Loans and Leases

Loans and leases were as follows:



	At December 31,
(In thousands)	2018		2017
Consumer real estate:
First mortgage lien	$	2,444,380	$	1,959,387
Junior lien	2,965,960		2,860,309
Total consumer real estate	5,410,340		4,819,696
Commercial:
Commercial real estate:
Permanent	2,510,583		2,385,752
Construction and development	397,564		365,533
Total commercial real estate	2,908,147		2,751,285
Commercial business	943,156		809,908
Total commercial	3,851,303		3,561,193
Leasing and equipment finance	4,699,740		4,761,661
Inventory finance	3,107,356		2,739,754
Auto finance	1,982,277		3,199,639
Other	21,295		22,517
Total loans and leases⁽¹⁾	$	19,072,311	$	19,104,460


(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 $(2.2) million and $33.3 million at December 31, 2018 and 2017, respectively.

Loan Sales During 2018, 2017 and 2016, TCF sold $1.0 billion, $1.3 billion and $1.6 billion, respectively, of consumer real estate loans, received cash of $1.1 billion, $1.4 billion and $1.7 billion, respectively, and recognized net gains of $33.5 million, $37.3 million and $50.4 million, respectively. Related to these sales, TCF retained interest-only strips of $4.8 million, $3.4 million and $16.9 million during 2018, 2017 and 2016, respectively. Included in consumer real estate loans sold in 2018 and 2017 were $34.7 million and $71.2 million, respectively, of non-accrual loans, which were sold servicing released. TCF generally retains servicing on loans sold.

During 2018, TCF did not sell any auto finance loans. During 2017 and 2016, TCF sold $424.7 million and $2.1 billion, respectively, of auto finance loans, received cash of $431.9 million and $2.1 billion, respectively, and recognized net gains of $5.5 million and $34.8 million, respectively. Related to the sales during 2016, TCF retained interest-only strips of $5.7 million. Included in auto finance loans sold in 2016 were amounts related to the completion of securitizations. The auto finance securitizations qualify for sale accounting and were executed by transferring the recorded investment to trusts. TCF transferred auto finance loans of $1.4 billion, with servicing retained, to trusts, received cash of $1.5 billion, recorded a securitization receivable of $18.6 million and recognized net gains of $12.5 million. These trusts are considered VIEs due to their limited capitalization and special purpose nature. TCF has concluded it is not the primary beneficiary of the trusts and therefore, they are not consolidated.

No servicing assets or liabilities related to consumer real estate or auto finance loans were recorded within TCF's Consolidated Statements of Financial Condition at December 31, 2018 and 2017, as the contractual servicing fees are adequate to compensate TCF for its servicing responsibilities based on the amount demanded by the marketplace.

Total interest-only strips and the contractual liabilities related to loan sales were as follows:



	At December 31,
(In thousands)	2018		2017
Interest-only strips attributable to:
Consumer real estate loan sales	$	15,316	$	16,440
Auto finance loan sales	1,519		4,946
Total interest-only strips	$	16,835	$	21,386
Contractual liabilities attributable to:
Consumer real estate loan sales	$	1,321	$	1,234

TCF recorded impairment charges on the consumer real estate interest-only strips of $0.3 million, $1.1 million and $0.8 million in 2018, 2017 and 2016, respectively. TCF recorded impairment charges on the auto finance interest-only strips of $0.4 million, $0.5 million and $2.4 million in 2018, 2017 and 2016, respectively.

TCF's agreements to sell consumer real estate and auto 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 TCF breaches 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. For repurchases related to auto finance loans, TCF typically has contractual agreements with the automobile dealerships that originated the loans requiring the dealers to reimburse TCF for the cost of such repurchases. Losses related to repurchases pursuant to such representations, warranties and covenants were immaterial for 2018, 2017 and 2016.

Leasing and Equipment Finance Portfolio The leasing and equipment finance portfolio consisted of $2.5 billion of leases and $2.2 billion of loans at December 31, 2018 and $2.5 billion of leases and $2.3 billion of loans at December 31, 2017.

Future minimum lease payments receivable for direct financing, sales-type and operating leases at December 31, 2018 were as follows:



(In thousands)
2019	$	986,449
2020	739,766
2021	520,985
2022	301,757
2023	145,156
Thereafter	57,194
Total	$	2,751,307

Acquired Loans and Leases TCF acquires loans and leases through business combinations and purchases of loan and lease portfolios. TCF purchased loans and leases at fair value of $1.0 billion and $771.3 million during 2018 and 2017, respectively. No PCI loans were acquired during 2018. Included in loans and leases acquired during 2017 were $14.0 million of leasing and equipment finance PCI loans that TCF acquired on September 29, 2017. On the acquisition date, the leasing and equipment finance PCI loans had contractually required payments receivable of $24.0 million, expected cash flows of $16.6 million and a fair value (initial carrying amount) of $14.0 million. The $7.4 million difference between the contractually required payments receivable and the expected cash flows represented the non-accretable difference. The $2.6 million difference between the expected cash flows and fair value represented the initial accretable yield. At December 31, 2018 and 2017, the outstanding contractual balance of these PCI loans was $7.0 million and $16.4 million, respectively.

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



	At or For the Year Ended December 31,
	2018						2017
(In thousands)	Accretable Yield			Carrying Amount			Accretable Yield			Carrying Amount
Balance, beginning of period	$	1,051		$	11,844		$	—		$	17
Additions due to acquisitions of loans	—			—			2,635			13,951
Accretion	(215		)	215			(25		)	25
Reclassifications from non-accretable difference	370			(356		)	312			—
Payments received	(245		)	(7,886		)	(1,871		)	(2,149		)
Balance, end of period	$	961		$	3,817		$	1,051		$	11,844