TCF Bank 2014 Annual Report Download - page 105

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The following table presents changes in Level 3 assets and liabilities measured at fair value on a recurring basis.
Securities Loans and Interest Forward
Available Leases Held Rate Lock Loan Sales Swap
(In thousands) for Sale for Sale Commitments Commitments Agreements
Asset (liability) balance, December 31, 2011 $ 1,450 $ – $ – $ – $ –
Transfers out of Level 3 (1,098) – – – –
Total net losses included in:
Net loss – – – – (150)
Other comprehensive loss (100) – – – –
Purchases – – – – (1,434)
Principal paydowns / settlements (125) – – – 357
Asset (liability) balance, December 31, 2012 127 – – – (1,227)
Principal paydowns / settlements (34) – – – 328
Asset (liability) balance, December 31, 2013 93 – – – (899)
Total net gains (losses) included in:
Net income – 72 285 (23) (47)
Sales – (39,246) – – –
Purchases / originations – 42,482 – – –
Principal paydowns / settlements (38) – – – 325
Asset (liability) balance, December 31, 2014 $ 55 $ 3,308 $285 $(23) $ (621)
Fair Value Option
In the third quarter of 2014, TCF initiated a correspondent lending program in which TCF Bank originates consumer mortgage
loans and sells them to a wholesale partner. TCF elected the fair value option for these loans. This election facilitates the
offsetting of changes in fair values of the loans held for sale and the derivative financial instruments used to economically hedge
them. The following table presents the difference between the aggregate fair value and aggregate unpaid principal balance of
these loans held for sale as of December 31, 2014. There were no loans held for sale reported under the fair value option as of
December 31, 2013.
(In thousands) At December 31, 2014
Fair value carrying amount $3,308
Aggregate unpaid principal amount 3,205
Fair value carrying amount less aggregate unpaid principal $ 103
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 nonaccrual status at December 31, 2014. The net gain from initial measurement
of the above loans and subsequent changes in fair value for loans outstanding was $0.9 million for the year ended December 31,
2014, and is included in gains on sales of consumer real estate loans, net. This amount excludes the impact from offsetting
hedging arrangements which are also included in gains on sales of consumer real estate loans, net.
Disclosures About Fair Value of Financial Instruments
Management discloses the estimated fair value of financial instruments, both assets and liabilities on and off the balance sheet,
for which it is practicable to estimate fair value. These fair value estimates were made at December 31, 2014 and 2013, based on
relevant market information and information about the financial instruments. Fair value estimates are intended to represent the
price at which an asset could be sold or a liability could be settled. However, given there is no active market or observable market
transactions for many of the Company’s financial instruments, the estimates of fair values are subjective in nature, involve
uncertainties and include matters of significant judgment. Changes in assumptions could significantly affect the estimated
values.
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