TCF Bank 2015 Annual Report Download - page 78

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63
Loans and Leases Held for Sale Loans and leases designated as held for sale are generally carried at the lower
of cost or fair value. Any amount by which cost exceeds fair value is initially recorded as a valuation allowance and
subsequently reflected in the gain or loss on sale when sold. Certain other loans and leases held for sale are recorded
at fair value under the elected fair value option. From time to time, management identifies and designates primarily
consumer real estate and auto finance loans held in the loan portfolios for sale. These loans are transferred to loans
and leases held for sale at the lower of cost or fair value at the time of transfer. Any associated allowance for loan
and lease losses is transferred to the valuation allowance.
Loans and Leases Loans and leases are reported at historical cost including net direct fees and costs associated
with originating and acquiring loans and leases. The net direct fees and costs for sales-type leases are offset against
revenues recorded at the commencement of sales-type leases. Discounts and premiums on acquired loans, net direct
fees and costs, unearned discounts and finance charges and unearned lease income are amortized to interest income
using methods which approximate a level yield over the estimated remaining lives of the loans and leases. Net direct
fees and costs on all lines of credit are amortized on a straight line basis over the contractual life of the line of credit
and adjusted for payoffs. Net deferred fees and costs on consumer real estate lines of credit are amortized to service
fee income.
Non-accrual Loans and Leases Loans and leases are generally placed on non-accrual status when the collection
of interest and principal is 90 days or more past due unless, in the case of commercial loans, they are well secured
and in the process of collection. Auto loans are placed on non-accrual status when interest and principal are 120 days
past due. Delinquent consumer real estate junior lien loans are also placed on non-accrual status when there is
evidence that the related third-party first lien mortgage may be 90 days or more past due, or foreclosure, charge-off
or collection action has been initiated. TDR loans are placed on non-accrual status prior to the past due thresholds
outlined above if repayment under the modified terms is not likely after performing a well-documented credit analysis.
Loans on non-accrual status are generally reported as non-accrual loans until there is sustained repayment
performance for six consecutive months, with the exception of loans not reaffirmed upon discharge under Chapter 7
bankruptcy, which remain on non-accrual status until a well-documented credit analysis indicates full repayment of
the remaining pre-discharged contractual principal and interest is likely. Income on these loans is recognized on a
cash basis when there is sustained repayment performance for six or 12 consecutive months based on the credit
evaluation and the loan is not more than 60 days delinquent.
Generally, when a loan or lease is placed on non-accrual status, uncollected interest accrued in prior years is charged-
off against the allowance for loan and lease losses and interest accrued in the current year is reversed against interest
income. For non-accrual leases that have been discounted with third-party financial institutions on a non-recourse
basis, the related liability is also placed on non-accrual status. Interest payments received on loans and leases in
non-accrual status are generally applied to principal unless the remaining principal balance has been determined to
be fully collectible, in which case interest income is recognized on a cash basis.
Premises and Equipment Premises and equipment, including leasehold improvements, are carried at cost and are
depreciated or amortized on a straight-line basis over estimated useful lives of owned assets and for leasehold
improvements over the estimated useful life of the related asset or the lease term, whichever is shorter. Maintenance
and repairs are charged to expense as incurred. Rent expense for leased land with facilities is recognized in occupancy
and equipment expense. Rent expense for leases with free rent periods or scheduled rent increases is recognized
on a straight-line basis over the lease term.