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. Its principal subsidiary, TCF National Bank ("TCF Bank"), is headquartered in Sioux Falls, South Dakota. TCF Bank operates bank branches in Illinois, Minnesota, Michigan, Colorado, Wisconsin, Arizona and South Dakota (TCF's "primary banking markets"). Through its direct subsidiaries, TCF Bank provides a full range of consumer-facing and commercial services, including consumer banking services, commercial banking services, commercial leasing and equipment financing, and commercial inventory financing.
The accompanying unaudited consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles ("GAAP") for interim financial information and in accordance with the instructions to Quarterly Report on Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission ("SEC"). Accordingly, the consolidated financial statements do not include all of the information and notes necessary for complete financial statements in conformity with GAAP. 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. 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 and for the year ended
December 31, 2018
.
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. All significant intercompany accounts and transactions have been eliminated in consolidation. Certain reclassifications have been made to prior period financial statements to conform to the current period presentation.
Note 2
.
Proposed Merger with Chemical Financial Corporation
On January 27, 2019, TCF entered into an Agreement and Plan of Merger (the "Merger Agreement") with Chemical Financial Corporation ("Chemical"), a bank holding company headquartered in Detroit, Michigan, with
$21.8 billion
in assets at
March 31, 2019
. The merger is expected to close in the late third or early fourth quarter of 2019, subject to satisfaction of customary closing conditions, including regulatory approvals and approval by the shareholders of TCF and Chemical. Under the terms of the Merger Agreement, which has been unanimously approved by the boards of directors of both companies, each outstanding share of TCF common stock will be converted into the right to receive, without interest,
0.5081
shares of Chemical common stock. Also, at the effective time of the merger, each outstanding share of the
5.70%
Series C non-cumulative perpetual preferred stock of TCF will be converted into the right to receive, without interest,
one
share of a newly created series of preferred stock of Chemical with equivalent rights and preferences (the "New Chemical Preferred Stock"). The shares of Chemical common stock and the New Chemical Preferred Stock to be issued in the merger will be listed on the Nasdaq. Following the completion of the merger, TCF and Chemical shareholders will own approximately
54%
and
46%
of the combined company, respectively, on a fully diluted basis.
Note 3
.
Summary of Significant Accounting Policies
Accounting policies in effect at
December 31, 2018
remain significantly unchanged and have been followed similarly as in previous periods except for the lease financing accounting policy. These accounting policy changes are the result of the adoption of Accounting Standards Update ("ASU") No. 2016-02,
Leases (Topic 842)
and related ASUs.
Leases
TCF enters into lease contracts as both a lessor and a lessee. A contract, or part of a contract, is considered a lease if it conveys the right to obtain substantially all of the economic benefits from, and the right to direct and use, an identified asset for a period of time in exchange for consideration. The determination of lease classification requires various judgments and estimates by management which may include the fair value of the equipment at lease inception, useful life of the equipment under lease, estimate of the lease residual value and collectability of minimum lease payments. Management has policies and procedures in place for the determination of lease classification and review of the related judgments and estimates for all leases.
As a lessor, TCF provides various types of lease financing that are classified for accounting purposes as direct financing, sales-type or operating leases. Leases that transfer substantially all of the benefits and risks of ownership to the lessee are classified as direct financing or sales-type leases and are recorded in loans and leases. Direct financing and sales-type leases are carried at the combined present value of future minimum lease payments and lease residual values.
Interest income on net investment in direct financing and sales-type leases is recognized using methods that approximate a level yield over the fixed, non-cancelable term of the lease, including pro rata rent payments received for the interim period until the lease contract commences and the fixed, non-cancelable lease term begins. Sales-type leases generate selling profit (loss), which is recognized on the commencement date by recording lease revenue net of lease cost. Lease revenue consists of the present value of the future minimum lease payments and lease cost consists of the leased equipment's net book value, less the present value of its residual.
Some lease financing contracts include a residual value component, which represents the estimated fair value of the leased equipment at the expiration of the initial term of the transaction. The estimation of residual values involves judgment regarding product and technology changes, customer behavior, shifts in supply and demand and other economic assumptions. TCF reviews residual assumptions when assessing potential impairment of the net investment in direct financing and sales-type leases each quarter. Decreases in the expected residual value are reflected through an increase in the provision for credit losses, which results in an increase to the allowance for loan and lease losses.
TCF may sell minimum lease payment receivables, primarily as a credit risk reduction tool, to third-party financial institutions at fixed rates, on a non-recourse basis, with its underlying equipment as collateral. For those transactions that qualify for sale accounting, the related lease cash flow stream and the non-recourse financing are derecognized. For those transactions that do not qualify for sale accounting, the underlying lease remains on TCF's Consolidated Statements of Financial Condition and non-recourse debt is recorded in the amount of the proceeds received. TCF retains servicing of these leases and bills, collects and remits funds to the third-party financial institution. Upon default by the lessee, the third-party financial institutions may take control of the underlying collateral which TCF would otherwise retain as residual value.
Leases that do not transfer substantially all benefits and risks of ownership to the lessee are classified as operating leases. Such leased equipment and related initial direct costs are included in other assets and depreciated to their estimated salvage value on a straight-line basis over the term of the lease. Lease financing equipment depreciation is recorded in non-interest expense. Operating lease payments received are recognized as lease income when due and recorded as a component of leasing and equipment finance non-interest income. An allowance for lease losses is not provided on operating leases.
See
Note 6
.
Loans and Leases
for further information.
As a lessee, TCF enters into contracts to lease real estate, information technology equipment and various other types of equipment. Leases that transfer substantially all of the benefits and risks of ownership to TCF are classified as finance leases, while all others are classified as operating leases. At lease commencement, a lease liability and right-of-use asset are calculated and recognized for both types of leases. The lease liability is equal to the present value of future minimum lease payments. The right-of-use asset is equal to the lease liability, plus any initial direct costs and prepaid lease payments, less any lease incentives received. Operating lease right-of-use assets are recorded in other assets and finance lease right-of-use assets are recorded in premises and equipment, net. The Company uses the appropriate term Federal Home Loan Bank ("FHLB") rate to determine the discount rate for the present value calculation of future minimum payments when an implicit rate is not known for a given lease. The lease term used in the calculation includes any options to extend that TCF is reasonably certain to exercise.
Subsequent to lease commencement, lease liabilities recorded for finance leases are measured using the effective interest rate method and the related right-of-use assets are amortized on a straight-line basis over the lease term. Interest expense and amortization expense are recorded separately in the income statement in interest expense on borrowings and occupancy and equipment non-interest expense, respectively. For operating leases, total lease cost is comprised of lease expense, short-term lease cost, variable lease cost and sublease income. Lease expense includes future minimum lease payments, which are recognized on a straight-line basis over the lease term, as well as common area maintenance charges, real estate taxes, insurance and other expenses, where applicable, which are expensed as incurred. Total lease cost for operating leases is recorded in occupancy and equipment non-interest expense.
See
Note 8
.
Operating Lease Right-of-Use Assets and Liabilities
for further information.
Recently Adopted Accounting Pronouncements
Effective January 1, 2019, the Company adopted ASU No. 2018-16,
Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes
, which permits the use of the OIS Rate based on SOFR as a U.S. benchmark interest rate for hedge accounting purposes under Topic 815 in addition to the interest rates on direct Treasury obligations of the U.S. government, the London Interbank Offered Rate ("LIBOR") swap rate, the OIS Rate based on the Fed Funds Effective Rate and the Securities Industry and Financial Markets Association Municipal Swap Rate. The adoption of this ASU was on a prospective basis for qualifying new or redesignated hedging relationships entered into on or after January 1, 2019. The adoption of this guidance did not have a material impact on our consolidated financial statements.
Effective January 1, 2019, the Company adopted ASU No. 2018-15,
Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force)
, which requires the decision to capitalize or expense implementation costs incurred in a cloud computing arrangement (i.e. a hosting arrangement) that is a service contract to follow the internal-use software guidance in Accounting Standards Codification ("ASC") 350-40. TCF's policy had been to expense these costs as incurred. The adoption of this ASU was on a prospective basis. The adoption of this guidance did not have a material impact on our consolidated financial statements.
Effective January 1, 2019, the Company adopted ASU No. 2018-07,
Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting
, which simplifies the accounting for share-based payments to nonemployees by aligning it more consistently with the accounting for share-based payments to employees. The new guidance in ASC 718 supersedes the guidance in ASC 505-50. The adoption of this ASU was on a modified retrospective basis with no cumulative effect adjustment recorded. The adoption of this guidance did not have a material impact on our consolidated financial statements.
Effective January 1, 2019, the Company adopted ASU No. 2017-11,
Earnings Per Share (Topic 260): Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features
, which simplifies the accounting for certain equity-linked financial instruments and embedded features with the down round features that reduce the exercise price when the pricing of a future round of financing is lower. The adoption of this ASU was on a modified retrospective basis. The adoption of this guidance did not have a material impact on our consolidated financial statements.
Effective January 1, 2019, the Company adopted ASU No. 2016-02,
Leases (Topic 842)
, which, along with 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. Effective January 1, 2019, the Company also adopted the following ASUs, which further amend the original lease guidance in Topic 842: (i) ASU No. 2017-13,
Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840) and Leases (Topic 842): Amendments to SEC Paragraphs
, which rescinds certain SEC Observer comments and staff announcements from the lease guidance and incorporates SEC staff announcements on the effect of a change in tax law on leveraged leases from ASC 840 into ASC 842; (ii) ASU No. 2018-01,
Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842
, which amends the new lease guidance to add an optional transition practical expedient that permits an entity to continue applying its current accounting policy for land easements that existed or expired before January 1, 2019; (iii) ASU No. 2018-10,
Codification Improvements to Topic 842, Leases
, which makes narrow scope improvements to the standard for specific issues; (iv) ASU No. 2018-11,
Leases (Topic 842): Targeted Improvements
, which provides an optional transition method allowing the standard to be applied at the adoption date and provides a practical expedient related to separating components of a contract for lessors; (v) ASU No. 2018-20,
Leases (Topic 842): Narrow-Scope Improvements for Lessors
, which allows lessors to elect to account for all sales taxes as lessee costs, instead of determining whether they are lessee or lessor costs in each individual jurisdiction. It requires lessor costs paid by lessees directly to third parties to be excluded from revenue, requires lessors to account for costs excluded from the consideration of a contract that are paid by the lessor as revenue and requires certain variable payments to be allocated (rather than recognized) to lease and nonlease components when changes occur in the facts and circumstances on which the variable payments are based; and (vi) ASU No. 2019-01,
Leases (Topic 842): Codification Improvements
, which allows lessors that are not manufacturers or dealers to calculate the fair value of an underlying asset as its cost less any volume or trade discount, requires lessors to classify principal payments received from direct financing and sales-type leases as investing activities in the statement of cash flows and clarifies that certain disclosure requirements that were explicitly excluded from annual reporting during the year of adoption are also excluded from interim reporting during the same year. These ASUs were adopted on a modified retrospective basis. Management elected the practical expedients and optional transition method, which allow for leases entered into prior to January 1, 2019 to be accounted for consistent with prior guidance. Management evaluated TCF's leasing contracts and activities, and developed methodologies and processes to estimate and account for the right-of-use assets and lease liabilities based on the present value of future lease payments. On January 1, 2019, the Company recorded right-of-use assets and lease liabilities totaling
$91.9 million
and
$112.8 million
, respectively. The impact to capital ratios as a result of increased risk-weighted assets is immaterial. The adoption of this guidance did not result in a material change to lessee expense recognition. The changes to lessor accounting, as well as changes in customer behavior driven by the adoption of these ASUs, impacts the results of TCF's leasing and equipment financing businesses, including earlier recognition of expense due to a narrower definition of initial direct costs and the timing of revenue recognition for certain leases, resulting in more revenue being deferred over the lease term.
Recently Issued Accounting Pronouncements
In November 2018, the Financial Accounting Standards Board (the "FASB") issued ASU No. 2018-18,
Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606
, which makes targeted improvements to the accounting for collaborative arrangements in response to questions raised as a result of the issuance of ASU 2014-09,
Revenue from Contracts with Customers (Topic 606)
. The adoption of this ASU will be required beginning with TCF's Quarterly Report on Form 10-Q for the quarter ending March 31, 2020. Early adoption is allowed. The adoption of this guidance will not have a material impact on our consolidated financial statements.
In October 2018, the FASB issued ASU No. 2018-17,
Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities
, which provides an elective exemption to private companies from applying variable interest entities ("VIE") guidance to all entities under common control if certain criteria are met. In addition, this ASU contains an amendment applicable to all entities which amends how a decision maker or service provider determines whether its fee is a variable interest in a VIE when a related party under common control also has an interest in the VIE. The adoption of this ASU will be required beginning with TCF's Quarterly Report on Form 10-Q for the quarter ending March 31, 2020. Early adoption is allowed. The adoption of this guidance will not have a material impact on our consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-13,
Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement
, which eliminates, adds and modifies certain disclosure requirements for fair value measurements. The adoption of this ASU will be required beginning with TCF's Quarterly Report on Form 10-Q for the quarter ending March 31, 2020. Certain of the amendments require prospective application, while the remainder require retrospective application. Early adoption is allowed either for the entire standard or only the provisions that eliminate or modify the requirements. 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, net investments in leases and purchased financial assets with credit deterioration. The ASU requires the use of a current expected credit loss ("CECL") approach to determine the allowance for credit losses for loans and held to maturity debt securities. CECL requires loss estimates for the remaining estimated life of the asset using historical loss data as well as reasonable and supportable forecasts based on current economic conditions. In November 2018, the FASB issued ASU No. 2018-19,
Codification Improvements to Topic 326, Financial Instruments - Credit Losses
, which clarifies that receivables arising from operating leases are not within the scope of Subtopic 326-20 and should be accounted for in accordance with Topic 842. In April 2019, the FASB issued ASU No. 2019-04,
Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments
, which clarifies and corrects certain unintended applications of the guidance contained in each of the amended Topics. The adoption of these ASUs 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. CECL represents a significant change in GAAP and may result in a material impact to our consolidated financial statements and capital ratios. The impact of these ASUs will depend on the composition of TCF's portfolios and general economic conditions at the date of adoption. Additionally, there are several implementation questions which could affect the adoption impact once resolved. TCF has established a governance structure to implement these ASUs and is developing the methodologies and models to be used upon adoption. Management will continue to develop and validate the new methodologies and models throughout 2019.
Note 4
.
Cash and Due from Banks
At
March 31, 2019
and
December 31, 2018
, TCF Bank was required by Federal Reserve regulations to maintain reserves of
$117.4 million
and
$106.2 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 obligations. 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
$34.1 million
and
$38.3 million
at
March 31, 2019
and
December 31, 2018
, respectively.
TCF had cash held in interest-bearing accounts of
$180.2 million
and
$307.8 million
at
March 31, 2019
and
December 31, 2018
, respectively.
Note 5
.
Debt Securities Available for Sale and Debt Securities Held to Maturity
Debt securities were as follows:
|
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|
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|
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|
|
|
|
|
|
|
|
|
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|
|
|
At March 31, 2019
|
|
At December 31, 2018
|
|
(In thousands)
|
Amortized Cost
|
|
Gross Unrealized Gains
|
|
Gross Unrealized Losses
|
|
Fair Value
|
|
Amortized Cost
|
|
Gross Unrealized Gains
|
|
Gross Unrealized Losses
|
|
Fair Value
|
|
Debt securities available for sale:
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|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government sponsored enterprises and federal agencies
|
$
|
2,566,426
|
|
|
$
|
31,187
|
|
|
$
|
13,102
|
|
|
$
|
2,584,511
|
|
|
$
|
1,930,696
|
|
|
$
|
9,222
|
|
|
$
|
26,728
|
|
|
$
|
1,913,190
|
|
|
Other
|
4
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
Obligations of states and political subdivisions
|
358,118
|
|
|
3,330
|
|
|
621
|
|
|
360,827
|
|
|
566,304
|
|
|
46
|
|
|
9,479
|
|
|
556,871
|
|
|
Total debt securities available for sale
|
$
|
2,924,548
|
|
|
$
|
34,517
|
|
|
$
|
13,723
|
|
|
$
|
2,945,342
|
|
|
$
|
2,497,004
|
|
|
$
|
9,268
|
|
|
$
|
36,207
|
|
|
$
|
2,470,065
|
|
|
Debt securities held to maturity:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government sponsored enterprises and federal agencies
|
$
|
144,403
|
|
|
$
|
3,755
|
|
|
$
|
548
|
|
|
$
|
147,610
|
|
|
$
|
146,052
|
|
|
$
|
1,460
|
|
|
$
|
1,045
|
|
|
$
|
146,467
|
|
|
Other securities
|
3,621
|
|
|
—
|
|
|
—
|
|
|
3,621
|
|
|
2,800
|
|
|
—
|
|
|
—
|
|
|
2,800
|
|
|
Total debt securities held to maturity
|
$
|
148,024
|
|
|
$
|
3,755
|
|
|
$
|
548
|
|
|
$
|
151,231
|
|
|
$
|
148,852
|
|
|
$
|
1,460
|
|
|
$
|
1,045
|
|
|
$
|
149,267
|
|
At
March 31, 2019
and
December 31, 2018
, mortgage-backed debt securities with a carrying value of
$1.5 million
and
$1.6 million
, respectively, were pledged as collateral to secure certain deposits and borrowings.
We have assessed each debt security with unrealized losses included in the table above for credit impairment. As part of that assessment we evaluated and concluded that it is more likely than not that we will not be required to and do not intend to sell any of the debt securities prior to recovery of the amortized cost. Unrealized losses on debt securities available for sale and debt securities held to maturity were primarily due to changes in interest rates.
Net gains (losses) on debt securities were
$451 thousand
and
$63 thousand
for the
first quarter
of
2019
and
2018
, respectively. During the
first quarter
of
2019
, TCF sold
$205.4 million
of debt securities available for sale and recognized a net gain of
$447 thousand
. There were
no
sales of debt securities available for sale during the
first quarter
of
2018
. There were
no
impairment charges on debt securities available for sale and debt securities held to maturity during the
first quarter
of
2019
and
2018
. The net gains (losses) on debt securities for both periods include recoveries on previously impaired debt securities held to maturity.
Gross unrealized losses and fair value of debt securities available for sale and debt securities held to maturity aggregated by investment category and the length of time the securities were in a continuous loss position were as follows:
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|
|
|
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|
|
At March 31, 2019
|
|
|
Less than 12 months
|
|
12 months or more
|
|
Total
|
|
(In thousands)
|
Fair Value
|
|
Unrealized Losses
|
|
Fair Value
|
|
Unrealized Losses
|
|
Fair Value
|
|
Unrealized Losses
|
|
Debt securities available for sale:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government sponsored enterprises and federal agencies
|
$
|
4,943
|
|
|
$
|
4
|
|
|
$
|
748,535
|
|
|
$
|
13,098
|
|
|
$
|
753,478
|
|
|
$
|
13,102
|
|
|
Obligations of states and political subdivisions
|
—
|
|
|
—
|
|
|
77,036
|
|
|
621
|
|
|
77,036
|
|
|
621
|
|
|
Total debt securities available for sale
|
$
|
4,943
|
|
|
$
|
4
|
|
|
$
|
825,571
|
|
|
$
|
13,719
|
|
|
$
|
830,514
|
|
|
$
|
13,723
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities held to maturity:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government sponsored enterprises and federal agencies
|
$
|
107
|
|
|
$
|
3
|
|
|
$
|
26,871
|
|
|
$
|
545
|
|
|
$
|
26,978
|
|
|
$
|
548
|
|
|
Total debt securities held to maturity
|
$
|
107
|
|
|
$
|
3
|
|
|
$
|
26,871
|
|
|
$
|
545
|
|
|
$
|
26,978
|
|
|
$
|
548
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
At December 31, 2018
|
|
|
Less than 12 months
|
|
12 months or more
|
|
Total
|
|
(In thousands)
|
Fair Value
|
|
Unrealized Losses
|
|
Fair Value
|
|
Unrealized Losses
|
|
Fair Value
|
|
Unrealized Losses
|
|
Debt securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government sponsored enterprises and federal agencies
|
$
|
102,709
|
|
|
$
|
184
|
|
|
$
|
838,482
|
|
|
$
|
26,544
|
|
|
$
|
941,191
|
|
|
$
|
26,728
|
|
|
Obligations of states and political subdivisions
|
3,620
|
|
|
—
|
|
|
526,817
|
|
|
9,479
|
|
|
530,437
|
|
|
9,479
|
|
|
Total debt securities available for sale
|
$
|
106,329
|
|
|
$
|
184
|
|
|
$
|
1,365,299
|
|
|
$
|
36,023
|
|
|
$
|
1,471,628
|
|
|
$
|
36,207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities held to maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government sponsored enterprises and federal agencies
|
$
|
3,074
|
|
|
$
|
14
|
|
|
$
|
31,738
|
|
|
$
|
1,031
|
|
|
$
|
34,812
|
|
|
$
|
1,045
|
|
|
Total debt securities held to maturity
|
$
|
3,074
|
|
|
$
|
14
|
|
|
$
|
31,738
|
|
|
$
|
1,031
|
|
|
$
|
34,812
|
|
|
$
|
1,045
|
|
The amortized cost and fair value of debt securities available for sale and debt securities held to maturity by final contractual maturity were as follows. The final contractual maturities do not consider possible prepayments and therefore expected maturities may differ because borrowers may have the right to prepay.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At March 31, 2019
|
|
At December 31, 2018
|
|
(In thousands)
|
Amortized Cost
|
|
Fair Value
|
|
Amortized Cost
|
|
Fair Value
|
|
Debt securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
Due in 1-5 years
|
$
|
21,220
|
|
|
$
|
21,241
|
|
|
$
|
24,464
|
|
|
$
|
24,375
|
|
|
Due in 5-10 years
|
367,273
|
|
|
369,916
|
|
|
509,832
|
|
|
503,768
|
|
|
Due after 10 years
|
2,536,055
|
|
|
2,554,185
|
|
|
1,962,708
|
|
|
1,941,922
|
|
|
Total debt securities available for sale
|
$
|
2,924,548
|
|
|
$
|
2,945,342
|
|
|
$
|
2,497,004
|
|
|
$
|
2,470,065
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities held to maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Due in 1-5 years
|
$
|
3,150
|
|
|
$
|
3,150
|
|
|
$
|
2,400
|
|
|
$
|
2,400
|
|
|
Due in 5-10 years
|
428
|
|
|
431
|
|
|
430
|
|
|
432
|
|
|
Due after 10 years
|
144,446
|
|
|
147,650
|
|
|
146,022
|
|
|
146,435
|
|
|
Total debt securities held to maturity
|
$
|
148,024
|
|
|
$
|
151,231
|
|
|
$
|
148,852
|
|
|
$
|
149,267
|
|
Interest income attributable to debt securities available for sale was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended March 31,
|
|
(In thousands)
|
2019
|
|
2018
|
|
Taxable interest income
|
$
|
16,131
|
|
|
$
|
5,813
|
|
|
Tax-exempt interest income
|
2,684
|
|
|
4,310
|
|
|
Total interest income
|
$
|
18,815
|
|
|
$
|
10,123
|
|
Note 6
.
Loans and Leases
Loans and leases were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
At March 31, 2019
|
|
At December 31, 2018
|
|
Consumer real estate:
|
|
|
|
|
|
|
First mortgage lien
|
$
|
2,480,750
|
|
|
$
|
2,444,380
|
|
|
Junior lien
|
2,872,807
|
|
|
2,965,960
|
|
|
Total consumer real estate
|
5,353,557
|
|
|
5,410,340
|
|
|
Commercial:
|
|
|
|
|
|
|
Commercial real estate:
|
|
|
|
|
|
|
Permanent
|
2,564,187
|
|
|
2,510,583
|
|
|
Construction and development
|
401,455
|
|
|
397,564
|
|
|
Total commercial real estate
|
2,965,642
|
|
|
2,908,147
|
|
|
Commercial business
|
918,464
|
|
|
943,156
|
|
|
Total commercial
|
3,884,106
|
|
|
3,851,303
|
|
|
Leasing and equipment finance
|
4,674,309
|
|
|
4,699,740
|
|
|
Inventory finance
|
3,749,146
|
|
|
3,107,356
|
|
|
Auto finance
|
1,704,614
|
|
|
1,982,277
|
|
|
Other
|
17,943
|
|
|
21,295
|
|
|
Total loans and leases
(1)
|
$
|
19,383,675
|
|
|
$
|
19,072,311
|
|
|
|
|
|
(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
$(5.4) million
and
$(2.2) million
at
March 31, 2019
and
December 31, 2018
, respectively.
|
Leasing and Equipment Finance Portfolio
Included in leasing and equipment finance loans and leases were
$2.6 billion
and
$2.5 billion
of direct financing and sales-type leases at
March 31, 2019
and
December 31, 2018
, respectively. Effective January 1, 2019, the Company adopted ASU No. 2016-02,
Leases (Topic 842)
and related ASUs on a modified retrospective basis, electing the practical expedients and optional transition method. As such, the following leasing disclosures include information at or for the quarter ended
March 31, 2019
.
The components of the net investment in direct financing and sales-type leases were as follows:
|
|
|
|
|
|
|
|
(In thousands)
|
At March 31, 2019
|
|
Carrying amount
|
$
|
2,627,699
|
|
|
Unguaranteed residual assets
|
139,184
|
|
|
Net direct fees and costs and unearned income
|
(215,539
|
)
|
|
Total net investment in direct financing and sales-type leases
|
$
|
2,551,344
|
|
The carrying amount of the direct financing and sales-type leases subject to residual value guarantees was
$249.7 million
at
March 31, 2019
.
The components of total lease income were as follows:
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
(In thousands)
|
March 31, 2019
|
|
Interest income - loans and leases:
|
|
|
Interest income on net investment in direct financing and sales-type leases
|
$
|
31,284
|
|
|
|
|
|
Leasing and equipment finance non-interest income:
|
|
|
Lease income from operating lease payments
|
25,250
|
|
|
Profit (loss) recorded on commencement date on sales-type leases
|
7,057
|
|
|
Other
(1)
|
8,832
|
|
|
Total leasing and equipment finance non-interest income
|
41,139
|
|
|
Total lease income
|
$
|
72,423
|
|
|
|
|
|
(1)
|
Other leasing and equipment finance non-interest income consists of gains (losses) on sales of leased equipment, fees and service charges on leases and gains (losses) on sales of leases.
|
Lease financing equipment depreciation on equipment leased to others was
$19.3 million
for the
first
quarter of
2019
. The net book value of equipment leased to others and related initial direct costs under operating leases was
$305.4 million
at
March 31, 2019
.
Undiscounted future minimum lease payments receivable for direct financing and sales-type leases, and a reconciliation to the carrying amount recorded at
March 31, 2019
were as follows:
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
2019
|
$
|
716,804
|
|
|
2020
|
736,501
|
|
|
2021
|
532,046
|
|
|
2022
|
320,015
|
|
|
2023
|
165,397
|
|
|
Thereafter
|
65,227
|
|
|
Equipment under leases not yet commenced
|
76,469
|
|
|
Total undiscounted future minimum lease payments receivable for direct financing and sales-type leases
|
2,612,459
|
|
|
Third-party residual value guarantees
|
15,240
|
|
|
Total carrying amount of direct financing and sales-type leases
|
$
|
2,627,699
|
|
Undiscounted future minimum lease payments expected to be received for operating leases at
March 31, 2019
were as follows:
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
2019
|
$
|
57,122
|
|
|
2020
|
61,709
|
|
|
2021
|
40,610
|
|
|
2022
|
20,497
|
|
|
2023
|
7,721
|
|
|
Thereafter
|
3,783
|
|
|
Total undiscounted future minimum lease payments
|
$
|
191,442
|
|
Loan Sales
During the
first quarter
of
2019
and
2018
, TCF sold
$219.1 million
and
$266.3 million
, respectively, of consumer real estate loans, received cash of
$227.6 million
and
$272.9 million
, respectively, and recognized net gains of
$8.0 million
and
$9.1 million
, respectively. Related to these sales, TCF retained interest-only strips of
$0.8 million
and
$3.3 million
during the
first
quarter of
2019
and
2018
, respectively. TCF generally retains servicing on loans sold.
No
servicing assets or liabilities related to consumer real estate loans were recorded within TCF's Consolidated Statements of Financial Condition at
March 31, 2019
and
December 31, 2018
, as the contractual servicing fees are adequate to compensate TCF for its servicing responsibilities based on the amount demanded by the marketplace.
Total interest-only strips and the contractual liabilities related to loan sales were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
At March 31, 2019
|
|
At December 31, 2018
|
|
Total interest-only strips
|
$
|
16,163
|
|
|
$
|
16,835
|
|
|
Contractual liabilities related to consumer real estate loan sales
|
871
|
|
|
1,321
|
|
TCF recorded
no
impairment charges on interest-only strips during the
first
quarter of
2019
and
$603 thousand
during the same period in
2018
.
Note 7
.
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 Quarter Ended March 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period
|
$
|
44,866
|
|
|
$
|
41,182
|
|
|
$
|
23,791
|
|
|
$
|
12,456
|
|
|
$
|
34,329
|
|
|
$
|
822
|
|
|
$
|
157,446
|
|
|
Charge-offs
|
(1,548
|
)
|
|
(2,100
|
)
|
|
(2,946
|
)
|
|
(2,519
|
)
|
|
(13,035
|
)
|
|
(2,283
|
)
|
|
(24,431
|
)
|
|
Recoveries
|
1,100
|
|
|
12
|
|
|
476
|
|
|
432
|
|
|
2,853
|
|
|
904
|
|
|
5,777
|
|
|
Net (charge-offs) recoveries
|
(448
|
)
|
|
(2,088
|
)
|
|
(2,470
|
)
|
|
(2,087
|
)
|
|
(10,182
|
)
|
|
(1,379
|
)
|
|
(18,654
|
)
|
|
Provision for credit losses
|
371
|
|
|
(4,383
|
)
|
|
3,524
|
|
|
3,723
|
|
|
5,707
|
|
|
1,180
|
|
|
10,122
|
|
|
Other
(1)
|
(969
|
)
|
|
—
|
|
|
(13
|
)
|
|
40
|
|
|
—
|
|
|
—
|
|
|
(942
|
)
|
|
Balance, end of period
|
$
|
43,820
|
|
|
$
|
34,711
|
|
|
$
|
24,832
|
|
|
$
|
14,132
|
|
|
$
|
29,854
|
|
|
$
|
623
|
|
|
$
|
147,972
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At or For the Quarter Ended March 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period
|
$
|
47,168
|
|
|
$
|
37,195
|
|
|
$
|
22,528
|
|
|
$
|
13,233
|
|
|
$
|
50,225
|
|
|
$
|
692
|
|
|
$
|
171,041
|
|
|
Charge-offs
|
(2,154
|
)
|
|
—
|
|
|
(1,956
|
)
|
|
(549
|
)
|
|
(13,441
|
)
|
|
(1,765
|
)
|
|
(19,865
|
)
|
|
Recoveries
|
1,037
|
|
|
14
|
|
|
616
|
|
|
140
|
|
|
2,785
|
|
|
1,122
|
|
|
5,714
|
|
|
Net (charge-offs) recoveries
|
(1,117
|
)
|
|
14
|
|
|
(1,340
|
)
|
|
(409
|
)
|
|
(10,656
|
)
|
|
(643
|
)
|
|
(14,151
|
)
|
|
Provision for credit losses
|
2,104
|
|
|
(11
|
)
|
|
1,996
|
|
|
512
|
|
|
6,253
|
|
|
514
|
|
|
11,368
|
|
|
Other
(1)
|
(470
|
)
|
|
—
|
|
|
(2
|
)
|
|
(83
|
)
|
|
—
|
|
|
—
|
|
|
(555
|
)
|
|
Balance, end of period
|
$
|
47,685
|
|
|
$
|
37,198
|
|
|
$
|
23,182
|
|
|
$
|
13,253
|
|
|
$
|
45,822
|
|
|
$
|
563
|
|
|
$
|
167,703
|
|
|
|
|
|
(1)
|
Primarily includes the transfer of the allowance for loan and lease losses to loans and leases held for sale.
|
The allowance for loan and lease losses and loans and leases outstanding by type of allowance methodology were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At March 31, 2019
|
|
(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
|
$
|
26,402
|
|
|
$
|
32,711
|
|
|
$
|
19,988
|
|
|
$
|
14,009
|
|
|
$
|
29,699
|
|
|
$
|
623
|
|
|
$
|
123,432
|
|
|
Individually evaluated for impairment
|
17,418
|
|
|
2,000
|
|
|
4,844
|
|
|
123
|
|
|
155
|
|
|
—
|
|
|
24,540
|
|
|
Total
|
$
|
43,820
|
|
|
$
|
34,711
|
|
|
$
|
24,832
|
|
|
$
|
14,132
|
|
|
$
|
29,854
|
|
|
$
|
623
|
|
|
$
|
147,972
|
|
|
Loans and leases outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collectively evaluated for impairment
|
$
|
5,238,404
|
|
|
$
|
3,852,073
|
|
|
$
|
4,642,913
|
|
|
$
|
3,748,177
|
|
|
$
|
1,690,996
|
|
|
$
|
17,942
|
|
|
$
|
19,190,505
|
|
|
Individually evaluated for impairment
|
115,153
|
|
|
32,033
|
|
|
28,277
|
|
|
969
|
|
|
13,618
|
|
|
1
|
|
|
190,051
|
|
|
Loans acquired with deteriorated credit quality
|
—
|
|
|
—
|
|
|
3,119
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,119
|
|
|
Total
|
$
|
5,353,557
|
|
|
$
|
3,884,106
|
|
|
$
|
4,674,309
|
|
|
$
|
3,749,146
|
|
|
$
|
1,704,614
|
|
|
$
|
17,943
|
|
|
$
|
19,383,675
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2018
|
|
(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
|
$
|
22,134
|
|
|
$
|
36,411
|
|
|
$
|
20,108
|
|
|
$
|
11,621
|
|
|
$
|
34,157
|
|
|
$
|
822
|
|
|
$
|
125,253
|
|
|
Individually evaluated for impairment
|
22,732
|
|
|
4,771
|
|
|
3,683
|
|
|
835
|
|
|
172
|
|
|
—
|
|
|
32,193
|
|
|
Total
|
$
|
44,866
|
|
|
$
|
41,182
|
|
|
$
|
23,791
|
|
|
$
|
12,456
|
|
|
$
|
34,329
|
|
|
$
|
822
|
|
|
$
|
157,446
|
|
|
Loans and leases outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collectively evaluated for impairment
|
$
|
5,295,817
|
|
|
$
|
3,815,422
|
|
|
$
|
4,672,168
|
|
|
$
|
3,099,073
|
|
|
$
|
1,968,645
|
|
|
$
|
21,291
|
|
|
$
|
18,872,416
|
|
|
Individually evaluated for impairment
|
114,523
|
|
|
35,881
|
|
|
23,755
|
|
|
8,283
|
|
|
13,632
|
|
|
4
|
|
|
196,078
|
|
|
Loans acquired with deteriorated credit quality
|
—
|
|
|
—
|
|
|
3,817
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,817
|
|
|
Total
|
$
|
5,410,340
|
|
|
$
|
3,851,303
|
|
|
$
|
4,699,740
|
|
|
$
|
3,107,356
|
|
|
$
|
1,982,277
|
|
|
$
|
21,295
|
|
|
$
|
19,072,311
|
|
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. Loans and leases that are over 60 days delinquent have a higher potential to become non-accrual and generally are a leading indicator for future charge-off trends. TCF's accruing and non-accrual loans and leases were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At March 31, 2019
|
|
(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
|
$
|
2,437,608
|
|
|
$
|
3,171
|
|
|
$
|
1,717
|
|
|
$
|
2,442,496
|
|
|
$
|
38,254
|
|
|
$
|
2,480,750
|
|
|
Junior lien
|
2,843,169
|
|
|
2,374
|
|
|
—
|
|
|
2,845,543
|
|
|
27,264
|
|
|
2,872,807
|
|
|
Total consumer real estate
|
5,280,777
|
|
|
5,545
|
|
|
1,717
|
|
|
5,288,039
|
|
|
65,518
|
|
|
5,353,557
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
2,965,035
|
|
|
—
|
|
|
—
|
|
|
2,965,035
|
|
|
607
|
|
|
2,965,642
|
|
|
Commercial business
|
911,542
|
|
|
—
|
|
|
—
|
|
|
911,542
|
|
|
6,922
|
|
|
918,464
|
|
|
Total commercial
|
3,876,577
|
|
|
—
|
|
|
—
|
|
|
3,876,577
|
|
|
7,529
|
|
|
3,884,106
|
|
|
Leasing and equipment finance
|
4,641,613
|
|
|
6,490
|
|
|
2,852
|
|
|
4,650,955
|
|
|
20,235
|
|
|
4,671,190
|
|
|
Inventory finance
|
3,748,110
|
|
|
67
|
|
|
—
|
|
|
3,748,177
|
|
|
969
|
|
|
3,749,146
|
|
|
Auto finance
|
1,689,055
|
|
|
4,196
|
|
|
2,330
|
|
|
1,695,581
|
|
|
9,033
|
|
|
1,704,614
|
|
|
Other
|
17,922
|
|
|
10
|
|
|
10
|
|
|
17,942
|
|
|
1
|
|
|
17,943
|
|
|
Subtotal
|
19,254,054
|
|
|
16,308
|
|
|
6,909
|
|
|
19,277,271
|
|
|
103,285
|
|
|
19,380,556
|
|
|
Portfolios acquired with deteriorated credit quality
|
2,909
|
|
|
—
|
|
|
210
|
|
|
3,119
|
|
|
—
|
|
|
3,119
|
|
|
Total
|
$
|
19,256,963
|
|
|
$
|
16,308
|
|
|
$
|
7,119
|
|
|
$
|
19,280,390
|
|
|
$
|
103,285
|
|
|
$
|
19,383,675
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2018
|
|
(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
|
$
|
2,403,391
|
|
|
$
|
3,281
|
|
|
$
|
1,276
|
|
|
$
|
2,407,948
|
|
|
$
|
36,432
|
|
|
$
|
2,444,380
|
|
|
Junior lien
|
2,942,414
|
|
|
1,213
|
|
|
—
|
|
|
2,943,627
|
|
|
22,333
|
|
|
2,965,960
|
|
|
Total consumer real estate
|
5,345,805
|
|
|
4,494
|
|
|
1,276
|
|
|
5,351,575
|
|
|
58,765
|
|
|
5,410,340
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
2,903,629
|
|
|
—
|
|
|
—
|
|
|
2,903,629
|
|
|
4,518
|
|
|
2,908,147
|
|
|
Commercial business
|
932,648
|
|
|
1
|
|
|
—
|
|
|
932,649
|
|
|
10,507
|
|
|
943,156
|
|
|
Total commercial
|
3,836,277
|
|
|
1
|
|
|
—
|
|
|
3,836,278
|
|
|
15,025
|
|
|
3,851,303
|
|
|
Leasing and equipment finance
|
4,670,021
|
|
|
7,996
|
|
|
2,642
|
|
|
4,680,659
|
|
|
15,264
|
|
|
4,695,923
|
|
|
Inventory finance
|
3,098,763
|
|
|
310
|
|
|
—
|
|
|
3,099,073
|
|
|
8,283
|
|
|
3,107,356
|
|
|
Auto finance
|
1,962,042
|
|
|
8,326
|
|
|
3,331
|
|
|
1,973,699
|
|
|
8,578
|
|
|
1,982,277
|
|
|
Other
|
21,264
|
|
|
11
|
|
|
17
|
|
|
21,292
|
|
|
3
|
|
|
21,295
|
|
|
Subtotal
|
18,934,172
|
|
|
21,138
|
|
|
7,266
|
|
|
18,962,576
|
|
|
105,918
|
|
|
19,068,494
|
|
|
Portfolios acquired with deteriorated credit quality
|
3,639
|
|
|
—
|
|
|
178
|
|
|
3,817
|
|
|
—
|
|
|
3,817
|
|
|
Total
|
$
|
18,937,811
|
|
|
$
|
21,138
|
|
|
$
|
7,444
|
|
|
$
|
18,966,393
|
|
|
$
|
105,918
|
|
|
$
|
19,072,311
|
|
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended March 31,
|
|
(In thousands)
|
2019
|
|
2018
|
|
Contractual interest due on non-accrual loans and leases
|
$
|
2,584
|
|
|
$
|
2,927
|
|
|
Interest income recognized on non-accrual loans and leases
|
223
|
|
|
458
|
|
|
Unrecognized interest income
|
$
|
2,361
|
|
|
$
|
2,469
|
|
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 March 31, 2019
|
|
At December 31, 2018
|
|
0-59 days delinquent and accruing
|
$
|
3,044
|
|
|
$
|
3,306
|
|
|
Non-accrual
|
11,359
|
|
|
9,046
|
|
|
Total consumer real estate loans to customers in bankruptcy
|
$
|
14,403
|
|
|
$
|
12,352
|
|
Loan Modifications for Borrowers with Financial Difficulties
Included within loans and leases in the previous accruing and non-accrual loans and leases 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. When a loan is modified as a TDR, principal balances are generally not forgiven. All loans classified as TDR loans are considered to be impaired. For purposes of this disclosure, purchased credit impaired ("PCI") loans have been excluded.
TDR loans were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At March 31, 2019
|
|
At December 31, 2018
|
|
(In thousands)
|
Accruing
TDR Loans
|
|
Non-accrual TDR Loans
|
|
Total
TDR Loans
|
|
Accruing
TDR Loans
|
|
Non-accrual TDR Loans
|
|
Total
TDR Loans
|
|
Consumer real estate
|
$
|
79,471
|
|
|
$
|
17,391
|
|
|
$
|
96,862
|
|
|
$
|
80,739
|
|
|
$
|
16,192
|
|
|
$
|
96,931
|
|
|
Commercial
|
7,958
|
|
|
607
|
|
|
8,565
|
|
|
4,174
|
|
|
3,946
|
|
|
8,120
|
|
|
Leasing and equipment finance
|
8,042
|
|
|
1,931
|
|
|
9,973
|
|
|
8,491
|
|
|
1,754
|
|
|
10,245
|
|
|
Inventory finance
|
—
|
|
|
205
|
|
|
205
|
|
|
—
|
|
|
453
|
|
|
453
|
|
|
Auto finance
|
4,585
|
|
|
6,956
|
|
|
11,541
|
|
|
5,054
|
|
|
6,362
|
|
|
11,416
|
|
|
Other
|
1
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
—
|
|
|
1
|
|
|
Total
|
$
|
100,057
|
|
|
$
|
27,090
|
|
|
$
|
127,147
|
|
|
$
|
98,459
|
|
|
$
|
28,707
|
|
|
$
|
127,166
|
|
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
March 31, 2019
,
$8.4 million
, or
48.5%
, were loans discharged in Chapter 7 bankruptcy that were not reaffirmed by the borrower, of which
60.4%
were current. Of the non-accrual TDR balance at
December 31, 2018
,
$7.8 million
, or
48.2%
, were loans discharged in Chapter 7 bankruptcy that were not reaffirmed by the borrower, of which
56.5%
were current. All eligible loans are re-aged to current delinquency status upon modification.
The allowance on accruing consumer real estate TDR loans was
$14.7 million
, or
18.5%
of the outstanding balance, at
March 31, 2019
and
$15.5 million
, or
19.2%
of the outstanding balance, at
December 31, 2018
. At
March 31, 2019
and
December 31, 2018
,
0.1%
and
0.3%
, respectively, of accruing consumer real estate TDR loans were
60
days or more delinquent. The allowance on accruing TDRs and the percentage of accruing TDR loans that were
60
days or more delinquent were not material for the remaining classes of finance receivables at
March 31, 2019
and
December 31, 2018
.
Unfunded commitments to consumer real estate loans classified as TDRs were
$0.5 million
and
$0.6 million
at
March 31, 2019
and
December 31, 2018
, respectively. At
March 31, 2019
and
December 31, 2018
,
no
additional funds were committed to the remaining classes of finance receivables classified as TDRs.
Loan modifications to troubled borrowers are no longer disclosed 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.
Interest income on TDR loans is recognized based on the restructured terms. Unrecognized interest represents the financial impact of TDR loans and is the difference between interest income recognized on accruing TDR loans and the contractual interest that would have been recorded had the loans performed in accordance with their original contractual terms. The following table summarizes the financial effects of consumer real estate accruing TDR loans. The financial effects of TDR loans for the remaining classes of finance receivables were not material for the
first quarter
of
2019
and
2018
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended March 31,
|
|
|
2019
|
|
2018
|
|
(In thousands)
|
Contractual Interest Due
|
|
Interest Income
|
|
Unrecognized Interest
|
|
Contractual Interest Due
|
|
Interest Income
|
|
Unrecognized Interest
|
|
Consumer real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgage lien
|
$
|
968
|
|
|
$
|
579
|
|
|
$
|
389
|
|
|
$
|
1,066
|
|
|
$
|
640
|
|
|
$
|
426
|
|
|
Junior lien
|
374
|
|
|
256
|
|
|
118
|
|
|
424
|
|
|
290
|
|
|
134
|
|
|
Total consumer real estate
|
$
|
1,342
|
|
|
$
|
835
|
|
|
$
|
507
|
|
|
$
|
1,490
|
|
|
$
|
930
|
|
|
$
|
560
|
|
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 periods presented that were modified during the respective reporting period or within one year of the beginning of the respective reporting period.
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended March 31,
|
|
(In thousands)
|
2019
|
|
2018
|
|
Defaulted TDR loan balances modified during the applicable period:
(1)
|
|
|
|
|
Consumer real estate:
|
|
|
|
|
|
|
First mortgage lien
|
$
|
190
|
|
|
$
|
1,480
|
|
|
Junior lien
|
94
|
|
|
28
|
|
|
Total consumer real estate
|
284
|
|
|
1,508
|
|
|
Commercial business
|
—
|
|
|
4,697
|
|
|
Auto finance
|
536
|
|
|
364
|
|
|
Defaulted TDR loan balances modified during the applicable period
|
$
|
820
|
|
|
$
|
6,569
|
|
|
|
|
|
(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.
|
Impaired Loans and Leases
Effective January 1, 2019, in conjunction with the adoption of ASU No. 2016-02,
Leases (Topic 842)
and related ASUs, TCF considers impaired loans and leases to include non-accrual commercial loans, non-accrual leasing and equipment finance loans and leases and non-accrual inventory finance loans, as well as all TDR loans. Previously, TCF did not include impaired leases within the following tables. For purposes of this disclosure, PCI loans have been excluded. Non-accrual impaired loans and leases, 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 table, the balance of impaired loans and leases 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 and leases at
March 31, 2019
and information on impaired loans at
December 31, 2018
was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At March 31, 2019
|
|
At December 31, 2018
|
|
(In thousands)
|
Unpaid
Contractual
Balance
|
|
Loan and Lease Balance
|
|
Related
Allowance
Recorded
|
|
Unpaid
Contractual
Balance
|
|
Loan Balance
|
|
Related
Allowance
Recorded
|
|
Impaired loans and leases with an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgage lien
|
$
|
68,890
|
|
|
$
|
65,360
|
|
|
$
|
14,322
|
|
|
$
|
64,529
|
|
|
$
|
61,744
|
|
|
$
|
16,848
|
|
|
Junior lien
|
30,213
|
|
|
28,910
|
|
|
3,096
|
|
|
25,861
|
|
|
24,264
|
|
|
5,656
|
|
|
Total consumer real estate
|
99,103
|
|
|
94,270
|
|
|
17,418
|
|
|
90,390
|
|
|
86,008
|
|
|
22,504
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
4,872
|
|
|
4,416
|
|
|
438
|
|
|
4,905
|
|
|
4,474
|
|
|
1,108
|
|
|
Commercial business
|
6,754
|
|
|
6,751
|
|
|
1,562
|
|
|
12,317
|
|
|
9,192
|
|
|
3,663
|
|
|
Total commercial
|
11,626
|
|
|
11,167
|
|
|
2,000
|
|
|
17,222
|
|
|
13,666
|
|
|
4,771
|
|
|
Leasing and equipment finance
|
28,277
|
|
|
28,277
|
|
|
4,844
|
|
|
15,763
|
|
|
15,763
|
|
|
1,856
|
|
|
Inventory finance
|
294
|
|
|
295
|
|
|
123
|
|
|
7,364
|
|
|
7,371
|
|
|
835
|
|
|
Auto finance
|
1,104
|
|
|
867
|
|
|
155
|
|
|
917
|
|
|
646
|
|
|
81
|
|
|
Other
|
1
|
|
|
1
|
|
|
—
|
|
|
2
|
|
|
1
|
|
|
—
|
|
|
Total impaired loans and leases with an allowance recorded
|
140,405
|
|
|
134,877
|
|
|
24,540
|
|
|
131,658
|
|
|
123,455
|
|
|
30,047
|
|
|
Impaired loans and leases without an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgage lien
|
21,298
|
|
|
18,872
|
|
|
—
|
|
|
11,829
|
|
|
9,586
|
|
|
—
|
|
|
Junior lien
|
12,672
|
|
|
2,011
|
|
|
—
|
|
|
10,427
|
|
|
1,337
|
|
|
—
|
|
|
Total consumer real estate
|
33,970
|
|
|
20,883
|
|
|
—
|
|
|
22,256
|
|
|
10,923
|
|
|
—
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
20,783
|
|
|
20,685
|
|
|
—
|
|
|
4,275
|
|
|
4,208
|
|
|
—
|
|
|
Commercial business
|
1,189
|
|
|
181
|
|
|
—
|
|
|
1,328
|
|
|
1,325
|
|
|
—
|
|
|
Total commercial
|
21,972
|
|
|
20,866
|
|
|
—
|
|
|
5,603
|
|
|
5,533
|
|
|
—
|
|
|
Inventory finance
|
672
|
|
|
674
|
|
|
—
|
|
|
911
|
|
|
912
|
|
|
—
|
|
|
Auto finance
|
17,859
|
|
|
12,751
|
|
|
—
|
|
|
15,071
|
|
|
10,770
|
|
|
—
|
|
|
Other
|
395
|
|
|
—
|
|
|
—
|
|
|
329
|
|
|
—
|
|
|
—
|
|
|
Total impaired loans and leases without an allowance recorded
|
74,868
|
|
|
55,174
|
|
|
—
|
|
|
44,170
|
|
|
28,138
|
|
|
—
|
|
|
Total impaired loans and leases
|
$
|
215,273
|
|
|
$
|
190,051
|
|
|
$
|
24,540
|
|
|
$
|
175,828
|
|
|
$
|
151,593
|
|
|
$
|
30,047
|
|
The average balance of impaired loans and leases and interest income recognized on impaired loans and leases for the
first quarter
of
2019
and the average loan balance of impaired loans and interest income recognized on impaired loans for the
first quarter
of
2018
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended March 31,
|
|
|
2019
|
|
2018
|
|
(In thousands)
|
Average Loan and Lease Balance
|
|
Interest Income Recognized
|
|
Average Loan Balance
|
|
Interest Income Recognized
|
|
Impaired loans and leases with an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgage lien
|
$
|
63,552
|
|
|
$
|
476
|
|
|
$
|
80,245
|
|
|
$
|
654
|
|
|
Junior lien
|
26,587
|
|
|
236
|
|
|
29,372
|
|
|
305
|
|
|
Total consumer real estate
|
90,139
|
|
|
712
|
|
|
109,617
|
|
|
959
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
4,445
|
|
|
17
|
|
|
6,631
|
|
|
—
|
|
|
Commercial business
|
7,972
|
|
|
—
|
|
|
7,552
|
|
|
86
|
|
|
Total commercial
|
12,417
|
|
|
17
|
|
|
14,183
|
|
|
86
|
|
|
Leasing and equipment finance
|
22,020
|
|
|
44
|
|
|
16,826
|
|
|
6
|
|
|
Inventory finance
|
3,833
|
|
|
6
|
|
|
1,243
|
|
|
23
|
|
|
Auto finance
|
756
|
|
|
—
|
|
|
873
|
|
|
—
|
|
|
Other
|
1
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
Total impaired loans and leases with an allowance recorded
|
129,166
|
|
|
779
|
|
|
142,746
|
|
|
1,074
|
|
|
Impaired loans and leases without an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgage lien
|
14,229
|
|
|
307
|
|
|
10,421
|
|
|
183
|
|
|
Junior lien
|
1,674
|
|
|
51
|
|
|
1,572
|
|
|
55
|
|
|
Total consumer real estate
|
15,903
|
|
|
358
|
|
|
11,993
|
|
|
238
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
12,447
|
|
|
272
|
|
|
4,457
|
|
|
58
|
|
|
Commercial business
|
752
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total commercial
|
13,199
|
|
|
272
|
|
|
4,457
|
|
|
58
|
|
|
Inventory finance
|
793
|
|
|
55
|
|
|
2,625
|
|
|
57
|
|
|
Auto finance
|
11,761
|
|
|
91
|
|
|
7,957
|
|
|
69
|
|
|
Total impaired loans and leases without an allowance recorded
|
41,656
|
|
|
776
|
|
|
27,032
|
|
|
422
|
|
|
Total impaired loans and leases
|
$
|
170,822
|
|
|
$
|
1,555
|
|
|
$
|
169,778
|
|
|
$
|
1,496
|
|
Other Real Estate Owned and Repossessed and Returned Assets
Other real estate owned and repossessed and returned assets were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
At March 31, 2019
|
|
At December 31, 2018
|
|
Other real estate owned
|
$
|
18,361
|
|
|
$
|
17,403
|
|
|
Repossessed and returned assets
|
15,645
|
|
|
14,574
|
|
|
Consumer real estate loans in process of foreclosure
|
15,594
|
|
|
15,540
|
|
Other real estate owned and repossessed and returned assets were written down
$1.8 million
and
$1.2 million
during the
first quarter
of
2019
and
2018
, respectively.
Note 8
.
Operating Lease Right-of-Use Assets and Liabilities
Operating lease right-of-use assets, included in other assets, were
$86.2 million
at
March 31, 2019
.
Operating lease liabilities, included in accrued expenses and other liabilities, were
$106.5 million
at
March 31, 2019
. Undiscounted future minimum operating lease payments and a reconciliation to the amount recorded as operating lease liabilities at
March 31, 2019
were as follows:
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
2019
|
$
|
21,854
|
|
|
2020
|
24,765
|
|
|
2021
|
16,432
|
|
|
2022
|
12,156
|
|
|
2023
|
10,505
|
|
|
Thereafter
|
31,648
|
|
|
Total undiscounted future minimum operating lease payments
|
117,360
|
|
|
Discount
|
(10,833
|
)
|
|
Total operating lease liabilities
|
$
|
106,527
|
|
The weighted-average discount rate and remaining lease term for operating leases were as follows:
|
|
|
|
|
|
|
|
At March 31, 2019
|
|
Weighted-average discount rate
|
2.86
|
%
|
|
Weighted-average remaining lease term (years)
|
6.3
|
|
The components of total lease cost for operating leases, included in occupancy and equipment non-interest expense, were as follows:
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
(In thousands)
|
March 31, 2019
|
|
Lease expense
|
$
|
8,899
|
|
|
Short-term and variable lease cost
|
45
|
|
|
Sublease income
|
(407
|
)
|
|
Total lease cost for operating leases
|
$
|
8,537
|
|
Note 9
.
Regulatory Capital Requirements
TCF and TCF Bank are subject to minimum capital requirements administered by the federal banking regulators. Failure to meet minimum capital requirements can initiate certain mandatory, and possible additional discretionary, actions by the federal banking regulators 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
$269.1 million
at
March 31, 2019
, 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 federal banking regulators. 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 March 31,
|
|
At December 31,
|
|
At March 31,
|
|
At December 31,
|
|
Well-capitalized Standard
|
|
Minimum Capital Requirement
|
|
(Dollars in thousands)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
|
Regulatory Capital:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common equity Tier 1 capital
|
$
|
2,266,244
|
|
|
$
|
2,224,183
|
|
|
$
|
2,347,092
|
|
|
$
|
2,282,013
|
|
|
|
|
|
|
Tier 1 capital
|
2,459,132
|
|
|
2,408,393
|
|
|
2,376,544
|
|
|
2,300,472
|
|
|
|
|
|
|
Total capital
|
2,792,419
|
|
|
2,750,581
|
|
|
2,742,456
|
|
|
2,675,347
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulatory Capital Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common equity Tier 1 capital ratio
|
10.79
|
%
|
|
10.82
|
%
|
|
11.18
|
%
|
|
11.10
|
%
|
|
6.50
|
%
|
|
7.00
|
%
|
|
Tier 1 risk-based capital ratio
|
11.71
|
|
|
11.72
|
|
|
11.32
|
|
|
11.19
|
|
|
8.00
|
|
|
8.50
|
|
|
Total risk-based capital ratio
|
13.30
|
|
|
13.38
|
|
|
13.06
|
|
|
13.01
|
|
|
10.00
|
|
|
10.50
|
|
|
Tier 1 leverage ratio
|
10.26
|
|
|
10.44
|
|
|
9.92
|
|
|
9.97
|
|
|
5.00
|
|
|
4.00
|
|
Note 10
.
Stock Compensation
TCF's restricted stock award transactions under the TCF Financial 2015 Omnibus Incentive Plan (the "Omnibus Incentive Plan") and the TCF Financial Incentive Stock Program were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Weighted-average Grant Date Fair Value
|
|
Outstanding at December 31, 2018
|
2,289,446
|
|
|
$
|
16.70
|
|
|
Granted
|
142,085
|
|
|
21.18
|
|
|
Forfeited/canceled
|
(120,003
|
)
|
|
17.60
|
|
|
Vested
|
(314,802
|
)
|
|
19.28
|
|
|
Outstanding at March 31, 2019
|
1,996,726
|
|
|
16.56
|
|
At
March 31, 2019
, there were
114,049
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
$17.6 million
with a weighted-average remaining amortization period of
1.5
years at
March 31, 2019
.
At
March 31, 2019
, there were
331,155
performance-based restricted stock units granted and outstanding 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 that will vest 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. The remaining weighted-average performance period of the restricted stock units was
2.1
years at
March 31, 2019
.
Compensation expense for restricted stock awards and restricted stock units was
$1.5 million
and
$5.9 million
for the
first quarter
of
2019
and
2018
, respectively.
Note 11
.
Employee Benefit Plans
The net periodic benefit plan (income) cost included in other non-interest expense for the TCF Cash Balance Pension Plan (the "Pension Plan") and the Postretirement Plan were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Plan
|
|
|
Quarter Ended March 31,
|
|
(In thousands)
|
2019
|
|
2018
|
|
Interest cost
|
$
|
264
|
|
|
$
|
246
|
|
|
Return on plan assets
|
(137
|
)
|
|
(132
|
)
|
|
Net periodic benefit plan (income) cost
|
$
|
127
|
|
|
$
|
114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Postretirement Plan
|
|
|
Quarter Ended March 31,
|
|
(In thousands)
|
2019
|
|
2018
|
|
Interest cost
|
$
|
30
|
|
|
$
|
28
|
|
|
Amortization of prior service cost
|
(12
|
)
|
|
(12
|
)
|
|
Net periodic benefit plan (income) cost
|
$
|
18
|
|
|
$
|
16
|
|
TCF made
no
cash contributions to the Pension Plan during the
first quarter
of
2019
and
2018
. TCF contributed
$0.1 million
to the Postretirement Plan during the
first quarter
of
2019
and
2018
.
Note 12
.
Derivative Instruments
Derivative instruments, recognized at fair value within other assets or accrued expenses and other liabilities on the Consolidated Statements of Financial Condition, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At March 31, 2019
|
|
|
|
|
Fair Value
|
|
(In thousands)
|
Notional Amount
|
|
Derivative Assets
|
|
Derivative Liabilities
|
|
Derivatives designated as hedging instruments:
|
|
|
|
|
|
|
Interest rate contracts
|
$
|
150,000
|
|
|
$
|
—
|
|
|
$
|
333
|
|
|
Forward foreign exchange contracts
|
163,828
|
|
|
—
|
|
|
815
|
|
|
Total derivatives designated as hedging instruments
|
|
|
—
|
|
|
1,148
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
Interest rate contracts
|
1,269,616
|
|
|
15,480
|
|
|
1,091
|
|
|
Forward foreign exchange contracts
|
241,060
|
|
|
286
|
|
|
513
|
|
|
Interest rate lock commitments
|
51,407
|
|
|
1,130
|
|
|
13
|
|
|
Other contracts
|
13,020
|
|
|
—
|
|
|
510
|
|
|
Total derivatives not designated as hedging instruments
|
|
|
16,896
|
|
|
2,127
|
|
|
Total derivatives before netting
|
|
|
16,896
|
|
|
3,275
|
|
|
Netting
(1)
|
|
|
(655
|
)
|
|
(1,093
|
)
|
|
Total derivatives, net
|
|
|
$
|
16,241
|
|
|
$
|
2,182
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2018
|
|
|
|
|
Fair Value
|
|
(In thousands)
|
Notional Amount
|
|
Derivative Assets
|
|
Derivative Liabilities
|
|
Derivatives designated as hedging instruments:
|
|
|
|
|
|
|
Interest rate contracts
|
$
|
150,000
|
|
|
$
|
393
|
|
|
$
|
—
|
|
|
Forward foreign exchange contracts
|
157,271
|
|
|
2,980
|
|
|
—
|
|
|
Total derivatives designated as hedging instruments
|
|
|
3,373
|
|
|
—
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
Interest rate contracts
|
1,095,449
|
|
|
7,516
|
|
|
3,732
|
|
|
Forward foreign exchange contracts
|
254,274
|
|
|
3,709
|
|
|
13
|
|
|
Interest rate lock commitments
|
28,007
|
|
|
652
|
|
|
28
|
|
|
Other contracts
|
13,020
|
|
|
—
|
|
|
583
|
|
|
Total derivatives not designated as hedging instruments
|
|
|
11,877
|
|
|
4,356
|
|
|
Total derivatives before netting
|
|
|
15,250
|
|
|
4,356
|
|
|
Netting
(1)
|
|
|
(6,982
|
)
|
|
(991
|
)
|
|
Total derivatives, net
|
|
|
$
|
8,268
|
|
|
$
|
3,365
|
|
|
|
|
|
(1)
|
Includes balance sheet netting of derivative asset and derivative liability balances, related cash collateral and portfolio level counterparty valuation adjustments.
|
Derivative instruments may be subject to master netting arrangements and collateral arrangements and qualify for offset in the Consolidated Statements of Financial Condition. A master netting arrangement with a counterparty creates a right of offset for amounts due to and from that same counterparty that is enforceable in the event of a default or bankruptcy. Derivative instruments subject to master netting arrangements and collateral arrangements are recognized on a net basis in the Consolidated Statements of Financial Condition. The gross amounts recognized, gross amounts offset and net amount presented of derivative instruments were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At March 31, 2019
|
|
(In thousands)
|
Gross Amounts Recognized
|
|
Gross Amounts
Offset
(1)
|
|
Net Amount Presented
|
|
Derivative assets:
|
|
|
|
|
|
|
Interest rate contracts
|
$
|
15,480
|
|
|
$
|
(369
|
)
|
|
$
|
15,111
|
|
|
Forward foreign exchange contracts
|
286
|
|
|
(286
|
)
|
|
—
|
|
|
Interest rate lock commitments
|
1,130
|
|
|
—
|
|
|
1,130
|
|
|
Total derivative assets
|
$
|
16,896
|
|
|
$
|
(655
|
)
|
|
$
|
16,241
|
|
|
Derivative liabilities:
|
|
|
|
|
|
|
Interest rate contracts
|
$
|
1,424
|
|
|
$
|
(340
|
)
|
|
$
|
1,084
|
|
|
Forward foreign exchange contracts
|
1,328
|
|
|
(243
|
)
|
|
1,085
|
|
|
Interest rate lock commitments
|
13
|
|
|
—
|
|
|
13
|
|
|
Other contracts
|
510
|
|
|
(510
|
)
|
|
—
|
|
|
Total derivative liabilities
|
$
|
3,275
|
|
|
$
|
(1,093
|
)
|
|
$
|
2,182
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2018
|
|
(In thousands)
|
Gross Amounts Recognized
|
|
Gross Amounts
Offset
(1)
|
|
Net Amount Presented
|
|
Derivative assets:
|
|
|
|
|
|
|
Interest rate contracts
|
$
|
7,909
|
|
|
$
|
(395
|
)
|
|
$
|
7,514
|
|
|
Forward foreign exchange contracts
|
6,689
|
|
|
(6,587
|
)
|
|
102
|
|
|
Interest rate lock commitments
|
652
|
|
|
—
|
|
|
652
|
|
|
Total derivative assets
|
$
|
15,250
|
|
|
$
|
(6,982
|
)
|
|
$
|
8,268
|
|
|
Derivative liabilities:
|
|
|
|
|
|
|
Interest rate contracts
|
$
|
3,732
|
|
|
$
|
(395
|
)
|
|
$
|
3,337
|
|
|
Forward foreign exchange contracts
|
13
|
|
|
(13
|
)
|
|
—
|
|
|
Interest rate lock commitments
|
28
|
|
|
—
|
|
|
28
|
|
|
Other contracts
|
583
|
|
|
(583
|
)
|
|
—
|
|
|
Total derivative liabilities
|
$
|
4,356
|
|
|
$
|
(991
|
)
|
|
$
|
3,365
|
|
|
|
|
|
(1)
|
Includes the amounts with counterparties subject to enforceable master netting arrangements that have been offset in the Consolidated Statements of Financial Condition.
|
Derivatives Designated as Hedging Instruments
Interest Rate Contract
TCF Bank entered into an interest rate swap agreement which was designated as a fair value hedge of its contemporaneously issued subordinated debt. The interest rate swap agreement effectively converts the fixed interest rate to a floating rate based on the three-month LIBOR plus a fixed number of basis points on the
$150.0 million
notional amount. The carrying amount of the hedged subordinated debt, including the cumulative basis adjustment related to the application of fair value hedge accounting, is recorded in long-term borrowings on the Consolidated Statements of Financial Condition and was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying Amount
of the Hedged Liability
|
|
Cumulative Amount of
Fair Value Hedging Adjustments
Included in the Carrying Amount
of the Hedged Liability
|
|
(In thousands)
|
At March 31, 2019
|
|
At December 31, 2018
|
|
At March 31, 2019
|
|
At December 31, 2018
|
|
Subordinated bank note - 2025
|
$
|
146,960
|
|
|
$
|
144,296
|
|
|
$
|
(1,555
|
)
|
|
$
|
(4,165
|
)
|
The gain (loss) related to the fair value hedge and the line within the Consolidated Statements of Income where the gain (loss) was recorded were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended March 31,
|
|
(In thousands)
|
2019
|
|
2018
|
|
Gain (loss) of fair value hedge:
|
|
|
|
|
Hedged item
|
$
|
(2,610
|
)
|
|
$
|
3,806
|
|
|
Derivative designated as a hedging instrument
|
2,562
|
|
|
(3,858
|
)
|
|
Income statement line where the gain (loss) on the fair value hedge was recorded:
|
|
|
|
|
Interest expense - borrowings
|
$
|
14,858
|
|
|
$
|
9,553
|
|
Forward Foreign Exchange Contracts
Certain of TCF's forward foreign exchange contracts are used to manage the foreign exchange risk associated with the Company's net investment in TCF Commercial Finance Canada, Inc., a wholly-owned indirect Canadian subsidiary of TCF Bank. These forward foreign exchange contracts have been designated as net investment hedges. The effect of net investment hedges on accumulated other comprehensive income was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended March 31,
|
|
(In thousands)
|
2019
|
|
2018
|
|
Forward foreign exchange contracts
|
$
|
(3,050
|
)
|
|
$
|
2,137
|
|
Derivatives Not Designated as Hedging Instruments
Certain other interest rate contracts, forward foreign exchange contracts, interest rate lock commitments and other contracts have not been designated as hedging instruments. The effect of these derivatives on the Consolidated Statements of Income was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended March 31,
|
|
(In thousands)
|
Location of Gain (Loss)
|
2019
|
|
2018
|
|
Interest rate contracts
|
Other non-interest income
|
$
|
(808
|
)
|
|
$
|
99
|
|
|
Forward foreign exchange contracts
|
Other non-interest expense
|
(4,779
|
)
|
|
8,944
|
|
|
Interest rate lock commitments
|
Gains on sales of loans, net
|
493
|
|
|
624
|
|
|
Net gain (loss) recognized
|
|
$
|
(5,094
|
)
|
|
$
|
9,667
|
|
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 March 31, 2019
and
December 31, 2018
, credit risk-related contingent features existed on forward foreign exchange contracts with a notional value of
$30.0 million
and
$25.7 million
, respectively. 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
$0.6 million
and
$0.5 million
in additional collateral at
March 31, 2019
and
December 31, 2018
, respectively. There were
$66 thousand
of forward foreign exchange contracts containing credit risk-related features in a liability position at
March 31, 2019
and
none
at
December 31, 2018
.
At March 31, 2019
, TCF had posted
$11.1 million
and
$1.3 million
of cash collateral related to its interest rate contracts and other contracts, respectively, and received
$2.4 million
of cash collateral related to its forward foreign exchange contracts.
Note 13
.
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. Debt securities available for sale, certain loans held for sale, interest-only strips, interest rate contracts, forward foreign exchange contracts, interest rate lock commitments, other contracts, forward loan sales commitments, and assets and liabilities held in trust for deferred compensation plans 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 debt securities held to maturity, loans and leases, goodwill, other intangible assets, other real estate owned, repossessed and returned assets or 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. The levels are 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, which includes valuations 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.
Debt Securities Available for Sale
Debt 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 for which the fair value option has been elected are categorized as Level 3. The fair value of these loans is recorded utilizing internal valuation models which use quoted investor prices to estimate the fair value.
Loans and Leases
Loans and leases 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. Effective January 1, 2019, in conjunction with the adoption of ASU No. 2016-02,
Leases (Topic 842)
and the related ASUs, such loans and leases include non-accrual impaired loans and leases as well as certain delinquent non-accrual consumer real estate and auto finance loans. Previously, TCF did not include non-accrual impaired leases. The fair value of the collateral is determined based on internal estimates and/or 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 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 fair value of the interest-only strips may fluctuate significantly from period to period.
Derivative Instruments
Interest Rate Contracts
TCF executes interest rate contracts with commercial banking customers to facilitate their respective risk management strategies. Certain of these interest rate contracts are simultaneously hedged by offsetting interest rate contracts 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 interest rate contracts, categorized as Level 2, is determined using a cash flow model which may consider the forward curve, the discount curve and credit valuation adjustments related to counterparty and/or borrower non-performance risk.
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 Lock Commitments
TCF's interest rate lock commitments are derivative instruments that are recorded at fair value using an internal valuation model that utilizes estimated rates of successful loan closings and quoted investor prices. While this model uses both Level 2 and Level 3 inputs, TCF has determined that the significant inputs used in the valuation of these commitments fall within Level 3 and therefore the interest rate lock commitments are categorized as Level 3.
Other Contracts
TCF's swap agreement, categorized as Level 3, is related to the sale of TCF's Visa Class B stock. 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.
Forward Loan Sales Commitments
TCF enters into forward loan sales commitments to sell certain consumer real estate loans. The resulting loans held for sale are 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 Level 3 inputs, TCF has determined that the significant inputs used in the valuation of these commitments fall within Level 3 and therefore the forward loan sales commitments 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.
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 stock 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.
The balances of assets and liabilities measured at fair value on a recurring and non-recurring basis were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At March 31, 2019
|
|
(In thousands)
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Recurring fair value measurements through net income:
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
Loans held for sale
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
9,863
|
|
|
$
|
9,863
|
|
|
Interest rate contracts
(1)
|
—
|
|
|
15,480
|
|
|
—
|
|
|
15,480
|
|
|
Forward foreign exchange contracts
(1)
|
—
|
|
|
286
|
|
|
—
|
|
|
286
|
|
|
Interest rate lock commitments
(1)
|
—
|
|
|
—
|
|
|
1,130
|
|
|
1,130
|
|
|
Forward loan sales commitments
|
—
|
|
|
—
|
|
|
109
|
|
|
109
|
|
|
Assets held in trust for deferred compensation plans
|
36,188
|
|
|
—
|
|
|
—
|
|
|
36,188
|
|
|
Total assets
|
$
|
36,188
|
|
|
$
|
15,766
|
|
|
$
|
11,102
|
|
|
$
|
63,056
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Interest rate contracts
(1)
|
$
|
—
|
|
|
$
|
1,424
|
|
|
$
|
—
|
|
|
$
|
1,424
|
|
|
Forward foreign exchange contracts
(1)
|
—
|
|
|
513
|
|
|
—
|
|
|
513
|
|
|
Interest rate lock commitments
(1)
|
—
|
|
|
—
|
|
|
13
|
|
|
13
|
|
|
Other contracts
(1)
|
—
|
|
|
—
|
|
|
510
|
|
|
510
|
|
|
Forward loan sales commitments
|
—
|
|
|
—
|
|
|
227
|
|
|
227
|
|
|
Liabilities held in trust for deferred compensation plans
|
36,188
|
|
|
—
|
|
|
—
|
|
|
36,188
|
|
|
Total liabilities
|
$
|
36,188
|
|
|
$
|
1,937
|
|
|
$
|
750
|
|
|
$
|
38,875
|
|
|
Recurring fair value measurements through other comprehensive income:
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
Debt securities available for sale:
|
|
|
|
|
|
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
U.S. Government sponsored enterprises and federal agencies
|
$
|
—
|
|
|
$
|
2,584,511
|
|
|
$
|
—
|
|
|
$
|
2,584,511
|
|
|
Other
|
—
|
|
|
—
|
|
|
4
|
|
|
4
|
|
|
Obligations of states and political subdivisions
|
—
|
|
|
360,827
|
|
|
—
|
|
|
360,827
|
|
|
Interest-only strips
|
—
|
|
|
—
|
|
|
16,163
|
|
|
16,163
|
|
|
Total assets
|
$
|
—
|
|
|
$
|
2,945,338
|
|
|
$
|
16,167
|
|
|
$
|
2,961,505
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Forward foreign exchange contracts
(1)
|
$
|
—
|
|
|
$
|
815
|
|
|
$
|
—
|
|
|
$
|
815
|
|
|
Total liabilities
|
$
|
—
|
|
|
$
|
815
|
|
|
$
|
—
|
|
|
$
|
815
|
|
|
Non-recurring fair value measurements:
|
|
|
|
|
|
|
|
|
Loans and leases
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
69,691
|
|
|
$
|
69,691
|
|
|
Other real estate owned
|
—
|
|
|
—
|
|
|
11,570
|
|
|
11,570
|
|
|
Repossessed and returned assets
|
—
|
|
|
6,496
|
|
|
4,536
|
|
|
11,032
|
|
|
Total non-recurring fair value measurements
|
$
|
—
|
|
|
$
|
6,496
|
|
|
$
|
85,797
|
|
|
$
|
92,293
|
|
|
|
|
|
(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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2018
|
|
(In thousands)
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Recurring fair value measurements through net income:
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
Loans held for sale
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
18,070
|
|
|
$
|
18,070
|
|
|
Interest rate contracts
(1)
|
—
|
|
|
7,909
|
|
|
—
|
|
|
7,909
|
|
|
Forward foreign exchange contracts
(1)
|
—
|
|
|
3,709
|
|
|
—
|
|
|
3,709
|
|
|
Interest rate lock commitments
(1)
|
—
|
|
|
—
|
|
|
652
|
|
|
652
|
|
|
Forward loan sales commitments
|
—
|
|
|
—
|
|
|
152
|
|
|
152
|
|
|
Assets held in trust for deferred compensation plans
|
33,217
|
|
|
—
|
|
|
—
|
|
|
33,217
|
|
|
Total assets
|
$
|
33,217
|
|
|
$
|
11,618
|
|
|
$
|
18,874
|
|
|
$
|
63,709
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Interest rate contracts
(1)
|
$
|
—
|
|
|
$
|
3,732
|
|
|
$
|
—
|
|
|
$
|
3,732
|
|
|
Forward foreign exchange contracts
(1)
|
—
|
|
|
13
|
|
|
—
|
|
|
13
|
|
|
Interest rate lock commitments
(1)
|
—
|
|
|
—
|
|
|
28
|
|
|
28
|
|
|
Other contracts
(1)
|
—
|
|
|
—
|
|
|
583
|
|
|
583
|
|
|
Forward loan sales commitments
|
—
|
|
|
—
|
|
|
178
|
|
|
178
|
|
|
Liabilities held in trust for deferred compensation plans
|
33,217
|
|
|
—
|
|
|
—
|
|
|
33,217
|
|
|
Total liabilities
|
$
|
33,217
|
|
|
$
|
3,745
|
|
|
$
|
789
|
|
|
$
|
37,751
|
|
|
Recurring fair value measurements through other comprehensive income:
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
Debt securities available for sale:
|
|
|
|
|
|
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
U.S. Government sponsored enterprises and federal agencies
|
$
|
—
|
|
|
$
|
1,913,190
|
|
|
$
|
—
|
|
|
$
|
1,913,190
|
|
|
Other
|
—
|
|
|
—
|
|
|
4
|
|
|
4
|
|
|
Obligations of states and political subdivisions
|
—
|
|
|
556,871
|
|
|
—
|
|
|
556,871
|
|
|
Interest-only strips
|
—
|
|
|
—
|
|
|
16,835
|
|
|
16,835
|
|
|
Forward foreign exchange contracts
(1)
|
—
|
|
|
2,980
|
|
|
—
|
|
|
2,980
|
|
|
Total assets
|
$
|
—
|
|
|
$
|
2,473,041
|
|
|
$
|
16,839
|
|
|
$
|
2,489,880
|
|
|
Non-recurring fair value measurements:
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
57,663
|
|
|
$
|
57,663
|
|
|
Other real estate owned
|
—
|
|
|
—
|
|
|
9,397
|
|
|
9,397
|
|
|
Repossessed and returned assets
|
—
|
|
|
4,358
|
|
|
5,165
|
|
|
9,523
|
|
|
Total non-recurring fair value measurements
|
$
|
—
|
|
|
$
|
4,358
|
|
|
$
|
72,225
|
|
|
$
|
76,583
|
|
|
|
|
|
(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 transfers occurred. TCF had
no
transfers during the
first quarter
of
2019
and
2018
.
The changes in Level 3 assets and liabilities measured at fair value on a recurring basis were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Debt Securities
Available
for Sale
|
|
Loans
Held for Sale
|
|
Interest-only Strips
|
|
Interest
Rate Lock
Commitments
|
|
Other Contracts
|
|
Forward
Loan Sales
Commitments
|
|
At or For the Quarter Ended March 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset (liability) balance, beginning of period
|
$
|
4
|
|
|
$
|
18,070
|
|
|
$
|
16,835
|
|
|
$
|
624
|
|
|
$
|
(583
|
)
|
|
$
|
(26
|
)
|
|
Total net gains (losses) included in:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
—
|
|
|
(166
|
)
|
|
712
|
|
|
493
|
|
|
—
|
|
|
(92
|
)
|
|
Other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
286
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Sales
|
—
|
|
|
(73,438
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Originations
|
—
|
|
|
65,400
|
|
|
844
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Principal paydowns / settlements
|
—
|
|
|
(3
|
)
|
|
(2,514
|
)
|
|
—
|
|
|
73
|
|
|
—
|
|
|
Asset (liability) balance, end of period
|
$
|
4
|
|
|
$
|
9,863
|
|
|
$
|
16,163
|
|
|
$
|
1,117
|
|
|
$
|
(510
|
)
|
|
$
|
(118
|
)
|
|
At or For the Quarter Ended March 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset (liability) balance, beginning of period
|
$
|
6
|
|
|
$
|
3,356
|
|
|
$
|
21,386
|
|
|
$
|
223
|
|
|
$
|
(615
|
)
|
|
$
|
63
|
|
|
Total net gains (losses) included in:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
—
|
|
|
97
|
|
|
331
|
|
|
335
|
|
|
—
|
|
|
81
|
|
|
Other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
777
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Sales
|
—
|
|
|
(59,747
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Originations
|
—
|
|
|
65,355
|
|
|
3,299
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Principal paydowns / settlements
|
(1
|
)
|
|
(3
|
)
|
|
(3,942
|
)
|
|
—
|
|
|
77
|
|
|
—
|
|
|
Asset (liability) balance, end of period
|
$
|
5
|
|
|
$
|
9,058
|
|
|
$
|
21,851
|
|
|
$
|
558
|
|
|
$
|
(538
|
)
|
|
$
|
144
|
|
Fair Value Option
TCF Home Loans, a division of TCF Bank, originates first mortgage lien loans in its primary banking markets and sells the loans through correspondent relationships. TCF elected the fair value option for these loans. This election facilitates the offsetting of changes in fair value 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 March 31, 2019
|
|
At December 31, 2018
|
|
Fair value carrying amount
|
$
|
9,863
|
|
|
$
|
18,070
|
|
|
Aggregate unpaid principal amount
|
9,520
|
|
|
17,517
|
|
|
Fair value carrying amount less aggregate unpaid principal
|
$
|
343
|
|
|
$
|
553
|
|
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
March 31, 2019
and
December 31, 2018
. 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
$2.2 million
and
$1.6 million
for the
first quarter
of
2019
and
2018
, respectively, and are included in net gains on sales of loans. These amounts exclude the impacts from the interest rate lock commitments and forward loan sales commitments which are also included in net gains on sales of loans.
Disclosures About Fair Value of Financial Instruments
Management discloses the estimated fair value of financial instruments, including assets and liabilities on and off the Consolidated Statements of Financial Condition, for which it is practicable to estimate fair value. These fair value estimates were made at
March 31, 2019
and
December 31, 2018
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 value 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 Consolidated Statements of Financial Condition 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At March 31, 2019
|
|
|
Carrying
|
|
Estimated Fair Value
|
|
(In thousands)
|
Amount
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Financial instrument assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
|
$
|
103,644
|
|
|
$
|
—
|
|
|
$
|
103,644
|
|
|
$
|
—
|
|
|
$
|
103,644
|
|
|
Debt securities held to maturity
|
148,024
|
|
|
—
|
|
|
147,610
|
|
|
3,621
|
|
|
151,231
|
|
|
Loans held for sale
|
53,905
|
|
|
—
|
|
|
—
|
|
|
55,919
|
|
|
55,919
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer real estate
|
5,353,557
|
|
|
—
|
|
|
—
|
|
|
5,434,461
|
|
|
5,434,461
|
|
|
Commercial real estate
|
2,965,642
|
|
|
—
|
|
|
—
|
|
|
2,920,368
|
|
|
2,920,368
|
|
|
Commercial business
|
918,464
|
|
|
—
|
|
|
—
|
|
|
885,178
|
|
|
885,178
|
|
|
Equipment finance
|
2,122,965
|
|
|
—
|
|
|
—
|
|
|
2,093,552
|
|
|
2,093,552
|
|
|
Inventory finance
|
3,749,146
|
|
|
—
|
|
|
—
|
|
|
3,731,535
|
|
|
3,731,535
|
|
|
Auto finance
|
1,704,614
|
|
|
—
|
|
|
—
|
|
|
1,668,084
|
|
|
1,668,084
|
|
|
Other
|
17,943
|
|
|
—
|
|
|
—
|
|
|
15,826
|
|
|
15,826
|
|
|
Allowance for loan losses
(1)
|
(147,972
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Securitization receivable
(2)
|
19,496
|
|
|
—
|
|
|
—
|
|
|
19,134
|
|
|
19,134
|
|
|
Total financial instrument assets
|
$
|
17,009,428
|
|
|
$
|
—
|
|
|
$
|
251,254
|
|
|
$
|
16,827,678
|
|
|
$
|
17,078,932
|
|
|
Financial instrument liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
$
|
19,024,111
|
|
|
$
|
14,532,113
|
|
|
$
|
4,525,854
|
|
|
$
|
—
|
|
|
$
|
19,057,967
|
|
|
Long-term borrowings
|
1,411,426
|
|
|
—
|
|
|
1,418,024
|
|
|
—
|
|
|
1,418,024
|
|
|
Total financial instrument liabilities
|
$
|
20,435,537
|
|
|
$
|
14,532,113
|
|
|
$
|
5,943,878
|
|
|
$
|
—
|
|
|
$
|
20,475,991
|
|
|
Financial instruments with off-balance sheet risk:
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments to extend credit
|
$
|
18,525
|
|
|
$
|
—
|
|
|
$
|
18,525
|
|
|
$
|
—
|
|
|
$
|
18,525
|
|
|
Standby letters of credit
|
(61
|
)
|
|
—
|
|
|
(61
|
)
|
|
—
|
|
|
(61
|
)
|
|
Total financial instruments with off-balance sheet risk
|
$
|
18,464
|
|
|
$
|
—
|
|
|
$
|
18,464
|
|
|
$
|
—
|
|
|
$
|
18,464
|
|
|
|
|
|
(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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2018
|
|
|
Carrying
|
|
Estimated Fair Value
|
|
(In thousands)
|
Amount
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Financial instrument assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
|
$
|
91,654
|
|
|
$
|
—
|
|
|
$
|
91,654
|
|
|
$
|
—
|
|
|
$
|
91,654
|
|
|
Debt securities held to maturity
|
148,852
|
|
|
—
|
|
|
146,467
|
|
|
2,800
|
|
|
149,267
|
|
|
Loans held for sale
|
72,594
|
|
|
—
|
|
|
—
|
|
|
74,078
|
|
|
74,078
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer real estate
|
5,410,340
|
|
|
—
|
|
|
—
|
|
|
5,461,209
|
|
|
5,461,209
|
|
|
Commercial real estate
|
2,908,147
|
|
|
—
|
|
|
—
|
|
|
2,872,829
|
|
|
2,872,829
|
|
|
Commercial business
|
943,156
|
|
|
—
|
|
|
—
|
|
|
890,828
|
|
|
890,828
|
|
|
Equipment finance
|
2,169,577
|
|
|
—
|
|
|
—
|
|
|
2,131,147
|
|
|
2,131,147
|
|
|
Inventory finance
|
3,107,356
|
|
|
—
|
|
|
—
|
|
|
3,091,593
|
|
|
3,091,593
|
|
|
Auto finance
|
1,982,277
|
|
|
—
|
|
|
—
|
|
|
1,935,017
|
|
|
1,935,017
|
|
|
Other
|
21,295
|
|
|
—
|
|
|
—
|
|
|
16,928
|
|
|
16,928
|
|
|
Allowance for loan losses
(1)
|
(157,446
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Securitization receivable
(2)
|
19,432
|
|
|
—
|
|
|
—
|
|
|
19,025
|
|
|
19,025
|
|
|
Total financial instrument assets
|
$
|
16,717,234
|
|
|
$
|
—
|
|
|
$
|
238,121
|
|
|
$
|
16,495,454
|
|
|
$
|
16,733,575
|
|
|
Financial instrument liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
$
|
18,903,686
|
|
|
$
|
14,113,006
|
|
|
$
|
4,820,442
|
|
|
$
|
—
|
|
|
$
|
18,933,448
|
|
|
Long-term borrowings
|
1,449,472
|
|
|
—
|
|
|
1,451,550
|
|
|
—
|
|
|
1,451,550
|
|
|
Total financial instrument liabilities
|
$
|
20,353,158
|
|
|
$
|
14,113,006
|
|
|
$
|
6,271,992
|
|
|
$
|
—
|
|
|
$
|
20,384,998
|
|
|
Financial instruments with off-balance sheet risk:
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments to extend credit
|
$
|
18,555
|
|
|
$
|
—
|
|
|
$
|
18,555
|
|
|
$
|
—
|
|
|
$
|
18,555
|
|
|
Standby letters of credit
|
(77
|
)
|
|
—
|
|
|
(77
|
)
|
|
—
|
|
|
(77
|
)
|
|
Total financial instruments with off-balance sheet risk
|
$
|
18,478
|
|
|
$
|
—
|
|
|
$
|
18,478
|
|
|
$
|
—
|
|
|
$
|
18,478
|
|
|
|
|
|
(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 14
.
Earnings Per Common Share
The computations of basic and diluted earnings per common share were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended March 31,
|
|
(Dollars in thousands, except per share data)
|
2019
|
|
2018
|
|
Basic earnings per common share:
|
|
|
|
|
|
|
Net income attributable to TCF Financial Corporation
|
$
|
70,494
|
|
|
$
|
73,761
|
|
|
Preferred stock dividends
|
2,493
|
|
|
4,106
|
|
|
Impact of preferred stock redemption
(1)
|
—
|
|
|
3,481
|
|
|
Net income available to common stockholders
|
68,001
|
|
|
66,174
|
|
|
Less: Earnings allocated to participating securities
|
13
|
|
|
9
|
|
|
Earnings allocated to common stock
|
$
|
67,988
|
|
|
$
|
66,165
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding used in basic earnings per common share calculation
|
161,865,270
|
|
|
168,507,448
|
|
|
Basic earnings per common share
|
$
|
0.42
|
|
|
$
|
0.39
|
|
|
|
|
|
|
|
Diluted earnings per common share:
|
|
|
|
|
|
|
Earnings allocated to common stock
|
$
|
67,988
|
|
|
$
|
66,165
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding used in basic earnings per common share calculation
|
161,865,270
|
|
|
168,507,448
|
|
|
Net dilutive effect of:
|
|
|
|
|
|
|
Non-participating restricted stock
|
562,553
|
|
|
721,353
|
|
|
Stock options
|
—
|
|
|
8,278
|
|
|
Warrants
|
—
|
|
|
760,067
|
|
|
Weighted-average common shares outstanding used in diluted earnings per common share calculation
|
162,427,823
|
|
|
169,997,146
|
|
|
Diluted earnings per common share
|
$
|
0.42
|
|
|
$
|
0.39
|
|
|
|
|
|
(1)
|
Represents the amount of deferred stock issuance costs originally recorded in preferred stock that were reclassified to retained earnings.
|
For the
first quarter
of
2019
and
2018
, there were
728,455
and
591,695
, respectively, outstanding shares related to non-participating restricted stock that were not included in the computation of diluted earnings per common share because they were anti-dilutive.
Note 15
.
Other Non-interest Expense
Other non-interest expense was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended March 31,
|
|
(In thousands)
|
2019
|
|
2018
|
|
Advertising and marketing
|
$
|
6,855
|
|
|
$
|
7,297
|
|
|
Professional fees
|
5,528
|
|
|
5,321
|
|
|
Outside processing
|
5,474
|
|
|
5,236
|
|
|
Card processing and issuance costs
|
4,508
|
|
|
4,457
|
|
|
FDIC insurance
|
2,918
|
|
|
4,070
|
|
|
Other
|
31,154
|
|
|
33,055
|
|
|
Total other non-interest expense
|
$
|
56,437
|
|
|
$
|
59,436
|
|
Note 16
.
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 other, and auto finance. Wholesale Banking is comprised of commercial banking, 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, internal audit, legal and human capital management 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
, 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At or For the Quarter Ended March 31, 2019
|
|
(In thousands)
|
Consumer Banking
|
|
Wholesale Banking
|
|
Enterprise Services
|
|
Consolidated
|
|
Interest income:
|
|
|
|
|
|
|
|
|
Loans and leases
|
$
|
105,759
|
|
|
$
|
174,845
|
|
|
$
|
(1,010
|
)
|
|
$
|
279,594
|
|
|
Debt securities available for sale
|
—
|
|
|
—
|
|
|
18,815
|
|
|
18,815
|
|
|
Debt securities held to maturity
|
—
|
|
|
22
|
|
|
513
|
|
|
535
|
|
|
Loans held for sale and other
|
1,669
|
|
|
142
|
|
|
2,490
|
|
|
4,301
|
|
|
Funds transfer pricing - credits
|
113,733
|
|
|
10,952
|
|
|
(124,685
|
)
|
|
—
|
|
|
Total interest income
|
221,161
|
|
|
185,961
|
|
|
(103,877
|
)
|
|
303,245
|
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
Deposits
|
26,607
|
|
|
4,143
|
|
|
6,730
|
|
|
37,480
|
|
|
Borrowings
|
7,933
|
|
|
26,236
|
|
|
(19,311
|
)
|
|
14,858
|
|
|
Funds transfer pricing - charges
|
48,614
|
|
|
59,724
|
|
|
(108,338
|
)
|
|
—
|
|
|
Total interest expense
|
83,154
|
|
|
90,103
|
|
|
(120,919
|
)
|
|
52,338
|
|
|
Net interest income (expense)
|
138,007
|
|
|
95,858
|
|
|
17,042
|
|
|
250,907
|
|
|
Provision for credit losses
|
7,294
|
|
|
2,828
|
|
|
—
|
|
|
10,122
|
|
|
Net interest income (expense) after provision for credit losses
|
130,713
|
|
|
93,030
|
|
|
17,042
|
|
|
240,785
|
|
|
Non-interest income:
|
|
|
|
|
|
|
|
|
Leasing and equipment finance
|
—
|
|
|
41,139
|
|
|
—
|
|
|
41,139
|
|
|
Fees and service charges
|
27,794
|
|
|
3,530
|
|
|
—
|
|
|
31,324
|
|
|
Card revenue
|
14,226
|
|
|
17
|
|
|
—
|
|
|
14,243
|
|
|
ATM revenue
|
4,439
|
|
|
1
|
|
|
—
|
|
|
4,440
|
|
|
Gains on sales of loans, net
|
7,972
|
|
|
—
|
|
|
—
|
|
|
7,972
|
|
|
Servicing fee income
|
4,824
|
|
|
286
|
|
|
—
|
|
|
5,110
|
|
|
Gains (losses) on debt securities, net
|
—
|
|
|
4
|
|
|
447
|
|
|
451
|
|
|
Other
|
2,593
|
|
|
(301
|
)
|
|
55
|
|
|
2,347
|
|
|
Total non-interest income
|
61,848
|
|
|
44,676
|
|
|
502
|
|
|
107,026
|
|
|
Non-interest expense:
|
|
|
|
|
|
|
|
|
|
Compensation and employee benefits
|
51,778
|
|
|
27,690
|
|
|
42,089
|
|
|
121,557
|
|
|
Occupancy and equipment
|
26,418
|
|
|
4,927
|
|
|
10,392
|
|
|
41,737
|
|
|
Lease financing equipment depreciation
|
—
|
|
|
19,256
|
|
|
—
|
|
|
19,256
|
|
|
Foreclosed real estate and repossessed assets, net
|
3,744
|
|
|
886
|
|
|
—
|
|
|
4,630
|
|
|
Merger-related expenses
|
—
|
|
|
—
|
|
|
9,458
|
|
|
9,458
|
|
|
Other
|
73,845
|
|
|
31,390
|
|
|
(48,798
|
)
|
|
56,437
|
|
|
Total non-interest expense
|
155,785
|
|
|
84,149
|
|
|
13,141
|
|
|
253,075
|
|
|
Income (loss) before income tax expense (benefit)
|
36,776
|
|
|
53,557
|
|
|
4,403
|
|
|
94,736
|
|
|
Income tax expense (benefit)
|
8,562
|
|
|
11,938
|
|
|
787
|
|
|
21,287
|
|
|
Income (loss) after income tax expense (benefit)
|
28,214
|
|
|
41,619
|
|
|
3,616
|
|
|
73,449
|
|
|
Income attributable to non-controlling interest
|
—
|
|
|
2,955
|
|
|
—
|
|
|
2,955
|
|
|
Preferred stock dividends
|
—
|
|
|
—
|
|
|
2,493
|
|
|
2,493
|
|
|
Net income (loss) available to common stockholders
|
$
|
28,214
|
|
|
$
|
38,664
|
|
|
$
|
1,123
|
|
|
$
|
68,001
|
|
|
Revenues from external customers:
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
$
|
107,428
|
|
|
$
|
173,999
|
|
|
$
|
21,818
|
|
|
$
|
303,245
|
|
|
Non-interest income
|
61,848
|
|
|
44,676
|
|
|
502
|
|
|
107,026
|
|
|
Total
|
$
|
169,276
|
|
|
$
|
218,675
|
|
|
$
|
22,320
|
|
|
$
|
410,271
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
$
|
7,896,858
|
|
|
$
|
12,875,586
|
|
|
$
|
3,646,271
|
|
|
$
|
24,418,715
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At or For the Quarter Ended March 31, 2018
|
|
(In thousands)
|
Consumer Banking
|
|
Wholesale Banking
|
|
Enterprise Services
|
|
Consolidated
|
|
Interest income:
|
|
|
|
|
|
|
|
|
Loans and leases
|
$
|
109,760
|
|
|
$
|
151,525
|
|
|
$
|
(910
|
)
|
|
$
|
260,375
|
|
|
Debt securities available for sale
|
—
|
|
|
—
|
|
|
10,123
|
|
|
10,123
|
|
|
Debt securities held to maturity
|
—
|
|
|
23
|
|
|
996
|
|
|
1,019
|
|
|
Loans held for sale and other
|
2,057
|
|
|
21
|
|
|
1,667
|
|
|
3,745
|
|
|
Funds transfer pricing - credits
|
96,582
|
|
|
7,748
|
|
|
(104,330
|
)
|
|
—
|
|
|
Total interest income
|
208,399
|
|
|
159,317
|
|
|
(92,454
|
)
|
|
275,262
|
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
Deposits
|
17,855
|
|
|
1,434
|
|
|
3,221
|
|
|
22,510
|
|
|
Borrowings
|
12,407
|
|
|
17,398
|
|
|
(20,252
|
)
|
|
9,553
|
|
|
Funds transfer pricing - charges
|
38,229
|
|
|
44,885
|
|
|
(83,114
|
)
|
|
—
|
|
|
Total interest expense
|
68,491
|
|
|
63,717
|
|
|
(100,145
|
)
|
|
32,063
|
|
|
Net interest income (expense)
|
139,908
|
|
|
95,600
|
|
|
7,691
|
|
|
243,199
|
|
|
Provision for credit losses
|
8,889
|
|
|
2,479
|
|
|
—
|
|
|
11,368
|
|
|
Net interest income (expense) after provision for credit losses
|
131,019
|
|
|
93,121
|
|
|
7,691
|
|
|
231,831
|
|
|
Non-interest income:
|
|
|
|
|
|
|
|
|
Leasing and equipment finance
|
—
|
|
|
41,847
|
|
|
—
|
|
|
41,847
|
|
|
Fees and service charges
|
28,597
|
|
|
2,154
|
|
|
—
|
|
|
30,751
|
|
|
Card revenue
|
13,750
|
|
|
9
|
|
|
—
|
|
|
13,759
|
|
|
ATM revenue
|
4,649
|
|
|
1
|
|
|
—
|
|
|
4,650
|
|
|
Gains on sales of loans, net
|
9,123
|
|
|
—
|
|
|
—
|
|
|
9,123
|
|
|
Servicing fee income
|
7,926
|
|
|
369
|
|
|
—
|
|
|
8,295
|
|
|
Gains (losses) on debt securities, net
|
—
|
|
|
63
|
|
|
—
|
|
|
63
|
|
|
Other
|
3,065
|
|
|
607
|
|
|
44
|
|
|
3,716
|
|
|
Total non-interest income
|
67,110
|
|
|
45,050
|
|
|
44
|
|
|
112,204
|
|
|
Non-interest expense:
|
|
|
|
|
|
|
|
|
|
Compensation and employee benefits
|
55,230
|
|
|
24,288
|
|
|
44,322
|
|
|
123,840
|
|
|
Occupancy and equipment
|
25,868
|
|
|
4,907
|
|
|
9,739
|
|
|
40,514
|
|
|
Lease financing equipment depreciation
|
—
|
|
|
17,274
|
|
|
—
|
|
|
17,274
|
|
|
Foreclosed real estate and repossessed assets, net
|
4,259
|
|
|
650
|
|
|
7
|
|
|
4,916
|
|
|
Other
|
76,109
|
|
|
29,253
|
|
|
(45,926
|
)
|
|
59,436
|
|
|
Total non-interest expense
|
161,466
|
|
|
76,372
|
|
|
8,142
|
|
|
245,980
|
|
|
Income (loss) before income tax expense (benefit)
|
36,663
|
|
|
61,799
|
|
|
(407
|
)
|
|
98,055
|
|
|
Income tax expense (benefit)
|
8,823
|
|
|
13,877
|
|
|
(1,069
|
)
|
|
21,631
|
|
|
Income (loss) after income tax expense (benefit)
|
27,840
|
|
|
47,922
|
|
|
662
|
|
|
76,424
|
|
|
Income attributable to non-controlling interest
|
—
|
|
|
2,663
|
|
|
—
|
|
|
2,663
|
|
|
Preferred stock dividends
|
—
|
|
|
—
|
|
|
4,106
|
|
|
4,106
|
|
|
Impact of preferred stock redemption
|
—
|
|
|
—
|
|
|
3,481
|
|
|
3,481
|
|
|
Net income (loss) available to common stockholders
|
$
|
27,840
|
|
|
$
|
45,259
|
|
|
$
|
(6,925
|
)
|
|
$
|
66,174
|
|
|
Revenues from external customers:
|
|
|
|
|
|
|
|
|
Interest income
|
$
|
111,817
|
|
|
$
|
150,659
|
|
|
$
|
12,786
|
|
|
$
|
275,262
|
|
|
Non-interest income
|
67,110
|
|
|
45,050
|
|
|
44
|
|
|
112,204
|
|
|
Total
|
$
|
178,927
|
|
|
$
|
195,709
|
|
|
$
|
12,830
|
|
|
$
|
387,466
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
$
|
8,325,213
|
|
|
$
|
12,293,798
|
|
|
$
|
2,766,041
|
|
|
$
|
23,385,052
|
|
Note 17
.
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 SEC, the Federal Reserve, the OCC and the Consumer Financial Protection Bureau which 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. Based on our current understanding of TCF's pending legal proceedings, including the lawsuits discussed below related to the proposed merger with Chemical, 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 March 29, 2019, purported stockholders of TCF filed two putative class action lawsuits and one individual lawsuit in the United States District Court for the District of Delaware against TCF and members of the TCF Board:
Wang v. TCF Financial Corporation et al.
, 1:19-cv-00661 (filed on April 9, 2019),
Parshall v. TCF Financial Corporation et al.
, 1:19-cv-00663 (filed on April 10, 2019), and
White v. TCF Financial Corporation et al.
, 1:19-cv-00683 (filed on April 12, 2019). The lawsuits contain similar allegations contending, among other things, that the registration statement on Form S-4 related to the proposed merger misstates or fails to disclose certain allegedly material information in violation of federal securities laws. These lawsuits generally seek, among other things, an award of costs and attorneys’ fees, to enjoin the stockholder vote with respect to the merger and/or the completion of the merger until additional information is disclosed, to recover damages and to rescind the merger to the extent the merger is completed. Additionally, a purported shareholder of TCF filed an individual lawsuit in the United States District Court for the Southern District of New York against TCF and members of the TCF Board:
Harrelson v. TCF Financial Corporation et al.
, 1:19-cv-03183 (filed on April 10, 2019). The lawsuit contains similar allegations to the complaints filed in the District of Delaware. Like the lawsuits filed in the District of Delaware, this lawsuit seeks, among other things, an award of costs and attorneys’ fees, to enjoin the completion of the merger until additional information is disclosed, to recover damages and to rescind the merger to the extent the merger is completed. Finally, a purported shareholder of TCF filed a putative class action
lawsuit in Minnesota’s Fourth Judicial District Court, Hennepin County against TCF and members of the TCF Board:
Nelson v. TCF Financial Corporation et al.
, 27-cv-19-6519 (filed on April 24, 2019). The lawsuit contends, among other things, that the TCF Board breached their fiduciary duty by filing a registration statement on Form S-4 that misstates or fails to disclose certain allegedly material information in violation of federal securities laws. As with the earlier federal lawsuits this lawsuit seeks, among other things, an award of costs and attorneys’ fees, to enjoin the shareholder vote with respect to the merger and/or the completion of the merger until additional information is disclosed, to recover damages and to rescind the merger to the extent the merger is completed. The defendants have not yet answered or otherwise responded to the complaints. TCF and the TCF board of directors believe these lawsuits are without merit and intend to defend against them vigorously.
Note 18
.
Accumulated Other Comprehensive Income (Loss)
The components of other comprehensive income (loss), reclassifications from accumulated other comprehensive income (loss) to various financial statement line items and the related tax effects were as follows
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended March 31,
|
|
|
2019
|
|
2018
|
|
(In thousands)
|
Before Tax
|
|
Tax Effect
|
|
Net of Tax
|
|
Before Tax
|
|
Tax Effect
|
|
Net of Tax
|
|
Net unrealized gains (losses) on debt securities available for sale and interest-only strips:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized gains (losses) arising during the period
|
$
|
48,628
|
|
|
$
|
(11,836
|
)
|
|
$
|
36,792
|
|
|
$
|
(37,892
|
)
|
|
$
|
9,538
|
|
|
$
|
(28,354
|
)
|
|
Reclassification of net (gains) losses from accumulated other comprehensive income (loss) to:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income
|
1,370
|
|
|
(333
|
)
|
|
1,037
|
|
|
276
|
|
|
(69
|
)
|
|
207
|
|
|
Gains (losses) on debt securities, net
|
(447
|
)
|
|
109
|
|
|
(338
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Other non-interest expense
|
(162
|
)
|
|
39
|
|
|
(123
|
)
|
|
437
|
|
|
(109
|
)
|
|
328
|
|
|
Amounts reclassified from accumulated other comprehensive income (loss)
|
761
|
|
|
(185
|
)
|
|
576
|
|
|
713
|
|
|
(178
|
)
|
|
535
|
|
|
Net unrealized gains (losses) on debt securities available for sale and interest-only strips
|
49,389
|
|
|
(12,021
|
)
|
|
37,368
|
|
|
(37,179
|
)
|
|
9,360
|
|
|
(27,819
|
)
|
|
Net unrealized gains (losses) on net investment hedges
|
(3,050
|
)
|
|
742
|
|
|
(2,308
|
)
|
|
2,137
|
|
|
(533
|
)
|
|
1,604
|
|
|
Foreign currency translation adjustment
(1)
|
3,567
|
|
|
—
|
|
|
3,567
|
|
|
(2,110
|
)
|
|
—
|
|
|
(2,110
|
)
|
|
Recognized postretirement prior service cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification of amortization of prior service cost to Other non-interest expense
|
(12
|
)
|
|
4
|
|
|
(8
|
)
|
|
(12
|
)
|
|
3
|
|
|
(9
|
)
|
|
Total other comprehensive income (loss)
|
$
|
49,894
|
|
|
$
|
(11,275
|
)
|
|
$
|
38,619
|
|
|
$
|
(37,164
|
)
|
|
$
|
8,830
|
|
|
$
|
(28,334
|
)
|
|
|
|
|
(1)
|
Foreign investments are deemed to be permanent in nature and, therefore, TCF does not provide for taxes on foreign currency translation adjustments.
|
The components of accumulated other comprehensive income (loss) were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Net Unrealized Gains (Losses) on Debt Securities Available for Sale and Interest-only Strips
|
|
Net Unrealized Gains (Losses) on Net
Investment
Hedges
|
|
Foreign
Currency
Translation
Adjustment
|
|
Recognized
Postretirement Prior
Service Cost
|
|
Total
|
|
At or For the Quarter Ended March 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period
|
$
|
(28,022
|
)
|
|
$
|
14,986
|
|
|
$
|
(20,211
|
)
|
|
$
|
109
|
|
|
$
|
(33,138
|
)
|
|
Other comprehensive income (loss)
|
36,792
|
|
|
(2,308
|
)
|
|
3,567
|
|
|
—
|
|
|
38,051
|
|
|
Amounts reclassified from accumulated other comprehensive income (loss)
|
576
|
|
|
—
|
|
|
—
|
|
|
(8
|
)
|
|
568
|
|
|
Net other comprehensive income (loss)
|
37,368
|
|
|
(2,308
|
)
|
|
3,567
|
|
|
(8
|
)
|
|
38,619
|
|
|
Balance, end of period
|
$
|
9,346
|
|
|
$
|
12,678
|
|
|
$
|
(16,644
|
)
|
|
$
|
101
|
|
|
$
|
5,481
|
|
|
At or For the Quarter Ended March 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period
|
$
|
(16,353
|
)
|
|
$
|
4,536
|
|
|
$
|
(6,843
|
)
|
|
$
|
143
|
|
|
$
|
(18,517
|
)
|
|
Other comprehensive income (loss)
|
(28,354
|
)
|
|
1,604
|
|
|
(2,110
|
)
|
|
—
|
|
|
(28,860
|
)
|
|
Amounts reclassified from accumulated other comprehensive income (loss)
|
535
|
|
|
—
|
|
|
—
|
|
|
(9
|
)
|
|
526
|
|
|
Net other comprehensive income (loss)
|
(27,819
|
)
|
|
1,604
|
|
|
(2,110
|
)
|
|
(9
|
)
|
|
(28,334
|
)
|
|
Balance, end of period
|
$
|
(44,172
|
)
|
|
$
|
6,140
|
|
|
$
|
(8,953
|
)
|
|
$
|
134
|
|
|
$
|
(46,851
|
)
|