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TCF Financial 10-Q 2011

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

 

FORM 10-Q

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended

June 30, 2011

 

or

 

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number: 001-10253

 

TCF FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

41-1591444

(State or other jurisdiction of

 

(I.R.S. Employer Identification No.)

incorporation or organization)

 

 

 

200 Lake Street East, Mail Code EX0-03-A,

Wayzata, Minnesota 55391-1693

(Address and Zip Code of principal executive offices)

 

(952) 745-2760

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X]

 

No [   ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [X]

 

No [   ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

[X]

 

Accelerated filer

[   ]

Non-accelerated filer

[   ]

(Do not check if a smaller reporting company)

Smaller reporting company

[   ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [   ]

 

No [X]

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

 

 

Outstanding at

Class

 

 

July 21, 2011

Common Stock, $.01 par value

 

 

159,642,016 shares

 



 

TCF FINANCIAL CORPORATION AND SUBSIDIARIES

 

INDEX

 

Part I.   Financial Information

Pages

 

 

 

 

 

Item 1. Financial Statements

 

 

 

 

 

 

 

 

Consolidated Statements of Financial Condition
at June 30, 2011 and December 31, 2010

3

 

 

 

 

 

 

 

 

 

Consolidated Statements of Income for the
Three and Six Months Ended June 30, 2011 and 2010

4

 

 

 

 

 

 

 

 

 

Consolidated Statements of Equity for the
Six Months Ended June 30, 2011 and 2010

5

 

 

 

 

 

 

 

 

 

Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 2011 and 2010

6

 

 

 

 

 

 

 

 

Notes to Consolidated Financial Statements

7

 

 

 

 

 

 

 

 

 

 

Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations

33

 

 

 

 

 

 

 

 

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

62

 

 

 

 

 

 

 

 

 

 

Item 4. Controls and Procedures

63

 

 

 

 

 

 

 

 

 

 

Supplementary Information

64

 

 

 

 

 

 

 

 

 

Part II. Other Information

 

 

 

 

 

 

 

 

 

 

 

Items 1-6

65

 

 

 

 

 

 

 

 

 

 

Signatures

67

 

 

 

 

 

 

 

 

 

 

Index to Exhibits

68

 

 

2



 

PART 1 - FINANCIAL INFORMATION

Item 1.  Financial Statements

TCF FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Financial Condition

 

 

 

At

 

At

 

 

 

June 30,

 

December 31,

 

(Dollars in thousands, except per-share data)

 

2011

 

2010

 

 

 

(Unaudited)

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

752,504

 

$

663,901

 

Investments

 

161,830

 

179,768

 

Securities available for sale

 

2,463,367

 

1,931,174

 

Loans and leases:

 

 

 

 

 

Consumer real estate and other

 

7,055,750

 

7,195,269

 

Commercial

 

3,614,395

 

3,646,203

 

Leasing and equipment finance

 

3,055,878

 

3,154,478

 

Inventory finance

 

905,922

 

792,354

 

Total loans and leases

 

14,631,945

 

14,788,304

 

Allowance for loan and lease losses

 

(255,472

)

(265,819

)

Net loans and leases

 

14,376,473

 

14,522,485

 

Premises and equipment, net

 

439,884

 

443,768

 

Goodwill

 

152,599

 

152,599

 

Other assets

 

487,786

 

571,330

 

Total assets

 

$

18,834,443

 

$

18,465,025

 

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

Checking

 

$

4,496,756

 

$

4,530,064

 

Savings

 

5,715,126

 

5,390,802

 

Money market

 

643,706

 

635,922

 

Certificates of deposit

 

1,083,888

 

1,028,327

 

Total deposits

 

11,939,476

 

11,585,115

 

Short-term borrowings

 

9,514

 

126,790

 

Long-term borrowings

 

4,415,362

 

4,858,821

 

Total borrowings

 

4,424,876

 

4,985,611

 

Accrued expenses and other liabilities

 

700,446

 

414,136

 

Total liabilities

 

17,064,798

 

16,984,862

 

Equity:

 

 

 

 

 

Preferred stock, par value $.01 per share, 30,000,000 shares authorized; none issued and outstanding

 

-

 

-

 

Common stock, par value $.01 per share, 280,000,000 shares authorized; 159,664,604 and 142,965,012 shares issued

 

1,597

 

1,430

 

Additional paid-in capital

 

702,192

 

459,884

 

Retained earnings, subject to certain restrictions

 

1,109,541

 

1,064,978

 

Accumulated other comprehensive loss

 

(23,823

)

(31,514

)

Treasury stock at cost, 45,504 and 51,160 shares, and other

 

(33,242

)

(23,115

)

Total TCF Financial Corporation stockholders’ equity

 

1,756,265

 

1,471,663

 

Non-controlling interest in subsidiaries

 

13,380

 

8,500

 

Total equity

 

1,769,645

 

1,480,163

 

Total liabilities and equity

 

$

18,834,443

 

$

18,465,025

 

See accompanying notes to consolidated financial statements.

 

 

3



 

TCF FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Income

(Unaudited)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

 

 

June 30,

 

(In thousands, except per-share data)

 

2011

 

2010

 

2011

 

2010

 

 

 

 

 

 

 

 

 

 

 

Interest income:

 

 

 

 

 

 

 

 

 

Loans and leases

 

$

213,823

 

$

221,913

 

$

428,496

 

$

443,177

 

Securities available for sale

 

20,639

 

21,065

 

40,068

 

42,472

 

Investments and other

 

1,836

 

1,236

 

3,637

 

2,377

 

Total interest income

 

236,298

 

244,214

 

472,201

 

488,026

 

Interest expense:

 

 

 

 

 

 

 

 

 

Deposits

 

11,430

 

16,281

 

23,434

 

33,885

 

Borrowings

 

48,718

 

51,434

 

98,577

 

102,980

 

Total interest expense

 

60,148

 

67,715

 

122,011

 

136,865

 

Net interest income

 

176,150

 

176,499

 

350,190

 

351,161

 

Provision for credit losses

 

44,005

 

49,013

 

89,279

 

99,504

 

Net interest income after provision for credit losses

 

132,145

 

127,486

 

260,911

 

251,657

 

Non-interest income:

 

 

 

 

 

 

 

 

 

Fees and service charges

 

56,396

 

77,845

 

109,909

 

144,017

 

Card revenue

 

28,219

 

28,591

 

54,803

 

55,663

 

ATM revenue

 

7,091

 

7,844

 

13,796

 

14,866

 

Subtotal

 

91,706

 

114,280

 

178,508

 

214,546

 

Leasing and equipment finance

 

22,279

 

20,528

 

49,029

 

40,880

 

Other

 

384

 

1,235

 

1,078

 

3,690

 

Fees and other revenue

 

114,369

 

136,043

 

228,615

 

259,116

 

Losses on securities

 

(227

)

(137

)

(227

)

(567

)

Total non-interest income

 

114,142

 

135,906

 

228,388

 

258,549

 

Non-interest expense:

 

 

 

 

 

 

 

 

 

Compensation and employee benefits

 

89,997

 

86,983

 

180,270

 

175,208

 

Occupancy and equipment

 

30,783

 

31,311

 

62,942

 

63,492

 

FDIC insurance

 

7,542

 

5,219

 

14,737

 

10,700

 

Deposit account premiums

 

6,166

 

5,478

 

9,364

 

12,276

 

Advertising and marketing

 

3,479

 

3,734

 

6,639

 

6,554

 

Other

 

37,067

 

35,053

 

71,633

 

69,463

 

Subtotal

 

175,034

 

167,778

 

345,585

 

337,693

 

Foreclosed real estate and repossessed assets, net

 

12,617

 

8,756

 

25,485

 

18,016

 

Operating lease depreciation

 

7,859

 

9,812

 

15,787

 

19,852

 

Other credit costs, net

 

496

 

2,723

 

3,044

 

5,310

 

Total non-interest expense

 

196,006

 

189,069

 

389,901

 

380,871

 

Income before income tax expense

 

50,281

 

74,323

 

99,398

 

129,335

 

Income tax expense

 

18,758

 

28,112

 

37,200

 

48,902

 

Income after income tax expense

 

31,523

 

46,211

 

62,198

 

80,433

 

Income attributable to non-controlling interest

 

1,686

 

1,186

 

2,675

 

1,487

 

Net income available to common stockholders

 

$

29,837

 

$

45,025

 

$

59,523

 

$

78,946

 

 

 

 

 

 

 

 

 

 

 

Net income per common share:

 

 

 

 

 

 

 

 

 

Basic

 

$

.19

 

$

.32

 

$

.39

 

$

.58

 

Diluted

 

$

.19

 

$

.32

 

$

.39

 

$

.58

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per common share

 

$

.05

 

$

.05

 

$

.10

 

$

.10

 

See accompanying notes to consolidated financial statements.

 

 

4



 

TCF FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Equity

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TCF Financial Corporation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

Number of

 

 

 

Additional

 

 

 

Other

 

Treasury

 

 

 

Non-

 

 

 

 

 

Common

 

Common

 

Paid-in

 

Retained

 

Comprehensive

 

Stock

 

 

 

controlling

 

Total

 

(Dollars in thousands)

 

Shares Issued

 

Stock

 

Capital

 

Earnings

 

Income (Loss)

 

and Other

 

Total

 

Interests

 

Equity

 

Balance, December 31, 2009

 

130,339,500

 

$

1,303

 

$

297,429

 

$

946,002

 

$

(18,545

)

$

(50,827

)

$

1,175,362

 

$

4,393

 

$

1,179,755

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income after income tax expense

 

-

 

-

 

-

 

78,946

 

-

 

-

 

78,946

 

1,487

 

80,433

 

Other comprehensive income

 

-

 

-

 

-

 

-

 

43,591

 

-

 

43,591

 

-

 

43,591

 

Comprehensive income

 

-

 

-

 

-

 

78,946

 

43,591

 

-

 

122,537

 

1,487

 

124,024

 

Public offering of common stock

 

12,322,250

 

124

 

164,443

 

-

 

-

 

-

 

164,567

 

-

 

164,567

 

Investment by non-controlling interest

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

5,723

 

5,723

 

Dividends on common stock

 

-

 

-

 

-

 

(13,472

)

-

 

-

 

(13,472

)

-

 

(13,472

)

Grants of restricted stock, 309,913 shares

 

-

 

-

 

(8,025

)

-

 

-

 

8,025

 

-

 

-

 

-

 

Treasury shares sold to TCF employee benefit plans, 640,271 shares

 

-

 

-

 

(6,727

)

-

 

-

 

16,580

 

9,853

 

-

 

9,853

 

Cancellation of shares of restricted stock

 

(10,250

)

-

 

(145

)

21

 

-

 

-

 

(124

)

 

 

(124

)

Cancellation of common shares for tax withholding

 

(103,936

)

(2

)

(1,430

)

-

 

-

 

-

 

(1,432

)

-

 

(1,432

)

Amortization of stock compensation

 

-

 

-

 

4,751

 

-

 

-

 

-

 

4,751

 

-

 

4,751

 

Stock compensation tax benefits

 

-

 

-

 

891

 

-

 

-

 

-

 

891

 

-

 

891

 

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

 

-

 

-

 

253

 

-

 

-

 

(253

)

-

 

-

 

-

 

Balance, June 30, 2010

 

142,547,564

 

$

1,425

 

$

451,440

 

$

1,011,497

 

$

25,046

 

$

(26,475

)

$

1,462,933

 

$

11,603

 

$

1,474,536

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2010

 

142,965,012

 

$

1,430

 

$

459,884

 

$

1,064,978

 

$

(31,514

)

$

(23,115

)

$

1,471,663

 

$

8,500

 

$

1,480,163

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income after income tax expense

 

-

 

-

 

-

 

59,523

 

-

 

-

 

59,523

 

2,675

 

62,198

 

Other comprehensive income

 

-

 

-

 

-

 

-

 

7,691

 

-

 

7,691

 

-

 

7,691

 

Comprehensive income

 

-

 

-

 

-

 

59,523

 

7,691

 

-

 

67,214

 

2,675

 

69,889

 

Public offering of common stock

 

15,081,968

 

151

 

219,515

 

-

 

-

 

-

 

219,666

 

-

 

219,666

 

Investment by non-controlling interest

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

2,205

 

2,205

 

Dividends on common stock

 

-

 

-

 

-

 

(14,975

)

-

 

-

 

(14,975

)

-

 

(14,975

)

Grants of restricted stock, 1,193,656 shares

 

1,188,000

 

12

 

(158

)

-

 

-

 

146

 

-

 

-

 

-

 

Common shares purchased by TCF employee benefit plans

 

641,799

 

7

 

9,907

 

-

 

-

 

-

 

9,914

 

-

 

9,914

 

Cancellation of shares of restricted stock

 

(27,850

)

-

 

(177

)

15

 

-

 

-

 

(162

)

 

 

(162

)

Cancellation of common shares for tax withholding

 

(184,325

)

(3

)

(2,788

)

-

 

-

 

-

 

(2,791

)

-

 

(2,791

)

Amortization of stock compensation

 

-

 

-

 

5,259

 

-

 

-

 

-

 

5,259

 

-

 

5,259

 

Stock compensation tax benefits

 

-

 

-

 

477

 

-

 

-

 

-

 

477

 

-

 

477

 

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

 

-

 

-

 

10,273

 

-

 

-

 

(10,273

)

-

 

-

 

-

 

Balance, June 30, 2011

 

159,664,604

 

$

1,597

 

$

702,192

 

$

1,109,541

 

$

(23,823

)

$

(33,242

)

$

1,756,265

 

$

13,380

 

$

1,769,645

 

See accompanying notes to consolidated financial statements.

 

 

5



 

TCF FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

Six Months Ended

 

 

 

June 30,

 

(In thousands)

 

2011

 

2010

 

Cash flows from operating activities:

 

 

 

 

 

Net income

 

$

59,523

 

$

78,946

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Provision for credit losses

 

89,279

 

99,504

 

Depreciation and amortization

 

40,272

 

44,380

 

Net increase in other assets and accrued expenses and other liabilities

 

79,305

 

24,772

 

Other, net

 

6,042

 

5,008

 

Total adjustments

 

214,898

 

173,664

 

Net cash provided by operating activities

 

274,421

 

252,610

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Principal collected on loans and leases, net of loan originations and purchases

 

291,226

 

94,256

 

Purchases of equipment for lease financing

 

(417,862

)

(381,130

)

Proceeds from sales of loans and leases

 

54,957

 

-

 

Purchases of securities available for sale

 

(512,762

)

(91,397

)

Proceeds from maturities of and principal collected on securities available for sale

 

264,125

 

127,868

 

Purchases of Federal Home Loan Bank stock

 

(4,439

)

(2,225

)

Redemption of Federal Home Loan Bank stock

 

22,250

 

11,135

 

Proceeds from sales of real estate owned

 

56,698

 

51,494

 

Purchases of premises and equipment

 

(15,602

)

(19,407

)

Other, net

 

18,359

 

15,089

 

Net cash used by investing activities

 

(243,050

)

(194,317

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Net increase (decrease) in deposits

 

354,361

 

(45,276

)

Net decrease in short-term borrowings

 

(117,276

)

(229,799

)

Proceeds from long-term borrowings

 

1,345

 

154,745

 

Payments on long-term borrowings

 

(402,884

)

(21,954

)

Net proceeds from public offering of common stock

 

219,666

 

164,567

 

Net investment by non-controlling interest

 

2,205

 

5,723

 

Dividends paid on common stock

 

(14,975

)

(13,472

)

Common stock sold to TCF employee benefit plans

 

9,914

 

-

 

Treasury shares sold to TCF employee benefit plans

 

-

 

9,853

 

Other, net

 

4,876

 

5,868

 

Net cash provided by financing activities

 

57,232

 

30,255

 

Net increase in cash and due from banks

 

88,603

 

88,548

 

Cash and due from banks at beginning of period

 

663,901

 

299,127

 

Cash and due from banks at end of period

 

$

752,504

 

$

387,675

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

Cash paid for:

 

 

 

 

 

Interest on deposits and borrowings

 

$

118,117

 

$

131,088

 

Income taxes

 

$

519

 

$

36,332

 

Transfer of loans and leases to other assets

 

$

93,100

 

$

97,287

 

See accompanying notes to consolidated financial statements.

 

 

 

 

 

 

 

6



 

TCF FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

 

(1)      Basis of Presentation

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all the information and notes necessary for complete financial statements in conformity with generally accepted accounting principles (“GAAP”). The information in this Quarterly Report on Form 10-Q is written with the presumption that the users of the interim financial statements have read or have access to the most recent Annual Report on Form 10-K of TCF Financial Corporation (“TCF” or the “Company”), which contains the latest audited financial statements and notes thereto, together with Management’s Discussion and Analysis of Financial Condition and Results of Operations as of December 31, 2010 and for the year then ended. All significant intercompany accounts and transactions have been eliminated in consolidation. Certain reclassifications have been made to prior period financial statements to conform to the current period presentation.  For Consolidated Statements of Cash Flow purposes, cash and cash equivalents include cash and due from banks.

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. These estimates are based on information available to management at the time the estimates are made.  Actual results could differ from those estimates.  In the opinion of management, the accompanying unaudited consolidated financial statements contain all 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.

 

(2)      Investments

 

The carrying values of investments consist of the following.

 

 

 

At

 

At

 

 

June 30,

 

December 31,

(In thousands)

 

2011

 

2010

Federal Home Loan Bank stock, at cost:

 

 

 

 

 

Des Moines

 

$

119,088

 

$

136,899

 

Chicago

 

4,617

 

4,617

 

Subtotal

 

123,705

 

141,516

 

Federal Reserve Bank stock, at cost

 

30,694

 

30,684

 

Other

 

7,431

 

7,568

 

Total investments

 

$

161,830

 

$

179,768

 

 

The investments in Federal Home Loan Bank (“FHLB”) stock are required investments related to TCF’s current and previous borrowings from these banks.  FHLBs obtain their funding primarily through issuance of consolidated obligations of the Federal Home Loan Bank system.  The U.S. Government does not guarantee these obligations, and each of the 12 FHLBs are generally jointly and severally liable for repayment of each other’s debt.  Therefore, TCF’s investments in these banks could be adversely impacted by the financial operations of the FHLBs and actions of their regulator, the Federal Housing Finance Agency. Other investments primarily consist of non-traded mortgage-backed securities and other bonds which qualify for investment credit under the Community Reinvestment Act.

 

During the second quarter and first six months of 2011, TCF recorded impairment charges of $16 thousand on other investments, which had a carrying value of $7.4 million at June 30, 2011. During the second quarter and first six months of 2010, TCF recorded impairment charges of $137 thousand and $241 thousand, respectively, on other investments, which had a carrying value of $7.7 million at June 30, 2010.

 

 

7



 

(3)      Securities Available for Sale

 

Securities available for sale consist of the following.

 

 

 

At June 30, 2011

 

At December 31, 2010

 

 

 

 

 

 

 

 

 

Gross

 

Gross

 

 

 

 

 

Gross

 

Gross

 

 

 

 

 

Amortized

 

Unrealized

 

Unrealized

 

Fair

 

Amortized

 

Unrealized

 

Unrealized

 

Fair

 

(Dollars in thousands)

 

Cost

 

Gains

 

Losses

 

Value

 

Cost

 

Gains

 

Losses

 

Value

 

Mortgage-backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government sponsored enterprises and federal agencies

 

$

2,346,543

 

$

26,409

 

$

41,794

 

$

2,331,158

 

$

1,929,098

 

$

16,579

 

$

42,141

 

$

1,903,536

 

Other

 

165

 

-

 

-

 

165

 

222

 

-

 

-

 

222

 

U.S. Treasury Bills

 

130,000

 

-

 

-

 

130,000

 

24,999

 

1

 

-

 

25,000

 

Other securities

 

2,400

 

-

 

356

 

2,044

 

2,610

 

-

 

194

 

2,416

 

Total

 

$

2,479,108

 

$

26,409

 

$

42,150

 

$

2,463,367

 

$

1,956,929

 

$

16,580

 

$

42,335

 

$

1,931,174

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average yield

 

3.62

%

 

 

 

 

 

 

3.87

%

 

 

 

 

 

 

 

TCF recorded $211 thousand of impairment charges on other securities during the second quarter of 2011 and no impairment charges during the same 2010 period.  TCF recorded impairment charges of $211 thousand and $326 thousand on other securities for the first six months of 2011 and 2010, respectively.  The other securities had fair values of $2 million and $3.6 million at June 30, 2011 and 2010, respectively.

 

The following table shows the securities available for sale portfolio’s gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position.  Unrealized losses on securities available for sale are due to changes in interest rates, lower values for equity securities and not due to credit quality issues.  TCF has the ability and intent to hold these investments until a recovery of fair value occurs.

 

 

 

Less than 12 months

 

12 months or more

 

Total

 

 

 

 

 

Unrealized

 

 

 

Unrealized

 

 

 

Unrealized

 

(In thousands)

 

Fair Value

 

Losses

 

Fair Value

 

Losses

 

Fair Value

 

Losses

 

At June 30, 2011:

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government sponsored enterprises and federal agencies

 

$

1,137,144

 

$

41,794

 

$

-

 

$

-

 

$

1,137,144

 

$

41,794

 

Other securities

 

1,843

 

356

 

-

 

-

 

1,843

 

356

 

Total

 

$

1,138,987

 

$

42,150

 

$

-

 

$

-

 

$

1,138,987

 

$

42,150

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government sponsored enterprises and federal agencies

 

$

988,753

 

$

42,141

 

$

-

 

$

-

 

$

988,753

 

$

42,141

 

Other securities

 

2,216

 

194

 

-

 

-

 

2,216

 

194

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

990,969

 

$

42,335

 

$

-

 

$

-

 

$

990,969

 

$

42,335

 

 

The amortized cost and fair value of securities available for sale at June 30, 2011, by contractual maturity, are shown below.

 

 

 

Amortized

 

 

 

(In thousands)

 

Cost

 

Fair Value

 

Due in one year or less

 

$

130,100

 

$

130,100

 

Due in 1-5 years

 

199

 

207

 

Due in 5-10 years

 

194

 

200

 

Due after 10 years

 

2,346,415

 

2,331,017

 

No stated maturity

 

2,200

 

1,843

 

Total

 

$

2,479,108

 

$

2,463,367

 

 

 

8



 

(4)      Loans and Leases

 

The following table sets forth information about loans and leases.

 

 

 

At

 

At

 

 

 

 

 

June 30,

 

December 31,

 

Percentage

 

(Dollars in thousands)

 

2011

 

2010

 

Change

 

Consumer real estate and other:

 

 

 

 

 

 

 

Consumer real estate:

 

 

 

 

 

 

 

First mortgage lien

 

$

4,833,744

 

$

4,893,887

 

(1.2

)  %

Junior lien

 

2,184,496

 

2,262,194

 

(3.4

)

Total consumer real estate

 

7,018,240

 

7,156,081

 

(1.9

)

Other

 

37,510

 

39,188

 

(4.3

)

Total consumer real estate and other

 

7,055,750

 

7,195,269

 

(1.9

)

Commercial:

 

 

 

 

 

 

 

Commercial real estate:

 

 

 

 

 

 

 

Permanent

 

3,128,149

 

3,125,837

 

.1

 

Construction and development

 

181,713

 

202,379

 

(10.2

)

Total commercial real estate

 

3,309,862

 

3,328,216

 

(.6

)

Commercial business

 

304,533

 

317,987

 

(4.2

)

Total commercial

 

3,614,395

 

3,646,203

 

(.9

)

Leasing and equipment finance (1):

 

 

 

 

 

 

 

Equipment finance loans

 

974,323

 

939,474

 

3.7

 

Lease financings:

 

 

 

 

 

 

 

Direct financing leases

 

2,120,654

 

2,277,753

 

(6.9

)

Sales-type leases

 

32,706

 

29,728

 

10.0

 

Lease residuals

 

105,643

 

109,555

 

(3.6

)

Unearned income and deferred lease costs

 

(177,448

)

(202,032

)

(12.2

)

Total lease financings

 

2,081,555

 

2,215,004

 

(6.0

)

Total leasing and equipment finance

 

3,055,878

 

3,154,478

 

(3.1

)

Inventory finance

 

905,922

 

792,354

 

14.3

 

Total loans and leases

 

$

14,631,945

 

$

14,788,304

 

(1.1

)  %

 

(1)

Operating leases of $66.4 million at June 30, 2011 and $77.4 million at December 31, 2010 are included in other assets in the Consolidated Statements of Financial Condition.

 

 

For certain leases, TCF sells minimum lease payments to third-party financial institutions at fixed rates.  For those transactions which achieve sale treatment, the related lease cash flow stream is not recognized on TCF’s Statements of Financial Condition.  During the three months ended June 30, 2011, TCF sold $18.2 million of minimum lease payments receivables, receiving cash of $18.5 million and recognizing a gain of $276 thousand. During the six months ended June 30, 2011, TCF sold $44.8 million of minimum lease payments receivables, receiving cash of $50.9 million and recognizing a gain of $6.1 million.  The retained residual values related to 2011 sales reported within the Statements of Financial Condition at June 30, 2011 totaled $2.2 million. At June 30, 2011, TCF’s lease residuals reported within the table above include $3.2 million related to sales of minimum lease payments receivables.

 

Acquired Loans and Leases  Non-accretable discounts of $3.3 million and $4.2 million remained on previously purchased loan and lease portfolios at June 30, 2011 and December 31, 2010, respectively.  In the future, if TCF is unable to collect the expected cash flows or reduces its expectations below the current level, an allowance for credit losses will be established on these acquired portfolios.

 

The excess of expected cash flows to be collected over the initial fair value of the acquired portfolios is referred to as the accretable yield and is accreted into interest income over the estimated life of the acquired portfolios using the effective yield method.  The accretable yield is affected by changes in interest rate indices for variable-rate acquired portfolios, changes in prepayment assumptions and changes in the expected principal and interest payments over the estimated life of the loan.  These loans and leases are classified as accruing and interest income continues to be recognized unless expected losses exceed the non-accretable discount.

 

 

9



 

Within the acquired loan and lease portfolios, there are certain loans which had experienced deterioration in credit quality at the time of acquisition.  These loans had outstanding principal balances of $9.9 million and $13.7 million at June 30, 2011 and December 31, 2010, respectively.  The non-accretable discount on loans acquired with deteriorated credit quality was $767 thousand and $769 thousand at June 30, 2011 and December 31, 2010, respectively.  The remaining accretion to be recognized in income for these loans was $141 thousand at June 30, 2011 and $207 thousand at December 31, 2010.  Accretion of $29 thousand and $34 thousand was recorded to income during the three months ended June 30, 2011 and June 30, 2010, respectively. Accretion of $66 thousand and $85 thousand was recorded to income during the six months ended June 30, 2011 and June 30, 2010, respectively.

 

 

10



 

(5)       Allowance for Loan and Lease Losses and Credit Quality Information

 

Allowance for Loan and Lease Losses  The following tables provide information regarding the allowance for loan and lease losses and other credit loss reserves.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At or For the Three Months Ended June 30, 2011

 

 

 

(In thousands)

 

Consumer
Real Estate and
Other

 

 

Commercial

 

 

Leasing and
Equipment
Finance

 

 

Inventory
Finance

 

 

Total

 

 

Allowance for loan and lease losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, at beginning of quarter

 

$

175,573

 

 

 

$

50,119

 

 

 

$

26,272

 

 

 

$

3,344

 

 

 

$

255,308

 

 

 

Charge-offs

 

(40,236

)

 

 

(3,030

)

 

 

(4,855

)

 

 

(336

)

 

 

(48,457

)

 

 

Recoveries

 

2,881

 

 

 

346

 

 

 

1,377

 

 

 

8

 

 

 

4,612

 

 

 

Net charge-offs

 

(37,355

)

 

 

(2,684

)

 

 

(3,478

)

 

 

(328

)

 

 

(43,845

)

 

 

Provision for credit losses

 

38,919

 

 

 

3,348

 

 

 

1,817

 

 

 

(79

)

 

 

44,005

 

 

 

Other

 

-

 

 

 

-

 

 

 

-

 

 

 

4

 

 

 

4