TCF FINANCIAL CORP (Form: 10-Q, Received: 08/10/2020 06:38:04)

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Table of Contents

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

June 30, 2020

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File No. 000-08185

TCF Financial Corporation

(Exact name of registrant as specified in its charter)



Michigan	38-2022454
(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)

(800) 867-9757

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock (par value $1 per share)	TCF	The NASDAQ Stock Market
Depositary shares, each representing a 1/1000th interest in a share of the 5.70% Series C Non-Cumulative Perpetual Preferred Stock	TCFCP	The 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 filer	☑	Accelerated filer	☐
Non-accelerated filer	☐	Smaller 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 July 31, 2020, there were 152,233,970 shares outstanding of the registrant's common stock, par value $1 per share, its only outstanding class of common stock.

Table of Contents

TABLE OF CONTENTS



Description	Page

Part I - Financial Information

Item 1. Financial Statements.

Consolidated Statements of Financial Condition at June 30, 2020 (Unaudited) and December 31, 2019	1

Consolidated Statements of Income for the Three Months and Six Months Ended June 30, 2020 and 2019 (Unaudited)	2

Consolidated Statements of Comprehensive Income for the Three Months and Six Months Ended June 30, 2020 and 2019 (Unaudited)	3

Consolidated Statements of Equity for the Three Months and Six Months Ended June 30, 2020 and 2019 (Unaudited)	4

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2019 (Unaudited)	6

Notes to Consolidated Financial Statements (Unaudited)	7

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.	54

Item 3. Quantitative and Qualitative Disclosures About Market Risk.	96

Item 4. Controls and Procedures.	98

Part II - Other Information

Item 1. Legal Proceedings.	99

Item 1A. Risk Factors.	99

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	100

Item 3. Defaults Upon Senior Securities.	100

Item 4. Mine Safety Disclosures.	100

Item 5. Other Information.	100

Item 6. Index to Exhibits.	102

Signatures	103

Table of Contents

Part I - Financial Information

Item 1. Financial Statements.

TCF FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Financial Condition



(Dollars in thousands, except per share data)	At June 30, 2020			At December 31, 2019
	(Unaudited)
ASSETS
Cash and cash equivalents:
Cash and due from banks	$	535,507		$	491,787
Interest-bearing deposits with other banks	2,545,170			736,584
Total cash and cash equivalents	3,080,677			1,228,371
Federal Home Loan Bank and Federal Reserve Bank stocks, at cost	386,483			442,440
Investment securities:
Available-for-sale, at fair value (amortized cost of $6,951,283 and $6,639,277)	7,219,373			6,720,001
Held-to-maturity, at amortized cost (fair value of $141,107 and $144,844)	130,101			139,445
Total investment securities	7,349,474			6,859,446
Loans and leases held-for-sale (includes $458,553 and $91,202 at fair value)	532,799			199,786
Loans and leases	35,535,824			34,497,464
Allowance for loan and lease losses	(461,114		)	(113,052		)
Loans and leases, net	35,074,710			34,384,412
Premises and equipment, net	472,240			533,138
Goodwill	1,313,046			1,299,878
Other intangible assets, net	157,373			168,368
Loan servicing rights	38,816			56,313
Other assets	1,656,842			1,479,401
Total assets	$	50,062,460		$	46,651,553
LIABILITIES AND EQUITY
Liabilities
Deposits:
Noninterest-bearing	$	10,480,245		$	7,970,590
Interest-bearing	28,730,627			26,497,873
Total deposits	39,210,872			34,468,463
Short-term borrowings	2,772,998			2,669,145
Long-term borrowings	936,908			2,354,448
Other liabilities	1,483,127			1,432,256
Total liabilities	44,403,905			40,924,312
Equity
Preferred stock, $0.01 par value, 2,000,000 shares authorized; 7,000 shares issued	169,302			169,302
Common stock, $1.00 par value, 220,000,000 shares authorized
Issued - 152,233,106 shares at June 30, 2020 and 152,965,571 shares at December 31, 2019	152,233			152,966
Additional paid-in capital	3,441,925			3,462,080
Retained earnings	1,700,480			1,896,427
Accumulated other comprehensive income	198,408			54,277
Other	(27,093		)	(28,037		)
Total TCF Financial Corporation shareholders' equity	5,635,255			5,707,015
Non-controlling interest	23,300			20,226
Total equity	5,658,555			5,727,241
Total liabilities and equity	$	50,062,460		$	46,651,553

See accompanying notes to consolidated financial statements.

Table of Contents

TCF FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Income (Unaudited)



	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands, except per share data)	2020		2019		2020		2019
Interest income
Interest and fees on loans and leases	$	392,826	$	283,282	$	835,922	$	566,520
Interest on investment securities:
Taxable	32,505		22,041		73,425		38,707
Tax-exempt	4,155		1,208		8,504		3,892
Interest on loans held-for-sale	3,322		599		4,883		1,424
Interest on other earning assets	5,562		3,651		11,028		7,132
Total interest income	438,370		310,781		933,762		617,675
Interest expense
Interest on deposits	46,785		40,646		114,204		78,254
Interest on borrowings	13,226		16,078		39,718		30,935
Total interest expense	60,011		56,724		153,922		109,189
Net interest income	378,359		254,057		779,840		508,486
Provision for credit losses	78,726		13,569		175,669		23,691
Net interest income after provision for credit losses	299,633		240,488		604,171		484,795
Noninterest income
Leasing revenue	37,172		39,277		70,737		77,442
Fees and service charges on deposit accounts	22,832		27,842		57,429		54,120
Net gains on sales of loans and leases	29,034		11,141		49,624		19,358
Card and ATM revenue	20,636		20,496		42,321		39,155
Wealth management revenue	6,206		—		12,357		—
Servicing fee revenue	3,041		4,523		9,833		9,633
Net gains on investment securities	8		1,066		8		1,517
Other	14,125		5,373		27,708		11,997
Total noninterest income	133,054		109,718		270,017		213,222
Noninterest expense
Compensation and employee benefits	171,799		116,266		343,327		240,208
Occupancy and equipment	54,107		41,850		111,395		83,560
Lease financing equipment depreciation	18,212		19,133		36,662		38,389
Net foreclosed real estate and repossessed assets	998		2,448		2,857		7,078
Merger-related expenses	81,619		4,226		118,347		13,684
Other	73,506		52,926		162,252		107,005
Total noninterest expense	400,241		236,849		774,840		489,924
Income before income tax expense	32,446		113,357		99,348		208,093
Income tax expense	6,213		19,314		19,299		40,601
Income after income tax expense	26,233		94,043		80,049		167,492
Income attributable to non-controlling interest	2,469		3,616		4,386		6,571
Net income attributable to TCF Financial Corporation	23,764		90,427		75,663		160,921
Preferred stock dividends	2,494		2,494		4,987		4,987
Net income available to common shareholders	$	21,270	$	87,933	$	70,676	$	155,934
Earnings per common share
Basic	$	0.14	$	1.07	$	0.47	$	1.89
Diluted	0.14		1.07		0.47		1.89
Weighted-average common shares outstanding
Basic	151,613,126		82,298,920		151,757,742		82,272,396
Diluted	151,660,139		82,298,920		151,837,226		82,272,396

See accompanying notes to consolidated financial statements.

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TCF FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Unaudited)



	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2020			2019			2020			2019
Net income attributable to TCF Financial Corporation	$	23,764		$	90,427		$	75,663		$	160,921
Other comprehensive income (loss), net of tax:
Net unrealized gains (losses) on available-for-sale investment securities and interest-only strips	30,397			30,625			146,244			67,993
Net unrealized gains (losses) on net investment hedges	(4,557		)	(2,179		)	5,924			(4,487		)
Foreign currency translation adjustment	6,407			3,415			(8,019		)	6,982
Recognized postretirement prior service cost	(9		)	(8		)	(18		)	(16		)
Total other comprehensive income (loss), net of tax	32,238			31,853			144,131			70,472
Comprehensive income	$	56,002		$	122,280		$	219,794		$	231,393

See accompanying notes to consolidated financial statements.

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TCF FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Equity (Unaudited)

At or For the Three Months Ended June 30, 2020 and 2019



	TCF Financial Corporation
	Number of Shares Issued		Preferred Stock		Common Stock		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)		Other			Total			Non- controlling Interest			Total Equity
(Dollars in thousands)	Preferred	Common
Balance, March 31, 2020	7,000	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
Net Income										23,764								23,764			2,469			26,233
Other comprehensive income (loss), net of tax	—	—	—		—		—			—			32,238		—			32,238			—			32,238
Net investment by (distribution to) non-controlling interest	—	—	—		—		—			—			—		—			—			(9,318		)	(9,318		)
Dividends on 5.70% Series C Preferred Stock	—	—	—		—		—			(2,494		)	—		—			(2,494		)	—			(2,494		)
Dividends on common stock of $0.35 per common share	—	—	—		—		—			(53,722		)	—		—			(53,722		)	—			(53,722		)
Stock compensation plans, net of tax	—	47,122	—		47		9,738			—			—		—			9,785			—			9,785
Change in shares held in trust for deferred compensation plans, at cost	—	—	—		—		(1,047		)	—			—		1,047			—			—			—
Balance, June 30, 2020	7,000	152,233,106	$	169,302	$	152,233	$	3,441,925		$	1,700,480		$	198,408	$	(27,093	)	$	5,635,255		$	23,300		$	5,658,555



Balance, March 31, 2019	7,000	88,063,038		$	169,302	$	88,063		$	789,467		$	1,810,701		$	5,481	$	(246,621	)	$	2,616,393		$	29,452		$	2,645,845
Net Income												90,427								90,427			3,616			94,043
Other comprehensive income (loss), net of tax	—	—		—		—			—			—			31,853		—			31,853			—			31,853
Net investment by (distribution to) non-controlling interest	—	—		—		—			—			—			—		—			—			(8,210		)	(8,210		)
Repurchases of 673,192 shares of common stock	—	—		—		—			—			—			—		(26,495		)	(26,495		)	—			(26,495		)
Dividends on 5.70% Series C Preferred Stock	—	—		—		—			—			(2,494		)	—		—			(2,494		)	—			(2,494		)
Dividends on common stock of $0.30 per common share	—	—		—		—			—			(24,326		)	—		—			(24,326		)	—			(24,326		)
Common shares purchased by TCF employee benefit plans	—	—		—		—			—			—			—		—			—			—			—
Stock compensation plans, net of tax	—	(119,178	)	—		(119		)	(8,306		)	—			—		8,726			301			—			301
Change in shares held in trust for deferred compensation plans, at cost	—	—		—		—			627			—			—		(627		)	—			—			—
Balance, June 30, 2019	7,000	87,943,860		$	169,302	$	87,944		$	781,788		$	1,874,308		$	37,334	$	(265,017	)	$	2,685,659		$	24,858		$	2,710,517

See accompanying notes to consolidated financial statements.

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TCF FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Equity (Unaudited)

At or For the Six Months Ended June 30, 2020 and 2019



	TCF Financial Corporation
	Number of Shares Issued			Preferred Stock		Common Stock			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Other			Total			Non- controlling Interest			Total Equity
(Dollars in thousands)	Preferred	Common
Balance, December 31, 2019	7,000	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, 2020	7,000	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	—	—		—		—			—			75,663			—			—			75,663			4,386			80,049
Other comprehensive income (loss), net of tax	—	—		—		—			—			—			144,131			—			144,131			—			144,131
Net investment by (distribution to) non-controlling interest	—	—		—		—			—			—			—			—			—			(1,386		)	(1,386		)
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	—	—		—		—			—			(4,987		)	—			—			(4,987		)	—			(4,987		)
Dividends on common stock of $0.70 per common share	—	—		—		—			—			(107,300		)	—			—			(107,300		)	—			(107,300		)
Stock compensation plans, net of tax	—	140,911		—		140			13,014			—			—			—			13,154			—			13,154
Change in shares held in trust for deferred compensation plans, at cost	—	—		—		—			(944		)	—			—			944			—			—			—
Balance, June 30, 2020	7,000	152,233,106		$	169,302	$	152,233		$	3,441,925		$	1,700,480		$	198,408		$	(27,093	)	$	5,635,255		$	23,300		$	5,658,555

December 31, 2018	7,000	88,198,460		$	169,302	$	88,198		$	798,627		$	1,766,994		$	(33,138	)	$	(252,182	)	$	2,537,801		$	18,459		$	2,556,260
Net income	—	—		—		—			—			160,921			—			—			160,921			6,571			167,492
Other comprehensive income (loss), net of tax	—	—		—		—			—			—			70,472			—			70,472			—			70,472
Net investment by (distribution to) non-controlling interest	—	—		—		—			—			—			—			—			—			(172		)	(172		)
Repurchases of 673,192 shares of common stock	—	—		—		—			—			—			—			(26,495		)	(26,495		)	—			(26,495		)
Dividends on 5.70% Series C Preferred Stock	—	—		—		—			—			(4,987		)	—			—			(4,987		)	—			(4,987		)
Dividends on common stock of $0.59 per common share	—	—		—		—			—			(48,620		)	—			—			(48,620		)	—			(48,620		)
Stock compensation plans, net of tax	—	(254,600	)	—		(254		)	(18,696		)	—			—			15,517			(3,433		)	—			(3,433		)
Change in shares held in trust for deferred compensation plans, at cost	—	—		—		—			1,857			—			—			(1,857		)	—			—			—
Balance, June 30, 2019	7,000	87,943,860		$	169,302	$	87,944		$	781,788		$	1,874,308		$	37,334		$	(265,017	)	$	2,685,659		$	24,858		$	2,710,517

(1) See "Note 3. Summary of Significant Accounting Policies" for further information

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TCF FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)



	Six Months Ended June 30,
(In thousands)	2020			2019
Cash flows from operating activities
Net income	$	80,049		$	167,492
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for credit losses	175,669			23,691
Share-based compensation expense	17,353			3,507
Depreciation and amortization	204,393			111,022
Provision for deferred income taxes	18,606			28,693
Net gains on sales of assets	(66,664		)	(34,648		)
Proceeds from sales of loans and leases held-for-sale	640,607			178,802
Originations of loans and leases held-for-sale, net of repayments	(961,255		)	(185,848		)
Impairment of loan servicing rights	17,094			—
Net change in other assets	(570,337		)	6,550
Net change in other liabilities	(60,568		)	(57,840		)
Other, net	(21,345		)	(23,289		)
Net cash provided by (used in) operating activities	(526,398		)	218,132
Cash flows from investing activities
Proceeds from sales of investment securities available-for-sale	—			408,230
Proceeds from maturities of and principal collected on investment securities available-for-sale	920,147			143,890
Purchases of investment securities available-for-sale	(896,547		)	(1,146,821		)
Proceeds from maturities of and principal collected on investment securities held-to-maturity	10,417			5,708
Purchases of investment securities held-to-maturity	—			(821		)
Redemption of Federal Home Loan Bank stock	258,014			68,000
Purchases of Federal Home Loan Bank stock	(202,000		)	(82,000		)
Proceeds from sales of loans and leases	493,779			414,974
Loan and lease originations and purchases, net of principal collected	(1,562,372		)	(556,311		)
Proceeds from sales of other assets	34,311			49,996
Purchases of premises and equipment and lease equipment	(42,606		)	(68,284		)
Other, net	15,758			3,034
Net cash provided by (used in) investing activities	(971,099		)	(760,405		)
Cash flows from financing activities
Net change in deposits	4,811,953			230,161
Net change in short-term borrowings	103,914			350,765
Proceeds from long-term borrowings	4,950,000			1,737,159
Payments on long-term borrowings	(6,365,249		)	(1,724,630		)
Payments on liabilities related to acquisition and portfolio purchase	—			(1,000		)
Repurchases of common stock	(33,098		)	(22,962		)
Dividends paid on preferred stock	(4,987		)	(4,987		)
Dividends paid on common stock	(107,300		)	(48,620		)
Exercise of stock options	(110		)	—
Payments related to tax-withholding upon conversion of share-based awards	(3,934		)	(5,227		)
Net investment by non-controlling interest	(1,386		)	(172		)
Net cash provided by (used in) financing activities	3,349,803			510,487
Net change in cash and due from banks	1,852,306			(31,786		)
Cash and cash equivalents at beginning of period	1,228,371			587,057
Cash and cash equivalents at end of period	$	3,080,677		$	555,271
Supplemental disclosures of cash flow information
Cash paid (received) for:
Interest on deposits and borrowings	$	151,791		$	103,413
Income taxes, net	5,483			7,374
Noncash activities:
Transfer of loans and leases to other assets	24,483			48,025
Transfer of loans and leases from held-for-investment to held for sale, net	444,905			375,084

See accompanying notes to consolidated financial statements.

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TCF FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Note 1. Basis of Presentation

On August 1, 2019 (the "Merger Date"), TCF Financial Corporation, a Delaware corporation ("Legacy TCF"), merged with and into Chemical Financial Corporation, a Michigan corporation ("Chemical"), with Chemical continuing as the surviving entity (the "Merger"). Immediately following the Merger, Chemical’s wholly owned bank subsidiary, Chemical Bank, a Michigan state-chartered bank, merged with and into Legacy TCF’s wholly owned bank subsidiary, TCF National Bank, a national banking association, with TCF National Bank surviving the merger (“TCF Bank”). Upon completion of the Merger, Chemical was renamed TCF Financial Corporation. TCF Financial 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 Bank has its main office in Sioux Falls, South Dakota. References herein to "TCF Financial" or the "Holding Company" refer to TCF Financial Corporation on an unconsolidated basis.

The Merger was accounted for as a reverse merger using the acquisition method of accounting, therefore, Legacy TCF was deemed the accounting acquirer for financial reporting purposes, even though Chemical was the legal acquirer. Accordingly, Legacy TCF's historical financial statements are the historical financial statements of the combined company for all periods before the Merger Date. TCF's results of operations include the results of operations of Chemical on and after August 1, 2019. Results for periods before August 1, 2019 reflect only those of Legacy TCF and do not include the results of operations of Chemical. The number of shares issued and outstanding, earnings per share, additional paid-in-capital, dividends paid and all references to share quantities of TCF have been retrospectively adjusted to reflect the equivalent number of shares issued to holders of Legacy TCF common stock in the Merger. See "Note 2. Merger" for further information. In addition, the assets and liabilities of Chemical as of the Merger Date have been recorded at their estimated fair value and added to those of Legacy TCF.

TCF Bank operates bank branches primarily located in Michigan, Illinois and Minnesota with additional locations in Colorado, Ohio, South Dakota and Wisconsin (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, 2019.

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.

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Note 2. Merger

As described in Note 1. Basis of Presentation, on August 1, 2019, the Corporation completed the Merger with Legacy TCF.

The Merger was an all-stock transaction. Pursuant to the merger agreement, on the Merger Date, each holder of Legacy TCF common stock received 0.5081 shares (the "Exchange Ratio") of TCF's common stock for each share of Legacy TCF common stock held. Each outstanding share of common stock of Chemical remained outstanding and was unaffected by the Merger other than by the change of the Corporation’s name from Chemical Financial Corporation to TCF Financial Corporation. As of the effective time of the Merger on August 1, 2019, TCF Financial had approximately 153.5 million shares of common stock outstanding. On the Merger Date, the shares of Legacy TCF common stock, which previously traded under the ticker symbol "TCF" on the New York Stock Exchange (the "NYSE") ceased trading on, and were delisted from, the NYSE. Following the Merger, TCF Financial common stock continues to trade on the Nasdaq Stock Market (“NASDAQ”), but its ticker symbol changed from "CHFC" to "TCF" effective August 1, 2019.

Pursuant to the merger agreement, each outstanding share of Legacy TCF 5.70% Series C Non-Cumulative Perpetual Preferred Stock, with a liquidation preference of $25,000 per share (the "Legacy TCF Preferred Stock") was converted into the right to receive one share of newly created 5.70% Series C Non-Cumulative Perpetual Preferred Stock of TCF, with a liquidation preference of $25,000 per share (the "New TCF Preferred Stock"), and each depository share representing 1/1000^th of a share of Legacy TCF Preferred Stock was converted into one depositary share representing 1/1000th of a share of New TCF Preferred Stock. Immediately following the effective time of the Merger, as of August 1, 2019, TCF Financial had 7,000 shares of New TCF Preferred Stock outstanding and 7.0 million related depositary shares outstanding.

The Merger constituted a business combination and was accounted for as a reverse merger using the acquisition method of accounting, therefore, Legacy TCF was deemed the acquirer for financial reporting purposes even though Chemical was the legal acquirer. As a result, the historical financial statements of Legacy TCF became the historical financial statements of the combined company. In addition, the assets acquired, including the intangible assets identified, and assumed liabilities of Chemical as of the Merger Date, have been recorded at their estimated fair value and added to those of Legacy TCF. In many cases, the determination of fair value required management to make estimates about discount rates, expected future cash flows, market conditions and other future events that are highly subjective in nature and subject to change.

As the legal acquirer, Chemical (now TCF Financial Corporation) issued approximately 81.9 million shares of TCF Financial common stock in connection with the Merger, which represented approximately 53% of the voting interests in TCF Financial upon completion of the Merger. Guidance in Accounting Standards Codification ("ASC") 805-40-30-2 explains that the purchase price in a reverse acquisition is determined based on “the number of equity interests the legal acquiree would have had to issue to give the owners of the legal acquirer the same percentage equity interest in the combined entity that results from the reverse acquisition.” The first step in calculating the purchase price in the Merger is to determine the ownership of the combined company following the Merger. The table below summarizes the ownership of the combined company ("TCF Financial") following the Merger, as well as the market capitalization of the combined company using shares of Chemical and Legacy TCF common stock outstanding at July 31, 2019 and Chemical’s closing price on July 31, 2019.



(Dollars in thousands)	TCF Financial Ownership and Market Value Table
	Number of Chemical Outstanding Shares	Percentage Ownership		Market Value at $42.04 Chemical Share Price
Legacy TCF shareholders	81,920,494	53.38	%	$	3,443,938
Chemical shareholders	71,558,755	46.62		3,008,330
Total	153,479,249	100.00	%	$	6,452,268

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Next, the hypothetical number of shares Legacy TCF would have to issue to give Chemical owners the same percentage ownership in the combined company is calculated in the table below (based on shares of Legacy TCF common stock outstanding at July 31, 2019):



	Hypothetical Legacy TCF Ownership
	Number of Legacy TCF Outstanding Shares	Percentage Ownership
Legacy TCF shareholders	161,229,078	53.38	%
Chemical shareholders	140,835,967	46.62
Total	302,065,045	100.00	%

Finally, the purchase price is calculated based on the number of hypothetical shares of Legacy TCF common stock issued to Chemical shareholders multiplied by the share price as demonstrated in the table below.



(Dollars in thousands, except per share data)
Number of hypothetical Legacy TCF shares issued to Chemical shareholders	140,835,967
Legacy TCF market price per share as of July 31, 2019	$	21.38
Purchase price determination of hypothetical Legacy TCF shares issued to Chemical shareholders	3,011,073
Value of Chemical stock options hypothetically converted to options to acquire shares of Legacy TCF common stock	7,335
Cash in lieu of fractional shares	148
Purchase price consideration	$	3,018,556

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The following table provides the purchase price allocation as of the Merger Date and the assets acquired and liabilities assumed at their estimated fair value as of the Merger Date as recorded by the Corporation. The Corporation recorded the estimate of fair value based on initial valuations available at the Merger Date and these estimates are considered preliminary and subject to adjustment for up to one year after the Merger Date. While the Corporation believes that the information available at the Merger Date provided a reasonable basis for estimating fair value, following the Merger, the Corporation obtained additional information and evidence and then finalized all valuations and recorded final adjustments during the first quarter of 2020. These adjustments included: (i) changes in the estimated fair value of loans and leases acquired, (ii) changes in deferred tax assets related to fair value estimates and changes in the expected realization of items considered to be net operating loss carryforwards, and (iii) changes in goodwill as a result of the net effect of any adjustments.



(In thousands)
Purchase price consideration:
Stock	$	3,018,556
Fair value of assets acquired⁽¹⁾
Cash and cash equivalents	975,014
Federal Home Loan Bank and Federal Reserve Bank stocks	218,582
Investment securities	3,774,738
Loans held-for-sale	44,532
Loans and leases	15,713,399
Premises and equipment	140,219
Loan servicing rights	59,567
Other intangible assets	159,532
Net deferred tax asset⁽²⁾	65,685
Other assets	552,432
Total assets acquired	21,703,700
Fair value of liabilities assumed⁽¹⁾
Deposits	16,418,215
Short-term borrowings	2,629,426
Long-term borrowings	442,323
Other liabilities	353,469
Total liabilities assumed	19,843,433
Fair value of net identifiable assets	1,860,267
Goodwill resulting from Merger⁽¹⁾	$	1,158,289

(1)

All amounts were previously reported in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2019, with the exception of the following adjustments to fair value based on additional information obtained in the first quarter of 2020: (i) loans and leases ($17.2 million decrease), (ii) net deferred tax asset ($4.0 million increase), and (iii) goodwill resulting from Merger ($13.2 million increase).


(2)	Net deferred tax asset includes acquisition-related fair value adjustments, loss and tax credit carry forwards, mortgage servicing rights and core deposit and customer intangibles.

The final loan valuation adjustments also impacted interest income in the first quarter of 2020. Additional accretion of $2.4 million would have been recorded as interest income in the year ended December 31, 2019, had the final loan valuation been recorded at the Merger Date.

As described in more detail in Note 3. Summary of Significant Accounting Policies below, all Chemical loans and leases were recorded at their estimated fair value as of the Merger Date with no carryover of the related allowance for loans and lease losses. The acquired loans and leases were segregated into two classifications at acquisition, purchased credit impaired (“PCI”) loans accounted for under the provisions of legacy GAAP Accounting Standards Codification ("ASC") Topic 310-30, and purchased nonimpaired loans and leases, also referred to as purchased loans and leases. The excess of cash flows expected to be collected over the estimated fair value of PCI loans is referred to as the accretable yield and is accreted into interest income over the estimated remaining life of the loan using the effective yield method. The difference between the contractually required payments and the cash flows expected to be collected at acquisition, considering the impact of prepayment and estimates of future credit losses expected to be incurred, is referred to as the nonaccretable difference.

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Information regarding acquired loans and leases included in net loans and leases acquired at the Merger Date was as follows:



(In thousands)
PCI loans:
Contractually required payments receivable	$	413,176
Nonaccretable difference	(63,014		)
Expected cash flows	350,162
Accretable yield	38,479
Fair value of PCI loans	$	311,683

Purchased nonimpaired loans and leases:
Unpaid principal balance	$	15,636,020
Fair value discount	(234,304		)
Fair value at acquisition	15,401,716
Total fair value at acquisition	$	15,713,399

Other intangible assets consisted of core deposits and customer relationship intangibles with estimated fair values at the Merger Date of $138.2 million and $21.3 million, respectively. Core deposit intangibles are being amortized over a weighted-average life of ten years on an accelerated basis. Customer relationship intangibles are being amortized over a weighted-average life of 15.6 years based on expected economic benefits of the underlying intangible assets. The weighted-average life of amortizable intangibles acquired in the Merger was 11 years.

As a result of the Merger, the Corporation recorded $1.2 billion of goodwill. Of the $1.2 billion, $528.0 million was attributable to Consumer Banking and $630.3 million was attributable to Commercial Banking. The goodwill recorded is not deductible for income tax purposes.

Pro Forma Combined Results of Operations The following pro forma financial information presents the consolidated results of operations of Legacy TCF and Chemical as if the Merger had occurred as of January 1, 2019 with pro forma adjustments. The pro forma adjustments give effect to any change in interest income due to the accretion of the discount (amortization of premium) associated with the fair value adjustments to acquired loans and leases, any change in interest expense due to estimated premium amortization/discount accretion associated with the fair value adjustments to acquired time deposits and borrowings and other debt, amortization of the customer relationship intangibles, and amortization of the core deposit intangibles that would have resulted had the deposits been acquired as of January 1, 2019. Merger-related expenses incurred by TCF during the three and six months ended June 30, 2020 are not reflected in the pro forma amounts. The pro forma information does not necessarily reflect the results of operations that would have occurred had Legacy TCF merged with Chemical at the beginning of 2019. Anticipated cost savings that have not yet been realized are also not reflected in the pro forma amounts for the three and six months ended June 30, 2020 and 2019.



	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands, except per share data)	2020		2019		2020		2019
Net interest income and other noninterest income	$	511,413	$	576,210	$	1,049,857	$	1,130,934
Net income	23,764		169,814		75,663		318,881
Net income available to common shareholders	21,270		167,320		70,676		313,894
Earnings per share:
Basic	$	0.14	$	1.09	$	0.47	$	2.04
Diluted	0.14		1.08		0.47		2.03

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Note 3. Summary of Significant Accounting Policies

Accounting policies in effect at December 31, 2019, as previously disclosed in "Note 3. Summary of Significant Accounting Policies" in the Corporation’s Annual Report on Form 10-K at and for the year ended December 31, 2019, remain significantly unchanged and have been followed similarly as in previous periods except for the allowance for credit losses accounting policy, the loans and leases acquired in a business combination accounting policy, the investments securities held-to-maturity accounting policy, and the investment securities available-for-sale accounting policy, resulting from the adoption of Accounting Standards Update ("ASU") No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and related ASUs, as described below.

Allowance for Credit Losses The Corporation's reserve methodology used to determine the appropriate level of the allowance for credit losses ("ACL") is a critical accounting estimate. The ACL is maintained at a level believed to be appropriate to provide for the current credit losses expected to be incurred in the loan and lease portfolios over the remaining expected life of each financial asset at the balance sheet date, including known or anticipated problem loans and leases, as well as for loans and leases which are not currently known to require specific allowances. The Corporation individually evaluates loans and leases that do not share similar risk characteristics with other financial assets for impairment, generally this means troubled debt restructuring ("TDR") loans, previously removed TDR loans and any other loans and leases that no longer exhibit similar risk characteristics of one of the pools of financial assets used for collective evaluation. All other loans and leases are evaluated collectively for impairment. The ACL includes the allowance for loan and lease losses ("ALLL") and a reserve for unfunded lending commitments ("RULC"). The ALLL and RULC are valuation accounts presented separately on the Consolidated Statements of Financial Condition. The ALLL is deducted from or added to loans' amortized cost basis to present the net amount expected to be collected. The RULC for letters of credit, financial guarantees and binding unfunded loan commitments is recorded in other liabilities.

Individually evaluated loans and leases are a key component of the ALLL. Individually evaluated consumer loans are generally measured at the present value of the expected future cash flows discounted at the loan's initial effective interest rate, unless the loans are collateral dependent, in which case loan impairment is based on the fair value of the collateral less estimated selling costs. Individually evaluated commercial loans and leases are generally measured at the present value of the expected future cash flows discounted at the initial effective interest rate of the loan or lease, unless the loan or lease is collateral dependent, in which case impairment is based on the fair value of collateral less estimated selling costs; however, if payment or satisfaction of the loan or lease is dependent on the operation, rather than the sale of the collateral, the impairment does not include estimated selling costs.

The impairment for all other consumer and commercial loans and leases is evaluated collectively by various characteristics. The collective evaluation of expected losses in these portfolios is based on their probability of default multiplied by historical loss rates, as well as adjustments for forward-looking information, including industry and macroeconomic forecasts. Management's current methodology includes a twenty-four month reasonable and supportable forecast period with a twelve month straight line reversion to historical loss rates. Factors utilized in the determination of the amount of the allowance include historical loss experience, current economic forecasts and measurement date credit risk characteristics such as product type, lien position, delinquency, collateral value, credit bureau scores and financial statement ratios. The various quantitative and qualitative factors used in the methodologies are reviewed quarterly.

Loans and leases are charged off to the extent they are deemed to be uncollectible. Net charge-offs are included in historical data utilized for calculating the ACL. Loans that are not collateral dependent are charged off when deemed uncollectible based on specific facts and circumstances. Residential mortgage and home equity loans are charged off to the estimated fair value of the underlying collateral, less estimated selling costs, no later than 150 days past due. Additional review of the fair value, less estimated costs to sell, compared with the recorded value occurs upon foreclosure and additional charge-offs are recorded if necessary. Consumer installment loans will generally be charged off in full no later than 120 days past due, unless repossession is reasonably assured and in process, in which case the loan would be charged off to the fair value of the collateral, less estimated selling costs. Consumer loans in bankruptcy status may be charged down to the fair value of the collateral, less estimated selling costs, when the loan is 60 days past due, or within 60 days after receipt of bankruptcy notification, whichever is shorter. Deposit account overdrafts are reported in other loans. Net losses on uncollectible overdrafts are reported as net charge-offs in the ALLL within 60 days from the date of overdraft. Commercial loans and leases that are considered collateral dependent are charged off to the estimated fair value, less estimated selling costs when it becomes probable, based on current information and events, that all principal and interest amounts will not be collectible in accordance with their contractual terms.

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The RULC leverages the same loss estimate methodology utilized to measure the ALLL. The Corporation estimates expected credit losses over the period in which it is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Corporation. The RULC estimate considers both the likelihood that funding will occur and expected credit losses on funded balances at the time of default.

The amount of the ACL significantly depends on management's estimates of key factors and assumptions affecting valuation, appraisals of collateral, evaluations of performance and status, the amounts and timing of future cash flows expected to be received, forecasts of future economic conditions and reversion periods. Such estimates, appraisals, evaluations, cash flows and forecasts may be subject to frequent adjustments due to changing economic prospects of borrowers, lessees, properties or economic conditions. These estimates are reviewed quarterly and adjustments, if necessary, are recorded in the provision for credit losses in the periods in which they become known.

Accrued interest receivable is included in other assets on the Consolidated Statements of Financial Condition, and an ACL is not recorded for these balances. Generally, when a loan or lease is placed on nonaccrual status, typically when the collection of interest or principal is 90 days or more past due, uncollected interest accrued in prior years is charged off against the ACL and interest accrued in the current year is reversed against interest income.

Management maintains a framework of controls over the estimation process for the ACL, including review of collective reserve methodologies for compliance with GAAP. Management has a quarterly process to review the appropriateness of historical observation periods and loss assumptions, risk ratings assigned to commercial loans and leases, and discount rate assumptions used to estimate the fair value of consumer real estate. Management reviews its qualitative framework and the effect on the collective reserve compared with relevant credit risk factors and consistency with credit trends. Management also maintains controls over the information systems, models and spreadsheets used in the quantitative components of the reserve estimate. This includes the quality and accuracy of historical data used to derive loss rates, the probability of default, loss given default, the inputs to industry and macroeconomic forecasts and the reversion periods utilized. The results of this process are summarized and presented to management quarterly for their approval of the recorded allowance.

See "Note 8. Allowance for Credit Losses and Credit Quality" for further information.

Loans and Leases Acquired in a Business Combination The Corporation records loans and leases acquired in a business combination at fair value at the acquisition date and the fair value discount or premium is recognized as an adjustment to yield over the remaining life of each loan or lease. An ALLL is also recorded following the Corporation’s ACL accounting policy. Purchased and acquired loans and leases are evaluated at the acquisition date and classified as either (i) loans and leases purchased without evidence of deteriorated credit quality since origination, or (ii) loans and leases purchased that as of the date of acquisition have experienced a more-than-insignificant deterioration in credit quality since origination, referred to as purchased financial assets with credit deterioration ("PCD") assets. In determining whether an acquired asset should be classified as PCD, the Corporation must make numerous assumptions, interpretations and judgments using internal and third-party credit quality information to determine whether or not the asset has experienced more-than-insignificant credit deterioration since origination. This is a point in time assessment and is inherently subjective due to the nature of the available information and judgment involved. Evidence of credit quality deterioration as of the acquisition date may include statistics such as past due and nonaccrual status, recent borrower credit scores and loan-to-value percentages. The ALLL estimated for PCD loans and leases as of the acquisition date is recorded as a gross-up of the loan or lease balance and the ALLL. Any remaining discount or premium after the gross-up is then recognized as an adjustment to yield over the remaining life of each PCD loan or lease. After the acquisition date, the accounting for acquired loans and leases, including PCD and non-PCD loans and leases, follows the same accounting guidance as loans and leases originated by the Corporation.

See "Note 8. Allowance for Credit Losses and Credit Quality" for further information.

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Investment Securities Held-to-Maturity

Investment securities held-to-maturity are carried at cost and adjusted for amortization of premiums or accretion of discounts using a level yield method; however, transfers of investment securities available-for-sale to investment securities held-to-maturity are made at fair value at the date of transfer. The unrealized holding gain or loss at the date of each transfer is retained in accumulated other comprehensive income (loss) and in the carrying value of the held-to-maturity investment security. Such amounts are then amortized over the remaining life of the transferred investment security as an adjustment of the yield on those securities. The Corporation evaluates investment securities held-to-maturity for credit losses on a quarterly basis, and records any such losses as a component of provision for credit losses in the Consolidated Statements of Income and a corresponding ACL. At June 30, 2020 there was no ACL recorded. See "Note 6. Investment Securities" for further information on investment securities held-to-maturity.

Investment Securities Available-for-Sale

Investment securities available-for-sale are carried at fair value with the unrealized gains or losses net of related deferred income taxes reported within accumulated other comprehensive income (loss). The cost of investment securities sold is determined on a specific identification basis and gains or losses on sales of investment securities available-for-sale are recognized on trade dates. Discounts and premiums on investment securities available-for-sale are amortized using a level yield method over the expected life of the security, or to the earliest call date for premiums on investment securities with call features. The Corporation evaluates investment securities available-for-sale for credit losses on a quarterly basis, and records any such losses as a component of provision for credit losses in the Consolidated Statements of Income and a corresponding ACL. At June 30, 2020 there was no ACL recorded. See "Note 6. Investment Securities" for further information on investment securities available-for-sale.

Recently Adopted Accounting Pronouncements

Effective January 1, 2020, the Corporation adopted ASU No. 2020-03, Codification Improvements to Financial Instruments, which is comprised of amendments intended to clarify or improve the accounting guidance for various financial instruments, including fair value measurement and disclosure, disclosures for depository and lending institutions, and the interaction between Topic 326 - Financial Instruments - Credit losses and other Topics. Each of the clarifying amendments are either not relevant to the Corporation's consolidated financial statements or further confirmed the Corporation's existing interpretation of the accounting guidance. As such, the adoption of this guidance did not have a material impact on the consolidated financial statements.

Effective January 1, 2020, the Corporation adopted ASU No. 2019-08, Compensation-Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606): Codification Improvements-Share-Based Consideration Payable to a Customer, which requires entities to measure and classify share-based payment awards granted to a customer by applying the guidance in Topic 718. The adoption of this guidance did not have a material impact on the consolidated financial statements.

Effective January 1, 2020, the Corporation adopted ASU No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606, which makes targeted improvements to the accounting for collaborative arrangements in response to questions raised as a result of the issuance of ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The adoption of this guidance did not have a material impact on the consolidated financial statements.

Effective January 1, 2020, the Corporation adopted ASU No. 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities. In addition to providing variable interest entities ("VIE") guidance to private companies, this ASU contains an amendment applicable to all entities which amends how a decision maker or service provider determines whether its fee is a variable interest in a VIE when a related party under common control also has an interest in the VIE. The adoption of this guidance did not have a material impact on the consolidated financial statements.

Effective January 1, 2020, the Corporation adopted ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which eliminates, adds and modifies certain disclosure requirements for fair value measurements. While the adoption of this guidance required adjustments to our fair value disclosures, it did not have a material impact on the consolidated financial statements.

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Effective January 1, 2020, the Corporation adopted ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This ASU simplifies the accounting for goodwill impairment by removing Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. Under the new guidance, the Corporation will compare the fair value of a reporting unit with its carrying amount and recognize an impairment charge for any amount by which a reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of goodwill. All other goodwill impairment guidance largely remains unchanged. The adoption of this guidance did not have a material impact on the consolidated financial statements.

Effective January 1, 2020, the Corporation adopted ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which changes the impairment model for most financial assets (including off-balance sheet exposures), including trade and other receivables, debt securities held-to-maturity, loans, net investments in leases and purchased financial assets with credit deterioration. The ASU requires the use of a current expected credit loss ("CECL") methodology to determine the allowance for credit losses for loans and debt securities held-to-maturity. CECL requires loss estimates for the remaining estimated life of the asset to be measured using historical loss data as well as adjustments for current conditions and reasonable and supportable forecasts of future economic conditions. Effective January 1, 2020, the Corporation also adopted the following ASUs, which further amend the original CECL guidance in Topic 326: (i) ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, which clarifies that receivables arising from operating leases are not within the scope of Subtopic 326-20 and should be accounted for in accordance with Topic 842; (ii) ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, which clarifies and corrects certain unintended applications of the guidance contained in each of the amended Topics; (iii) ASU No. 2019-05, Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief, which provides an option to irrevocably elect to apply the fair value option in Subtopic 825-10 to certain instruments within the scope of Subtopic 326-20 upon adoption of Topic 326; (iv) ASU No. 2019-11, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, which clarifies that expected recoveries of amounts previously written off or expected to be written off should be included in the estimate of allowance for credit losses for purchased financial assets with credit deterioration, provides certain transition relief for TDR accounting when the discounted cash flow method is used to estimate credit losses, allows entities to elect to disclose separately the total amount of accrued interest included in the amortized cost basis as a single balance to meet certain disclosure requirements, and clarifies that an entity should assess whether it reasonably expects the borrower will be able to continually replenish collateral securing financial assets when electing a practical expedient to measure the estimate of expected credit losses by comparing the amortized cost basis of the financial asset and the fair value of collateral securing the financial asset as of the reporting date. These ASUs were adopted on a modified retrospective basis.

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CECL represents a significant change in GAAP and has resulted in a significant change to industry practice, which the Corporation expects will continue to evolve over time. Our adoption resulted in an ALLL as of January 1, 2020 that is larger than the ALLL that would have been recorded under the legacy guidance on the same date by $206.0 million in total for all portfolios. Approximately 20% of the increase relates to originated loans and leases, with the largest impact on the consumer segment given the longer duration of the portfolios. A significant portion of the increase is a result of new requirements to record ALLL related to acquired loans and leases, regardless of any credit mark previously recorded with respect to them. Approximately 80% of the increase relates to acquired loans and leases, which were recorded at estimated fair value at their respective acquisition date, the majority of which relate to loans and leases acquired in the Merger. Under legacy GAAP, credit marks were included in the determination of the fair value adjustments reflected as a discount to the carrying value of the loans, and an ALLL was not recorded on acquired loans and leases until evidence of credit deterioration existed post acquisition. However, upon adoption of CECL an ALLL is recorded for all acquired loans and leases based on the lifetime loss concept. Further, for acquired loans and leases that do not meet the definition of PCD, the credit and interest marks which existed from acquisition accounting as of December 31, 2019 will continue to accrete over the life of loan. For acquired loans that met the definition of PCI under legacy GAAP and converted to PCD at CECL adoption, the ALLL recorded is recognized through a gross-up that increases the amortized cost basis of loans with a corresponding ALLL, and therefore results in little to no impact to the cumulative effect adjustment to retained earnings. Prior to the adoption of CECL, PCI loans were not classified as nonaccrual loans because they were recorded at their net realizable value based on the principal and interest expected to be collected on the loans. At January 1, 2020, $73.4 million of loans previously classified as PCI were reclassified to nonaccrual loans as a result of the adoption of CECL. The adoption of CECL also resulted in an increase in the liability for unfunded lending commitments of $14.7 million. For other assets within the scope of the standard such as available-for-sale investment securities, held-to-maturity investment securities, and trade and other receivables, the impact from the standard was inconsequential. The cumulative tax effected adjustment to record ALLL and to increase the unfunded lending commitment liability resulted in a reduction to retained earnings of $159.3 million. Post-adoption, as loans and leases are added to the portfolio, the Corporation expects higher levels of ACL determined by CECL assumptions, resulting in accelerated recognition of provision for credit losses, as compared to historical results. In response to the COVID-19 pandemic, the regulatory agencies published an interim final rule on March 31, 2020 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 2 years, followed by a three-year phase-in period. Management elected the 5-year transition period consistent with the March 31, 2020 interim final rule. Additional and modified disclosure requirements under CECL are included in "Note 6. Investment Securities" and "Note 8. Allowance for Credit Losses and Credit Quality."

CARES Act and Interagency Regulatory Guidance Regarding Troubled Debt Restructurings

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was signed into law. Section 4013 of the CARES Act provides banks the option to temporarily suspend certain TDR accounting guidance for loans modified due to the effects of COVID-19. Additionally, on April 7, 2020, the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, National Credit Union Administration, and Office of the Comptroller of the Currency (collectively the "agencies") issued a statement, "Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working With Customers Affected by the Coronavirus (Revised)" ("Interagency Statement on Loan Modifications") to encourage banks to work prudently with borrowers and to describe the agencies' interpretation of how accounting guidance for troubled debt restructuring applies to certain COVID-19-related modifications.

The CARES Act includes a provision permitting the Corporation to opt out of applying TDR accounting guidance for certain loan modifications. Loan modifications made between March 1, 2020 and the earlier of December 31, 2020 or 60 days after the President of the United States declares a termination of the COVID-19 national emergency are eligible for this relief if the related loans were not more than 30 days past due as of December 31, 2019 and meet the other requirements. The Corporation will first assess if a loan modification meets the qualifications. If the loan modification does not meet the qualification under the CARES Act, the Corporation will then assess applicability of the Interagency Statement on Loan Modifications offering practical expedients for short term modifications. Under both guidance principals, subsequent modifications must be re-evaluated for the appropriate accounting treatment. The Corporation will apply its existing accounting policies for those loans that either do not qualify for the relief under either the CARES Act or the Interagency Statement on Loan Modifications, or for which the Corporation has decided not to apply the relief.

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Under the CARES Act, the Corporation has made certain modifications that include the short-term deferral of interest for certain borrowers. In these cases, the Corporation recognizes interest income as earned. The deferred interest will be repaid by the borrower in a future period, and will be evaluated by the Corporation for collectability.

Recently Issued but Not Yet Adopted Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board (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. 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.

In January 2020, the FASB issued 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 ASU will be required beginning with the Corporation's Quarterly Report on Form 10-Q for the quarter ending March 31, 2021. Early adoption is allowed. Management is currently evaluating the impact of this guidance on the consolidated financial statements.

In December 2019, the FASB issued 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 ASU will be required beginning with the Corporation's Quarterly Report on Form 10-Q for the quarter ending March 31, 2021. Early adoption is allowed. 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 $3.1 billion and $1.2 billion at June 30, 2020 and December 31, 2019, respectively.

As of March 26, 2020, TCF Bank was no longer required by Federal Reserve regulations to maintain reserves in cash on hand or at the Federal Reserve Bank.

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 $105.5 million and $68.6 million at June 30, 2020 and December 31, 2019, respectively.

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 June 30, 2020		At December 31, 2019
FHLB stock, at cost	$	262,459	$	318,473
FRB stock, at cost	124,024		123,967
Total investments	$	386,483	$	442,440

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 no impairment of these investments at June 30, 2020 and December 31, 2019.

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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 Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
At June 30, 2020
Debt securities:
Government and government-sponsored enterprises	$	209,771	$	504	$	156	$	210,119
Obligations of states and political subdivisions	810,091		30,967		2,913		838,145
Mortgage-backed securities:
Residential agency	4,981,205		192,830		523		5,173,512
Residential non-agency	265,927		4,540		35		270,432
Commercial agency	644,458		40,048		—		684,506
Commercial non-agency	39,378		2,843		—		42,221
Total mortgage-backed debt securities	5,930,968		240,261		558		6,170,671
Corporate debt and trust preferred securities	453		—		15		438
Total investment securities available-for-sale	$	6,951,283	$	271,732	$	3,642	$	7,219,373
At December 31, 2019
Debt securities:
Government and government-sponsored enterprises	$	235,045	$	18	$	678	$	234,385
Obligations of states and political subdivisions	852,096		12,446		687		863,855
Mortgage-backed securities:
Residential agency	4,492,427		68,797		6,103		4,555,121
Residential non-agency	374,046		1,166		616		374,596
Commercial agency	645,814		8,639		2,049		652,404
Commercial non-agency	39,398		17		205		39,210
Total mortgage-backed debt securities	5,551,685		78,619		8,973		5,621,331
Corporate debt and trust preferred securities	451		—		21		430
Total investment securities available-for-sale	$	6,639,277	$	91,083	$	10,359	$	6,720,001



	Investment Securities Held-to-Maturity
(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
At June 30, 2020
Residential agency mortgage-backed securities	$	126,429	$	11,006	$	—	$	137,435
Corporate debt and trust preferred securities	3,672		—		—		3,672
Total investment securities held-to-maturity ⁽¹⁾	$	130,101	$	11,006	$	—	$	141,107
At December 31, 2019
Residential agency mortgage-backed securities	$	135,769	$	5,576	$	177	$	141,168
Corporate debt and trust preferred securities	3,676		—		—		3,676
Total investment securities held-to-maturity	$	139,445	$	5,576	$	177	$	144,844


(1)	The adoption of CECL was inconsequential to held-to-maturity investment securities. At June 30, 2020 there was no ACL for investment securities held-to-maturity.

Accrued interest receivable for investment securities was $21.2 million and $21.6 million at June 30, 2020 and December 31, 2019, respectively, and is included in other assets on the Consolidated Statements of Financial Condition.

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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 June 30, 2020
	Less than 12 months				12 months or more				Total
(In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Investment securities available-for-sale
Debt securities:
Government and government sponsored enterprises	$	58,504	$	156	$	—	$	—	$	58,504	$	156
Obligations of states and political subdivisions	206,197		2,913		—		—		206,197		2,913
Mortgage-backed securities:
Residential agency	292,534		523		—		—		292,534		523
Residential non-agency	20,079		35		—		—		20,079		35
Commercial agency	—		—		—		—		—		—
Commercial non-agency	—		—		—		—		—		—
Total mortgage-backed debt securities	312,613		558		—		—		312,613		558
Corporate debt and trust preferred securities	438		15		—		—		438		15
Total investment securities available-for-sale	$	577,752	$	3,642	$	—	$	—	$	577,752	$	3,642



	At December 31, 2019
	Less than 12 months				12 months or more				Total
(In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Investment securities available-for-sale
Debt securities:
Government and government sponsored enterprises	$	226,177	$	678	$	—	$	—	$	226,177	$	678
Obligations of states and political subdivisions	60,639		687		—		—		60,639		687
Mortgage-backed securities:
Residential agency	667,511		3,586		200,534		2,517		868,045		6,103
Residential non-agency	140,403		616		—		—		140,403		616
Commercial agency	176,880		2,049		—		—		176,880		2,049
Commercial non-agency	25,560		205		—		—		25,560		205
Total mortgage-backed debt securities	1,010,354		6,456		200,534		2,517		1,210,888		8,973
Corporate debt and trust preferred securities	430		21		—		—		430		21
Total investment securities available-for-sale	$	1,297,600	$	7,842	$	200,534	$	2,517	$	1,498,134	$	10,359

The adoption of CECL was inconsequential to available-for-sale investment securities. At June 30, 2020 there was no ACL for investment securities available-for-sale. At June 30, 2020 there were 805 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 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.

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The gross gains and losses on sales of investment securities were as follows:



	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2020		2019		2020		2019
Gross realized gains	$	—	$	1,533	$	—	$	3,155
Gross realized losses	—		467		—		1,642
Recoveries on previously impaired investment securities held-to-maturity	8		—		8		4
Net gains on investment securities	$	8	$	1,066	$	8	$	1,517

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 June 30, 2020				At December 31, 2019
(In thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Investment Securities Available-for-Sale
Due in one year or less	$	63,391	$	63,440	$	66,124	$	66,112
Due in 1-5 years	182,753		184,351		191,364		192,065
Due in 5-10 years	558,013		588,103		547,813		555,523
Due after 10 years	6,147,126		6,383,479		5,833,976		5,906,301
Total investment securities available-for-sale	$	6,951,283	$	7,219,373	$	6,639,277	$	6,720,001
Investment Securities Held-to-Maturity
Due in 1-5 years	$	3,550	$	3,550	$	3,550	$	3,550
Due in 5-10 years	52		58		58		64
Due after 10 years	126,499		137,499		135,837		141,230
Total investment securities held-to-maturity	$	130,101	$	141,107	$	139,445	$	144,844

At June 30, 2020 and December 31, 2019, investment securities with a carrying value of $1.3 billion and $627.0 million, 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 June 30, 2020		At December 31, 2019
Commercial loan and lease portfolio:
Commercial and industrial	$	12,200,721	$	11,439,602
Commercial real estate	9,628,344		9,136,870
Lease financing	2,707,402		2,699,869
Total commercial loan and lease portfolio	24,536,467		23,276,341
Consumer loan portfolio:
Residential mortgage	6,123,118		6,179,805
Consumer installment	1,430,655		1,542,411
Home equity	3,445,584		3,498,907
Total consumer loan portfolio	10,999,357		11,221,123
Total loans and leases⁽¹⁾	$	35,535,824	$	34,497,464


(1)	Loans and leases are reported at historical cost including net direct fees and costs associated with originating and acquiring loans and leases, lease residuals, unearned income and unamortized purchase premiums and discounts. The aggregate amount of these loan and lease adjustments was $(207.9) million and $(201.5) million at June 30, 2020 and December 31, 2019, respectively.

Accrued interest receivable for loans and leases was $102.3 million and $106.5 million at June 30, 2020 and December 31, 2019, respectively, and is included in other assets on the Consolidated Statements of Financial Condition.

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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. The Corporation purchased jumbo residential mortgage loans at their fair value of $423.0 million during the three months ended March 31, 2020, none of which qualified as PCD loans.

See "Note 3. Summary of Significant Accounting Policies" for further acquired loans and leases policy information.

Lease Income The components of total lease income were as follows:



	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2020		2019		2020		2019
Interest income - loans and leases:
Interest income on net investment in direct financing and sales-type leases	$	33,803	$	32,899	$	67,959	$	65,283
Leasing revenue (noninterest income):
Lease income from operating lease payments	23,799		25,497		47,701		50,896
Profit recorded on commencement date on sales-type leases	5,607		7,249		9,187		14,306
Gains on sales of leased equipment	7,766		6,531		13,849		12,240
Leasing revenue	37,172		39,277		70,737		77,442
Total lease income	$	70,975	$	72,176	$	138,696	$	142,725

Loan and Lease Sales The following table summarizes the net gains on sales of loans and leases. The Corporation retains servicing on a majority of loans sold. See "Note 10. Loan Servicing Rights" for further information.



	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2020		2019		2020		2019
Sale proceeds, net	$	579,204	$	318,790	$	1,134,386	$	593,776
Recorded investment in loans and leases sold, including accrued interest	555,358		308,155		1,092,538		575,264
Other	5,188		506		7,776		846
Net gains on sales of loans and leases	$	29,034	$	11,141	$	49,624	$	19,358

The interest-only strips on the balance sheet related to loan sales were as follows:



(In thousands)	At June 30, 2020		At December 31, 2019
Interest-only strips	$	11,811	$	12,813

The Corporation recorded no impairment charges during the three months ended June 30, 2020 and $224 thousand of impairment charges on interest-only strips during the six months ended June 30, 2020, respectively, and $21 thousand of impairment charges for both the three and six months ended June 30, 2019.

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 and six months ended June 30, 2020 and 2019.

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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. Financial information at June 30, 2020 reflects this adoption, and historical financial information disclosed is in accordance with ASC Topic 310.

Allowance for Credit Losses The rollforwards of the allowance for credit losses were as follows:



(In thousands)	Consumer Loan Portfolio			Commercial Loan and Lease Portfolio			Total Allowance for Loan and Lease Losses			Reserve for Unfunded Lending Commitments⁽¹⁾			Total Allowance for Credit Losses
At or For the Three Months Ended June 30, 2020
Balance, beginning of period	$	175,057		$	231,326		$	406,383		$	22,188		$	428,571
Charge-offs	(4,997		)	(4,961		)	(9,958		)	—			(9,958		)
Recoveries	3,629			2,934			6,563			—			6,563
Net (charge-offs) recoveries	(1,368		)	(2,027		)	(3,395		)	—			(3,395		)
Provision for credit losses⁽²⁾	(16,004		)	74,130			58,126			20,600			78,726
Balance, end of period	$	157,685		$	303,429		$	461,114		$	42,788		$	503,902
At or For the Three Months Ended June 30, 2019
Balance, beginning of period	$	74,297		$	73,675		$	147,972		$	1,941		$	149,913
Charge-offs	(12,958		)	(8,108		)	(21,066		)	—			(21,066		)
Recoveries	5,653			1,331			6,984			—			6,984
Net (charge-offs) recoveries	(7,305		)	(6,777		)	(14,082		)	—			(14,082		)
Provision for credit losses⁽²⁾	4,693			8,876			13,569			(5		)	13,564
Other⁽³⁾	(974		)	18			(956		)	—			(956		)
Balance, end of period	$	70,711		$	75,792		$	146,503		$	1,936		$	148,439
At or For the Six Months Ended June 30, 2020
Balance, beginning of period	$	28,572		$	84,480		$	113,052		$	3,528		$	116,580
Impact of CECL adoption	107,337			98,655			205,992			14,707			220,699
Adjusted balance, beginning of period	135,909			183,135			319,044			18,235			337,279
Charge-offs	(10,845		)	(13,842		)	(24,687		)	—			(24,687		)
Recoveries	8,337			7,478			15,815			—			15,815
Net (charge-offs) recoveries	(2,508		)	(6,364		)	(8,872		)	—			(8,872		)
Provision for credit losses⁽²⁾	24,284			126,832			151,116			24,553			175,669
Other⁽³⁾	—			(174		)	(174		)	—			(174		)
Balance, end of period	$	157,685		$	303,429		$	461,114		$	42,788		$	503,902
At or For the Six Months Ended June 30, 2019
Balance, beginning of period	$	80,017		$	77,429		$	157,446		$	1,428		$	158,874
Charge-offs	(29,824		)	(15,673		)	(45,497		)	—			(45,497		)
Recoveries	10,510			2,251			12,761			—			12,761
Net (charge-offs) recoveries	(19,314		)	(13,422		)	(32,736		)	—			(32,736		)
Provision for credit losses⁽²⁾	11,951			11,740			23,691			508			24,199
Other⁽³⁾	(1,943		)	45			(1,898		)	—			(1,898		)
Balance, end of period	$	70,711		$	75,792		$	146,503		$	1,936		$	148,439


(1)	RULC is recognized within other liabilities.


(2)	As a result of the adoption of CECL, effective January 1, 2020, the provision for credit losses includes the provision for unfunded lending commitments that was previously included within other noninterest expense.


(3)	Primarily includes the transfer of the allowance for credit losses to loans and leases held-for-sale.

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The following tables provide additional disclosures previously required by ASC Topic 310 related to the Corporation's December 31, 2019 balances.

The allowance for loan and lease losses and loans and leases outstanding by type of allowance methodology was as follows:



	At December 31, 2019
(In thousands)	Consumer Loan Portfolio		Commercial Loan and Lease Portfolio		Total Loans and Leases
Allowance for loan and lease losses
Collectively evaluated for impairment	$	26,430	$	75,756	$	102,186
Individually evaluated for impairment	1,468		5,769		7,237
Loans acquired with deteriorated credit quality	674		2,955		3,629
Total	$	28,572	$	84,480	$	113,052
Loans and leases outstanding
Collectively evaluated for impairment	$	11,087,534	$	22,986,607	$	34,074,141
Individually evaluated for impairment	60,694		115,843		176,537
Loans acquired with deteriorated credit quality	72,895		173,891		246,786
Total	$	11,221,123	$	23,276,341	$	34,497,464

Information on impaired loans and leases at December 31, 2019 was as follows:



	At December 31, 2019
(In thousands)	Unpaid Contractual Balance		Loan and Lease Balance		Related Allowance Recorded
Impaired loans and leases with an allowance recorded:
Commercial loan and lease portfolio:
Commercial and industrial	$	20,069	$	20,090	$	2,844
Commercial real estate	4,225		3,962		333
Lease financing	10,956		10,956		2,592
Total commercial loan and lease portfolio	35,250		35,008		5,769
Consumer loan portfolio:
Residential mortgage	24,297		22,250		1,030
Home equity	9,418		8,791		438
Total consumer loan portfolio	33,715		31,041		1,468
Total impaired loans and leases with an allowance recorded	68,965		66,049		7,237
Impaired loans and leases without an allowance recorded:
Commercial loan and lease portfolio:
Commercial and industrial	55,889		39,098		—
Commercial real estate	69,143		41,737		—
Total commercial loan and lease portfolio	125,032		80,835		—
Consumer loan portfolio:
Residential mortgage	31,142		22,594		—
Consumer installment	2,095		880		—
Home equity	24,709		6,179		—
Total consumer loan portfolio	57,946		29,653		—
Total impaired loans and leases without an allowance recorded	182,978		110,488		—
Total impaired loans and leases	$	251,943	$	176,537	$	7,237

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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. The Corporation's accruing and nonaccrual loans and leases were as follows:



(In thousands)	Current		30-89 Days Delinquent and Accruing		90 Days or More Delinquent and Accruing		Total Accruing		Nonaccrual⁽¹⁾		Total
At June 30, 2020
Commercial loan and lease portfolio:
Commercial and industrial	$	12,043,000	$	57,542	$	1,995	$	12,102,537	$	98,184	$	12,200,721
Commercial real estate	9,517,890		52,560		373		9,570,823		57,521		9,628,344
Lease financing	2,641,554		42,193		4,899		2,688,646		18,756		2,707,402
Total commercial loan and lease portfolio	24,202,444		152,295		7,267		24,362,006		174,461		24,536,467
Consumer loan portfolio:
Residential mortgage	6,037,390		17,217		749		6,055,356		67,762		6,123,118
Consumer installment	1,426,008		2,979		—		1,428,987		1,668		1,430,655
Home equity	3,385,539		12,485		—		3,398,024		47,560		3,445,584
Total consumer loan portfolio	10,848,937		32,681		749		10,882,367		116,990		10,999,357
Total	$	35,051,381	$	184,976	$	8,016	$	35,244,373	$	291,451	$	35,535,824
At December 31, 2019
Commercial loan and lease portfolio:
Commercial and industrial	$	11,283,832	$	29,780	$	331	$	11,313,943	$	53,812	$	11,367,755
Commercial real estate	8,993,360		10,291		1,440		9,005,091		29,735		9,034,826
Lease financing	2,662,354		24,657		1,901		2,688,912		10,957		2,699,869
Total commercial loan and lease portfolio	22,939,546		64,728		3,672		23,007,946		94,504		23,102,450
Consumer loan portfolio:
Residential mortgage	6,056,817		17,245		559		6,074,621		38,577		6,113,198
Consumer installment	1,536,714		4,292		108		1,541,114		714		1,541,828
Home equity	3,434,771		22,568		—		3,457,339		35,863		3,493,202
Total consumer loan portfolio	11,028,302		44,105		667		11,073,074		75,154		11,148,228
Purchased credit impaired loans⁽¹⁾	217,206		3,843		25,737		246,786		—		246,786
Total	$	34,185,054	$	112,676	$	30,076	$	34,327,806	$	169,658	$	34,497,464

(1)

Prior to the adoption of CECL as of January 1, 2020, purchased credit impaired loans were not classified as nonaccrual loans because they were recorded at their net realizable value based on the principal and interest expected to be collected on the loans. At January 1, 2020, $73.4 million of previous purchased credit impaired loans were reclassified to nonaccrual loans as a result of the adoption of CECL.

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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 Year												Revolving Loans and Leases		Revolving Loans and Leases Converted to Term Loans and Leases
At June 30, 2020	2020		2019		2018		2017		2016		2015 and Prior		Revolving Loans and Leases				Total
Commercial loan and lease portfolio:
Commercial and industrial	$	—	$	1,322	$	3	$	97	$	15	$	284	$	274	$	—	$	1,995
Commercial real estate	—		—		—		—		—		373		—		—		373
Lease financing	835		1,631		1,199		802		218		214		—		—		4,899
Total commercial loan and lease portfolio	835		2,953		1,202		899		233		871		274		—		7,267
Consumer loan portfolio:
Residential mortgage	—		—		—		—		—		749		—		—		749
Total consumer loan portfolio	—		—		—		—		—		749		—		—		749
Total 90 days or more delinquent and accruing	$	835	$	2,953	$	1,202	$	899	$	233	$	1,620	$	274	$	—	$	8,016

Nonaccrual loans and leases by year of origination were as follows:



			Amortized Cost Basis
(In thousands)	Term Loans and Leases by Origination Year												Revolving Loans and Leases		Revolving Loans and Leases Converted to Term Loans and Leases
At June 30, 2020	2020		2019		2018		2017		2016		2015 and Prior		Revolving Loans and Leases				Total
Commercial loan and lease portfolio:
Commercial and industrial	$	1,190	$	19,942	$	13,183	$	12,758	$	8,493	$	16,854	$	25,764	$	—	$	98,184
Commercial real estate	—		219		5,057		7,427		9,158		35,660		—		—		57,521
Lease financing	309		3,941		4,239		4,489		2,461		2,350		—		967		18,756
Total commercial loan and lease portfolio	1,499		24,102		22,479		24,674		20,112		54,864		25,764		967		174,461
Consumer loan portfolio:
Residential mortgage	269		1,788		3,271		3,865		1,966		55,518		—		1,085		67,762
Consumer installment	18		196		243		329		217		566		99		—		1,668
Home equity	729		1,757		629		354		207		3,729		38,159		1,996		47,560
Total consumer loan portfolio	1,016		3,741		4,143		4,548		2,390		59,813		38,258		3,081		116,990
Total nonaccrual loans and leases	$	2,515	$	27,843	$	26,622	$	29,222	$	22,502	$	114,677	$	64,022	$	4,048	$	291,451

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The average balance of nonaccrual loans and leases and interest income recognized on nonaccrual loans and leases were as follows:



	Three Months Ended June 30,								Six Months Ended June 30,
	2020				2019				2020				2019
(In thousands)	Average Loan and Lease Balance⁽¹⁾		Interest Income Recognized⁽¹⁾		Average Loan and Lease Balance		Interest Income Recognized		Average Loan and Lease Balance		Interest Income Recognized		Average Loan and Lease Balance		Interest Income Recognized
Commercial loan and lease portfolio:
Commercial and industrial	$	91,171	$	1,959	$	17,816	$	51	$	75,998	$	3,668	$	22,272	$	122
Commercial real estate	52,277		1,746		576		63		43,628		3,530		2,531		63
Lease financing	15,963		20		11,932		27		14,856		71		10,440		61
Total commercial loan and lease portfolio	159,411		3,725		30,324		141		134,482		7,269		35,243		246
Consumer loan portfolio:
Residential mortgage	64,870		726		34,993		59		53,170		1,364		33,935		137
Consumer installment	1,328		41		8,833		—		1,191		66		8,607		—
Home equity	45,354		127		31,489		55		41,711		283		29,171		95
Total consumer loan portfolio	111,552		894		75,315		114		96,072		1,713		71,713		232
Total nonaccrual loans and leases	$	270,963	$	4,619	$	105,639	$	255	$	230,554	$	8,982	$	106,956	$	478


(1)	At January 1, 2020, $73.4 million of previously purchased credit impaired loans were reclassified to nonaccrual loans as a result of the adoption of CECL. Beginning January 1, 2020, interest income, including the related purchase accounting accretion and amortization is included related to these loans.

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 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.

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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 June 30, 2020	2020		2019		2018		2017		2016		2015 and Prior						Total
Commercial loan and lease portfolio:
Commercial and industrial
Pass	$	2,870,840	$	2,324,427	$	1,178,500	$	701,249	$	401,396	$	358,937	$	3,786,856	$	41,929	$	11,664,134
Special mention	21,404		30,925		68,788		20,061		6,686		8,298		129,718		—		285,880
Substandard	2,980		30,502		33,139		29,763		23,800		23,587		106,927		9		250,707
Total commercial and industrial	2,895,224		2,385,854		1,280,427		751,073		431,882		390,822		4,023,501		41,938		12,200,721
Commercial real estate
Pass	947,705		2,333,832		2,105,250		1,557,798		791,144		1,274,833		109,791		—		9,120,353
Special mention	1,994		40,041		42,127		98,648		42,644		77,196		261		—		302,911
Substandard	—		34,172		9,398		74,172		16,386		70,952		—		—		205,080
Total commercial real estate	949,699		2,408,045		2,156,775		1,730,618		850,174		1,422,981		110,052		—		9,628,344
Lease financing
Pass	492,516		869,060		504,714		314,348		177,670		67,231		34,276		176,789		2,636,604
Special mention	1,390		10,818		4,742		5,201		3,270		2,120		3,837		6,173		37,551
Substandard	3,761		6,218		5,696		6,519		3,463		3,478		900		3,212		33,247
Total lease financing	497,667		886,096		515,152		326,068		184,403		72,829		39,013		186,174		2,707,402
Total commercial	4,342,590		5,679,995		3,952,354		2,807,759		1,466,459		1,886,632		4,172,566		228,112		24,536,467
Consumer loan portfolio:
Residential mortgage
Pass	814,910		1,360,556		870,577		582,465		562,440		1,842,690		—		15,799		6,049,437
Special mention	—		391		—		—		—		1,531		—		—		1,922
Substandard	269		1,922		3,271		3,998		2,406		58,808		—		1,085		71,759
Total residential mortgage	815,179		1,362,869		873,848		586,463		564,846		1,903,029		—		16,884		6,123,118
Consumer installment
Pass	149,212		447,414		236,490		239,163		164,156		159,931		32,334		73		1,428,773
Substandard	54		365		243		329		217		567		107		—		1,882
Total consumer installment	149,266		447,779		236,733		239,492		164,373		160,498		32,441		73		1,430,655
Home equity
Pass	20,297		63,096		61,983		50,597		36,899		143,980		2,981,806		37,149		3,395,807
Special mention	—		266		—		37		—		372		30		—		705
Substandard	953		1,973		701		354		207		3,761		39,117		2,006		49,072
Total home equity	21,250		65,335		62,684		50,988		37,106		148,113		3,020,953		39,155		3,445,584
Total consumer	985,695		1,875,983		1,173,265		876,943		766,325		2,211,640		3,053,394		56,112		10,999,357
Total loans and leases	$	5,328,285	$	7,555,978	$	5,125,619	$	3,684,702	$	2,232,784	$	4,098,272	$	7,225,960	$	284,224	$	35,535,824


(1)	This balance includes $39.0 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 $228.1 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.

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The recorded investment of loans and leases by credit risk categories as of December 31, 2019 was as follows:



(In thousands)	Pass		Special Mention		Substandard		Total
At December 31, 2019
Commercial loan and lease portfolio:
Commercial and industrial	$	10,930,939	$	315,097	$	193,566	$	11,439,602
Commercial real estate	8,891,361		170,114		75,395		9,136,870
Lease financing	2,646,874		28,091		24,904		2,699,869
Total commercial loan and lease portfolio	22,469,174		513,302		293,865		23,276,341
Consumer loan portfolio:
Residential mortgage	6,135,096		565		44,144		6,179,805
Consumer installment	1,541,524		—		887		1,542,411
Home equity	3,457,292		456		41,159		3,498,907
Total consumer loan portfolio	11,133,912		1,021		86,190		11,221,123
Total loans and leases	$	33,603,086	$	514,323	$	380,055	$	34,497,464

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. See "Note 1. Basis of Presentation" of the Notes to Consolidated Financial Statements for information regarding recent updated guidance on TDR accounting provided by the CARES Act and Interagency guidance. 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 June 30,								Six Months Ended June 30,
	2020				2019				2020				2019
(In thousands)	Pre-modification Investment		Post-modification Investment		Pre-modification Investment		Post-modification Investment		Pre-modification Investment		Post-modification Investment		Pre-modification Investment		Post-modification Investment
Commercial loan and lease portfolio:
Commercial and industrial	$	4,875	$	4,875	$	31,311	$	31,311	$	7,346	$	7,346	$	32,505	$	32,505
Commercial real estate	2,629		2,629		—		—		2,735		2,735		—		—
Total commercial loan and lease portfolio	7,504		7,504		31,311		31,311		10,081		10,081		32,505		32,505
Consumer loan portfolio:
Residential mortgage	2,373		2,373		1,107		1,107		5,581		5,580		2,360		2,353
Consumer installment	134		67		257		257		511		420		630		630
Home equity	1,099		1,041		877		877		2,066		2,008		2,515		2,503
Total consumer loan portfolio	3,606		3,481		2,241		2,241		8,158		8,008		5,505		5,486
Total	$	11,110	$	10,985	$	33,552	$	33,552	$	18,239	$	18,089	$	38,010	$	37,991

The following table presents TDR loans:



	At June 30, 2020						At December 31, 2019
(In thousands)	Accruing TDR Loans		Nonaccrual TDR Loans		Total TDR Loans		Accruing TDR Loans		Nonaccrual TDR Loans		Total TDR Loans
Commercial loan and lease portfolio	$	13,707	$	10,630	$	24,337	$	12,986	$	5,356	$	18,342
Consumer loan portfolio	14,507		18,476		32,983		12,403		14,875		27,278
Total	$	28,214	$	29,106	$	57,320	$	25,389	$	20,231	$	45,620

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Commitments to lend additional funds to borrowers whose terms have been modified in TDRs were $2.9 million and $638 thousand at June 30, 2020 and December 31, 2019, 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 are still considered impaired and follow the Corporation's impaired loan reserve policies.

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 June 30,				Six Months Ended June 30,
(In thousands)	2020		2019		2020		2019
Defaulted TDR loan balances modified during the applicable period
Commercial loan and lease portfolio:
Commercial and industrial	$	223	$	297	$	223	$	297
Consumer loan portfolio:
Residential mortgage	509		432		1,139		622
Consumer installment	15		447		15		1,017
Home equity	197		282		256		376
Total consumer loan portfolio	721		1,161		1,410		2,015
Defaulted TDR loan balances	$	944	$	1,458	$	1,633	$	2,312

Other Real Estate Owned and Repossessed and Returned Assets Other real estate owned and repossessed and returned assets were as follows:



(In thousands)	At June 30, 2020		At December 31, 2019
Other real estate owned	$	42,744	$	34,256
Repossessed and returned assets	10,060		8,045
Consumer loans in process of foreclosure	17,709		17,758

Other real estate owned and repossessed and returned assets were written down $348 thousand and $1.2 million, and $1.3 million and $3.1 million during the three and six months ended June 30, 2020 and June 30, 2019, respectively, and were included in other assets on the Consolidated Statements of Financial Condition.

Note 9. Goodwill

Goodwill was as follows:



(In thousands)	At June 30, 2020		At December 31, 2019
Goodwill related to consumer banking segment	$	771,555	$	764,389
Goodwill related to commercial banking segment	541,491		535,489
Goodwill, net	$	1,313,046	$	1,299,878

The Corporation recorded goodwill in the amount of $1.2 billion related to the merger with Legacy TCF completed on August 1, 2019. Goodwill was allocated to the appropriate reporting unit based on the relative fair value of assets acquired and deposits held by the reporting unit. This methodology allocates goodwill in proportion to the assets held by each reporting unit as well as incorporating the value of the funding source provided by the in place deposits. The reporting units aggregate between the Consumer Banking and Commercial Banking segments. See "Note 2. Merger" for further information. There was no impairment of goodwill for the three and six months ended June 30, 2020 and 2019.

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Note 10. Loan Servicing Rights

Information regarding LSRs was as follows:



(In thousands)	At or For the Three Months Ended June 30, 2020			At or For the Six Months Ended June 30, 2020
Balance, beginning of period	$	47,283		$	56,313
New servicing assets created	3,508			5,958
Impairment (charge) recovery	(8,859		)	(17,094		)
Amortization	(3,116		)	(6,361		)
Balance, end of period	$	38,816		$	38,816
Valuation allowance, end of period	$	(20,977	)	$	(20,977	)
Loans serviced for others that have servicing rights capitalized, end of period	$	6,198,187		$	6,198,187

Total loan servicing, late fee and other ancillary fee income, included in servicing fee income, related to loans serviced for others that have servicing rights capitalized was $4.1 million for the three months ended June 30, 2020 and $8.3 million for the six months ended June 30, 2020.

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

The Corporation invests in qualified affordable housing projects and federal 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 $5.1 million and $10.4 million for the three and six months ended June 30, 2020, respectively, and $2.5 million and $5.0 million for the three and six months ended June 30, 2019, respectively. Amortization expense was more than offset by tax credits and other benefits of $6.3 million and $12.9 million for the three and six months ended June 30, 2020, respectively, and $3.0 million and $6.0 million for the three and six months ended June 30, 2019, respectively. The Corporation's remaining investment in qualified affordable housing projects totaled $225.2 million and $195.8 million at June 30, 2020 and December 31, 2019, 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 the federal historic projects and Ohio historic preservation tax credits totaled $54.0 million and $43.6 million at June 30, 2020 and December 31, 2019, respectively. During the three months ended June 30, 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 six months ended June 30, 2020, $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 $0.4 million. During the six months ended June 30, 2020 the amount of state tax credits recognized, inclusive of impairment, was $0.4 million.

The Corporation's unfunded equity contributions relating to investments in qualified affordable housing projects and federal historic projects are included in other liabilities. The Corporation's remaining unfunded equity contributions totaled $138.5 million and $131.3 million at June 30, 2020 and December 31, 2019, 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 federal 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 June 30, 2020				At December 31, 2019
(Dollars in thousands)	Amount		Weighted-average Rate		Amount		Weighted-average Rate
FHLB advances	$	2,550,000	0.49	%	$	2,450,000	1.85	%
Collateralized Deposits	222,998		0.25		219,145		0.64
Total short-term borrowings	$	2,772,998	0.47		$	2,669,145	1.75

On June 29, 2020, TCF Financial voluntarily prepaid the outstanding $80.0 million on its $150.0 million unsecured 364-day revolving credit facility with an unaffiliated bank. As of June 30, 2020, the credit facility was closed.

Long-term borrowings were as follows:



(In thousands)	At June 30, 2020		At December 31, 2019
FHLB advances	$	270,927	$	1,822,058
Subordinated debt obligations	587,058		428,470
Discounted lease rentals	75,910		100,882
Finance lease obligation	3,013		3,038
Total long-term borrowings	$	936,908	$	2,354,448

On May 6, 2020, TCF Bank issued $150.0 million of fixed-to-floating rate subordinated notes (the “2030 Notes”) at par. The fixed-to-floating rate subordinated notes, due May 6, 2030, bear an initial fixed interest rate of 5.50% per annum, payable semi-annually in arrears on May 6 and November 6, commencing on November 6, 2020. The 2030 Notes are redeemable at TCF Bank's option beginning on May 6, 2025. Commencing May 6, 2025, the interest rate will reset quarterly to an annual interest rate equal to the then-current three-month LIBOR rate plus 509 basis points, payable quarterly in arrears on February 6, May 6, August 6 and November 6. TCF Bank incurred issuance costs of $1.6 million that are amortized as interest expense over the full term of the 2030 Notes using the effective interest method.

At June 30, 2020, TCF Bank had pledged loans secured by consumer and commercial real estate with an aggregate carrying value of $11.9 billion to provide borrowing capacity from the FHLB. At June 30, 2020, none of the FHLB advances outstanding were prepayable at the Corporation's option.

At June 30, 2020, TCF Bank had pledged loans and securities with an aggregate carrying value of $3.8 billion to provide borrowing capacity from the Federal Reserve Bank discount window. No borrowings were sourced from this facility at June 30, 2020.

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The contractual maturities of long-term borrowings at June 30, 2020 were as follows:



(In thousands)
Remainder of 2020	$	61,387
2021	14,511
2022	138,399
2023	22,116
2024	8,962
Thereafter	691,533
Total long-term borrowings	$	936,908

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 June 30,
	2020									2019
(In thousands)	Before Tax			Tax Effect			Net of Tax			Before Tax			Tax Effect			Net of Tax
Net unrealized gains (losses) on available-for-sale investment securities and interest-only strips:
Net unrealized gains (losses) arising during the period	$	38,136		$	(8,947	)	$	29,189		$	41,399		$	(10,077	)	$	31,322
Reclassification of net (gains) losses from accumulated other comprehensive income (loss) to:
Total interest income	1,625			(381		)	1,244			281			(69		)	212
Net gains (losses) on investment securities	—			—			—			(1,066		)	259			(807		)
Other noninterest expense	(46		)	10			(36		)	(135		)	33			(102		)
Amounts reclassified from accumulated other comprehensive income (loss)	1,579			(371		)	1,208			(920		)	223			(697		)
Net unrealized gains (losses) on available-for-sale investment securities and interest-only strips	39,715			(9,318		)	30,397			40,479			(9,854		)	30,625
Recognized postretirement prior service cost:
Reclassification of amortization of prior service cost to other noninterest expense	(11		)	2			(9		)	(11		)	3			(8		)
Foreign currency translation adjustment⁽¹⁾	6,407			—			6,407			3,415			—			3,415
Net unrealized gains (losses) on net investment hedges	(5,954		)	1,397			$	(4,557	)	(2,881		)	702			(2,179		)
Total other comprehensive income (loss)	$	40,157		$	(7,919	)	$	32,238		$	41,002		$	(9,149	)	$	31,853

	Six Months Ended June 30,
	2020									2019
(In thousands)	Before Tax			Tax Effect			Net of Tax			Before Tax			Tax Effect			Net of Tax
Net unrealized gains (losses) on available-for-sale investment securities and interest-only strips:
Net unrealized gains (losses) arising during the period	$	188,880		$	(44,554	)	$	144,326		$	90,027		$	(21,913	)	$	68,114
Reclassification of net (gains) losses from accumulated other comprehensive income (loss) to:
Total interest income	2,379			(558		)	1,821			1,651			(402		)	1,249
Net gains (losses) on investment securities	—			—			—			(1,513		)	368			(1,145		)
Other noninterest expense	127			(30		)	97			(297		)	72			(225		)
Amounts reclassified from accumulated other comprehensive income (loss)	2,506			(588		)	1,918			(159		)	38			(121		)
Net unrealized gains (losses) on available-for-sale investment securities and interest-only strips	191,386			(45,142		)	146,244			89,868			(21,875		)	67,993
Recognized postretirement prior service cost:
Reclassification of amortization of prior service cost to other noninterest expense	(23		)	5			(18		)	(23		)	7			(16		)
Foreign currency translation adjustment⁽¹⁾	(8,019		)	—			(8,019		)	6,982			—			6,982
Net unrealized gains (losses) on net investment hedges	7,741			(1,817		)	5,924			(5,931		)	1,444			(4,487		)
Total other comprehensive income (loss)	$	191,085		$	(46,954	)	$	144,131		$	90,896		$	(20,424	)	$	70,472


(1)	Foreign investments are deemed to be permanent in nature and, therefore, TCF does not provide for taxes on foreign currency translation adjustments.

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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 Strips			Net Unrealized Gains (Losses) on Net Investment Hedges			Foreign Currency Translation Adjustment			Recognized Postretirement Prior Service Cost			Total
At or For the Three Months Ended June 30, 2020
Balance, beginning of period	$	171,945		$	20,281		$	(26,123	)	$	67		$	166,170
Other comprehensive income (loss)	29,189			(4,557		)	6,407			—			31,039
Amounts reclassified from accumulated other comprehensive income (loss)	1,208			—			—			(9		)	1,199
Net other comprehensive income (loss)	30,397			(4,557		)	6,407			(9		)	32,238
Balance, end of period	$	202,342		$	15,724		$	(19,716	)	$	58		$	198,408
At or For the Three Months Ended June 30, 2019
Balance, beginning of period	$	9,346		$	12,678		$	(16,644	)	$	101		$	5,481
Other comprehensive income (loss)	31,322			(2,179		)	3,415			—			32,558
Amounts reclassified from accumulated other comprehensive income (loss)	(697		)	—			—			(8		)	(705		)
Net other comprehensive income (loss)	30,625			(2,179		)	3,415			(8		)	31,853
Balance, end of period	$	39,971		$	10,499		$	(13,229	)	$	93		$	37,334
At or For the Six Months Ended June 30, 2020
Balance, beginning of period	$	56,098		$	9,800		$	(11,697	)	$	76		$	54,277
Other comprehensive income (loss)	144,326			5,924			(8,019		)	—			142,231
Amounts reclassified from accumulated other comprehensive income (loss)	1,918			—			—			(18		)	1,900
Net other comprehensive income (loss)	146,244			5,924			(8,019		)	(18		)	144,131
Balance, end of period	$	202,342		$	15,724		$	(19,716	)	$	58		$	198,408
At or For the Six Months Ended June 30, 2019
Balance, beginning of period	$	(28,022	)	$	14,986		$	(20,211	)	$	109		$	(33,138	)
Other comprehensive income (loss)	68,114			(4,487		)	6,982			—			70,609
Amounts reclassified from accumulated other comprehensive income (loss)	(121		)	—			—			(16		)	(137		)
Net other comprehensive income (loss)	67,993			(4,487		)	6,982			(16		)	70,472
Balance, end of period	$	39,971		$	10,499		$	(13,229	)	$	93		$	37,334

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 $58.6 million at June 30, 2020, 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.

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Effective January 1, 2020, the Corporation adopted CECL. In response to the COVID-19 pandemic, the regulatory agencies published an interim final rule on March 31, 2020 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 March 31, 2020 interim final rule.

Regulatory capital information for TCF and TCF Bank was as follows:



	TCF						TCF Bank
	At June 30,			At December 31,			At June 30,			At December 31,			Well-capitalized Standard		Minimum Capital Requirement⁽¹⁾
(Dollars in thousands)	2020			2019			2020			2019
Regulatory Capital:
Common equity Tier 1 capital	$	4,028,681		$	4,050,826		$	3,997,522		$	4,039,191
Tier 1 capital	4,221,283			4,236,648			4,020,822			4,059,417
Total capital	4,907,760			4,681,630			4,705,265			4,524,051

Regulatory Capital Ratios:
Common equity Tier 1 capital ratio	11.06		%	10.99		%	10.99		%	10.97		%	6.50	%	4.50	%
Tier 1 risk-based capital ratio	11.59			11.49			11.05			11.03			8.00		6.00
Total risk-based capital ratio	13.47			12.70			12.93			12.29			10.00		8.00
Tier 1 leverage ratio	8.75			9.49			8.34			9.10			5.00		4.00


(1)	Excludes capital conservation buffer of 2.5% at both June 30, 2020 and December 31, 2019.

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 June 30, 2020
			Fair Value
(In thousands)	Notional Amount⁽¹⁾		Derivative Assets			Derivative Liabilities
Derivatives designated as hedging instruments
Interest rate contract	$	150,000	$	—		$	46
Forward foreign exchange contracts	176,195		2,311			—
Total derivatives designated as hedging instruments			$	2,311		$	46
Derivatives not designated as hedging instruments
Interest rate contracts	$	5,895,881	$	299,207		$	16,267
Risk participation agreements	428,623		88			123
Forward foreign exchange contracts	107,691		208			1,764
Interest rate lock commitments	638,942		18,525			1
Forward loan sales commitments	911,872		63			4,613
Power Equity CDs	24,937		535			535
Swap agreement	12,652		—			213
Total derivatives not designated as hedging instruments			$	318,626		$	23,516
Total derivatives before netting			320,937			23,562
Netting⁽²⁾			(4,834		)	(2,584		)
Total derivatives, net			$	316,103		$	20,978


(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.

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	At December 31, 2019
			Fair Value
(In thousands)	Notional Amount⁽¹⁾		Derivative Assets			Derivative Liabilities
Derivatives designated as hedging instruments
Interest rate contract	$	150,000	$	—		$	168
Forward foreign exchange contracts	177,593		—			3,251
Total derivatives designated as hedging instruments			$	—		$	3,419
Derivatives not designated as hedging instruments
Interest rate contracts	$	5,095,969	$	102,893		$	5,872
Risk participation agreements	316,353		202			354
Forward foreign exchange contracts	262,656		—			3,268
Interest rate lock commitments	158,111		2,772			20
Forward loan sales commitments	174,013		41			289
Power Equity CD	29,009		734			734
Swap agreement	12,652		—			356
Total derivatives not designated as hedging instruments			$	106,642		$	10,893
Total derivatives before netting			$	106,642		$	14,312
Netting⁽²⁾			(540		)	(5,109		)
Total derivatives, net			$	106,102		$	9,203


(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.

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 June 30, 2020
(In thousands)	Gross Amounts Recognized		Gross Amounts Offset⁽¹⁾			Net Amount Presented
Derivative assets
Interest rate contracts	$	299,207	$	(2,252	)	$	296,955
Risk participation agreements	88		—			88
Forward foreign exchange contracts	2,519		(2,518		)	1
Interest rate lock commitments	18,525		(1		)	18,524
Forward loan sales commitments	63		(63		)	—
Power Equity CDs	535		—			535
Total derivative assets	$	320,937	$	(4,834	)	$	316,103
Derivative liabilities
Interest rate contracts	$	16,313	$	(2,252	)	$	14,061
Risk participation agreements	123		—			123
Forward foreign exchange contracts	1,764		(55		)	1,709
Interest rate lock commitments	1		(1		)	—
Forward loan sales commitments	4,613		(63		)	4,550
Power Equity CDs	535		—			535
Swap agreement	213		(213		)	—
Total derivative liabilities	$	23,562	$	(2,584	)	$	20,978


(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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	At December 31, 2019
(In thousands)	Gross Amounts Recognized		Gross Amounts Offset⁽¹⁾			Net Amount Presented
Derivative assets
Interest rate contracts	$	102,893	$	(492	)	$	102,401
Risk participation agreements	202		—			202
Forward foreign exchange contracts	—		—			—
Interest rate lock commitments	2,772		(7		)	2,765
Forward loan sales commitments	41		(41		)	—
Power Equity CDs	734		—			734
Total derivative assets	$	106,642	$	(540	)	$	106,102
Derivative liabilities
Interest rate contracts	$	6,040	$	(491	)	$	5,549
Risk participation agreements	354		—			354
Forward foreign exchange contracts	6,519		(4,214		)	2,305
Interest rate lock commitments	20		(7		)	13
Forward loan sales commitments	289		(41		)	248
Power Equity CD	734		—			734
Swap agreement	356		(356		)	—
Total derivative liabilities	$	14,312	$	(5,109	)	$	9,203


(1)	Includes the amounts with counterparties subject to enforceable master netting arrangements that have been offset in the Consolidated Statements of Financial Condition.

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 June 30, 2020		At December 31, 2019		At June 30, 2020		At December 31, 2019
Subordinated bank note - 2025	$	161,316	$	151,454	$	12,520	$	2,773

The following table summarizes the effect of fair value hedge accounting on the Consolidated Statements of Income for the three and six months ended June 30, 2020 and 2019.



	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2020			2019			2020			2019
Statement of income line where the gain (loss) on the fair value hedge was recorded:
Interest expense on borrowings	$	13,226		$	16,078		$	39,718		$	30,935
Gain (loss) on interest rate contract (fair value hedge)
Hedged item	(918		)	(4,137		)	(9,748		)	(6,747		)
Derivative designated as a hedging instrument	929			4,181			9,865			6,743
Gain (loss) on interest rate contract recognized in interest expense on borrowings	$	11		$	44		$	117		$	(4	)

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Forward foreign exchange contracts: The effect of net investment hedges on accumulated other comprehensive income was as follows:



	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2020			2019			2020		2019
Forward foreign exchange contracts	$	(5,954	)	$	(2,881	)	$	7,741	$	(5,931	)

Derivatives Not Designated as Hedging Instruments Certain other interest rate contracts, forward foreign exchange contracts, interest rate lock commitments, Power Equity CDs 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 June 30,						Six Months Ended June 30,
(In thousands)	Location of Gain (Loss)	2020			2019			2020			2019
Interest rate contracts	Other noninterest income	$	(477	)	$	(773	)	$	1,185		$	(1,260	)
Risk participation agreements	Other noninterest expense	49			38			4,375			(283		)
Forward foreign exchange contracts	Other noninterest expense	(7,492		)	(3,830		)	11,221			(8,609		)
Interest rate lock commitments	Net gains on sales of loans and leases	5,394			287			15,772			780
Forward loan sales commitments	Net gains on sales of loans and leases	4,243			—			(4,302		)	—
Swap agreement	Other noninterest income	—			—			(1		)	—
Net gain (loss) recognized		$	1,717		$	(4,278	)	$	28,250		$	(9,372	)

At June 30, 2020 and December 31, 2019, credit risk-related contingent features existed on forward foreign exchange contracts with a notional value of $11.0 million and $23.1 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 $221 thousand and $462 thousand in additional collateral at June 30, 2020 and December 31, 2019, respectively. There were no forward foreign exchange contracts containing credit risk-related features in a liability position at both June 30, 2020 and December 31, 2019.

At June 30, 2020, the Corporation had posted $85.3 million and $1.0 million of cash collateral related to its interest rate contracts and forward foreign exchange contracts, respectively, and received $4.1 million of cash collateral related to its forward foreign exchange contracts.

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.

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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).

Derivative Instruments:

Interest Rate Contracts: The Corporation executes interest rate contracts as described in Note 15. 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.

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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, categorized as Level 3, is related to the sale of Legacy TCF's Visa Class B stock. 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.

The balances of assets and liabilities measured at fair value on a recurring basis were as follows:



	June 30, 2020
(In thousands)	Level 1		Level 2		Level 3		Total
Assets
Investment securities available-for-sale	$	—	$	7,218,932	$	441	$	7,219,373
Loans held-for-sale	—		458,553		—		458,553
Interest-only strips	—		—		11,811		11,811
Derivative assets:⁽¹⁾
Interest rate contracts	—		299,207		—		299,207
Risk participation agreements	—		88		—		88
Forward foreign exchange contracts	—		2,519		—		2,519
Interest rate lock commitments	—		18,525		—		18,525
Forward loan sales commitments	—		63		—		63
Power Equity CDs	—		535		—		535
Total derivative assets	—		320,937		—		320,937
Assets held in trust for deferred compensation plans	43,203		—		—		43,203
Total assets at fair value	$	43,203	$	7,998,422	$	12,252	$	8,053,877
Liabilities
Derivative liabilities:⁽¹⁾
Interest rate contracts	$	—	$	16,313	$	—	$	16,313
Risk participation agreements	—		123		—		123
Forward foreign exchange contracts	—		1,764		—		1,764
Interest rate lock commitments	—		1		—		1
Forward loan sales commitments	—		4,613		—		4,613
Power Equity CDs	—		535		—		535
Swap agreement	—		—		213		213
Total derivative liabilities	—		23,349		213		23,562
Liabilities held in trust for deferred compensation plans	43,203		—		—		43,203
Total liabilities at fair value	$	43,203	$	23,349	$	213	$	66,765


(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, 2019
(In thousands)	Level 1		Level 2		Level 3		Total
Assets
Investment securities available-for-sale	$	—	$	6,719,568	$	433	$	6,720,001
Loans held-for-sale	—		91,202		—		91,202
Interest-only strips	—		—		12,813		12,813
Derivative assets:⁽¹⁾
Interest rate contracts	—		102,893		—		102,893
Risk participation agreements	—		202		—		202
Interest rate lock commitments	—		2,772		—		2,772
Forward loan sales commitments	—		41		—		41
Power Equity CDs	—		734		—		734
Total derivative assets	—		106,642		—		106,642
Forward loan sales commitments, non-derivative	—		46		—		46
Assets held in trust for deferred compensation plans	43,743		—		—		43,743
Total assets at fair value	$	43,743	$	6,917,458	$	13,246	$	6,974,447
Liabilities
Derivative liabilities:⁽¹⁾
Interest rate contracts	$	—	$	6,040	$	—	$	6,040
Risk participation agreements	—		354		—		354
Forward foreign exchange contracts	—		6,519		—		6,519
Interest rate lock commitments	—		20		—		20
Forward loan sales commitments	—		289		—		289
Power Equity CDs	—		734		—		734
Swap agreement	—		—		356		356
Total derivative liabilities	—		13,956		356		14,312
Liabilities held in trust for deferred compensation plans	43,743		—		—		43,743
Total liabilities at fair value	$	43,743	$	13,956	$	356	$	58,055


(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-sale			Loans held-for-sale			Interest-only strips			Interest rate lock commitments		Swap agreement			Forward loan sales commitments
At or For the Three Months Ended June 30, 2020
Asset (liability) balance, beginning of period	$	403		$	—		$	10,951		$	—	$	(286	)	$	—
Total net gains (losses) included in:
Net income	1			—			327			—		—			—
Other comprehensive income (loss)	37			—			1,989			—		—			—
Principal paydowns / settlements	—			—			(1,456		)	—		73			—
Asset (liability) balance, end of period	$	441		$	—		$	11,811		$	—	$	(213	)	$	—
Unrealized gains (losses) included in other comprehensive income for assets held at the end of the period	$	37		$	—		$	1,989		$	—	$	—		$	—
At or For the Three Months Ended June 30, 2019
Asset (liability) balance, beginning of period	$	4		$	9,863		$	16,163		$	1,117	$	(510	)	$	(118	)
Total net gains (losses) included in:
Net income	—			700			653			285		—			(27		)
Other comprehensive income (loss)	—			—			25			—		—			—
Sales	—			(91,255		)	—			—		—			—
Originations	—			109,904			708			—		—			—
Principal paydowns / settlements	(1		)	(1		)	(2,313		)	—		75			—
Asset (liability) balance, end of period	$	3		$	29,211		$	15,236		$	1,402	$	(435	)	$	(145	)
Unrealized gains (losses) included in other comprehensive income for assets held at the end of the period	$	—		$	—		$	25		$	—	$	—		$	—
At or For the Six Months Ended June 30, 2020
Asset (liability) balance, beginning of period	$	433		$	—		$	12,813		$	—	$	(356	)	$	—
Total net gains (losses) included in:
Net income	2			—			486			—		(1		)	—
Other comprehensive income (loss)	6			—			1,641			—		—			—
Principal paydowns / settlements	—			—			(3,129		)	—		144			—
Asset (liability) balance, end of period	$	441		$	—		$	11,811		$	—	$	(213	)	$	—
Unrealized gains (losses) included in other comprehensive income for assets held at the end of the period	$	6		$	—		$	1,641		$	—	$	—		$	—
At or For the Six Months Ended June 30, 2019
Asset (liability) balance, beginning of period	$	4		$	18,070		$	16,835		$	624	$	(583	)	$	(26	)
Total net gains (losses) included in:
Net income	—			534			1,365			778		—			(119		)
Other comprehensive income (loss)	—			—			311			—		—			—
Sales	—			(164,693		)	—			—		—			—
Originations	—			175,304			1,552			—		—			—
Principal paydowns / settlements	(1		)	(4		)	(4,827		)	—		148			—
Asset (liability) balance, end of period	$	3		$	29,211		$	15,236		$	1,402	$	(435	)	$	(145	)
Unrealized gains (losses) included in other comprehensive income for assets held at the end of the period	$	—		$	—		$	311		$	—	$	—		$	—

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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 ranging from 10% to 30%.

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 9% to 25%. 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 discount rates ranging from 10% to 30%. 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.

The balances of assets measured at fair value on a non-recurring basis were as follows. There were no liabilities measured at fair value on a non-recurring basis at June 30, 2020 and December 31, 2019.



(In thousands)	Level 1		Level 2		Level 3		Total
At June 30, 2020
Loans and leases	$	—	$	—	$	244,943	$	244,943
Loan servicing rights	—		—		38,816		38,816
Other real estate owned	—		—		17,647		17,647
Repossessed and returned assets	—		8,259		—		8,259
Total non-recurring fair value measurements	$	—	$	8,259	$	301,406	$	309,665
At December 31, 2019
Loans and leases	$	—	$	—	$	141,199	$	141,199
Loan servicing rights	—		—		56,298		56,298
Other real estate owned	—		—		17,577		17,577
Repossessed and returned assets	—		6,968		—		6,968
Total non-recurring fair value measurements	$	—	$	6,968	$	215,074	$	222,042

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)	June 30, 2020		December 31, 2019
Fair value carrying amount	$	458,553	$	91,202
Aggregate unpaid principal amount	434,894		88,192
Fair value carrying amount less aggregate unpaid principal	$	23,659	$	3,010

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Differences between the fair value carrying amount and the aggregate unpaid principal balance include changes in fair value recorded at and subsequent to funding and gains and losses on the related loan commitment prior to funding. No loans recorded under the fair value option were delinquent or on nonaccrual status at June 30, 2020 and December 31, 2019. 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 $32.4 million and $47.7 million for the three and six months ended June 30, 2020 and $3.7 million and $5.9 million for the same periods in 2019, and are included in net gains on sales of loans and leases. These amounts exclude the impacts from the interest rate lock commitments and forward loan sales commitments which are also included in net gains on sales of loans and leases.

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 June 30, 2020 and December 31, 2019 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.

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 branches 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 June 30, 2020
	Carrying		Estimated Fair Value
(In thousands)	Amount		Level 1		Level 2		Level 3		Total
Financial instrument assets
FHLB and FRB stocks	$	386,483	$	—	$	386,483	$	—	$	386,483
Investment securities held-to-maturity	130,101		—		137,435		3,672		141,107
Loans and leases held-for-sale	74,246		—		75,746		1,887		77,633
Net loans⁽¹⁾	32,386,349		—		—		32,701,958		32,701,958
Securitization receivable⁽²⁾	19,818		—		—		19,690		19,690
Deferred fees on commitments to extend credit⁽²⁾	21,441		—		21,441		—		21,441
Total financial instrument assets	$	33,018,438	$	—	$	621,105	$	32,727,207	$	33,348,312
Financial instrument liabilities
Certificates of deposits	$	7,142,996	$	—	$	7,171,519	$	—	$	7,171,519
Long-term borrowings	936,908		—		940,617		—		940,617
Total financial instrument liabilities	$	8,079,904	$	—	$	8,112,136	$	—	$	8,112,136


(1)	Expected credit losses are included in the carrying amount and estimated fair value.


(2)	Carrying amounts are included in other assets.


(3)	Carrying amounts are included in other liabilities.

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	At December 31, 2019
	Carrying		Estimated Fair Value
(In thousands)	Amount		Level 1		Level 2		Level 3		Total
Financial instrument assets
FHLB and FRB stocks	$	442,440	$	—	$	442,440	$	—	$	442,440
Investment securities held-to-maturity	139,445		—		141,168		3,676		144,844
Loans held-for-sale	108,584		—		110,252		2,273		112,525
Net loans⁽¹⁾	31,699,285		—		—		31,804,513		31,804,513
Securitization receivable⁽²⁾	19,689		—		—		19,466		19,466
Deferred fees on commitments to extend credit⁽²⁾	19,300		—		19,300		—		19,300
Total financial instrument assets	$	32,428,743	$	—	$	713,160	$	31,829,928	$	32,543,088
Financial instrument liabilities
Certificates of deposits	$	7,455,556	$	—	$	7,460,577	$	—	$	7,460,577
Long-term borrowings	2,354,448		—		2,368,469		—		2,368,469
Deferred fees on standby letters of credit⁽³⁾	56		—		56		—		56
Total financial instrument liabilities	$	9,810,060	$	—	$	9,829,102	$	—	$	9,829,102


(1)	Expected credit losses are included in the carrying amount and estimated fair value.


(2)	Carrying amounts are included in other assets.


(3)	Carrying amounts are included in other liabilities.

Note 17. Revenue from Contracts with Customers

The Corporation earns a variety of revenue, including interest and fees, from customers, as well as revenues from 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.

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. The Corporation also provides 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, therefore, the performance obligation is satisfied and the related revenue is 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.

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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 June 30, 2020
	Within the scope of ASC 606						Out of scope of ASC 606		Total
(In thousands)	Consumer Banking		Commercial Banking		Enterprise Services		Out of scope of ASC 606		Total
Noninterest income
Fees and service charges on deposit accounts	$	18,812	$	1,157	$	—	$	2,863	$	22,832
Wealth management revenue	266		—		—		5,940		6,206
Card and ATM revenue	18,223		15		—		2,398		20,636
Other noninterest income	16,480		2,573		32		64,295		83,380
Total	$	53,781	$	3,745	$	32	$	75,496	$	133,054



	Three Months Ended June 30, 2019
	Within the scope of ASC 606						Out of scope of ASC 606		Total
(In thousands)	Consumer Banking		Commercial Banking		Enterprise Services		Out of scope of ASC 606		Total
Noninterest income
Fees and service charges on deposit accounts	$	26,707	$	1,135	$	—	$	—	$	27,842
Card and ATM revenue	20,475		—		—		21		20,496
Other noninterest income	348		2,103		3,051		55,878		61,380
Total	$	47,530	$	3,238	$	3,051	$	55,899	$	109,718



	Six Months Ended June 30, 2020
	Within the scope of ASC 606							Out of scope of ASC 606		Total
(In thousands)	Consumer Banking		Commercial Banking		Enterprise Services			Out of scope of ASC 606		Total
Noninterest income
Fees and service charges on deposit accounts	$	49,030	$	2,551	$	—		$	5,848	$	57,429
Wealth management revenue	27		—		—			12,330		12,357
Card and ATM revenue	37,404		41		—			4,876		42,321
Other noninterest income	20,301		4,537		(688		)	133,760		157,910
Total	$	106,762	$	7,129	$	(688	)	$	156,814	$	270,017



	Six Months Ended June 30, 2019
	Within the scope of ASC 606						Out of scope of ASC 606			Total
(In thousands)	Consumer Banking		Commercial Banking		Enterprise Services		Out of scope of ASC 606			Total
Noninterest income
Fees and service charges on deposit accounts	$	51,900	$	2,196	$	—	$	24		$	54,120
Card and ATM revenue	39,105		1,303		—		(1,253		)	39,155
Other noninterest income	850		5,316		6,846		106,935			119,947
Total	$	91,855	$	8,815	$	6,846	$	105,706		$	213,222

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. The noninterest income streams are 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.

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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 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 June 30, 2020, there were 1,419,595 shares reserved for issuance under the Legacy TCF Omnibus Incentive Plan and there were 1,181,039 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 $12.7 million and $21.7 million for the three and six months ended June 30, 2020, respectively, and $2.4 million and $3.9 million for the same period in 2019, respectively. The excess tax realized from share-based compensation transactions during the three and six months ended June 30, 2020 was an expense of $1.8 million and $1.1 million, respectively, and a benefit of $602 thousand and $1.3 million for the same period in 2019, respectively.

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 employees who previously were employees of Legacy TCF. At June 30, 2020, there were 426,868 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 performance target level and/or satisfaction of a service condition, as applicable, the TRSUs are converted into shares of TCF Financial's common stock on a one-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 six months ended June 30, 2020 is presented below:



	Number of Units		Weighted-average Grant Date Fair Value Per Unit
Outstanding at December 31, 2019	1,511,820		$	44.49
Granted	1,430,459		24.93
Forfeited/canceled	(7,082	)	50.60
Vested	(331,065	)	46.10
Outstanding at June 30, 2020	2,604,132		$	33.52

Unrecognized compensation expense related to RSUs totaled $61.3 million at June 30, 2020 and is expected to be recognized over the remaining weighted-average period of 2.8 years.

Restricted Stock Awards

The Corporation's restricted stock award transactions were as follows:



	Number of Awards		Weighted-Average Grant Date Fair Value Per Award
Outstanding at December 31, 2019	888,305		$	40.67
Granted	54,040		25.91
Forfeited/canceled	(4,786	)	39.62
Vested	(357,810	)	41.14
Outstanding at June 30, 2020	579,749		$	38.71

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At June 30, 2020, there were no shares of performance-based restricted stock awards outstanding. Unrecognized stock compensation expense for restricted stock awards was $14.2 million at June 30, 2020 with a weighted-average remaining amortization period of 2.0 years.

The following table provides information regarding total expense for restricted stock awards:



	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2020		2019		2020		2019
Restricted stock expense related to employees⁽¹⁾	$	5,670	$	—	$	10,394	$	—
Restricted stock expense related to directors⁽²⁾	214		—		214		—
Total restricted stock expense	$	5,884	$	—	$	10,608	$	—


⁽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 six months ended June 30, 2020 is presented below:



	Non-Vested Stock Options Outstanding				Stock Options Outstanding
	Number of Options		Weighted-average Exercise Price		Number of Options		Weighted-average Exercise Price
Outstanding at December 31, 2019	120,809		$	39.63	495,165		$	29.48
Exercised	—		—		(82,276	)	22.03
Forfeited/canceled	(3,173	)	39.00		—		—
Expired	—		—		(36,202	)	34.27
Vested	(55,568	)	38.25		55,568		38.25
Outstanding at June 30, 2020	62,068		$	40.89	432,255		$	31.63
Exercisable/vested at June 30, 2020					432,255		$	31.63

The weighted-average remaining contractual term was 4.1 years for all outstanding stock options and 3.9 years for exercisable stock options at June 30, 2020.

Note 19. Retirement Plans

The Corporation's retirement plans include qualified defined benefit pension plans, nonqualified postretirement benefit plans, 401(k) savings plans and nonqualified supplemental retirement plans. These plans are discussed in further detail in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2019.

Qualified Defined Benefit Pension Plans

The TCF Cash Balance Pension Plan (the "Legacy TCF Pension Plan") and the Chemical Financial Corporation Employees' Pension Plan ("Chemical Pension Plan") are both defined as qualified benefit pension plans (collectively, the "Pension Plans"), which previously provided for postretirement pension benefits for plan eligible employees.

The Board of Directors of Legacy TCF approved the termination of the Legacy TCF Pension Plan effective November 1, 2019. The Legacy TCF Pension Plan was fully funded as of June 30, 2020. The weighted-average interest crediting rate was 2.05% as of June 30, 2020. TCF does not consolidate the assets and liabilities associated with the Legacy TCF Pension Plan.

The termination of the Chemical Pension Plan was approved effective August 31, 2019. The discount rate was adjusted to 3.48% based on the remeasurement of the Chemical Pension Plan required due to the Merger and the termination. At the time of the Merger, as a result of the termination, the Corporation recognized a prepaid asset representing the funded status of the Chemical Pension Plan, net of estimated settlement costs, and the balance previously recorded in accumulated other comprehensive income was eliminated. The purchase accounting adjustment, as a result of the Merger, was reported in goodwill. The Chemical Pension Plan was fully funded as of June 30, 2020.

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Nonqualified Postretirement Benefit Plans

The Legacy TCF Postretirement Plan provides health care benefits to eligible retired employees who retired prior to December 31, 2009. The provisions for active and retired employees then eligible for these benefits were not changed. The Postretirement Plan is not funded.

The Chemical Postretirement Benefit Plan provides medical and dental benefits, during retirement, to a limited number of active and retired employees. The benefits can be amended, modified or terminated by the Corporation at any time.

401(k) Savings Plans

The TCF 401K Plan (the "TCF 401K"), a qualified postretirement benefit and employee stock ownership plan provides, and until December 31, 2019 the Chemical Financial Corporation 401K Savings Plan (the "Chemical 401K"), a qualified postretirement benefit plan provided the option to invest in TCF common stock. Effective December 31, 2019, the Chemical 401K merged with and into the TCF 401K. All participant balances remaining in the Chemical 401K were transferred into the TCF 401K on December 31, 2019.

Nonqualified Supplemental Retirement Plans

The TCF 401K Supplemental Plan (the "Legacy TCF SERP") and the TCF Financial Corporation Deferred Compensation Plan (the "TCF Deferred Compensation Plan") are both defined as nonqualified supplemental retirement plans. Effective January 1, 2020, the Legacy TCF SERP no longer receives new contributions from the Corporation or participants. The Legacy TCF SERP's assets, which include investments in TCF common stock, are held in trust and included in equity in the other line item.

Net Periodic Benefit

The net periodic benefit plan (income) cost included in other noninterest expense for defined benefit pension plans and postretirement benefit plans were as follows:



	Defined Benefit Pension Plans
	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2020			2019			2020			2019
Interest cost	$	946		$	264		$	1,892		$	528
Return on plan assets	(772		)	(137		)	(1,729		)	(274		)
Net periodic benefit plan (income) cost	$	174		$	127		$	163		$	254



	Postretirement Benefit Plans
	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2020			2019			2020			2019
Interest cost	$	35		$	30		$	71		$	60
Service cost	—			—			1			—
Amortization of prior service cost	(11		)	(11		)	(23		)	(23		)
Net periodic benefit plan (income) cost	$	24		$	19		$	49		$	37

TCF made no cash contributions to the defined benefit pension plans during the three and six months ended June 30, 2020 and 2019. TCF contributed $0.1 million and $0.1 million to the Legacy TCF Postretirement Plan during the three months ended June 30, 2020 and 2019, respectively, and $0.1 million and $0.2 million during the six months ended June 30, 2020 and 2019, respectively. TCF made no contributions to the Chemical Postretirement Benefit Plan during both the three and six months ended June 30, 2020 and 2019.

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The TCF 401K allows participants to make contributions of up to 50% of their covered compensation on a tax-deferred and/or after-tax basis, subject to the annual covered compensation limitation imposed by the Internal Revenue Service ("IRS"). TCF matches the contributions of all participants at a rate of $1 per dollar for employees to a maximum company contribution of 5% of the employee's covered compensation per pay period subject to the annual covered compensation limitation imposed by the IRS. Employee contributions and matching contributions vest immediately. The Corporation match under the TCF 401K was $5.3 million and $11.8 million for the three and six months ended June 30, 2020, respectively, compared to $2.7 million and $7.1 million for the three and six months ended June 30, 2019, respectively. Dividends on TCF's common shares held in the TCF 401K are reinvested in such fund or, at the election of the participant, may be paid in cash to the participant.

Effective January 1, 2020, the TCF Deferred Compensation Plan (previously the Chemical Deferred Compensation Plan), a nonqualified supplemental retirement plan, was amended to allow certain employees to contribute up to 60% of their salary and up to 85% of bonus compensation. The amounts deferred under this plan are invested in a selection of mutual funds.

Note 20. Earnings Per Common Share

The computations of basic and diluted earnings per common share were as follows:



	Three Months Ended June 30,				Six Months Ended June 30,
(Dollars in thousands, except per share data)	2020		2019		2020		2019
Basic earnings per common share
Net income attributable to TCF Financial Corporation	$	23,764	$	90,427	$	75,663	$	160,921
Preferred stock dividends	2,494		2,494		4,987		4,987
Net income available to common shareholders	21,270		87,933		70,676		155,934
Less: Earnings allocated to participating securities	—		17		—		30
Earnings allocated to common stock	$	21,270	$	87,916	$	70,676	$	155,904
Weighted-average common shares outstanding used in basic earnings per common share calculation	151,613,126		82,298,920		151,757,742		82,272,396
Basic earnings per common share	$	0.14	$	1.07	$	0.47	$	1.89
Diluted earnings per common share
Earnings allocated to common stock	$	21,270	$	87,916	$	70,676	$	155,904
Weighted-average common shares outstanding used in basic earnings per common share calculation	151,613,126		82,298,920		151,757,742		82,272,396
Net dilutive effect of:
Non-participating restricted stock	10,374		—		6,924		—
Stock options	36,639		—		72,560		—
Weighted-average common shares outstanding used in diluted earnings per common share calculation	151,660,139		82,298,920		151,837,226		82,272,396
Diluted earnings per common share	$	0.14	$	1.07	$	0.47	$	1.89
Anti-dilutive shares outstanding not included in the computation of diluted earnings per common share
Non-participating restricted stock	2,702,972		914,459		2,962,872		914,459
Stock options	358,522		—		259,900		—

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Note 21. Other Noninterest Income and Expense

Other noninterest income and expense was as follows:



	Three Months Ended June 30,					Six Months Ended June 30,
(In thousands)	2020			2019		2020			2019
Other Noninterest Income
Gain on branch sales⁽¹⁾	$	14,717		$	—	$	14,717		$	—
Loan servicing rights impairment	(8,858		)	—		(17,094		)	—
Other	8,266			5,373		30,085			11,997
Total other noninterest income	$	14,125		$	5,373	$	27,708		$	11,997

Other Noninterest Expense
Outside processing	$	12,804		$	5,917	$	26,717		$	11,391
Loan and lease expense	8,356			3,374		16,139			6,663
Professional fees	5,628			5,385		12,197			10,913
Advertising and marketing	4,463			5,273		12,840			12,128
FDIC insurance	6,742			2,492		13,301			5,410
Card processing and issuance costs	5,831			4,183		14,521			8,691
Other	29,682			26,302		66,537			51,809
Total other noninterest expense	$	73,506		$	52,926	$	162,252		$	107,005

(1) Represents the completion of the sale of seven branches in conjunction with deposits associated with those branches.

Note 22. 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, previously named Wholesale 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.

In connection with the Merger, effective August 1, 2019, the Corporation renamed its Wholesale Banking segment to Commercial Banking to align with the way it is now managed. In addition, activity that was related to small business banking and private banking were moved from the Wholesale Banking (now named Commercial Banking) segment to the Consumer Banking segment. The revised presentation of previously reported segment data has been applied retroactively to all periods presented in these financial statements.

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 tax-equivalent basis. The Corporation generally accounts for inter-segment sales and transfers at cost.

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Certain information for each of the Corporation's reportable segments, including reconciliations of the consolidated totals, was as follows:



(In thousands)	Consumer Banking			Commercial Banking		Enterprise Services			Consolidated
At or For the Three Months Ended June 30, 2020
Net interest income	$	206,285		$	169,473	$	2,601		$	378,359
Provision (benefit) for credit losses	(10,924		)	89,650		—			78,726
Net interest income after provision for credit losses	217,209			79,823		2,601			299,633
Noninterest income	85,276			43,831		3,947			133,054
Noninterest expense	207,319			105,324		87,598			400,241
Income tax expense (benefit)	15,752			3,440		(12,979		)	6,213
Income (loss) after income tax expense (benefit)	79,414			14,890		(68,071		)	26,233
Income attributable to non-controlling interest	—			2,469		—			2,469
Preferred stock dividends	—			—		2,494			2,494
Net income (loss) available to common shareholders	79,414			12,421		(70,565		)	21,270
Total assets	$	14,694,025		$	24,318,452	$	11,049,983		$	50,062,460
Revenues from external customers
Interest income	$	143,666		$	252,825	$	41,879		$	438,370
Noninterest income	85,276			43,831		3,947			133,054
Total	$	228,942		$	296,656	$	45,826		$	571,424
At or For the Three Months Ended June 30, 2019
Net interest income	$	138,094		$	96,726	$	19,237		$	254,057
Provision for credit losses	4,691			8,878		—			13,569
Net interest income after provision for credit losses	133,403			87,848		19,237			240,488
Noninterest income	66,163			42,455		1,100			109,718
Noninterest expense	152,757			80,892		3,200			236,849
Income tax expense (benefit)	10,971			10,340		(1,997		)	19,314
Income after income tax expense (benefit)	35,838			39,071		19,134			94,043
Income attributable to non-controlling interest	—			3,616		—			3,616
Preferred stock dividends	—			—		2,494			2,494
Net income available to common shareholders	35,838			35,455		16,640			87,933
Total assets	$	7,713,169		$	12,865,821	$	4,047,840		$	24,626,830
Revenues from external customers
Interest income	$	105,487		$	179,350	$	25,944		$	310,781
Noninterest income	66,163			42,455		1,100			109,718
Total	$	171,650		$	221,805	$	27,044		$	420,499

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(In thousands)	Consumer Banking		Commercial Banking		Enterprise Services			Consolidated
At or For the Six Months Ended June 30, 2020
Net interest income	$	400,117	$	355,459	$	24,264		$	779,840
Provision for credit losses	33,445		142,224		—			175,669
Net interest income after provision for credit losses	366,672		213,235		24,264			604,171
Noninterest income	166,690		99,604		3,723			270,017
Noninterest expense	436,178		219,779		118,883			774,840
Income tax expense (benefit)	17,734		19,746		(18,181		)	19,299
Income (loss) after income tax expense (benefit)	79,450		73,314		(72,715		)	80,049
Income attributable to non-controlling interest	—		4,386		—			4,386
Preferred stock dividends	—		—		4,987			4,987
Net income (loss) available to common shareholders	79,450		68,928		(77,702		)	70,676
Total assets	$	14,694,025	$	24,318,452	$	11,049,983		$	50,062,460
Revenues from external customers
Interest income	$	290,335	$	551,685	$	91,742		$	933,762
Noninterest income	166,690		99,604		3,723			270,017
Total	$	457,025	$	651,289	$	95,465		$	1,203,779
At or For the Six Months Ended June 30, 2019
Net interest income	$	278,796	$	193,411	$	36,279		$	508,486
Provision for credit losses	11,917		11,774		—			23,691
Net interest income after provision for credit losses	266,879		181,637		36,279			484,795
Noninterest income	126,666		84,954		1,602			213,222
Noninterest expense	309,278		164,305		16,341			489,924
Income tax expense (benefit)	19,712		22,099		(1,210		)	40,601
Income after income tax expense (benefit)	64,555		80,187		22,750			167,492
Income attributable to non-controlling interest	—		6,571		—			6,571
Preferred stock dividends	—		—		4,987			4,987
Net income available to common shareholders	64,555		73,616		17,763			155,934
Total assets	$	7,713,169	$	12,865,821	$	4,047,840		$	24,626,830
Revenues from external customers
Interest income	$	216,172	$	353,741	$	47,762		$	617,675
Noninterest income	126,666		84,954		1,602			213,222
Total	$	342,838	$	438,695	$	49,364		$	830,897

Note 23. 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 June 30, 2020		At December 31, 2019
Commitments to extend credit:
Commercial	$	4,784,205	$	5,743,072
Consumer	2,243,985		2,305,096
Total commitments to extend credit	7,028,190		8,048,168
Standby letters of credit and guarantees on industrial revenue bonds	116,490		129,192
Total	$	7,144,680	$	8,177,360

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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 $8.0 million and $6.2 million at June 30, 2020 and December 31, 2019, 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 $7.9 million and $6.0 million at June 30, 2020 and December 31, 2019, respectively. In the event of nonperformance, the Corporation has rights to the underlying collateral securing the loans. At both June 30, 2020 and December 31, 2019, the Corporation had recorded a liability of $0.1 million, in connection with the recourse agreements, in other liabilities.

In addition, the Corporation acquired, through the Merger, 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 $14.3 million and $16.7 million at June 30, 2020 and December 31, 2019, respectively. In the event of default, the Corporation has rights to the underlying collateral securing the loans. At June 30, 2020 and December 31, 2019, the Corporation had recorded a liability of $0.8 million and $0.9 million, respectively, in other liabilities.

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 June 30, 2020 and December 31, 2019 the liability recorded in connection with these representations and warranties was $4.6 million and $5.7 million, respectively, included in other liabilities.

Litigation Contingencies From time to time, the Corporation is a party to legal proceedings arising out of its lending, leasing and deposit operations, including foreclosure proceedings and other collection actions as part of its lending and leasing collections activities. The Corporation may also be subject to regulatory examinations and enforcement actions brought by federal regulators, including the SEC, the Federal Reserve, the OCC and the Consumer Financial Protection Bureau which may impose sanctions on the Corporation for failures related to regulatory compliance. From time to time borrowers and other customers, and employees and former employees have also brought actions against the Corporation, in some cases claiming substantial damages. The Corporation, like other financial services companies, is 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 the current understanding of the Corporation's 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 the consolidated financial position, operating results or cash flows of the Corporation.

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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 integration following our Merger, 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.

Management's determination of the allowance for credit losses and related provision; the carrying value of acquired loans and leases, 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.

These forward-looking statements are subject to certain risks, uncertainties and assumptions ("risk factors") that could cause actual results to differ materially from those expressed or implied in such statements, and no assurance can be given that the results in any forward-looking statement will be achieved. 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, except as required by law. These factors include the factors discussed in Item 1A. in our Annual Report on Form 10-K for the year ended December 31, 2019 under the heading "Risk Factors" or otherwise disclosed in documents filed or furnished by us with or to the SEC after the filing of the Annual Reporting on Form 10-K, 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 branches, including supermarket branches; inability to successfully execute on TCF's growth strategy through acquisitions or expanding existing business relationships; adverse effects related to competition from traditional competitors, non-bank providers of financial services and new technologies; failure to keep pace with technological change, including with respect to customer demands or system upgrades; risks related to developing new products, markets or lines of business; 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 or risk mitigation frameworks; dependence on accurate and complete information from customers and counterparties; the failure to attract and retain key employees; ineffective internal controls; soundness of other financial institutions and

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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 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; technological or operational difficulties; 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 Quarterly Report on Form 10-Q also contains forward-looking statements regarding our outlook or expectations with respect to the Merger with Legacy TCF. Examples of forward-looking statements include, but are not limited to, statements regarding outlook and expectations with respect to the strategic and financial benefits of the Merger, including the expected impact of the transaction on TCF's future financial performance (including anticipated accretion to earnings per share, the tangible book value earn-back period and other operating and return metrics), the expected costs to be incurred in connection with the Merger, and operational aspects of post-Merger integration. Such risks, uncertainties and assumptions, include, among others, the following:


•	the impact of the COVID-19 pandemic;

•

the possibility that the anticipated benefits of the Merger, 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, the integration of the two companies or as a result of the strength of the economy, competitive factors in the areas where TCF does business, or as a result of other unexpected factors or events;


•	the impact of purchase accounting with respect to the Merger, 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;


•	the operational integration of the merged businesses and operations, which may take longer than anticipated or be more costly than anticipated or have unanticipated adverse results;


•	failure to attract new customers and retain existing customers in the manner anticipated;


•	the challenges of integrating, retaining and hiring key personnel;


•	the potential impact of the Merger on relationships with third parties, including customers, vendors, employees and competitors; and

•

other factors that may affect future results of TCF including changes in asset quality and credit risk; the inability to sustain revenue and earnings growth; 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.

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 June 30, 2020, TCF had approximately 500 branches primarily located in Michigan, Illinois and Minnesota with additional locations in Colorado, Ohio, South Dakota and Wisconsin (our "primary banking markets"). We also conduct business across all 50 states and Canada 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".

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Supporting Team Members, Customers and Communities through the COVID-19 Pandemic and Civil Unrest

To support our team members we have:


•	Implemented health and safety policies, protocols and guidelines while ensuring adequate PPE and cleaning supplies are available at all locations in response to the COVID-19 pandemic;


•	developed a thoughtful return to work approach where team members are returning in phases based on safety guidelines and local restrictions while evaluating lessons learned and opportunities for a more flexible workspace strategy in the future; and

•

established various internal initiatives to increase awareness of diversity and inclusion issues including launching the Executive Diversity and Inclusion Council, providing executive office hours for team members to have candid discussions with leaders regarding diversity issues, required unconscious bias training for all team members and provided the opportunity for team members to connect with community thought leaders through TCF Talks: The Color Line to discuss racial equity issues held on Juneteenth.

To support our customers we have:


•	Assisted customers in response to the COVID-19 pandemic via loan and lease deferrals with $1.8 billion of unpaid principal balance on deferral status as of June 30, 2020 ($1.5 billion of commercial unpaid principal balance and $327.1 million of consumer unpaid principal balance); and


•	assisted business and commercial customers via $1.9 billion of total loans funded through the Paycheck Protection Program ("PPP").

To support our communities we have:


•	Expanded closing costs assistance program through the Heart and Home Lending Program providing up to $2 million of annualized grants to help cover closing costs for qualified low-to-moderate income home buyers;


•	partnered with Wayne County, Michigan to provide fast relief through low-interest loans to help small businesses in the Detroit area;


•	provided $700 thousand in donations to organizations that offered programs and resources to underserved communities impacted by COVID-19; and


•	committed $250 thousand for relief efforts supporting Great Lakes Bay Region community organizations and a $10 million Hardship Lending Program to support residents and business impacted by dam failures and historic flooding in the Midland, Michigan area.

The COVID-19 pandemic has resulted in historic job losses and decreases in economic activity. While the duration and full extent of job losses and magnitude of economic dislocation are not yet known, it is clear that they have impacted, and may impact in the future, the ability of individuals and small businesses to make payments, the value of underlying collateral and the ability of guarantors to make payments in the case of default, which may decrease consumer demand for our products and services and reduce our ability to access capital. As a result, we have faced and may continue to face a decrease in demand for certain products, reduced access to our branches by our customers, and disruptions in the operations of our vendors. The pandemic could also result in the recognition of additional credit losses in our loan and lease portfolios and increase our allowance for credit losses as both businesses and consumers are negatively impacted by the economic downturn. The extent of such impact will depend on the outcome of certain developments, including but not limited to, the duration and spread of the outbreak as well as its continuing impact on our customers, vendors, employees and the financial markets all of which are uncertain. See Part II, Item 1A, "Risk Factors - Risks related to the impact of COVID-19" for further discussion.

Merger of Equals

On August 1, 2019 (the "Merger Date"), TCF Financial Corporation, a Delaware corporation ("Legacy TCF"), merged with and into Chemical Financial Corporation, a Michigan corporation ("Chemical"), with Chemical surviving the merger (the "Merger") and being renamed TCF Financial Corporation. Immediately following the Merger, Chemical’s wholly owned bank subsidiary, Chemical Bank, a Michigan state-chartered bank, merged with and into TCF Bank, with TCF Bank surviving the Merger. Upon completion of the Merger, Chemical was renamed TCF Financial Corporation.

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The Merger was accounted for as a reverse merger using the acquisition method of accounting, therefore, Legacy TCF was deemed the acquirer for financial reporting purposes, even though Chemical was the legal acquirer. Accordingly, Legacy TCF's historical financial statements are the historical financial statements of the combined company for all periods before the Merger Date. Our results of operations for the first and second quarters of 2020 include the results of operations of the post-Merger combined TCF. Results for the first half of 2019 reflect only those of Legacy TCF and do not include the results of operations of Chemical. Accordingly, comparisons of our results for the second quarter of 2020 to the second quarter of 2019 and the six months ended June 30, 2020 to the six months ended June 30, 2019 may not be meaningful. The number of shares issued and outstanding, earnings per share, additional paid-in-capital and all references to share quantities of TCF have been retrospectively adjusted to reflect the equivalent number of shares issued in the Merger. See "Note 2. Merger" of the Notes to Consolidated Financial Statements for further information.

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 74.0% of our total revenue for the three months ended June 30, 2020, compared with 74.6% and 69.8% of our total revenue for the three months ended March 31, 2020 and June 30, 2019, respectively. Net interest income represented 74.3% of our total revenue for the six months ended June 30, 2020, compared with 70.5% of our total revenue for the six months ended June 30, 2019. 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, net gains on sales of loans and leases, card and ATM revenue, wealth management revenue and servicing fee revenue. 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. Providing a wide range of consumer banking services is an integral component of our business philosophy. We sell loans, primarily secured by consumer real estate, which results in gains on sales, as well as servicing fee income. Primary drivers of gains on sales include our ability to originate loans, identify loan buyers and execute loan sales.

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 and six months ended June 30, 2020, the three months ended March 31, 2020, and the three and six months ended June 30, 2019 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 2019 Annual Report on Form 10-K.

Critical Accounting 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 make estimates, assumptions and complex judgments that affect the amounts reported in our Consolidated Financial Statements and accompanying notes. These 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.

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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), 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 estimate related to accounting for business combinations is more fully described in the Critical Accounting Estimates section of this Management's Discussion and Analysis of Financial Condition within our audited Consolidated Financial Statements and notes thereto and additionally described in our Annual Report on Form 10-K for the year ended December 31, 2019. As a result of our adoption of CECL as of January 1, 2020, we have made updates to our allowance for credit losses accounting measurements as detailed below. We have also provided updates regarding the evaluation of goodwill impairment below.

Updates to Critical Accounting Estimates

Allowance for Credit Losses

The allowance for credit losses ("ACL") represents management's estimate of current credit losses expected to be incurred in the loan and lease portfolios over the remaining expected life of each financial asset at the balance sheet date, including known or anticipated problem loans and leases, as well as for loans and leases which are not currently known to require specific allowances. The ACL includes the allowance for loan and lease losses ("ALLL") and a reserve for unfunded lending commitments ("RULC"). Determining the amount of the ACL is considered a critical accounting estimate because it requires significant judgment and the use of estimates related to the amounts and timing of expected future cash flows, adjustments for forward-looking information, estimates of losses based on measurement date credit risk characteristics and consideration of other qualitative factors, all of which may be susceptible to significant change.

Events that are not within our control, such as changes in economic conditions, could change subsequent to the end of the period covered by this Quarterly Report on Form 10-Q, and could cause the ACL to be overstated or understated. The amount of ACL is affected by net charge-offs, which decrease the ACL, and the provision for credit losses charged to earnings, which increases or decreases the ACL.

See "Note 3. Summary of Significant Accounting Policies" and "Note 8. Allowance for Credit Losses and Credit Quality" of the Consolidated Financial Statements for additional disclosure regarding our ACL.

Goodwill

Goodwill represents the excess of the purchase price of our business acquisition and other purchases of bank branches and other businesses over the fair value of the net assets acquired. Goodwill is not amortized, but rather is tested by management annually in the fourth quarter for impairment, or more frequently if triggering events occur and indicate potential impairment, in accordance with ASC Topic 350-20, Goodwill (ASC 350-20). ASC 350-20 allows an entity to assess qualitative factors to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount. ASC 350-20 also allows an entity to bypass the qualitative assessment approach and determine if goodwill is impaired utilizing a quantitative assessment approach.

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Given the economic deterioration due to the COVID-19 pandemic, during both the first and second quarters of 2020, we evaluated whether it was more-likely-than-not that the fair value of any reporting unit was less than its carrying amount. We assessed economic conditions, including projections of the duration of current conditions and timing of a potential recovery; industry and market considerations; government intervention and regulatory updates; the impact of recent events to financial performance and cost factors of the reporting units including Merger synergies; the market price of our common stock and other relevant events. At the conclusion of each assessment, we determined that it was not more-likely-than-not that the fair value of each reporting unit was less than its carrying amount.

We could incur impairment charges related to goodwill in the future due to changes in financial results or other matters that could affect the fair value of our reporting units.

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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. Our financial results were significantly impacted by the Merger, and periods before the Merger reflect financial data of Legacy TCF, while periods after the Merger reflect financial data for the combined company. Earnings per share and share quantities of TCF have been retrospectively adjusted to reflect the equivalent number of shares issued in the Merger. 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									For the Six Months Ended
(Dollars in thousands, except per share data)	June 30, 2020			March 31, 2020			June 30, 2019			June 30, 2020			June 30, 2019
Consolidated Income:
Interest income	$	438,370		$	495,392		$	310,781		$	933,762		$	617,675
Interest expense	60,011			93,911			56,724			153,922			109,189
Net interest income	378,359			401,481			254,057			779,840			508,486
Noninterest income	133,054			136,963			109,718			270,017			213,222
Total revenue	511,413			538,444			363,775			1,049,857			721,708
Provision for credit losses	78,726			96,943			13,569			175,669			23,691
Noninterest expense	400,241			374,599			236,849			774,840			489,924
Income before income tax expense	32,446			66,902			113,357			99,348			208,093
Income tax expense	6,213			13,086			19,314			19,299			40,601
Income attributable to non-controlling interest	2,469			1,917			3,616			4,386			6,571
Net income attributable to TCF	23,764			51,899			90,427			75,663			160,921
Preferred stock dividends	2,494			2,493			2,494			4,987			4,987
Net income available to common shareholders	$	21,270		$	49,406		$	87,933		$	70,676		$	155,934
Earnings per common share:
Basic	$	0.14		$	0.33		$	1.07		$	0.47		$	1.89
Diluted	0.14			0.32			1.07			0.47			1.89
Financial Ratios:
Return on average assets ("ROAA")⁽¹⁾	0.21		%	0.46		%	1.54		%	0.33		%	1.38		%
Return on average common equity ("ROACE")⁽¹⁾	1.56			3.64			14.27			2.59			12.86
Return on average tangible common equity ("ROATCE")⁽¹⁾⁽²⁾	2.57			5.42			15.46			3.99			13.96
Net interest margin	3.33			3.73			4.46			3.52			4.52
Net interest margin (FTE)^(1)(3)(4)	3.35			3.76			4.49			3.55			4.55
Dividend payout ratio	250.00			109.38			27.59			148.94			31.24
Efficiency ratio	78.26			69.57			65.11			73.80			67.88
Credit Quality Ratios:
Net charge-offs as a percentage of average loans and leases⁽¹⁾	0.04			0.06			0.29			0.05			0.34
Adjusted Financial Results (non-GAAP):
Adjusted net income attributable to TCF⁽²⁾	$	84,862		$	89,855		$	93,650		$	174,717		$	171,350
Adjusted diluted earnings per common share⁽²⁾	$	0.54		$	0.57		$	1.11		$	1.12		$	2.02
Adjusted ROAA⁽¹⁾⁽²⁾	0.70		%	0.78		%	1.59		%	0.74		%	1.46		%
Adjusted ROACE⁽¹⁾⁽²⁾	6.03			6.43			14.79			6.23			13.72
Adjusted ROATCE⁽¹⁾⁽²⁾	8.70			9.24			16.02			8.97			14.89
Adjusted efficiency ratio (non-GAAP)⁽²⁾	59.80			58.24			61.48			58.99			63.56


(1)	Annualized.


(2)	See section entitled "Non-GAAP Financial Measures" for further information.


(3)	Net interest income on a fully tax-equivalent ("FTE") basis divided by average interest-earning assets.


(4)	Presented on a tax-equivalent basis using a 21% tax rate for each period presented.

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(Dollars in thousands)	At June 30, 2020			At December 31, 2019
Consolidated Financial Condition:
Loans and leases	$	35,535,824		$	34,497,464
Total assets	50,062,460			46,651,553
Deposits	39,210,872			34,468,463
Borrowings	3,709,906			5,023,593
Total equity	5,658,555			5,727,241
Financial Ratios:
Common equity to assets	10.92		%	11.87		%
Tangible common equity as a percent of tangible assets (non-GAAP)⁽¹⁾	8.22			9.01
Total risk-based capital ratio	13.47			12.70
Book value per common share	$	35.91		$	36.20
Tangible book value per common share (non-GAAP)⁽¹⁾	26.25			26.60
Credit Quality Ratios:
Nonaccrual loans and leases as a percentage of total loans and leases⁽²⁾	0.82		%	0.49		%
Nonperforming assets as a percentage of total loans and leases and other real estate owned	0.94			0.59
Allowance for loan and lease losses as a percentage of total nonaccrual loans and leases	158.21			66.64
Allowance for credit losses as a percentage of total nonaccrual loans and leases	172.89			68.71
Allowance for loan and lease losses as a percentage of total loans and leases	1.30			0.33
Allowance for credit losses as a percentage of total loans and leases	1.42			0.34


(1)	See section entitled "Non-GAAP Financial Measures" for further information.


(2)	Prior to the adoption of CECL as of January 1, 2020, purchased credit impaired loans were not classified as nonaccrual loans because they were recorded at their net realizable value based on the principal and interest expected to be collected on the loans. At January 1, 2020, $73.4 million of previous purchased credit impaired loans were classified as nonaccrual loans.

Results of Operations

Performance Summary We reported net income of $23.8 million for the three months ended June 30, 2020, compared with $51.9 million for the three months ended March 31, 2020, and $90.4 million for the three months ended June 30, 2019. Merger-related expenses included in net income totaled $81.6 million for the three months ended June 30, 2020, $36.7 million for the three months ended March 31, 2020 and $4.2 million for the three months ended June 30, 2019. Notable items, on a pre-tax basis, for the three months ended June 30, 2020, included $14.2 million of gains on sales of branches, net of expense related to branch exit costs, $8.9 million of loan servicing rights impairment and $0.9 million of expense related to the sale of the Legacy TCF auto finance portfolio. Notable items, for the three months ended March 31, 2020, included $8.2 million of loan servicing rights impairment and $3.1 million of expenses related to the sale of the Legacy TCF auto finance portfolio. Adjusted net income, a non-GAAP financial measure that excludes merger-related expenses and the identified notable items, net of tax, was $84.9 million for the three months ended June 30, 2020, compared with $89.9 million for the three months ended March 31, 2020 and $93.7 million for the three months ended June 30, 2019. See "Non-GAAP Financial Measures" in this Management's Discussion and Analysis for further information.

We reported net income of $75.7 million for the six months ended June 30, 2020, compared with $160.9 million for the six months ended June 30, 2019. Merger-related expenses included in net income totaled $118.3 million for the six months ended June 30, 2020, compared to $13.7 million for the six months ended June 30, 2019. Notable items, on a pre-tax basis, for the six months ended June 30, 2020, included $17.1 million of loan servicing rights impairment, $14.2 million of gains on sales of branches, net of expense related to branch exit costs and $4.0 million of expense related to the sale of the Legacy TCF auto finance portfolio. Adjusted net income, a non-GAAP financial measure that excludes merger-related expenses and the identified notable items, net of tax, was $174.7 million for the six months ended June 30, 2020, compared with $171.4 million for the six months ended June 30, 2019. See "Non-GAAP Financial Measures" in this Management's Discussion and Analysis for further information.

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We reported diluted earnings per common share of $0.14 for the three months ended June 30, 2020, compared with $0.32 for the three months ended March 31, 2020, and $1.07 for the three months ended June 30, 2019. For the six months ended June 30, 2020, we reported diluted earnings per common share of $0.47, compared to $1.89 for the six months ended June 30, 2019. Adjusted diluted earnings per common share, a non-GAAP financial measure that excludes merger-related expenses and notable items was $0.54 for the three months ended June 30, 2020, compared to $0.57 for the three months ended March 31, 2020 and $1.11 for the three months ended June 30, 2019. Adjusted diluted earnings per common share for the six months ended June 30, 2020 was $1.12, compared to $2.02 for the six months ended June 30, 2019. See "Non-GAAP Financial Measures" in this Management's Discussion and Analysis for further information.

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 Ended						For the Six Months Ended				Change From
	June 30, 2020		March 31, 2020		June 30, 2019		June 30, 2020		June 30, 2019		Three Months Ended						Six Months Ended
	June 30, 2020		March 31, 2020		June 30, 2019		June 30, 2020		June 30, 2019		March 31, 2020			June 30, 2019			June 30, 2019
Return on average assets ("ROAA")⁽¹⁾	0.21	%	0.46	%	1.54	%	0.33	%	1.38	%	(25	)	bps	(133	)	bps	(105	)	bps
ROACE⁽¹⁾	1.56		3.64		14.27		2.59		12.86		(208	)		(1,271	)		(1,027	)
ROATCE (non-GAAP)⁽¹⁾⁽²⁾	2.57		5.42		15.46		3.99		13.96		(285	)		(1,289	)		(997	)
Efficiency ratio	78.26		69.57		65.11		73.80		67.88		869			1,315			592
Adjusted Financial Results (non-GAAP)
Adjusted ROAA⁽¹⁾⁽²⁾	0.70	%	0.78	%	1.59	%	0.74	%	1.46	%	(8	)	bps	(89	)	bps	(72	)	bps
Adjusted ROACE⁽¹⁾⁽²⁾	6.03		6.43		14.79		6.23		13.72		(40	)		(876	)		(749	)
Adjusted ROATCE⁽¹⁾⁽²⁾	8.70		9.24		16.02		8.97		14.89		(54	)		(732	)		(592	)
Adjusted efficiency ratio⁽²⁾	59.80		58.24		61.48		58.99		63.56		156			(168	)		(457	)


(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 $378.4 million for the three months ended June 30, 2020, compared with $401.5 million for the three months ended March 31, 2020 and $254.1 million for the three months ended June 30, 2019. Net interest income was $779.8 million for the six months ended June 30, 2020, compared to $508.5 million for the six months ended June 30, 2019. Net interest income, our largest source of net revenue (net interest income plus noninterest income), represented 74.0% of our total revenue for the three months ended June 30, 2020, 74.6% for the three months ended March 31, 2020 and 69.8% for the three months ended June 30, 2019. Net interest income represented 74.3% of our total revenue for the six months ended June 30, 2020, compared to 70.5% for the six months ended June 30, 2019. The decrease in net interest income for the three months ended June 30, 2020, compared to the three months ended March 31, 2020, was primarily due to the full quarter impact of the Federal Reserve's rate cuts in addition to a decrease in the benefit provided by purchase accounting accretion and amortization and higher average cash balances. The increase in net interest income for the three and six months ended June 30, 2020, compared to the three and six months ended June 30, 2019, was primarily due to the increase in interest-earning assets acquired in the Merger, partially offset by the increase in interest-bearing liabilities acquired in the Merger.

Net interest income, on a fully tax-equivalent ("FTE") basis, a non-GAAP financial measure, was $381.4 million and $785.9 million for the three and six months ended June 30, 2020, respectively, compared to $404.5 million for the three months ended March 31, 2020 and $255.4 million and $511.5 million for the three and six months ended June 30, 2019, respectively. Net interest income (FTE), a non-GAAP financial measure, is the difference between interest income and interest expense adjusted for the tax benefit received on tax-exempt loans, leases and investment securities.

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Net interest margin was 3.33% for the three months ended June 30, 2020, compared with 3.73% for the three months ended March 31, 2020 and 4.46% for the three months ended June 30, 2019. Net interest margin was 3.52% for the six months ended June 30, 2020, compared to 4.52% for the six months ended June 30, 2019. Net interest margin (FTE) was 3.35% for the three months ended June 30, 2020, compared with 3.76% for the three months ended March 31, 2020 and 4.49% for the three months ended June 30, 2019. Net interest margin (FTE) was 3.55% for the six months ended June 30, 2020, compared to 4.55% for the six months ended June 30, 2019. 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, (v) the impact of modified loans and leases, and (vi) changes in customer demand for products due to economic events. The decrease in both net interest margin and net interest margin (FTE) for the three months ended June 30, 2020, compared to the three months ended March 31, 2020, was primarily due to the full quarter impact of the Federal Reserve's rate cuts in addition to a decrease in the benefit provided by purchase accounting accretion and amortization and higher average cash balances, partially offset by a lower cost of funds. The decreases in both net interest margin and net interest margin (FTE) for the three and six months ended June 30, 2020, compared to the three and six months ended June 30, 2019, was primarily due to a decrease in the yield earned on loans and leases added as a result of the lower average yields added to the portfolio through the Merger in addition to the impact of the Federal Reserve's rate cuts. Adjusted net interest margin (FTE), excluding purchase accounting accretion and amortization and the impact of PPP loans, a non-GAAP financial measure, was 3.20% for the three months ended June 30, 2020, compared to 3.53% for the three months ended March 31, 2020 and 4.49% for the three months ended June 30, 2019. Adjusted net interest margin (FTE), excluding purchase accounting accretion and amortization and the impact of PPP loans, a non-GAAP financial measure, was 3.36% for the six months ended June 30, 2020, compared to 4.55% for the six months ended June 30, 2019. See the tables following for a reconciliation of net interest margin (FTE).

The following tables present the average balances of our major categories of assets and liabilities, interest income and expense on a FTE basis, average interest rates earned and paid on the assets and liabilities, net interest income (FTE), net interest spread and net interest margin for the three months ended June 30, 2020, March 31, 2020 and June 30, 2019, and for the six months ended June 30, 2020 and June 30, 2019. The presentation of net interest income on a FTE basis is not in accordance with GAAP but is customary in the banking industry. This non-GAAP measure ensures comparability of net interest income arising from both taxable and tax-exempt loans and investment securities.

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	Three Months Ended
	June 30, 2020						March 31, 2020						June 30, 2019
(Dollars in thousands)	Average Balance		Interest⁽¹⁾		Yields & Rates⁽¹⁾⁽²⁾		Average Balance		Interest⁽¹⁾		Yields & Rates⁽¹⁾⁽²⁾		Average Balance		Interest⁽¹⁾		Yields & Rates⁽¹⁾⁽²⁾
Assets:
Federal Home Loan Bank and Federal Reserve Bank stocks	$	401,532	$	4,376	4.38	%	$	454,675	$	3,152	2.79	%	$	112,118	$	1,093	3.91	%
Investment securities held-to-maturity	132,054		71		0.21		136,277		560		1.64		146,296		924		2.53
Investment securities available-for-sale:
Taxable	5,730,762		32,434		2.26		5,892,006		40,360		2.74		2,711,984		21,117		3.11
Tax-exempt⁽³⁾	743,744		5,221		2.81		773,468		5,503		2.85		222,534		1,530		2.75
Loans and leases held-for-sale	356,671		3,322		3.73		138,058		1,561		4.53		40,835		599		5.88
Loans and leases⁽³⁾⁽⁴⁾
Commercial and industrial	12,713,714		140,576		4.41		11,827,315		160,802		5.42		6,683,060		109,679		6.56
Commercial real estate	9,658,124		95,373		3.91		9,291,540		117,743		5.01		3,069,969		39,204		5.05
Lease financing	2,712,291		33,803		4.99		2,682,323		34,156		5.09		2,565,175		32,899		5.13
Residential mortgage	6,326,227		62,023		3.93		6,113,279		61,379		4.02		2,337,818		28,665		4.91
Consumer installment	1,459,446		17,703		4.88		1,517,412		19,742		5.23		1,586,633		22,262		5.63
Home equity	3,509,107		45,314		5.19		3,514,278		51,103		5.85		2,997,050		51,588		6.90
Total loans and leases⁽³⁾⁽⁴⁾	36,378,909		394,792		4.33		34,946,147		444,925		5.08		19,239,705		284,297		5.91
Interest-bearing deposits with banks and other	1,587,665		1,186		0.30		538,971		2,314		1.72		280,075		2,557		3.64
Total interest-earning assets	45,331,337		441,402		3.88		42,879,602		498,375		4.64		22,753,547		312,117		5.48
Other assets	4,384,779						4,105,824						1,730,275
Total assets	$	49,716,116					$	46,985,426					$	24,483,822
Liabilities and Equity:
Noninterest-bearing deposits	$	9,830,687					$	7,929,933					$	3,980,811
Interest-bearing deposits:
Checking	6,649,288		2,329		0.14		5,990,309		5,830		0.39		2,479,814		440		0.07
Savings	9,082,184		8,930		0.40		8,589,815		13,669		0.64		6,452,510		12,314		0.77
Money market	5,380,547		8,782		0.66		4,792,248		14,855		1.25		1,430,556		4,588		1.29
Certificates of deposit	7,491,502		26,744		1.44		7,329,632		33,065		1.81		4,527,822		23,304		2.06
Total interest-bearing deposits	28,603,521		46,785		0.66		26,702,004		67,419		1.02		14,890,702		40,646		1.09
Total deposits	38,434,208		46,785		0.49		34,631,937		67,419		0.78		18,871,513		40,646		0.86
Borrowings:
Short-term borrowings	3,016,490		4,085		0.54		2,689,262		10,582		1.56		321,043		2,131		2.63
Long-term borrowings	1,072,394		9,141		3.40		2,608,204		15,910		2.42		1,657,527		13,946		3.34
Total borrowings	4,088,884		13,226		1.29		5,297,466		26,492		1.98		1,978,570		16,077		3.23
Total interest-bearing liabilities	32,692,405		60,011		0.74		31,999,470		93,911		1.18		16,869,272		56,723		1.34
Total deposits and borrowings	42,523,092		60,011		0.57		39,929,403		93,911		0.94		20,850,083		56,723		1.09
Other liabilities	1,534,769						1,425,536						969,723
Total liabilities	44,057,861						41,354,939						21,819,806
Total TCF Financial Corporation shareholders' equity	5,630,133						5,605,159						2,634,386
Non-controlling interest in subsidiaries	28,122						25,328						29,630
Total equity	5,658,255						5,630,487						2,664,016
Total liabilities and equity	$	49,716,116					$	46,985,426					$	24,483,822
Net interest spread (FTE)					3.31						3.70						4.39
Net interest income (FTE) and net interest margin (FTE)			$381,391		3.35				$404,464		3.76				$255,394		4.49
Reconciliation of Net Interest Income (FTE) and Net Interest Margin (FTE)
Net interest income and net interest margin (GAAP)			$	378,359	3.33	%			$	401,481	3.73	%			$	254,057	4.46%
Adjustments for taxable equivalent interest⁽¹⁾⁽³⁾
Loans and leases			$	1,966					$	1,829					$	1,015
Tax-exempt investment securities			1,066						1,154						322
Total FTE adjustments			3,032						2,983						1,337
Net interest income (FTE) and net interest margin (FTE)			$	381,391	3.35	%			$	404,464	3.76	%			$	255,394	4.49%


(1)	Interest and yields are presented on a FTE basis.


(2)	Annualized.


(3)	The yield on tax-exempt loans, leases and investment securities available-for-sale is computed on a FTE basis using a statutory federal income tax rate of 21%.


(4)	Average balances of loans and leases include nonaccrual loans and leases and are presented net of unearned income.

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	Six Months Ended
	June 30, 2020						June 30, 2019
(Dollars in thousands)	Average Balance		Interest⁽¹⁾		Yields and Rates⁽¹⁾⁽²⁾		Average Balance		Interest⁽¹⁾		Yields and Rates⁽¹⁾⁽²⁾
Assets:
Federal Home Loan Bank and Federal Reserve Bank stocks	$	428,103	$	7,528	3.54	%	$	108,646	$	2,054	3.81	%
Investment securities held-to-maturity	134,166		631		0.94		146,922		1,459		1.99
Investment securities available-for-sale:
Taxable	5,811,384		72,794		2.51		2,418,222		37,248		3.08
Tax-exempt⁽³⁾	758,606		10,724		2.83		368,951		4,927		2.67
Loans and leases held-for-sale	247,364		4,883		3.95		47,980		1,424		5.97
Loans and leases⁽³⁾⁽⁴⁾
Commercial and industrial	12,270,514		301,378		4.90		6,589,631		216,395		6.59
Commercial real estate	9,474,832		213,116		4.45		2,994,221		76,941		5.11
Lease financing	2,697,307		67,959		5.04		2,546,364		65,283		5.13
Residential mortgage	6,219,753		123,402		3.97		2,341,827		58,123		4.99
Consumer installment	1,488,429		37,445		5.06		1,718,987		47,762		5.60
Home equity	3,511,693		96,417		5.52		3,022,449		104,040		6.94
Total loans and leases⁽³⁾⁽⁴⁾	35,662,528		839,717		4.70		19,213,479		568,544		5.94
Interest-bearing deposits with banks and other	1,063,319		3,500		0.66		270,867		5,078		3.75
Total interest-earning assets	44,105,470		939,777		4.25		22,575,067		620,734		5.52
Other assets	4,245,301						1,721,355
Total assets	$	48,350,771					$	24,296,422
Liabilities and Equity:
Noninterest-bearing deposits	$	8,880,310					$	3,950,447
Interest-bearing deposits:
Checking	6,319,799		8,159		0.26		2,468,852		827		0.07
Savings	8,836,000		22,599		0.51		6,353,800		22,984		0.73
Money market	5,086,397		23,637		0.93		1,460,427		9,041		1.25
Certificates of deposit	7,410,567		59,809		1.62		4,574,710		45,402		2.00
Total interest-bearing deposits	27,652,763		114,204		0.83		14,857,789		78,254		1.06
Total deposits	36,533,073		114,204		0.63		18,808,236		78,254		0.84
Borrowings:
Short-term borrowings	2,852,876		14,667		1.02		307,347		4,088		2.65
Long-term borrowings	1,840,299		25,051		2.71		1,579,613		26,847		3.39
Total borrowings	4,693,175		39,718		1.68		1,886,960		30,935		3.27
Total interest-bearing liabilities	32,345,938		153,922		0.95		16,744,749		109,189		1.31
Total deposits and borrowings	41,226,248		153,922		0.75		20,695,196		109,189		1.06
Other liabilities	1,480,152						979,359
Total liabilities	42,706,400						21,674,555
Total TCF Financial Corp. shareholders' equity	5,617,646						2,594,778
Non-controlling interest in subsidiaries	26,725						27,089
Total equity	5,644,371						2,621,867
Total liabilities and equity	$	48,350,771					$	24,296,422
Net interest spread (FTE)					3.50						4.46
Net interest income (FTE) and net interest margin (FTE)			$	785,855	3.55				$	511,545	4.55
Reconciliation of Net Interest Income (FTE) and Net Interest Margin (FTE)
Net interest income and net interest margin (GAAP)			$	779,840	3.52	%			$	508,486	4.52%
Adjustments for taxable equivalent interest⁽¹⁾⁽³⁾
Loans and leases			3,795						2,024
Tax-exempt investment securities			2,220						1,035
Total FTE adjustments			6,015						3,059
Net interest income (FTE) and net interest margin (FTE)			$	785,855					$	511,545


(1)	Interest and yields are presented on a FTE basis.


(2)	Annualized.


(3)	The yield on tax-exempt loans, leases and investment securities available-for-sale is computed on a FTE basis using a statutory federal income tax rate of 21%.


(4)	Average balances of loans and leases include nonaccrual loans and leases and are presented net of unearned income.

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Volume and Rate Variance Analysis



	Three Months Ended June 30, 2020 vs. March 31, 2020									Three Months Ended June 30, 2020 vs. June 30, 2019
	Increase (Decrease) Due to Changes in									Increase (Decrease) Due to Changes in
(Dollars in thousands)	Average Volume⁽¹⁾			Average Yield/Rate⁽¹⁾			Total Change			Average Volume⁽¹⁾			Average Yield/Rate⁽¹⁾			Total Change
Changes in Interest Income on Interest-Earning Assets:
Federal Home Loan Bank and Federal Reserve Bank stocks	$	(405	)	$	1,629		$	1,224		$	3,137		$	146		$	3,283
Investment securities held-to-maturity	(17		)	(472		)	(489		)	(82		)	(771		)	(853		)
Investment securities available-for-sale:
Taxable	(1,078		)	(6,848		)	(7,926		)	18,350			(7,033		)	11,317
Tax-exempt	(74		)	(208		)	(282		)	3,658			33			3,691
Loans and leases held-for-sale	2,082			(321		)	1,761			3,019			(296		)	2,723
Loans and leases	17,676			(67,809		)	(50,133		)	202,250			(91,755		)	110,495
Interest-bearing deposits with banks and other	1,910			(3,038		)	(1,128		)	2,780			(4,151		)	(1,371		)
Total interest-earning assets	$	20,094		$	(77,067	)	$	(56,973	)	$	233,112		$	(103,827	)	$	129,285
Changes in Interest Expense on Interest-Bearing Liabilities:
Interest-bearing deposits:
Checking	$	581		$	(4,082	)	$	(3,501	)	$	1,191		$	698		$	1,889
Savings	744			(5,483		)	(4,739		)	3,883			(7,267		)	(3,384		)
Money market	1,646			(7,719		)	(6,073		)	7,368			(3,174		)	4,194
Certificates of deposit	715			(7,036		)	(6,321		)	11,993			(8,553		)	3,440
Interest-bearing deposits	3,686			(24,320		)	(20,634		)	24,435			(18,296		)	6,139
Short-term borrowings	1,154			(7,651		)	(6,497		)	4,882			(2,928		)	1,954
Long-term borrowings	(11,623		)	4,854			(6,769		)	(5,047		)	242			(4,805		)
Total interest-bearing liabilities	$	(6,783	)	$	(27,117	)	$	(33,900	)	$	24,270		$	(20,982	)	$	3,288
Total change in net interest income (FTE)⁽²⁾	$	26,877		$	(49,950	)	$	(23,073	)	$	208,842		$	(82,845	)	$	125,997


(1)	Changes attributable to the combined impact of volume and rate have been allocated proportionately to the change due to volume and the change due to rate.


(2)	FTE basis using a federal income tax rate of 21%. The presentation of net interest income on a FTE basis is not in accordance with GAAP, but is customary in the banking industry.



	Six Months Ended June 30, 2020 vs. June 30, 2019
	Increase (Decrease) Due to Changes in
(Dollars in thousands)	Average Volume⁽¹⁾			Average Yield/Rate⁽¹⁾			Total Change
Changes in Interest Income on Interest-Earning Assets:
Federal Home Loan Bank and Federal Reserve Bank stocks	$	5,594		$	(120	)	$	5,474
Investment securities held-to-maturity	(117		)	(711		)	(828		)
Investment securities available-for-sale:
Taxable	43,650			(8,104		)	35,546
Tax-exempt	5,492			305			5,797
Loans and leases held-for-sale	4,088			(629		)	3,459
Loans and leases	409,396			(138,223		)	271,173
Interest-bearing deposits with banks and other	5,317			(6,895		)	(1,578		)
Total interest-earning assets	$	473,420		$	(154,377	)	$	319,043
Changes in Interest Expense on Interest-Bearing Liabilities:
Interest-bearing deposits:
Checking	$	2,578		$	4,754		$	7,332
Savings	7,457			(7,842		)	(385		)
Money market	17,275			(2,679		)	14,596
Certificates of deposit	23,950			(9,543		)	14,407
Interest-bearing deposits	51,260			(15,310		)	35,950
Short-term borrowings	14,553			(3,974		)	10,579
Long-term borrowings	4,069			(5,865		)	(1,796		)
Total interest-bearing liabilities	$	69,882		$	(25,149	)	$	44,733
Total change in net interest income (FTE)⁽²⁾	$	403,538		$	(129,228	)	$	274,310


(1)	Changes attributable to the combined impact of volume and rate have been allocated proportionately to the change due to volume and the change due to rate.


(2)	FTE basis using a federal income tax rate of 21%. The presentation of net interest income on a FTE basis is not in accordance with GAAP, but is customary in the banking industry.

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Provision for Credit Losses The provision for credit losses was $78.7 million for the three months ended June 30, 2020, compared with $96.9 million for the three months ended March 31, 2020 and $13.6 million for the three months ended June 30, 2019. The provision for credit losses was $175.7 million for the six months ended June 30, 2020, compared with $23.7 million for the six months ended June 30, 2019. The decrease in the three months ended June 30, 2020 from the three months ended March 31, 2020 was primarily due to a decrease in loan originations excluding PPP loans. The PPP loans are individually guaranteed by the Small Business Administration and therefore the accounting under CECL does not require reserves to be recorded on such loans. The increase in both the three and six months ended June 30, 2020 from the three and six months ended June 30, 2019, was primarily due to high levels of change in both current and forecasted macroeconomic conditions, which are impacted by the COVID-19 pandemic and was additionally impacted by the adoption of CECL at January 1, 2020. Prior to the adoption of CECL on January 1, 2020, the allowance for credit losses was calculated under an incurred loss model which delayed recognition of loss until it was probable the loss had been incurred. The accounting under CECL considers current credit losses expected to be incurred in the loan and lease portfolios over the remaining expected life of each financial asset and considers expected future changes in macroeconomic conditions. In addition, as a result of the adoption of CECL, the provision for credit losses now includes the provision for unfunded lending commitments that was previously included within other noninterest expense. The provision for unfunded lending commitments was $20.6 million for the three months ended June 30, 2020 and $4.0 million for the three months ended March 31, 2020. The provision for unfunded lending commitments was $24.6 million for the six months ended June 30, 2020. The increase in the provision for unfunded lending commitments in the three and six months ended June 30, 2020, compared to the prior periods, was primarily due to high levels of change in both current and forecasted macroeconomic conditions, which are impacted by the COVID-19 pandemic and was additionally impacted by a decrease in line utilization. The provision for credit losses is predominantly a function of our reserving methodology used to determine the appropriate level of the allowance for credit losses, which is a critical accounting estimate. Additional deterioration in macroeconomic conditions could result in the recognition of additional credit losses in our loan and lease portfolios and increase our allowance for credit losses as both businesses and consumers are negatively impacted by the economic downturn in future periods.

An analysis of the allowance for credit losses is presented under "Consolidated Financial Condition Analysis — Credit Quality" in this Management's Discussion and Analysis.

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Noninterest Income The components of noninterest income were as follows:



	Three Months Ended									Change from
	June 30, 2020			March 31, 2020			June 30, 2019			March 31, 2020					June 30, 2019
(Dollars in thousands)	June 30, 2020			March 31, 2020			June 30, 2019			$			% / bps		$			% / bps
Leasing revenue	$	37,172		$	33,565		$	39,277		3,607			10.7		(2,105		)	(5.4	)
Fees and service charges on deposit accounts	22,832			34,597			27,842			(11,765		)	(34.0	)	(5,010		)	(18.0	)
Net gains on sales of loans and leases	29,034			20,590			11,141			8,444			41.0		17,893			160.6
Card and ATM revenue	20,636			21,685			20,496			(1,049		)	(4.8	)	140			0.7
Wealth management revenue	6,206			6,151			—			55			0.9		6,206			N.M.
Servicing fee revenue	3,041			6,792			4,523			(3,751		)	(55.2	)	(1,482		)	(32.8	)
Net gains on investment securities	8			—			1,066			8			N.M.		(1,058		)	(99.2	)
Other	14,125			13,583			5,373			542			4.0		8,752			162.9
Total noninterest income	$	133,054		$	136,963		$	109,718		$	(3,909	)	(2.9	)	$	23,336		21.3
Total noninterest income as a percentage of total revenue	26.0		%	25.4		%	30.2		%				60 bps					(420) bps

N.M. Not Meaningful



	Six Months Ended						Change
(Dollars in thousands)	June 30, 2020			June 30, 2019			$			%
Leasing revenue	$	70,737		$	77,442		$	(6,705	)	(8.7	)%
Fees and service charges on deposit accounts	57,429			54,120			3,309			6.1
Net gains on sales of loans and leases	49,624			19,358			30,266			156.3
Card and ATM revenue	42,321			39,155			3,166			8.1
Wealth management revenue	12,357			—			12,357			N.M.
Servicing fee revenue	9,833			9,633			200			2.1
Net gains on investment securities	8			1,517			(1,509		)	(99.5	)
Other	27,708			11,997			15,711			131.0
Total noninterest income	$	270,017		$	213,222		$	56,795		26.6
Total noninterest income as a percentage of total revenue	25.7		%	29.5		%				(380) bps

N.M. Not Meaningful

Noninterest income was $133.1 million for the three months ended June 30, 2020, compared to $137.0 million for the three months ended March 31, 2020 and $109.7 million for the three months ended June 30, 2019. Noninterest income included a $14.7 million gain on the sale of our Arizona branches and $8.9 million of loan servicing rights impairment for the three months ended June 30, 2020, compared to $8.2 million of loan servicing rights impairment for the three months ended March 31, 2020, considered notable items. The gain on sales of branches and loan servicing rights impairment are recorded within other noninterest income. Adjusted noninterest income, a non-GAAP financial measure that excludes the identified notable items, was $127.2 million for the three months ended June 30, 2020, compared to $145.2 million for the three months ended March 31, 2020 and $109.7 million for the three months ended June 30, 2019. See "Non-GAAP Financial Measures" in this Management's Discussion and Analysis for further information.

Noninterest income was $270.0 million for the six months ended June 30, 2020, compared to $213.2 million for the six months ended June 30, 2019. Noninterest income included $17.1 million of loan servicing rights impairment for the six months ended June 30, 2020 and a $14.7 million gain on the sale of our Arizona branches, considered notable items. Adjusted noninterest income, a non-GAAP financial measure that excludes the identified notable item, was $272.4 million for the six months ended June 30, 2020 compared to $213.2 million for the six months ended June 30, 2019. See "Non-GAAP Financial Measures" in this Management's Discussion and Analysis for further information.

Leasing revenue Leasing revenue was $37.2 million for the three months ended June 30, 2020, compared with $33.6 million for the three months ended March 31, 2020 and $39.3 million for the three months ended June 30, 2019. Leasing revenue was $70.7 million in the six months ended June 30, 2020, compared to $77.4 million for the six months ended June 30, 2019. Leasing revenue is impacted by changes in our operating lease revenue and sales-type lease revenue through our equipment financing activity.

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Fees and service charges on deposit accounts Fees and service charges on deposit accounts were $22.8 million for the three months ended June 30, 2020, compared with $34.6 million for the three months ended March 31, 2020 and $27.8 million for the three months ended June 30, 2019. The decrease for the three months ended June 30, 2020, compared to the three months ended March 31, 2020, was partly due to higher customer account balances maintained resulting in a decline in fees charged. The decrease for three months ended June 30, 2020, compared to the three months ended June 30, 2019, was primarily attributable to higher customer account balances maintained resulting in a decline in fees charged, partially offset by incremental fees resulting from the Merger. The $3.3 million increase in fees and service charges on deposit accounts in the six months ended June 30, 2020, compared to $54.1 million for the six months ended June 30, 2019, was primarily attributable to incremental fees resulting from the Merger, partially offset by other declines in fees charged as customers maintained higher account balances.

Net gains on sales of loans and leases Net gains on sales of loans and leases were $29.0 million for the three months ended June 30, 2020, compared with $20.6 million for the three months ended March 31, 2020 and $11.1 million for the three months ended June 30, 2019. The increase for three months ended June 30, 2020, compared to the three months ended March 31, 2020, was primarily due to an increase in residential mortgage gain on sale as demand increased during the period. The increase for three months ended June 30, 2020, compared to the three months ended June 30, 2019, was primarily due to higher volume of consumer loans sold resulting from the Merger. The $30.3 million increase in net gains on sales of loans and leases in the six months ended June 30, 2020, compared to $19.4 million for the six months ended June 30, 2019, was primarily attributable to higher volume of consumer loans sold resulting from the Merger. We sold $554.2 million and $1.1 billion of loans and leases during the three and six months ended June 30, 2020, respectively, compared with $535.8 million during the three months ended March 31, 2020 and $307.0 million and $573.2 million during the three and six months ended June 30, 2019, respectively.

Card and ATM revenue Card and ATM revenue was $20.6 million for the three months ended June 30, 2020, compared with $21.7 million for the three months ended March 31, 2020 and $20.5 million for the three months ended June 30, 2019. The decrease for three months ended June 30, 2020, compared to the three months ended March 31, 2020, was primarily due to a reduction in debit card and ATM activity partly related to governmental imposed restrictions on activities as a result of the COVID-19 pandemic. The increase for the three months ended June 30, 2020, compared to the three months ended June 30, 2019, was primarily due to incremental revenue resulting from the Merger, partially offset by a reduction in debit card and ATM activity partly related to the COVID-19 pandemic. The $3.2 million increase in card and ATM revenue in the six months ended June 30, 2020, compared to $39.2 million for the six months ended June 30, 2019, was primarily attributable to incremental revenue resulting from the Merger, partially offset by the decline in debit card and ATM activity partly related to the COVID-19 pandemic.

Wealth management Wealth management revenue is comprised of investment fees that are generally based on the market value of assets within a trust account, custodial fees and fees from the sale of investment products and is a revenue stream added as a result of the Merger. Revenues from wealth management were $6.2 million for both the three months ended June 30, 2020 and the three months ended March 31, 2020. For the six months ended June 30, 2020, revenues from wealth management were $12.4 million.

Servicing fee revenue Servicing fee revenue was $3.0 million for the three months ended June 30, 2020, compared with $6.8 million for the three months ended March 31, 2020 and $4.5 million for the three months ended June 30, 2019. The decrease for the three months ended June 30, 2020, compared to the three months ended March 31, 2020, was primarily due to the first quarter of 2020 including the final recognition of the transitional servicing fee revenue on the Legacy TCF auto finance portfolio that was sold in the fourth quarter of 2019. The decrease for the three months ended June 30, 2020, compared to the three months ended June 30, 2019 was primarily due to no further transitional servicing fee revenue being received on the Legacy TCF auto finance portfolio, partially offset by the incremental servicing fee revenue resulting from the Merger. The $0.2 million decrease in servicing fee revenue in the six months ended June 30, 2020, compared to $9.6 million for the six months ended June 30, 2019, was primarily attributable to no further transitional servicing fees received related to the Legacy TCF auto finance portfolio subsequent to the first quarter of 2020, partially offset by the incremental servicing fee revenue resulting from the Merger. Final transitional servicing fees were received in the first quarter of 2020 on the Legacy auto finance portfolio.

Net gains on investment securities There were $8 thousand of net gains on sales of investment securities for the three and six months ended June 30, 2020, compared with no sales for the three months ended March 31, 2020, and $1.1 million and $1.5 million of net gains on sales of investment securities for the three and six months ended June 30, 2019.

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Other Other noninterest income was $14.1 million for the three months ended June 30, 2020, compared with $13.6 million for the three months ended March 31, 2020 and $5.4 million for the three months ended June 30, 2019. The increase for the three months ended June 30, 2020, compared to the three months ended March 31, 2020, was primarily due to a $14.7 million gain on the sale of our Arizona branches, partially offset by lower interest rate swap fees and market adjustments. The increase for three months ended June 30, 2020, compared to the three months ended June 30, 2019, was primarily due to an increase in incremental revenue resulting from the Merger, partially offset by the recognition of $8.9 million of loan servicing rights impairment. The $15.7 million increase in other noninterest income in the six months ended June 30, 2020, compared to $12.0 million for the six months ended June 30, 2019, was primarily due to an increase in incremental revenue resulting from the Merger, partially offset by the recognition of $17.1 million of loan servicing rights impairment.

Noninterest Expense The components of noninterest expense were as follows:



	Three Months Ended									Change from
	June 30, 2020			March 31, 2020			June 30, 2019			March 31, 2020					June 30, 2019
(Dollars in thousands)	June 30, 2020			March 31, 2020			June 30, 2019			$			% / bps		$			% / bps
Compensation and employee benefits	$	171,799		$	171,528		$	116,266		$	271		0.2	%	$	55,533		47.8	%
Occupancy and equipment	54,107			57,288			41,850			(3,181		)	(5.6	)	12,257			29.3
Lease financing equipment depreciation	18,212			18,450			19,133			(238		)	(1.3	)	(921		)	(4.8	)
Net foreclosed real estate and repossessed assets	998			1,859			2,448			(861		)	(46.3	)	(1,450		)	(59.2	)
Merger-related expenses	81,619			36,728			4,226			44,891			122.2		77,393			N.M.
Other	73,506			88,746			52,926			(15,240		)	(17.2	)	20,580			38.9
Total noninterest expense	$	400,241		$	374,599		$	236,849		$	25,642		6.8		$	163,392		69.0
Full-time equivalent staff (at period end)	7,183			7,572			5,054			(389		)	(5.1	)	2,129			42.1
Efficiency ratio	78.26		%	69.57		%	65.11		%				869	bps				1,315	bps
Adjusted efficiency ratio (non-GAAP)⁽¹⁾	59.80			58.24			61.48						156					(168	)

N.M. Not Meaningful


(1)	See "Consolidated Financial Condition Analysis - Non-GAAP Financial Measures" in this Management's Discussion and Analysis for further information.



	Six Months Ended						Change
(Dollars in thousands)	June 30, 2020			June 30, 2019			$			%
Compensation and employee benefits	$	343,327		$	240,208		$	103,119		42.9	%
Occupancy and equipment	111,395			83,560			27,835			33.3
Lease financing equipment depreciation	36,662			38,389			(1,727		)	(4.5	)
Net foreclosed real estate and repossessed assets	2,857			7,078			(4,221		)	(59.6	)
Merger-related expenses	118,347			13,684			104,663			N.M.
Other	162,252			107,005			55,247			51.6
Total noninterest expense	$	774,840		$	489,924		$	284,916		58.2
Efficiency ratio	73.80		%	67.88		%				592	bps
Adjusted efficiency ratio, Non-GAAP⁽¹⁾	58.99			63.56						(457	)

N.M. Not Meaningful


(1)	See "Consolidated Financial Condition Analysis - Non-GAAP Financial Measures" in this Management's Discussion and Analysis for further information.

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Noninterest expense was $400.2 million for the three months ended June 30, 2020, compared to $374.6 million for the three months ended March 31, 2020 and $236.8 million for the three months ended June 30, 2019. Noninterest expense included merger-related costs of $81.6 million for the three months ended June 30, 2020, $36.7 million for the three months ended March 31, 2020 and $4.2 million for the three months ended June 30, 2019. Noninterest expense for the three months ended June 30, 2020 included $0.9 million of expense related to the sale of the Legacy TCF auto finance portfolio ($0.8 million in other noninterest expense and $0.1 million in compensation and employee benefits) and $0.6 million of expense related to branch exit costs, included in other noninterest expense, considered notable items. Noninterest expense for the three months ended March 31, 2020, included $3.1 million of expense related to the sale of the Legacy TCF auto finance portfolio ($1.6 million in occupancy and equipment expense, $0.9 million in compensation and employee benefits and $0.6 million in other noninterest expense), considered a notable item. Adjusted noninterest expense, a non-GAAP financial measure that excludes merger-related expenses and the identified notable items, was $317.2 million for the three months ended June 30, 2020, compared to $334.8 million for the three months ended March 31, 2020 and $232.6 million for the three months ended June 30, 2019. See "Non-GAAP Financial Measures" in this Management's Discussion and Analysis for further information.

Noninterest expense was $774.8 million for the six months ended June 30, 2020, compared to $489.9 million for the six months ended June 30, 2019. Noninterest expense included merger-related costs of $118.3 million for the six months ended June 30, 2020 and $13.7 million for the six months ended June 30, 2019. Noninterest expense for the six months ended June 30, 2020 included $4.0 million of expenses related to the sale of the Legacy TCF auto finance portfolio ($1.6 million included in occupancy and equipment, $1.4 million included in other noninterest expense and $1.0 million included in compensation and employee benefits) and $0.6 million of expense related to branch exit costs, included in other noninterest expense, considered notable items. Adjusted noninterest expense, a non-GAAP financial measure that excludes merger-related expenses and the identified notable items, was $652.0 million for the six months ended June 30, 2020, compared to $476.2 million for the six months ended June 30, 2019. See "Non-GAAP Financial Measures" in this Management's Discussion and Analysis for further information.

Compensation and employee benefits expense Compensation and employee benefits expense was $171.8 million for the three months ended June 30, 2020, compared with $171.5 million for the three months ended March 31, 2020 and $116.3 million for the three months ended June 30, 2019. Compensation and employee benefits expense was $343.3 million for the six months ended June 30, 2020, compared to $240.2 million for the six months ended June 30, 2019. The increases in both the three and six months ended June 30, 2020, compared to the three and six months ended June 30, 2019, were primarily due to the staff additions resulting from the Merger and to support revenue producing loan and lease growth.

Occupancy and equipment Occupancy and equipment expense was $54.1 million for the three months ended June 30, 2020, compared with $57.3 million for the three months ended March 31, 2020 and $41.9 million for the three months ended June 30, 2019. Occupancy expense for the six months ended June 30, 2020 was $111.4 million, compared to $83.6 million for the six months ended June 30, 2019. The decrease in the three months ended June 30, 2020, compared to the three months ended March 31, 2020, was primarily due to lower maintenance and repairs expense. The increases in both the three and six months ended June 30, 2020, compared to the three and six months ended June 30, 2019, were primarily due to the incremental operating costs associated with the Merger.

Lease financing equipment depreciation Lease financing equipment depreciation was $18.2 million for the three months ended June 30, 2020, compared with $18.5 million for the three months ended March 31, 2020 and $19.1 million for the three months ended June 30, 2019. Lease financing equipment depreciation was $36.7 million for the six months ended June 30, 2020, compared to $38.4 million for the six months ended June 30, 2019. Shifts in lease financing equipment depreciation are the result of changes in balances of leased equipment.

Merger-related expenses Merger-related expenses were $81.6 million for the three months ended June 30, 2020, compared with $36.7 million for the three months ended March 31, 2020 and $4.2 million for the three months ended June 30, 2019. Merger-related expenses were $118.3 million for the six months ended June 30, 2020, an increase of $104.6 million compared to $13.7 million for the six months ended June 30, 2019. Merger-related expenses consist primarily of employment related expenses, professional fees and merger-related branch closing expenses. We anticipate incurring a meaningful amount of merger-related expenses through the remainder of 2020.

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Other noninterest expense Other noninterest expense was $73.5 million for the three months ended June 30, 2020, compared with $88.7 million for the three months ended March 31, 2020 and $52.9 million for the three months ended June 30, 2019. Other noninterest expense was $162.3 million for the six months ended June 30, 2020, compared to $107.0 million for the six months ended June 30, 2019. The increases in both the three and six months ended June 30, 2020, compared to the three and six months ended June 30, 2019, was primarily due to the incremental operating costs associated with the Merger.

Income Tax Expense Income tax expense was $6.2 million, or 19.1% of income before income tax expense for the three months ended June 30, 2020, compared with $13.1 million, or 19.6% of income before income tax expense for the three months ended March 31, 2020 and $19.3 million, or 17.0% of income before income tax expense for the three months ended June 30, 2019. Income tax expense was $19.3 million, or 19.4% of income before income tax expense for the six months ended June 30, 2020, compared with $40.6 million, or 19.5% of income before income tax expense for the six months ended June 30, 2019. The fluctuations in our effective income tax rate reflect changes each period in the proportion of tax-exempt interest income, nondeductible expenses and credits relative to income before income tax expense. The CARES Act was enacted on March 27, 2020 in response to the COVID-19 pandemic. The CARES Act, among other things, permits tax net operating losses from 2018, 2019 and 2020 to be carried back five years to generate refunds of previously paid income taxes and provides changes in depreciation rules for certain qualified improvement property. We are currently analyzing the potential impacts of the CARES Act related to the tax net operating losses in these periods. We have not yet recorded any related tax benefits, but continue to evaluate potential tax benefits which may be available in future quarters based on carryback capacity.

Reportable Segment Results Our reportable segments are Consumer Banking, Commercial Banking and Enterprise Services. See "Note 22. Reportable Segments" of the Notes to Consolidated Financial Statements for further information regarding net income (loss), revenues and assets for each of our reportable segments.

Consumer Banking

Consumer Banking is comprised of all of our consumer and small business-facing businesses and includes Retail Banking, Wealth Management, Residential and Consumer Lending, and Business Banking. Our consumer banking strategy is primarily to generate deposits and originate high credit quality loans for investment and sale. Deposits are generated from consumers and small businesses to provide a source of low cost funds, with a focus on building and maintaining quality customer relationships.



	Three Months Ended							Six Months Ended
(In thousands)	June 30, 2020			March 31, 2020		June 30, 2019		June 30, 2020		June 30, 2019
Consumer Banking
Net interest income	$	206,285		$	193,832	$	138,094	$	400,117	$	278,796
Provision (benefit) for credit losses	(10,924		)	44,369		4,691		33,445		11,917
Net interest income after provision (benefit) for credit losses	217,209			149,463		133,403		366,672		266,879
Noninterest income	85,276			81,414		66,163		166,690		126,666
Noninterest expense	207,319			228,859		152,757		436,178		309,278
Income before income tax expense	95,166			2,018		46,809		97,184		84,267
Income tax expense	15,752			1,982		10,971		17,734		19,712
Net income available to common shareholders	79,414			36		35,838		79,450		64,555
Total assets (at period end)	$	14,694,025		$	14,463,055	$	7,713,169	$	14,694,025	$	7,713,169

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Consumer Banking generated net income available to common shareholders of $79.4 million for the three months ended June 30, 2020, compared with $36 thousand for the three months ended March 31, 2020 and $35.8 million for the three months ended June 30, 2019. Consumer Banking generated net income available to common shareholders of $79.5 million for the six months ended June 30, 2020, compared to $64.6 million for the six months ended June 30, 2019. The increase in the three months ended June 30, 2020, compared to the three months ended March 31, 2020, was primarily due to the initial impact of the economic downturn related to COVID-19 on the provision for credit losses in the three months ended March 31, 2020 and a decrease in noninterest expense. The increases in the three and six months ended June 30, 2020, compared to the three and six months ended June 30, 2019, were primarily due to increases in incremental operating costs, partially offset by the incremental income resulting from the Merger. The provision for credit losses is predominantly a function of our reserving methodology used to determine the appropriate level of the allowance for credit losses. For further information, see "Consolidated Income Statement Analysis — Provision for Credit Losses" and "Consolidated Financial Condition Analysis — Credit Quality" in this Management's Discussion and Analysis and "Note 8. Allowance for Credit Losses and Credit Quality" of the Notes to Consolidated Financial Statements.

Commercial Banking

Commercial Banking is comprised of commercial and industrial, commercial real estate banking and lease financing. Our commercial banking strategy focuses on building full commercial relationships including originating high credit quality loans and leases and providing deposit and treasury services.



	Three Months Ended						Six Months Ended
(In thousands)	June 30, 2020		March 31, 2020		June 30, 2019		June 30, 2020		June 30, 2019
Commercial Banking
Net interest income	$	169,473	$	185,986	$	96,726	$	355,459	$	193,411
Provision for credit losses	89,650		52,574		8,878		142,224		11,774
Net interest income after provision for credit losses	79,823		133,412		87,848		213,235		181,637
Noninterest income	43,831		55,773		42,455		99,604		84,954
Noninterest expense	105,324		114,455		80,892		219,779		164,305
Income before income tax expense	18,330		74,730		49,411		93,060		102,286
Income tax expense	3,440		16,306		10,340		19,746		22,099
Income after income tax expense	14,890		58,424		39,071		73,314		80,187
Income attributable to non-controlling interest	2,469		1,917		3,616		4,386		6,571
Net income available to common shareholders	12,421		56,507		35,455		68,928		73,616
Total assets (at period end)	$	24,318,452	$	24,859,839	$	12,865,821	$	24,318,452	$	12,865,821

Commercial Banking generated net income available to common shareholders of $12.4 million for the three months ended June 30, 2020, compared with $56.5 million for the three months ended March 31, 2020 and $35.5 million for the three months ended June 30, 2019. Commercial Banking generated net income available to common shareholders of $68.9 million for the six months ended June 30, 2020, compared to $73.6 million for the six months ended June 30, 2019. The decrease in the three months ended June 30, 2020, compared to the three months ended March 31, 2020, was primarily due to an increase in provision for credit losses primarily due to additional deterioration in macroeconomic conditions related to COVID-19 and a decrease in interest income as a result of the full quarter impact of the Federal Reserve's rate cuts in addition to a decrease in the benefit provided by purchase accounting accretion and amortization. The decreases in the three and six months ended June 30, 2020, compared to the three and six months ended June 30, 2019, were primarily due to the incremental income resulting from the Merger, partially offset by an increase in provision for credit losses primarily due to additional deterioration in macroeconomic conditions related to COVID-19. The provision for credit losses is predominantly a function of our reserving methodology used to determine the appropriate level of the allowance for credit losses. For further information, see "Consolidated Income Statement Analysis — Provision for Credit Losses" and "Consolidated Financial Condition Analysis — Credit Quality" in this Management's Discussion and Analysis and "Note 8. Allowance for Credit Losses and Credit Quality" of the Notes to Consolidated Financial Statements.

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Enterprise Services

Enterprise Services is comprised of (i) corporate treasury, which includes our 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) TCF Financial and (iv) eliminations. Our investment portfolio accounts for the earning assets within this segment. Borrowings may be used to offset reductions in deposits or to support lending activities. This segment also includes residual revenues and expenses representing the difference between actual amounts incurred by Enterprise Services and amounts allocated to the operating segments, including interest rate risk residuals such as funds transfer pricing mismatches.



	Three Months Ended									Six Months Ended
(In thousands)	June 30, 2020			March 31, 2020			June 30, 2019			June 30, 2020			June 30, 2019
Enterprise Services
Net interest income	$	2,601		$	21,663		$	19,237		$	24,264		$	36,279
Noninterest income	3,947			(224		)	1,100			3,723			1,602
Noninterest expense	87,598			31,285			3,200			118,883			16,341
Income (loss) before income tax expense (benefit)	(81,050		)	(9,846		)	17,137			(90,896		)	21,540
Income tax expense (benefit)	(12,979		)	(5,202		)	(1,997		)	(18,181		)	(1,210		)
Income (loss) after income tax expense (benefit)	(68,071		)	(4,644		)	19,134			(72,715		)	22,750
Preferred stock dividends	2,494			2,493			2,494			4,987			4,987
Net income (loss) available to common shareholders	(70,565		)	(7,137		)	16,640			(77,702		)	17,763
Total assets (at period end)	$	11,049,983		$	9,271,489		$	4,047,840		$	11,049,983		$	4,047,840

Enterprise Services generated a net loss available to common shareholders of $70.6 million for the three months ended June 30, 2020, compared with a net loss of $7.1 million for the three months ended March 31, 2020 and net income available to common shareholders of $16.6 million for the three months ended June 30, 2019. Enterprise Services generated a net loss available to common shareholders of $77.7 million for the six months ended June 30, 2020, compared to net income of $17.8 million for the six months ended June 30, 2019. The larger net loss in the three months ended June 30, 2020, compared to the three months ended March 31, 2020, was primarily due to an increase in merger-related expenses, included in noninterest expense. The decreases in the three and six months ended June 30, 2020, compared to the three and six months ended June 30, 2019, were primarily due to an increase in merger-related expenses and other noninterest expense.

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Consolidated Financial Condition Analysis

Investment Securities Total investment securities available-for-sale, at fair value, were $7.2 billion at June 30, 2020, compared with $6.7 billion at December 31, 2019. Our investment securities available-for-sale are debt securities consisting primarily of fixed-rate mortgage-backed securities issued by the Federal National Mortgage Association ("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC"), and obligations of states and political subdivisions. The increase in investment securities available-for-sale was primarily due to purchases of additional residential agency mortgage-backed securities.

Total investment securities held-to-maturity were $130.1 million at June 30, 2020, compared with $139.4 million at December 31, 2019. Our investment securities held-to-maturity portfolio consists primarily of fixed-rate mortgage-backed securities issued by the FNMA.

The amortized cost and fair value of investment securities available-for-sale and held-to-maturity were as follows:



	At June 30, 2020				At December 31, 2019
(In thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Investment securities available-for-sale, at fair value
Debt securities:
Government and government-sponsored enterprises	$	209,771	$	210,119	$	235,045	$	234,385
Obligations of states and political subdivisions	810,091		838,145		852,096		863,855
Residential mortgage-backed securities	5,247,132		5,443,944		4,866,473		4,929,717
Commercial mortgage-backed securities	683,836		726,727		685,212		691,614
Corporate debt and trust preferred securities	453		438		451		430
Total investment securities available-for-sale	6,951,283		7,219,373		6,639,277		6,720,001
Investment securities held-to-maturity
Residential mortgage-backed securities	126,429		137,435		135,769		141,168
Corporate debt and trust preferred securities	3,672		3,672		3,676		3,676
Total investment securities held-to-maturity	130,101		141,107		139,445		144,844
Total investment securities	$	7,081,384	$	7,360,480	$	6,778,722	$	6,864,845

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The carrying value and FTE yield of investment securities available-for-sale and investment securities held-to-maturity by final contractual maturity were as follows. 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.



	June 30, 2020
	Government and Government-sponsored Enterprises				Obligations of States and Political Subdivisions				Residential Mortgage-backed Securities				Commercial Mortgage-backed Securities					Corporate Debt And Trust Preferred Securities				Total
(Dollars in thousands)	Amount		Yield⁽¹⁾		Amount		Yield⁽¹⁾		Amount		Yield⁽¹⁾		Amount		Yield⁽¹⁾			Amount		Yield⁽¹⁾		Amount		Yield⁽¹⁾
Investment securities available-for-sale
Due in one year or less	$	—	—	%	$	63,440	2.33	%	$	—	—	%	$	—	—		%	$	—	—	%	$	63,440	2.33	%
Due in 1-5 years	—		—		151,917		2.82		18,941		1.89		13,493		1.60			—		—		184,351		2.64
Due in 5-10 years	19,842		0.60		195,738		2.90		125,435		2.00		247,088		2.16			—		—		588,103		2.32
Due after 10 years	190,277		1.33		427,050		2.94		5,299,568		2.51		466,146		2.63			438		4.74		6,383,479		2.51
Total	$	210,119	1.26	%	$	838,145	2.86	%	$	5,443,944	2.50	%	$	726,727	2.45		%	$	438	4.74	%	$	7,219,373	2.50	%
Investment securities held-to-maturity
Due in one year or less	$	—	—	%	$	—	—	%	$	—	—	%	$	—	$	—		$	—	—	%	$	—	—	%
Due in 1-5 years	—		—		—		—		—		—		—		—			3,550		3.00		3,550		3.00
Due in 5-10 years	—		—		—		—		52		6.50		—		—			—		—		52		6.50
Due after 10 years	—		—		—		—		126,377		2.35		—		—			122		6.00		126,499		2.35
Total	$	—	—	%	$	—	—	%	$	126,429	2.35	%	$	—	—		%	$	3,672	3.10	%	$	130,101	2.37	%


(1)	Interest and yields are presented on a FTE basis.

See "Note 6. Investment Securities" of Notes to Consolidated Financial Statements for further information regarding our investment securities available-for-sale and investment securities held-to-maturity.

Loans and Leases Held-for-Sale

Our loans and leases held-for-sale were $532.8 million at June 30, 2020, an increase of $333.0 million, compared to $199.8 million at December 31, 2019. The increase was primarily due to an increase in timing to settle sale transactions.

Loans and Leases

Our commercial loan and lease portfolio is comprised of commercial and industrial loans, commercial real estate loans, and lease financing. Our consumer loan portfolio is comprised of residential mortgages, consumer installment loans and home equity loans and lines of credit. Our lending markets primarily consist of communities throughout our primary banking markets in addition to Florida, Texas, New York, California and Canada.

Total loans and leases were $35.5 billion at June 30, 2020, an increase of $1.0 billion, or 3.0%, compared to $34.5 billion at December 31, 2019. At June 30, 2020, commercial and industrial loans included $1.8 billion of PPP loans outstanding. Excluding the PPP loans, the decrease from December 31, 2019 was primarily due to a decrease in the commercial and industrial portfolio, primarily inventory finance related to seasonality, strong dealer activity and the lack of backfill from manufacturers as a result of the economic shutdown, in addition to a decrease in the consumer installment portfolio, partially offset by an increase in our commercial real estate portfolio.

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Information about our loans and leases was as follows:



	At June 30, 2020				At December 31, 2019				Change
(Dollars in thousands)	Amount		% of Total		Amount		% of Total		$			%
Commercial loan and lease portfolio:
Commercial and industrial	$	12,200,721	34.3	%	$	11,439,602	33.2	%	$	761,119		6.7	%
Commercial real estate	9,628,344		27.1		9,136,870		26.5		491,474			5.4
Lease financing	2,707,402		7.6		2,699,869		7.8		7,533			0.3
Total commercial loan and lease portfolio	24,536,467		69.0		23,276,341		67.5		1,260,126			5.4
Consumer loan portfolio:
Residential mortgage	6,123,118		17.3		6,179,805		17.9		(56,687		)	(0.9	)
Consumer installment	1,430,655		4.0		1,542,411		4.5		(111,756		)	(7.2	)
Home equity	3,445,584		9.7		3,498,907		10.1		(53,323		)	(1.5	)
Total consumer loan portfolio	10,999,357		31.0		11,221,123		32.5		(221,766		)	(2.0	)
Total loans and leases	$	35,535,824	100.0	%	$	34,497,464	100.0	%	$	1,038,360		3.0	%

Commercial Loan and Lease Portfolio

Our commercial loan and lease portfolio was $24.5 billion at June 30, 2020, an increase of $1.3 billion, or 5.4%, compared to $23.3 billion at December 31, 2019. We believe that our commercial loan and lease portfolio is well diversified across business lines and has no material concentration in any one industry.

Commercial and industrial Commercial and industrial ("C&I") loans and lines of credit include loans to varying types of businesses, municipalities, school districts and nonprofit organizations, for the purpose of supporting working capital and operational needs and term financing of equipment. C&I loans are secured by various types of business assets including inventory, floorplan equipment, receivables, equipment or financial instruments. Origination levels related to equipment dealers are impacted by the velocity of fundings and repayments with dealers. C&I loans were $12.2 billion at June 30, 2020, an increase of $761.1 million, or 6.7%, compared to $11.4 billion at December 31, 2019. At June 30, 2020 C&I loans included $1.8 billion of PPP loans.

Our C&I portfolio by North American Industry Classification System ("NAICS") code was as follows:



	At June 30, 2020
(In thousands)	Total		% of Total Loan and Lease Portfolio
Retail trade	$	2,554,187	7.2	%
Transportation and warehouse	1,398,421		3.9
Manufacturing	1,318,030		3.7
Real estate rental and leasing	964,343		2.7
Wholesale trade	906,309		2.6
Construction	732,506		2.1
Health care and social assistance	653,117		1.8
Finance and insurance	484,977		1.4
Administration and Support and Waste Management and Remediation	434,674		1.2
All other	2,754,157		7.7
Total	$	12,200,721	34.3	%

Commercial real estate Commercial real estate loans include loans that are secured by real estate occupied by the borrower for ongoing operations, non-owner occupied real estate leased to one or more tenants and construction and development loans primarily originated for construction of commercial properties. Construction and development loans often convert to a commercial real estate loan at the completion of the construction period. Commercial real estate loans were $9.6 billion at June 30, 2020, an increase of $491.5 million, or 5.4%, compared to $9.1 billion at December 31, 2019.

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Our commercial real estate loan portfolio by property and loan type was as follows:



	At June 30, 2020				At December 31, 2019
(In thousands)	Total		Percent of Total Loan and Lease Portfolio		Total		Percent of Total Loan and Lease Portfolio
Multifamily	$	1,964,850	5.5	%	$	1,726,450	5.0	%
Office	1,370,298		3.9		1,061,877		3.1
Retail	1,299,577		3.7		814,230		2.4
Warehouse	1,005,351		2.8		853,042		2.5
Hotel	775,191		2.2		612,098		1.8
Senior housing	671,530		1.9		523,736		1.5
Self‐storage	507,216		1.4		429,779		1.2
Mixed use	474,521		1.3		382,281		1.1
Other	1,559,810		4.4		2,733,377		7.9
Total	$	9,628,344	27.1	%	$	9,136,870	26.5	%

Lease financing We provide a broad range of comprehensive lease products addressing the diverse financing needs of small to large companies. Lease financings were $2.7 billion at both June 30, 2020 and December 31, 2019.

Our lease financing portfolio by equipment type was as follows:



	At June 30, 2020				At December 31, 2019
(Dollars in thousands)	Balance		Percent of Total Loan and Lease Portfolio		Balance		Percent of Total Loan and Lease Portfolio
Specialty vehicles	$	587,335	1.7	%	$	585,829	1.7	%
Golf cart and turf equipment	512,755		1.4		473,476		1.4
Medical equipment	384,524		1.1		377,998		1.1
Technology and data processing equipment	229,626		0.6		248,187		0.7
Construction equipment	194,532		0.5		180,963		0.5
Manufacturing equipment	189,381		0.5		226,833		0.7
Material handling	165,929		0.5		138,182		0.4
Trucks and trailers	96,915		0.3		91,711		0.3
Agricultural equipment	91,374		0.3		92,392		0.3
Other	255,031		0.7		284,298		0.7
Total	$	2,707,402	7.6	%	$	2,699,869	7.8	%

Consumer Loan Portfolio

Our consumer loan portfolio was $11.0 billion at June 30, 2020, a decrease of $221.8 million, or 2.0%, compared to $11.2 billion at December 31, 2019.

Residential mortgage Residential mortgage loans consist primarily of one-to-four family residential loans with fixed and adjustable interest rates, with amortization periods generally from 15 to 30 years. The loan-to-value ratio at the time of origination is generally 90% or less. Loans with more than an 80% loan-to-value ratio generally require private mortgage insurance. Residential mortgage loans also include loans to consumers for the construction of single family residences that are secured by these properties. Residential mortgage loans were $6.1 billion at June 30, 2020, a decrease of $56.7 million, or 0.9%, compared to $6.2 billion at December 31, 2019.

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Consumer installment Consumer installment loans consist of relatively small loan amounts to consumers to finance personal items (primarily automobiles, recreational vehicles and marine vehicles) and are comprised primarily of indirect loans purchased from dealerships. Consumer rates are both fixed and variable, with negotiated terms. Our consumer installment loans typically amortize over periods up to 60 months. Consumer loans not secured by real estate are generally considered to have greater risk than first or second mortgages on real estate because they may be unsecured, or, if they are secured, the value of the collateral may be difficult to assess and more likely to decrease in value, and the collateral is more difficult to control, than real estate. Consumer installment loans were $1.4 billion at June 30, 2020, a decrease of $111.8 million, or 7.2%, compared to $1.5 billion at December 31, 2019.

Home equity Home equity loans and lines of credit are comprised of loans to consumers who utilize equity in their personal residence, including junior lien mortgages, as collateral to secure the loan or line-of-credit. Our home equity portfolio totaled $3.4 billion at June 30, 2020 (consisting of $3.0 billion of home equity lines of credit and $416.5 million of amortizing home equity loans), compared to $3.5 billion at December 31, 2019 (consisting of $3.0 billion of home equity lines of credit and $474.7 million of amortizing home equity loans). At June 30, 2020, $2.5 billion of our home equity lines of credit were comprised of loans with a 10-year interest-only draw period and a 20-year amortization repayment period, of which all were within the 10-year interest-only draw period and will not convert to amortizing loans until 2021 or later. At June 30, 2020, $577.8 million of the home equity line of credits were interest-only revolving draw loans with no defined amortization period and original draw periods of five to 40 years. Home equity lines of credit mostly include junior lien mortgages where the first lien mortgage is held by a nonaffiliated financial institution.

Credit Quality

Loans and Leases The following summarizes our loan and lease portfolio based on the credit quality factors that we believe are the most important and should be considered to understand the overall condition of the portfolio. The following items should be considered throughout this section:


•	Loans and leases that are over 90-days delinquent and accruing generally are a leading indicator for future charge-off trends.


•	Nonaccrual loans and leases have been charged down to the estimated fair value of the collateral less estimated selling costs, or reserved for expected loss upon workout.


•	Within the performing loans and leases, we classify customers within regulatory classification guidelines. Loans and leases that are "classified" are loans or leases that management has concerns regarding the ability of the borrowers to meet existing loan or lease terms and conditions, but may never become nonaccrual or result in a loss.

Past due loans and leases Delinquent balances are determined based on the contractual terms of the loan or lease. See "Note 8. Allowance for Credit Losses and Credit Quality" of Notes to Consolidated Financial Statements for further information. Over 90-day delinquent loans and leases by type, excluding nonaccrual loans and leases, were as follows:



	At June 30, 2020				At December 31, 2019
(Dollars in thousands)	90 Days or More Delinquent and Accruing		Percentage of Period-end Loans and Leases		90 Days or More Delinquent and Accruing		Percentage of Period-end Loans and Leases
Commercial loan and lease portfolio:
Commercial and industrial	$	1,995	0.02	%	$	331	—	%
Commercial real estate	373		—		1,440		0.02
Lease financing	4,899		0.18		1,901		0.07
Total commercial loan and lease portfolio	7,267		0.03		3,672		0.02
Consumer loan portfolio:
Residential mortgage	749		0.01		559		0.01
Consumer installment	—		—		108		0.01
Total consumer loan portfolio	749		0.01		667		0.01
Portfolios acquired with deteriorated credit quality⁽¹⁾	N/A		N/A		25,737		10.43
Total	$	8,016	0.02	%	$	30,076	0.09	%


(1)	Prior to the adoption of CECL as of January 1, 2020, purchased credit impaired loans were not classified as nonaccrual loans because they were recorded at their net realizable value based on the principal and interest expected to be collected on the loans.

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Nonperforming assets Nonperforming assets, consisting of nonaccrual loans and leases and other real estate owned, were as follows:



(Dollars in thousands)	At June 30, 2020			At December 31, 2019
Commercial loan and lease portfolio:
Commercial and industrial	$	98,184		$	53,812
Commercial real estate	57,521			29,735
Lease financing	18,756			10,957
Total commercial loan and lease portfolio	174,461			94,504
Consumer loan portfolio:
Residential mortgage	67,762			38,577
Consumer installment	1,668			714
Home equity	47,560			35,863
Total consumer loan portfolio	116,990			75,154
Nonaccrual loans and leases	291,451			169,658
Other real estate owned	42,744			34,256
Total nonperforming assets	$	334,195		$	203,914
Nonaccrual loans and leases as a percentage of total loans and leases	0.82		%	0.49		%
Nonperforming assets as a percentage of total loans and leases and other real estate owned	0.94			0.59
Allowance for loan and lease losses as a percentage of nonaccrual loans and leases	158.21			66.64
Allowance for credit losses as a percentage of nonaccrual loans and leases	172.89			68.71

Nonperforming assets were $334.2 million at June 30, 2020, compared with $203.9 million at December 31, 2019. The $130.3 million increase in nonaccrual loans and leases from March 31, 2020 was substantially driven by the adoption of CECL ($73.4 million of loans previously accounted for as purchased credit impaired were reclassified to nonaccrual loans as of January 1, 2020 due to the adoption of CECL) and included additional increases within each of our loan and lease portfolios.

Loans and leases are generally placed on nonaccrual status when the collection of interest or principal is 90 days or more past due unless, in the case of commercial loans, they are well secured and in process of collection. Delinquent consumer home equity loans with a junior lien are also placed on nonaccrual status when there is evidence that the related third-party first lien mortgage may be 90 days or more past due, or foreclosure, charge-off or collection action has been initiated. TDR loans are placed on nonaccrual status prior to the past due thresholds outlined above if repayment under the modified terms is not likely after performing a well-documented credit analysis. Loans on nonaccrual status are generally reported as nonaccrual loans until there is sustained repayment performance for six consecutive months, with the exception of loans not reaffirmed upon discharge in Chapter 7 bankruptcy, which remain on nonaccrual status until a well-documented credit analysis indicates full repayment of the remaining pre-discharged contractual principal and interest is likely.

The majority of our nonaccrual loans are secured by real estate. Given the nature of these assets and the related mortgage foreclosure, property sale and, if applicable, mortgage insurance claims processes, it can take 18 months or longer for a loan to migrate from initial delinquency to final disposition. This resolution process generally takes much longer for loans secured by real estate than for unsecured loans or loans secured by other property primarily due to state real estate foreclosure laws.

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Changes in the amount of nonaccrual loans and leases were as follows:



	At or For the Three Months Ended June 30, 2020
(In thousands)	Consumer Loan Portfolio			Commercial Loan and Lease Portfolio			Total
Balance, beginning of period	$	106,116		$	144,359		$	250,475
Additions	20,735			93,800			114,535
Charge-offs	(3,037		)	(4,158		)	(7,195		)
Transfers to other assets	(907		)	(2,297		)	(3,204		)
Return to accrual status	(1,571		)	(37,300		)	(38,871		)
Payments received	(4,358		)	(19,059		)	(23,417		)
Other, net	12			(884		)	(872		)
Balance, end of period	$	116,990		$	174,461		$	291,451

	At or For the Six Months Ended June 30, 2020
(In thousands)	Consumer Loan Portfolio			Commercial Loan and Lease Portfolio			Total
Balance, beginning of period	$	75,154		$	94,504		$	169,658
Transfer in of loans previously accounted for as purchased credit impaired⁽¹⁾	20,560			52,825			73,385
Adjusted balance, beginning of period	95,714			147,329			243,043
Additions	46,548			142,457			189,005
Charge-offs	(5,876		)	(10,969		)	(16,845		)
Transfers to other assets	(3,443		)	(10,042		)	(13,485		)
Return to accrual status	(5,810		)	(44,978		)	(50,788		)
Payments received	(10,155		)	(47,333		)	(57,488		)
Other, net	12			(2,003		)	(1,991		)
Balance, end of period	$	116,990		$	174,461		$	291,451


(1)	Prior to the adoption of CECL as of January 1, 2020, purchased credit impaired loans were not classified as nonaccrual loans because they were recorded at their net realizable value based on the principal and interest expected to be collected on the loans.

Interest income recognized on loans and leases in nonaccrual status was $4.6 million and $9.0 million for the three and six months ended June 30, 2020, respectively, compared to $4.4 million for the three months ended March 31, 2020, and $255 thousand and $478 thousand for the three and six months ended June 30, 2019, respectively.

See "Note 8. Allowance for Credit Losses and Credit Quality" of Notes to Consolidated Financial Statements for further information.

Loan and lease credit risk classifications We assess the risk of our loan and lease portfolio utilizing numerous risk characteristics as outlined in the previous sections. Credit risk classifications are an additional characteristic monitored in the overall credit risk process. Loan and lease credit risk classifications are derived from standard regulatory rating definitions, which include: non-classified (pass and special mention) and classified (substandard and doubtful). Classified loans and leases have well-defined weaknesses, but may never result in a loss.

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Loans and leases by portfolio and credit risk classification were as follows:



	At June 30, 2020
	Non-classified				Classified				Total
(In thousands)	Pass		Special Mention		Substandard		Doubtful		Total
Commercial loan and lease portfolio:
Commercial and industrial	$	11,664,134	$	285,880	$	250,707	$	—	$	12,200,721
Commercial real estate	9,120,353		302,911		205,080		—		9,628,344
Lease financing	2,636,604		37,551		33,247		—		2,707,402
Total commercial loan and lease portfolio	23,421,091		626,342		489,034		—		24,536,467
Consumer loan portfolio:
Residential mortgage	6,049,437		1,922		71,759		—		6,123,118
Consumer installment	1,428,773		—		1,882		—		1,430,655
Home equity	3,395,807		705		49,072		—		3,445,584
Total consumer loan portfolio	10,874,017		2,627		122,713		—		10,999,357
Total loans and leases	$	34,295,108	$	628,969	$	611,747	$	—	$	35,535,824



	At December 31, 2019
	Non-classified				Classified				Total
(In thousands)	Pass		Special Mention		Substandard		Doubtful		Total
Commercial loan and lease portfolio:
Commercial and industrial	$	10,930,939	$	315,097	$	193,566	$	—	$	11,439,602
Commercial real estate	8,891,361		170,114		75,395		—		9,136,870
Lease financing	2,646,874		28,091		24,904		—		2,699,869
Total commercial loan and lease portfolio	22,469,174		513,302		293,865		—		23,276,341
Consumer loan portfolio:
Residential mortgage	6,135,096		565		44,144		—		6,179,805
Consumer installment	1,541,524		—		887		—		1,542,411
Home equity	3,457,292		456		41,159		—		3,498,907
Total consumer loan portfolio	11,133,912		1,021		86,190		—		11,221,123
Total loans and leases	$	33,603,086	$	514,323	$	380,055	$	—	$	34,497,464

Total classified loans and leases in our loan and lease portfolio were $611.7 million at June 30, 2020, compared with $380.1 million at December 31, 2019. The increase was primarily due to downgrades in our commercial loan and lease portfolio.

Loan modifications Troubled debt restructuring ("TDR") loans are loans to financially troubled borrowers that have been modified such that we have granted a concession in terms to improve the likelihood of collection of all principal and modified interest owed. TDR loans were as follows:



	At June 30, 2020							At December 31, 2019
(Dollars in thousands)	Accruing TDR Loans			Nonaccrual TDR Loans		Total TDR Loans		Accruing TDR Loans			Nonaccrual TDR Loans		Total TDR Loans
Commercial loan and lease portfolio	$	13,707		$	10,630	$	24,337	$	12,986		$	5,356	$	18,342
Consumer loan portfolio	14,507			18,476		32,983		12,403			14,875		27,278
Total	$	28,214		$	29,106	$	57,320	$	25,389		$	20,231	$	45,620
Over 90-day delinquency as a percentage of total accruing TDR loans	0.59		%	N.A.		N.A.		0.52		%	N.A.		N.A.

N.A. Not Applicable

Total TDRs were $57.3 million at June 30, 2020, compared with $45.6 million at December 31, 2019.

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Loan modifications to borrowers who have not been granted concessions are not considered TDR loans and therefore are not included in the table above. In addition, Section 4013 of the CARES Act and the Interagency Statement on Loan Modifications provide banks the option to temporarily suspend certain TDR accounting guidance for loans modified due to the effects of COVID-19 when certain conditions are met. In March 2020, TCF began providing assistance to customers in response to the COVID-19 pandemic, predominantly in the form of payment deferrals. As of June 30, 2020, $1.8 billion of loan and lease unpaid principal balance was on deferral status. TCF also granted certain other loan modifications which provide temporary customer assistance predominantly in the form of covenant waivers and modification of borrowing base. As of June 30, 2020, other loan modifications unpaid principal balance was $628.7 million. See "Note 1. Basis of Presentation" of the Notes to Consolidated Financial Statements for information regarding recent updated guidance on TDR accounting provided by the CARES Act and Interagency Regulatory guidance. TDR loans with an interest rate consistent with market rates on loans with comparable risk at the time of restructuring and performing based on the restructured terms are no longer disclosed as TDR loans in the calendar years after modification; however, these loans are still considered impaired and follow our impaired loan reserve policies.

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.

Interest income recognized on TDR loans and contractual interest that would have been recorded had the TDR loans performed in accordance with their original contractual terms were as follows:



	Three Months Ended						Six Months Ended
(In thousands)	June 30, 2020		March 31, 2020		June 30, 2019		June 30, 2020		June 30, 2019
Contractual interest due on TDR loans	$	759	$	321	$	1,668	$	1,080	$	3,287
Interest income recognized on TDR loans	287		292		1,151		579		2,261
Unrecognized interest income	$	472	$	29	$	517	$	501	$	1,026

See "Note 8. Allowance for Credit Losses and Credit Quality" of Notes to Consolidated Financial Statements for further information.

Allowance for Credit Losses The ACL includes the ALLL and the RULC. The ALLL is a valuation account presented separately on the Consolidated Statements of Financial Condition that is deducted from or added to loans' amortized cost basis to present the net amount expected to be collected. The RULC for letters of credit, financial guarantees and binding unfunded loan commitments is recorded in other liabilities on the Consolidated Statements of Financial Condition. The Corporation's reserve methodology used to determine the appropriate level of the ACL is a critical accounting estimate. The ACL is maintained at a level believed to be appropriate to provide for the current credit losses expected to be incurred in the loan and lease portfolios over the remaining expected life of each financial asset at the balance sheet date, including known or anticipated problem loans and leases, as well as for loans and leases which are not currently known to require specific allowances. The collective evaluation of expected losses in these portfolios is based on their probability of default multiplied by historical loss rates, as well as adjustments for forward-looking information, including industry and macroeconomic forecasts. Factors utilized in the determination of the amount of the allowance include historic loss experience, current economic forecasts and measurement date credit risk characteristics such as product type, lien position, delinquency, collateral value, credit bureau scores and financial statement ratios. The various quantitative and qualitative factors used in the methodologies are reviewed quarterly.

We consider our ACL of $503.9 million, or 1.42% 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 June 30, 2020, including loans and leases which are not currently known to require specific allowances. The ACL as a percentage of total loans and leases, excluding PPP loans was 1.49%, a non-GAAP financial measure. The PPP loans are individually guaranteed by the Small Business Administration and therefore the accounting under CECL does not require reserves to be recorded on such loans. Our ACL at June 30, 2020 reflects high levels of change in both current and forecasted macroeconomic conditions, which are impacted by the COVID-19 pandemic. However, no assurance can be given that we will not, in any particular period, sustain loan and lease losses that are sizable in relation to the amount reserved or will not require significant changes in the balance of the ACL due to subsequent evaluations of the loan and lease portfolios, in light of factors then prevailing, including economic conditions, information obtained during our ongoing credit review process or regulatory requirements. Among other factors, economic slowdown, increasing levels of unemployment, declines in collateral values and/or rising interest rates may have an adverse impact on the current adequacy of our ACL by increasing credit risk and the risk of potential loss. See "Non-GAAP Financial Measures" in this Management's Discussion and Analysis for further information.

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The total ACL is expected to absorb losses from any segment of the portfolio. The allocation of our ACL disclosed in the following table is subject to change based on changes in the criteria used to evaluate the allowance.

Prior to the adoption of CECL on January 1, 2020, the ACL was calculated under an incurred loss model which delayed recognition of loss until it was probable the loss had been incurred, in contrast to the accounting under CECL which considers current credit losses expected to be incurred in the loan and lease portfolios over the remaining expected life of each financial asset.

Detailed information regarding our credit loss reserves was as follows:



	At June 30, 2020						Adjusted for adoption of CECL⁽¹⁾						At December 31, 2019
	ACL⁽¹⁾				% of Category to Total Loan and Lease Portfolio		ACL⁽¹⁾				% of Category to Total Loan and Lease Portfolio		ACL⁽¹⁾				% of Category to Total Loan and Lease Portfolio
(Dollars in thousands)	Amount		As a % of Loan and Lease Portfolio		% of Category to Total Loan and Lease Portfolio		Amount		As a % of Loan and Lease Portfolio		% of Category to Total Loan and Lease Portfolio		Amount		As a % of Loan and Lease Portfolio		% of Category to Total Loan and Lease Portfolio
Commercial loan and lease portfolio:
Commercial and industrial	$	122,024	1.00	%	34.3	%	$	93,884	0.82	%	29.4	%	$	42,430	0.38	%	33.2	%
Commercial real estate	162,364		1.69		27.1		67,620		0.74		21.2		27,308		0.29		26.5
Lease financing	19,041		0.70		7.6		21,631		0.80		6.8		14,742		0.55		7.8
Total commercial loan and lease portfolio	303,429		1.24		69.0		183,135		0.79		57.4		84,480		0.36		67.5
Consumer loan portfolio:
Residential mortgage	79,479		1.30		17.3		72,939		1.18		22.9		8,099		0.13		17.9
Consumer installment	21,382		1.49		4.0		15,967		1.04		5.0		2,678		0.17		4.5
Home equity	56,824		1.65		9.7		47,003		1.34		14.7		17,795		0.51		10.1
Total consumer loan portfolio	157,685		1.43		31.0		135,909		1.21		42.6		28,572		0.25		32.5
Total allowance for loan and lease losses	461,114		1.30		100.0	%	319,044		0.92		100.0	%	113,052		0.33		100.0	%
Reserve for unfunded lending commitments	42,788		N.A.				18,235		N.A.				3,528		N.A.
Allowance for credit losses⁽¹⁾	$	503,902	1.42	%			$	337,279	0.98	%			$	116,580	0.34	%

N.A. Not Applicable

(1)

Allowance for credit losses effective January 1, 2020 are calculated under the guidance of CECL. At December 31, 2019 allowance for credit losses were calculated under the guidance of ASC Topic 310 prior to adoption of CECL, See "Note 3. Summary of Significant Accounting Policies" and "Note 8. Allowance for Credit Losses and Credit Quality" of Notes to Consolidated Financial Statements for further information.

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The rollforward of the allowance for credit losses were as follows:



	Three Months Ended									Six Months Ended
(Dollars in thousands)	Jun. 30, 2020			Mar. 31, 2020			Jun. 30, 2019			Jun. 30, 2020			Jun. 30, 2019
Allowance for loans and lease losses
Balance, beginning of period	$	406,383		$	113,052		$	147,972		$	113,052		$	157,446
Impact of CECL adoption	—			205,992			—			205,992			—
Adjusted balance, beginning of period	406,383			319,044			147,972			319,044			157,446
Charge-offs
Commercial loan and lease portfolio:
Commercial and industrial	(2,562		)	(7,584		)	(6,689		)	(10,146		)	(12,570		)
Commercial real estate	(761		)	—			—			(761		)	—
Lease financing	(1,638		)	(1,297		)	(1,419		)	(2,935		)	(3,103		)
Total commercial loan and lease portfolio	(4,961		)	(8,881		)	(8,108		)	(13,842		)	(15,673		)
Consumer loan portfolio:
Residential mortgage	(1,166		)	(528		)	(590		)	(1,694		)	(1,333		)
Consumer installment	(2,753		)	(4,071		)	(11,307		)	(6,824		)	(26,625		)
Home equity	(1,078		)	(1,249		)	(1,061		)	(2,327		)	(1,866		)
Total consumer loan portfolio	(4,997		)	(5,848		)	(12,958		)	(10,845		)	(29,824		)
Total charge-offs	(9,958		)	(14,729		)	(21,066		)	(24,687		)	(45,497		)
Recoveries
Commercial loan and lease portfolio:
Commercial and industrial	2,571			3,562			869			6,133			1,491
Commercial real estate	117			563			9			680			14
Lease financing	246			419			453			665			746
Total commercial loan and lease portfolio	2,934			4,544			1,331			7,478			2,251
Consumer loan portfolio:
Residential mortgage	295			883			510			1,178			786
Consumer installment	2,591			2,822			4,317			5,413			8,072
Home equity	743			1,003			826			1,746			1,652
Total consumer loan portfolio	3,629			4,708			5,653			8,337			10,510
Total recoveries	6,563			9,252			6,984			15,815			12,761
Net charge-offs	(3,395		)	(5,477		)	(14,082		)	(8,872		)	(32,736		)
Provision for credit losses related to loans and leases⁽¹⁾	58,126			92,990			13,569			151,116			23,691
Other	—			(174		)	(956		)	(174		)	(1,898		)
Balance, end of period	461,114			406,383			146,503			461,114			146,503
Reserve for unfunded lending commitments
Balance, beginning of period	22,188			3,528			1,941			3,528			1,428
Impact of CECL adoption	—			14,707			—			14,707			—
Adjusted balance, beginning of period	22,188			18,235			1,941			18,235			1,428
Provision (benefit) for credit losses related to unfunded lending commitments⁽¹⁾	20,600			3,953			(5		)	24,553			508
Balance, end of period	42,788			22,188			1,936			42,788			1,936
Total Allowance for Credit Losses	$	503,902		$	428,571		$	148,439		$	503,902		$	148,439


(1)	Provision for credit losses related to loans and leases and the provision for credit losses related to unfunded lending commitments are included within Provision for Credit Losses.

Net loan and lease charge-offs for the three months ended June 30, 2020 were $3.4 million, or 0.04% of average loans and leases (annualized), compared with $5.5 million, or 0.06% of average loans and leases (annualized) for the three months ended March 31, 2020, and $14.1 million, or 0.29% of average loans and leases (annualized) for the three months ended June 30, 2019. The decrease in the three months ended June 30, 2020, compared to the three months ended March 31, 2020, was primarily due to a decrease in net charge-offs in our commercial and industrial portfolio. The decrease in the three months ended June 30, 2020, compared to the three months ended June 30, 2019, was primarily due to decreases in net charge-offs in both our consumer and commercial loan portfolios.

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Net loan and lease charge-offs for the six months ended June 30, 2020 were $8.9 million, or 0.05% of average loans and leases (annualized), compared with $32.7 million, or 0.34% of average loans and leases (annualized) for the six months ended June 30, 2019. The decrease in the six months ended June 30, 2020, compared to the six months ended June 30, 2019, was primarily due to a decrease in charge-offs in our consumer loan portfolio.

Investment Securities Held-to-Maturity The investment securities held-to-maturity portfolio consist primarily of fixed-rate mortgage-backed securities issued and guaranteed by FNMA, GNMA and FHLMC which significantly decreases credit risk. The most important credit quality factor we consider to understand the condition of the residential agency mortgage-backed securities is that all are AAA rated and guaranteed.

Liquidity Management We manage our liquidity to ensure that our funding needs are met both promptly and in a cost-effective manner. Asset liquidity arises from liquid assets that can be sold or pledged as collateral, amortization, prepayment or maturity of assets and from our ability to sell loans. Liability liquidity results from our ability to maintain a diverse set of funding sources to promptly meet funding requirements.

TCF Bank had $2.2 billion of net liquidity qualifying interest-bearing deposits at the Federal Reserve Bank at June 30, 2020, compared with $489.7 million at December 31, 2019. Certain investment securities held-to-maturity and investment securities carried at fair value provide the ability to liquidate or pledge unencumbered securities as needed. At June 30, 2020, $1.3 billion of our securities were pledged as collateral to secure certain deposits and borrowings.

TCF Financial had net liquidity qualifying cash of $179.8 million at June 30, 2020, compared with $156.0 million at December 31, 2019.

Deposits are the primary source of our funds for use in lending and for other general business purposes. In addition to deposits, we receive funds from loan and lease repayments, loan sales and borrowings. Borrowings may be used to compensate for reductions in normal sources of funds, such as deposit inflows at less than projected levels, net deposit outflows or to fund balance sheet growth. We primarily borrow from the Federal Home Loan Bank (the "FHLB") of Des Moines. We had $4.3 billion of additional borrowing capacity at the FHLB of Des Moines at June 30, 2020, as well as access to the Federal Reserve Discount Window. In addition, we maintain a diversified set of unsecured and uncommitted funding sources, including access to overnight federal funds purchased lines, brokered deposits and capital markets. Lending activities, such as loan originations, loan purchases and equipment purchases for lease financing are the primary uses of our funds.

Our wholly-owned subsidiary, TCF Commercial Finance Canada, Inc. ("TCFCFC"), maintains a $20.0 million Canadian dollar-denominated line of credit facility with an unaffiliated bank, which is guaranteed by TCF Bank. TCFCFC had no (USD) outstanding under the line of credit with the counterparty at June 30, 2020 and at December 31, 2019.

Deposits Deposits were $39.2 billion at June 30, 2020, an increase of $4.7 billion, compared to $34.5 billion at December 31, 2019. The increase in deposits was primarily due to increases in noninterest-bearing deposits of $2.5 billion, money market deposits of $1.0 billion, savings account balances of $804.3 million, and interest-bearing checking account balances of $726.9 million, reflecting lower consumer spending impacted by the COVID-19 pandemic, partially offset by a decrease of $312.6 million of certificates of deposit.

Noninterest-bearing checking accounts represented 26.7% of total deposits at June 30, 2020, compared with 23.1% of total deposits at December 31, 2019. Our weighted-average interest rate for deposits, including noninterest-bearing deposits, was 0.49% for the three months ended June 30, 2020, 0.78% for the three months ended March 31, 2020 and 0.86% for the three months ended June 30, 2019, and was 0.63% for the six months ended June 30, 2020 and 0.84% for the six months ended June 30, 2019.

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Certificates of deposit including Certificate of Deposit Account Registry Service ("CDARS") deposits, IRA deposits and brokered deposits, were $7.1 billion and $7.5 billion at June 30, 2020 and December 31, 2019, respectively. The maturities of certificates of deposit with denominations equal to or greater than $100,000 at June 30, 2020 were as follows:



(In thousands)
Three months or less	$	820,942
Over three through six months	1,208,033
Over six through 12 months	1,192,633
Over 12 months	309,984
Total	$	3,531,592

Borrowings Borrowings were $3.7 billion at June 30, 2020, compared with $5.0 billion at December 31, 2019. The decrease in borrowings was primarily due to a decrease in long-term FHLB borrowings.

Information regarding short-term borrowings (borrowings with an original maturity of less than one year) was as follows:



	At or For the Three Months Ended June 30,						At or For the Six Months Ended June 30,
(Dollars in thousands)	2020			2019			2020			2019
FHLB advances
Maximum outstanding at any month-end	$	2,750,000		$	—		$	3,200,000		$	—
Balance outstanding at end of period	2,550,000			350,000			2,550,000			350,000
Weighted average interest rate at end of period	0.49		%	2.51		%	0.49		%	2.64		%
Average balance outstanding	$	2,725,824		$	317,583		$	2,596,704		$	303,316
Weighted average interest rate	0.50		%	2.62		%	1.04		%	2.51		%
Federal funds purchased
Maximum outstanding at any month-end	$	—		$	—		$	—		$	—
Balance outstanding at end of period	—			—			—			—
Weighted average interest rate at end of period	—		%	—		%	—		%	—		%
Average balance outstanding	$	—		$	—		$	115		$	171
Weighted average interest rate	—		%	—		%	1.78		%	2.67		%
Collateralized Deposits
Maximum outstanding at any month-end	$	222,998		$	—		$	222,998		$	—
Balance outstanding at end of period	222,998			—			222,998			—
Weighted average interest rate at end of period	0.25		%	—		%	0.25		%	—		%
Average balance outstanding	$	212,213		$	2,251		$	210,264		$	2,513
Weighted average interest rate	0.40		%	2.62		%	0.48		%	2.64		%
Line-of-credit: TCF Financial Corporation
Maximum outstanding at any month-end	$	80,000		$	—		$	80,000		$	—
Balance outstanding at end of period	—			—			—			—
Weighted average interest rate at end of period	—		%	—		%	—		%	—		%
Average balance outstanding	$	78,242		$	—		$	45,385		$	—
Weighted average interest rate	2.17		%	—		%	2.40		%	—		%
Line-of-credit: TCF Commercial Finance Canada, Inc.
Maximum outstanding at any month-end	$	—		$	10,455		$	747		$	10,455
Balance outstanding at end of period	—			764			—			764
Weighted average interest rate at end of period	—		%	3.00		%	—		%	3.00		%
Average balance outstanding	$	211		$	1,209		$	408		$	1,347
Weighted average interest rate	1.50		%	3.00		%	2.52		%	3.00		%

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Long-term borrowings were as follows:



(In thousands)	June 30, 2020		December 31, 2019
FHLB advances	$	270,927	$	1,822,058
Subordinated debt obligations	587,058		428,470
Discounted lease rentals	75,910		100,882
Finance lease obligation	3,013		3,038
Total long-term borrowings	$	936,908	$	2,354,448

On May 6, 2020, TCF Bank issued $150.0 million of fixed-to-floating rate subordinated notes (the “2030 Notes”), at par. The 2030 Notes, due May 6, 2030, bear an initial fixed interest rate of 5.50% per annum until May 6, 2025, payable semi-annually in arrears on May 6 and November 6, commencing on November 6, 2020, resetting quarterly thereafter to the then-current three-month LIBOR rate plus 509 basis points.

See "Note 12. Borrowings" of Notes to Consolidated Financial Statements for further information regarding our long-term borrowings.

Commitments We have commitments that may impact our liquidity. The following schedule summarizes our credit-related commitments and expected expiration dates by period as of June 30, 2020. Although many of these commitments historically have expired without being drawn upon, and therefore, the total amount of these commitments does not necessarily represent future liquidity requirements, changes in macroeconomic conditions and customer liquidity needs could result in greater utilization than we have experienced previously. See "Note 23. Commitments, Contingent Liabilities and Guarantees" of Notes to Consolidated Financial Statements for a further discussion of these obligations.



	Amount of Commitment - Expiration by Period
(In thousands)	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Commitments:
Commitments to extend credit:
Commercial	$	4,784,205	$	2,015,643	$	1,485,686	$	1,036,957	$	245,919
Consumer	2,243,985		107,288		132,258		175,367		1,829,072
Total commitments to extend credit	7,028,190		2,122,931		1,617,944		1,212,324		2,074,991
Standby letters of credit and guarantees on industrial revenue bonds	116,490		64,482		35,084		16,072		852
Total	$	7,144,680	$	2,187,413	$	1,653,028	$	1,228,396	$	2,075,843

Unrecognized tax benefits, projected benefit obligations, demand deposits with indeterminate maturities and discretionary credit facilities that do not obligate us to lend have been excluded from the contractual obligations table above.

Capital Management We are committed to managing capital to maintain protection for shareholders, depositors and creditors. We employ a variety of capital management tools to achieve our capital goals, including, but not limited to, dividends, public offerings of debt and preferred and common stock, common stock repurchases, redemption of preferred stock and the issuance or redemption of subordinated debt and other capital instruments. We maintain a Capital Planning and Dividend Policy which applies to TCF Financial and incorporates TCF Bank's Capital Planning and Dividend Policy. These policies are intended to ensure that capital strategy actions, including the addition of new capital, if needed, common stock repurchases, redemption of preferred stock or the declaration of preferred stock, common stock and bank dividends are prudent, efficient and provide value to our shareholders, while ensuring that past and prospective earnings retention is consistent with our capital needs for growth, as well as asset quality and overall financial condition. TCF Financial and TCF Bank manage capital levels to exceed all regulatory capital requirements.

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In 2019, our Board of Directors approved an authorization to repurchase up to $150 million of our common stock. The repurchase program has no expiration, and permits shares to be repurchased in compliance with Rule 10b-18 of the Exchange Act, through one or more broker-dealers as part of “block purchases” made by TCF, and/or through privately negotiated purchases, accelerated stock repurchase agreements, or Rule 10b5-1 plans at our discretion. In response to the COVID-19 pandemic, TCF temporarily suspended buybacks under its share repurchase program, but retains the ability to resume repurchases as circumstances warrant. We did not repurchase any shares of our common stock during the three months ended June 30, 2020, and we repurchased 873,376 shares of our common stock totaling $33.1 million during the six months ended June 30, 2020.

Effective January 1, 2020, the Corporation adopted CECL. Consistent with the treatment of the ACL under the capital rule’s standardized approach, the ALLL (excluding PCD loans) and RULC are eligible for inclusion in TCF’s Tier 2 capital up to 1.25 percent of standardized total risk weighted assets. In response to the COVID-19 pandemic, the regulatory agencies published an interim final rule on March 31, 2020 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 March 31, 2020 interim final rule.

At June 30, 2020 and December 31, 2019, TCF Bank's capital ratios exceeded the quantitative capital ratios required for an institution to be considered "well-capitalized." Significant factors that may affect capital adequacy include, but are not limited to, economic uncertainty, deteriorating economic conditions, a disproportionate growth in assets versus capital and a change in mix or credit quality of assets. There are no conditions or events since June 30, 2020 that management believes have changed TCF Bank's status as well-capitalized.

Equity Total equity was $5.7 billion, or 11.3% of total assets, at June 30, 2020, compared with $5.7 billion, or 12.3% of total assets, at December 31, 2019.

Common Stock Dividends Dividends to common shareholders on a per share basis were $0.35 for both the three months ended June 30, 2020 and March 31, 2020. Dividends to common shareholders on a per share basis, adjusted to reflect the Merger Exchange Ratio, were $0.30 and $0.59 for the three and six months ended June 30, 2019, respectively. Our common stock dividend payout ratio was 250.00% and 148.94% for the three and six months ended June 30, 2020, respectively, compared with 109.38% for the three months ended March 31, 2020, and 27.59% and 31.24% for the three and six months ended June 30, 2019, respectively. TCF Financial's primary funding sources for dividends are dividends received from TCF Bank.

On July 27, 2020, our Board of Directors announced a regular quarterly cash dividend of $0.35 per common share payable on September 1, 2020 to shareholders of record at the close of business on August 14, 2020, and a quarterly cash dividend of $0.35625 per depositary share representing a 1/1,000th interest in a share of the 5.70% Series C Non-Cumulative Perpetual Preferred Stock, payable on September 1, 2020 to shareholders of record at the close of business on August 14, 2020.

Common Shareholders' Equity Total common shareholders' equity was $5.5 billion, or 10.92% of total assets, at June 30, 2020, compared with $5.5 billion, or 11.87%, at December 31, 2019. Tangible common equity was $4.0 billion, or 8.22% of total tangible assets, at June 30, 2020, compared with $4.0 billion, or 9.01% of total tangible assets, at December 31, 2019. Book value per common share was $35.91 at June 30, 2020, compared with $36.20 at December 31, 2019. Tangible book value per common share was $26.25 at June 30, 2020, compared with $26.60 at December 31, 2019. Tangible common equity and tangible book value are non-GAAP measures that exclude goodwill and other intangible assets See "Consolidated Financial Condition Analysis — Non-GAAP Financial Measures" in this Management's Discussion and Analysis for further information.

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Non-GAAP Financial Measures

This report contains references to financial measures that are not defined in GAAP. Such non-GAAP financial measures include our tangible book value per common share; tangible common shareholders' equity; presentation of net interest income and net interest margin on a fully tax-equivalent ("FTE") basis; our adjusted efficiency ratio (which excludes merger-related expenses, expenses associated with the sale of the Legacy TCF auto finance portfolio, gains on sales of branches and branch exit costs, loan servicing rights impairment, lease financing equipment depreciation, net interest income FTE adjustment, amortization of intangible assets, and federal historic tax credit amortization), composition of loans and allowance excluding PPP loans, the adjusted allowance for credit losses as a percentage of loans and leases, excluding PPP loans; adjusted net interest income and margin (which excludes purchase accounting accretion and amortization and the impact of PPP loans); and other adjusted information presented excluding merger-related expenses and notable items (defined as expenses associated with the sale of the Legacy TCF auto finance portfolio, gains on sales of branches and branch exit costs and loan servicing rights impairment) including net income, diluted earnings per share, return on average assets, return on average common shareholders' equity, return on average tangible common shareholders' equity tangible book value per common share and tangible common equity to tangible assets. Management believes that the presentation of these non-GAAP financial measures (i) provides important supplemental information that contributes to a proper understanding of our operating performance, (ii) enables a more complete understanding of factors and trends affecting our business and (iii) allows investors to evaluate our performance in a manner similar to management, the financial services industry, bank stock analysts, and bank regulators. Management uses non-GAAP financial measures internally in the preparation of our operating budgets, monthly financial performance reporting, and in our presentation to investors of our performance. Non-GAAP financial measures are not defined by GAAP and other entities may calculate them differently than we do. Non-GAAP financial measures have inherent limitations and are not required to be uniformly applied. Although non-GAAP financial measures are frequently used by stakeholders in the evaluation of a company, they have limitations as analytical tools and should not be considered in isolation or as a substitute for analyses of results as reported under GAAP.

The following tables provide a reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure. A reconciliation of net interest income and net interest margin (FTE) to the most directly comparable GAAP financial measure can be found within the Net Interest Income subheading of this report.

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The computation of the adjusted diluted earnings per common share and adjusted net income attributable to TCF was as follows:



		Three Months Ended									Six Months Ended
(Dollars in thousands, except per share data)		June 30, 2020			March 31, 2020			June 30, 2019			June 30, 2020			June 30, 2019
Net income available to common shareholders		$	21,270		$	49,406		$	87,933		$	70,676		$	155,934
Earnings allocated to participating securities		—			—			(17		)	—			(30		)
Earnings allocated to common shareholders	(a)	21,270			49,406			87,916			70,676			155,964
Merger-related expenses		81,619			36,728			4,226			118,347			13,684
Notable items:
Sale of legacy TCF auto finance portfolio and related expenses⁽¹⁾		901			3,063			—			3,964			—
Gains on sales of branches and branch exit costs⁽²⁾		(14,166		)	—			—			(14,166		)	—
Loan servicing rights impairment⁽³⁾		8,858			8,236			—			17,094			—
Total notable items		(4,407		)	11,299			—			6,892			—
Total merger-related expenses and notable items		77,212			48,027			4,226			125,239			13,684
Related income tax expense, net of benefits⁽⁴⁾		(16,114		)	(10,071		)	(1,003		)	(26,185		)	(3,255		)
Total adjustments, net of tax		61,098			37,956			3,223			99,054			10,429
Adjusted earnings allocated to common stock	(b)	$	82,368		$	87,362		$	91,139		$	169,730		$	166,393

Weighted-average common shares outstanding used in diluted earnings per common share calculation⁽⁵⁾	(c)	151,660,139			152,114,017			82,298,920			151,837,226			82,272,396

Diluted earnings per common share	(a) / (c)	$	0.14		$	0.32		$	1.07		$	0.47		$	1.89
Adjusted diluted earnings per common share	(b) / (c)	0.54			0.57			1.11			1.12			2.02

Net income attributable to TCF		$	23,764		$	51,899		$	90,427		$	75,663		$	160,921
Total adjustments, net of tax		61,098			37,956			3,223			99,054			10,429
Adjusted net income attributable to TCF		$	84,862		$	89,855		$	93,650		$	174,717		$	171,350

(1)

Three months ended June 30, 2020 amount included within other noninterest expense ($0.8 million) and compensation and employee benefits ($0.1 million). Three months ended March 31, 2020 amount included within occupancy and equipment ($1.6 million), compensation and employee benefits ($0.9 million) and other noninterest expense ($0.6 million). Six months ended June 30, 2020 amount included within occupancy and equipment ($1.6 million), compensation and employee benefits ($1.0 million) and other noninterest expense ($1.3 million).


(2)	Included within other noninterest income ($14.7 million net gain) and other noninterest expense ($0.6 million).


(3)	Included within other noninterest income.


(4)	Included within income tax expense.


(5)	Assumes conversion of common shares, as applicable.

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The computation of the adjusted net interest income and margin was as follows:



	Three Months Ended									Six Months Ended
(Dollars in thousands, except per share data)	June 30, 2020			March 31, 2020			June 30, 2019			June 30, 2020			June 30, 2019
Net Interest Income	$	378,359		$	401,481		$	254,057		$	779,840		$	508,486
Purchase accounting accretion and amortization	(18,209		)	(25,258		)	—			(43,467		)	—
Adjusted net interest income, excluding purchase accounting accretion and amortization	360,150			376,223			254,057			736,373			508,486
Net fees recognized on PPP loans	(7,805		)	—			—			(7,805		)	—
Interest recognition on PPP loans⁽¹⁾	(1,759		)	—			—			(1,759		)	—
Total PPP loans impact	(9,564		)	—			—			(9,564		)	—
Adjusted net interest income, excluding purchase accounting accretion and amortization and PPP impact	$	350,586		$	376,223		$	254,057		$	726,809		$	508,486
Net interest margin (FTE)	3.35		%	3.76		%	4.49		%	3.55		%	4.55		%
Purchase accounting accretion and amortization	(0.16		)	(0.23		)	—			(0.20		)	—
Adjusted net interest margin, excluding purchase accounting accretion and amortization (FTE)	3.19			3.53			4.49			3.35			4.55
PPP loans impact⁽²⁾	0.01			—			—			0.01			—
Adjusted net interest margin, excluding purchase accounting accretion and amortization and PPP loans impact (FTE)	3.20		%	3.53		%	4.49		%	3.36		%	4.55		%


(1)	Interest income on PPP loans less funding costs.


(2)	The exclusion of PPP loans additionally reduces average earning assets by $1.2 billion in the three months ended June 30, 2020 and $0.6 billion in the six months ended June 30, 2020.

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The computation of the adjusted return on average assets, common equity and average tangible common equity was as follows:



		Three Months Ended									Six Months Ended
(Dollars in thousands)		June 30, 2020			March 31, 2020			June 30, 2019			June 30, 2020			June 30, 2019
Adjusted net income after tax expense:
Income after tax expense	(a)	$	26,233		$	53,816		$	94,043		$	80,049		$	167,492
Merger-related expenses		81,619			36,728			4,226			118,347			13,684
Notable items		(4,407		)	11,299			—			6,892			—
Related income tax expense, net of tax benefits		(16,114		)	(10,071		)	(1,003		)	(26,185		)	(3,255		)
Adjusted net income after tax expense for ROAA calculation	(b)	87,331			91,772			97,266			179,103			177,921
Net income available to common shareholders	(c)	21,270			49,406			87,933			70,676			155,934
Other intangibles amortization		5,516			5,480			798			10,996			1,610
Related income tax expense		(1,151		)	(1,149		)	(189		)	(2,300		)	(382		)
Net income available to common shareholders used in ROATCE calculation	(d)	25,635			53,737			88,542			79,372			157,162

Adjusted net income available to common shareholders:
Net income available to common shareholders		21,270			49,406			87,933			70,676			155,934
Notable items		(4,407		)	11,299			—			6,892			—
Merger-related expenses		81,619			36,728			4,226			118,347			13,684
Related income tax expense, net of tax benefits		(16,114		)	(10,071		)	(1,003		)	(26,185		)	(3,255		)
Net income available to common shareholders used in adjusted ROACE calculation	(e)	82,368			87,362			91,156			169,730			166,363
Other intangibles amortization		5,516			5,480			798			10,996			1,610
Related income tax expense		(1,151		)	(1,149		)	(189		)	(2,300		)	(382		)
Net income available to common shareholders used in adjusted ROATCE calculation	(f)	86,733			91,693			91,765			178,426			167,591
Average balances:
Average assets	(g)	49,716,116			46,985,426			24,483,822			48,350,771			24,296,422
Total average equity		5,658,255			5,630,487			2,664,016			5,644,371			2,621,867
Non-controlling interest in subsidiaries		(28,122		)	(25,328		)	(29,630		)	(26,725		)	(27,089		)
Total TCF Financial Corporation shareholders' equity		5,630,133			5,605,159			2,634,386			5,617,646			2,594,778
Preferred stock		(169,302		)	(169,302		)	(169,302		)	(169,302		)	(169,302		)
Average total common shareholders' equity used in ROACE calculation	(h)	5,460,831			5,435,857			2,465,084			5,448,344			2,425,476
Average goodwill, net		(1,313,046		)	(1,301,080		)	(154,757		)	(1,307,063		)	(154,757		)
Average other intangibles, net		(160,841		)	(166,298		)	(19,270		)	(156,890		)	(19,674		)
Average tangible common shareholders' equity used in ROATCE calculation	(i)	$	3,986,944		$	3,968,479		$	2,291,057		$	3,984,391		$	2,251,045

ROAA⁽¹⁾	(a) / (g)	0.21		%	0.46		%	1.54		%	0.33		%	1.38		%
Adjusted ROAA⁽¹⁾	(b) / (g)	0.70			0.78			1.59			0.74			1.46
ROACE⁽¹⁾	(c) / (h)	1.56			3.64			14.27			2.59			12.86
Adjusted ROACE⁽¹⁾	(e) / (h)	6.03			6.43			14.79			6.23			13.72
ROATCE⁽¹⁾	(d) / (i)	2.57			5.42			15.46			3.99			13.96
Adjusted ROATCE⁽¹⁾	(f) / (i)	8.70			9.24			16.02			8.97			14.89


(1)	Annualized.

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The computation of the adjusted efficiency ratio, noninterest income and noninterest expense was as follows:



		Three Months Ended									Six Months Ended
(Dollars in thousands)		June 30, 2020			March 31, 2020			June 30, 2019			June 30, 2020			June 30, 2019
Noninterest expense	(a)	$	400,241		$	374,599		$	236,849		$	774,840		$	489,924
Merger-related expenses		(81,619		)	(36,728		)	(4,226		)	(118,347		)	(13,684		)
Write-down of company-owned vacant land parcels and branch exit costs		(551		)	—			—			(551		)	—
Expenses related to the sale of Legacy TCF auto finance portfolio		(901		)	(3,063		)	—			(3,964		)	—
Adjusted noninterest expense		317,170			334,808			232,623			651,978			476,240
Lease financing equipment depreciation		(18,212		)	(18,450		)	(19,133		)	(36,662		)	(38,389		)
Amortization of intangibles		(5,516		)	(5,480		)	(798		)	(10,996		)	(1,610		)
Federal historic tax credit amortization		(179		)	(1,521		)	—			(1,701		)	—
Adjusted noninterest expense, efficiency ratio	(b)	$	293,263		$	309,357		$	212,692		$	602,619		$	436,241

Net interest income		$	378,359		$	401,481		$	254,057		$	779,840		$	508,486
Noninterest income		133,054			136,963			109,718			270,017			213,222
Total revenue	(c)	511,413			538,444			363,775			1,049,857			721,708

Noninterest income		133,054			136,963			109,718			270,017			213,222
Gain on sales of branches		(14,717		)	—			—			(14,717		)	—
Loan servicing rights impairment		8,858			8,236			—			17,094			—
Adjusted noninterest income		127,195			145,199			109,718			272,394			213,222
Net interest income		378,359			401,481			254,057			779,840			508,486
Net interest income FTE adjustment		3,032			2,983			1,337			6,015			3,059
Adjusted net interest income		381,391			404,464			255,394			785,855			511,545
Lease financing equipment depreciation		(18,212		)	(18,450		)	(19,133		)	(36,662		)	(38,389		)
Adjusted total revenue, efficiency ratio	(d)	$	490,374		$	531,213		$	345,979		$	1,021,587		$	686,378

Efficiency ratio	(a) / (c)	78.26		%	69.57		%	65.11		%	73.80		%	67.88		%
Adjusted efficiency ratio	(b) / (d)	59.80			58.24			61.48			58.99			63.56

The computations of tangible common equity to tangible assets and tangible book value per common share were as follows:



(Dollars in thousands, except per share data)		At June 30, 2020			At December 31, 2019
Total equity		$	5,658,555		$	5,727,241
Non-controlling interest in subsidiaries		(23,300		)	(20,226		)
Total TCF Financial Corporation shareholders' equity		5,635,255			5,707,015
Preferred stock		(169,302		)	(169,302		)
Total common shareholders' equity	(a)	5,465,953			5,537,713
Goodwill, net		(1,313,046		)	(1,299,878		)
Other intangibles, net		(157,373		)	(168,368		)
Tangible common shareholders' equity	(b)	$	3,995,534		$	4,069,467

Total assets	(c)	$	50,062,460		$	46,651,553
Goodwill, net		(1,313,046		)	(1,299,878		)
Other intangibles, net		(157,373		)	(168,368		)
Tangible assets	(d)	$	48,592,041		$	45,183,307

Common stock shares outstanding	(e)	152,233,106			152,965,571

Common equity to assets	(a) / (c)	10.92		%	11.87		%
Tangible common equity to tangible assets	(b) / (d)	8.22			9.01

Book value per common share	(a) / (e)	$	35.91		$	36.20
Tangible book value per common share	(b) / (e)	26.25			26.60

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The computations of loans and leases and the related allowance for credit losses excluding PPP were as follows:



							Change from December 31, 2019
(Dollars in thousands)	At June 30, 2020			At December 31, 2019			$			%
Commercial and industrial	$	12,200,721		$	11,439,602		$	761,119		6.7%
Commercial real estate	9,628,344			9,136,870			491,474			5.4
Lease financing	2,707,402			2,699,869			7,533			0.3
Total commercial loan and lease portfolio	24,536,467			23,276,341			1,260,126			5.4
Residential mortgage	6,123,118			6,179,805			(56,687		)	(0.9)
Consumer installment	1,430,655			1,542,411			(111,756		)	(7.2)
Home equity	3,445,584			3,498,907			(53,323		)	(1.5)
Total consumer loan portfolio	10,999,357			11,221,123			(221,766		)	(2.0)
Total loans and leases	35,535,824			34,497,464			1,038,360			3.0
PPP (Commercial and industrial)	1,819,469			—			1,819,469			N.M.
Loans and leases excluding PPP loans
Commercial and industrial	10,381,252			11,439,602			(1,058,350		)	(9.3)
Commercial real estate	9,628,344			9,136,870			491,474			5.4
Lease financing	2,707,402			2,699,869			7,533			0.3
Total commercial loan and lease portfolio	22,716,998			23,276,341			(559,343		)	(2.4)
Residential mortgage	6,123,118			6,179,805			(56,687		)	(0.9)
Consumer installment	1,430,655			1,542,411			(111,756		)	(7.2)
Home equity	3,445,584			3,498,907			(53,323		)	(1.5)
Total consumer loan portfolio	10,999,357			11,221,123			(221,766		)	(2.0)
Total loans and leases, excluding PPP loans	$	33,716,355		$	34,497,464		$	(781,109	)	(2.3)%
Allowance for credit losses	$	503,902		$	116,580
Allowance for credit losses as a % of total loans and leases	1.42		%	0.34		%	108			bps
Allowance for credit losses as a % of loans and leases, excluding PPP loans	1.49		%	0.34		%	115

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Our results of operations depend, to a large degree, on our net interest income and our ability to manage interest rate risk. Although we manage other risks in the normal course of business, such as credit risk, liquidity risk and foreign currency risk, we consider interest rate risk to be one of our more significant market risks.

Interest Rate Risk

Our ALCO and Finance Committee of our Board of Directors have established interest rate risk policy limits. Interest rate risk is defined as the exposure of net interest income and fair value of financial instruments (interest earning assets, deposits and borrowings) to movements in interest rates. The major sources of our interest rate risk are timing differences in the maturity and repricing characteristics of assets and liabilities, changes in the shape of the yield curve, changes in consumer behavior and changes in relationships between rate indices (basis risk). Management measures these risks and their impact in various ways, including through the use of simulation and valuation analyses. The interest rate scenarios may include gradual or rapid changes in interest rates, spread narrowing and widening, yield curve twists and changes in assumptions about consumer behavior in various interest rate scenarios. A mismatch between maturities, interest rate sensitivities and prepayment characteristics of assets and liabilities results in interest rate risk. We, like most financial institutions, have material interest rate risk exposure to changes in both short- and long-term interest rates, as well as variable interest rate indices (e.g., the prime rate or London Interbank Offered Rate).

Our ALCO is responsible for reviewing our interest rate sensitivity position and establishing policies to monitor and limit exposure to interest rate risk. ALCO manages our interest rate risk based on interest rate expectations and other factors. The principal objective in managing our assets and liabilities is to provide maximum levels of net interest income and facilitate our funding needs, while maintaining acceptable levels of interest rate risk and liquidity risk.

ALCO primarily uses two interest rate risk tools with policy limits to evaluate our interest rate risk: net interest income simulation and economic value of equity ("EVE") analysis.

Management utilizes net interest income simulation models to estimate the near-term effects of changing interest rates on our net interest income. Net interest income simulation involves forecasting net interest income under a variety of scenarios, including the level of interest rates, the shape of the yield curve and the spreads between market interest rates. Management exercises best judgment in making assumptions regarding events that management can influence, such as non-contractual deposit repricings and events outside management's control, including consumer behavior on loan and deposit activity and the effect that competition has on both loan and deposit pricing. These assumptions are subjective and, as a result, net interest income simulation results will differ from actual results due to the timing, magnitude and frequency of interest rate changes and changes in market conditions, consumer behavior and management strategies, among other factors. We perform various sensitivity analyses on new loan spreads, prepayment rates, basis risk and deposit assumptions.

The following table presents changes in our net interest income over a twelve month period if short- and long-term interest rates were to sustain an immediate change. These projections were based on our assets and liabilities remaining static over the next twelve months and factored into the simulation model.



	Impact on Net Interest Income
(Dollars in thousands)	June 30, 2020
Immediate change in interest rates:
+200 basis points	$	80,800		5.7	%
+100 basis points	43,700			3.1
-100 basis points⁽¹⁾	(28,900		)	(2.0	)

(1) Sensitivity measure is calculated assuming market rates do not decline below 0%.

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Management also uses EVE to measure risk in the balance sheet that might not be taken into account in the net interest income simulation analysis. Net interest income simulation highlights exposure over a relatively short time period, while EVE analysis incorporates all cash flows over the estimated remaining life of all balance sheet positions. The valuation of the balance sheet, at a point in time, is defined as the discounted present value of asset cash flows minus the discounted present value of liability cash flows. EVE analysis addresses only the current balance sheet and does not incorporate the planned changes to interest-earning assets. As with the net interest income simulation model, EVE analysis is based on key assumptions about the timing and variability of balance sheet cash flows and does not take into account any potential responses by management to anticipated changes in interest rates.

LIBOR Transition

In 2017, the U.K. Financial Conduct Authority (the “FCA”) noted that market conditions raised serious questions about the future sustainability of LIBOR benchmarks. Many financial products, including mortgages and other consumer loans, commercial loans, corporate loans, various types of debt, derivatives and other securities, reference LIBOR to determine their applicable interest rate. The expected cessation of publication of LIBOR will impact the mechanics of floating rate financial instruments and contracts that reference LIBOR and mature after 2021. Certain of these financial products do not provide for alternative reference rates, and those that do may differ from the prior benchmark rates. The FCA subsequently announced that it had secured voluntary panel bank support of LIBOR through only 2021. As a result, central banks and regulators have convened working groups to find a suitable replacement index for LIBOR, and TCF is working to identify, assess and monitor risks associated with the expected discontinuation or unavailability of LIBOR, achieve operational readiness and engage impacted customers in connection with the transition.

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Item 4. Controls and Procedures.

Disclosure Controls and Procedures TCF Financial carried out an evaluation, under the supervision and with the participation of TCF Financial's management, including its Chief Executive Officer (Principal Executive Officer), Chief Financial Officer (Principal Financial Officer) and Chief Accounting Officer (Principal Accounting Officer), of the effectiveness of the design and operation of TCF Financial's disclosure controls and procedures pursuant to Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Based on that evaluation, TCF’s Principal Executive Officer and Principal Financial Officer concluded that TCF's disclosure controls and procedures were effective as of June 30, 2020.

Any system of disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. The design of a control system inherently has limitations and the benefits of controls must be weighed against their costs. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. Therefore, no assessment of a cost-effective system of internal controls can provide absolute assurance that all control issues and instances of fraud, if any, will be detected.

Disclosure controls and procedures are designed to ensure that information required to be disclosed by TCF Financial in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to TCF Financial's management, including the Chief Executive Officer (Principal Executive Officer), Chief Financial Officer (Principal Financial Officer) and Chief Accounting Officer (Principal Accounting Officer), as appropriate, to allow for timely decisions regarding required disclosure. TCF Financial's disclosure controls also include internal controls that are designed to provide reasonable assurance that transactions are properly authorized, assets are safeguarded against unauthorized or improper use and that transactions are properly recorded and reported.

Changes in Internal Control Over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting for TCF Financial. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Internal control over financial reporting includes those policies and procedures that pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of TCF Financial; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of TCF Financial are only being made in accordance with authorizations of management and directors of TCF Financial; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of TCF Financial’s assets that could have a material effect on the financial statements.

While we have incorporated certain new controls related to our final adoption of ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments into our existing internal control environment, there was no change in internal control over financial reporting (as a defined rule in Rule 13a-15(f) of the Exchange Act) that occurred during the three months ended June 30, 2020 that has materially affected, or is reasonably likely to materially affect, the Corporation's internal control over financial reporting.

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Part II - Other Information

Item 1. Legal Proceedings.

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 on us for failures related to regulatory compliance. 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.

Item 1A. Risk Factors.

In addition to the risks detailed below, additional information concerning risk factors facing the Corporation is contained in this report under the heading "Forward-Looking Statements" and in Item 1A, “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2019. TCF's business, financial condition or results of operations could be materially adversely affected by any of these risks.

We face risks and uncertainties related to the outbreak of COVID-19

In March 2020, the outbreak of COVID-19 caused by a novel strain of the coronavirus was recognized as a pandemic by the World Health Organization. Shortly thereafter, the President of the United States declared a National Emergency throughout the United States attributable to such outbreak. The outbreak has become increasingly widespread in the United States, including in the markets in which we operate. We are currently taking steps to assess the effects, and mitigate the adverse consequences to our businesses, of the outbreak; though the magnitude of the impact remains to be seen, our businesses will be adversely impacted by the outbreak of COVID-19.

As previously disclosed in Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019, our operations and profitability are impacted by business and economic conditions generally, as well as those in the primary banking markets in which we operate. The COVID-19 pandemic has resulted in historic job losses and decreases in economic activity. While the duration and full extent of job losses and magnitude of economic dislocation are not yet known, it is clear that they have impacted, and may impact in the future, the ability of individuals and small businesses to make payments, the value of underlying collateral and the ability of guarantors to make payments in the case of default, which may decrease consumer demand for our products and services, reduce our ability to access capital, and otherwise adversely impact the financial condition, results of operations, prospects of our businesses and our credit ratings. While the United States and various state and local governments have implemented various programs designed to aid individuals and businesses, the impact of, and extent to which, these efforts will be successful cannot be determined at this time.

Specifically, many of our customers and counterparties have been and may continue to be adversely impacted by the COVID-19 pandemic and resulting economic downturn. As a result, we have faced and may continue to face a decrease in demand for certain products, reduced access to our branches by our customers, and disruptions in the operations of our vendors. The pandemic could also result in the recognition of additional credit losses in our loan and lease portfolios and increase our allowance for credit losses as both businesses and consumers are negatively impacted by the economic downturn. Additionally, customers that are increasingly forced to work remotely and may not have appropriately secured remote networks may be more vulnerable to cyber-attacks or phishing schemes. Any of these occurrences could have a material adverse effect on our financial condition, results of operations and prospects. The extent to which the pandemic impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning its severity and the actions necessary to contain it or address its impact, among others. The duration of these impacts resulting from the COVID-19 is unknown, and the resulting customer behavioral changes are not fully known and may not be temporary.

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In addition, the COVID-19 outbreak has caused, and will continue to cause, substantial disruption to our employees as a result of illness, increased family responsibilities, self-isolation, travel limitations, and otherwise. Most areas within the United States have imposed restrictions on the activities of people and businesses, and it is currently unclear for how long such restrictions will last. Although nearly all of our corporate employees are able to work remotely, closures have nevertheless caused us to reduce access to our branches, and affected many of our customers and many businesses through which we sell our products and services. In addition, the increased reliance on remote work may result in increased vulnerabilities through heavy dependence on remote networks.

Any of the foregoing factors, or other cascading effects of the COVID-19 pandemic that are not currently known, could materially impact our team members and decrease our ability to serve customers, increase our costs, negatively impact our sales and damage our results of operations and our liquidity position, possibly to a significant degree. The duration of any such impacts cannot be predicted.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Share repurchase activity for the three months ended June 30, 2020 was as follows:



Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan
April 1 to April 30, 2020
Share repurchase program⁽¹⁾	—	$	—	—	$	89,419,941
Employee transactions⁽²⁾	74,978	21.05		N.A.	N.A.
May 1 to May 31, 2020
Share repurchase program⁽¹⁾	—	$	—	—	$	89,419,941
Employee transactions⁽²⁾	310	28.77		N.A.	N.A.
June 1 to June 30, 2020
Share repurchase program⁽¹⁾	—	$	—	—	$	89,419,941
Employee transactions⁽²⁾	1,959	29.73		N.A.	N.A.
Total
Share repurchase program⁽¹⁾	—	$	—	—	$	89,419,941
Employee transactions⁽²⁾	77,247	21.30		N.A.	N.A.

N.A. Not Applicable


(1)	On October 24, 2019, the Board of Directors approved an authorization to repurchase up to $150.0 million of our common stock. Repurchases will be based on market conditions, the trading price of our shares and other factors. The ability to repurchase shares in the future may be adversely affected by new legislation or regulations or by changes in regulatory policies.

(2)

Represents restricted stock withheld pursuant to the terms of awards granted under the Legacy TCF Financial Omnibus Incentive Plan to offset tax withholding obligations that occur upon vesting and release of restricted stock. The plan provides that the value of shares withheld shall be the average of the high and low prices of common stock of TCF Financial Corporation on the date the relevant transaction occurs.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

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Item 5. Other Information.

The following information is being filed herewith in lieu of filing such information on a Current Report on Form 8-K under Item 5.02, Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers:

On August 5, 2020, Dennis L. Klaeser and TCF Financial Corporation, a Michigan corporation (the “Corporation” or “TCF”) entered into an agreement (the “Consulting Agreement”) pursuant to which Mr. Klaeser will provide consulting services (the “Services”) to TCF relating to strategic opportunities following the end of Mr. Klaeser’s employment. The term of the Consulting Agreement shall commence on October 2, 2020, and shall end on October 2, 2022 (the “Term”), unless terminated earlier by TCF or Mr. Klaeser. Services may include advising on corporate strategic opportunities, providing M&A support and deal structuring advice, assisting with negotiations, advising on financial models, and providing assistance with investor communications.

Under the terms of the Consulting Agreement, Mr. Klaeser will receive $215,000 per year payable in equal monthly installments (the “Consulting Fee”), and TCF shall reimburse Mr. Klaeser for all reasonable out-of-pocket expenses incurred in providing the Services under the Consulting Agreement. In addition, if Mr. Klaeser provides material support on any acquisition by TCF, he shall receive a Success Fee (as defined in the Consulting Agreement) of between 0.09% and 0.15% of the market capitalization of the acquired company as set forth in the Consulting Agreement; provided, however that no fee will be earned for any transaction for which a letter of intent is not executed prior to the end of the term of the Consulting Agreement, and that in the event that the market capitalization of the acquired company exceeds $5 billion, the Success Fee shall be the same dollar amount as though it were for a seller with a market capitalization of $5 billion.

Either TCF or Mr. Klaeser may terminate the Consulting Agreement for any reason upon one month’s written notice. If Mr. Klaeser is terminated without Cause (as defined in the Consulting Agreement), TCF will remain obligated to pay the remaining Consulting Fee through the end of the Term, and TCF will remain obligated to pay any Success Fees earned or that would be earned but for the early termination of the Consulting Agreement. The Consulting Agreement also subjects Mr. Klaeser to standard confidentiality provisions.

The foregoing description is qualified in all respects by reference to the full text of the Consulting Agreement, a copy of which is attached as Exhibit 10(j) to this to this Quarterly Report on Form 10-Q.

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Item 6. Exhibits.



Exhibit Number		Description
3(a)		Restated Articles of Incorporation of TCF Financial Corporation [incorporated by reference to Exhibit 3.1 to our Form 10-Q for the quarter ended March 31, 2017 (No. 17829102)]
3(b)		Amendment to the Restated Articles of Incorporation of TCF Financial Corporation, including the Certificate of Designations of 5.70% Series C Non-Cumulative Perpetual Preferred Stock [incorporated by reference to Exhibit 3.2 of TCF Financial Corporation’s Current Report on Form 8-K filed with the SEC on August 1, 2019 (No. 19993087)]
3(c)		Bylaws of TCF Financial Corporation, as of August 1, 2019 [incorporated by reference to Exhibit 3.3 of TCF Financial Corporation’s Current Report on Form 8-K filed with the SEC on August 1, 2019 (No. 19993087)]
4(a)		Description of Capital Stock [incorporated by reference to Exhibit 4.1 of TCF Financial Corporation’s Current Report on Form 8-K filed with the SEC on August 1, 2019 (No. 19993087)]
10(a)		Separation and Release between David T. Provost and TCF Financial Corporation, dated May 8, 2020. Previously filed as Exhibit 10(k) of the registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 8, 2020. Here incorporated by reference.
10(b)		Stock Incentive Plan of 2019. Previously filed as Appendix A to the registrant's definitive proxy statement for the registrant's 2019 Annual Meeting of Shareholders, filed with the SEC on March 26, 2019. Here incorporated by reference.
10(c)		Form of Restricted Stock Unit Agreement pursuant to the Stock Incentive Plan of 2019 for Time-Based Restricted Stock Units. Previously filed as Exhibit 10(d) of the registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 8, 2020. Here incorporated by reference.
10(d)		Form of Restricted Stock Unit Agreement pursuant to the Stock Incentive Plan of 2019 for Performance-Based Restricted Stock Units. Previously filed as Exhibit 10(e) of the registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 8, 2020. Here incorporated by reference.
10(e)		Form of Director’s Restricted Stock Agreement pursuant to the Stock Incentive Plan of 2019 for Deferred Restricted Stock. Previously filed as Exhibit 10(f) of the registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 8, 2020. Here incorporated by reference.
10(f)		Form of Director’s Restricted Stock Agreement pursuant to the Stock Incentive Plan of 2019 for Non-Deferred Restricted Stock. Previously filed as Exhibit 10(g) of the registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 8, 2020. Here incorporated by reference.
10(g)		Amended and Restated TCF Financial 2015 Omnibus Incentive Plan. Previously filed as Exhibit 10(a) to Legacy TCF’s Annual Report on Form 10-K filed with the SEC on February 26, 2019. Here incorporated by reference.
10(h)		Form of Restricted Stock Unit Agreement pursuant to the TCF Financial 2015 Omnibus Incentive Plan for Time-Based Restricted Stock Units. Previously filed as Exhibit 10(i) of the registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 8, 2020. Here incorporated by reference.
10(i)		Form of Restricted Stock Unit Agreement pursuant to the TCF Financial 2015 Omnibus Incentive Plan for Performance-Based Restricted Stock Units. Previously filed as Exhibit 10(j) of the registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 8, 2020. Here incorporated by reference.
10(j)#		Consulting Agreement between Dennis L. Klaeser and TCF Financial Corporation, dated August 5, 2020.
31.1#		Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2#		Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1#		Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2#		Certification of the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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101.DEF#		XBRL Taxonomy Extension Definitions Linkbase Document
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101.PRE#		XBRL Taxonomy Extension Presentation Linkbase Document

# Filed herein

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	TCF FINANCIAL CORPORATION


	/s/ Craig R. Dahl
	Craig R. Dahl,
	Chief Executive Officer and President
	(Principal Executive Officer)

	/s/ Dennis L. Klaeser
	Dennis L. Klaeser,
	Executive Vice President and Chief Financial Officer
	(Principal Financial Officer)

	/s/ Kathleen S. Wendt
	Kathleen S. Wendt,
	Executive Vice President and Chief Accounting Officer
	(Principal Accounting Officer)

Dated: August 7, 2020

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(i)	Consultant will provide advice and guidance regarding strategic opportunities that may benefit TCF. Strategic opportunities may include, but not limited to, acquisitions of other banks, merger of equals with other banks, acquisitions of branch networks, acquisitions of specialty finance companies and acquisitions of loan portfolios;


(ii)	Consultant will regularly provide detailed updates regarding current and future activities;


(iii)	Consultant will utilize his capital markets and equity research experience, investment banking relationships, and other connections to identify and evaluate potential opportunities for TCF;


(iv)	Consultant will coordinate with TCF’s Legal Department to negotiate engagement letters with investment bankers;


(v)	Consultant will provide guidance on deal evaluation and due diligence strategies;


(vi)	Consultant will advise TCF’s Finance Department on the development of merger models, key input assumptions (cost savings), portfolio restructuring and valuation parameters;


(vii)	Consultant will provide advice on deal structuring strategies, negotiations, terms and conditions;


(viii)	Consultant will assist with the terms and content of fairness opinions from investment bankers;


(ix)	Upon the signing of a definitive agreement, Consultant will provide advice on regulatory merger applications and SEC filings;


(x)	Consultant will assist with the development of investor presentations and communication strategies;


(xi)	Consultant will be available to assist the CEO on merger/acquisition related matters as requested by the CEO.


1.	I have reviewed this Quarterly Report on Form 10-Q of TCF Financial Corporation for the quarter ended June 30, 2020;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



	/s/ Craig R. Dahl
	Craig R. Dahl
	Chief Executive Officer and President
	(Principal Executive Officer)



	/s/ Dennis L. Klaeser
	Dennis L. Klaeser
	Executive Vice President and Chief Financial Officer
	(Principal Financial Officer)


1.	This statement is provided pursuant to 18 U.S.C. § 1350 in connection with the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 (the “Periodic Report”);


2.	The Periodic Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and


3.	The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods indicated therein.



*	A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to TCF Financial Corporation and will be retained by TCF Financial Corporation and furnished to the Securities and Exchange Commission or its staff upon request.