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TCF Financial (TCF)

Filed: 7 May 21, 12:45pm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended
March 31, 2021
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 Commission File No. 001-39009
 
TCF Financial Corporation
(Exact name of registrant as specified in its charter)
Michigan38-2022454
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
 
333 W. Fort Street, Suite 1800
Detroit, Michigan 48226
(Address and Zip Code of principal executive offices)
(866) 258-1807
(Registrant's telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock (par value $1 per share)TCFThe NASDAQ Stock Market
Depositary shares, each representing a 1/1000th interest in a share of the 5.70% Series C Non-Cumulative Perpetual Preferred StockTCFCPThe NASDAQ Stock Market

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                                                    No
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
Yes                                                    No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐                                                 No

As of April 30, 2021, there were 152,648,603 shares outstanding of the registrant's common stock, par value $1 per share, its only outstanding class of common stock.



TABLE OF CONTENTS
 
DescriptionPage
Part I - Financial Information
 
Part II - Other Information 




Part I - Financial Information                                            


Item 1. Financial Statements.

TCF FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Financial Condition (Unaudited)
(Dollars in thousands, except per share data)At March 31, 2021At December 31, 2020
ASSETS
Cash and cash equivalents:
Cash and due from banks$585,663 $531,918 
Interest-bearing deposits with other banks463,641 728,677 
Total cash and cash equivalents1,049,304 1,260,595 
Federal Home Loan Bank and Federal Reserve Bank stocks, at cost358,414 320,436 
Investment securities:
Available-for-sale, at fair value (amortized cost of $8,396,973 and $8,041,173)8,403,788 8,284,723 
Held-to-maturity, at amortized cost (fair value of $212,411 and $193,554)209,778 184,359 
Total investment securities8,613,566 8,469,082 
Loans and leases held-for-sale (includes $107,417 and $221,784 at fair value)107,649 222,028 
Loans and leases36,221,019 34,466,408 
Allowance for loan and lease losses(504,645)(525,868)
Loans and leases, net35,716,374 33,940,540 
Premises and equipment, net455,032 470,131 
Goodwill1,379,890 1,313,046 
Other intangible assets, net149,438 146,377 
Loan servicing rights44,151 38,303 
Other assets1,585,733 1,621,949 
Total assets$49,459,551 $47,802,487 
LIABILITIES AND EQUITY
Liabilities
Deposits:
Noninterest-bearing$12,394,753 $11,036,086 
Interest-bearing27,392,061 27,820,233 
Total deposits39,786,814 38,856,319 
Short-term borrowings1,426,083 617,363 
Long-term borrowings1,518,816 1,374,732 
Other liabilities1,136,067 1,264,776 
Total liabilities43,867,780 42,113,190 
Equity
Preferred stock, 0 par value, 2,000,000 shares authorized; 7,000 shares issued169,302 169,302 
Common stock, $1.00 par value, 220,000,000 shares authorized
Issued - 152,696,133 shares at March 31, 2021 and 152,565,504 shares
at December 31, 2020
152,696 152,566 
Additional paid-in capital3,466,655 3,457,802 
Retained earnings1,802,340 1,735,201 
Accumulated other comprehensive income2,654 182,673 
Other(29,813)(26,731)
Total TCF Financial Corporation shareholders' equity5,563,834 5,670,813 
Non-controlling interest27,937 18,484 
Total equity5,591,771 5,689,297 
Total liabilities and equity$49,459,551 $47,802,487 
 
See accompanying notes to consolidated financial statements.


1

TCF FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income (Unaudited)
 Three Months Ended March 31,
(In thousands, except per share data)20212020
Interest income
Interest and fees on loans and leases$360,584 $443,096 
Interest on investment securities:
Taxable38,716 40,920 
Tax-exempt3,700 4,349 
Interest on loans held-for-sale975 1,561 
Interest on other earning assets1,657 5,466 
Total interest income405,632 495,392 
Interest expense
Interest on deposits13,786 67,419 
Interest on borrowings10,019 26,492 
Total interest expense23,805 93,911 
Net interest income381,827 401,481 
Provision for credit losses20,556 96,943 
Net interest income after provision for credit losses361,271 304,538 
Noninterest income
Leasing revenue36,453 33,565 
Fees and service charges on deposit accounts25,895 34,597 
Card and ATM revenue24,661 21,685 
Mortgage banking income20,986 5,665 
Wealth management revenue6,944 6,151 
Net gains on sales of loans and leases6,058 7,573 
Net gains on investment securities
Other11,055 27,727 
Total noninterest income132,060 136,963 
Noninterest expense
Compensation and employee benefits173,602 171,528 
Occupancy and equipment52,166 57,288 
Lease financing equipment depreciation20,426 18,450 
Net foreclosed real estate and repossessed assets1,029 1,859 
Merger-related expenses16,216 36,728 
Other85,243 88,746 
Total noninterest expense348,682 374,599 
Income before income tax expense144,649 66,902 
Income tax expense19,540 13,086 
Income after income tax expense125,109 53,816 
Income attributable to non-controlling interest1,773 1,917 
Net income attributable to TCF Financial Corporation123,336 51,899 
Preferred stock dividends2,493 2,493 
Net income available to common shareholders$120,843 $49,406 
Earnings per common share
Basic$0.79 $0.33 
Diluted0.79 0.32 
Weighted-average common shares outstanding
Basic152,159,117 151,902,357 
Diluted152,540,687 152,114,017 
 
See accompanying notes to consolidated financial statements.

2

TCF FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income (Unaudited)
 Three Months Ended March 31,
(In thousands)20212020
Net income attributable to TCF Financial Corporation$123,336 $51,899 
Other comprehensive income (loss), net of tax:  
Net unrealized gains (losses) on available-for-sale investment securities and interest-only strips(180,612)115,847 
Net unrealized gains (losses) on net investment hedges(1,559)10,481 
Foreign currency translation adjustment2,170 (14,426)
Recognized postretirement prior service cost(18)(9)
Total other comprehensive income (loss), net of tax(180,019)111,893 
Comprehensive (loss) income$(56,683)$163,792 
 See accompanying notes to consolidated financial statements.

3

TCF FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Equity (Unaudited)
At or For the Three Months Ended March 31, 2021 and 2020
 TCF Financial Corporation
Number of
Shares Issued
Preferred
Stock
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
OtherTotalNon-
controlling
Interest
Total
Equity
(Dollars in thousands)PreferredCommon
Balance, December 31, 20207,000 152,565,504 $169,302 $152,566 $3,457,802 $1,735,201 $182,673 $(26,731)$5,670,813 $18,484 $5,689,297 
Net income— — — — — 123,336 — — 123,336 1,773 125,109 
Other comprehensive income (loss), net of tax— — — — — — (180,019)— (180,019)— (180,019)
Net investment by (distribution to) non-controlling interest— — — — — — — — — 7,680 7,680 
Dividends on 5.70% Series C Preferred Stock— — — — — (2,493)— — (2,493)— (2,493)
Dividends on common stock of $0.35 per common share— — — — — (53,704)— — (53,704)— (53,704)
Stock compensation plans, net of tax— 130,629 — 130 5,771 — — 5,901 — 5,901 
Change in shares held in trust for deferred compensation plans, at cost— — — — 3,082 — — (3,082)— — — 
Balance, March 31, 20217,000 152,696,133 $169,302 $152,696 $3,466,655 $1,802,340 $2,654 $(29,813)$5,563,834 $27,937 $5,591,771 
See accompanying notes to consolidated financial statements.

 TCF Financial Corporation  
Number of
Shares Issued
Preferred
Stock
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
OtherTotalNon-
controlling
Interest
Total
Equity
(Dollars in thousands)PreferredCommon
Balance, December 31, 20197,000 152,965,571 $169,302 $152,966 $3,462,080 $1,896,427 $54,277 $(28,037)$5,707,015 $20,226 $5,727,241 
Cumulative effect adjustment related to adoption of Accounting Standards Update 2016-13(1)
— — — — — (159,323)— — (159,323)74 (159,249)
Balance, January 1, 20207,000 152,965,571 $169,302 $152,966 $3,462,080 $1,737,104 $54,277 $(28,037)$5,547,692 $20,300 $5,567,992 
Net income— — — — — 51,899 — — 51,899 1,917 53,816 
Other comprehensive income (loss), net of tax— — — — — — 111,893 — 111,893 — 111,893 
Net investment by (distribution to) non-controlling interest— — — — — — — — — 7,932 7,932 
Repurchases of 873,376 shares of common stock— (873,376)— (873)(32,225)— — (33,098)— (33,098)
Dividends on 5.70% Series C Preferred Stock— — — — — (2,493)— — (2,493)— (2,493)
Dividends on common stock of $0.35 per common share— — — — — (53,578)— — (53,578)— (53,578)
Stock compensation plans, net of tax— 93,789 — 93 3,276 — — 3,369 — 3,369 
Change in shares held in trust for deferred compensation plans, at cost— — — — 103 — — (103)— — — 
Balance, March 31, 20207,000 152,185,984 $169,302 $152,186 $3,433,234 $1,732,932 $166,170 $(28,140)$5,625,684 $30,149 $5,655,833 
(1) See "Note 2. Summary of Significant Accounting Policies" in our Annual Report on Form 10-K for the year ended December 31, 2020 for further information.

4

TCF FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
 Quarter Ended March 31,
(In thousands)20212020
Cash flows from operating activities
Income after income tax expense$125,109 $53,816 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:  
Provision for credit losses20,556 96,943 
Share-based compensation expense7,277 5,647 
Depreciation and amortization106,381 99,541 
Provision (benefit) for deferred income taxes46,452 (3,016)
Net gains on sales of assets(24,365)(28,573)
Proceeds from sales of loans and leases held-for-sale525,556 268,133 
Originations of loans and leases held-for-sale, net of repayments(399,628)(362,680)
Loan servicing rights (recovery) impairment(7,637)8,236 
Net change in other assets(138,828)(218,094)
Net change in other liabilities(143,062)(405,718)
Other, net(1,073)(14,106)
Net cash provided by (used in) operating activities116,738 (499,871)
Cash flows from investing activities  
Proceeds from maturities of and principal collected on investment securities available-for-sale704,304 311,531 
Purchases of investment securities available-for-sale(858,934)(412,011)
Proceeds from maturities of and principal collected on investment securities held-to-maturity9,865 4,152 
Purchases of investment securities held-to-maturity(20,051)
Redemption of Federal Home Loan Bank stock136,002 144,000 
Purchases of Federal Home Loan Bank stock(174,000)(186,000)
Proceeds from sales of loans and leases67,791 287,050 
Loan and lease originations and purchases, net of principal collected(961,317)(1,717,733)
Proceeds from sales of other assets28,114 16,494 
Purchases of premises and equipment and lease equipment(25,304)(23,846)
Net cash paid in business combination(1,069,830)
Other, net(1,732)15,177 
Net cash used in investing activities(2,165,092)(1,561,186)
Cash flows from financing activities  
Net change in deposits930,495 1,143,905 
Net change in short-term borrowings808,720 813,425 
Proceeds from long-term borrowings2,857,651 4,150,000 
Payments on long-term borrowings(2,710,221)(3,912,310)
Repurchases of common stock(33,098)
Dividends paid on preferred stock(2,493)(2,493)
Dividends paid on common stock(53,704)(53,578)
Exercise of stock options(327)63 
Payments related to tax-withholding upon conversion of share-based awards(738)(2,289)
Net investment by (distribution to) non-controlling interest7,680 7,932 
Net cash provided by financing activities1,837,063 2,111,557 
Net change in cash and due from banks(211,291)50,500 
Cash and cash equivalents at beginning of period1,260,595 1,228,371 
Cash and cash equivalents at end of period$1,049,304 $1,278,871 
Supplemental disclosures of cash flow information  
Cash paid for:  
Interest on deposits and borrowings$34,454 $76,688 
Income taxes, net4,971 1,838 
Noncash activities:
Transfer of loans and leases to other assets8,143 15,983 
Transfer of loans and leases from held-for-investment to held for sale, net48,210 251,855 
See accompanying notes to consolidated financial statements.

5

TCF FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)

Note 1. Basis of Presentation
 
TCF Financial Corporation, a Michigan corporation (together with its direct and indirect subsidiaries, "we," "us," "our," "TCF" or the "Corporation"), is a financial holding company, headquartered in Detroit, Michigan. TCF National Bank ("TCF Bank"), TCF's wholly owned bank subsidiary, a national banking association, has its main office in Sioux Falls, South Dakota. References herein to "TCF Financial" refer to TCF Financial Corporation on an unconsolidated basis.

TCF Bank operates banking centers primarily located in Michigan, Illinois and Minnesota with additional locations in Colorado, Ohio, Wisconsin 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 and commercial banking, trust and wealth management, and specialty leasing and lending products and services to consumers, small businesses and commercial customers.

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 Corporation'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, 2020.
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. Certain reclassifications have been made to prior period financial statements to conform to the current period presentation.

Note 2. Business Combinations

Proposed Merger with Huntington Bancshares Incorporated

On December 13, 2020, TCF and Huntington Bancshares Incorporated ("Huntington") jointly announced the signing of a definitive merger agreement (the "TCF/Huntington Merger Agreement"). Under the terms of the agreement, the combined company will have dual headquarters for banking operations in Detroit, Michigan and Columbus, Ohio. Huntington is headquartered in Columbus, Ohio with reported assets of $125.8 billion as of March 31, 2021. Under the terms of the TCF/Huntington Merger Agreement, TCF shareholders will receive 3.0028 shares of Huntington common stock for each share of TCF common stock. Holders of TCF common stock will receive cash in lieu of fractional shares. Each outstanding share of 5.70% Series C Non-Cumulative Perpetual Preferred Stock of TCF will be converted into the right to receive 1 share of a newly created series of preferred stock of Huntington and Huntington will assume the obligations of TCF under the applicable deposit agreement related to the depositary shares. On March 25, 2021, shareholders of both TCF and Huntington have approved the merger. Subject to receipt of regulatory approvals and satisfaction of other customary closing conditions, the transaction is anticipated to close in the second quarter of 2021.

Note 3. Summary of Significant Accounting Policies

Accounting policies in effect at December 31, 2020, as previously disclosed in "Note 2. Summary of Significant Accounting Policies" in the Corporation’s Annual Report on Form 10-K at and for the year ended December 31, 2020, remain significantly unchanged and have been followed similarly as in previous periods.

6


Recently Adopted Accounting Pronouncements

Effective January 1, 2021, the Corporation adopted Accounting Standards Update ("ASU") No. 2020-10, Codification Improvements, which is intended to clarify or correct the unintended application of the Codification of accounting guidance for a wide variety of topics. The adoption of this guidance did not have a material impact on the consolidated financial statements.

Effective January 1, 2021, the Corporation adopted ASU No. 2020-08, Codification Improvements to Subtopic 310-20, Receivables - Nonrefundable Fees and Other Costs, which clarifies the intent of certain updates that were included in ASU No. 2017-08, Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The adoption of this guidance did not have a material impact on the consolidated financial statements.

Effective January 1, 2021, the Corporation adopted ASU No. 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)-Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (a consensus of the Emerging Issues Task Force), which clarifies the interactions between Topic 321, Topic 323 and Topic 815, including accounting for the transition into and out of the equity method and measuring certain purchased options and forward contracts to acquire investments. The adoption of this guidance did not have a material impact on the consolidated financial statements.

Effective January 1, 2021, the Corporation adopted ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify the accounting for income taxes by removing certain exceptions to the general rules found in Topic 740 - Income Taxes. The adoption of this guidance did not have a material impact on the consolidated financial statements.

Recently Issued but Not Yet Adopted Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board (the "FASB") issued ASU No. 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which reduces the complexity of accounting for certain financial instruments with characteristics of both debt and equity. The adoption of this ASU will be required beginning with the Corporation's Quarterly Report on Form 10-Q for the quarter ending March 31, 2022. Early adoption is allowed. Management is currently evaluating the impact of this guidance on the consolidated financial statements.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides a number of optional expedients to general accounting guidance intended to ease the burden of the accounting impacts of reference rate reform related to contract modifications and hedge accounting elections. In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope, which clarifies that the scope of Topic 848 includes derivative instruments that do not reference a rate that is expected to be discontinued but that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. Adoption of the expedients is allowed after March 12, 2020 and no later than December 31, 2022. Management is currently evaluating the impact of this guidance on the consolidated financial statements.

Note 4. Cash and Cash Equivalents
 
Cash and cash equivalents include cash and due from banks and interest-bearing deposits in other banks. Total cash and cash equivalents were $1.0 billion and $1.3 billion at March 31, 2021 and December 31, 2020, respectively.

The Corporation 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. The Corporation may also retain cash balances for collateral on certain borrowings and derivatives. The Corporation maintained restricted cash totaling $95.5 million and $95.1 million at March 31, 2021 and December 31, 2020, respectively.


7

Note 5. Federal Home Loan Bank and Federal Reserve Bank Stocks

Federal Home Loan Bank ("FHLB") and Federal Reserve Bank ("FRB") stocks were as follows:
(In thousands)At March 31, 2021At December 31, 2020
FHLB stock, at cost$234,455 $196,457 
FRB stock, at cost123,959 123,979 
Total investments$358,414 $320,436 

The investments in FHLB stock are required investments related to the Corporation's membership and borrowings in the FHLB of Des Moines, and additional commitments from the FHLB of Indianapolis and Cincinnati. The Corporation's investments in the FHLB of Des Moines, Indianapolis and Cincinnati could be adversely impacted by the financial operations of the Federal Home Loan Banks and actions of their regulator, the Federal Housing Finance Agency. The amount of FRB stock that TCF Bank is required to hold is based on TCF Bank's capital structure. The Corporation periodically evaluates investments for impairment. There was 0 impairment of these investments at March 31, 2021 and December 31, 2020.

Note 6. Investment Securities
 
The amortized cost and fair value of investment securities were as follows:
 Investment Securities Available-for-sale, At Fair Value
(In thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
At March 31, 2021
Debt securities:    
Obligations of states and political subdivisions$824,061 $30,772 $8,041 $846,792 
Government and government-sponsored enterprises186,541 506 649 186,398 
Mortgage-backed securities:    
Residential agency6,545,644 93,014 123,937 6,514,721 
Residential non-agency119,284 1,882 121,163 
Commercial agency681,641 23,146 10,557 694,230 
Commercial non-agency39,348 671 40,019 
Total mortgage-backed debt securities7,385,917 118,713 134,497 7,370,133 
Corporate debt and trust preferred securities454 11 465 
Total investment securities available-for-sale$8,396,973 $150,002 $143,187 $8,403,788 
At December 31, 2020
Debt securities:    
Obligations of states and political subdivisions$827,191 $44,077 $1,087 $870,181 
Government and government-sponsored enterprises196,560 153 813 195,900 
Mortgage-backed securities:    
Residential agency6,151,511 157,955 1,388 6,308,078 
Residential non-agency156,865 2,819 159,682 
Commercial agency669,235 39,715 999 707,951 
Commercial non-agency39,358 3,072 42,430 
Total mortgage-backed debt securities7,016,969 203,561 2,389 7,218,141 
Corporate debt and trust preferred securities453 48 501 
Total investment securities available-for-sale$8,041,173 $247,839 $4,289 $8,284,723 


8

 Investment Securities Held-to-Maturity
(In thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
At March 31, 2021
Residential agency mortgage-backed securities$206,151 $6,615 $3,982 $208,784 
Corporate debt and trust preferred securities3,627 3,627 
Total investment securities held-to-maturity (1)
$209,778 $6,615 $3,982 $212,411 
At December 31, 2020
Residential agency mortgage-backed securities$180,946 $9,267 $72 $190,141 
Corporate debt and trust preferred securities3,413 3,413 
Total investment securities held-to-maturity (1)
$184,359 $9,267 $72 $193,554 
(1)At both March 31, 2021 and December 31, 2020 there was no ACL for investment securities held-to-maturity.

Accrued interest receivable for investment securities was $23.1 million and $20.6 million at March 31, 2021 and December 31, 2020, respectively, and is included in other assets on the Consolidated Statements of Financial Condition.


9

Gross unrealized losses and fair value of available-for-sale investment securities aggregated by investment category and the length of time the securities were in a continuous loss position were as follows: 
 At March 31, 2021
 Less than 12 months12 months or moreTotal
(In thousands)Fair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized Losses
Investment securities available-for-sale
Debt securities:      
Obligations of states and political subdivisions$130,928 $8,041 $$$130,928 $8,041 
Government and government sponsored enterprises93,950 649 93,950 649 
Mortgage-backed securities:
Residential agency3,848,667 123,937 3,848,667 123,937 
Residential non-agency3,001 3,001 
Commercial agency175,579 10,557 175,579 10,557 
Commercial non-agency
Total mortgage-backed debt securities4,027,247 134,497 4,027,247 134,497 
Total investment securities available-for-sale$4,252,125 $143,187 $$$4,252,125 $143,187 
Investment securities held-to-maturity      
Residential agency mortgage-backed securities108,682 3,982 108,682 3,982 
Total investment securities held-to-maturity$108,682 $3,982 $$$108,682 $3,982 
 At December 31, 2020
 Less than 12 months12 months or moreTotal
(In thousands)Fair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized Losses
Investment securities available-for-sale
Debt securities:      
Obligations of states and political subdivisions$78,241 $1,087 $$$78,241 $1,087 
Government and government sponsored enterprises139,940 813 139,940 813 
Mortgage-backed securities:
 Residential agency426,171 1,388 426,171 1,388 
Residential non-agency1,529 1,529 
Commercial agency96,667 999 96,667 999 
Commercial non-agency
Total mortgage-backed debt securities524,367 2,389 524,367 2,389 
Total investment securities available-for-sale$742,548 $4,289 $$$742,548 $4,289 

At March 31, 2021 there was no ACL for investment securities available-for-sale. At March 31, 2021 there were 582 available-for-sale investment securities in an unrealized loss position. Management assessed each investment security with unrealized losses for credit impairment. Substantially all unrealized losses on investment securities available-for-sale were due to credit spreads and interest rates rather than credit impairment. As part of that assessment, management evaluated and concluded that it is more-likely-than-not that the Corporation will not be required and does not intend to sell any of the investment securities prior to recovery of the amortized cost.

The gross gains and losses on sales of investment securities were as follows: 
Three Months Ended March 31,
(In thousands)20212020
Gross realized gains$$
Gross realized losses
Recoveries on previously impaired investment securities held-to-maturity
Net gains on investment securities$$

10


The amortized cost and fair value of investment securities by final contractual maturity were as follows. Securities with multiple maturity dates are classified in the period of final maturity. The final contractual maturities do not consider possible prepayments and therefore expected maturities may differ because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
 At March 31, 2021At December 31, 2020
(In thousands)Amortized CostFair ValueAmortized CostFair Value
Investment Securities Available-for-Sale    
Due in one year or less$45,902 $46,020 $45,912 $46,163 
Due in 1-5 years160,915 163,885 163,346 168,125 
Due in 5-10 years770,039 788,800 681,135 720,239 
Due after 10 years7,420,117 7,405,083 7,150,780 7,350,196 
Total investment securities available-for-sale$8,396,973 $8,403,788 $8,041,173 $8,284,723 
Investment Securities Held-to-Maturity    
Due in one year or less$400 $400 $400 $400 
Due in 1-5 years2,150 2,150 2,150 2,150 
Due in 5-10 years43 48 46 51 
Due after 10 years207,185 209,813 181,763 190,953 
Total investment securities held-to-maturity$209,778 $212,411 $184,359 $193,554 

At March 31, 2021 and December 31, 2020, investment securities with a carrying value of $581.0 million and $1.0 billion, respectively, were pledged as collateral to secure certain deposits and borrowings.

Note 7. Loans and Leases

Loans and leases were as follows:
(In thousands)At March 31, 2021At December 31, 2020
Commercial loan and lease portfolio:  
Commercial and industrial(1)
$12,856,701 $11,422,383 
Commercial real estate9,881,341 9,702,587 
Lease financing2,956,626 2,817,231 
Total commercial loan and lease portfolio25,694,668 23,942,201 
Consumer loan portfolio:
Residential mortgage6,510,981 6,182,045 
Home equity2,864,142 3,108,736 
Consumer installment1,151,228 1,233,426 
Total consumer loan portfolio10,526,351 10,524,207 
Total loans and leases(2)
$36,221,019 $34,466,408 
(1)Includes $1.9 billion and $1.6 billion of PPP loans at March 31, 2021 and December 31, 2020, respectively.
(2)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 $(85.4) million and $(118.6) million at March 31, 2021 and December 31, 2020, respectively.

Accrued interest receivable for loans and leases was $94.2 million and $93.6 million at March 31, 2021 and December 31, 2020, respectively, and is included in other assets on the Consolidated Statements of Financial Condition.

Acquired Loans and Leases The Corporation acquires loans and leases through business combinations and purchases of loan and lease portfolios. These loans and leases are recorded at fair value at acquisition and the fair value discount or premium is recognized as an adjustment to yield over the remaining life of each loan or lease. On January 29, 2021, TCF acquired BB&T Commercial Equipment Capital, Corp. ("CEC") through a business combination, which included a portfolio of $1.0 billion of commercial loans and leases. During the three months ended March 31, 2021, the Corporation acquired total loans and leases with a fair value of $1.8 billion, which primarily included the CEC commercial loans and leases and jumbo residential mortgage loans.




11

Lease Income The components of total lease income were as follows:
Three Months Ended March 31,
(In thousands)20212020
Interest and fees on loans and leases (Interest income):
Interest income on net investment in direct financing and sales-type leases$34,189 $34,156 
Leasing revenue (Noninterest income):
Lease income from operating lease payments25,550 23,902 
Profit recorded on commencement date on sales-type leases6,541 3,580 
Gains on sales of leased equipment4,362 6,083 
Leasing revenue36,453 33,565 
Total lease income$70,642 $67,721 

Loan and Lease Sales The following table summarizes the net gains on sales of loans and leases related to all loan and lease sales. The Corporation retains servicing on a majority of loans sold. See "Note 10. Loan Servicing Rights" for further information.
Three Months Ended March 31,
(In thousands)20212020
Sale proceeds, net$593,347 $555,182 
Recorded investment in loans and leases sold, including accrued interest563,489 537,180 
Other(8,135)2,588 
Net gains on sales of loans and leases related to all loan and lease sales(1)
$21,723 $20,590 
(1)Three months ended March 31, 2021 amount included within net gain on sales of loans and leases ($6.1 million) and mortgage banking income ($15.7 million). Three months ended March 31, 2020 amounts included within net gain on sales of loans and leases ($7.6 million) and mortgage banking income ($13.0 million).

The interest-only strips on the balance sheet related to loan sales were as follows:
(In thousands)At March 31, 2021At December 31, 2020
Interest-only strips$6,737 $7,823 

The Corporation recorded $262 thousand of impairment charges related to interest-only strips during the three months ended March 31, 2021 and $224 thousand of impairment charges for the three months ended March 31, 2020.

The Corporation's agreements to sell consumer loans typically contain certain representations, warranties and covenants regarding the loans sold or securitized. These representations, warranties and covenants generally relate to, among other things, the ownership of the loan, the validity, priority and perfection of the lien securing the loan, accuracy of information supplied to the buyer or investor, the loan's compliance with the criteria set forth in the agreement, the manner in which the loans will be serviced, payment delinquency and compliance with applicable laws and regulations. These agreements generally require the repurchase of loans or indemnification of the purchaser in the event these representations are breached, warranties or covenants and such breaches are not cured. In addition, some agreements contain a requirement to repurchase loans as a result of early payoffs by the borrower, early payment default of the borrower or the failure to obtain valid title. Losses related to repurchases pursuant to such representations, warranties and covenants were immaterial for the three months ended March 31, 2021 and 2020.


12

Note 8. Allowance for Credit Losses and Credit Quality
Effective January 1, 2020, the Corporation adopted ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and related ASUs on a modified retrospective basis.

Allowance for Credit Losses The rollforwards of the allowance for credit losses ("ACL") were as follows:
(In thousands)Consumer Loan PortfolioCommercial Loan and Lease PortfolioTotal Allowance for Loan and Lease Losses
Reserve for Unfunded Lending Commitments(1)
Total Allowance for Credit Losses
Three months ended March 31, 2021
Balance, beginning of period$136,894 $388,974 $525,868 $23,313 $549,181 
Charge-offs(8,340)(47,278)(55,618)(55,618)
Recoveries7,879 4,477 12,356 12,356 
Net (charge-offs) recoveries(461)(42,801)(43,262)(43,262)
Provision for credit losses9,276 12,684 21,960 (1,404)20,556 
Other(2)
(2,230)2,309 79 79 
Balance, end of period$143,479 $361,166 $504,645 $21,909 $526,554 
Three months ended March 31, 2020
Balance, beginning of period$28,572 $84,480 $113,052 $3,528 $116,580 
Impact of CECL adoption107,337 98,655 205,992 14,707 220,699 
Adjusted balance, beginning of period135,909 183,135 319,044 18,235 337,279 
Charge-offs(5,848)(8,881)(14,729)(14,729)
Recoveries4,708 4,544 9,252 9,252 
Net (charge-offs) recoveries(1,140)(4,337)(5,477)(5,477)
Provision for credit losses40,288 52,702 92,990 3,953 96,943 
Other(2)
(174)(174)(174)
Balance, end of period$175,057 $231,326 $406,383 $22,188 $428,571 
(1)Reserve for unfunded lending commitments ("RULC") is recognized within other liabilities.
(2)Primarily includes the allowance for purchased financial assets with credit deterioration ("PCD") and the transfer of the allowance to loans and leases held-for-sale.

Management considers our ACL of $526.6 million, or 1.45% of total loans and leases, appropriate to cover current credit losses expected to be incurred in the loan and lease portfolios over the remaining expected life of each financial asset at March 31, 2021, including loans and leases which are not currently known to require specific allowances. The ACL was $549.2 million, or 1.59% of total loans and leases, at December 31, 2020. The decrease in the ACL as a percentage of total loans and leases from December 31, 2020 was primarily due to continued improvement in both current and forecasted macro-economic conditions and benefit from nonaccrual loan sale recoveries. The provision for credit losses related to loans and leases for the three months ended March 31, 2021 was primarily due to loan and lease growth, which included the purchase of commercial loans and leases as a part of the CEC business combination. PPP loans totaling $1.9 billion at March 31, 2021, are individually guaranteed by the Small Business Administration and therefore the accounting under CECL does not require reserves to be recorded on such loans.

PCD Loan Activity

For PCD loans and leases, the initial estimate of expected credit losses is recognized in the allowance for loan and lease losses ("ALLL") on the date of acquisition using the same methodology as other loans and leases held-for-investment. The following table provides a summary of loans and leases purchased as part of the CEC business combination with credit deterioration at acquisition:

(In thousands)
Three months ended March 31, 2021
Par value$70,263 
ALLL at acquisition(2,383)
Non-credit premium (discount)(1,020)
Purchase price$66,860 

13




Accruing and Nonaccrual Loans and Leases The Corporation's key credit quality indicator is the receivable's payment performance status, defined as accruing or not accruing. Nonaccrual 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 90 days delinquent are a leading indicator for future charge-off trends and are generally placed on nonaccrual status. In addition, loans and leases that have requested payment deferral under the Coronavirus Aid, Relief and Economic Security ("CARES") Act of greater than 180 days are generally placed on nonaccrual status. The Corporation's accruing and nonaccrual loans and leases were as follows:
(In thousands)Current30-89 Days Delinquent and Accruing90 Days or More Delinquent and AccruingTotal
 Accruing
NonaccrualTotal
At March 31, 2021
Commercial loan and lease portfolio:    
Commercial and industrial$12,588,529 $25,413 $2,772 $12,616,714 $239,987 $12,856,701 
Commercial real estate9,662,431 30,490 9,692,921 188,420 9,881,341 
Lease financing2,824,770 33,164 4,734 2,862,668 93,958 2,956,626 
Total commercial loan and lease portfolio25,075,730 89,067 7,506 25,172,303 522,365 25,694,668 
Consumer loan portfolio:      
Residential mortgage6,421,403 11,171 1,874 6,434,448 76,533 6,510,981 
Home equity2,781,347 9,798 56 2,791,201 72,941 2,864,142 
Consumer installment1,142,579 2,587 1,145,166 6,062 1,151,228 
Total consumer loan portfolio10,345,329 23,556 1,930 10,370,815 155,536 10,526,351 
Total$35,421,059 $112,623 $9,436 $35,543,118 $677,901 $36,221,019 
At December 31, 2020
Commercial loan and lease portfolio:    
Commercial and industrial$11,119,453 $42,033 $1,458 $11,162,944 $259,439 $11,422,383 
Commercial real estate9,453,743 94,383 22 9,548,148 154,439 9,702,587 
Lease financing2,695,356 27,118 3,935 2,726,409 90,822 2,817,231 
Total commercial loan and lease portfolio23,268,552 163,534 5,415 23,437,501 504,700 23,942,201 
Consumer loan portfolio:      
Residential mortgage6,065,379 17,048 1,965 6,084,392 97,653 6,182,045 
Home equity3,008,450 30,840 63 3,039,353 69,383 3,108,736 
Consumer installment1,224,059 3,801 1,227,860 5,566 1,233,426 
Total consumer loan portfolio10,297,888 51,689 2,028 10,351,605 172,602 10,524,207 
Total$33,566,440 $215,223 $7,443 $33,789,106 $677,302 $34,466,408 

Further details of the Corporation's nonaccrual loans and leases were as follows:

At March 31, 2021At December 31, 2020
(In thousands)Total nonaccrualNonaccrual with no ACLTotal nonaccrualNonaccrual with no ACL
Commercial loan and lease portfolio:  
Commercial and industrial$239,987 $45,371 $259,439 $55,773 
Commercial real estate188,420 150,882 154,439 79,203 
Lease financing93,958 90,822 
Total commercial loan and lease portfolio522,365 196,253 504,700 134,976 
Consumer loan portfolio:
Residential mortgage76,533 97,653 49 
Home equity72,941 358 69,383 23 
Consumer installment6,062 3,505 5,566 3,531 
Total consumer loan portfolio155,536 3,863 172,602 3,603 
Total$677,901 $200,116 $677,302 $138,579 



14

Loans and leases that are 90 days or more delinquent and accruing by year of origination were as follows:
 Amortized Cost Basis
(In thousands)Term Loans and Leases by Origination YearRevolving Loans and LeasesRevolving Loans and Leases Converted to Term Loans and Leases
At March 31, 2021202120202019201820172016 and PriorTotal
Commercial loan and lease portfolio:
Commercial and industrial$$420 $163 $$$262 $1,923 $$2,772 
Commercial real estate
Lease financing1,693 1,085 1,022 674 260 4,734 
Total commercial loan and lease portfolio2,113 1,248 1,022 678 522 1,923 7,506 
Consumer loan portfolio:
Residential mortgage85 312 202 1,275 1,874 
Home equity56 56 
Consumer installment
Total consumer loan portfolio85 312 258 1,275 1,930 
Total 90 days or more delinquent and accruing$$2,198 $1,560 $1,022 $936 $1,797 $1,923 $$9,436 
 Amortized Cost Basis
(In thousands)Term Loans and Leases by Origination YearRevolving Loans and LeasesRevolving Loans and Leases Converted to Term Loans and Leases
At December 31, 2020202020192018201720162015 and PriorTotal
Commercial loan and lease portfolio:
Commercial and industrial$874 $50 $94 $13 $$52 $375 $$1,458 
Commercial real estate22 22 
Lease financing1,286 975 680 463 392 139 3,935 
Total commercial loan and lease portfolio2,160 1,025 774 476 392 213 375 5,415 
Consumer loan portfolio:
Residential mortgage85 134 1,746 1,965 
Home equity27 36 63 
Consumer installment
Total consumer loan portfolio85 134 1,773 36 2,028 
Total 90 days or more delinquent and accruing$2,245 $1,159 $774 $476 $392 $1,986 $411 $$7,443 



15

Nonaccrual loans and leases by year of origination were as follows:
 Amortized Cost Basis
(In thousands)Term Loans and Leases by Origination YearRevolving Loans and LeasesRevolving Loans and Leases Converted to Term Loans and Leases
At March 31, 2021202120202019201820172016 and PriorTotal
Commercial loan and lease portfolio:
Commercial and industrial$121 $27,464 $58,160 $51,542 $25,885 $39,613 $37,191 $11 $239,987 
Commercial real estate4,309 25,233 13,738 57,547 87,593 188,420 
Lease financing3,606 29,189 26,513 16,047 16,758 1,845 93,958 
Total commercial loan and lease portfolio121 35,379 112,582 91,793 99,479 143,964 37,191 1,856 522,365 
Consumer loan portfolio:
Residential mortgage3,253 7,744 11,920 2,996 50,620 76,533 
Home equity22 847 934 445 432 5,594 63,920 747 72,941 
Consumer installment87 238 340 514 4,690 193 6,062 
Total consumer loan portfolio22 4,187 8,916 12,705 3,942 60,904 64,113 747 155,536 
Total nonaccrual loans and leases$143 $39,566 $121,498 $104,498 $103,421 $204,868 $101,304 $2,603 $677,901 

 Amortized Cost Basis
(In thousands)Term Loans and Leases by Origination YearRevolving Loans and LeasesRevolving Loans and Leases Converted to Term Loans and Leases
At December 31, 2020202020192018201720162015 and PriorTotal
Commercial loan and lease portfolio:
Commercial and industrial$26,109 $61,595 $60,686 $29,360 $17,669 $23,644 $40,364 $12 $259,439 
Commercial real estate5,194 4,835 14,452 53,934 21,667 54,357 154,439 
Lease financing3,190 27,412 26,348 15,184 8,601 8,145 1,942 90,822 
Total commercial loan and lease portfolio34,493 93,842 101,486 98,478 47,937 86,146 40,364 1,954 504,700 
Consumer loan portfolio:
Residential mortgage2,631 9,177 16,391 4,172 2,812 62,470 97,653 
Home equity889 1,449 530 379 223 5,149 59,826 938 69,383 
Consumer installment33 267 181 281 575 4,060 169 5,566 
Total consumer loan portfolio3,553 10,893 17,102 4,832 3,610 71,679 59,995 938 172,602 
Total nonaccrual loans and leases$38,046 $104,735 $118,588 $103,310 $51,547 $157,825 $100,359 $2,892 $677,302 

16

The average balance of nonaccrual loans and leases and interest income recognized on nonaccrual loans and leases were as follows:
Three Months Ended March 31,
 20212020
(In thousands)Average Loan and Lease BalanceInterest Income RecognizedAverage Loan and Lease BalanceInterest Income Recognized
Commercial loan and lease portfolio:    
Commercial and industrial$249,713 $2,116 $68,985 $1,709 
Commercial real estate171,429 3,040 38,383 1,784 
Lease financing92,390 19 12,063 51 
Total commercial loan and lease portfolio513,532 5,175 119,431 3,544 
Consumer loan portfolio:
Residential mortgage87,093 1,304 50,278 638 
Home equity71,162 1,387 39,505 156 
Consumer installment5,814 66 852 25 
Total consumer loan portfolio164,069 2,757 90,635 819 
Total nonaccrual loans and leases$677,601 $7,932 $210,066 $4,363 

In addition to the receivable's payment performance status, credit quality is also analyzed using credit risk classifications, which vary based on the size and type of credit risk exposure and additionally measure liquidity, debt capacity, coverage and payment behavior as shown in the borrower's financial statements. The credit risk classifications also measure the quality of the borrower's management group and the repayment support offered by any guarantors. Loan and lease credit risk classifications are derived from standard regulatory rating definitions, which include: pass, special mention, substandard, doubtful and loss. Substandard and doubtful loans and leases have well-defined weaknesses, but may never result in a loss.


17

The amortized cost basis of loans and leases by credit risk classifications and year of origination was as follows:
 Amortized Cost Basis
(In thousands)Term Loans and Leases by Origination Year
Revolving Loans and Leases(1)
Revolving Loans and Leases Converted to Term Loans and Leases(2)
At March 31, 2021202120202019201820172016 and PriorTotal
Commercial loan and lease portfolio:
Commercial and industrial
Pass$1,289,456 $3,069,589 $1,924,724 $1,033,717 $527,205 $618,661 $3,541,892 $51,531 $12,056,775 
Special mention6,898 16,592 87,857 75,921 42,692 10,888 147,237 754 388,839 
Substandard2,501 36,312 98,860 61,460 33,431 76,814 101,429 280 411,087 
Total commercial and industrial1,298,855 3,122,493 2,111,441 1,171,098 603,328 706,363 3,790,558 52,565 12,856,701 
Commercial real estate
Pass304,562 1,373,808 2,274,851 1,767,581 1,169,172 2,021,114 8,911,088 
Special mention81 17,878 88,125 83,486 214,000 175,698 579,268 
Substandard1,739 60,777 43,251 86,540 82,812 115,866 390,985 
Total commercial real estate306,382 1,452,463 2,406,227 1,937,607 1,465,984 2,312,678 9,881,341 
Lease financing
Pass247,246 970,143 686,909 389,597 205,845 115,862 32,369 148,755 2,796,726 
Special mention848 14,307 8,802 5,459 4,670 2,461 4,586 41,133 
Substandard1,023 10,122 35,382 30,848 18,302 18,751 4,339 118,767 
Total lease financing249,117 994,572 731,093 425,904 228,817 137,074 32,369 157,680 2,956,626 
Total commercial1,854,354 5,569,528 5,248,761 3,534,609 2,298,129 3,156,115 3,822,927 210,245 25,694,668 
Consumer loan portfolio:
Residential mortgage
Pass710,828 2,207,173 860,827 510,015 361,669 1,780,396 6,430,908 
Substandard3,338 8,056 11,920 3,198 53,561 80,073 
Total residential mortgage710,828 2,210,511 868,883 521,935 364,867 1,833,957 6,510,981 
Home equity
Pass1,362 20,638 44,156 42,176 34,373 135,924 2,503,856 7,331 2,789,816 
Substandard22 847 934 445 488 6,923 63,920 747 74,326 
Total home equity1,384 21,485 45,090 42,621 34,861 142,847 2,567,776 8,078 2,864,142 
Consumer installment
Pass65,000 183,103 335,641 171,972 155,700 212,480 20,871 62 1,144,829 
Substandard134 403 340 514 4,815 193 6,399 
Total consumer installment65,000 183,237 336,044 172,312 156,214 217,295 21,064 62 1,151,228 
Total consumer777,212 2,415,233 1,250,017 736,868 555,942 2,194,099 2,588,840 8,140 10,526,351 
Total loans and leases$2,631,566 $7,984,761 $6,498,778 $4,271,477 $2,854,071 $5,350,214 $6,411,767 $218,385 $36,221,019 
(1)This balance includes $32.4 million of leased equipment that has been provided to lessees under certain master lease agreements. Under these agreements, the total amount of equipment included in each lease is provided over time, and additional amounts are required to be provided to the respective lessees in future accounting periods.
(2)This balance includes $210.2 million of leased equipment that has been provided to lessees under certain master lease agreements. Under these agreements, the total amount of equipment included in each lease was provided over time, and all equipment required by the lease has been provided to the respective lessees in current or previous accounting periods.


18

 Amortized Cost Basis
(In thousands)Term Loans and Leases by Origination Year
Revolving Loans and Leases(1)
Revolving Loans and Leases Converted to Term Loans and Leases(2)
December 31, 2020202020192018201720162015 and PriorTotal
Commercial loan and lease portfolio:
Commercial and industrial
Pass$3,282,275 $1,877,468 $994,081 $547,940 $357,567 $316,557 $3,286,687 $48,079 $10,710,654 
Special mention13,377 66,485 46,174 34,959 4,661 6,733 94,338 858 267,585 
Substandard28,908 69,510 94,227 48,246 52,944 29,295 120,738 276 444,144 
Total commercial and industrial3,324,560 2,013,463 1,134,482 631,145 415,172 352,585 3,501,763 49,213 11,422,383 
Commercial real estate
Pass1,361,117 2,193,489 1,877,374 1,211,426 683,612 1,480,027 8,807,045 
Special mention17,745 78,236 53,087 197,935 79,540 104,473 531,016 
Substandard6,995 53,079 31,930 124,728 57,221 90,573 364,526 
Total commercial real estate1,385,857 2,324,804 1,962,391 1,534,089 820,373 1,675,073 9,702,587 
Lease financing
Pass1,013,374 715,327 393,644 226,818 109,992 30,620 23,806 167,726 2,681,307 
Special mention4,050 9,871 3,897 4,870 1,484 1,001 8,911 34,084 
Substandard6,440 29,040 27,579 16,150 9,360 8,635 4,629 101,840 
Total lease financing1,023,864 754,238 425,120 247,838 120,836 40,256 23,813 181,266 2,817,231 
Total commercial5,734,281 5,092,505 3,521,993 2,413,072 1,356,381 2,067,914 3,525,576 230,479 23,942,201 
Consumer loan portfolio:
Residential mortgage
Pass2,011,791 1,047,735 604,127 435,617 439,816 1,539,779 6,078,865 
Special mention112 112 
Substandard3,292 9,311 17,268 4,601 3,814 64,782 103,068 
Total residential mortgage2,015,083 1,057,046 621,395 440,218 443,630 1,604,673 6,182,045 
Home equity
Pass23,066 51,448 48,092 39,834 29,071 126,147 2,703,354 7,753 3,028,765 
Special mention
Substandard940 1,469 579 515 424 8,354 66,590 1,100 79,971 
Total home equity24,006 52,917 48,671 40,349 29,495 134,501 2,769,944 8,853 3,108,736 
Consumer installment
Pass206,994 371,924 192,067 185,051 119,663 127,252 24,043 67 1,227,061 
Special mention
Substandard247 1,179 680 887 909 2,086 377 6,365 
Total consumer installment207,241 373,103 192,747 185,938 120,572 129,338 24,420 67 1,233,426 
Total consumer2,246,330 1,483,066 862,813 666,505 593,697 1,868,512 2,794,364 8,920 10,524,207 
Total loans and leases$7,980,611 $6,575,571 $4,384,806 $3,079,577 $1,950,078 $3,936,426 $6,319,940 $239,399 $34,466,408 
(1)This balance includes $23.8 million of leased equipment that has been provided to lessees under certain master lease agreements. Under these agreements, the total amount of equipment included in each lease is provided over time, and additional amounts are required to be provided to the respective lessees in future accounting periods.
(2)This balance includes $230.5 million of leased equipment that has been provided to lessees under certain master lease agreements. Under these agreements, the total amount of equipment included in each lease was provided over time, and all equipment required by the lease has been provided to the respective lessees in current or previous accounting periods.

19


Troubled Debt Restructurings In certain circumstances, the Corporation may consider modifying the terms of a loan for economic or legal reasons related to the customer's financial difficulties. If the Corporation grants a concession, the modified loan would generally be classified as a TDR. However, Section 4013 of the CARES Act and the Interagency Statement on Loan Modifications provide banks the option to temporarily suspend the application of TDR accounting guidance for loans modified due to the effects of COVID-19 when certain conditions are met. TDRs typically involve a deferral of the principal balance of the loan, a reduction of the stated interest rate of the loan or, in certain limited circumstances, a reduction of the principal balance of the loan or the loan's accrued interest.

The following table presents the recorded investment of loan modifications first classified as TDRs during the periods presented:
Three Months Ended March 31,
20212020
(In thousands)Pre-modification InvestmentPost-modification InvestmentPre-modification InvestmentPost-modification Investment
Commercial loan and lease portfolio:
Commercial and industrial$2,491 $2,491 $5,751 $5,751 
Commercial real estate1,700 1,700 106 106 
Total commercial loan and lease portfolio4,191 4,191 5,857 5,857 
Consumer loan portfolio:
Residential mortgage1,126 1,126 3,222 3,157 
Home equity334 334 997 996 
Consumer installment44 44 376 353 
Total consumer loan portfolio1,504 1,504 4,595 4,506 
Total$5,695 $5,695 $10,452 $10,363 

The following table presents TDR loans:
At March 31, 2021At December 31, 2020
(In thousands)Accruing
TDR Loans
Nonaccrual TDR LoansTotal
TDR Loans
Accruing
TDR Loans
Nonaccrual TDR LoansTotal
TDR Loans
Commercial loan and lease portfolio$12,121 $21,554 $33,675 $35,697 $23,575 $59,272 
Consumer loan portfolio17,154 19,700 36,854 16,658 22,804 39,462 
Total$29,275 $41,254 $70,529 $52,355 $46,379 $98,734 

Commitments to lend additional funds to borrowers whose terms have been modified in TDRs were $1.3 million and $2.6 million at March 31, 2021 and December 31, 2020, respectively.

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 do not share similar risk characteristics with other loans and follow the Corporation's loan reserve policies for individually evaluated loans.


20

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. The Corporation considers a loan to have defaulted when under the modified terms it becomes 90 or more days delinquent, has been transferred to nonaccrual status, has been charged down or has been transferred to other real estate owned or repossessed and returned assets.
 Three Months Ended March 31,
(In thousands)20212020
Defaulted TDR loan balances modified during the applicable period
Commercial loan and lease portfolio:
Commercial and industrial$1,515 $
Commercial real estate1,228 
Total commercial loan and lease portfolio2,743 
Consumer loan portfolio:  
Residential mortgage197 630 
Home equity198 59 
Consumer installment34 
Total consumer loan portfolio429 689 
Defaulted TDR loan balances$3,172 $689 

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, 2021At December 31, 2020
Other real estate owned$32,115 $33,192 
Repossessed and returned assets8,501 8,932 
Consumer loans in process of foreclosure24,173 14,790 

Other real estate owned and repossessed and returned assets were written down $816 thousand and $842 thousand and during the three months ended March 31, 2021 and March 31, 2020, respectively. Other real estate owned and repossessed and returned assets are included in other assets on the Consolidated Statements of Financial Condition.

Note 9. Goodwill

Goodwill was as follows:
(In thousands)At March 31, 2021At December 31, 2020
Goodwill related to consumer banking segment$771,555 $771,555 
Goodwill related to commercial banking segment608,335 541,491 
Goodwill, net$1,379,890 $1,313,046 
During the three months ended March 31, 2021, the Corporation recorded additional goodwill in the amount of $66.8 million related to the CEC business combination. There was 0 impairment of goodwill for the three months ended March 31, 2021 and 2020.


21

Note 10. Loan Servicing Rights

Information regarding LSRs was as follows:
Three Months Ended March 31,
(In thousands)20212020
Balance, beginning of period$38,303 $56,313 
New servicing assets created4,531 2,451 
Impairment (charge) recovery7,637 (8,236)
Amortization(6,320)(3,245)
Balance, end of period$44,151 $47,283 
Valuation allowance, end of period$(13,850)$(12,118)
Loans serviced for others that have servicing rights capitalized, end of period$6,068,120 $6,444,101 

Total loan servicing, late fee and other ancillary fee income, included in mortgage banking income, related to loans serviced for others that have servicing rights capitalized was $4.0 million for the three months ended March 31, 2021 and $4.2 million for the three months ended March 31, 2020.

Note 11. Investments in Qualified Affordable Housing Projects and Historic Projects

The Corporation invests in qualified affordable housing projects and historic projects for the purposes of community reinvestment and to obtain tax credits. Return on the Corporation's investment in these projects comes in the form of pass-through tax credits and tax losses. The carrying value of the investments is included in other assets. The Corporation primarily utilizes the proportional amortization method to account for investments in qualified affordable housing projects and the equity method to account for investments in other tax credit projects.

Under the proportional amortization method, the Corporation amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits. The Corporation recognized amortization expense of investments in qualified affordable housing projects of $5.9 million and $5.3 million for the three months ended March 31, 2021 and 2020, respectively. Amortization expense was more than offset by tax credits and other tax benefits of $7.9 million and $6.6 million for the three months ended March 31, 2021 and 2020, respectively. The Corporation's remaining investment in qualified affordable housing projects totaled $222.1 million and $214.3 million at March 31, 2021 and December 31, 2020, respectively.

Under the equity method, the Corporation's share of the earnings or losses is included in other noninterest expense. The Corporation's remaining investment in historic projects and Ohio historic preservation tax credits totaled $50.2 million and $48.6 million at March 31, 2021 and December 31, 2020, respectively. During the three months ended March 31, 2021, $0.6 million of income tax benefit was recognized due to the federal historic tax credits, which was partially offset by amortization expense, inclusive of impairment, of $0.5 million. During the three months ended March 31, 2020, $0.3 million of income tax benefit was recognized due to the federal historic tax credits, which was partially offset by amortization expense, inclusive of impairment, of $0.2 million. During the three months ended March 31, 2020, state tax credits, inclusive of impairment, totaled $0.4 million.

The Corporation's unfunded equity contributions relating to investments in qualified affordable housing projects and historic projects are included in other liabilities. The Corporation's remaining unfunded equity contributions totaled $109.4 million and $107.4 million at March 31, 2021 and December 31, 2020, respectively.

Management analyzes these investments for potential impairment when events or changes in circumstances indicate that it is more-likely-than-not that the carrying amount of the investment will not be realized. An impairment loss is measured as the amount by which the carrying amount of an investment exceeds its fair value.


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Investments in qualified affordable housing projects and historic projects are considered VIEs because TCF, as a limited partner, lacks the power to direct the activities that most significantly impact the entities' economic performance. TCF has concluded it is not the primary beneficiary and therefore, they are not consolidated. The maximum exposure to loss on the VIE investments is limited to the carrying amount of the investments and the potential recapture of any recognized tax credits. TCF believes the likelihood of the tax credits being recaptured is remote, as a loss would only take place if the managing entity failed to meet certain government compliance requirements. Further, certain of TCF's investments in affordable housing limited liability entities include guaranteed minimum returns which are backed by an investment grade credit-rated company, which reduces the risk of loss.

Note 12. Borrowings

TCF Bank is a member of the FHLB, which provides short- and long-term funding collateralized by mortgage related assets to its members.

Collateralized Deposits include TCF Bank's Repurchase Investment Sweep Agreement product collateralized by mortgage-backed securities, and funds deposited by customers that are collateralized by investment securities owned by TCF Bank, as these deposits are not covered by FDIC insurance.

Short-term borrowings (borrowings with an original maturity of less than one year) were as follows:
At March 31, 2021At December 31, 2020
(Dollars in thousands)AmountWeighted-average RateAmountWeighted-average Rate
FHLB advances$1,200,000 0.29 %$400,000 0.33 %
Collateralized Deposits223,695 0.07 217,363 0.11 
Line-of-Credit - TCF Commercial Finance Canada, Inc.2,388 2.45 
 Total short-term borrowings$1,426,083 0.26 %$617,363 0.25 %

Long-term borrowings were as follows:
(In thousands)At March 31, 2021At December 31, 2020
FHLB advances$859,335 $709,848 
Subordinated debt obligations583,312 586,145 
Discounted lease rentals73,222 75,770 
Finance lease obligation2,947 2,969 
Total long-term borrowings$1,518,816 $1,374,732 

At March 31, 2021, TCF Bank had pledged $13.0 billion of loans secured by consumer and commercial real estate to provide borrowing capacity from the FHLB.

At March 31, 2021, TCF Bank had pledged $3.4 billion of loans secured by assets to provide borrowing capacity from the Federal Reserve Bank discount window. NaN borrowings were sourced from this facility at March 31, 2021.

The contractual maturities of long-term borrowings at March 31, 2021 were as follows:
(In thousands)
Remainder of 2021$4,339 
2022779,845 
202325,099 
202415,996 
2025373,772 
Thereafter319,765 
Total long-term borrowings$1,518,816 


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Note 13. 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:
 Three Months Ended March 31,
 20212020
(In thousands)Before TaxTax EffectNet of TaxBefore TaxTax EffectNet of Tax
Net unrealized gains (losses) on available-for-sale investment securities and interest-only strips:      
Net unrealized gains (losses) arising during the period$(237,054)$56,371 $(180,683)$150,744 $(35,607)$115,137 
Reclassification of net (gains) losses from accumulated other comprehensive income (loss) to:
Total interest income(44)10 (34)754 (177)577 
Net gains (losses) on investment securities
Other noninterest expense137 (32)105 173 (40)133 
Amounts reclassified from accumulated other comprehensive income (loss)93 (22)71 927 (217)710 
Net unrealized gains (losses) on available-for-sale investment securities and interest-only strips(236,961)56,349 (180,612)151,671 (35,824)115,847 
Recognized postretirement prior service cost:      
Reclassification of amortization of prior service cost to other noninterest expense(23)(18)(12)(9)
Foreign currency translation adjustment(1)
2,170 2,170 (14,426)(14,426)
Net unrealized gains (losses) on net investment hedges(2,046)487 $(1,559)13,695 (3,214)10,481 
Total other comprehensive income (loss)$(236,860)$56,841 $(180,019)$150,928 $(39,035)$111,893 
(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 Available-for-Sale Investment Securities and Interest-only StripsNet Unrealized Gains (Losses) on Net
Investment
Hedges
Foreign
Currency
Translation
Adjustment
Recognized
Postretirement Prior
Service Cost
Total
At or For the Three Months Ended March 31, 2021     
Balance, beginning of period$182,488 $5,605 $(5,803)$383 $182,673 
Other comprehensive income (loss)(180,683)(1,559)2,170 (180,072)
Amounts reclassified from accumulated other comprehensive income (loss)71 (18)53 
Net other comprehensive income (loss)(180,612)(1,559)2,170 (18)(180,019)
Balance, end of period$1,876 $4,046 $(3,633)$365 $2,654 
At or For the Three Months Ended March 31, 2020     
Balance, beginning of period$56,098 $9,800 $(11,697)$76 $54,277 
Other comprehensive income (loss)115,137 10,481 (14,426)111,192 
Amounts reclassified from accumulated other comprehensive income (loss)710 (9)701 
Net other comprehensive income (loss)115,847 10,481 (14,426)(9)111,893 
Balance, end of period$171,945 $20,281 $(26,123)$67 $166,170 



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Note 14. 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 $207.8 million at March 31, 2021, 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.

The Basel III capital standards allowed institutions not subject to the advanced approaches requirements to opt out of including components of accumulated other comprehensive income (loss) in common equity Tier 1 capital. TCF and TCF Bank made the one-time permanent election to not include accumulated other comprehensive income (loss) in regulatory capital.

Effective January 1, 2020, the Corporation adopted CECL. In response to the COVID-19 pandemic, the regulatory agencies published a final rule that provides the option to delay the cumulative effect of the day 1 impact of CECL adoption on regulatory capital, along with 25% of the change in the adjusted allowance for credit losses (as computed for regulatory capital purposes which excludes PCD loans), for two years, followed by a three-year phase-in period. Management elected the 5-year transition period consistent with the final rule issued by the regulatory agencies.

Regulatory capital information for TCF and TCF Bank was as follows:
TCFTCF Bank
At March 31,At December 31,At March 31,At December 31,
(Dollars in thousands)2021202020212020Well-capitalized Standard
Minimum Capital Requirement(1)
Regulatory Capital:
Common equity Tier 1 capital$4,101,896 $4,103,007 $4,095,564 $4,093,974 
Tier 1 capital4,299,135 4,290,793 4,123,501 4,112,458 
Total capital4,994,676 5,026,611 4,799,935 4,831,026 
Regulatory Capital Ratios:
Common equity Tier 1 capital ratio11.06 %11.45 %11.06 %11.45 %6.50 %4.50 %
Tier 1 risk-based capital ratio11.59 11.98 11.14 11.50 8.00 6.00 
Total risk-based capital ratio13.47 14.03 12.96 13.51 10.00 8.00 
Tier 1 leverage ratio9.09 9.34 8.73 8.97 5.00 4.00 
(1)Excludes capital conservation buffer of 2.5% at both March 31, 2021 and December 31, 2020.


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Note 15. Derivative Instruments

Derivative instruments, recognized at fair value within other assets or other liabilities on the Consolidated Statements of Financial Condition, were as follows:
At March 31, 2021
Fair Value
(In thousands)
Notional Amount(1)
Derivative AssetsDerivative Liabilities
Derivatives designated as hedging instruments
Interest rate contract$150,000 $$118 
Forward foreign exchange contracts210,856 373 1,400 
Total derivatives designated as hedging instruments0373 1,518 
Derivatives not designated as hedging instruments
Interest rate contracts$6,297,778 $164,438 $21,827 
Risk participation agreements549,262 27 63 
Forward foreign exchange contracts75,267 820 105 
Interest rate lock commitments465,180 7,073 166 
Forward loan sales commitments460,280 5,560 45 
Power Equity CDs10,450 300 300 
Swap agreement12,652 286 
Total derivatives not designated as hedging instruments0178,218 22,792 
Total derivatives before netting0178,591 24,310 
Netting(2)
(781)(627)
Total derivatives, net$177,810 $23,683 
(1)Notional or contract amounts, which represent the extent of involvement in the derivatives market, are used to determine the contractual cash flows required in accordance with the terms of the agreement. These amounts are typically not exchanged, significantly exceed amounts subject to credit or market risk and are not reflected in the Consolidated Statements of Financial Condition.
(2)Includes netting of derivative asset and liability balances and related cash collateral, where counterparty netting agreements are in place.

At December 31, 2020
Fair Value
(In thousands)
Notional Amount(1)
Derivative AssetsDerivative Liabilities
Derivatives designated as hedging instruments
Interest rate contract$150,000 $59 $
Forward foreign exchange contracts207,515 1,521 
Total derivatives designated as hedging instruments059 1,521 
Derivatives not designated as hedging instruments
Interest rate contracts6,140,464 248,208 14,681 
Risk participation agreements470,670 62 125 
Forward foreign exchange contracts90,647 11 865 
Interest rate lock commitments447,278 14,565 
Forward loan sales commitments535,244 37 3,411 
Power Equity CD16,752 459 459 
Swap agreement12,652 66 
Total derivatives not designated as hedging instruments0263,342 19,611 
Total derivatives before netting0263,401 21,132 
Netting(2)
(52)(1,876)
Total derivatives, net$263,349 $19,256 
(1)Notional or contract amounts, which represent the extent of involvement in the derivatives market, are used to determine the contractual cash flows required in accordance with the terms of the agreement. These amounts are typically not exchanged, significantly exceed amounts subject to credit or market risk and are not reflected in the Consolidated Statements of Financial Condition.
(2)Includes netting of derivative asset and liability balances and related cash collateral, where counterparty netting agreements are in place.


26

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, 2021
(In thousands)Gross Amounts Recognized
Gross Amounts
 Offset(1)
Net Amount Presented
Derivative assets
Interest rate contracts$164,438 $$164,438 
Risk participation agreements27 27 
Forward foreign exchange contracts1,193 (570)623 
Interest rate lock commitments7,073 (166)6,907 
Forward loan sales commitments5,560 (45)5,515 
Power Equity CDs300 0300 
Total derivative assets$178,591 $(781)$177,810 
Derivative liabilities
Interest rate contracts$21,945 $$21,945 
Risk participation agreements63 63 
Forward foreign exchange contracts1,505 (130)1,375 
Interest rate lock commitments166 (166)
Forward loan sales commitments45 (45)
Power Equity CDs300 0300 
Swap agreement286 (286)
Total derivative liabilities$24,310 $(627)$23,683 
(1)Includes the amounts with counterparties subject to enforceable master netting arrangements that have been offset in the Consolidated Statements of Financial Condition.

At December 31, 2020
(In thousands)Gross Amounts Recognized
Gross Amounts
Offset(1)
Net Amount Presented
Derivative assets
Interest rate contracts$248,267 $$248,267 
Risk participation agreements62 62 
Forward foreign exchange contracts11 (11)
Interest rate lock commitments14,565 (4)14,561 
Forward loan sales commitments37 (37)
Power Equity CDs459 459 
Total derivative assets$263,401 $(52)$263,349 
Derivative liabilities
Interest rate contracts$14,681 $$14,681 
Risk participation agreements125 125 
Forward foreign exchange contracts2,386 (1,769)617 
Interest rate lock commitments(4)
Forward loan sales commitments3,411 (37)3,374 
Power Equity CD459 459 
Swap agreement66 (66)
Total derivative liabilities$21,132 $(1,876)$19,256 
(1)Includes the amounts with counterparties subject to enforceable master netting arrangements that have been offset in the Consolidated Statements of Financial Condition.


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Derivatives Designated as Hedging Instruments

Interest rate contract: 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, 2021At December 31, 2020At March 31, 2021At December 31, 2020
Subordinated bank note - 2025$156,829 $159,888 $7,857 $10,975 

The following table summarizes the effect of fair value hedge accounting on the Consolidated Statements of Income for the three months ended March 31, 2021 and 2020.
Three Months Ended March 31,
(In thousands)20212020
Statement of income line where the gain (loss) on the fair value hedge was recorded:
Interest expense on borrowings$10,019 $26,492 
Gain (loss) on interest rate contract (fair value hedge)
Hedged item3,118 (8,830)
Derivative designated as a hedging instrument(3,176)8,936 
Gain (loss) on interest rate contract recognized in interest expense on borrowings$(58)$106 

Forward foreign exchange contracts: The effect of net investment hedges on accumulated other comprehensive income was as follows:
Three Months Ended March 31,
(In thousands)20212020
Forward foreign exchange contracts$(2,046)$13,695 

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:
Three Months Ended March 31,
(In thousands)Location of Gain (Loss)20212020
Interest rate contractsOther noninterest income$255 $1,662 
Risk participation agreementsOther noninterest expense1,607 4,326 
Forward foreign exchange contractsOther noninterest expense10 18,713 
Interest rate lock commitmentsMortgage banking income(7,189)10,378 
Forward loan sales commitmentsMortgage banking income8,889 (8,545)
Swap agreementOther noninterest income(288)(1)
Net gain (loss) recognized$3,284 $26,533 

At March 31, 2021 and December 31, 2020, credit risk-related contingent features existed on forward foreign exchange contracts with a notional value of $26.8 million and $35.0 million, respectively. In the event the Corporation is rated less than BB- by Standard and Poor's, the contracts could be terminated or the Corporation may be required to provide approximately $535 thousand and $699 thousand in additional collateral at March 31, 2021 and December 31, 2020, respectively. There were 0 forward foreign exchange contracts containing credit risk-related features in a liability position at both March 31, 2021 and December 31, 2020.

At March 31, 2021, the Corporation had posted $65.9 million and $340 thousand of cash collateral related to its interest rate contracts and forward foreign exchange contracts, respectively, and received $440 thousand of cash collateral related to its forward foreign exchange contracts.


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Note 16. Fair Value Measurements

The Corporation uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. 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. Investment securities available-for-sale, certain loans held for sale, interest-only strips, derivative instruments, 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 the Corporation may be required to record at fair value other assets on a non-recurring basis, such as certain investment securities held-to-maturity, loans and leases, goodwill, loan servicing rights, other intangible assets, other real estate owned, repossessed and returned assets or securitization receivables. These non-recurring fair value adjustments typically involve application of lower of cost or fair value accounting or write-downs of individual assets.
The Corporation 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    Valuations that are based on prices obtained from independent pricing sources for the same instruments traded in active markets.

Level 2    Valuations that are based on prices obtained from independent pricing sources that are based on observable transactions of similar instruments, but not quoted markets.

Level 3    Valuations generated from model-based techniques that use at least one significant unobservable input. Such unobservable inputs reflect estimates of assumptions that market participants would use in pricing the asset or liability.

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

Investment Securities Available-for-Sale: The fair value of investment securities available-for-sale, categorized primarily 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: The Corporation has elected the fair value option for residential mortgage loans held-for-sale. Accordingly, the fair values of residential mortgage loans held-for-sale are based on valuation models that use the market price for similar loans sold in the secondary market. As these prices are derived from market observable inputs, they are categorized as Level 2.

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 the Corporation on certain assets. The Corporation 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 the Corporation 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. Unobservable inputs used to value the interest-only strips include a discount rate of 14% (weighted average) and prepayment rates of 4% (weighted average).


29

Derivative Instruments:

Interest Rate Contracts: The Corporation executes interest rate contracts as described in "Note 15. Derivative Instruments." 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, option volatilities and credit valuation adjustments related to counterparty and/or borrower non-performance risk.

Risk Participation Agreements: The fair value of risk participation agreements, categorized as Level 2, is determined using a cash flow model which may consider the forward curve, the discount curve, option volatilities and credit valuation adjustments related to counterparty and/or borrower nonperformance risk.

Forward Foreign Exchange Contracts: The Corporation's forward foreign exchange contracts 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: The Corporation's interest rate lock commitments are derivative instruments that are recorded at fair value based on valuation models that use the market price for similar loans sold in the secondary market. The interest rate lock commitments are adjusted for expectations of exercise and funding. As the prices are derived from market observable inputs, the Corporation categorized these instruments as Level 2.

Power Equity CDs: Power Equity CDs are categorized as Level 2, and determined using quoted prices of underlying stocks, along with other terms and features of the derivative instruments.

Swap Agreement: The Corporation's swap agreement related to the sale of Legacy TCF's Visa Class B stock is categorized as Level 3. The fair value of the swap agreement is based on the Corporation's estimated exposure related to the Visa covered litigation through a probability analysis of the funding and estimated settlement amounts.

Forward Loan Sales Commitments: The Corporation enters into forward loan sales commitments to sell certain mortgage loans which are recorded at fair value based on valuation models. The Corporation’s expectation of the amount of its interest rate lock commitments that will ultimately close is a factor in determining the position. The valuation models utilize the fair value of related mortgage loans determined using observable market data and therefore the commitments are categorized as Level 2.

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 Financial common stock reported in 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.


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The balances of assets and liabilities measured at fair value on a recurring basis were as follows:
March 31, 2021
(In thousands)Level 1Level 2Level 3Total
Assets
Investment securities available-for-sale$$8,403,321 $467 $8,403,788 
Loans held-for-sale107,417 107,417 
Interest-only strips6,737 6,737 
Derivative assets:(1)
Interest rate contracts164,438 164,438 
Risk participation agreements27 27 
Forward foreign exchange contracts1,193 1,193 
Interest rate lock commitments7,073 7,073 
   Forward loan sales commitments5,560 5,560 
Power Equity CDs300 300 
Total derivative assets178,591 178,591 
Assets held in trust for deferred compensation plans49,669 49,669 
Total assets at fair value$49,669 $8,689,329 $7,204 $8,746,202 
Liabilities
Derivative liabilities:(1)
Interest rate contracts$$21,945 $$21,945 
Risk participation agreements63 63 
Forward foreign exchange contracts1,505 1,505 
Interest rate lock commitments166 166 
   Forward loan sales commitments45 45 
Power Equity CDs300 300 
Swap agreement286 286 
Total derivative liabilities24,024 286 24,310 
Liabilities held in trust for deferred compensation plans49,669 49,669 
Total liabilities at fair value$49,669 $24,024 $286 $73,979 
(1)As permitted under GAAP, the Corporation 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.



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December 31, 2020
(In thousands)Level 1Level 2Level 3Total
Assets
Investment securities available-for-sale$$8,284,219 $504 $8,284,723 
Loans held-for-sale221,784 221,784 
Interest-only strips7,823 7,823 
Derivative assets:(1)
Interest rate contracts248,267 248,267 
Risk participation agreements62 62 
Forward foreign exchange contracts11 11 
Interest rate lock commitments14,565 14,565 
Forward loan sales commitments37 37 
Power Equity CDs459 459 
Total derivative assets263,401 263,401 
Assets held in trust for deferred compensation plans48,659 48,659 
Total assets at fair value$48,659 $8,769,404 $8,327 $8,826,390 
Liabilities
Derivative liabilities:(1)
Interest rate contracts$$14,681 $$14,681 
Risk participation agreements125 125 
Forward foreign exchange contracts2,386 2,386 
Interest rate lock commitments
Forward loan sales commitments3,411 3,411 
Power Equity CDs459 459 
Swap agreement66 66 
Total derivative liabilities21,066 66 21,132 
Liabilities held in trust for deferred compensation plans48,659 48,659 
Total liabilities at fair value$48,659 $21,066 $66 $69,791 
(1)As permitted under GAAP, the Corporation 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 the 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.


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The changes in Level 3 assets and liabilities measured at fair value on a recurring basis were as follows:
(In thousands)Investment securities available-for-saleInterest-only stripsSwap agreement
At or For the Three Months Ended March 31, 2021
Asset (liability) balance, beginning of period$504 $7,823 $(66)
Total net gains (losses) included in:
Net income144 
Other comprehensive income (loss)(37)(181)
Originations(288)
Principal paydowns / settlements(1,049)68 
Asset (liability) balance, end of period$467 $6,737 $(286)
Unrealized gains (losses) included in other comprehensive income for assets held at the end of the period$(37)$(181)$
At or For the Three Months Ended March 31, 2020
Asset (liability) balance, beginning of period$433 $12,813 $(356)
Total net gains (losses) included in:
Net income159 (1)
Other comprehensive income (loss)(31)(348)
Principal paydowns / settlements(1,673)71 
Asset (liability) balance, end of period$403 $10,951 $(286)
Unrealized gains (losses) included in other comprehensive income for assets held at the end of the period$(31)$(348)$

Assets and Liabilities Recorded at Fair Value on a Non-recurring Basis

The following is a discussion of the valuation methodologies used to record assets and liabilities at fair value on a non-recurring basis.

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. The fair value of the collateral is determined based on internal estimates and/or assessments provided by third-party appraisers and the valuation relies on discount rates of 10%.

Loan servicing rights: The fair value of loan servicing rights, categorized as Level 3, is based on a third party valuation model utilizing a discounted cash flow analysis using interest rates and prepayment speed assumptions currently quoted for comparable instruments and a discount rate determined by management. The valuation relies on discount rates ranging from 10% to 15% and prepayment speeds ranging from 8% to 43%. Loan servicing rights are recorded at the lower of cost or fair value.

Other Real Estate Owned: 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 and include a discount rate of 10%. Assets acquired through foreclosure 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.

Repossessed and Returned Assets: The fair value of repossessed and returned assets, categorized as Level 2 or Level 3 depending on the underlying asset type, are based on available pricing guides, auction results or price opinions, less estimated selling costs. Assets acquired through 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 repossessed and returned assets.


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The balances of assets measured at fair value on a non-recurring basis were as follows. There were 0 liabilities measured at fair value on a non-recurring basis at March 31, 2021 and December 31, 2020.
(In thousands)Level 1Level 2Level 3Total
At March 31, 2021
Loans and leases$$$602,723 $602,723 
Loan servicing rights44,151 44,151 
Other real estate owned14,072 14,072 
Repossessed and returned assets6,348 6,348 
Total non-recurring fair value measurements$$6,348 $660,946 $667,294 
At December 31, 2020
Loans and leases$$$592,133 $592,133 
Loan servicing rights38,303 38,303 
Other real estate owned14,575 14,575 
Repossessed and returned assets7,332 7,332 
Total non-recurring fair value measurements$$7,332 $645,011 $652,343 

Fair Value Option

The Corporation has elected the fair value option for residential mortgage loans held-for-sale. 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)March 31, 2021December 31, 2020
Fair value carrying amount$107,417 $221,784 
Aggregate unpaid principal amount105,019 210,311 
Fair value carrying amount less aggregate unpaid principal$2,398 $11,473 

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. NaN loans recorded under the fair value option were delinquent or on nonaccrual status at March 31, 2021 and December 31, 2020. The net gain from initial measurement of the 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 $9.5 million for the three months ended March 31, 2021 and $15.2 million for the same period in 2020, and are included in mortgage banking income. These amounts exclude the impacts from the interest rate lock commitments and forward loan sales commitments which are also included in mortgage banking income.

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, 2021 and December 31, 2020 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 TCF'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.


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The carrying amounts and estimated fair values of the financial instruments, excluding short-term financial assets and liabilities as their carrying amounts approximate fair value, and financial instruments recorded at fair value on a recurring basis, are included below. This information represents only a portion of the Consolidated Statements of Financial Condition not recorded in their entirety on a recurring basis and not the estimated value of the Corporation as a whole. Non-financial instruments such as the intangible value of the Corporation's banking centers and core deposits, leasing operations, goodwill, premises and equipment and the future revenues from the Corporation's customers are not reflected in this disclosure. Therefore, this information is of limited use in assessing the value of the Corporation.
At March 31, 2021
CarryingEstimated Fair Value
(In thousands)AmountLevel 1Level 2Level 3Total
Financial instrument assets     
FHLB and FRB stocks$358,414 $$358,414 $$358,414 
Investment securities held-to-maturity209,778 208,784 3,627 212,411 
Loans and leases held-for-sale232 233 233 
Net loans(1)
32,806,406 32,983,379 32,983,379 
Securitization receivable(2)
19,992 19,992 19,992 
Deferred fees on commitments to extend credit(2)
18,477 18,477 18,477 
Total financial instrument assets$33,413,299 $$585,675 $33,007,231 $33,592,906 
Financial instrument liabilities    
Certificates of deposits$4,665,211 $$4,670,257 $$4,670,257 
Long-term borrowings1,518,816 1,562,225 1,562,225 
Total financial instrument liabilities$6,184,027 $$6,232,482 $$6,232,482 
(1)Expected credit losses are included in the carrying amount and estimated fair value.
(2)Carrying amounts are included in other assets.
At December 31, 2020
CarryingEstimated Fair Value
(In thousands)  AmountLevel 1Level 2Level 3Total
Financial instrument assets     
FHLB and FRB stocks$320,436 $$320,436 $$320,436 
Investment securities held-to-maturity184,359 190,141 3,413 193,554 
Loans held-for-sale244 248 248 
Net loans(1)
31,164,287 31,434,749 31,434,749 
Securitization receivable(2)
19,949 19,916 19,916 
Deferred fees on commitments to extend credit(2)
20,002 20,002 20,002 
Total financial instrument assets$31,709,277 $$530,579 $31,458,326 $31,988,905 
Financial instrument liabilities    
Certificates of deposits$5,524,381 $$5,534,751 $$5,534,751 
Long-term borrowings1,374,732 1,416,355 1,416,355 
Total financial instrument liabilities$6,899,113 $$6,951,106 $$6,951,106 
(1)Expected credit losses are included in the carrying amount and estimated fair value.
(2)Carrying amounts are included in other assets.


Note 17. Revenue from Contracts with Customers

The Corporation earns revenue from various sources, including interest and fees from customers and noncustomers. The majority of the sources of revenue are included in interest income and noninterest income and are outside of the scope of ASC Topic 606, Revenue from Contracts with Customers ("ASC 606"). Other sources of revenue fall within the scope of ASC 606 and are mostly included in noninterest income.


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The Corporation recognizes revenue when the performance obligations related to the transfer of goods or services under the terms of a contract are satisfied. Some obligations are satisfied at a point in time, while others are satisfied over a period of time. Revenue is recognized as the amount of consideration expected to be received in exchange for transferring goods or services to a customer and is segregated based on the nature of product and services offered as part of contractual arrangements. Revenue streams within the scope of ASC 606 are discussed below.

Fees and Service Charges on Deposit Accounts Fees and service charges on deposit accounts includes fees and other charges TCF receives to provide various services, including but not limited to, service charges on deposit accounts and other fees including account analysis fees, monthly service fees, overdraft services, transferring funds, and accepting and executing stop-payment orders. The Corporation's performance obligation for account analysis fees and monthly service fees are generally satisfied and, therefore, revenue is recognized over the period in which the service is provided. Deposit account related fees are largely transactional based, and therefore, the performance obligation is satisfied and the related revenue is recognized at the point in time when the transaction occurs.

Wealth Management Revenue Wealth management revenue includes fee income generated from personal and institutional customers and investment management services. Revenue is recognized over the period of time the services are rendered. Wealth management revenue also includes commissions that are earned for placing a brokerage transaction for execution. Revenue is recognized once the transaction is completed and the Corporation is entitled to receive consideration.

Card and ATM Revenue Card and ATM revenue includes ATM surcharges and debit card related revenue. ATM surcharges and certain debit card fees are transaction based and the performance obligation is satisfied with related revenue recognized at the point in time when the transaction occurs. Other debit card fees satisfied over a period of time are recognized over the period in which the service is provided.

Other Noninterest Income Other noninterest income includes wire transfer fees, safe deposit box income and check orders. The consideration includes both fixed (e.g., safe deposit box fees) and transaction (e.g., wire-transfer fee and check orders) fees. Fixed fees are recognized over the period of time the service is provided, while transaction fees are recognized when a specific service is rendered to the customer.

The following tables present total noninterest income segregated between contracts with customers within the scope of ASC 606 and those within the scope of other GAAP topics.
Three Months Ended March 31, 2021
Within the scope of ASC 606Out of scope of ASC 606Total
(In thousands)Consumer BankingCommercial BankingEnterprise Services
Noninterest income
Fees and service charges on deposit accounts$22,560 $3,007 $$328 $25,895 
Wealth management revenue1,919 5,025 6,944 
Card and ATM revenue21,214 29 3,418 24,661 
Other noninterest income1,755 1,785 30 70,990 74,560 
Total$47,448 $4,821 $30 $79,761 $132,060 
Three Months Ended March 31, 2020
Within the scope of ASC 606Out of scope of ASC 606Total
(In thousands)Consumer BankingCommercial BankingEnterprise Services
Noninterest income
Fees and service charges on deposit accounts$31,828 $2,555 $$214 $34,597 
Wealth management revenue1,110 5,041 6,151 
Card and ATM revenue19,182 2,501 21,685 
Other noninterest income1,004 2,405 359 70,762 74,530 
Total$53,124 $4,962 $359 $78,518 $136,963 


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Contract Balances A contract asset balance occurs when an entity performs a service for a customer before the customer pays consideration (resulting in a contract receivable) or before payment is due (resulting in a contract asset). A contract liability balance is an entity's obligation to transfer a service to a customer for which the entity has already received payment (or payment is due) from the customer. Noninterest income is largely based on transactional activity, or standard month-end revenue accruals such as asset management fees based on month-end market values. Consideration is most often received immediately or shortly after the Corporation satisfies its performance obligation and revenue is recognized. The Corporation does not typically enter into long-term revenue contracts with customers, and therefore, does not experience significant contract balances.

Note 18. Share-based Compensation

The Corporation maintains share-based compensation plans under which it periodically grants share-based awards for a fixed number of shares to directors and certain officers of the Corporation.

Before the TCF/Chemical Merger, Chemical and Legacy TCF granted share-based awards under their respective share-based compensation plans, including the Chemical Stock Incentive Plan of 2019 (the "Stock Incentive Plan of 2019") and the TCF Financial 2015 Omnibus Incentive Plan (the "Legacy TCF Omnibus Incentive Plan"). At March 31, 2021, there were 1,029,723 shares reserved for issuance under the Legacy TCF Omnibus Incentive Plan and there were 639,366 shares reserved for issuance under the Stock Incentive Plan of 2019.

The fair value of share-based awards is recognized as compensation expense over the requisite service or performance period. Compensation expense for share-based awards, including the merger-related share-based compensation expense was $6.2 million for the three months ended March 31, 2021 and $4.7 million for the same period in 2020. The excess tax realized from share-based compensation transactions during the three months ended March 31, 2021 was a benefit of $161 thousand and a benefit of $677 thousand for the same period in 2020.

Restricted Stock Units

The Corporation can grant performance-based restricted stock units ("PRSUs") and time-based restricted stock units ("TRSUs") (collectively referred to as "RSUs") under the Stock Incentive Plan of 2019 and the Legacy TCF Omnibus Incentive Plan; provided, that, RSUs granted under the Legacy TCF Omnibus Incentive Plan may only be granted to new employees hired after the merger or employees who previously were employees of Legacy TCF. At March 31, 2021, there were 306,190 PRSUs outstanding dependent on achieving certain performance target levels and the grantee completing the requisite service period. The TRSUs vest upon satisfaction of a service condition. Upon achievement of the satisfaction of a service condition and/or performance target level, as applicable, the TRSUs are converted into shares of TCF Financial's common stock on a 1-to-one basis and the PRSUs are converted into shares of TCF Financial's common stock in accordance with the achievement of the performance target (ranging from 0% to 150% of the granted PRSUs). Compensation expense related to RSUs is recognized over the expected requisite performance or service period, as applicable.
A summary of the activity for RSUs at and for the three months ended March 31, 2021 is presented below:
 Number of UnitsWeighted-average Grant Date Fair Value Per Unit
Outstanding at December 31, 20202,015,514 $31.25 
Granted686,885 47.41 
Forfeited/canceled(56,707)32.93 
Vested(121,476)45.07 
Outstanding at March 31, 20212,524,216 $34.94 

Unrecognized compensation expense related to RSUs totaled $66.8 million at March 31, 2021 and is expected to be recognized over the remaining weighted-average period of 3.1 years.


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Restricted Stock Awards

The Corporation's restricted stock award transactions were as follows:
 Number of AwardsWeighted-Average Grant Date Fair Value Per Award
Outstanding at December 31, 2020505,162 $38.57 
Granted27,417 47.41 
Forfeited/canceled(3,983)40.48 
Vested(50,264)40.38 
Outstanding at March 31, 2021478,332 $38.88 

At March 31, 2021, there were 0 shares of performance-based restricted stock awards outstanding. Unrecognized stock compensation expense for restricted stock awards was $7.9 million at March 31, 2021 with a weighted-average remaining amortization period of 1.6 years.

The following table provides information regarding total expense for restricted stock awards:
 Three Months Ended March 31,
(In thousands)20212020
Restricted stock expense related to employees(1)
$5,692 $4,724 
Restricted stock expense related to directors(2)
470 
Total restricted stock expense$6,162 $4,724 
(1)Included in "Compensation and employee benefits" in the Consolidated Statements of Income.
(2)Included in "Other noninterest expense" in the Consolidated Statements of Income.

Stock Options

A summary of activity for the Corporation's stock options at and for the three months ended March 31, 2021 is presented below:
Non-Vested Stock Options OutstandingStock Options Outstanding
 Number of OptionsWeighted-average Exercise PriceNumber of OptionsWeighted-average
Exercise Price
Outstanding at December 31, 202055,722 $41.23 401,636 $31.69 
Exercised(156,347)27.74 
Forfeited/canceled(135)53.72 
Vested(43,272)38.00 43,272 38.00 
Outstanding at March 31, 202112,315 $52.46 288,561 $35.05 
Exercisable/vested at March 31, 2021288,561 $35.05 

The weighted-average remaining contractual term was 4.3 years for all outstanding stock options and 4.2 years for exercisable stock options at March 31, 2021.


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Note 19. Earnings Per Common Share

The computations of basic and diluted earnings per common share were as follows:
 Three Months Ended March 31,
(Dollars in thousands, except per share data)20212020
Basic earnings per common share  
Net income attributable to TCF Financial Corporation$123,336 $51,899 
Preferred stock dividends2,493 2,493 
Net income available to common shareholders120,843 49,406 
Less: Earnings allocated to participating securities
Earnings allocated to common stock$120,843 $49,406 
Weighted-average common shares outstanding used in basic earnings per common share calculation152,159,117 151,902,357 
Basic earnings per common share$0.79 $0.33 
Diluted earnings per common share  
Earnings allocated to common stock$120,843 $49,406 
Weighted-average common shares outstanding used in basic earnings per common share calculation152,159,117 151,902,357 
Net dilutive effect of:  
Non-participating restricted stock279,308 83,580 
Stock options102,262 128,080 
Weighted-average common shares outstanding used in diluted earnings per common share calculation152,540,687 152,114,017 
Diluted earnings per common share$0.79 $0.32 
Anti-dilutive shares outstanding not included in the computation of diluted earnings per common share
Non-participating restricted stock324,514 1,173,331 
Stock options74,376 90,144 

Note 20. Other Noninterest Income and Expense

Other noninterest income and expense was as follows:
 Three Months Ended March 31,
(In thousands)20212020
Other Noninterest Income
Interest rate swap mark-to-market adjustment$1,863 $5,988 
Other9,192 21,739 
Total other noninterest income$11,055 $27,727 
Other Noninterest Expense
Outside processing$16,730 $13,913 
Loan and lease expense7,185 7,783 
Professional fees9,073 6,569 
Advertising and marketing6,879 8,377 
FDIC insurance5,688 6,559 
Card processing and issuance costs4,274 8,690 
Other35,414 36,855 
Total other noninterest expense$85,243 $88,746 



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Note 21. Reportable Segments
 
The Corporation's reportable segments are Consumer Banking, Commercial Banking and Enterprise Services. Consumer Banking is comprised of all of the Corporation's consumer-facing businesses and includes retail banking, consumer lending, wealth management and small business banking. Commercial Banking is comprised of commercial and industrial and commercial real estate banking and lease financing. Enterprise Services is comprised of (i) corporate treasury, which includes the Corporation'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.

The Corporation evaluates performance and allocates resources based on each reportable segment's net income or loss. The reportable 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-taxable equivalent basis. The Corporation generally accounts for inter-segment sales and transfers at cost.

Certain information for each of the Corporation's reportable segments, including reconciliations of the consolidated totals, was as follows:
(In thousands)Consumer BankingCommercial BankingEnterprise ServicesConsolidated
At or For the Three Months Ended March 31, 2021
Net interest income$199,374 $174,018 $8,435 $381,827 
Provision (benefit) for credit losses4,101 16,455 20,556 
Net interest income after provision for credit losses195,273 157,563 8,435 361,271 
Noninterest income81,390 49,016 1,654 132,060 
Noninterest expense212,304 110,630 25,748 348,682 
Income (loss) before income tax expense (benefit)64,359 95,949 (15,659)144,649 
Income tax expense (benefit)13,401 19,568 (13,429)19,540 
Income (loss) after income tax expense (benefit)50,958 76,381 (2,230)125,109 
Income attributable to non-controlling interest1,773 1,773 
Preferred stock dividends2,493 2,493 
Net income (loss) available to common shareholders50,958 74,608 (4,723)120,843 
Total assets$13,699,477 $25,941,038 $9,819,036 $49,459,551 
At or For the Three Months Ended March 31, 2020
Net interest income$193,832 $185,986 $21,663 $401,481 
Provision for credit losses44,369 52,574 96,943 
Net interest income after provision for credit losses149,463 133,412 21,663 304,538 
Noninterest income81,414 55,773 (224)136,963 
Noninterest expense228,859 114,455 31,285 374,599 
Income (loss) before income tax expense (benefit)2,018 74,730 (9,846)66,902 
Income tax expense (benefit)1,982 16,306 (5,202)13,086 
Income (loss) after income tax expense (benefit)36 58,424 (4,644)53,816 
Income attributable to non-controlling interest1,917 1,917 
Preferred stock dividends2,493 2,493 
Net income (loss) available to common shareholders36 56,507 (7,137)49,406 
Total assets$14,463,055 $24,859,839 $9,271,489 $48,594,383 

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Note 22. Commitments, Contingent Liabilities and Guarantees

Financial Instruments with Off-Balance Sheet Risk In the normal course of business, the Corporation enters into financial instruments with off-balance sheet risk, primarily to meet the financing needs of its customers. These financial instruments, which are issued or held for purposes other than trading, involve elements of credit and interest-rate risk in excess of the amounts recognized in the Consolidated Statements of Financial Condition.

The Corporation's exposure to credit loss, in the event of non-performance by the counterparty to the financial instrument is represented by the contractual amount of the commitments. The Corporation uses the same credit policies in making these commitments as it does for making direct loans. The Corporation evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained is based on a credit evaluation of the customer.

Financial instruments with off-balance sheet risk were as follows:
(In thousands)At March 31, 2021At December 31, 2020
Commitments to extend credit:
Commercial$4,441,962 $4,396,191 
Consumer2,113,311 2,126,327 
Total commitments to extend credit6,555,273 6,522,518 
Standby letters of credit and guarantees on industrial revenue bonds120,779 114,636 
Total$6,676,052 $6,637,154 

Commitments to Extend Credit: Commitments to extend credit are agreements to lend provided there is no violation of any condition in the contract. These commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since a certain amount of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Collateral to secure any funding of these commitments predominantly consists of residential and commercial real estate mortgages.

Standby Letters of Credit and Guarantees on Industrial Revenue Bonds: Standby letters of credit and guarantees on industrial revenue bonds are conditional commitments issued by the Corporation guaranteeing the performance of a customer to a third party. These conditional commitments expire in various years through 2039. The majority of these standby letters of credit are collateralized. Collateral held consists primarily of commercial real estate mortgages. Since the conditions under which the Corporation is required to fund these commitments may not materialize, the cash requirements are expected to be less than the total outstanding commitments.

Contingencies and Guarantees The Corporation has originated and sold certain loans, and additionally acquired the potential liability for loans originated and sold by merged or acquired entities, for which the buyer has limited recourse to the Corporation in the event the loans do not perform as specified in the agreements. These loans had an outstanding balance of $6.8 million and $7.0 million at March 31, 2021 and December 31, 2020, respectively. The maximum potential amount of undiscounted future payments that the Corporation could be required to make in the event of nonperformance by the borrower totaled $6.8 million and $7.0 million at March 31, 2021 and December 31, 2020, respectively. In the event of nonperformance, the Corporation has rights to the underlying collateral securing the loans. At both March 31, 2021 and December 31, 2020 there was 0 recorded liability.

In addition, the Corporation acquired certain Small Business Administration ("SBA") guaranteed loans in which the guaranteed portion had been sold to a third party investor. In the event these loans default and the SBA guaranty is no longer intact (i.e. an issue is found to have occurred during the origination or the liquidation of the loans) the Corporation would be liable to make the loan whole to the third party investor. The maximum potential amount of undiscounted future payments that the Corporation could be required to make in the event of default by the borrower was $12.7 million and $13.2 million at March 31, 2021 and December 31, 2020, respectively. In the event of default, the Corporation has rights to the underlying collateral securing the loans. At both March 31, 2021 and December 31, 2020, the Corporation had recorded a liability of $829 thousand in other liabilities.


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Representations, Warranties and Contractual Liabilities In connection with the Corporation's residential mortgage loan sales, and the historical sales of merged or acquired entities, the Corporation makes certain representations and warranties that the loans meet certain criteria, such as collateral type, underwriting standards and the manner in which the loans will be serviced. The Corporation may be required to repurchase individual loans and/or indemnify the purchaser against losses if the loan fails to meet established criteria. In addition, some agreements contain a requirement to repurchase loans as a result of early payoffs by the borrower, early payment default of the borrower or the failure to obtain valid title. At March 31, 2021 and December 31, 2020 the liability recorded in connection with these representations and warranties was $3.0 million and $3.6 million, respectively, included in other liabilities.

Litigation Contingencies From time to time, we are a party to legal proceedings arising out of our lending, leasing and deposit operations, including foreclosure proceedings and other collection actions as part of our lending and leasing collections activities. We may also be subject to regulatory examinations and enforcement actions brought by federal regulators, including the SEC, the Federal Reserve, the OCC and the CFPB which may impose sanctions in the event of a regulatory violation. The COVID-19 pandemic has resulted in novel legal and regulatory risks, including risks in the area of workplace safety, risks related to emergency lending programs and the associated risk of fraud and regulatory activity. From time to time, borrowers and other customers, and employees and former employees have also brought actions against us, in some cases claiming substantial damages. We, like 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 our pending legal proceedings, 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 our consolidated financial position, operating results or cash flows.

As previously disclosed, following the announcement of our proposed merger with Huntington, ten lawsuits challenging the merger were filed alleging, among other things, that the defendants, including TCF, caused a materially incomplete and misleading joint proxy statement/prospectus relating to the proposed merger to be filed with the SEC in violation of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 and Rule 14a-9 promulgated thereunder and/or in breach of their fiduciary obligations under state law. We refer to the ten lawsuits collectively as the “Merger Litigation.”

TCF and Huntington believe that the claims asserted in the Merger Litigation, including those related to breaches of law or fiduciary duties to shareholders, are without merit and supplemental disclosures are not required or necessary under applicable laws. However, in order to avoid the risk that the Merger Litigation would delay or otherwise adversely affect the merger, and to minimize the costs, risks and uncertainties inherent in defending the lawsuits, and without admitting any liability or wrongdoing, TCF and Huntington agreed to supplement the joint proxy statement/prospectus as described in our Current Report on Form 8-K filed with the SEC on March 12, 2021, and plaintiffs in the Merger Litigation agreed to dismiss their complaints as moot. In the Garfield and Bushansky actions, which were filed as a putative class action, such dismissal was agreed to be with prejudice as to the named plaintiff only and without prejudice to all other members of the putative class. The Stein and Garfield cases were voluntarily dismissed on March 15, 2021, the Curtis case was voluntarily dismissed on March 12, 2021, and the Gallo case was voluntarily dismissed on March 16, 2021.



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

Forward-looking Information

Any statements contained in this Quarterly Report on Form 10-Q regarding the outlook for the Corporation's businesses and their respective markets, such as projections of future performance, targets, guidance, statements of the Corporation's plans and objectives, forecasts of market trends and other matters are forward-looking statements based on the Corporation's assumptions and beliefs. Such statements may be identified by such words or phrases as "will likely result," "are expected to," "will continue," "outlook," "will benefit," "is anticipated," "estimate," "project," "management believes" or similar expressions. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those discussed in such statements, and no assurance can be given that the results in any forward-looking statement will be achieved. For these statements, TCF claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Any forward-looking statement speaks only as of the date on which it is made, and we disclaim any obligation to subsequently revise any forward-looking statement to reflect events or circumstances after such date or to reflect the occurrence of anticipated or unanticipated events.
These statements include, among others, statements related to: our strategic plan to develop customer relationships that will drive core deposit growth and stability, management's belief that our commercial and commercial real estate loan portfolios are generally well-secured, the impact of projected changes in net interest income assuming changes to short-term market interest rates, statements regarding our risk exposure, statements related to our planned merger with Huntington, including statements related to the anticipated effects on results of operations and financial condition from expected developments. All statements referencing future time periods are forward-looking.
Furthermore, management's determination of the allowance for credit losses and related provision; the carrying value of goodwill and loan servicing rights; the fair value of investment securities (including whether there is any credit impairment); and management's assumptions concerning postretirement benefit plans involve judgments that are inherently forward-looking. There can be no assurance that future loan losses will be limited to the amounts estimated. All of the information concerning interest rate sensitivity is forward-looking. The future effect of changes in the financial and credit markets and the national and regional economies on the banking industry, generally, and on us, specifically, are also inherently uncertain.

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Certain factors could cause the Corporation's future results to differ materially from those expressed or implied in any forward-looking statements contained herein. These factors include the factors discussed in Part I, Item 1A of our Annual Report on Form 10-K under the heading "Risk Factors", the factors discussed below and any other cautionary statements, written or oral, which may be made or referred to in connection with any such forward-looking statements. Since it is not possible to foresee all such factors, these factors should not be considered as complete or exhaustive: macroeconomic and other challenges and uncertainties resulting from the COVID-19 pandemic, such as the extent and duration of the impact on public health, the U.S. and global economies, financial markets and consumer and corporate customers and clients, including economic activity, employment levels and market liquidity, as well as the various actions taken in response to the challenges and uncertainties by governments, central banks and others, including TCF; a failure to manage credit risk; cyber-security breaches involving us or third parties, hacking, denial of service, loss or theft of information, or other cyber-attacks that disrupt TCF's business operations or damage its reputation; adverse developments affecting TCF's banking centers; inability to successfully execute on TCF's growth strategy through business combinations or expanding existing business relationships; calculating an allowance for loan and lease losses insufficient to absorb actual losses in our loan and lease portfolio; adverse effects related to competition from traditional competitors, non-bank providers of financial services and new technologies; technological difficulties, including those related to system upgrades or the failure to keep pace with technological changes in response to customer demands; risks related to developing new products, markets or lines of business; adverse political or economic conditions; risks related to TCF's loan origination and sales activity; lack of access to liquidity or ability to raise capital that isn’t dilutive; adverse changes in monetary, fiscal or tax policies; litigation or government enforcement actions; heightened consumer protection, supervisory or regulatory practices or requirements; deficiencies in TCF's compliance programs, risk mitigation frameworks or ineffective internal controls; dependence on accurate and complete information from customers and counterparties; the failure to attract and retain key employees; soundness of other financial institutions and other counterparty risk, including the risk of default, operational disruptions, or diminished availability of counterparties who satisfy our credit quality requirements; inability to grow deposits, increase earnings and revenue, manage operating expenses, or pay and receive dividends; interruptions, systems failures in information technology and telecommunications systems failures of third-party services; deficiencies in TCF's quantitative models; the effect of any negative publicity or reputational damage; changes in accounting standards or interpretations of existing standards; adverse federal, state or foreign tax assessments; and the effects of man-made and natural disasters, any of which may negatively affect our operations and/or our customers.
This report also contains forward-looking statements regarding TCF's outlook or expectations with respect to the planned merger with Huntington. Examples of forward-looking statements include, but are not limited to, statements regarding the outlook and expectations of TCF and Huntington with respect to the planned merger, the strategic benefits and financial benefits of the merger, including the expected impact of the merger on the combined corporation's future financial performance including the timing of the closing of the transaction. Such risks, uncertainties and assumptions, include, among others, the following:     
the failure to obtain necessary regulatory approvals when expected or at all (and the risk that such approvals may result in the imposition of conditions that could adversely affect TCF or Huntington or the expected benefits of the merger);
the failure of either TCF or Huntington to satisfy any of the other closing conditions to the merger on a timely basis or at all;
the occurrence of any event, change or other circumstances that could give rise to the right of one or both of the parties to terminate the merger agreement;
the possibility that the anticipated benefits of the transaction, including anticipated cost savings and strategic gains, are not realized when expected or at all, including as a result of the impact of, or problems arising from, economic weakness, competitive factors in the areas where TCF and Huntington do business, or as a result of other unexpected factors or events;
the impact of purchase accounting with respect to the transaction, or any change in the assumptions used regarding the assets purchased and liabilities assumed to determine their fair value;
diversion of management's attention from ongoing business operations and opportunities;
potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the transaction;
the ability of either TCF or Huntington to repurchase their stock and the prices at which such repurchases may be made;
the outcome of any legal proceedings that may be instituted against TCF or Huntington;

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the integration of the businesses and operations of TCF and Huntington, which may take longer than anticipated or be more costly than anticipated or have unanticipated adverse results relating to our existing businesses
business disruptions following the merger; and
other factors that may affect future results of TCF and Huntington including changes in asset quality and credit risk; the inability to grow revenue and earnings; changes in interest rates and capital markets; inflation; customer borrowing, repayment, investment and deposit practices; the impact, extent and timing of technological changes; capital management activities; and other actions of the Federal Reserve Board and legislative and regulatory actions and reforms.

Additional factors that could cause results to differ materially from those described above can be found in the risk factors described in Part I, Item 1A of this Annual Report on Form 10-K under the heading "Risk Factors" and Huntington’s Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2020. Annualized, pro forma, projected and estimated numbers are used for illustrative purpose only, are not forecasts and may not reflect actual results. TCF disclaims any obligation to update or revise any forward-looking statements contained in this communication, which speak only as of the date hereof, whether as a result of new information, future events or otherwise, except as required by law.

Overview

TCF Financial Corporation, formerly known as Chemical Financial Corporation, ("TCF") is a financial holding company, incorporated in Michigan in 1973 and headquartered in Detroit, Michigan.

Through our wholly-owned bank subsidiary, TCF National Bank, a national banking association ("TCF Bank") with its main office in Sioux Falls, South Dakota, we provide a full range of consumer-facing and commercial services, including consumer and commercial banking, trust and wealth management, and specialty leasing and lending products and services to consumers, small businesses and commercial customers. As of March 31, 2021, TCF had approximately 475 banking centers primarily located in Michigan, Illinois and Minnesota with additional locations in Colorado, Ohio, Wisconsin and South Dakota (our "primary banking markets"). We also conduct business across all 50 states, Canada, New Zealand and Australia through our specialty lending and leasing businesses.

References herein to "TCF Financial" or the "Holding Company" refer to TCF Financial Corporation on an unconsolidated basis. TCF Financial Corporation (together with its direct and indirect subsidiaries), are referred to as "we," "us," "our," "TCF" or the "Corporation".

Business Overview

Net interest income, the difference between interest income earned on loans and leases, investments securities and other earning assets (interest income) and interest paid on deposits and borrowings (interest expense), represented 74.3% of our total revenue for the three months ended March 31, 2021, compared to 74.6% of our total revenue for the three months ended March 31, 2020. Net interest income can change significantly from period to period based on interest rates, customer prepayment patterns and the volume and mix of interest-earning assets, noninterest-bearing deposits and interest-bearing liabilities. We manage the risk of changes in interest rates on our net interest income through TCF's Asset & Liability Committee ("ALCO") and through related interest rate risk monitoring and management policies. See "Part I, Item 3. Quantitative and Qualitative Disclosures about Market Risk" for further discussion.

Noninterest income is a significant source of our revenue and an important component of our results of operations. The significant components of noninterest income are leasing revenue, fees and service charges on deposit accounts, card and ATM revenue, mortgage banking income, wealth management revenue and net gains on sales of loans and leases. Leasing revenue generates noninterest income primarily from operating and sales-type leases. Primary drivers of fees and service charges include the number of customers we attract, the customers' level of engagement and the frequency with which the customer uses our solutions. Mortgage banking earns fee income from the origination and servicing of residential loans, and recognizes gains or losses from the sale of those loans. Providing a wide range of consumer banking services is an integral component of our business philosophy.


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Proposed Merger with Huntington Bancshares Incorporated

TCF and Huntington Bancshares Incorporated ("Huntington") have entered into an Agreement and Plan of Merger, dated as of December 13, 2020. Under the terms of the agreement, the combined company will have dual headquarters for banking operations in Detroit, Michigan and Columbus, Ohio. Immediately following the merger, TCF Bank will merge with and into The Huntington National Bank, with The Huntington National Bank as the surviving bank. The merger agreement was approved by the boards of directors and the shareholders of TCF and Huntington, and is subject to regulatory approval and other customary closing conditions. The transaction is anticipated to close in the second quarter of 2021. The transaction is discussed in more detail in "Note 2. Business Combinations" of the Notes to Consolidated Financial Statements. Also see Part I, Item 1A, "Risk Factors - Strategic Risks - We face risks and uncertainties related to our proposed merger with Huntington and Failure to complete our proposed merger with Huntington could negatively impact our business, financial results and stock price" in our Annual Report on Form 10-K for the year ended December 31, 2020 for further discussion.

The following portions of this Management's Discussion and Analysis of Financial Condition and Results of Operations ("Management's Discussion and Analysis") focus in more detail on the results of operations for the three months ended March 31, 2021 and the three months ended March 31, 2020 and on information about our financial condition, loan and lease portfolio, liquidity, funding resources, capital and other matters. This discussion should be read in conjunction with the Consolidated Financial Statements and accompanying notes appearing in this report and the Consolidated Financial Statements and related notes and disclosures in our 2020 Annual Report on Form 10-K.

Critical Accounting Policies and Estimates

Our Consolidated Financial Statements are prepared in accordance with United States generally accepted accounting principles ("GAAP"), Securities and Exchange Commission ("SEC") rules and interpretive releases and general practices within our industry. Application of these principles requires management to establish accounting policies and make estimates, assumptions and complex judgments that affect the amounts reported in our Consolidated Financial Statements and accompanying notes. The estimates, assumptions and judgments are based on historical experience and various assumptions that we believe to be reasonable as of the date of the financial statements; accordingly, as this information changes, our Consolidated Financial Statements could reflect different estimates, assumptions and judgments. Actual results could differ significantly from those estimates.

Certain accounting measurements inherently have a greater reliance on the use of estimates, assumptions and judgments and, as such, have a greater possibility of producing results that could be materially different than originally reported. We use third-party sources to assist us with developing certain estimates, assumptions and judgments regarding certain amounts reported in our Consolidated Financial Statements and accompanying notes. When using third-party sources, management remains responsible for complying with GAAP. To meet management's responsibilities, we have processes in place to develop an understanding of the third-party methodologies used and to design and implement internal controls.

We have identified the determination of the allowance for credit losses (loans and leases and unfunded lending commitments), accounting for business combinations (including fair value of purchased loans and leases and core deposit intangibles), and the evaluation of goodwill impairment to be the accounting areas that require the most subjective or complex judgments and, as such, could be most subject to revision as new or additional information becomes available or circumstances change, including overall changes in the economic climate and/or market interest rates. Therefore, we consider them to be critical accounting estimates and discuss them directly with the Audit Committee of our Board of Directors.

Our significant accounting policies are more fully described in "Note 2. Summary of Significant Accounting Policies" and our critical accounting estimates are more fully described in the "Critical Accounting Policies and Estimates" section of the Management's Discussion and Analysis of Financial Condition and Result of Operations in our Annual Report on Form 10-K for the year ended December 31, 2020.



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Selected Financial Data

The following table provides our selected financial information for the periods and at the dates indicated. This information should be read together with our Consolidated Financial Statements and the related notes thereto, which are included elsewhere in this report. As noted in the following table, we have included certain non-GAAP financial measures, which should be read in conjunction with the section entitled "Non-GAAP Financial Measures" and the accompanying table entitled "Reconciliation of Non-GAAP Operating Results," for an explanation of the use of non-GAAP financial measures in this Quarterly Report on Form 10-Q and a reconciliation of non-GAAP measures to the most directly comparable GAAP financial measure. Historical data is not necessarily indicative of TCF's future results of operations or financial condition.
For the Three Months Ended
(Dollars in thousands, except per share data)March 31, 2021March 31, 2020
Consolidated Income:
Interest income$405,632 $495,392 
Interest expense23,805 93,911 
Net interest income381,827 401,481 
Noninterest income132,060 136,963 
Total revenue513,887 538,444 
Provision for credit losses20,556 96,943 
Noninterest expense348,682 374,599 
Income before income tax expense144,649 66,902 
Income tax expense19,540 13,086 
Income attributable to non-controlling interest1,773 1,917 
Net income attributable to TCF123,336 51,899 
Preferred stock dividends2,493 2,493 
Net income available to common shareholders$120,843 $49,406 
Earnings per common share:
Basic$0.79 $0.33 
Diluted0.79 0.32 
Financial Ratios:
Return on average assets ("ROAA")(1)
1.03 %0.46 %
Return on average common equity ("ROACE")(1)
8.78 3.64 
Return on average tangible common equity ("ROATCE")(1)(2)
12.51 5.42 
Net interest margin3.45 3.73 
Net interest margin (FTE)(1)(2)(3)(4)
3.47 3.76 
Dividend payout ratio44.30 109.38 
Efficiency ratio67.85 69.57 
Credit Quality Ratios:
Net charge-offs as a percentage of average loans and leases(1)
0.49 0.06 
Adjusted Financial Results (non-GAAP):
Adjusted net income attributable to TCF(2)
$130,074 $89,855 
Adjusted diluted earnings per common share(2)
$0.84 $0.57 
Adjusted ROAA(1)(2)
1.08 %0.78 %
Adjusted ROACE(1)(2)
9.27 6.43 
Adjusted ROATCE(1)(2)
13.18 9.24 
Adjusted efficiency ratio (non-GAAP)(2)
62.69 58.24 
(1)Annualized.
(2)See section entitled "Non-GAAP Financial Measures" for further information.
(3)Net interest income on a fully-taxable equivalent ("FTE") basis divided by average interest-earning assets.
(4)Presented on a FTE basis using a 21% tax rate for each period presented.

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(Dollars in thousands)At March 31, 2021At December 31, 2020
Consolidated Financial Condition:
Loans and leases$36,221,019 $34,466,408 
Total assets49,459,551 47,802,487 
Deposits39,786,814 38,856,319 
Borrowings2,944,899 1,992,095 
Total equity5,591,771 5,689,297 
Financial Ratios:
Common equity to assets10.91 %11.51 %
Tangible common equity as a percent of tangible assets (non-GAAP)(1)
8.06 8.72 
Total risk-based capital ratio13.47 14.03 
Book value per common share$35.33 $36.06 
Tangible book value per common share (non-GAAP)(1)
25.31 26.49 
Credit Quality Ratios:
Nonaccrual loans and leases as a percentage of total loans and leases1.87 %1.97 %
Nonperforming assets as a percentage of total loans and leases and other real estate owned1.96 2.06 
Allowance for loan and lease losses as a percentage of total nonaccrual loans and leases74.44 77.64 
Allowance for credit losses as a percentage of total nonaccrual loans and leases77.67 81.08 
Allowance for loan and lease losses as a percentage of total loans and leases1.39 1.53 
Allowance for credit losses as a percentage of total loans and leases1.45 1.59 
(1)See section entitled "Non-GAAP Financial Measures" for further information.

Results of Operations

Performance Summary We reported net income of $123.3 million for the three months ended March 31, 2021, compared to $51.9 million for the three months ended March 31, 2020. Merger-related expenses included in net income totaled $16.2 million for the three months ended March 31, 2021, and $36.7 million for the three months ended, March 31, 2020. Notable items, on a pre-tax basis, for the three months ended March 31, 2021 included $7.6 million loan servicing rights recovery of impairment. Notable items, for the three months ended March 31, 2020, included $8.2 million of loan servicing rights impairment and a $3.1 million net loss on transfer of Legacy TCF auto finance portfolio to held-for-sale. Adjusted net income, a non-GAAP financial measure that excludes merger-related expenses and the identified notable items, net of tax, was $130.1 million for the three months ended March 31, 2021, compared to $89.9 million for the three months ended March 31, 2020. See "Non-GAAP Financial Measures" in this Management's Discussion and Analysis for further information.

We reported diluted earnings per common share of $0.79 for the three months ended March 31, 2021, compared to $0.32 for the three months ended March 31, 2020. Adjusted diluted earnings per common share, a non-GAAP financial measure that excludes merger-related expenses and notable items was $0.84 for the three months ended March 31, 2021, compared to $0.57 for the three months ended March 31, 2020. See "Non-GAAP Financial Measures" in this Management's Discussion and Analysis for further information.


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The following table provides our financial ratios and the adjusted ratios (non-GAAP), which exclude merger-related expenses and notable items.
Summary of Financial Ratios
For the Three Months EndedChange From
March 31, 2021March 31, 2020Three Months Ended
March 31, 2020
Return on average assets ("ROAA")(1)
1.03 %0.46 %57 bps
ROACE(1)
8.78 3.64 514 
ROATCE(1)(2)
12.51 5.42 709 
Efficiency ratio67.85 69.57 (172)
Adjusted Financial Results (non-GAAP)
Adjusted ROAA(1)(2)
1.08 %0.78 %30 bps
Adjusted ROACE(1)(2)
9.27 6.43 284 
Adjusted ROATCE(1)(2)
13.18 9.24 394 
Adjusted efficiency ratio(2)
62.69 58.24 445 
(1)Annualized.
(2)See section entitled "Non-GAAP Financial Measures" in this Management's Discussion and Analysis for further information.

Consolidated Income Statement Analysis

Net Interest Income Net interest income was $381.8 million for the three months ended March 31, 2021, compared to $401.5 million for the three months ended March 31, 2020. The decrease in net interest income for the three months ended March 31, 2021, compared to the three months ended March 31, 2020, was primarily due to lower loan yields driven by the impact of the Federal Reserve's rate cuts that took place during the three months ended March 31, 2020, and a decrease in the benefit provided by purchase accounting accretion and amortization, partially offset by the impact of the PPP loans.

Net interest income on a fully-taxable equivalent ("FTE"), a non-GAAP financial measure, was $384.6 million for the three months ended March 31, 2021, compared to $404.5 million for the three months ended March 31, 2020. Net interest income (FTE) is the difference between interest income and interest expense adjusted for the tax benefit received on tax-exempt loans, leases and investment securities. The presentation of net interest income (FTE) is not in accordance with GAAP but is customary in the banking industry. For further information on the calculation of net interest income (FTE), see the tables below. FTE adjustments to net interest income totaled $2.8 million for the three months ended March 31, 2021, compared to $3.0 million for the three months ended March 31, 2020. Purchase accounting accretion and amortization included in net interest income was $15.0 million for the three months ended March 31, 2021, compared to $25.3 million for the three months ended March 31, 2020. Additionally, for the three months ended March 31, 2021, net interest income included $17.8 million of interest and fee income from PPP less funding costs. Adjusted net interest income (FTE), excluding purchase accounting accretion and amortization and the impact from PPP loans, a non-GAAP financial measure, was $351.8 million for the three months ended March 31, 2021, compared to $379.2 million for the three months ended March 31, 2020. See "Non-GAAP Financial Measures" in this Management's Discussion and Analysis for further information.

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Net interest margin was 3.45% for the three months ended March 31, 2021, compared to 3.73% for the three months ended March 31, 2020. Net interest margin (FTE), a non-GAAP financial measure, was 3.47% for the three months ended March 31, 2021, compared to 3.76% for the three months ended March 31, 2020. Net interest margin (FTE) is calculated by dividing net interest income (FTE) by average interest-earning assets, expressed as a percentage, annualized as applicable. Net interest income and net interest margin are affected by (i) changes in prevailing short- and long-term interest rates, (ii) loan, lease and deposit pricing strategies and competitive conditions, (iii) the volume and mix of interest-earning assets, noninterest-bearing deposits and interest-bearing liabilities, (iv) the level of nonaccrual loans and leases and other real estate owned, and (v) the impact of modified loans and leases. The decreases in both net interest margin and net interest margin (FTE) for the three months ended March 31, 2021, compared to the three months ended March 31, 2020, were primarily due to a decrease in the yield earned on loans and leases, impacted by the Federal Reserve's rate cuts that took place during the three months ended March 31, 2020 and a decrease in the benefit provided by purchase accounting accretion and amortization, and lower investment securities yields on higher average balances, partially offset by lower cost of funds. Adjusted net interest margin (FTE), excluding purchase accounting accretion and amortization and the impact of PPP loans, a non-GAAP financial measure, was 3.30% for the three months ended March 31, 2021, compared to 3.53% for the three months ended March 31, 2020. See the tables following for a reconciliation of net interest margin (FTE) and adjusted net interest margin (FTE) and "Non-GAAP Financial Measures" in this Management's Discussion and Analysis for further information.

The following tables present the average balances of our major categories of assets and liabilities, interest income and expense (FTE), average interest rates earned and paid on the assets and liabilities, net interest income (FTE), net interest spread (FTE) and net interest margin for the three months ended March 31, 2021 and March 31, 2020. The presentations of net interest income (FTE), net interest spread (FTE) and net interest margin (FTE) are not in accordance with GAAP but are customary in the banking industry. These non-GAAP measures ensure comparability of net interest income and net interest margin arising from both taxable and tax-exempt loans and investment securities.

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 Three Months Ended
 March 31, 2021March 31, 2020
(Dollars in thousands)Average
Balance
Interest
Yields &
Rates
(1)
Average
Balance
Interest
Yields &
Rates
(1)
Assets:
Federal Home Loan Bank and Federal Reserve Bank stocks$354,019 $999 1.14 %$454,675 $3,152 2.79 %
Investment securities held-to-maturity188,824 1,085 2.30 136,277 560