Loans and Leases

12 Months Ended

Dec. 31, 2019

Loans and leases were as follows:



	At December 31,
(In thousands)	2019		2018
Commercial loan and lease portfolio:
Commercial and industrial	$	11,439,602	$	6,298,240
Commercial real estate	9,136,870		2,830,705
Lease financing	2,699,869		2,530,163
Total commercial loan and lease portfolio	23,276,341		11,659,108
Consumer loan portfolio:
Residential mortgage	6,179,805		2,335,835
Consumer installment	1,542,411		2,003,572
Home equity	3,498,907		3,074,505
Total consumer loan portfolio	11,221,123		7,413,912
Total loans and leases⁽¹⁾	$	34,497,464	$	19,073,020


(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 a net deferred cost of $201.5 million and $1.5 million at December 31, 2019 and 2018, respectively.

Acquired Loans and Leases The Corporation acquired loans and leases at fair value in the Merger and in previous acquisitions completed by Legacy TCF. Certain loans acquired were classified as PCI and are accounted for under ASC 310-30, which recognizes the expected shortfall of expected future cash flows, as compared to the contractual amount due, as nonaccretable difference. Any excess of the net present value of expected future cash flows over the acquisition date fair value is recognized as the accretable yield. The accretable yield is recognized over the expected remaining life of the acquired loan. In the event an acquired loan is renewed or extended, the loan continues to be accounted for as an acquired loan in accordance with ASC 310-30.

The carrying value and changes in accretable yield of all PCI loans were as follows:



	At or For Year Ended December 31,
(In thousands)	2019			2018
Balance of PCI loans, beginning of period	$	3,817		$	11,844
Accretable Yield
Balance, beginning of period	$	961		$	1,051
Addition attributable to the Merger	38,479			—
Accretion recognized in interest income	(11,453		)	(215		)
Net reclassification (to) from nonaccretable difference	10,091			370
Payments received	(10,445		)	(245		)
Balance, end of period	$	27,633		$	961
Balance of PCI loans, end of period	$	246,786		$	3,817

Leases Effective January 1, 2019, we adopted ASU No. 2016-02, Leases (Topic 842), and related ASUs on a modified retrospective basis, electing the practical expedients and optional transition method. As such, the following leasing disclosures include information at or for the year ended December 31, 2019.

The components of the net investment in direct financing and sales-type leases were as follows:



(In thousands)	At December 31, 2019
Carrying amount	$	2,794,212
Unguaranteed residual assets	152,030
Net direct fees and costs and unearned income	(246,373		)
Total net investment in direct financing and sales-type leases	$	2,699,869

The carrying amount of the sales-type and direct financing leases subject to residual value guarantees was $277.1 million at December 31, 2019.

The components of total lease income were as follows:



(In thousands)	Year Ended December 31, 2019
Interest income - loans and leases:
Interest income on net investment in direct financing and sales-type leases	$	131,547
Leasing revenue (noninterest income):
Lease income from operating lease payments	100,975
Profit (loss) recorded on commencement date on sales-type	35,694
Gain (losses) on sales of leased equipment	27,049
Leasing Revenue	163,718
Total lease income	$	295,265

Lease financing equipment depreciation on equipment leased to others was $76.4 million and the net book value of equipment leased to others and related initial direct costs under operating leases was $289.7 million at December 31, 2019.

Undiscounted future minimum lease payments receivable for direct financing and sales-type leases, and a reconciliation to the carrying amount recorded at December 31, 2019 were as follows:



(In thousands)
2020	$	298,172
2021	432,641
2022	553,109
2023	588,042
2024	528,749
Thereafter	257,911
Equipment under leases not yet commenced	47,141
Total undiscounted future minimum lease payments receivable for direct financing and sales-type leases	2,705,765
Third-party residual value guarantees	88,447
Total carrying amount of direct financing and sales-type leases	$	2,794,212

Undiscounted future minimum lease payments expected to be received for operating leases at December 31, 2019 were as follows:



(In thousands)
2020	$	75,507
2021	54,274
2022	31,494
2023	14,405
2024	5,283
Thereafter	3,674
Total undiscounted future minimum lease payments	$	184,637

Loan Sales The following table summarizes the net gains on sales of loans and leases. We retain servicing on a majority of loans sold. See "Note 11. Loan Servicing Rights" for further information.



	Year Ended December 31,
(In millions)	2019			2018			2017
Sale proceeds, net	$	2,951,445		$	1,275,960		$	1,899,430
Recorded investment in loans and leases sold, including accrued interest	2,888,408			1,238,018			1,837,500
Loss on transfer of loans to held-for-sale, interest-only strips at initial value and other	(36,729		)	(4,247		)	(16,612		)
Net gains on sales of loans and leases	$	26,308		$	33,695		$	45,318

During the fourth quarter of 2019, we completed the sale of the Legacy TCF auto finance portfolio of $1.1 billion, which had been included within loans held-for-sale at September 30, 2019, resulting in a $27.5 million loss for the year, included in net gains on sales of loans and leases.

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



	At December 31,
(In thousands)	2019		2018
Interest-only strips	$	12,813	$	16,835

We recorded $62 thousand, $661 thousand and $1.6 million of impairment charges on interest-only strips in 2019, 2018 and 2017, respectively.

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 in the event we breach these representations, 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 2019, 2018 and 2017.