TCF Bank 2014 Annual Report Download - page 77

Note 5. Loans and Leases
Loans and leases consisted of the following.
At December 31, Percent
(Dollars in thousands) 2014 2013 Change
Consumer real estate:
First mortgage lien $ 3,139,152 $ 3,766,421 (16.7)%
Junior lien 2,543,212 2,572,905 (1.2)
Total consumer real estate 5,682,364 6,339,326 (10.4)
Commercial:
Commercial real estate:
Permanent 2,382,144 2,604,673 (8.5)
Construction and development 242,111 139,024 74.2
Total commercial real estate 2,624,255 2,743,697 (4.4)
Commercial business 533,410 404,655 31.8
Total commercial 3,157,665 3,148,352 0.3
Leasing and equipment finance 3,745,322 3,428,755 9.2
Inventory finance 1,877,090 1,664,377 12.8
Auto finance 1,915,061 1,239,386 54.5
Other 24,144 26,743 (9.7)
Total loans and leases(1) $16,401,646 $15,846,939 3.5
(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 $43.4 million and $30.3 million at December 31, 2014 and 2013, respectively.
The consumer real estate junior lien portfolio was comprised of $2.1 billion of home equity lines of credit (‘‘HELOCs’’) and
$424.4 million of amortizing junior lien mortgage loans at December 31, 2014, compared with $2.1 billion and $505.5 million at
December 31, 2013, respectively. At December 31, 2014 and 2013, $1.3 billion and $1.1 billion, respectively, of the consumer
real estate junior lien HELOCs had a 10-year interest-only draw period and a 20-year amortization repayment period and all were
within the 10-year initial draw period and will not convert to amortizing loans until 2021 or later. At December 31, 2014 and 2013,
$816.0 million and $969.2 million, respectively, of the consumer real estate junior lien HELOCs were interest-only revolving draw
loans with no defined amortization period and original draw periods of 5 to 40 years. As of December 31, 2014, 14.6% of these
loans will mature in the next five years.
In 2014 and 2013, TCF sold $1.3 billion and $0.8 billion, respectively, of consumer auto loans with servicing retained, received
cash of $1.4 billion and $0.8 billion, respectively, and recognized net gains of $44.7 million and $29.7 million, respectively. Related
to these sales, TCF retained interest-only strips of $17.9 million and $50.7 million in 2014 and 2013, respectively. Total
interest-only strips related to sales of auto loans totaled $48.6 million and $64.9 million at December 31, 2014 and 2013,
respectively. TCF recorded impairment charges on these interest-only strips of $3.5 million and $5.4 million in 2014 and 2013,
respectively, primarily as a result of higher prepayments than originally assumed. Contractual recourse liabilities related to sales
of auto loans totaled $0.7 million and $1.1 million at December 31, 2014 and 2013, respectively. No servicing assets or liabilities
related to consumer auto loans were recorded within TCF’s Consolidated Statements of Financial Condition, as the contractual
servicing fees are adequate to compensate TCF for its servicing responsibilities based on the amount demanded by the
marketplace. TCF’s managed auto loan portfolio, which includes portfolio loans, loans held for sale and loans sold and serviced
for others, totaled $3.8 billion and $2.4 billion at December 31, 2014 and 2013, respectively.
In July 2014, TCF transferred consumer auto loans totaling $256.3 million with servicing retained to a trust in the Company’s
inaugural securitization transaction, received cash proceeds of $266.7 million and recognized gains of $7.4 million, which
qualified for sale accounting and is included in the amounts above. This trust is considered a variable interest entity due to its
limited capitalization and special purpose nature, however it is not consolidated as TCF is not the primary beneficiary because the
Company does not have a variable interest in the trust.
In 2014 and 2013, TCF sold $1.4 billion and $0.8 billion, respectively, of consumer real estate loans, received cash of $1.4 billion
and $0.8 billion, respectively, and recognized net gains of $34.1 million and $21.7 million, respectively. Related to these sales,
TCF retained interest-only strips of $10.8 million and $22.2 million in 2014 and 2013, respectively. Total interest-only strips related
to sales of consumer real estate loans totaled $21.2 million and $19.6 million at December 31, 2014 and 2013, respectively. TCF
had no impairment charges on these interest-only strips in 2014 and recorded impairment charges of $0.5 million on these
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