the largest consumer segments in the market. The Company focuses on attracting and retaining customers through service and convenience, including select locations open seven days a week with extended hours and on most holidays, full-service supermarket branches, access to automated teller machine ("ATM") networks and digital banking channels. TCF's philosophy is to generate interest income, fees and other revenue growth through business lines that emphasize higher yielding assets and low interest cost deposits. TCF's growth strategies include organic growth in existing businesses, development of new products and services, new customer acquisition and acquisitions of portfolios or businesses. New products and services are designed to build on existing businesses and expand into complementary products and services through strategic initiatives. Funded generally through retail deposit generation, TCF continues to focus on profitable asset growth.
Net interest income, the difference between interest income earned on loans and leases, securities, investments and other interest-earning assets (interest income) and interest paid on deposits and borrowings (interest expense), represented
66.5%
and
67.3%
of TCF's total revenue for the
second quarter and first six months
of
2017
, respectively, compared with
64.4%
and
64.8%
for the same periods in
2016
. Net interest income can change significantly from period to period based on interest rates, customer prepayment patterns, the volume and mix of interest-earning assets and the volume and mix of interest-bearing and non-interest bearing deposits and interest-bearing borrowings. TCF manages the risk of changes in interest rates on its net interest income through a management Asset & Liability Committee and through related interest rate risk monitoring and management policies. See "Part I, Item 3. Quantitative and Qualitative Disclosures about Market Risk" for further discussion.
Non-interest income is a significant source of revenue for TCF and an important component of TCF's results of operations. Providing a wide range of retail banking services is an integral component of TCF's business philosophy. Primary drivers of bank fees and service charges include the number of customers we attract, the customers' level of engagement and the frequency with which the customer uses our solutions. As an effort to diversify TCF's non-interest income sources and manage credit concentration risk, TCF sells loans, primarily in consumer real estate, which result in gains on sales as well as increased servicing fee income through the growth of the portfolio of loans sold with servicing retained by TCF. Primary drivers of gains on sales include TCF's ability to originate loans held for sale, identify loan buyers and execute loan sales. TCF implemented changes to its auto finance business strategy in 2017 transitioning from a reliance on gains on sales of loans to an originate-to-hold model. Over time, this shift may decrease liquidity, capital and operational risk and increase credit risk and will impact net interest income, provision for credit losses, gains on sales of auto loans and servicing fee income, as auto finance loans with a higher risk-adjusted yield are retained on the balance sheet. In addition, growth in the leasing and equipment finance lending business results in increased non-interest income from sales-type and operating leases.
The following portions of this Management's Discussion and Analysis of Financial Condition and Results of Operations ("Management's Discussion and Analysis") focus in more detail on the results of operations for the
second quarter and first six months
of
2017
and
2016
, and on information about TCF's balance sheet, loan and lease portfolio, liquidity, funding resources, capital and other matters.
Results of Operations
Performance Summary
TCF reported diluted earnings per common share of
33 cent
s and
58 cent
s for the
second quarter and first six months
of
2017
, respectively, compared with
31 cent
s and
57 cent
s for the same periods in
2016
. TCF reported net income of
$60.4 million
and
$106.7 million
for the
second quarter and first six months
of
2017
, respectively, compared with
$57.7 million
and
$105.7 million
for the same periods in
2016
. Net income
increase
d
$2.7 million
, or
4.7%
, and
$1.0 million
, or
0.9%
, from the
second quarter and first six months
of
2016
, respectively.
Return on average assets on a fully tax-equivalent basis was
1.17%
and
1.03%
for the
second quarter and first six months
of
2017
, respectively, compared with
1.14%
and
1.05%
for the same periods in
2016
. Total average assets were
$21.7 billion
for both the
second quarter and first six months
of
2017
, increases of
$0.5 billion
, or
2.6%
, and
$0.6 billion
, or
3.1%
, from the
second quarter and first six months
of
2016
, respectively. Return on average common equity was
9.96%
and
8.82%
for the
second quarter and first six months
of
2017
, respectively, compared with
10.09%
and
9.28%
for the same periods in
2016
. Total average common equity was
$2.2 billion
for both the
second quarter and first six months
of
2017
, increases of
$0.1 billion
, or
6.5%
, and
$0.1 billion
, or
6.3%
, from the
second quarter and first six months
of
2016
, respectively.
Consolidated Income Statement Analysis
Net Interest Income
Net interest income represented
66.5%
and
67.3%
of TCF's total revenue for the
second quarter and first six months
of
2017
, respectively, compared with
64.4%
and
64.8%
for the same periods in
2016
. Net interest income was
$227.2 million
and
$449.3 million
for the
second quarter and first six months
of
2017
, respectively, compared with
$213.0 million
and
$424.6 million
for the same periods in
2016
. Net interest income
increase
d
$14.2 million
, or
6.7%
, and
$24.6 million
, or
5.8%
, from the
second quarter and first six months
of
2016
, respectively. The average yield on interest-earning assets on a fully tax-equivalent basis was
4.94%
and
4.90%
for the
second quarter and first six months
of
2017
, respectively, compared with
4.77%
and
4.78%
for the same periods in
2016
. Average interest-earning assets
increase
d
$512.4 million
, or
2.6%
, and
$651.9 million
, or
3.3%
, from the
second quarter and first six months
of
2016
, respectively.
The
increase
in net interest income from the
second
quarter of
2016
was primarily due to an increase in interest income on loans and leases, partially offset by a decrease in interest income on loans held for sale and other. Total interest income increased
$14.5 million
, or
6.2%
, from the
second
quarter of
2016
primarily due to increased average yields on the variable-rate inventory finance loans, variable- and adjustable-rate consumer real estate and commercial loans and fixed-rate auto finance loans. In addition, the increase was due to higher average balances in the commercial, leasing and equipment finance and inventory finance portfolios, partially offset by a lower average balance in the consumer real estate portfolio.
The increase in net interest income from the
first six months
of
2016
was primarily due to an increase in interest income on loans and leases and securities available for sale, partially offset by a decrease in interest income on loans held for sale and other. Total interest income increased
$24.5 million
, or
5.2%
, from the
first six months
of
2016
primarily due to higher average balances in the inventory finance and leasing and equipment finance portfolios, securities available for sale and the commercial portfolio, partially offset by a lower average balance in the consumer real estate portfolio. In addition, the increase was due to increased average yields on the variable- and adjustable rate consumer real estate loans, variable-rate inventory finance loans, variable- and adjustable-rate commercial loans and fixed-rate auto finance loans.
Net interest income on a fully tax-equivalent basis divided by average interest-earning assets is referred to as the net interest margin, expressed as a percentage. Net interest income and net interest margin are affected by (i) changes in prevailing short- and long-term interest rates, (ii) loan and deposit pricing strategies and competitive conditions, (iii) the volume and mix of interest-earning assets, non-interest bearing deposits and interest-bearing liabilities, (iv) the level of non-accrual loans and leases and other real estate owned and (v) the impact of modified loans and leases.
Net interest margin was
4.52%
and
4.49%
for the
second quarter and first six months
of
2017
, respectively, compared with
4.35%
and
4.36%
for the same periods in
2016
. Net interest margin
increase
d
17 basis points
and
13 basis points
from the
second quarter and first six months
of
2016
, respectively. The
increase
in net interest margin from the
second
quarter of
2016
was primarily due to higher average yields on the variable- and adjustable-rate loans due to interest rate increases. The
increase
from the first
six
months of
2016
was primarily due to higher average balances in the inventory finance and leasing and equipment finance portfolios, securities available for sale and the commercial portfolio and higher average yields on the variable- and adjustable-rate loans due to interest rate increases.
TCF's average balances, interest, and yields and rates on major categories of TCF's interest-earning assets and interest-bearing liabilities on a fully tax-equivalent basis were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
2017
|
|
2016
|
(Dollars in thousands)
|
Average
Balance
|
|
Interest
(1)
|
|
Yields and
Rates
(1)(2)
|
|
Average
Balance
|
|
Interest
(1)
|
|
Yields and
Rates
(1)(2)
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
Investments and other
|
$
|
259,548
|
|
|
$
|
2,716
|
|
|
4.20
|
%
|
|
$
|
322,477
|
|
|
$
|
2,396
|
|
|
2.99
|
%
|
Securities held to maturity
|
172,322
|
|
|
1,035
|
|
|
2.40
|
|
|
194,693
|
|
|
1,116
|
|
|
2.29
|
|
Securities available for sale:
(3)
|
|
|
|
|
|
|
|
|
|
|
|
Taxable
|
821,744
|
|
|
4,434
|
|
|
2.16
|
|
|
697,902
|
|
|
3,853
|
|
|
2.21
|
|
Tax-exempt
(4)
|
689,667
|
|
|
5,566
|
|
|
3.23
|
|
|
481,246
|
|
|
3,912
|
|
|
3.25
|
|
Loans and leases held for sale
|
165,859
|
|
|
2,622
|
|
|
6.34
|
|
|
497,797
|
|
|
9,968
|
|
|
8.05
|
|
Loans and leases:
(5)
|
|
|
|
|
|
|
|
|
|
|
|
Consumer real estate:
|
|
|
|
|
|
|
|
|
|
|
|
Fixed-rate
|
1,963,822
|
|
|
27,679
|
|
|
5.65
|
|
|
2,327,409
|
|
|
33,143
|
|
|
5.73
|
|
Variable- and adjustable-rate
|
2,782,296
|
|
|
39,982
|
|
|
5.76
|
|
|
2,931,318
|
|
|
38,773
|
|
|
5.32
|
|
Total consumer real estate
|
4,746,118
|
|
|
67,661
|
|
|
5.72
|
|
|
5,258,727
|
|
|
71,916
|
|
|
5.50
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
Fixed-rate
|
966,884
|
|
|
11,126
|
|
|
4.62
|
|
|
982,914
|
|
|
12,129
|
|
|
4.96
|
|
Variable- and adjustable-rate
|
2,450,168
|
|
|
27,198
|
|
|
4.45
|
|
|
2,127,032
|
|
|
21,143
|
|
|
4.00
|
|
Total commercial
|
3,417,052
|
|
|
38,324
|
|
|
4.50
|
|
|
3,109,946
|
|
|
33,272
|
|
|
4.30
|
|
Leasing and equipment finance
|
4,277,376
|
|
|
47,936
|
|
|
4.48
|
|
|
4,032,112
|
|
|
44,824
|
|
|
4.45
|
|
Inventory finance
|
2,723,340
|
|
|
42,260
|
|
|
6.22
|
|
|
2,564,648
|
|
|
36,598
|
|
|
5.74
|
|
Auto finance
|
3,149,974
|
|
|
39,309
|
|
|
5.01
|
|
|
2,751,679
|
|
|
28,660
|
|
|
4.19
|
|
Other
|
10,235
|
|
|
137
|
|
|
5.37
|
|
|
9,585
|
|
|
135
|
|
|
5.77
|
|
Total loans and leases
|
18,324,095
|
|
|
235,627
|
|
|
5.15
|
|
|
17,726,697
|
|
|
215,405
|
|
|
4.88
|
|
Total interest-earning assets
|
20,433,235
|
|
|
252,000
|
|
|
4.94
|
|
|
19,920,812
|
|
|
236,650
|
|
|
4.77
|
|
Other assets
(6)
|
1,315,495
|
|
|
|
|
|
|
1,286,506
|
|
|
|
|
|
Total assets
|
$
|
21,748,730
|
|
|
|
|
|
|
$
|
21,207,318
|
|
|
|
|
|
Liabilities and Equity:
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest bearing deposits:
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
$
|
1,967,542
|
|
|
|
|
|
|
$
|
1,817,734
|
|
|
|
|
|
Small business
|
897,391
|
|
|
|
|
|
|
861,394
|
|
|
|
|
|
Commercial and custodial
|
608,706
|
|
|
|
|
|
|
582,041
|
|
|
|
|
|
Total non-interest bearing deposits
|
3,473,639
|
|
|
|
|
|
|
3,261,169
|
|
|
|
|
|
Interest-bearing deposits:
|
|
|
|
|
|
|
|
|
|
|
|
Checking
|
2,554,563
|
|
|
83
|
|
|
0.01
|
|
|
2,478,673
|
|
|
92
|
|
|
0.02
|
|
Savings
|
4,806,371
|
|
|
538
|
|
|
0.04
|
|
|
4,677,681
|
|
|
336
|
|
|
0.03
|
|
Money market
|
2,221,807
|
|
|
2,481
|
|
|
0.45
|
|
|
2,557,897
|
|
|
4,033
|
|
|
0.63
|
|
Certificates of deposit
|
4,266,488
|
|
|
11,334
|
|
|
1.07
|
|
|
4,308,367
|
|
|
11,432
|
|
|
1.07
|
|
Total interest-bearing deposits
|
13,849,229
|
|
|
14,436
|
|
|
0.42
|
|
|
14,022,618
|
|
|
15,893
|
|
|
0.46
|
|
Total deposits
|
17,322,868
|
|
|
14,436
|
|
|
0.33
|
|
|
17,283,787
|
|
|
15,893
|
|
|
0.37
|
|
Borrowings:
|
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings
|
6,230
|
|
|
13
|
|
|
0.79
|
|
|
9,100
|
|
|
16
|
|
|
0.71
|
|
Long-term borrowings
|
1,225,022
|
|
|
6,907
|
|
|
2.26
|
|
|
840,739
|
|
|
5,111
|
|
|
2.43
|
|
Total borrowings
|
1,231,252
|
|
|
6,920
|
|
|
2.25
|
|
|
849,839
|
|
|
5,127
|
|
|
2.42
|
|
Total interest-bearing liabilities
|
15,080,481
|
|
|
21,356
|
|
|
0.57
|
|
|
14,872,457
|
|
|
21,020
|
|
|
0.57
|
|
Total deposits and borrowings
|
18,554,120
|
|
|
21,356
|
|
|
0.46
|
|
|
18,133,626
|
|
|
21,020
|
|
|
0.47
|
|
Other liabilities
|
673,740
|
|
|
|
|
|
|
690,363
|
|
|
|
|
|
Total liabilities
|
19,227,860
|
|
|
|
|
|
|
18,823,989
|
|
|
|
|
|
Total TCF Financial Corp. stockholders' equity
|
2,494,682
|
|
|
|
|
|
|
2,357,509
|
|
|
|
|
|
Non-controlling interest in subsidiaries
|
26,188
|
|
|
|
|
|
|
25,820
|
|
|
|
|
|
Total equity
|
2,520,870
|
|
|
|
|
|
|
2,383,329
|
|
|
|
|
|
Total liabilities and equity
|
$
|
21,748,730
|
|
|
|
|
|
|
$
|
21,207,318
|
|
|
|
|
|
Net interest income and margin
|
|
|
$
|
230,644
|
|
|
4.52
|
|
|
|
|
$
|
215,630
|
|
|
4.35
|
|
|
|
(1)
|
Interest and yields are presented on a fully tax-equivalent basis.
|
|
|
(3)
|
Average balances and yields of securities available for sale are based upon historical amortized cost and exclude equity securities.
|
|
|
(4)
|
The yield on tax-exempt securities available for sale is computed on a tax-equivalent basis using a statutory federal income tax rate of 35% for all periods presented.
|
|
|
(5)
|
Average balances of loans and leases include non-accrual loans and leases and are presented net of unearned income.
|
|
|
(6)
|
Includes leased equipment and related initial direct costs under operating leases of
$200.7 million
and
$131.9 million
for the
second
quarters of
2017
and
2016
, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
2017
|
|
2016
|
(Dollars in thousands)
|
Average
Balance
|
|
Interest
(1)
|
|
Yields and Rates
(1)(2)
|
|
Average
Balance
|
|
Interest
(1)
|
|
Yields and Rates
(1)(2)
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
Investments and other
|
$
|
272,959
|
|
|
$
|
5,463
|
|
|
4.03
|
%
|
|
$
|
335,778
|
|
|
$
|
4,612
|
|
|
2.76
|
%
|
Securities held to maturity
|
175,115
|
|
|
2,315
|
|
|
2.64
|
|
|
196,998
|
|
|
2,435
|
|
|
2.47
|
|
Securities available for sale:
(3)
|
|
|
|
|
|
|
|
|
|
|
|
Taxable
|
818,821
|
|
|
9,088
|
|
|
2.22
|
|
|
669,349
|
|
|
7,671
|
|
|
2.29
|
|
Tax-exempt
(4)
|
665,382
|
|
|
10,683
|
|
|
3.21
|
|
|
400,337
|
|
|
6,496
|
|
|
3.25
|
|
Loans and leases held for sale
|
314,256
|
|
|
13,374
|
|
|
8.58
|
|
|
432,741
|
|
|
18,472
|
|
|
8.58
|
|
Loans and leases:
(5)
|
|
|
|
|
|
|
|
|
|
|
|
Consumer real estate:
|
|
|
|
|
|
|
|
|
|
|
|
Fixed-rate
|
2,023,317
|
|
|
56,966
|
|
|
5.67
|
|
|
2,379,091
|
|
|
68,345
|
|
|
5.78
|
|
Variable- and adjustable-rate
|
2,863,461
|
|
|
80,221
|
|
|
5.65
|
|
|
2,979,660
|
|
|
78,829
|
|
|
5.32
|
|
Total consumer real estate
|
4,886,778
|
|
|
137,187
|
|
|
5.66
|
|
|
5,358,751
|
|
|
147,174
|
|
|
5.52
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
Fixed-rate
|
983,508
|
|
|
22,839
|
|
|
4.68
|
|
|
997,892
|
|
|
24,558
|
|
|
4.95
|
|
Variable- and adjustable-rate
|
2,376,779
|
|
|
51,589
|
|
|
4.38
|
|
|
2,136,131
|
|
|
42,480
|
|
|
4.00
|
|
Total commercial
|
3,360,287
|
|
|
74,428
|
|
|
4.47
|
|
|
3,134,023
|
|
|
67,038
|
|
|
4.30
|
|
Leasing and equipment finance
|
4,281,636
|
|
|
95,912
|
|
|
4.48
|
|
|
4,012,395
|
|
|
89,478
|
|
|
4.46
|
|
Inventory finance
|
2,710,137
|
|
|
81,711
|
|
|
6.08
|
|
|
2,499,091
|
|
|
70,968
|
|
|
5.71
|
|
Auto finance
|
2,933,620
|
|
|
67,080
|
|
|
4.61
|
|
|
2,727,779
|
|
|
56,497
|
|
|
4.17
|
|
Other
|
9,989
|
|
|
268
|
|
|
5.40
|
|
|
9,802
|
|
|
277
|
|
|
5.70
|
|
Total loans and leases
|
18,182,447
|
|
|
456,586
|
|
|
5.05
|
|
|
17,741,841
|
|
|
431,432
|
|
|
4.88
|
|
Total interest-earning assets
|
20,428,980
|
|
|
497,509
|
|
|
4.90
|
|
|
19,777,044
|
|
|
471,118
|
|
|
4.78
|
|
Other assets
(6)
|
1,289,730
|
|
|
|
|
|
|
1,291,993
|
|
|
|
|
|
Total assets
|
$
|
21,718,710
|
|
|
|
|
|
|
$
|
21,069,037
|
|
|
|
|
|
Liabilities and Equity:
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest bearing deposits:
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
$
|
1,924,161
|
|
|
|
|
|
|
$
|
1,784,722
|
|
|
|
|
|
Small business
|
896,125
|
|
|
|
|
|
|
857,519
|
|
|
|
|
|
Commercial and custodial
|
617,345
|
|
|
|
|
|
|
571,513
|
|
|
|
|
|
Total non-interest bearing deposits
|
3,437,631
|
|
|
|
|
|
|
3,213,754
|
|
|
|
|
|
Interest-bearing deposits:
|
|
|
|
|
|
|
|
|
|
|
|
Checking
|
2,542,489
|
|
|
166
|
|
|
0.01
|
|
|
2,459,618
|
|
|
173
|
|
|
0.01
|
|
Savings
|
4,781,566
|
|
|
1,039
|
|
|
0.04
|
|
|
4,688,923
|
|
|
682
|
|
|
0.03
|
|
Money market
|
2,303,129
|
|
|
5,419
|
|
|
0.47
|
|
|
2,515,324
|
|
|
7,840
|
|
|
0.63
|
|
Certificates of deposit
|
4,150,460
|
|
|
21,527
|
|
|
1.05
|
|
|
4,206,659
|
|
|
22,189
|
|
|
1.06
|
|
Total interest-bearing deposits
|
13,777,644
|
|
|
28,151
|
|
|
0.41
|
|
|
13,870,524
|
|
|
30,884
|
|
|
0.45
|
|
Total deposits
|
17,215,275
|
|
|
28,151
|
|
|
0.33
|
|
|
17,084,278
|
|
|
30,884
|
|
|
0.36
|
|
Borrowings:
|
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings
|
5,434
|
|
|
20
|
|
|
0.73
|
|
|
7,331
|
|
|
23
|
|
|
0.64
|
|
Long-term borrowings
|
1,341,391
|
|
|
13,378
|
|
|
2.00
|
|
|
951,626
|
|
|
10,797
|
|
|
2.27
|
|
Total borrowings
|
1,346,825
|
|
|
13,398
|
|
|
2.00
|
|
|
958,957
|
|
|
10,820
|
|
|
2.26
|
|
Total interest-bearing liabilities
|
15,124,469
|
|
|
41,549
|
|
|
0.55
|
|
|
14,829,481
|
|
|
41,704
|
|
|
0.56
|
|
Total deposits and borrowings
|
18,562,100
|
|
|
41,549
|
|
|
0.45
|
|
|
18,043,235
|
|
|
41,704
|
|
|
0.46
|
|
Other liabilities
|
669,544
|
|
|
|
|
|
|
670,635
|
|
|
|
|
|
Total liabilities
|
19,231,644
|
|
|
|
|
|
|
18,713,870
|
|
|
|
|
|
Total TCF Financial Corp. stockholders' equity
|
2,463,393
|
|
|
|
|
|
|
2,332,645
|
|
|
|
|
|
Non-controlling interest in subsidiaries
|
23,673
|
|
|
|
|
|
|
22,522
|
|
|
|
|
|
Total equity
|
2,487,066
|
|
|
|
|
|
|
2,355,167
|
|
|
|
|
|
Total liabilities and equity
|
$
|
21,718,710
|
|
|
|
|
|
|
$
|
21,069,037
|
|
|
|
|
|
Net interest income and margin
|
|
|
$
|
455,960
|
|
|
4.49
|
|
|
|
|
$
|
429,414
|
|
|
4.36
|
|
|
|
(1)
|
Interest and yields are presented on a fully tax-equivalent basis.
|
|
|
(3)
|
Average balances and yields of securities available for sale are based upon historical amortized cost and exclude equity securities.
|
|
|
(4)
|
The yield on tax-exempt securities available for sale is computed on a tax-equivalent basis using a statutory federal income tax rate of 35% for all periods presented.
|
|
|
(5)
|
Average balances of loans and leases include non-accrual loans and leases and are presented net of unearned income.
|
|
|
(6)
|
Includes leased equipment and related initial direct costs under operating leases of
$190.5 million
and
$132.7 million
for the
six
months ended
June 30, 2017
and
2016
, respectively.
|
Provision for Credit Losses
The provision for credit losses is calculated as part of the determination of the allowance for loan and lease losses, which is a critical accounting estimate. TCF's evaluation of incurred losses is based upon historical loss rates multiplied by the respective portfolio's loss emergence period. Factors utilized in the determination and allocation of the allowance for loan and lease losses and the related provision for credit losses include historical trends in loss rates, a portfolio's overall risk characteristics, changes in its character or size, risk rating migration, delinquencies, collateral values, economic outlook and prevailing economic conditions.
The composition of TCF's provision for credit losses for the
second quarter and first six months
of
2017
and
2016
was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Change
|
(Dollars in thousands)
|
2017
|
|
2016
|
|
$
|
|
%
|
Consumer real estate
|
$
|
253
|
|
|
1.3
|
%
|
|
$
|
2,536
|
|
|
19.1
|
%
|
|
$
|
(2,283
|
)
|
|
(90.0
|
)%
|
Commercial
|
3,477
|
|
|
17.9
|
|
|
219
|
|
|
1.7
|
|
|
3,258
|
|
|
N.M.
|
|
Leasing and equipment finance
|
2,167
|
|
|
11.1
|
|
|
1,828
|
|
|
13.8
|
|
|
339
|
|
|
18.5
|
|
Inventory finance
|
(3,108
|
)
|
|
(16.0
|
)
|
|
(673
|
)
|
|
(5.1
|
)
|
|
(2,435
|
)
|
|
N.M.
|
|
Auto finance
|
15,847
|
|
|
81.5
|
|
|
8,575
|
|
|
64.7
|
|
|
7,272
|
|
|
84.8
|
|
Other
|
810
|
|
|
4.2
|
|
|
765
|
|
|
5.8
|
|
|
45
|
|
|
5.9
|
|
Total
|
$
|
19,446
|
|
|
100.0
|
%
|
|
$
|
13,250
|
|
|
100.0
|
%
|
|
$
|
6,196
|
|
|
46.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
Change
|
(Dollars in thousands)
|
2017
|
|
2016
|
|
$
|
|
%
|
Consumer real estate
|
$
|
(7,884
|
)
|
|
(24.9
|
)%
|
|
$
|
7,561
|
|
|
23.5
|
%
|
|
$
|
(15,445
|
)
|
|
N.M.
|
|
Commercial
|
7,146
|
|
|
22.6
|
|
|
1,390
|
|
|
4.3
|
|
|
5,756
|
|
|
N.M.
|
|
Leasing and equipment finance
|
3,553
|
|
|
11.2
|
|
|
3,555
|
|
|
11.1
|
|
|
(2
|
)
|
|
(0.1
|
)%
|
Inventory finance
|
(1,143
|
)
|
|
(3.6
|
)
|
|
1,590
|
|
|
5.0
|
|
|
(2,733
|
)
|
|
N.M.
|
|
Auto finance
|
28,704
|
|
|
90.7
|
|
|
17,640
|
|
|
55.0
|
|
|
11,064
|
|
|
62.7
|
|
Other
|
1,263
|
|
|
4.0
|
|
|
356
|
|
|
1.1
|
|
|
907
|
|
|
N.M.
|
|
Total
|
$
|
31,639
|
|
|
100.0
|
%
|
|
$
|
32,092
|
|
|
100.0
|
%
|
|
$
|
(453
|
)
|
|
(1.4
|
)
|
N.M. Not Meaningful.
TCF's provision for credit losses was
$19.4 million
and
$31.6 million
for the
second quarter and first six months
of
2017
, respectively, compared with
$13.3 million
and
$32.1 million
for the same periods in
2016
. The provision for credit losses
increase
d
$6.2 million
, or
46.8%
, from the
second
quarter of
2016
and
decrease
d
$0.5 million
, or
1.4%
, from the first
six
months of
2016
. The
increase
in the provision for credit losses from the
second
quarter of
2016
was primarily due to increases in the provision for credit losses attributable to the auto finance and commercial portfolios, partially offset by decreases in the provision for credit losses attributable to the inventory finance and consumer real estate portfolios. The
decrease
in the provision for credit losses from the first
six
months of
2016
was primarily due to decreases in the provision for credit losses attributable to the consumer real estate and inventory finance portfolios, partially offset by increases in the provision for credit losses attributable to the auto finance and commercial portfolios. The increases in the provision for credit losses attributable to the auto finance portfolio for both periods were primarily due to growth in the portfolio, increased net charge-offs and increased reserve requirements due to the reclassification of loans from held for sale to held for investment. The increases in the provision for credit losses attributable to the commercial portfolio for both periods were primarily due to increased net charge-offs and growth in the portfolio. The
decrease
in the provision for credit losses attributable to the consumer real estate portfolio from the
second
quarter of
2016
was primarily due to a decrease in the consumer real estate portfolio and decreased net charge-offs in the consumer real estate first mortgage lien portfolio. The decrease in the provision for credit losses attributable to the consumer real estate portfolio from the first
six
months of
2016
was primarily due to the recovery of $8.7 million on previous charge-offs related to the consumer real estate non-accrual loans that were sold during the
first
quarter of
2017
and a decrease in the consumer real estate portfolio. The decreases in the provision for credit losses attributable to the inventory finance portfolio for both periods was primarily due to improving credit quality.
Net loan and lease charge-offs for the
second quarter and first six months
of
2017
were
$12.9 million
, or
0.28%
(annualized), and
$18.0 million
, or
0.20%
(annualized), of average loans and leases, respectively, compared with
$10.1 million
, or
0.23%
(annualized), and
$22.0 million
, or
0.25%
(annualized), for the same periods in
2016
. Net loan and lease charge-offs
increase
d
$2.8 million
from the
second
quarter of
2016
and
decrease
d
$4.0 million
from the first
six
months of
2016
. The
increase
in net loan and lease charge-offs from the
second
quarter of
2016
was primarily due to increased net charge-offs in the commercial and auto finance portfolios, partially offset by decreased net charge-offs in the consumer real estate first mortgage lien portfolio. The
decrease
from the first
six
months of
2016
was primarily due to the recovery of $8.7 million on previous charge-offs related to the consumer real estate non-accrual loans that were sold during the
first
quarter of
2017
, partially offset by increased net charge-offs in the commercial and auto finance portfolios.
For additional information, see "Consolidated Financial Condition Analysis — Credit Quality" in this Management's Discussion and Analysis and
Note 5
,
Allowance for Loan and Lease Losses and Credit Quality Information
of Notes to Consolidated Financial Statements.
Non-interest Income
Non-interest income is a significant source of revenue for TCF, representing
33.5%
and
32.7%
of total revenue for the
second quarter and first six months
of
2017
, respectively, compared with
35.6%
and
35.2%
for the same periods in
2016
, and is an important factor in TCF's results of operations. Non-interest income was
$114.7 million
and
$218.2 million
for the
second quarter and first six months
of
2017
, respectively, compared with
$118.0 million
and
$230.6 million
for the same periods in
2016
. Non-interest income
decrease
d
$3.3 million
, or
2.8%
, and
$12.4 million
, or
5.4%
, from the
second quarter and first six months
of
2016
, respectively, primarily due to decreases in gains on sales of auto loans, net, fees and service charges and gains on sales of consumer real estate loans, net, partially offset by increases in leasing and equipment finance non-interest income and servicing fee income.
The components of non-interest income were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Change
|
(Dollars in thousands)
|
2017
|
|
2016
|
|
$
|
|
%
|
Fees and service charges
|
$
|
32,733
|
|
|
$
|
34,622
|
|
|
$
|
(1,889
|
)
|
|
(5.5
|
)%
|
Card revenue
|
14,154
|
|
|
14,083
|
|
|
71
|
|
|
0.5
|
|
ATM revenue
|
5,061
|
|
|
5,288
|
|
|
(227
|
)
|
|
(4.3
|
)
|
Subtotal
|
51,948
|
|
|
53,993
|
|
|
(2,045
|
)
|
|
(3.8
|
)
|
Gains on sales of auto loans, net
|
380
|
|
|
10,143
|
|
|
(9,763
|
)
|
|
(96.3
|
)
|
Gains on sales of consumer real estate loans, net
|
8,980
|
|
|
10,839
|
|
|
(1,859
|
)
|
|
(17.2
|
)
|
Servicing fee income
|
10,730
|
|
|
9,502
|
|
|
1,228
|
|
|
12.9
|
|
Subtotal
|
20,090
|
|
|
30,484
|
|
|
(10,394
|
)
|
|
(34.1
|
)
|
Leasing and equipment finance
|
39,830
|
|
|
31,074
|
|
|
8,756
|
|
|
28.2
|
|
Other
|
2,795
|
|
|
2,405
|
|
|
390
|
|
|
16.2
|
|
Fees and other revenue
|
114,663
|
|
|
117,956
|
|
|
(3,293
|
)
|
|
(2.8
|
)
|
Gains (losses) on securities, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total non-interest income
|
$
|
114,663
|
|
|
$
|
117,956
|
|
|
$
|
(3,293
|
)
|
|
(2.8
|
)
|
Total non-interest income as a percentage of total revenue
|
33.5
|
%
|
|
35.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
Change
|
(Dollars in thousands)
|
2017
|
|
2016
|
|
$
|
|
%
|
Fees and service charges
|
$
|
64,015
|
|
|
$
|
67,439
|
|
|
$
|
(3,424
|
)
|
|
(5.1
|
)%
|
Card revenue
|
27,304
|
|
|
27,446
|
|
|
(142
|
)
|
|
(0.5
|
)
|
ATM revenue
|
9,736
|
|
|
10,309
|
|
|
(573
|
)
|
|
(5.6
|
)
|
Subtotal
|
101,055
|
|
|
105,194
|
|
|
(4,139
|
)
|
|
(3.9
|
)
|
Gains on sales of auto loans, net
|
3,244
|
|
|
22,063
|
|
|
(18,819
|
)
|
|
(85.3
|
)
|
Gains on sales of consumer real estate loans, net
|
17,871
|
|
|
20,223
|
|
|
(2,352
|
)
|
|
(11.6
|
)
|
Servicing fee income
|
22,381
|
|
|
18,385
|
|
|
3,996
|
|
|
21.7
|
|
Subtotal
|
43,496
|
|
|
60,671
|
|
|
(17,175
|
)
|
|
(28.3
|
)
|
Leasing and equipment finance
|
68,128
|
|
|
59,561
|
|
|
8,567
|
|
|
14.4
|
|
Other
|
5,498
|
|
|
5,248
|
|
|
250
|
|
|
4.8
|
|
Fees and other revenue
|
218,177
|
|
|
230,674
|
|
|
(12,497
|
)
|
|
(5.4
|
)
|
Gains (losses) on securities, net
|
—
|
|
|
(116
|
)
|
|
116
|
|
|
(100.0
|
)
|
Total non-interest income
|
$
|
218,177
|
|
|
$
|
230,558
|
|
|
$
|
(12,381
|
)
|
|
(5.4
|
)
|
Total non-interest income as a percentage of total revenue
|
32.7
|
%
|
|
35.2
|
%
|
|
|
|
|
Fees and Service Charges
Fees and service charges totaled
$32.7 million
and
$64.0 million
for the
second quarter and first six months
of
2017
, respectively, compared with
$34.6 million
and
$67.4 million
for the same periods in
2016
. Fees and service charges
decrease
d
$1.9 million
, or
5.5%
, and
$3.4 million
, or
5.1%
, from the
second quarter and first six months
of
2016
, respectively, primarily due to lower overdraft fees due to ongoing consumer behavior changes as well as higher average checking account balances per customer.
Gains on Sales of Auto Loans, Net
Net gains on sales of auto loans totaled
$0.4 million
and
$3.2 million
for the
second quarter and first six months
of
2017
, respectively, compared with
$10.1 million
and
$22.1 million
for the same periods in
2016
. Gains on sales of auto loans, net
decrease
d
$9.8 million
, or
96.3%
, and
$18.8 million
, or
85.3%
, from the
second quarter and first six months
of
2016
, respectively, primarily due to decreased volume of loans sold as a result of the strategic shift in auto finance. TCF sold
$48.0 million
and
$298.6 million
of auto loans during the
second quarter and first six months
of
2017
, respectively, compared with
$533.4 million
and
$977.7 million
for the same periods in
2016
.
Gains on Sales of Consumer Real Estate Loans, Net
Net gains on sales of consumer real estate loans totaled
$9.0 million
and
$17.9 million
for the
second quarter and first six months
of
2017
, respectively, compared with
$10.8 million
and
$20.2 million
for the same periods in
2016
. Gains on sales of consumer real estate loans, net
decrease
d
$1.9 million
, or
17.2%
, and
$2.4 million
, or
11.6%
, from the
second quarter and first six months
of
2016
, respectively, primarily due to decreased volume of loans sold. TCF sold
$273.4 million
and
$652.8 million
of consumer real estate loans during the
second quarter and first six months
of
2017
, respectively, compared with
$344.6 million
and
$666.0 million
for the same periods in
2016
.
Servicing Fee Income
Servicing fee income totaled
$10.7 million
and
$22.4 million
for the
second quarter and first six months
of
2017
, respectively, compared with
$9.5 million
and
$18.4 million
for the same periods in
2016
. Servicing fee income
increase
d
$1.2 million
, or
12.9%
, and
$4.0 million
, or
21.7%
, from the
second quarter and first six months
of
2016
, respectively, primarily due to the cumulative effect of the increases in the portfolios of consumer real estate and auto finance loans sold with servicing retained by TCF. Average loans and leases serviced for others were
$5.3 billion
and
$5.4 billion
for the
second quarter and first six months
of
2017
, respectively, compared with
$4.7 billion
and
$4.5 billion
for the same periods in
2016
.
Leasing and Equipment Finance
Leasing and equipment finance non-interest income totaled
$39.8 million
and
$68.1 million
for the
second quarter and first six months
of
2017
, respectively, compared with
$31.1 million
and
$59.6 million
for the same periods in
2016
. Leasing and equipment finance non-interest income increased
$8.8 million
, or
28.2%
, and
$8.6 million
, or
14.4%
, from the
second quarter and first six months
of
2016
, respectively. The increase from the
second
quarter of
2016
was primarily due to increases in sales-type and operating lease revenue. The increase from the
first six months
of
2016
was primarily due to increases in operating and sales-type lease revenue.
Non-interest Expense
Non-interest expense totaled
$233.1 million
and
$477.1 million
for the
second quarter and first six months
of
2017
, respectively, compared with
$227.3 million
and
$455.7 million
for the same periods in
2016
. Non-interest expense
increase
d
$5.8 million
, or
2.5%
, and
$21.4 million
, or
4.7%
, from the
second quarter and first six months
of
2016
, respectively.
The components of non-interest expense were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Change
|
(Dollars in thousands)
|
2017
|
|
2016
|
|
$
|
|
%
|
Compensation and employee benefits
|
$
|
115,918
|
|
|
$
|
118,093
|
|
|
$
|
(2,175
|
)
|
|
(1.8
|
)%
|
Occupancy and equipment
|
38,965
|
|
|
36,884
|
|
|
2,081
|
|
|
5.6
|
|
Other
|
61,075
|
|
|
59,416
|
|
|
1,659
|
|
|
2.8
|
|
Subtotal
|
215,958
|
|
|
214,393
|
|
|
1,565
|
|
|
0.7
|
|
Operating lease depreciation
|
12,466
|
|
|
9,842
|
|
|
2,624
|
|
|
26.7
|
|
Foreclosed real estate and repossessed assets, net
|
4,639
|
|
|
3,135
|
|
|
1,504
|
|
|
48.0
|
|
Other credit costs, net
|
24
|
|
|
(54
|
)
|
|
78
|
|
|
N.M.
|
|
Total non-interest expense
|
$
|
233,087
|
|
|
$
|
227,316
|
|
|
$
|
5,771
|
|
|
2.5
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
Change
|
(Dollars in thousands)
|
2017
|
|
2016
|
|
$
|
|
%
|
Compensation and employee benefits
|
$
|
240,395
|
|
|
$
|
242,566
|
|
|
$
|
(2,171
|
)
|
|
(0.9
|
)%
|
Occupancy and equipment
|
78,565
|
|
|
73,892
|
|
|
4,673
|
|
|
6.3
|
|
Other
|
125,112
|
|
|
112,764
|
|
|
12,348
|
|
|
11.0
|
|
Subtotal
|
444,072
|
|
|
429,222
|
|
|
14,850
|
|
|
3.5
|
|
Operating lease depreciation
|
23,708
|
|
|
19,415
|
|
|
4,293
|
|
|
22.1
|
|
Foreclosed real estate and repossessed assets, net
|
9,188
|
|
|
7,055
|
|
|
2,133
|
|
|
30.2
|
|
Other credit costs, net
|
125
|
|
|
(42
|
)
|
|
167
|
|
|
N.M.
|
|
Total non-interest expense
|
$
|
477,093
|
|
|
$
|
455,650
|
|
|
$
|
21,443
|
|
|
4.7
|
|
N.M. Not Meaningful.
Compensation and Employee Benefits Expense
Compensation and employee benefits expense totaled
$115.9 million
and
$240.4 million
for the
second quarter and first six months
of
2017
, respectively, compared with
$118.1 million
and
$242.6 million
for the same periods in
2016
. Compensation and employee benefits expense
decrease
d
$2.2 million
, or
1.8%
,
and
$2.2 million
, or
0.9%
, from the
second quarter and first six months
of
2016
, respectively, primarily due to reduced headcount in auto finance, partially offset by higher enterprise services contract labor utilization.
Other Non-interest Expense
Other non-interest expense totaled
$61.1 million
and
$125.1 million
for the
second quarter and first six months
of
2017
, respectively, compared with
$59.4 million
and
$112.8 million
for the same periods in
2016
. Other non-interest expense
increase
d
$1.7 million
, or
2.8%
, and
$12.3 million
, or
11.0%
, from the
second quarter and first six months
of
2016
, respectively. The
increase
in other non-interest expense from the
second
quarter of
2016
was primarily due to higher professional fees related to strategic investments in technology capabilities, as well as advertising and marketing expenses, partially offset by $2.9 million of branch realignment expense incurred in the second quarter of 2016. The
increase
from the first
six
months of
2016
was primarily due to higher professional fees related to strategic investments in technology capabilities and higher severance expense in the auto finance business, partially offset by $3.4 million of branch realignment expense incurred in the first six months of 2016. See
Note 14
,
Other Non-interest Expense
of Notes to Consolidated Financial Statements for additional information.
Foreclosed Real Estate and Repossessed Assets, Net
Foreclosed real estate and repossessed assets expense, net totaled
$4.6 million
and
$9.2 million
for the
second quarter and first six months
of
2017
, respectively, compared with
$3.1 million
and
$7.1 million
for the same periods in
2016
. Foreclosed real estate and repossessed assets expense, net
increase
d
$1.5 million
, or
48.0%
, and
$2.1 million
, or
30.2%
, from the
second quarter and first six months
of
2016
, respectively, primarily due to lower gains on sales of consumer real estate properties and higher repossessed assets expense attributable to auto finance, partially offset by lower operating costs.
Income Taxes
Income tax expense was
28.9%
and
29.4%
of income before income tax expense for the
second quarter and first six months
of
2017
, respectively, compared with
32.9%
and
33.7%
for the same periods in
2016
.
The lower effective income tax rates from both periods were primarily due to a
$3.4 million
favorable state tax settlement in the second quarter of
2017
and
$0.7 million
and $
2.7 million
of tax benefits related to stock compensation recorded in income tax expense that were previously recorded in additional paid-in capital for the
second quarter and first six months
of
2017
, respectively. See
Note 1
,
Basis of Presentation
of Notes to Consolidated Financial Statements for additional information.
Reportable Segment Results
The Company's reportable segments are Consumer Banking, Wholesale Banking and Enterprise Services. See
Note 15
,
Business Segments
of Notes to Consolidated Financial Statements for information regarding net income (loss), assets and revenues for each of TCF's reportable segments.
Consumer Banking
Consumer Banking is comprised of all of the Company's consumer-facing businesses and includes retail banking, consumer real estate and auto finance. TCF's consumer banking strategy is primarily to generate deposits to use for funding high credit quality secured loans and leases. Loans are originated for investment and for sale. Deposits are generated from consumers and small businesses to provide a source of low cost funds, with a focus on building and maintaining quality customer relationships. The Consumer Banking reportable segment generates a significant portion of the Company's net interest income and non-interest income from fees and service charges, card revenue, ATM revenue, gains on sales of loans and servicing fee income and incurs a significant portion of the Company's non-interest expense.
Consumer Banking generated net income available to common stockholders of
$23.5 million
and
$48.4 million
for the
second quarter and first six months
of
2017
, respectively, compared with
$30.4 million
and
$59.8 million
for the same periods in
2016
. Consumer Banking net income available to common stockholders
decrease
d
$6.9 million
, or
22.8%
, and
$11.4 million
, or
19.0%
, from the
second quarter and first six months
of
2016
, respectively.
Consumer Banking net interest income totaled
$143.1 million
and
$283.4 million
for the
second quarter and first six months
of
2017
, respectively, compared with
$140.7 million
and
$280.0 million
for the same periods in
2016
. Net interest income
increase
d
$2.4 million
, or
1.7%
, and
$3.4 million
, or
1.2%
, from the
second quarter and first six months
of
2016
, respectively, primarily due to increased average yields on the variable- and adjustable-rate consumer real estate loans and fixed-rate auto finance loans, partially offset by lower average consumer real estate loan balances and higher interest expense related to funds transfer pricing.
Consumer Banking provision for credit losses totaled
$16.7 million
and
$22.1 million
for the
second quarter and first six months
of
2017
, respectively, compared with
$11.9 million
and
$25.6 million
for the same periods in
2016
. The provision for credit losses
increase
d
$4.8 million
, or
40.8%
, and
decrease
d
$3.5 million
, or
13.6%
, from the
second quarter and first six months
of
2016
, respectively. The
increase
in the provision for credit losses from the
second
quarter of
2016
was primarily attributable to an increase in the provision for credit losses attributable to the auto finance portfolio, partially offset by a decrease in the provision for credit losses attributable to the consumer real estate portfolio. The decrease in the provision for credit losses from the first
six
months of
2016
was primarily due to a decrease in the provision for credit losses attributable to the consumer real estate portfolio, partially offset by an increase in the provision for credit losses attributable to the auto finance portfolio. The increases in the provision for credit losses attributable to the auto finance portfolio for both periods were primarily due to growth in the portfolio, increased net charge-offs and increased reserve requirements due to the reclassification of loans from held for sale to held for investment. The
decrease
in the provision for credit losses attributable to the consumer real estate portfolio from the
second
quarter of
2016
was primarily due to a decrease in the consumer real estate portfolio and decreased net charge-offs in the consumer real estate first mortgage lien portfolio. The decrease in the provision for credit losses attributable to the consumer real estate portfolio from the first
six
months of
2016
was primarily due to the recovery of $8.7 million on previous charge-offs related to the consumer real estate non-accrual loans that were sold during the
first
quarter of
2017
and a decrease in the consumer real estate portfolio.
Consumer Banking non-interest income totaled
$71.5 million
and
$144.2 million
for the
second quarter and first six months
of
2017
, respectively, compared with
$83.7 million
and
$164.8 million
for the same periods in
2016
. Non-interest income
decrease
d
$12.2 million
, or
14.6%
, and
$20.5 million
, or
12.5%
, from the
second quarter and first six months
of
2016
, respectively, primarily due to decreases in net gains on sales of auto loans, fees and service charges and net gains on sales of consumer real estate loans, partially offset by an increase in servicing fee income. Net gains on sales of auto loans totaled
$0.4 million
and
$3.2 million
for the
second quarter and first six months
of
2017
, respectively, compared with
$10.1 million
and
$22.1 million
for the same periods in
2016
. Net gains on sales of auto loans
decrease
d
$9.8 million
, or
96.3%
, and
$18.8 million
, or
85.3%
, from the
second quarter and first six months
of
2016
, respectively, primarily due to decreased volume of loans sold as a result of the strategic shift in auto finance. Fees and service charges attributable to the Consumer Banking segment totaled
$30.1 million
and
$59.6 million
for the
second quarter and first six months
of
2017
, respectively, compared with
$32.7 million
and
$64.0 million
for the same periods in
2016
. Fees and service charges
decrease
d
$2.6 million
, or
7.8%
, and
$4.4 million
, or
6.8%
, from the
second quarter and first six months
of
2016
, respectively, primarily due to lower overdraft fees due to ongoing consumer behavior changes as well as higher average checking account balances per customer. Net gains on sales of consumer real estate loans totaled
$9.0 million
and
$17.9 million
for the
second quarter and first six months
of
2017
, respectively, compared with
$10.8 million
and
$20.2 million
for the same periods in
2016
. Net gains on sales of consumer real estate loans
decrease
d
$1.9 million
, or
17.2%
, and
$2.3 million
, or
11.4%
, from the
second quarter and first six months
of
2016
, respectively, primarily due to decreased volume of loans sold. Servicing fee income attributable to the Consumer Banking segment totaled
$10.4 million
and
$21.7 million
for the
second quarter and first six months
of
2017
, respectively, compared with
$9.0 million
and
$17.4 million
for the same periods in
2016
. Servicing fee income
increase
d
$1.4 million
, or
15.4%
, and
$4.3 million
, or
25.0%
, from the
second quarter and first six months
of
2017
, respectively, primarily due to the cumulative effect of the increase in the portfolio of loans sold with servicing retained by TCF. Average consumer real estate and auto finance loans serviced for others were
$5.0 billion
and
$5.2 billion
for the
second quarter and first six months
of
2017
, respectively, compared with
$4.4 billion
and
$4.3 billion
for the same periods in
2016
.
Consumer Banking non-interest expense totaled
$161.1 million
and
$330.4 million
for the
second quarter and first six months
of
2017
, respectively, compared with
$165.4 million
and
$326.0 million
for the same periods in
2016
. Non-interest expense
decrease
d
$4.3 million
, or
2.6%
, and
increase
d
$4.4 million
, or
1.4%
, from the
second quarter and first six months
of
2016
, respectively. The
decrease
in non-interest expense from the
second
quarter of
2016
was primarily due to a decrease in compensation and employee benefits expense attributable to reduced headcount in auto finance and a decrease in branch realignment expense incurred in the second quarter of 2016, partially offset by higher allocation expense from Enterprise Services, higher foreclosed real estate and repossessed assets expense attributable to lower gains on sales of consumer real estate properties, higher occupancy and equipment expense and higher advertising and marketing expense
.
The
increase
from the first
six
months of
2016
was primarily due to higher severance expense in the auto finance business, higher allocation expense from Enterprise Services, higher occupancy and equipment expense, higher foreclosed real estate and repossessed assets expense and higher advertising and marketing expense, partially offset by a decrease in compensation and employee benefits due to reduced auto finance headcount and lower branch realignment expense.
Wholesale Banking
Wholesale Banking is comprised of commercial real estate and business lending, leasing and equipment finance and inventory finance. TCF's wholesale banking strategy is primarily to originate high credit quality secured loans and leases for investment.
Wholesale Banking generated net income available to common stockholders of
$37.8 million
and
$66.4 million
for the
second quarter and first six months
of
2017
, respectively, compared with
$36.1 million
and
$66.5 million
for the same periods in
2016
. Wholesale Banking net income available to common stockholders
increase
d
$1.7 million
, or
4.7%
, from the
second
quarter of
2016
and was consistent with the first
six
months of
2016
.
Wholesale Banking net interest income totaled
$88.2 million
and
$175.8 million
for the
second quarter and first six months
of
2017
, respectively, compared with
$86.5 million
and
$172.2 million
for the same periods in
2016
. Net interest income
increase
d
$1.6 million
, or
1.9%
, and
$3.6 million
, or
2.1%
, from the
second quarter and first six months
of
2016
, respectively. The
increase
in net interest income from the
second
quarter of
2016
was primarily due to increased average yields on variable-rate inventory finance loans and variable- and adjustable-rate commercial loans, as well as higher average balances in the commercial, leasing and equipment finance and inventory finance portfolios, partially offset by higher interest expense related to funds transfer pricing. The
increase
from the first
six
months of
2016
was primarily due to higher average balances in the inventory finance, leasing and equipment finance and commercial portfolios, as well as increased average yields on variable-rate inventory finance loans and variable- and adjustable-rate commercial loans, partially offset by higher interest expense related to funds transfer pricing.
Wholesale Banking provision for credit losses totaled
$2.7 million
and
$9.6 million
for the
second quarter and first six months
of
2017
, respectively, compared with
$1.4 million
and
$6.5 million
for the same periods in
2016
. The provision for credit losses
increase
d
$1.3 million
, or
98.6%
, and
$3.0 million
, or
46.3%
, from the
second quarter and first six months
of
2016
, respectively, primarily attributable to the commercial portfolio due to increased net charge-offs and growth in the portfolio, partially offset by improving credit quality in the inventory finance portfolio.
Wholesale Banking non-interest expense totaled
$66.9 million
and
$132.5 million
for the
second quarter and first six months
of
2017
, respectively, compared with
$60.7 million
and
$122.8 million
for the same periods in
2016
. Non-interest expense
increase
d
$6.2 million
, or
10.2%
, and
$9.7 million
, or
7.9%
, from the
second quarter and first six months
of
2016
, respectively. The
increase
from the
second
quarter of
2016
was primarily due to increases in operating lease depreciation and occupancy and equipment expense. The
increase
from the first
six
months of
2016
was primarily due to increases in occupancy and equipment expense and operating lease depreciation.
Enterprise Services
Enterprise Services is comprised of (i) corporate treasury, which includes the Company's investment and borrowing portfolios and management of capital, debt and market risks, (ii) corporate functions, such as information technology, risk and credit management, bank operations, finance, investor relations, corporate development, legal and human resources, that provide services to the operating segments, (iii) the Holding Company and (iv) eliminations. The Company's investment portfolio accounts for the earning assets within this segment. Borrowings may be used to offset reductions in deposits or to support lending activities. This segment also includes residual revenues and expenses representing the difference between actual amounts incurred by Enterprise Services and amounts allocated to the operating segments, including interest rate risk residuals such as funds transfer pricing mismatches.
Enterprise Services generated a net loss available to common stockholders of
$5.7 million
and
$17.8 million
for the
second quarter and first six months
of
2017
, respectively, compared with
$13.7 million
and
$30.2 million
for the same periods in
2016
. Enterprise Services net loss available to common stockholders
decrease
d
$8.0 million
, or
58.1%
, and
$12.4 million
, or
41.1%
, from the
second quarter and first six months
of
2016
, respectively.
Enterprise Services net interest expense totaled
$4.1 million
and
$10.0 million
for the
second quarter and first six months
of
2017
, respectively, compared with
$14.2 million
and
$27.6 million
for the same periods in
2016
. Net interest expense
decrease
d
$10.1 million
, or
71.1%
, and
$17.6 million
, or
63.9%
, from the
second quarter and first six months
of
2016
, respectively, primarily driven by a decrease in funds transfer pricing mismatches attributable to rising interest rates and an increase in interest income attributable to higher average balances of securities available for sale, partially offset by an increase in funding costs.
Enterprise Services non-interest expense totaled
$5.0 million
and
$14.2 million
for the
second quarter and first six months
of
2017
, respectively, compared with
$1.1 million
and
$6.9 million
for the same periods in
2016
. Non-interest expense
increase
d
$3.9 million
, or
342.0%
, and
$7.4 million
, or
107.3%
, from the
second quarter and first six months
of
2016
, respectively, primarily due to higher professional fees related to strategic investments in technology capabilities and higher compensation and employee benefits expense, partially offset by a decrease in occupancy and equipment expense.
Consolidated Financial Condition Analysis
Securities Available for Sale and Securities Held to Maturity
Total securities available for sale were
$1.6 billion
at
June 30, 2017
, an
increase
of
$131.5 million
, or
9.2%
, from
$1.4 billion
at
December 31, 2016
. TCF's securities available for sale portfolio consists primarily of fixed-rate mortgage-backed securities issued by the Federal National Mortgage Association ("Fannie Mae") and obligations of states and political subdivisions. TCF may, from time to time, sell securities available for sale and utilize the proceeds to reduce borrowings, fund growth in loans and leases or for other corporate purposes.
Total securities held to maturity were
$171.3 million
at
June 30, 2017
, a
decrease
of
$10.0 million
, or
5.5%
, from
$181.3 million
at
December 31, 2016
. TCF's securities held to maturity portfolio consists primarily of fixed-rate mortgage-backed securities issued by Fannie Mae.
The amortized cost, fair value and fully tax-equivalent yield of securities available for sale and securities held to maturity by final contractual maturity at
June 30, 2017
and
December 31, 2016
were as follows. 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 June 30, 2017
|
|
At December 31, 2016
|
(Dollars in thousands)
|
Amortized Cost
|
|
Fair Value
|
|
Tax-equivalent Yield
|
|
Amortized Cost
|
|
Fair Value
|
|
Tax-equivalent Yield
|
Securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
Due in one year or less
|
$
|
3
|
|
|
$
|
3
|
|
|
1.53
|
%
|
|
$
|
1
|
|
|
$
|
1
|
|
|
8.02
|
%
|
Due in 1-5 years
|
8
|
|
|
8
|
|
|
2.47
|
|
|
18
|
|
|
18
|
|
|
2.28
|
|
Due in 5-10 years
|
47,227
|
|
|
47,006
|
|
|
1.93
|
|
|
54,202
|
|
|
54,429
|
|
|
1.93
|
|
Due after 10 years
|
791,474
|
|
|
780,134
|
|
|
2.25
|
|
|
773,519
|
|
|
756,461
|
|
|
2.25
|
|
Obligations of states and political subdivisions:
|
|
|
|
|
|
|
|
|
|
|
|
Due in 1-5 years
|
5,583
|
|
|
5,706
|
|
|
2.97
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Due in 5-10 years
|
337,411
|
|
|
343,539
|
|
|
3.16
|
|
|
277,228
|
|
|
274,576
|
|
|
3.13
|
|
Due after 10 years
|
383,147
|
|
|
378,555
|
|
|
3.26
|
|
|
351,744
|
|
|
337,950
|
|
|
3.20
|
|
Total securities available for sale
|
$
|
1,564,853
|
|
|
$
|
1,554,951
|
|
|
2.69
|
|
|
$
|
1,456,712
|
|
|
$
|
1,423,435
|
|
|
2.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities held to maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
Due after 10 years
|
$
|
168,520
|
|
|
$
|
172,786
|
|
|
2.56
|
%
|
|
$
|
178,514
|
|
|
$
|
181,146
|
|
|
2.54
|
%
|
Other securities:
|
|
|
|
|
|
|
|
|
|
|
|
Due in 1-5 years
|
1,400
|
|
|
1,400
|
|
|
2.86
|
|
|
1,400
|
|
|
1,400
|
|
|
2.86
|
|
Due in 5-10 years
|
1,400
|
|
|
1,400
|
|
|
3.36
|
|
|
1,400
|
|
|
1,400
|
|
|
3.36
|
|
Total securities held to maturity
|
$
|
171,320
|
|
|
$
|
175,586
|
|
|
2.57
|
|
|
$
|
181,314
|
|
|
$
|
183,946
|
|
|
2.55
|
|
Loans and Leases
Information about loans and leases held in TCF's portfolio was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2017
|
|
At December 31, 2016
|
|
Change
|
(Dollars in thousands)
|
Amount
|
|
% of
Total
|
|
Amount
|
|
% of
Total
|
|
$
|
|
%
|
Consumer real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgage lien
|
$
|
2,070,385
|
|
|
11.3
|
%
|
|
$
|
2,292,596
|
|
|
12.9
|
%
|
|
$
|
(222,211
|
)
|
|
(9.7
|
)%
|
Junior lien
|
2,701,592
|
|
|
14.7
|
|
|
2,791,756
|
|
|
15.6
|
|
|
(90,164
|
)
|
|
(3.2
|
)
|
Total consumer real estate
|
4,771,977
|
|
|
26.0
|
|
|
5,084,352
|
|
|
28.5
|
|
|
(312,375
|
)
|
|
(6.1
|
)
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
2,722,300
|
|
|
14.8
|
|
|
2,634,191
|
|
|
14.7
|
|
|
88,109
|
|
|
3.3
|
|
Commercial business
|
766,425
|
|
|
4.2
|
|
|
652,287
|
|
|
3.7
|
|
|
114,138
|
|
|
17.5
|
|
Total commercial
|
3,488,725
|
|
|
19.0
|
|
|
3,286,478
|
|
|
18.4
|
|
|
202,247
|
|
|
6.2
|
|
Leasing and equipment finance
|
4,333,735
|
|
|
23.5
|
|
|
4,336,310
|
|
|
24.3
|
|
|
(2,575
|
)
|
|
(0.1
|
)
|
Inventory finance
|
2,509,485
|
|
|
13.7
|
|
|
2,470,175
|
|
|
13.8
|
|
|
39,310
|
|
|
1.6
|
|
Auto finance
|
3,243,144
|
|
|
17.7
|
|
|
2,647,741
|
|
|
14.8
|
|
|
595,403
|
|
|
22.5
|
|
Other
|
19,459
|
|
|
0.1
|
|
|
18,771
|
|
|
0.2
|
|
|
688
|
|
|
3.7
|
|
Total loans and leases
|
$
|
18,366,525
|
|
|
100.0
|
%
|
|
$
|
17,843,827
|
|
|
100.0
|
%
|
|
$
|
522,698
|
|
|
2.9
|
|
Consumer Real Estate
The consumer real estate portfolio is secured by mortgages on residential real estate and consisted of
$2.1 billion
of first mortgage lien loans and
$2.7 billion
of junior lien loans at
June 30, 2017
, with
decrease
s of
$222.2 million
, or
9.7%
, and
$90.2 million
, or
3.2%
, respectively, from
$2.3 billion
and
$2.8 billion
, respectively, at
December 31, 2016
. The
decrease
in the consumer real estate portfolio was primarily due to transfers to loans held for sale, as well as run-off in the consumer real estate first mortgage lien portfolio. Consumer real estate loans held for sale were
$149.9 million
at
June 30, 2017
, compared with
$13.2 million
at
December 31, 2016
. Loans are originated for investment and for sale. TCF sold
$273.4 million
and
$652.8 million
of consumer real estate loans in the
second quarter and first six months
of
2017
, respectively, compared with
$344.6 million
and
$666.0 million
for the same periods in
2016
. Included in consumer real estate loans sold in the six months ended
June 30, 2017
were $49.4 million of non-accrual loans. Consumer real estate originations were
$0.6 billion
and
$1.1 billion
for the
second quarter and first six months
of
2017
, respectively, compared with
$0.7 billion
and
$1.2 billion
for the same periods in
2016
. Consumer real estate originations decreased
$54.4 million
, or
7.8%
, and
$41.4 million
, or
3.5%
, from the
second quarter and first six months
of
2016
, respectively. At
June 30, 2017
and
December 31, 2016
,
65.6%
and
68.1%
, respectively, of the consumer real estate portfolio were in TCF's primary banking markets. At
June 30, 2017
and
December 31, 2016
,
59.8%
and
58.0%
, respectively, of the consumer real estate portfolio carried a variable or adjustable interest rate generally tied to the prime rate. At
June 30, 2017
and
December 31, 2016
,
45.3%
and
47.3%
, respectively, of TCF's consumer real estate loans consisted of closed-end loans. TCF's closed-end consumer real estate loans require payments of principal and interest over a fixed term.
The average Fair Isaac Corporation ("FICO
®
") credit score at loan origination for the consumer real estate portfolio was
736
and
735
at
June 30, 2017
and
December 31, 2016
, respectively. As part of TCF's credit risk monitoring, TCF obtains updated FICO score information quarterly. The average updated FICO score for the consumer real estate portfolio was
735
and
733
at
June 30, 2017
and
December 31, 2016
, respectively.
TCF's consumer real estate underwriting standards are intended to produce adequately secured loans to customers with good credit scores at the origination date. Beginning in 2008, TCF generally has not made new loans in excess of 90% loan-to-value at origination. TCF also has not originated consumer real estate loans with multiple payment options or loans with "teaser" interest rates. At
June 30, 2017
,
64.2%
of the consumer real estate portfolio had been originated since January 1, 2009 with annualized net charge-offs of less than
0.01%
.
The consumer real estate junior lien portfolio was comprised of
$2.5 billion
of home equity lines of credit ("HELOCs") and
$234.7 million
of amortizing consumer real estate junior lien mortgage loans at
June 30, 2017
, compared with
$2.5 billion
and
$272.9 million
at
December 31, 2016
, respectively. At both
June 30, 2017
and
December 31, 2016
,
$2.0 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
June 30, 2017
and
December 31, 2016
,
$455.3 million
and
$525.4 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, 2017
,
17.1%
of these loans mature prior to 2021. Outstanding balances on consumer real estate lines of credit were
66.8%
of total lines of credit at
June 30, 2017
, compared to
67.1%
at
December 31, 2016
.
Commercial Real Estate and Business Lending
The commercial portfolio consisted of
$2.7 billion
of commercial real estate loans and
$766.4 million
of commercial business loans at
June 30, 2017
, with
increase
s of
$88.1 million
, or
3.3%
, and
$114.1 million
, or
17.5%
, respectively, from
$2.6 billion
and
$652.3 million
, respectively, at
December 31, 2016
. The
increase
in the commercial portfolio was primarily due to originations outpacing lower prepayments and pay-offs during the
second quarter and first six months
of
2017
. Total commercial originations were
$476.5 million
and
$881.6 million
in the
second quarter and first six months
of
2017
, respectively, compared with
$451.2 million
and
$866.5 million
for the same periods in
2016
. Total commercial originations increased
$25.4 million
, or
5.6%
, and
$15.1 million
, or
1.7%
, from the
second quarter and first six months
of
2016
, respectively. At
June 30, 2017
and
December 31, 2016
,
75.0%
and
77.8%
, respectively, of TCF's commercial real estate loans outstanding were secured by properties located in TCF's primary banking markets. With an emphasis on secured lending, essentially all of TCF's commercial loans were secured either by properties or other business assets at
June 30, 2017
and
December 31, 2016
. At
June 30, 2017
and
December 31, 2016
, variable- and adjustable-rate loans represented
72.1%
and
69.0%
, respectively, of total commercial loans outstanding.
Leasing and Equipment Finance
The leasing and equipment finance portfolio consisted of
$2.3 billion
of leases and
$2.0 billion
of loans at
June 30, 2017
, with a
decrease
of
$9.0 million
, or
0.4%
,
and an
increase
of
$6.4 million
, or
0.3%
, respectively, from
$2.3 billion
of leases and
$2.0 billion
of loans at
December 31, 2016
. Leasing and equipment finance originations were
$537.0 million
and
$943.1 million
in the
second quarter and first six months
of
2017
, respectively, compared with
$567.1 million
and
$981.9 million
for the same periods in
2016
. Leasing and equipment finance originations decreased
$30.0 million
, or
5.3%
, and
$38.8 million
, or
3.9%
, from the
second quarter and first six months
of
2016
, respectively. The uninstalled backlog of approved transactions was
$508.8 million
and
$453.6 million
at
June 30, 2017
and
December 31, 2016
, respectively.
Inventory Finance
The inventory finance portfolio totaled
$2.5 billion
at both
June 30, 2017
and
December 31, 2016
. TCF's inventory finance customers included more than
10,700
and
10,800
active dealers at
June 30, 2017
and
December 31, 2016
, respectively. Inventory finance originations were
$1.9 billion
and
$3.7 billion
in the
second quarter and first six months
of
2017
, respectively, compared with
$1.7 billion
and
$3.5 billion
for the same periods in
2016
. Inventory finance originations increased
$230.9 million
, or
13.9%
, and
$247.1 million
, or
7.1%
, from the
second quarter and first six months
of
2016
, respectively. Origination levels are impacted by the velocity of fundings and repayments with dealers.
Auto Finance
The auto finance portfolio totaled
$3.2 billion
at
June 30, 2017
, an
increase
of
$595.4 million
, or
22.5%
, from
$2.6 billion
at
December 31, 2016
. The
increase
was primarily due to the strategic shift from an originate-to-sell model to an originate-to-hold model resulting in the reclassification of approximately $345 million of loans from held for sale to held for investment. As a result of the shift, loans are primarily originated for investment. TCF sold
$48.0 million
and
$298.6 million
of auto finance loans in the
second quarter and first six months
of
2017
, respectively, compared with
$533.4 million
and
$977.7 million
for the same periods in
2016
. Auto finance originations were
$524.6 million
and
$1.4 billion
in the
second quarter and first six months
of
2017
, respectively, compared with
$903.9 million
and
$1.8 billion
for the same periods in
2016
. Auto finance originations decreased
$379.3 million
, or
42.0%
, and
$431.4 million
, or
23.7%
, from the
second quarter and first six months
of
2016
, respectively. The decreases in originations from both periods were primarily due to the implementation of the shift. The auto finance network included dealers in all
50
states and more than
6,500
and
11,400
active dealers at
June 30, 2017
and
December 31, 2016
, respectively. The decrease in the number of active dealers was primarily due to the implementation of the shift. The auto finance portfolio consisted of
21.1%
new auto loans and
78.9%
used auto loans at
June 30, 2017
, compared with
23.3%
and
76.7%
, respectively, at
December 31, 2016
. The average original FICO score for the auto finance held for investment portfolio was
716
and
733
at
June 30, 2017
and
December 31, 2016
, respectively. The decrease in average original FICO score was primarily due to the shift.
Credit Quality
The following summarizes TCF's loan and lease portfolio based on the credit quality factors that TCF believes are the most important and should be considered to understand the overall condition of the portfolio.
Past Due Loans and Leases
Over 60-day delinquent loans and leases by type, excluding non-accrual loans and leases, were as follows. Delinquent balances are determined based on the contractual terms of the loan or lease. See
Note 5
,
Allowance for Loan and Lease Losses and Credit Quality Information
of Notes to Consolidated Financial Statements for additional information.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2017
|
|
At December 31, 2016
|
(Dollars in thousands)
|
60 Days or More Delinquent and Accruing
|
|
Percentage of Period-End Loans and Leases
(1)
|
|
60 Days or More Delinquent and Accruing
|
|
Percentage of Period-End Loans and Leases
(1)
|
Consumer real estate:
|
|
|
|
|
|
|
|
|
|
|
|
First mortgage lien
|
$
|
6,154
|
|
|
0.31
|
%
|
|
$
|
8,725
|
|
|
0.40
|
%
|
Junior lien
|
1,382
|
|
|
0.05
|
|
|
1,404
|
|
|
0.05
|
|
Total consumer real estate
|
7,536
|
|
|
0.16
|
|
|
10,129
|
|
|
0.21
|
|
Commercial
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Leasing and equipment finance
|
6,099
|
|
|
0.14
|
|
|
4,523
|
|
|
0.10
|
|
Inventory finance
|
153
|
|
|
0.01
|
|
|
55
|
|
|
—
|
|
Auto finance
|
6,314
|
|
|
0.20
|
|
|
6,102
|
|
|
0.23
|
|
Other
|
59
|
|
|
0.30
|
|
|
20
|
|
|
0.10
|
|
Subtotal
|
20,163
|
|
|
0.11
|
|
|
20,829
|
|
|
0.12
|
|
Portfolios acquired with deteriorated credit quality
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
$
|
20,163
|
|
|
0.11
|
|
|
$
|
20,829
|
|
|
0.12
|
|
|
|
(1)
|
Excludes non-accrual loans and leases.
|
Loan Modifications
Troubled debt restructuring ("TDR") loans were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2017
|
(Dollars in thousands)
|
Accruing TDR Loans
|
|
Non-accrual TDR Loans
|
|
Total TDR Loans
|
Consumer real estate
|
$
|
94,398
|
|
|
$
|
43,201
|
|
|
$
|
137,599
|
|
Commercial
|
12,831
|
|
|
3,874
|
|
|
16,705
|
|
Leasing and equipment finance
|
4,769
|
|
|
1,454
|
|
|
6,223
|
|
Inventory finance
|
—
|
|
|
212
|
|
|
212
|
|
Auto finance
|
2,698
|
|
|
4,611
|
|
|
7,309
|
|
Other
|
4
|
|
|
—
|
|
|
4
|
|
Total
|
$
|
114,700
|
|
|
$
|
53,352
|
|
|
$
|
168,052
|
|
Over 60-day delinquency as a percentage of total accruing TDR loans
|
0.41
|
%
|
|
N.A
|
|
|
N.A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2016
|
(Dollars in thousands)
|
Accruing TDR Loans
|
|
Non-accrual TDR Loans
|
|
Total TDR Loans
|
Consumer real estate
|
$
|
98,606
|
|
|
$
|
71,961
|
|
|
$
|
170,567
|
|
Commercial
|
20,304
|
|
|
2,170
|
|
|
22,474
|
|
Leasing and equipment finance
|
4,802
|
|
|
1,350
|
|
|
6,152
|
|
Inventory finance
|
—
|
|
|
357
|
|
|
357
|
|
Auto finance
|
2,323
|
|
|
5,504
|
|
|
7,827
|
|
Other
|
6
|
|
|
—
|
|
|
6
|
|
Total
|
$
|
126,041
|
|
|
$
|
81,342
|
|
|
$
|
207,383
|
|
Over 60-day delinquency as a percentage of total accruing TDR loans
|
1.19
|
%
|
|
N.A
|
|
|
N.A
|
|
N.A. Not Applicable.
Total TDR loans were
$168.1 million
at
June 30, 2017
, a
decrease
of
$39.3 million
, or
19.0%
, from
$207.4 million
at
December 31, 2016
. Accruing TDR loans were
$114.7 million
at
June 30, 2017
, a
decrease
of
$11.3 million
, or
9.0%
, from
$126.0 million
at
December 31, 2016
. The
decrease
in accruing TDRs was primarily due to a
$7.5 million
decrease
in commercial accruing TDR loans primarily due to the transfer of loans to non-accrual status during the first quarter of 2017. Non-accrual TDR loans were
$53.4 million
at
June 30, 2017
, a
decrease
of
$28.0 million
, or
34.4%
, from
$81.3 million
at
December 31, 2016
. The
decrease
was primarily due to a
$28.8 million
decrease
in consumer real estate non-accrual TDR loans driven by the non-accrual loan sale of $49.4 million in the first quarter of 2017.
TCF modifies loans through reductions in interest rates, extension of payment dates, term extensions or term extensions with a reduction of contractual payments, but generally not through reductions of principal.
Loan modifications to borrowers who have not been granted concessions are not included in the table above. Loan modifications to troubled borrowers are not reported as TDR loans in the calendar years after modification if the loans were modified to an interest rate equal to or greater than the yields of new loan originations with comparable risk at the time of restructuring and if the loan is performing based on the restructured terms; however, these loans are still considered impaired and follow TCF's impaired loan reserve policies.
TCF typically reduces a consumer real estate customer's contractual payments by reducing the interest rate by an amount appropriate for the borrower's financial condition. Loans discharged in Chapter 7 bankruptcy where the borrower did not reaffirm the debt are reported as non-accrual TDR loans upon discharge as a result of the removal of the borrower's personal liability on the loan. These loans may return to accrual status when TCF expects full repayment of the remaining pre-discharged contractual principal and interest. At
June 30, 2017
,
68.6%
of total consumer real estate TDR loans were accruing and TCF recognized more than
62%
of the original contractual interest due on accruing consumer real estate TDR loans for both the
second quarter and first six months
of
2017
, respectively, yielding
4.2%
, by modifying the loans to qualified customers instead of foreclosing on the property. At
June 30, 2017
, collection of principal and interest under the modified terms was reasonably assured on all accruing consumer real estate TDR loans.
Commercial loans modified when on non-accrual status continue to be reported as non-accrual loans until there is sustained repayment performance for a reasonable period of at least six consecutive months. At
June 30, 2017
,
76.8%
of total commercial TDR loans were accruing and TCF recognized more than
98%
and
97%
of the original contractual interest due on accruing commercial TDR loans in the
second quarter and first six months
of
2017
, respectively, yielding
5.2%
and
5.3%
, respectively. At
June 30, 2017
, collection of principal and interest under the modified terms was reasonably assured on all accruing commercial TDR loans.
See
Note 5
,
Allowance for Loan and Lease Losses and Credit Quality Information
of Notes to Consolidated Financial Statements for additional information regarding TCF's loan modifications.
Non-performing Assets
TCF's non-accrual loans and leases and other real estate owned were as follows:
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
At June 30, 2017
|
|
At December 31, 2016
|
Consumer real estate:
|
|
|
|
|
|
First mortgage lien
|
$
|
74,536
|
|
|
$
|
106,125
|
|
Junior lien
|
24,450
|
|
|
46,346
|
|
Total consumer real estate
|
98,986
|
|
|
152,471
|
|
Commercial:
|
|
|
|
Commercial real estate
|
6,914
|
|
|
5,564
|
|
Commercial business
|
354
|
|
|
355
|
|
Total commercial
|
7,268
|
|
|
5,919
|
|
Leasing and equipment finance
|
12,798
|
|
|
10,880
|
|
Inventory finance
|
3,488
|
|
|
5,134
|
|
Auto finance
|
6,733
|
|
|
7,038
|
|
Other
|
—
|
|
|
3
|
|
Total non-accrual loans and leases
|
129,273
|
|
|
181,445
|
|
Other real estate owned:
|
|
|
|
Consumer real estate
|
22,590
|
|
|
34,070
|
|
Commercial real estate
|
6,137
|
|
|
12,727
|
|
Total other real estate owned
|
28,727
|
|
|
46,797
|
|
Total non-accrual loans and leases and other real estate owned
|
$
|
158,000
|
|
|
$
|
228,242
|
|
|
|
|
|
Non-accrual loans and leases as a percentage of total loans and leases
|
0.70
|
%
|
|
1.02
|
%
|
|
|
|
|
Non-accrual loans and leases and other real estate owned as a percentage of total loans and leases and other real estate owned
|
0.86
|
|
|
1.28
|
|
|
|
|
|
Allowance for loan and lease losses as a percentage of non-accrual loans and leases
|
128.12
|
|
|
88.33
|
|
Non-accrual loans and leases were
$129.3 million
at
June 30, 2017
, a
decrease
of
$52.2 million
, or
28.8%
, from
$181.4 million
at
December 31, 2016
. The
decrease
was primarily due to the consumer real estate non-accrual loan sale of $49.4 million in the first quarter of 2017. Other real estate owned was
$28.7 million
at
June 30, 2017
, a
decrease
of
$18.1 million
, or
38.6%
, from
$46.8 million
at
December 31, 2016
. The
decrease
was primarily due to the sales of consumer real estate properties outpacing additions. Consumer real estate loans in process of foreclosure were
$26.2 million
and
$32.1 million
at
June 30, 2017
and
December 31, 2016
, respectively.
Loans and leases are generally placed on non-accrual status when the collection of interest or principal is 90 days or more past due unless, in the case of commercial loans, they are well secured and in process of collection. Delinquent consumer real estate junior lien loans are also placed on non-accrual status when there is evidence that the related third-party first lien mortgage may be 90 days or more past due, or foreclosure, charge-off or collection action has been initiated. TDR loans are placed on non-accrual status prior to the past due thresholds outlined above if repayment under the modified terms is not likely after performing a well-documented credit analysis. Loans on non-accrual status are generally reported as non-accrual loans until there is sustained repayment performance for six consecutive months, with the exception of loans not reaffirmed upon discharge under Chapter 7 bankruptcy, which remain on non-accrual status until a well-documented credit analysis indicates full repayment of the remaining pre-discharged contractual principal and interest is likely. Most of TCF's non-accrual loans and past due loans are secured by real estate. Given the nature of these assets and the related mortgage foreclosure, property sale and, if applicable, mortgage insurance claims processes, it can take 18 months or longer for a loan to migrate from initial delinquency to final disposition. This resolution process generally takes much longer for loans secured by real estate than for unsecured loans or loans secured by other property primarily due to state real estate foreclosure laws.
Changes in the amount of non-accrual loans and leases for the
three and six
months ended
June 30, 2017
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At or For the Three Months Ended June 30, 2017
|
(In thousands)
|
Consumer Real Estate
|
|
Commercial
|
|
Leasing and Equipment Finance
|
|
Inventory Finance
|
|
Auto Finance
|
|
Other
|
|
Total
|
Balance, beginning of period
|
$
|
101,937
|
|
|
$
|
12,697
|
|
|
$
|
12,274
|
|
|
$
|
5,162
|
|
|
$
|
6,909
|
|
|
$
|
2
|
|
|
$
|
138,981
|
|
Additions
|
14,753
|
|
|
—
|
|
|
4,682
|
|
|
2,120
|
|
|
2,112
|
|
|
—
|
|
|
23,667
|
|
(Charge-offs) recoveries
|
(2,033
|
)
|
|
(2,696
|
)
|
|
(1,135
|
)
|
|
(570
|
)
|
|
(408
|
)
|
|
23
|
|
|
(6,819
|
)
|
Transfers to other assets
|
(8,451
|
)
|
|
(100
|
)
|
|
(1,373
|
)
|
|
(545
|
)
|
|
(401
|
)
|
|
—
|
|
|
(10,870
|
)
|
Return to accrual status
|
(2,294
|
)
|
|
—
|
|
|
(138
|
)
|
|
(645
|
)
|
|
—
|
|
|
—
|
|
|
(3,077
|
)
|
Payments received
|
(4,820
|
)
|
|
(1,781
|
)
|
|
(1,512
|
)
|
|
(2,030
|
)
|
|
(1,479
|
)
|
|
(25
|
)
|
|
(11,647
|
)
|
Sales
|
—
|
|
|
(892
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(892
|
)
|
Other, net
|
(106
|
)
|
|
40
|
|
|
—
|
|
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
(70
|
)
|
Balance, end of period
|
$
|
98,986
|
|
|
$
|
7,268
|
|
|
$
|
12,798
|
|
|
$
|
3,488
|
|
|
$
|
6,733
|
|
|
$
|
—
|
|
|
$
|
129,273
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At or For the Six Months Ended June 30, 2017
|
(In thousands)
|
Consumer Real Estate
|
|
Commercial
|
|
Leasing and Equipment Finance
|
|
Inventory Finance
|
|
Auto Finance
|
|
Other
|
|
Total
|
Balance, beginning of period
|
$
|
152,471
|
|
|
$
|
5,919
|
|
|
$
|
10,880
|
|
|
$
|
5,134
|
|
|
$
|
7,038
|
|
|
$
|
3
|
|
|
$
|
181,445
|
|
Additions
|
30,489
|
|
|
9,880
|
|
|
9,659
|
|
|
4,083
|
|
|
4,217
|
|
|
—
|
|
|
58,328
|
|
(Charge-offs) recoveries
|
(3,762
|
)
|
|
(5,428
|
)
|
|
(2,444
|
)
|
|
(636
|
)
|
|
(1,005
|
)
|
|
44
|
|
|
(13,231
|
)
|
Transfers to other assets
|
(15,690
|
)
|
|
(100
|
)
|
|
(2,379
|
)
|
|
(645
|
)
|
|
(842
|
)
|
|
—
|
|
|
(19,656
|
)
|
Return to accrual status
|
(4,086
|
)
|
|
—
|
|
|
(161
|
)
|
|
(1,421
|
)
|
|
—
|
|
|
—
|
|
|
(5,668
|
)
|
Payments received
|
(11,727
|
)
|
|
(2,151
|
)
|
|
(2,757
|
)
|
|
(3,022
|
)
|
|
(2,675
|
)
|
|
(47
|
)
|
|
(22,379
|
)
|
Sales
|
(49,916
|
)
|
|
(892
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(50,808
|
)
|
Other, net
|
1,207
|
|
|
40
|
|
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
—
|
|
|
1,242
|
|
Balance, end of period
|
$
|
98,986
|
|
|
$
|
7,268
|
|
|
$
|
12,798
|
|
|
$
|
3,488
|
|
|
$
|
6,733
|
|
|
$
|
—
|
|
|
$
|
129,273
|
|
Loan and Lease Credit Classifications
TCF assesses the risk of its loan and lease portfolio utilizing numerous risk characteristics as outlined in the previous sections. Loan and lease credit classifications are an additional characteristic monitored in the overall credit risk process. Loan and lease credit classifications are derived from standard regulatory rating definitions, which include: non-classified (pass and special mention) and classified (substandard and doubtful). Classified loans and leases have well-defined weaknesses, but may never result in a loss.
Loans and leases by portfolio and regulatory classification were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2017
|
|
Non-classified
|
|
Classified
|
|
Total
|
(In thousands)
|
Pass
|
|
Special Mention
|
|
Substandard
|
|
Doubtful
|
|
Consumer real estate
|
$
|
4,631,643
|
|
|
$
|
30,267
|
|
|
$
|
110,067
|
|
|
$
|
—
|
|
|
$
|
4,771,977
|
|
Commercial
|
3,367,192
|
|
|
68,106
|
|
|
53,427
|
|
|
—
|
|
|
3,488,725
|
|
Leasing and equipment finance
|
4,278,751
|
|
|
24,311
|
|
|
30,673
|
|
|
—
|
|
|
4,333,735
|
|
Inventory finance
|
2,344,430
|
|
|
98,987
|
|
|
66,068
|
|
|
—
|
|
|
2,509,485
|
|
Auto finance
|
3,226,733
|
|
|
354
|
|
|
16,057
|
|
|
—
|
|
|
3,243,144
|
|
Other
|
19,400
|
|
|
—
|
|
|
59
|
|
|
—
|
|
|
19,459
|
|
Total loans and leases
|
$
|
17,868,149
|
|
|
$
|
222,025
|
|
|
$
|
276,351
|
|
|
$
|
—
|
|
|
$
|
18,366,525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2016
|
|
Non-classified
|
|
Classified
|
|
Total
|
(In thousands)
|
Pass
|
|
Special Mention
|
|
Substandard
|
|
Doubtful
|
|
Consumer real estate
|
$
|
4,877,740
|
|
|
$
|
40,253
|
|
|
$
|
166,359
|
|
|
$
|
—
|
|
|
$
|
5,084,352
|
|
Commercial
|
3,190,241
|
|
|
61,771
|
|
|
34,466
|
|
|
—
|
|
|
3,286,478
|
|
Leasing and equipment finance
|
4,285,065
|
|
|
23,441
|
|
|
27,804
|
|
|
—
|
|
|
4,336,310
|
|
Inventory finance
|
2,163,764
|
|
|
139,385
|
|
|
167,026
|
|
|
—
|
|
|
2,470,175
|
|
Auto finance
|
2,631,406
|
|
|
244
|
|
|
16,091
|
|
|
—
|
|
|
2,647,741
|
|
Other
|
18,750
|
|
|
—
|
|
|
21
|
|
|
—
|
|
|
18,771
|
|
Total loans and leases
|
$
|
17,166,966
|
|
|
$
|
265,094
|
|
|
$
|
411,767
|
|
|
$
|
—
|
|
|
$
|
17,843,827
|
|
Total classified loans and leases were
$276.4 million
and
$411.8 million
at
June 30, 2017
and
December 31, 2016
, respectively. The
decrease
of
$135.4 million
, or
32.9%
, from
December 31, 2016
was primarily due to
decrease
s in inventory finance and consumer real estate classified loans, partially offset by an
increase
in commercial classified loans. The decrease in inventory finance classified loans was due to enhancements made to the model used to determine the classifications of loans in the first quarter of 2017 that better align with the inherent risk in this portfolio. The decrease in consumer real estate classified loans was a result of the non-accrual loan sale in the first quarter of 2017.
Allowance for Loan and Lease Losses
The determination of the allowance for loan and lease losses is a critical accounting estimate. TCF's evaluation of incurred losses is based upon historical loss rates multiplied by the respective portfolio's loss emergence period. Factors utilized in the determination of the amount of the allowance include historical trends in loss rates, a portfolio's overall risk characteristics, changes in its character or size, risk rating migration, delinquencies, collateral values, economic outlook and prevailing economic conditions. The various factors used in the methodologies are reviewed on a periodic basis.
The Company considers the allowance for loan and lease losses of
$165.6 million
appropriate to cover losses incurred in the loan and lease portfolios at
June 30, 2017
. However, no assurance can be given that TCF will not, in any particular period, sustain loan and lease losses that are sizable in relation to the amount reserved or will not require significant changes in the balance of the allowance for loan and lease losses due to subsequent evaluations of the loan and lease portfolios, in light of factors then prevailing, including economic conditions, information obtained during TCF's ongoing credit review process or regulatory requirements. Among other factors, an economic slowdown, increasing levels of unemployment, a decline in collateral values and/or rising interest rates may have an adverse impact on the current adequacy of the allowance for loan and lease losses by increasing credit risk and the risk of potential loss.
The total allowance for loan and lease losses is generally available to absorb losses from any segment of the portfolio. The allocation of TCF's allowance for loan and lease losses disclosed in the following table is subject to change based on changes in the criteria used to evaluate the allowance and is not necessarily indicative of the trend of future losses in any particular portfolio.
In conjunction with
Note 5
,
Allowance for Loan and Lease Losses and Credit Quality Information
of Notes to Consolidated Financial Statements, detailed information regarding TCF's allowance for loan and lease losses was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2017
|
|
At December 31, 2016
|
|
Credit Loss Reserves
|
|
Credit Loss Reserves
|
(Dollars in thousands)
|
Amount
|
|
As a Percentage of Portfolio
|
|
Amount
|
|
As a Percentage of Portfolio
|
Consumer real estate:
|
|
|
|
|
|
|
|
|
First mortgage lien
|
$
|
29,149
|
|
|
1.41
|
%
|
|
$
|
33,828
|
|
|
1.48
|
%
|
Junior lien
|
23,259
|
|
|
0.86
|
|
|
25,620
|
|
|
0.92
|
|
Consumer real estate
|
52,408
|
|
|
1.10
|
|
|
59,448
|
|
|
1.17
|
|
Commercial:
|
|
|
|
|
|
|
|
Commercial real estate
|
23,669
|
|
|
0.87
|
|
|
22,785
|
|
|
0.86
|
|
Commercial business
|
11,000
|
|
|
1.44
|
|
|
9,910
|
|
|
1.52
|
|
Total commercial
|
34,669
|
|
|
0.99
|
|
|
32,695
|
|
|
0.99
|
|
Leasing and equipment finance
|
21,922
|
|
|
0.51
|
|
|
21,350
|
|
|
0.49
|
|
Inventory finance
|
12,129
|
|
|
0.48
|
|
|
13,932
|
|
|
0.56
|
|
Auto finance
|
43,893
|
|
|
1.35
|
|
|
32,310
|
|
|
1.22
|
|
Other
|
599
|
|
|
3.08
|
|
|
534
|
|
|
2.84
|
|
Total allowance for loan and lease losses
|
165,620
|
|
|
0.90
|
|
|
160,269
|
|
|
0.90
|
|
Other credit loss reserves:
|
|
|
|
|
|
|
|
|
|
|
Reserves for unfunded commitments
|
1,147
|
|
|
N.A.
|
|
|
1,115
|
|
|
N.A.
|
|
Total credit loss reserves
|
$
|
166,767
|
|
|
0.91
|
|
|
$
|
161,384
|
|
|
0.90
|
|
N.A. Not Applicable.
Liquidity Management
TCF manages its liquidity to ensure that the funding needs of depositors and borrowers are met both promptly and in a cost-effective manner. Asset liquidity arises from liquid assets that can be sold or pledged as collateral, amortization, prepayment or maturity of assets and from the ability of TCF to sell loans. Liability liquidity results from the ability of TCF to maintain a diverse set of funding sources to promptly meet funding requirements.
TCF Bank had
$198.0 million
and
$256.6 million
of net liquidity qualifying interest-bearing deposits at the Federal Reserve Bank at
June 30, 2017
and
December 31, 2016
, respectively. Interest-bearing deposits held at the Federal Reserve Bank and unencumbered U.S. Government sponsored enterprises and federal agencies mortgage-backed securities were
$1.1 billion
and
$1.2 billion
at
June 30, 2017
and
December 31, 2016
, respectively. In addition, TCF held unencumbered obligations of states and political subdivisions totaling
$727.8 million
and
$612.5 million
at
June 30, 2017
and
December 31, 2016
, respectively.
Deposits are the primary source of TCF's funds for use in lending and for other general business purposes. In addition to deposits, TCF receives funds from loan and lease repayments, loan sales and borrowings. Lending activities, such as loan originations and purchases and equipment purchases for lease financing, are the primary uses of TCF's funds.
The primary source of funding for TCF Commercial Finance Canada, Inc. ("TCFCFC") is a line of credit with TCF Bank. TCFCFC also maintains a
$20.0 million
Canadian dollar-denominated line of credit facility with a counterparty, which is guaranteed by TCF Bank. TCFCFC had
$6.2 million
(USD) and
$2.2 million
(USD) outstanding under the line of credit with the counterparty at
June 30, 2017
and
December 31, 2016
, respectively.
Deposits
Deposits totaled
$17.5 billion
at
June 30, 2017
, an
increase
of
$0.3 billion
, or
1.6%
, from
$17.2 billion
at
December 31, 2016
. The
increase
was due to growth in certificates of deposit, checking and savings balances, partially offset by a decrease in money market balances.
Non-interest bearing checking accounts represented
20.4%
and
20.0%
of total deposits at
June 30, 2017
and
December 31, 2016
, respectively. TCF's weighted-average interest rate for deposits, including non-interest bearing deposits, was
0.33%
and
0.36%
at
June 30, 2017
and
December 31, 2016
, respectively. The
decrease
was primarily due to decreased average interest rates on money market balances.
Checking, savings and certain money market deposits are an important source of low cost or no cost funds for TCF. The average balance of these types of deposits was
$10.9 billion
and
$10.8 billion
for the
second quarter and first six months
of
2017
, respectively, compared with
$10.7 billion
and
$10.6 billion
for the same periods in
2016
. These deposits comprised approximately
63%
of total average deposits for both the
second quarter and first six months
of
2017
, compared with
approximately
62%
of total average deposits for the same periods in
2016
.
Certificates of deposit totaled
$4.4 billion
and
$4.1 billion
at
June 30, 2017
and
December 31, 2016
, respectively. The maturities of certificates of deposit with denominations equal to or greater than $100,000 at
June 30, 2017
were as follows:
|
|
|
|
|
(In thousands)
|
Denominations $100 Thousand or Greater at June 30, 2017
|
Maturity:
|
|
Three months or less
|
$
|
466,323
|
|
Over three through six months
|
571,873
|
|
Over six through 12 months
|
458,853
|
|
Over 12 months
|
700,411
|
|
Total
|
$
|
2,197,460
|
|
Borrowings
Borrowings totaled
$1.3 billion
and
$1.1 billion
at
June 30, 2017
and
December 31, 2016
, respectively. Historically, TCF has borrowed primarily from the Federal Home Loan Bank ("FHLB") of Des Moines, institutional sources under repurchase agreements and other sources. TCF had
$1.6 billion
of additional borrowing capacity at the FHLB of Des Moines at
June 30, 2017
, as well as access to overnight federal funds purchased lines and the Federal Reserve Discount Window.
See
Note 7
,
Long-term Borrowings
of Notes to Consolidated Financial Statements for additional information regarding TCF's long-term borrowings.
Capital Management
TCF is committed to managing capital to maintain protection for stockholders, depositors and creditors. TCF employs a variety of capital management tools to achieve its capital goals, including, but not limited to, dividends, public offerings of preferred and common stock, common stock repurchases, redemption of preferred stock and the issuance or redemption of subordinated debt and other capital instruments. TCF maintains a Capital Planning and Dividend Policy which applies to TCF Financial and incorporates TCF Bank's Capital Planning and Dividend Policy. These policies ensure that capital strategy actions, including the addition of new capital, if needed, common stock repurchases, redemption of preferred stock or the declaration of preferred stock, common stock and bank dividends are prudent, efficient and provide value to TCF's stockholders, while ensuring that past and prospective earnings retention is consistent with TCF's capital needs, asset quality and overall financial condition. TCF and TCF Bank manage their capital levels to exceed all regulatory capital requirements, which were achieved at
June 30, 2017
and
December 31, 2016
. See
Note 8
,
Regulatory Capital Requirements
of Notes to Consolidated Financial Statements.
Preferred Stock
At
June 30, 2017
, there were
6,900,000
depositary shares outstanding, each representing a 1/1,000
th
interest in a share of the Series A Non-Cumulative Perpetual Preferred Stock of TCF Financial Corporation, par value $.01 per share, with a liquidation preference of $25,000 per share (equivalent to $25 per depositary share) (the "Series A Preferred Stock"). Dividends are payable on the Series A Preferred Stock if, as and when declared by TCF's Board of Directors on a non-cumulative basis on March 1, June 1, September 1 and December 1 of each year at a per annum rate of 7.5%. The Series A Preferred Stock may be redeemed at TCF's option in whole or in part at any time.
At
June 30, 2017
, there were
4,000,000
shares outstanding of the 6.45% Series B Non-Cumulative Perpetual Preferred Stock of TCF Financial Corporation, par value $.01 per share, with a liquidation preference of $25 per share (the "Series B Preferred Stock"). Dividends are payable on the Series B Preferred Stock if, as and when declared by TCF's Board of Directors on a non-cumulative basis on March 1, June 1, September 1 and December 1 of each year at a per annum rate of 6.45%. The Series B Preferred Stock may be redeemed at TCF's option in whole or in part on or after December 19, 2017.
Equity
Total equity at
June 30, 2017
was
$2.5 billion
, or
11.6%
of total assets, compared with
$2.4 billion
, or
11.4%
of total assets, at
December 31, 2016
. Dividends to common stockholders on a per share basis totaled
7.5 cent
s for the
second
quarters of
2017
and
2016
. TCF's common dividend payout ratio was
22.7%
and
24.2%
for the
second
quarters of
2017
and
2016
, respectively. TCF Financial's primary funding sources for dividends are earnings and dividends received from TCF Bank.
At
June 30, 2017
, TCF had
5.4 million
shares remaining in its stock repurchase program authorized by its Board of Directors, which has no expiration. Prior consultation with the Federal Reserve is required before TCF could repurchase any shares of its common stock.
Common stockholders' equity at
June 30, 2017
was
$2.3 billion
, or
10.26%
of total assets, compared with
$2.2 billion
, or
10.09%
of total assets, at
December 31, 2016
. Tangible common equity at
June 30, 2017
was
$2.0 billion
, or
9.24%
of total tangible assets, compared with
$1.9 billion
, or
9.13%
of total tangible assets, at
December 31, 2016
. Tangible common equity and tangible assets are not financial measures recognized under generally accepted accounting principles in the United States ("GAAP") (i.e., non-GAAP). Tangible common equity represents total equity less preferred stock, goodwill, other intangible assets and non-controlling interest in subsidiaries. Tangible assets represent total assets less goodwill and other intangible assets. When evaluating capital adequacy and utilization, management considers financial measures such as tangible common equity to tangible assets. This non-GAAP financial measure is viewed by management as a useful indicator of capital levels available to withstand unexpected market or economic conditions and also provide investors, regulators and other users with information to be viewed in relation to other banking institutions.
Reconciliations of the non-GAAP financial measures of tangible common equity and tangible assets to the GAAP measures of total equity and total assets were as follows:
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
At June 30, 2017
|
|
At December 31, 2016
|
Computation of tangible common equity to tangible assets:
|
|
|
|
|
|
|
Total equity
|
|
$
|
2,549,831
|
|
|
$
|
2,444,645
|
|
Less: Non-controlling interest in subsidiaries
|
|
22,766
|
|
|
17,162
|
|
Total TCF Financial Corporation stockholders' equity
|
|
2,527,065
|
|
|
2,427,483
|
|
Less: Preferred stock
|
|
263,240
|
|
|
263,240
|
|
Total common stockholders' equity
|
(a)
|
$
|
2,263,825
|
|
|
$
|
2,164,243
|
|
Less:
|
|
|
|
|
Goodwill
|
|
227,072
|
|
|
225,640
|
|
Other intangibles
(1)
|
|
22,682
|
|
|
1,738
|
|
Tangible common equity
|
(b)
|
$
|
2,014,071
|
|
|
$
|
1,936,865
|
|
Total assets
|
(c)
|
$
|
22,054,651
|
|
|
$
|
21,441,326
|
|
Less:
|
|
|
|
|
|
|
Goodwill
|
|
227,072
|
|
|
225,640
|
|
Other intangibles
(1)
|
|
22,682
|
|
|
1,738
|
|
Tangible assets
|
(d)
|
$
|
21,804,897
|
|
|
$
|
21,213,948
|
|
|
|
|
|
|
Common equity to assets
|
(a) / (c)
|
10.26
|
%
|
|
10.09
|
%
|
Tangible common equity to tangible assets
|
(b) / (d)
|
9.24
|
%
|
|
9.13
|
%
|
|
|
(1)
|
Includes non-mortgage servicing assets.
|
Recent Accounting Developments
In May 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2017-09:
Compensation - Stock Compensation (Topic 718): Scope Modification Accounting
, which provides guidance about which changes to the terms and conditions of a share-based payment award requires an entity to apply modification accounting in Topic 718. The adoption of this ASU will be required on a prospective basis to an award modified beginning with TCF’s Quarterly Report on Form 10-Q for the quarter ending March 31, 2018. Early adoption is allowed. The adoption of this guidance will not have a material impact on our consolidated financial statements.
In March 2017, the FASB issued ASU No. 2017-07:
Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost
, which will change how employers that sponsor defined benefit pension and/or other postretirement benefit plans present the net periodic benefit cost in the income statement. Under the new guidance, employers will present the service cost component of the net periodic benefit cost in the same income statement line item as other employee compensation costs arising from services rendered during the period. Only the service cost component will be eligible for capitalization in assets. The other components of net periodic benefit cost will be presented separately from the line item that includes service cost and outside of any subtotal of operating income. In addition, disclosure of the line items used to present the other components of net periodic benefit cost is required if the components are not presented separately in the income statement. The adoption of this ASU will be required on either a full or modified retrospective basis beginning with TCF’s Quarterly Report on Form 10-Q for the quarter ending March 31, 2018. Early adoption is allowed. The adoption of this guidance will not have a material impact on our consolidated financial statements.
In February 2017, the FASB issued ASU No. 2017-05:
Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20)
, which provides guidance for recognizing gains and losses from the transfer of nonfinancial assets in contracts with non-customers. The ASU also clarifies that Accounting Standards Codification 610-20 applies to the derecognition of nonfinancial assets and in substance nonfinancial assets unless other specific guidance applies or the sale is to a customer. The new guidance does not apply to the derecognition of businesses, nonprofit activities, financial assets, including equity method investments, or to revenue contracts with customers. The adoption of this ASU will be required on either a full or modified retrospective basis beginning with TCF’s Quarterly Report on Form 10-Q for the quarter ending March 31, 2018. Early adoption is allowed. The adoption of this guidance will not have a material impact on our consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-01,
Business Combinations (Topic 805): Clarifying the Definition of a Business
, which clarifies the definition of a business with the objective of adding guidance to assist companies with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The ASU provides a more robust framework to use in determining when a set of assets and activities is a business. The adoption of this ASU will be required on a prospective basis beginning with TCF’s Quarterly Report on Form 10-Q for the quarter ending March 31, 2018. Management is currently evaluating the potential impact of this guidance on our consolidated financial statements.
In November 2016, the FASB issued ASU No. 2016-18,
Statement of Cash Flows (Topic 230): Restricted Cash
, which requires entities to show changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. As a result, entities will no longer present transfers between cash and cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. The adoption of this ASU will be required on a retrospective basis beginning with TCF’s Quarterly Report on Form 10-Q for the quarter ending March 31, 2018. Management is currently evaluating the potential impact of this guidance on our consolidated financial statements.
In August 2016, the FASB issued ASU No. 2016-15,
Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments
, which addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice in how certain types of cash receipts and cash payments are presented in the statement of cash flows. The adoption of this ASU will be required on a retrospective basis beginning with TCF’s Quarterly Report on Form 10-Q for the quarter ending March 31, 2018. Early adoption is allowed. Management is currently evaluating the potential impact of this guidance on our consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13,
Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments
, which changes the impairment model for most financial assets, including trade and other receivables, held to maturity debt securities, loans and purchased financial assets with credit deterioration. The adoption of this ASU will be required on a modified retrospective basis with a cumulative-effect adjustment required beginning with TCF’s Quarterly Report on Form 10-Q for the quarter ending March 31, 2020. Early adoption is allowed. Management is currently evaluating the potential impact of this guidance on our consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-04,
Liabilities - Extinguishment of Liabilities (Subtopic 405-20): Recognition of Breakage for Certain Prepaid Stored-Value Products
, which requires issuers of prepaid stored-value products redeemable for goods, services or cash at third-party merchants to derecognize liabilities related to those products for breakage. The adoption of this ASU will be required on a retrospective or modified retrospective basis beginning with TCF’s Quarterly Report on Form 10-Q for the quarter ending March 31, 2018. Early adoption is allowed. Management is currently evaluating the potential impact of this guidance on our consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02,
Leases (Topic 842)
, which, among other amendments, requires lessees to recognize most leases on their balance sheet. Lessor accounting is largely unchanged. The ASU requires both quantitative and qualitative disclosure regarding key information about leasing arrangements from both lessees and lessors. The adoption of this ASU will be required on a modified retrospective basis beginning with TCF’s Quarterly Report on Form 10-Q for the quarter ending March 31, 2019. Early adoption is allowed. Management has started to implement this ASU which has included an initial evaluation of TCF's leasing contracts and activities. Management is currently evaluating the impact of electing the practical expedients, which would allow for existing leases to be accounted for consistent with current guidance, with the exception of the balance sheet recognition for lessees. Management will continue to evaluate the impact of this guidance on our consolidated financial statements.
In May 2014, the FASB issued ASU No. 2014-09,
Revenue from Contracts with Customers (Topic 606)
, which requires revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued ASU No. 2015-14,
Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date
, which delays the effective date of the new revenue recognition requirements in ASU No. 2014-09 by one year. In March 2016, the FASB issued ASU No. 2016-08,
Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)
, which clarifies how an entity should identify the unit of accounting for the principal versus agent evaluation, and how it should apply the control principle to certain types of arrangements by explaining what a principal controls before the specified good or service is transferred to the customer. In April 2016, the FASB issued ASU No. 2016-10,
Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing
, which amends the guidance for identifying performance obligations and accounting for a license which grants the right to use intellectual property. In May 2016, the FASB issued ASU No. 2016-12,
Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients
, which provides narrow-scope improvements to transition, collectability, noncash consideration and the presentation of sales and other similar taxes. In December 2016, the FASB issued ASU No. 2016-20,
Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers
, which provides guidance that affects narrow aspects of the guidance issued in ASU No. 2014-09. The adoption of these ASUs will be required using one of two retrospective application methods beginning with TCF’s Quarterly Report on Form 10-Q for the quarter ending March 31, 2018. TCF plans to apply the modified retrospective method with a cumulative-effect adjustment to opening retained earnings. Management is currently evaluating the potential impact of this guidance on our consolidated financial statements. In evaluating this standard, management has determined that the majority of revenue earned by the Company is from revenue streams not included in the scope of this standard and therefore management does not expect the new revenue recognition guidance to have a material impact on our consolidated financial statements. Management is also evaluating existing disclosures and the need to provide additional information as a result of adoption of these ASUs.
Legislative and Regulatory Developments
Federal and state legislation impose numerous legal and regulatory requirements on financial institutions. Future legislative or regulatory change, or changes in enforcement practices or court rulings, may have a dramatic and potentially adverse impact on TCF.
Forward-looking Information
Any statements contained in this Quarterly Report on Form 10-Q regarding the outlook for the Company's businesses and their respective markets, such as projections of future performance, targets, guidance, statements of the Company's plans and objectives, forecasts of market trends and other matters, are forward-looking statements based on the Company's assumptions and beliefs. Such statements may be identified by such words or phrases as "will likely result," "are expected to," "will continue," "outlook," "will benefit," "is anticipated," "estimate," "project," "management believes" or similar expressions. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those discussed in such statements and no assurance can be given that the results in any forward-looking statement will be achieved. For these statements, TCF claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Any forward-looking statement speaks only as of the date on which it is made, and we disclaim any obligation to subsequently revise any forward-looking statement to reflect events or circumstances after such date or to reflect the occurrence of anticipated or unanticipated events.
Certain factors could cause the Company's future results to differ materially from those expressed or implied in any forward-looking statements contained herein. These factors include the factors discussed in Part I, Item 1A of the Company's Annual Report on Form 10-K for the year ended
December 31, 2016
under the heading "Risk Factors", the factors discussed below and any other cautionary statements, written or oral, which may be made or referred to in connection with any such forward-looking statements. Since it is not possible to foresee all such factors, these factors should not be considered as complete or exhaustive.
Adverse Economic or Business Conditions; Competitive Conditions; Credit and Other Risks.
Deterioration in general economic and banking industry conditions, including those arising from government shutdowns, defaults, anticipated defaults or rating agency downgrades of sovereign debt (including debt of the U.S.), or increases in unemployment; adverse economic, business and competitive developments such as shrinking interest margins, reduced demand for financial services and loan and lease products, deposit outflows, increased deposit costs due to competition for deposit growth and evolving payment system developments, deposit account attrition or an inability to increase the number of deposit accounts; customers completing financial transactions without using a bank; adverse changes in credit quality and other risks posed by TCF's loan, lease, investment, securities held to maturity and securities available for sale portfolios, including declines in commercial or residential real estate values, changes in the allowance for loan and lease losses dictated by new market conditions or regulatory requirements, or the inability of home equity line borrowers to make increased payments caused by increased interest rates or amortization of principal; deviations from estimates of prepayment rates and fluctuations in interest rates that result in decreases in the value of assets such as interest-only strips that arise in connection with TCF's loan sales activity; interest rate risks resulting from fluctuations in prevailing interest rates or other factors that result in a mismatch between yields earned on TCF's interest-earning assets and the rates paid on its deposits and borrowings; foreign currency exchange risks; counterparty risk, including the risk of defaults by our counterparties or diminished availability of counterparties who satisfy our credit quality requirements; decreases in demand for the types of equipment that TCF leases or finances; the effect of any negative publicity.
Legislative and Regulatory Requirements.
New consumer protection and supervisory requirements and regulations, including those resulting from action by the Consumer Financial Protection Bureau ("CFPB") and changes in the scope of Federal preemption of state laws that could be applied to national banks and their subsidiaries; the imposition of requirements that adversely impact TCF's deposit, lending, loan collection and other business activities such as mortgage foreclosure moratorium laws, further regulation of financial institution campus banking programs, or new restrictions on loan and lease products; changes affecting customer account charges and fee income, including changes to interchange rates; regulatory actions or changes in customer opt-in preferences with respect to overdrafts, which may have an adverse impact on TCF; governmental regulations or judicial actions affecting the security interests of creditors; deficiencies in TCF's compliance programs, including under the Bank Secrecy Act in past or future periods, which may result in regulatory enforcement action including monetary penalties; increased health care costs including those resulting from health care reform; regulatory criticism and resulting enforcement actions or other adverse consequences such as increased capital requirements, higher deposit insurance assessments or monetary damages or penalties; heightened regulatory practices, requirements or expectations, including, but not limited to, requirements related to enterprise risk management, the Bank Secrecy Act and anti-money laundering compliance activity.
Earnings/Capital Risks and Constraints, Liquidity Risks.
Limitations on TCF's ability to pay dividends or to increase dividends because of financial performance deterioration, regulatory restrictions or limitations; increased deposit insurance premiums, special assessments or other costs related to adverse conditions in the banking industry; the impact on banks of regulatory reform, including additional capital, leverage, liquidity and risk management requirements or changes in the composition of qualifying regulatory capital; adverse changes in securities markets directly or indirectly affecting TCF's ability to sell assets or to fund its operations; diminished unsecured borrowing capacity resulting from TCF credit rating downgrades or unfavorable conditions in the credit markets that restrict or limit various funding sources; costs associated with new regulatory requirements or interpretive guidance including those relating to liquidity; uncertainties relating to future retail deposit account changes, including limitations on TCF's ability to predict customer behavior and the impact on TCF's fee revenues.
Branching Risk; Growth Risks.
Adverse developments affecting TCF's supermarket banking relationships or either of the primary supermarket chains in which TCF maintains supermarket branches; costs related to closing underperforming branches; inability to timely close underperforming branches due to long-term lease obligations; slower than anticipated growth in existing or acquired businesses; inability to successfully execute on TCF's growth strategy through acquisitions or expanding existing business relationships; failure to expand or diversify TCF's balance sheet through new or expanded programs or opportunities; failure to effectuate, and risks of claims related to, sales of loans; risks related to new product additions and addition of distribution channels (or entry into new markets) for existing products.
Technological and Operational Matters.
Technological or operational difficulties, loss or theft of information, cyber-attacks and other security breaches, counterparty failures and the possibility that deposit account losses (fraudulent checks, etc.) may increase; failure to keep pace with technological change, such as by failing to develop and maintain technology necessary to satisfy customer demands, costs and possible disruptions related to upgrading systems; the failure to attract and retain key employees.
Litigation Risks.
Results of litigation or government enforcement actions such as TCF's pending litigation with the CFPB and related matters, including class action litigation or enforcement actions concerning TCF's lending or deposit activities, including account opening/origination, servicing practices, fees or charges, employment practices, or checking account overdraft program "opt in" requirements; possible increases in indemnification obligations for certain litigation against Visa U.S.A.
Accounting, Audit, Tax and Insurance Matters.
Changes in accounting standards or interpretations of existing standards; federal or state monetary, fiscal or tax policies, including adoption of state legislation that would increase state taxes; ineffective internal controls; adverse federal, state or foreign tax assessments or findings in tax audits; lack of or inadequate insurance coverage for claims against TCF; potential for claims and legal action related to TCF's fiduciary responsibilities.