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Section 1: DEF 14A (DEF 14A)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.     )

 

Filed by the Registrant  x

 

Filed by a Party other than the Registrant  o

 

Check the appropriate box:

o

Preliminary Proxy Statement

o

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

x

Definitive Proxy Statement

o

Definitive Additional Materials

o

Soliciting Material under §240.14a-12

 

TCF Financial Corporation

(Name of Registrant as Specified In Its Charter)

 

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

x

No fee required.

o

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

(1)

Title of each class of securities to which transaction applies:

 

 

 

 

(2)

Aggregate number of securities to which transaction applies:

 

 

 

 

(3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

 

 

 

(4)

Proposed maximum aggregate value of transaction:

 

 

 

 

(5)

Total fee paid:

 

 

 

o

Fee paid previously with preliminary materials.

o

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

(1)

Amount Previously Paid:

 

 

 

 

(2)

Form, Schedule or Registration Statement No.:

 

 

 

 

(3)

Filing Party:

 

 

 

 

(4)

Date Filed:

 



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TCF FINANCIAL CORPORATION

200 Lake Street East

Wayzata, MN 55391-1693

(952) 745-2760

 

 

 

March 7, 2013

 

Dear Stockholder:

 

You are invited to attend TCF Financial Corporation’s Annual Meeting of Stockholders at the Marriott Minneapolis West, 9960 Wayzata Boulevard, St. Louis Park, Minnesota, on April 24, 2013, at 3:30 p.m. local time.

 

At the Annual Meeting you will be asked to elect 15 Directors.  You will also be asked to approve the amended and restated TCF Financial Incentive Stock Program, approve the amended and restated TCF Performance-Based Compensation Policy for Covered Executive Officers, and to give advisory (non-binding) votes on executive compensation and on the Audit Committee’s appointment of KPMG LLP as the Company’s independent registered public accountants for 2013.  The Board of Directors recommends that you vote “FOR” all of the proposals to be presented at the meeting.

 

Your vote is important, regardless of the number of shares you own.  I urge you to vote now, even if you plan to attend the Annual Meeting.  We are also mailing a Notice of Internet Availability of Proxy Materials (the “Notice”) to the majority of stockholders who are eligible to vote at the Annual Meeting, instead of sending the traditional printed proxy materials.  The Notice instructs stockholders how to access TCF’s proxy materials online and how to vote their shares of TCF common stock. If you are sent this Notice but would prefer to receive the traditional printed proxy materials free of charge, please follow the instructions on the Notice to request the printed materials via U. S. mail. If you received the traditional printed proxy materials in lieu of the Notice, you may vote your TCF shares online, by telephone, or by mail by following the instructions on the proxy card.  If you received more than one proxy card, please vote each card.

 

Finally, if you plan to attend the Annual Meeting, please bring a valid form of photo identification.

 

 

Sincerely,

 

 

William A. Cooper

 

Chairman and Chief Executive Officer

 



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TCF FINANCIAL CORPORATION

200 LAKE STREET EAST

WAYZATA, MN 55391-1693

(952) 745-2760


 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD APRIL 24, 2013


 

The Annual Meeting of Stockholders of TCF Financial Corporation (“TCF”) is scheduled as shown below:

 

Date:      April 24, 2013

Time:     3:30 p.m. local time

Place:     Marriott Minneapolis West

9960 Wayzata Boulevard

St. Louis Park, MN  55426

 

Meeting Agenda

 

1.              Elect 15 Directors, each to serve a one-year term;

2.              Approve the amended and restated TCF Financial Incentive Stock Program;

3.              Approve the amended and restated TCF Performance-Based Compensation Policy for Covered Executive Officers;

4.              Advisory (non-binding) vote on executive compensation as disclosed in the proxy statement;

5.              Advisory (non-binding) vote on the appointment of KPMG LLP as independent registered public accountants for the fiscal year ending December 31, 2013; and

6.              Other business properly brought before the Annual Meeting, if any.

 

You are entitled to vote at the Annual Meeting if you owned TCF common stock at the close of business on February 25, 2013.  If you plan to attend the Annual Meeting, please bring a valid form of photo identification.

 

Whether or not you plan to attend the Annual Meeting, we urge you to vote now to make sure there will be a quorum for the Annual Meeting.  You may vote your shares online, by telephone, or by mail by following the instructions on your proxy card.  You may revoke your proxy by submitting another timely proxy, by notifying the Secretary of TCF in writing before your shares are voted at the Annual Meeting, or by voting your shares in person at the Annual Meeting.  If you hold shares through a broker or other nominee, please follow the voting instructions provided to you by that broker or other nominee.

 

TCF is making its Proxy Statement for the 2013 Annual Meeting of Stockholders and its 2012 Annual Report to Stockholders available via the Investor Relations section of TCF’s website at http://ir.tcfbank.com.  A free webcast of the Annual Meeting also will be available at http://ir.tcfbank.com on Wednesday, April 24, 2013, at 3:30 p.m. local time.

 

 

By Order of the Board of Directors

 

 

William A. Cooper

 

Chairman and Chief Executive Officer

 

Wayzata, Minnesota

March 7, 2013

 



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TABLE OF CONTENTS

 

 

Page

 

 

About the Annual Meeting

1

Proposal 1: Election of Directors

4

Corporate Governance

7

Director Compensation

16

Ownership of TCF Stock

18

Section 16(a) Beneficial Ownership Reporting Compliance

20

Background of Executive Officers Who Are Not Directors

21

Compensation Discussion and Analysis

22

Compensation Committee Report

37

Executive Compensation

38

Equity Compensation Plans Approved by Stockholders

51

Proposal 2:  Approve the Amended and Restated TCF Financial Incentive Stock Program

51

Proposal 3:  Approve the Amended and Restated TCF Performance-Based Compensation Policy for Covered Executive Officers

57

Proposal 4:  Advisory (Non-Binding) Vote on Executive Compensation

59

Proposal 5:  Advisory (Non-Binding) Vote on the Appointment of KPMG LLP as Independent Registered Public Accountants

60

Audit Committee Report

61

Independent Registered Public Accountants

61

Additional Information

62

Appendix I – Proposed TCF Financial Incentive Stock Program

63

Appendix II – Proposed TCF Performance-Based Compensation Policy for Covered Executive Officers

70

 



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TCF FINANCIAL CORPORATION

200 LAKE STREET EAST

WAYZATA, MN 55391-1693

(952) 745-2760

 

 

PROXY STATEMENT

 

 

The Board of Directors (the “Board”) of TCF Financial Corporation (“TCF Financial,” “TCF,” or the “Company”) requests your proxy for the 2013 Annual Meeting of Stockholders (the “Annual Meeting”).  The proxy is being solicited on behalf of the Board and TCF.  The Annual Meeting is scheduled as shown below:

 

Date:      April 24, 2013

Time:     3:30 p.m. local time

Place:     Marriott Minneapolis West

9960 Wayzata Boulevard

St. Louis Park, MN  55426

 

The Notice of Internet Availability of Proxy Materials (the “Notice”) or, in some cases, this proxy statement and the accompanying form of proxy, will first be mailed on or about March 7, 2013.

 

ABOUT THE ANNUAL MEETING

 

What Proposals are on the Agenda for the Annual Meeting?

 

Assuming a quorum is present, the following proposals will be voted on at the Annual Meeting:

1.     Elect 15 Directors, each to serve a one-year term;

2.              Approve the amended and restated TCF Financial Incentive Stock Program (the “Incentive Stock Program”);

3.              Approve the amended and restated TCF Performance-Based Compensation Policy for Covered Executive Officers (the “Performance-Based Compensation Policy”);

4.              Advisory (non-binding) vote on executive compensation as disclosed herein (“Say on Pay”); and

5.              Advisory (non-binding) vote on the appointment of KPMG LLP as independent registered public accountants for the fiscal year ending December 31, 2013.

 

Who is Permitted to Vote at the Annual Meeting?

 

You are entitled to vote at the Annual Meeting if you owned shares of TCF’s common stock (“TCF Common Stock”) at the close of business on February 25, 2013 (the “Record Date”).  There were 163,754,966 shares of TCF Common Stock outstanding on the Record Date.  Each share of TCF Common Stock you owned as of the Record Date entitles you to one vote on each proposal at the Annual Meeting.

 

You may vote “FOR” or “WITHHOLD” on Proposal 1.  With respect to all other proposals, you may vote “FOR,” “AGAINST,” or “ABSTAIN.”

 

Stockholders of Record.  If your shares of TCF Common Stock are registered directly in your name, then you are considered the stockholder of record with respect to those shares and you may grant your proxy directly to the individuals listed on the proxy card or vote in person at the Annual Meeting.

 

“Street Name” Holders.  If your shares are held in a stock brokerage account or by any other nominee, then you are considered the beneficial owner of those shares, which are said to be held in “street name.”  As the beneficial owner, you may direct your broker or other nominee how to vote your shares using the voting instructions provided to you

 



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by that broker or other nominee.  You may not vote your shares in person at the Annual Meeting unless you obtain a legal proxy from your broker or other nominee.

 

How is a Quorum Determined?

 

A majority of the shares of TCF Common Stock outstanding as of the Record Date must be present in person or by proxy at the Annual Meeting in order to have a quorum.  Broker non-votes (described below) of your shares are counted toward the quorum requirement.  If you vote by proxy before the Annual Meeting but decide to withhold authority or abstain on one or more proposals, you are counted as being present at the Annual Meeting and your shares count toward the quorum requirement but will not be deemed to have been voted in favor of such proposal(s).

 

How Do I Vote?

 

Stockholders of Record.  In addition to voting your shares in person at the Annual Meeting, you can also vote your shares of TCF Common Stock in advance of the Annual Meeting by submitting a proxy to TCF using one of the following options:

·      online using the instructions for Internet voting shown on the Notice or proxy card(s);

·      by telephone using the instructions for telephone voting shown on the proxy card(s); or

·     by mail by marking the proxy card(s) with your instructions and then signing, dating and returning the proxy card(s) in the enclosed return addressed envelope.

 

The individuals designated as proxies on a proxy submitted to TCF will vote your shares based on your instructions.  If you submit your proxy card(s) to TCF, but do not give instructions as to any or all of the proposals, they will vote “FOR” the proposal(s) for which you do not provide instructions.  If any other business comes before the Annual Meeting, they will vote your proxy according to their own judgment.

 

“Street Name” Holders.  You must follow the voting instructions provided by your broker or other nominee.  Under the rules of the New York Stock Exchange (“NYSE”), brokers who hold your shares in “street name” have the authority to vote shares for which they do not receive instructions on all routine matters submitted for approval at the Annual Meeting.  In the absence of your specific instructions as to how to vote, your broker will not have authority to vote on the matters considered non-routine, which include the election of Directors, approval of the amended and restated Incentive Stock Program, approval of the amended and restated Performance-Based Compensation Policy, and Say on Pay.  “Street name” holders are invited to attend the Annual Meeting; however, you must obtain a legal proxy from the stockholder of record (your broker or other nominee) in order to vote your shares in person at the Annual Meeting.

 

Annual Meeting Webcast.  Only stockholders who attend in person may vote during the Annual Meeting.  Stockholders listening to the Annual Meeting via webcast are not able to vote during the Annual Meeting.  If you plan to listen to the Annual Meeting via webcast, please vote in advance by proxy by following the instructions set forth on the Notice or proxy card(s).

 

Notice.  You may not vote by filling out and returning the Notice.  The Notice identifies the items to be voted on at the Annual Meeting and provides instructions on how to submit your vote, but you cannot vote by marking the Notice and returning it.

 

Once I Have Voted My Proxy, May I Revoke It and Vote at the Annual Meeting?

 

Yes, your proxy is revocable and is automatically revoked if you submit a new proxy or vote.  You can vote your shares at the Annual Meeting by written ballots available at the Annual Meeting, even if you voted them in advance by proxy.  However, if your shares are held in “street name” by a broker or other nominee, you must bring with you to the Annual Meeting a legal proxy from them in your name.  Stockholders who listen to the Annual Meeting via the webcast will not be able to revoke proxies or vote at the Annual Meeting via the webcast.

 

What is the Vote Required for Approval?

 

For Proposal 1, the election of Directors, the 15 candidates who receive the most votes (a plurality) will be elected.  Withholding authority to vote for a Director will have no effect on the election of the Director.  Proposal 2, approval of the amended and restated Incentive Stock Program, and Proposal 3, approval of the amended and restated

 

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Performance-Based Compensation Policy, each requires the affirmative vote of the holders of a majority of the shares cast on such proposal, provided the total votes cast on the proposal represent more than 50% of the outstanding shares of TCF Common Stock entitled to vote.  All other proposals must be approved by a majority of the shares present in person or by proxy and entitled to vote at the Annual Meeting.

 

What is a “Broker Non-Vote” and What is the Effect of Broker Non-Votes and Abstentions?

 

A “broker non-vote” occurs when your broker or other institution holding title to your shares as your nominee (in “street name”) does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that item and has not received voting instructions from you.  Generally, if a broker returns a “non-vote” proxy with respect to a proposal, then the shares covered by such a “non-vote” proxy will be counted as present for purposes of determining a quorum, but will not be counted in determining the outcome of the vote on that matter at the Annual Meeting.  In the absence of specific instructions from you, your broker or other institution holding title to your shares as nominee will not have discretion to vote on any matters at the Annual Meeting other than Proposal 5, the advisory (non-binding) vote on the appointment of KPMG LLP as independent registered public accountants for the fiscal year ending December 31, 2013.

 

A properly executed proxy marked “ABSTAIN” with respect to a proposal will be counted for purposes of determining a quorum, but will not be deemed to have voted in favor of such proposal.  Because shares voted “ABSTAIN”  are counted as entitled to vote on a proposal, abstentions will have the same effect as a vote against the proposal.

 

Who Pays for the Expenses Related to Proxy Solicitation?

 

TCF is paying all costs of solicitation.  Proxies may be solicited on TCF’s behalf by Directors, officers or employees in person or by telephone, electronic transmission, mail or facsimile.  Directors, officers and employees will not receive any additional compensation for such services.  TCF will, upon request, reimburse brokerage firms and other nominees for their reasonable expenses incurred for forwarding solicitation materials to beneficial owners of TCF Common Stock.  TCF has also retained The Proxy Advisory Group, LLC to assist in the solicitation of proxies for an estimated fee of $15,000, plus out-of-pocket expenses.

 

Who Will Count the Votes?

 

A representative of Broadridge Financial Solutions, Inc., TCF’s tabulation agent, will tabulate the votes and act as independent inspector of election.

 

Are There any Requirements to Attend the Annual Meeting?

 

Holders of TCF Common Stock will be permitted to attend the Annual Meeting upon presentation of a valid form of photo identification.

 

May Stockholders Submit Proposals or Nominate Directors for This Annual Meeting?

 

The deadline for stockholders to submit proposals or a Director nomination for inclusion in this proxy statement was November 8, 2012 and the deadline to submit proposals or nominations not to be included in this proxy statement was February 23, 2013.  No stockholder proposals or nominations were submitted by either date.

 

What is TCF’s Policy on Stockholder Nominations?

 

Please refer to “Corporate Governance – Director Nominations” below for a description of TCF’s policy on stockholder nominations.

 

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PROPOSAL 1:  ELECTION OF DIRECTORS

 

Each Director listed below is being nominated for election to a one-year term.  Unless instructed otherwise by the person submitting the proxy, all proxies received will be voted in favor of the Nominees listed in the following table.  All Nominees agree they will serve if elected.  However, if any Nominee is unable to serve or for good cause will not serve, a proxy submitted to TCF may be voted for a replacement nominee by the persons named on the proxies as recommended by the Nominating Committee of the Compensation/Nominating/ Corporate Governance Committee.

 

Name

 

Position(s) with TCF Financial

 

Age

 

Director
Since *

 

 

 

 

 

 

 

Raymond L. Barton

 

Director

 

64

 

2011

Peter Bell

 

Director

 

61

 

2009

William F. Bieber

 

Director

 

70

 

1997

Theodore J. Bigos

 

Director

 

60

 

2008

William A. Cooper

 

Director, Chairman and Chief Executive Officer

 

69

 

1987

Thomas A. Cusick

 

Director

 

68

 

1988

Craig R. Dahl

 

Director, Vice Chairman and Executive Vice President, Lending

 

58

 

2012

Karen L. Grandstrand

 

Director

 

58

 

2010

Thomas F. Jasper

 

Director, Vice Chairman and Executive Vice President, Funding, Operations and Finance

 

44

 

2012

George G. Johnson

 

Director

 

70

 

1998

Vance K. Opperman

 

Director

 

70

 

2009

James M. Ramstad

 

Director

 

66

 

2011

Gerald A. Schwalbach

 

Director

 

68

 

1999

Barry N. Winslow

 

Director and Vice Chairman, Corporate Development

 

65

 

2008

Richard A. Zona

 

Director

 

68

 

2011

 

*  Excludes Director service with subsidiaries, predecessor companies or companies merged with TCF Financial.

 

Each Nominee’s qualifications and contributions made to the Board were considered before each individual was nominated for election at the Annual Meeting.

 

Recommendation of the Board.  The Board unanimously recommends that stockholders vote “FOR” all of the Nominees listed above.

 

Background of the Nominees

 

The following describes at least the last five years of business experience of each Nominee proposed for election as a Director, as well as the specific experience, qualifications, attributes or skills that led to the conclusion that the Nominee should serve as a Director of TCF.  The descriptions also include any other directorships at public companies held during the past five years by the Nominees.  There is no family relationship between any of the Nominees or executive officers of TCF Financial.

 

RAYMOND L. BARTON has been a Director of TCF Financial since 2011 and is currently a member of the Bank Secrecy Act (“BSA”) Compliance, Compensation/Nominating/Corporate Governance, Executive, and Finance Committees.  He has been the Chairman of the Board of Great Clips, Inc., an operator and franchiser of hair salons, since 1998 and also served as its Chief Executive Officer from 1998 to January 2011.  Mr. Barton was President of Great Clips, Inc. from 1983 to 1998.  Previously, he served as a vice president at Questex Energy from 1982 to 1983 and Treasurer at Century 21 Real Estate North Central States from 1978 to 1982.  He was a member of the accounting firm Alexander Grant & Co. (now Grant Thornton) from 1972 to 1978.  He was a member of the Board of Directors of Children’s Hospitals and Clinics of Minnesota from 2005 to 2012, and Chairman of the Board from 2010 to 2011.  Mr. Barton’s insight into retail services businesses and demonstrated success as an entrepreneur make him a valuable contributor to the Board.

 

PETER BELL has been a Director of TCF Financial since 2009 and is currently a member of the BSA Compliance and Finance Committees.  Since December 2010, Mr. Bell has served as Senior Advisor to the Center of the American Experiment, a public policy institution.  From 2003 until December 2010, he was the chair of the

 

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Metropolitan Council, a regional agency serving the Minneapolis/St. Paul metropolitan area, that operates the bus, wastewater, and parks systems, and administers funds for affordable housing opportunities, and he was responsible for strategic long-range growth planning for the Minneapolis/St. Paul metropolitan area.  Formerly, he was executive vice president at Hazelden Publishing and Educational Services from 1999 to 2002 and Executive Vice President of Corporate Community Relations at TCF National Bank, a wholly-owned national bank subsidiary of TCF Financial (“TCF Bank”), from 1994 to 1999.  He was the co-founder and executive director of the Institute on Black Chemical Abuse and has authored and published numerous books on chemical dependence.  He is a former member of the Board of Regents of the University of Minnesota, serves as the chair of the American Refugee Committee, and serves on the board of directors of the Friends of Education, the United Way, and many other local and national social and civic organizations.  In addition to unique management experience in the public and private sectors, Mr. Bell contributes his extensive experience in government affairs to the Board.  As a bank holding company regulated by several federal agencies, TCF has numerous dealings with regulatory bodies, and Mr. Bell’s expertise in dealing with a wide variety of state and federal regulators is very helpful in Board deliberations that involve TCF’s regulatory relationships.

 

WILLIAM F. BIEBER has been a Director of TCF Financial since 1997 and is currently a member of the BSA Compliance, Compensation/Nominating/Corporate Governance, and Finance Committees.  He is currently Chairman of the Board of ATEK Companies, Inc., a Minnesota-based organization supplying various products to the commercial, medical, and industrial marketplace, a position he has held since 1984.  As the Chief Executive Officer and owner of Acrometal Products, a position he first held in 1973, Mr. Bieber acquired numerous manufacturing and production entities, expanding the business that would become the ATEK family of companies.  He previously served as President of the Board of Hammer Residences Inc. and as a cabinet member to the Minneapolis United Way.  In these roles, Mr. Bieber obtained years of management experience and financial expertise.  The Board especially values his extensive experience in starting, acquiring and growing businesses.  TCF attempts to run its business lines with an entrepreneurial spirit, and Mr. Bieber’s knowledge of how to turn a product concept into a profitable business venture benefits Board discussions regarding products and strategic initiatives.

 

THEODORE J. BIGOS has been a Director of TCF Financial since 2008 and is currently a member of the BSA Compliance, Compensation/Nominating/Corporate Governance, and Finance Committees.  He is the owner of Bigos Management, Inc., an apartment ownership and management firm located in Minnesota, and he has been involved in the ownership or operation of apartment complexes for the past 40 years.  As TCF’s primary businesses include both residential and commercial lending, Mr. Bigos’ unique experience in long-term management of an apartment conglomerate and corresponding knowledge of the real estate markets make him a valuable contributor to the Board.

 

WILLIAM A. COOPER has been a Director and the Chairman of the Board of TCF Financial since its formation in 1987.  He has served as the Chief Executive Officer (“CEO”) of TCF Financial since July 2008 and also served as CEO from 1987 until his temporary retirement on December 31, 2005.  Mr. Cooper continued to serve as non-executive Chairman of TCF Financial during his brief retirement.  He has also been the Chairman and Chief Executive Officer of TCF Bank since August 2012 and was the Chief Executive Officer of TCF Bank from 1985 to 1993.  He is a director and controlling shareholder of C Financial Corporation, the holding company of Cooper State Bank. Cooper State Bank is a state bank organized under the laws of the State of Ohio.  Mr. Cooper’s key attributes are his leadership skills and the experience gained through his long career in the banking industry and 28-year tenure at TCF.  Mr. Cooper’s demonstrated ability to lead Company management in deliberations on a wide variety of topics in various economic cycles is critical to the successful functioning of the Board.

 

THOMAS A. CUSICK has been a Director of TCF Financial since 1988 and is currently a member of the Audit, BSA Compliance, Finance, and Risk Committees.  He was Chief Operating Officer of TCF Financial from 1997 to 2002 and Vice Chairman from 1993 to 2002.  Mr. Cusick served as President of TCF Financial from its formation in 1987 until 1993.  He also served as Chief Executive Officer of TCF Bank from 1993 to 1996.  Mr. Cusick retired as an executive of TCF Financial in 2002.  Mr. Cusick contributes unique knowledge to the Board obtained during his 40-year career in banking with a special focus on retail banking and technology.  Mr. Cusick’s retail and information technology experience is invaluable when the Board takes up issues involving TCF Bank’s extensive information technology service requirements.  In the current environment of rapidly-changing information technology, Mr. Cusick’s experience with the Company and familiarity with addressing challenges in retail banking areas is important to Board deliberations.

 

CRAIG R. DAHL has been a Director of TCF Financial since January 2012 and has been Vice Chairman and Executive Vice President, Lending of the Company since January 1, 2012.  From 2010 to 2011, he was Executive Vice President, Wholesale Banking of TCF Financial.  Mr. Dahl has also been the Chairman of TCF Inventory Finance, Inc. since 2008, Chairman and Chief Executive Officer of Winthrop Resources Corporation since 2003,

 

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Chairman of TCF Equipment Finance, Inc. since 2008, and Chairman of Gateway One Lending and Finance, LLC since 2011, all of which are wholly-owned subsidiaries of TCF Bank.  Mr. Dahl was also the Chief Executive Officer of TCF Equipment Finance, Inc. from 2005 until December 2012.  Since 1999, he has been an Executive Vice President of TCF Financial.  Mr. Dahl’s expertise in lending and the specialty finance industry enables him to make meaningful contributions during Board discussions.

 

KAREN L. GRANDSTRAND has been a Director of TCF Financial since 2010 and is currently the Chair of the BSA Compliance Committee and a member of the Audit, Executive, Finance, and Risk Committees.  She is a shareholder in the Minneapolis law firm of Fredrikson & Byron, P.A. and chair of the firm’s Bank and Finance Group.  Prior to joining the firm in 1999, Ms. Grandstrand was Senior Vice President of the Banking Supervision and Risk Management Departments at the Federal Reserve Bank of Minneapolis, where she worked from 1985 to 1999.  She served as a director of Thrivent Financial Bank from 2006 to 2010 and has also served as a director for various Minnesota civic and educational entities.  Ms. Grandstrand’s unique contribution as a Director is her insight into the regulatory environment in which TCF operates and expertise in regulatory compliance.  As the banking industry is highly regulated, her knowledge and skills contribute to the Board’s decision making.

 

THOMAS F. JASPER has been a Director of TCF Financial since January 2012 and has served as Vice Chairman and Executive Vice President, Funding, Operations and Finance of TCF Financial since January 1, 2012.  Prior to that, Mr. Jasper was Executive Vice President and Chief Financial Officer of TCF Financial from 2007 to 2011.  During the period from 2001 to January 2007, Mr. Jasper was Executive Vice President and Chief Financial Officer of TCF Equipment Finance, Inc. and Executive Vice President of Winthrop Resources Corporation.  Prior to joining TCF Equipment Finance, Inc. in 2001, he held various positions at KPMG LLP, last serving as a Senior Manager.  With his extensive financial, operational and risk management background and expertise, Mr. Jasper provides an additional level of insight to the Board and its review of the Company’s financial statements.

 

GEORGE G. JOHNSON has been a Director of TCF Financial since 1998 and is currently a member of the Audit, BSA Compliance, Finance, and Risk Committees.  Mr. Johnson is a certified public accountant and Managing Director of George Johnson & Company, a certified public accounting firm which he founded in 1971, and George Johnson Consultants, a consulting firm which he founded in 1995.  He serves as a director for various civic and educational organizations in the Detroit, Michigan area.  In addition to management and entrepreneurial experience, Mr. Johnson contributes accounting expertise to the Board grounded in his 40-year career as a certified public accountant.  The Board is focused on the integrity of TCF’s financial statements, as a public financial services company, and Mr. Johnson’s financial acumen is invaluable in the Board’s reviews.

 

VANCE K. OPPERMAN has been a Director of TCF Financial since 2009 and is currently the Chair of the Compensation/Nominating/Corporate Governance Committee and a member of the Audit, BSA Compliance, Executive, Finance, and Risk Committees.  He is President and Chief Executive Officer of Key Investment, a private investment company involved in publishing and other activities, a position he has held since 1996.  From 1993 to 1996, he was President of West Publishing Company, a provider of legal and business information research now owned by Thomson Reuters.  He has served on the Board of Directors for Thomson Reuters since 1996 and is currently the chair of the audit committee for that board.  He also serves on the Board of Directors of Blue Cross Blue Shield of Minnesota and currently serves as Chair of the Board, and served as the chair of the CEO selection committee and chair of the business development committee.  Mr. Opperman’s background in executive management and expertise in finance make him a valuable member of the Board.  The legal skills he acquired as an attorney and as the president of a large public company in the legal publishing business are useful in the Board’s discussions of legal risk and regulatory issues.  As president of West Publishing, Mr. Opperman acquired managerial and analytical skills which enable him to provide valuable insight to Board discussions.  In addition, Mr. Opperman’s experience in the healthcare industry is unique to the Board, and allows him to provide special insights with respect to TCF’s healthcare and medical benefits issues.

 

JAMES M. RAMSTAD has been a Director of TCF Financial since October 2011 and is currently a member of the BSA Compliance and Finance Committees.  He served nine terms as Minnesota Congressman in the U.S. House of Representatives from 1991 to 2009, during which time he was a member of the House Ways and Means Committee, Health and Trade Subcommittees, and Chairman of the IRS Oversight Committee.  Mr. Ramstad is currently a Senior Policy Advisor to the Hazelden Foundation and the National Association of Drug Court Professionals, as well as a Senior Advisor to alliantgroup, LLC, a provider of specialty tax services.  Mr. Ramstad’s service as a United States Congressman brings a wealth of knowledge and experience in political, legislative, and governmental affairs to the Board.

 

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GERALD A. SCHWALBACH has been a Director of TCF Financial since 1999 and Lead Director since February 2012.  He is currently the Chair of both the Audit and Risk Committees and a member of the BSA Compliance, Compensation/Nominating/Corporate Governance, Executive, and Finance Committees.  Mr. Schwalbach has been the Chairman of the Board of Spensa Development Group, LLC, a real estate management company, since the company’s formation in 2003, and manages related companies that are engaged in the real estate business.  From 1997 to 2009, he was a director of C.H. Robinson Worldwide, Inc., a logistics and transportation company.  In these positions and others, Mr. Schwalbach developed extensive experience in finance and tax matters relating to real estate.  Mr. Schwalbach’s special contribution to the Board comes from his financial acumen acquired in his career as a financial advisor and entrepreneur, and also his experience as an audit committee chair acquired outside and inside TCF.  Mr. Schwalbach’s insights and leadership skills are valuable in achieving the strong control environment that is critical to TCF’s success.  In addition, Mr. Schwalbach’s experience in tax matters enables him to provide significant guidance to the Board in this area.

 

BARRY N. WINSLOW has been a Director since 2008 and has served as Vice Chairman, Corporate Development of TCF Financial since January 2012.  Mr. Winslow has been a Vice Chairman of TCF since 2008, and served as the Chief Risk Officer of TCF Financial from 2010 through 2011.  From 2009 to 2010, he was responsible for TCF’s Wholesale Banking business.  From January 2008 to July 2008, Mr. Winslow was a financial consultant for several banks, including TCF.  In this role, his primary focus was advice, analysis, and strategic plan input related to mergers and acquisitions, as well as strategies for non-performing asset dispositions.  He previously held the positions of Chief Operating Officer of TCF Financial from 2006 to 2007, Chief Executive Officer of TCF Bank from 2001 to 2005, and President of TCF Bank from 1998 to 2005.  He held additional positions with TCF affiliates including President of TCF Bank – Michigan from 1995 to 1998 and President and Chief Executive Officer of TCF Bank – Illinois from 1993 to 1995.  Prior to joining TCF, Mr. Winslow was a senior vice president with Huntington National Bank.  He has served as a director of Cooper State Bank since 2005 and Sit Mutual Funds since 2010.  Mr. Winslow has also served as an adjunct professor of finance at several universities, including Ohio State, Cincinnati, Xavier, and North Texas.  Mr. Winslow has extensive knowledge of the banking industry, with an emphasis in commercial lending, which he obtained through his 35-year career.  This knowledge and his experience as an advisor and employee of TCF make him a valuable member of the Board.

 

RICHARD A. ZONA has been a Director of TCF Financial since 2011 and is currently the Chair of the Finance Committee and a member of the Audit, BSA Compliance, Executive, and Risk Committees.  Mr. Zona held the position of Vice Chairman of Wholesale Banking and Wealth Management for U.S. Bancorp from 1996 until his retirement in 2000.  He joined U.S. Bancorp in 1989 as Executive Vice President and Chief Financial Officer, and from 1991 to 1996 served as Vice Chairman and Chief Financial Officer of U.S. Bancorp.  Mr. Zona practiced as a certified public accountant with Ernst & Young from 1970 to 1989 and was admitted to partnership in 1979.  While at Ernst & Young, Mr. Zona served as National Director of the firm’s financial institutions practice.  He has served on the boards of ING Direct Bank fsb (USA), New Century Financial Corporation from 2000 to 2007, Piper Jaffray Companies from 2004 to 2005, Polaris Industries Inc. from 2000 to 2007, and ShopKo Stores Inc. from 2003 to 2006.  Mr. Zona contributes extensive management, finance, and accounting experience from his lengthy career in the financial services industry.  In addition, his knowledge of the challenges facing financial institutions is particularly useful to the Board given the current climate.

 

CORPORATE GOVERNANCE

 

TCF has established and operates within a comprehensive plan for membership, independence, committee membership, and ethical conduct of the Board of Directors.  TCF’s Corporate Governance Guidelines may be accessed at www.tcfbank.com (click on “About TCF,” then click on “Corporate Governance,” then click on “Learn More” next to the heading “Corporate Governance Guidelines,” and then click on “View Document”).  Included in the Corporate Governance Guidelines are the criteria used to determine whether a Director is independent.

 

TCF’s corporate governance policies recognize the importance of sound governance practices in the financial services industry.  The Board currently consists of 15 members.  The number of Directors is determined by the Board from time to time and may range in size from 7 to 25 members.  The Board of Directors typically meets at least quarterly in January, April, July, and October.

 

TCF’s Board has six committees:  Audit, BSA Compliance, Compensation/Nominating/Corporate Governance, Executive, Finance, and Risk.  Directors are elected by a plurality vote of the stockholders.

 

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Director Nominations

 

The Nominating Committee of the Compensation/Nominating/Corporate Governance Committee is responsible for Director nominations.  The Nominating Committee consists entirely of independent Directors as determined by the Board under applicable rules, all of whom are also members of the full Compensation/Nominating/Corporate Governance Committee.  The Nominating Committee operates under the Compensation/Nominating/Corporate Governance Committee Charter.

 

The Board and management regularly make recommendations to the Nominating Committee of potential Director candidates they have identified through business and professional contacts.  The Nominating Committee will consider nominees for new Directors as vacancies become available using the following criteria: a majority of the Directors must be independent, as determined by the Board under applicable rules; nominees shall possess expertise in general business matters and in such other areas as are relevant to the committees on which they are expected to serve (such as financial expertise for Directors expected to serve on the Audit Committee); and nominees shall be individuals with the background, character, skills and expertise such that they will meaningfully contribute to the success of the Company and its operations.

 

The Board does not have a formal policy of considering diversity in identifying potential Director nominees, but believes that its membership should broadly reflect the banking community served by the Company and therefore has an informal practice of considering a nominee’s age, race, ethnicity, national origin, gender, and geographic location in addition to such nominee’s other qualifications for Board service.

 

Stockholders may submit nominations to the Nominating Committee for consideration at next year’s Annual Meeting prior to the deadlines set forth below under “Additional Information – How Can Stockholders Submit Proposals and Nominate Directors for Next Year’s Annual Meeting?” Any such nomination should include the information specified in Article II, Section 13 of TCF’s Bylaws, a copy of which may be obtained from the Company’s Corporate Secretary at 200 Lake Street East, Mail Code EX0-03-A, Wayzata, MN 55391-1693.  Nominations should be mailed to the attention of the Compensation/Nominating/Corporate Governance Committee, c/o TCF’s Corporate Secretary at the TCF address provided above.  The Nominating Committee will evaluate all recommended nominees, including those submitted by stockholders, based on the criteria set forth above, with particular emphasis on whether they will meaningfully contribute to the success of the Company and its operations.  TCF has not, to date, paid any fees to any firm in connection with locating or evaluating any Director candidates.

 

Board Leadership Structure and the Board’s Role in Risk Oversight

 

In February 2012, TCF created the position of independent lead Director (the “Lead Director”) to serve as the liaison between the Chairman and the independent Directors.  The Lead Director works with management to determine the information and materials provided to Board members.  The Lead Director also consults with the Chairman on such other matters as are pertinent to the Board and the Company and is available for direct communication and consultation with regulators upon request.  TCF’s Lead Director chairs the Board meetings when the Chairman is not present, which includes the executive sessions of the Board for only the independent Directors, and has the authority to call meetings of the independent Directors.  The Lead Director is elected annually by the independent members of the Board.  Gerald A. Schwalbach, a Director since 1999, has served as TCF’s Lead Director since February 2012.

 

Mr. Cooper currently serves as both the CEO of the Company and Chairman of the Board.  TCF believes that having both a combined Chairman and CEO and an independent Lead Director currently provides the best board leadership structure for TCF.  This structure, together with TCF’s other good corporate governance practices, provides strong independent oversight of management while ensuring clear strategic alignment throughout the Company.  Specifically, Mr. Cooper proposes strategic priorities to the Board, and with input from the Lead Director, communicates the Board’s guidance to management and is ultimately responsible for implementing the Company’s key strategic initiatives.

 

The Board believes that this leadership structure is appropriate given TCF’s characteristics and present circumstances.  Having both a combined Chairman and CEO and a Lead Director facilitates the retention of Mr. Cooper, a strong Chairman and CEO under whose leadership the Company has achieved extraordinary success over the years, particularly in the context of the difficult environment in which TCF has been operating.  This leadership structure provides the Board with a leader with great substantive knowledge of the Company and the industry in which it operates, as well as a Lead Director to act as a single voice for the independent Directors and to lead the Board when the Chairman and CEO is unavailable.  The Board believes all of these considerations provide value for the Company’s stockholders.

 

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Furthermore, TCF has had a combined Chairman and CEO in place most of the time since the Company’s inception.  While there exists the possibility that the Board would separate the roles of Chairman and CEO in the future under appropriate circumstances (e.g., in connection with a management succession), the Board believes that separating the roles at this time would be detrimental to Company performance.

 

The Board believes that the current arrangement also provides for adequate independent oversight of the Company.  The Company places a significant emphasis on Board independence.  Currently, 11 of the Board’s 15 members (73%) meet the independence requirements under NYSE rules and the Company’s own independence requirements.  These independent Directors regularly meet in executive session without management present.  The members of the Board’s Audit Committee, Compensation/Nominating/Corporate Governance Committee, and Risk Committee are all independent and, in addition to the Chairman and Lead Director, serve in oversight roles.  Through these committees, the Board is actively involved in oversight of risk, compliance, potential conflicts of interest and related party transactions, and business results.  The Compensation/Nominating/Corporate Governance Committee is also specifically responsible for an annual review of the CEO’s performance and compensation.  Since all Board members have complete access to management and outside advisors, the Chairman and Lead Director are not the only sources of information for the Board.

 

Communications with Directors

 

The Board has provided a process for stockholders and other interested parties to communicate directly with any Director, the Lead Director, the full Board, or with independent Directors as a group.  The process for doing so is disclosed on TCF’s website at www.tcfbank.com (click on “About TCF,” then click on “Corporate Governance,” then click on “Learn More” next to the heading “Communications with Directors”).

 

Regular Separate Non-Management Director Meetings

 

The non-management Directors, all of whom are independent under NYSE rules as of the date of this proxy statement, meet independently in executive sessions following the regularly scheduled meetings of the Board.  The Lead Director presides over each executive session.

 

Code of Ethics

 

TCF has adopted a code of ethics applicable to the Principal Executive Officer (“PEO”), Principal Financial Officer (“PFO”), and Principal Accounting Officer (“PAO”) (the “Senior Financial Management Code of Ethics”) as well as a code of ethics generally applicable to all officers (including the PEO, PFO, and PAO), Directors, and employees of TCF (the “Code of Ethics”).  The Code of Ethics and Senior Financial Management Code of Ethics are both available for review on TCF’s website at www.tcfbank.com (click on “About TCF,” then click on “Corporate Governance,” then click on “Learn More” next to the headings “Code of Ethics Policy” or “Code of Ethics for Senior Financial Management,” respectively, and then click on “View Document”).   Any changes to either code will be posted on the website, and any waivers of either granted to the PEO, PFO, PAO, or any Director will be posted on the website.  To date, there have not been any waivers of either code granted to the PEO, PFO, PAO, or any Director.

 

Director Attendance

 

The business, property, and affairs of TCF are managed by or under the direction of the Board.  The Board met eight times in 2012.  All Board members are expected to attend all committee meetings of which they are a member and are invited to attend meetings of committees of which they are not members.  During 2012, all Directors attended at least 75% of the combined meetings of the Board and the committees on which they served.  TCF requests Directors to attend the Annual Meeting if their schedules permit.  All of the Directors attended the 2012 Annual Meeting.

 

Board Committees, Committee Memberships, and Meetings in 2012

 

The following table identifies the principal responsibilities, number of meetings held in 2012, and the members for each of the standing Board committees (those which meet regularly) including those with audit, compensation, and nominating responsibilities.  Messrs. Cooper, Dahl, Jasper, and Winslow are executive officers of TCF and do not serve on any of the standing Board Committees.  In addition to the committees reflected below, there is a duly-elected Executive Committee of the Board consisting of Mr. Cooper, Ms. Grandstrand, and Messrs. Barton, Opperman, Schwalbach, and Zona.  The Executive Committee, which serves as a liaison between management and the Board, met twice during 2012 and is scheduled to meet eight times during 2013.

 

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Committee

 

Principal Responsibilities

 

Members
(*Chair)

 

 

 

 

 

Audit (1)(2)

 

14 meetings in 2012

 

·   Oversee relationship with independent auditor

·   Oversee and review financial reporting and disclosure matters

·   Oversee compliance

·   Oversee internal audit function, including supervision and evaluation of the performance of the Chief Audit Executive

 

 

Cusick

Grandstrand

Johnson

Opperman

Schwalbach *

Zona

 

 

BSA Compliance (2)(3)

 

4 meetings in 2012

 

 

·   Monitor adherence to the provisions of the BSA Consent Order dated July 20, 2010 between TCF and the Office of the Comptroller of the Currency (the “OCC”)

·   Ensure that TCF is in compliance with the BSA and the rules and regulations of the Office of Foreign Assets Control (“OFAC”)

·   Review reports on BSA issues, trends, policies, processes, identification of risks, or any other matter brought to the Committee’s attention

 

 

Barton

Bell

Bieber

Bigos

Cusick

Grandstrand *

Johnson

Opperman

Ramstad

Schwalbach

Zona

 

 

Compensation/

Nominating/

Corporate Governance (2)

 

5 meetings in 2012

 

 

·   Review, recommend, and approve personnel-related matters

·   Evaluate the performance of the Chief Executive Officer

·   Review, recommend, and approve executive compensation, including equity awards

·   Review, recommend, and approve Director nominations

·   Oversee corporate governance matters

·   Review management succession planning

·   Supervise the administration of benefit plans

 

 

 

Barton (4)

Bieber

Bigos

Opperman *

Schwalbach

 

 

Finance (2)(3)(5)

 

4 meetings in 2012

 

 

 

·   Review and approve, and oversee the administration and effectiveness of, TCF’s financial risk management policies

·   Review financial strategies

·   Review capital planning, including dividend recommendations

·   Review merger, acquisition, and expansion activity

·   Review debt and equity issuance and retirement matters

 

 

 

Barton

Bell

Bieber

Bigos

Cusick

Grandstrand

Johnson

Opperman

Ramstad

Schwalbach

Zona *

 

 

Risk (2)

 

4 meetings in 2012

 

 

·   Oversee TCF’s Enterprise Risk Management Program

·   Oversee and consult with management regarding the Company’s risk appetite

·   Evaluate the performance of the Chief Risk Officer

 

 

 

Cusick

Grandstrand

Johnson

Opperman

Schwalbach *

Zona

 

 

(1)       Messrs. Cusick, Johnson, Opperman, Schwalbach, and Zona have been designated by the Board as Audit Committee Financial Experts.

(2)       Luella Goldberg was chair of the BSA Compliance Committee, and was a member of the Audit, Compensation/Nominating/Corporate Governance, Finance, and Risk Committees until her retirement from the Board on April 25, 2012.

(3)       Ralph Strangis was a member of the BSA Compliance and Finance Committees until his retirement from the Board on April 25, 2012.

(4)    Mr. Barton was appointed to the Compensation/Nominating/Corporate Governance Committee in January 2012 following Mr. Bell’s resignation from this Committee.

(5)       In January 2012, the Asset Liability Management Committee and the Shareholder Relations/Capital and Expansion Committee were merged to form the Finance Committee.  Each committee met once during 2012 before the merger.

 

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Compensation/Nominating/Corporate Governance Committee

 

All members of the Compensation/Nominating/Corporate Governance Committee are listed above and are independent under the standards outlined below under “Director Independence and Related Party Transactions – How Does the Board Determine Which Directors Are Independent?” In addition, each member of the Committee currently meets the requirements for an “outside director” under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), and is a “non-employee director” under Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  The Committee operates under a formal charter that may be accessed at www.tcfbank.com (click on “About TCF,” then click on “Corporate Governance,” then click on “Learn More” next to the heading “Compensation/Nominating/Corporate Governance Charter,” and then click on “View Document”).

 

Scope of Authority of Compensation Committee.  The Compensation Committee is one of the three component committees of the Compensation/Nominating/Corporate Governance Committee.  All of the members of the Compensation Committee are also members of the full Compensation/Nominating/Corporate Governance Committee.  Full authority is delegated from the Board to the Compensation Committee to act on the following matters without Board approval:

·                  Review and approve the Company’s compensation and benefits policies generally, including reviewing and approving any equity-based compensation.

·                  Review and approve the compensation of, and benefits for, the CEO and other senior officers.

·                  Review and approve management’s risk assessment of incentive compensation plans for the CEO and other executive and senior officers of the Company.

·                  Determine if any deferral or claw back provisions for the CEO or other senior executive officers have been triggered and executed as required.

·                  Prepare the Compensation Committee Report required by the Securities and Exchange Commission (the “SEC”) and NYSE rules to be included in the proxy statement and review and discuss the Compensation Discussion and Analysis (the “CD&A”) with management and provide a recommendation to the Board regarding the inclusion of the CD&A in the Company’s proxy statement.

·                  Periodically review the Company’s management succession planning, in consultation with the CEO.

§                  Review and approve any employment contracts and severance agreements with executive officers other than the CEO.

§                  Annually, review and approve the summary of perquisites for the CEO and review summaries of perquisites for the other senior executive officers.

·                  Supervise the administration of all TCF benefit plans, including:

§                  Approval of amendments as needed (except where the amendment requires full Board approval);

§                  Selection of trustees, funding agents, investment managers and other similar asset managers for the trust funds;

§                  Act as the Advisory Committee for the TCF Employees Stock Purchase Plan (the “ESPP”), directing the vote of shares for which participants in the plan do not provide direction;

§                  Exercise of all other administrative and interpretive authority under the plans; and

§                  Exercise of all other responsibilities as provided in the plans.

 

·                  Review the following matters and recommend proposals for action by the full Board:

§                  Election of officers for TCF; and

§                  Compensation and employment contracts for the CEO, including change in control arrangements.

 

Delegation of Authority by Compensation Committee.  The Compensation Committee may establish subcommittees from time to time.  The Compensation Committee has the power to delegate such duties and authority to the subcommittees as it approves. Additionally, the CEO makes recommendations to the Compensation Committee concerning the compensation of executive officers. The CEO reviews the performance of certain executive officers other than himself, future management changes and other matters relating to compensation with the Chair of the Compensation Committee regularly on an informal basis.  Other executive officers generally do not make recommendations to the Committee concerning their own compensation, although certain executive officers may provide the CEO with information used to support a recommendation to the Compensation Committee, such as an individual’s proposed goals, performance against those goals, and information concerning the structure of their compensation.

 

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Compensation Committee Use of Consultants.  The Compensation Committee has authority to retain consulting firms for the purpose of evaluating compensation and other compensation-related matters for TCF’s Directors, CEO and other executive officers.  The Compensation Committee has retained Towers Watson, principally to provide advice and peer group information, which the Compensation Committee considers when developing the terms of long-term incentive awards, incentive compensation plans, and overall compensation amounts for the executive officers named in the Summary Compensation Table (the “Named Executives”).  For a discussion of services performed by Towers Watson for the Compensation Committee in 2012, see “Analysis of Tools the Committee Uses” in the CD&A.  During 2012, the Compensation Committee paid Towers Watson approximately $121,000 for these services.  Also, Towers Watson and its affiliates were paid $211,000 for providing additional services to the Company (and its affiliates) in 2012 in connection with broad-based health and welfare plans and the production of total compensation statements for all employees.  The decision to engage Towers Watson for the additional services was made by management.  The services were not approved by the Board as they were services of the type routinely performed by Towers Watson in the past.  Towers Watson has internal policies regarding conflicts of interest.  The Board affirmatively determined that no conflicts of interest have been raised in connection with the services provided by Towers Watson.

 

Compensation Committee’s Process For Determining Director and Executive Compensation.  The Compensation Committee generally meets five times each year beginning in January and then quarterly in March, June, September, and December, with additional special meetings held as needed.  Director compensation is reviewed from time to time on an informal basis by the CEO and Chair of the Compensation Committee.  Their recommendations concerning any change in Director compensation are referred to the Compensation Committee and the Board.  Executive compensation is determined by the Compensation Committee.  The CEO provides input for executive officers.  Following the end of the calendar year, the Compensation Committee reviews the Company’s financial results for the previous year to determine if performance targets have been achieved for purposes of performance-based compensation for each executive officer and to make other compensation decisions.  Compensation decisions by the Compensation Committee are subjective and are based upon evaluation of an individual’s overall performance and are not based on a statistical or formulaic analysis of particular results or criteria.  Rather, the Compensation Committee considers overall performance in areas of responsibility, management and communication skills, leadership qualities, innovation and creative abilities, risk controls and difficulties encountered in achieving results in light of industry conditions.  Taking the CEO’s recommendations into consideration, the Committee then establishes the compensation levels, annual cash incentive amounts and long-term incentive awards for each executive officer.

 

Compensation Committee Interlocks and Insider Participation.  Directors Barton, Bell (until his resignation from the committee in January 2012), Bieber, Bigos, Goldberg (until her retirement in April 2012), Opperman, and Schwalbach served on the Compensation Committee in 2012.  None of these Directors has ever served as an officer or employee of TCF or any of its subsidiaries, with the exception of Mr. Bell, who was an officer of TCF Bank from 1994 to 1999.  The Board has determined that all members of the Compensation Committee were independent for 2012 under standards outlined below.  Certain transactions between TCF and Directors Barton, Bell, Bieber, Bigos, Opperman, and Schwalbach are disclosed below under “Director Independence and Related Party Transactions – What Transactions Were Considered Non-Material?”

 

Audit Committee

 

All members of the Audit Committee are listed above and are independent under the standards outlined below.  The Board has determined that Messrs. Cusick, Johnson, Opperman, Schwalbach, and Zona are Audit Committee Financial Experts, as defined in Item 407(d)(5) of Regulation S-K promulgated under the Securities Act of 1933, as amended, and the Exchange Act (“Regulation S-K”).  The Audit Committee operates under a formal charter that may be accessed at www.tcfbank.com (click on “About TCF,” then click on “Corporate Governance,” then click on “Learn More” next to the heading “Audit Committee Charter,” and then click on “View Document”).

 

Director Independence and Related Person Transactions

 

How Does the Board Determine Which Directors are Independent?  Pursuant to NYSE listing standards, at least a majority of TCF Directors must be independent.  For a Director to be considered independent, the Board must make an affirmative determination that the Director has “no material relationship” with TCF.  The NYSE independence standards, as incorporated into the regulations of the SEC, identify certain transactions or relationships which automatically disqualify a Director from being considered independent.  In the case of transactions or relationships

 

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with a Director’s business, annual payments of more than the greater of $1.0 million or 2.0% of the gross revenues of the Director’s business are automatically disqualifying.

 

In addition, the Board of Directors has adopted the categorical standards listed below to assist it in determinations of independence.  The additional categorical independence standards are included in TCF’s Corporate Governance Guidelines, which may be accessed at www.tcfbank.com (click on “About TCF,” then click on “Corporate Governance,” then click on “Learn More” next to the heading “Corporate Governance Guidelines,” and then click on “View Document”).  The Board deems transactions or relationships falling within a categorical standard listed below to automatically be non-material.

 

·                  Commercial Loans from TCF Bank Subject to Approval Under Federal Reserve Board Regulation O (“Regulation O”) (or Below Threshold Amounts) to a Director’s Business.  Loans, leases, and other extensions of credit from TCF Bank or a subsidiary to a Director’s company are not material if they are not automatically disqualifying under the NYSE independence standards, are subject to approval under Regulation O (or are for an amount less than that requiring approval under Regulation O), and TCF has not classified them as being in default.

·                  Transactions or Relationships Which Are Beneath Certain Thresholds and Are Not Automatically Disqualifying.  Transactions or relationships between TCF and a Director, the Director’s related business, or any immediate family members of the Director are not material if they are not automatically disqualifying under the NYSE independence standards, and the transaction (including employment) amounts are not in excess of $120,000 in a calendar year.

·                  Retail Banking Relationships: Home Mortgages, Consumer Loans, and Retail Deposit Accounts.  Home mortgages, consumer loans and retail deposit accounts at TCF for a Director or immediate family members of the Director are not material if they are not automatically disqualifying under the NYSE independence standards and are on ordinary retail consumer terms and conditions.

·                  Stockholder Ownership under 10%; Limited Partnerships; Service as Executive Officer.  A Director’s ownership of less than a 10% equity interest in a company, or a limited partnership interest in a company, is not sufficient to cause the company to be considered as an indirect interest of the Director for purposes of determining material business relationships between the Director and TCF.  However, a Director’s service as an executive officer of a company is sufficient to cause the company to be considered as an indirect interest of the Director for purposes of determining material business relationships between the Director and TCF, even if the Director has ownership of less than a 10% equity interest in such a company.

 

What Transactions Were Considered Non-Material?  During 2010 through 2012, TCF was a party to relationships with certain Directors, their related companies, or immediate family members, each of which was determined by the Board to be not material for purposes of Director independence.

 

Commercial Loans, Consumer Loans, and Retail Banking Accounts.  Each of the following transactions and relationships was reviewed by the Board and was determined to not constitute a material relationship for purposes of Director independence, based on the categorical standards described above:

·                  Messrs. Bieber and Bigos or their related companies have, or had during 2010 through 2012, commercial loans or leases with TCF.

·                  Messrs. Barton and Bigos or their related companies have, or had during 2010 through 2012, commercial deposit accounts with TCF.

·                  The following Directors have, or had during 2010 through 2012, retail deposit accounts or consumer loans with TCF, all of which are on ordinary retail consumer terms and conditions:  Messrs. Barton, Bell, Bigos, Cooper, Cusick, Dahl, Jasper, Johnson, and Winslow.

 

All commercial loans and leases, and all home mortgages and consumer loans, were made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with persons not related to TCF and do not involve more than the normal risk of collectability, nor do they present other unfavorable features.  All such loans and leases have been approved by the Board of Directors when required by Regulation O.

 

Related Person Transactions Involving Independent Directors.  Mr. Strangis was a member of the Board until his retirement in April 2012.  Kaplan, Strangis and Kaplan, P.A. (“KSK”), of which Mr. Strangis is a member, provided legal services to TCF during 2010, 2011, and 2012.  Total fees paid by TCF to KSK in 2010 and 2011 were

 

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approximately $703,565 and $480,775, respectively.  During 2010 and 2011, CTS Corporate Travel Solutions (“CTS”) provided certain travel-related services to TCF.  Mr. Strangis was a director and his spouse was an officer and minority stockholder of CTS until November 2011 when they sold their interest in CTS.  Total payments by TCF to CTS in 2010 and 2011 through the sale date were approximately $161,900 and $150,119 respectively.  The Board of Directors reviewed these relationships prior to Mr. Strangis’ retirement and affirmatively determined (with Mr. Strangis abstaining) that they did not constitute a material relationship between Mr. Strangis and the Company for purposes of Director independence because: the extent to which Mr. Strangis was expected to benefit from the payments was not so significant as to compromise his exercise of independent judgment as a Director, especially in light of his background as an experienced lawyer and corporate director, exemplary performance as a Director of TCF, and his overall financial condition; the payments were consistent with the range of payments in previous years; the payments and the transactions for which they were made were negotiated on an arm’s length basis, and the payments were reasonable for the services provided; the payments were not material to TCF, KSK, or CTS; in the case of CTS, the Director’s interest was indirect and insignificant; and in the case of KSK, TCF deals with many law firms in addition to KSK.  Therefore, the Board determined that the relationships did not affect Mr. Strangis’ status as an independent Director at that time.  Total fees paid by TCF to KSK in 2012 were approximately $838,000.  TCF expects that KSK will continue to provide legal services to TCF on an ongoing basis.

 

Other Business Relationships Involving Independent Directors.  Each of the following additional transactions and business relationships was reviewed and was determined by the Board to be not material, either individually or in the aggregate, for purposes of Director independence:

·                 During 2010, the law firm of Fredrikson and Byron, P.A. (“Fredrikson and Byron”) had a business relationship with TCF.  Ms. Grandstrand is a shareholder in the firm of Fredrikson and Byron.  Total fees paid by TCF to Fredrikson and Byron in 2010 were approximately $23,381.  However, TCF did no business with Fredrikson and Byron during 2011 or 2012 and Ms. Grandstrand was appointed to the Audit Committee in January 2011.  The Board has reviewed this relationship and affirmatively determined (with Ms. Grandstrand abstaining) that it does not constitute a material relationship between Ms. Grandstrand and TCF for purposes of Director independence because the fees paid during any twelve-month period within the last three years are significantly below $120,000, the payments and transactions were negotiated on an arm’s length basis and the payments were reasonable for the services provided, and TCF deals with many law firms in addition to Fredrikson and Byron.

·                 Several Directors are investors in C Financial Corporation, an Ohio corporation, which is the holding company of Cooper State Bank, a state bank organized under the laws of Ohio, of which Mr. Cooper is controlling shareholder.  In addition to Mr. Cooper, Messrs. Bigos, Schwalbach, Winslow, and certain members of TCF management are shareholders in C Financial.  Three current members of TCF management are also directors of both C Financial and Cooper State Bank.  Additionally, during 2012, Fredrikson and Byron provided legal services to C Financial and Cooper State Bank in the amounts of $894 and $4,110, respectively.  The Board of Directors has reviewed these relationships and affirmatively determined (with each affected Director abstaining from his or her own determination) that they do not constitute material relationships between each of the non-management Directors, Mr. Bigos, Ms. Grandstrand, and Mr. Schwalbach, and TCF for purposes of Director independence because: these relationships are not so significant as to compromise their exercise of independent judgment as Directors; the relationships are not with TCF or TCF management; there are no material transactions between TCF and C Financial or Cooper State Bank; Cooper State Bank is not a competitor of TCF (its geographic market area does not overlap TCF’s); and the investments are not otherwise so significant as to compromise the Director’s exercise of independent judgment as a Director.

·                 During 2012 and 2011, Mr. Bell received payments and distributions from the TCF Financial Corporation Executive Deferred Compensation Plan (the “Executive Deferred Compensation Plan”) of $225,629 and $276,925, respectively, and distributions from the TCF Cash Balance Pension Plan (the “Pension Plan”) of $0 and $46,432 respectively, as a result of his prior service as an officer of TCF Bank from 1994 to 1999.  The Board has reviewed this relationship and affirmatively determined (with Mr. Bell abstaining) that it does not constitute a material relationship between Mr. Bell and TCF because such payments and distributions were for his prior service as an officer of TCF Bank and such payments and distributions were not contingent in any way on continued service.

·                 Ms. Goldberg’s son is employed by TCF in a non-executive capacity.  Prior to Ms. Goldberg’s retirement from the Board in April 2012, the Board reviewed the relationship and affirmatively determined (with Ms. Goldberg abstaining) that it did not constitute a material relationship between Ms. Goldberg and TCF for purposes of Director independence because he is employed in a non-executive position and had not received during any 12-month period within the prior three years more than $120,000 in direct compensation from TCF.  At that time, Ms. Goldberg and her son did not reside at the same residence.

 

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·                  In April 2012, Mr. Opperman was reimbursed at cost for the business use of a suite by TCF.  The Board has reviewed this transaction and affirmatively determined (with Mr. Opperman abstaining) that it does not constitute a material relationship between Mr. Opperman and TCF because such reimbursement was made at cost.

·                  The Board has also reviewed Director ownership of shares of TCF Common Stock, trust preferred capital (until its redemption in July 2012), and both series of preferred stock of TCF and affirmatively determined (with affected Directors abstaining) that such ownership does not constitute a material relationship between any of those Directors and TCF for purposes of Director independence because no such Director owns 10% or more of any voting class of outstanding TCF securities.

 

Which Directors are Independent?  The evaluation of director independence under NYSE listing standards is based on a three-year look-back period.  On the basis of the foregoing categorical standards and review of the transactions and relationships between Directors and TCF during 2010 through 2012, the Compensation/Nominating/Corporate Governance Committee and the Board of Directors affirmatively determined in January 2013 that the following Directors have no material relationship with TCF and are considered to be independent:  Ms. Grandstrand, and Messrs. Barton, Bell, Bieber, Bigos, Cusick, Johnson, Opperman, Ramstad, Schwalbach, and Zona.  Additionally, Ms. Goldberg and Mr. Strangis, who were Directors of TCF until they retired in April 2012, were previously deemed independent by the Board under the NYSE standards.  All members of the Audit Committee and Compensation/Nominating/Corporate Governance Committee are independent.  The Board of Directors determined that the following Directors are not independent:  Mr. Cooper (TCF CEO), Mr. Dahl (TCF Vice Chairman and Executive Vice President, Lending), Mr. Jasper (TCF Vice Chairman and Executive Vice President, Funding, Operations and Finance), and Mr. Winslow (TCF Vice Chairman, Corporate Development), because current executives are deemed to be non-independent under the NYSE standards.

 

Related Person Transactions.  During 2012, TCF engaged in transactions in the ordinary course of business with some of its Directors and officers, and entities with which they are associated.  As noted above under “What Transactions Were Considered Non-Material – Commercial Loans, Consumer Loans, and Retail Banking Accounts,” all such transactions were made in the ordinary course of business, on substantially the same terms, including current interest rates and collateral, as those prevailing at the time for comparable transactions with others not related to TCF and did not involve more than the normal risk of collectibility or present other unfavorable features.

 

Related Person Transaction Approval Process.  By written policy and regulation, loans to Directors, executive officers or their immediate family members are submitted for review to the Board of Directors of TCF Bank as and to the extent required by Regulation O.  Transactions with Directors, executive officers or their immediate family members that present a possible conflict of interest under the Code of Ethics are reviewed by the General Counsel and submitted to the Board where appropriate or required under the Code of Ethics.  In practice, all other transactions between TCF and Directors, Director nominees, executive officers and their immediate family members or related companies that are reportable in the proxy statement are reported to the Audit Committee and, for transactions involving independent Directors, the Compensation/Nominating/Corporate Governance Committee and the Board.  All such reports are in writing and maintained with the records of the applicable committee or Board meetings.  The Board and the respective committees are responsible for reviewing and evaluating any transactions submitted to them and, where appropriate or otherwise required under applicable regulations, for approving, denying, ratifying, or terminating such transactions.  The Board, or a committee of the Board, evaluates these transactions and specifically determines whether or not they serve the best interest of TCF and its stockholders, whether they present a conflict of interest for the affected person, and whether the relationship should be continued or eliminated.  Any such action is reflected in the minutes of the Board or the respective committees.

 

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DIRECTOR COMPENSATION

 

TCF’s compensation of non-management Directors in 2012, including cash and other non-cash compensation, is shown in the following table.  Messrs. Cooper, Dahl, Jasper, and Winslow are executive officers of TCF and do not receive any compensation for their service as Directors.

 

Name

 

Fees Earned
or Paid in Cash
($)

 

Stock
Awards
(1)(5)
($)

 

Change in Pension Value and
Nonqualified Deferred
Compensation Earnings
(2)
($)

 

 

All Other
Compensation
(2)(3)
($)

 

Total
($)

Raymond L. Barton

 

$47,000

 

$45,000

 

$0

 

 

$

10,000

 

 

$102,000

Peter Bell

 

$49,000

 

$45,000

 

$0

 

 

$

5,000

 

 

$  99,000

William F. Bieber

 

$44,500

 

$45,000

 

$0

 

 

$

0

 

 

$  89,500

Theodore J. Bigos

 

$47,000

 

$45,000

 

$0

 

 

$

10,000

 

 

$102,000

Thomas A. Cusick

 

$60,000

 

$45,000

 

$0

 

 

$

10,000

 

 

$115,000

Luella G. Goldberg (4)

 

$32,000

 

$45,000

 

$0

 

 

$

10,000

 

 

$  87,000

Karen L. Grandstrand

 

$85,000

 

$45,000

 

$0

 

 

$

3,500

 

 

$133,500

George G. Johnson

 

$58,000

 

$45,000

 

$0

 

 

$

10,000

 

 

$113,000

Vance K. Opperman

 

$94,000

 

$45,000

 

$0

 

 

$

0

 

 

$139,000

James M. Ramstad

 

$49,000

 

$45,000

 

$0

 

 

$

0

 

 

$  94,000

Gerald A. Schwalbach

 

$87,000

 

$45,000

 

$0

 

 

$

10,000

 

 

$142,000

Ralph Strangis (4)

 

$23,333

 

$45,000

 

$0

 

 

$

0

 

 

$  68,333

Richard A. Zona

 

$84,000

 

$45,000

 

$0

 

 

$

9,500

 

 

$138,500

 

(1)                   The grant date fair value for all awards is computed in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 718, “Stock Compensation.”  TCF’s accounting policy for stock-based compensation is described in Notes 1 and 16 of the Notes to TCF’s Consolidated Financial Statements included in TCF’s Annual Report on Form 10-K for the year ended December 31, 2012.  Dividends are paid on the shares at the regular rate generally paid to holders of TCF Common Stock.

(2)       The Directors’ Retirement Plan was frozen and terminated on July 18, 2011.  All eligible Directors received discounted retirement benefit payments in 2012 for all earned benefits as of July 2011, including the following:  Ms. Goldberg, $282,038; Mr. Bieber, $213,587; Mr. Cusick, $121,206; Mr. Johnson, $204,358; Mr. Schwalbach, $191,742; and Mr. Strangis, $255,272.  Ms. Grandstrand and Messrs. Barton, Bell, Bigos, Opperman, and Zona were not eligible to receive a retirement benefit at the time the plan was frozen.  Mr. Ramstad was elected to the Board after the plan was frozen.

(3)       This column consists of matching charitable gift contributions by TCF Foundation on behalf of Directors.  The material terms regarding the matching charitable gift program are described below under “Material Information Regarding Directors’ Compensation.”

(4)    Ms. Goldberg and Mr. Strangis retired from the Board in April 2012.

(5)       The following table shows the outstanding equity awards of non-management Directors at December 31, 2012:

 

Name

 

 

# of Shares
Unvested Restricted Stock
(a)

 

 

Market Value of Unvested Shares (b)(c)
($)

Raymond L. Barton

 

 

5,439

 

 

$66,084

Peter Bell

 

 

5,266

 

 

$63,982

William F. Bieber

 

 

5,266

 

 

$63,982

Theodore J. Bigos

 

 

5,266

 

 

$63,982

Thomas A. Cusick

 

 

5,266

 

 

$63,982

Luella G. Goldberg (d)

 

 

-

 

 

-

Karen L. Grandstrand

 

 

5,110

 

 

$62,087

George G. Johnson

 

 

5,266

 

 

$63,982

Vance K. Opperman

 

 

5,266

 

 

$63,982

James M. Ramstad

 

 

5,494

 

 

$66,752

Gerald A. Schwalbach

 

 

5,266

 

 

$63,982

Ralph Strangis (d)

 

 

-

 

 

-

Richard A. Zona

 

 

5,439

 

 

$66,084

 

(a)       Consists of the unvested portion of the April 17, 2010 restricted stock awards made to Messrs. Bell, Bieber, Bigos, Cusick, Johnson, Opperman, and Schwalbach.  Also consists of the unvested portion of the pro-rata awards made to the following Directors on the dates they were elected to the Board: Ms. Grandstrand on October 18, 2010; Messrs. Barton and Zona on January 18, 2011; and Mr. Ramstad on October 17, 2011.  Dividends are paid on the shares at the regular rate generally paid to holders of TCF Common Stock.  The shares will vest as soon as possible after the results are known in the year following the

 

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year that TCF achieves a Return on Equity above the median of its peer group or, if not sooner, the award will vest ten years after the award date.  Also includes unvested restricted stock awards of 4,025 shares made in January 2012 to Ms. Grandstrand and Messrs. Barton, Bell, Bieber, Bigos, Cusick, Johnson, Opperman, Ramstad, Schwalbach, and Zona which vested on January 15, 2013.

(b)    Consists of the number of unvested shares shown in the previous column, multiplied by the closing stock price on December 31, 2012 of $12.15 per share.

(c)     Grant date fair value of the stock awards made in 2012 is shown on the Director Compensation table.

(d)    All restricted stock awards to Ms. Goldberg and Mr. Strangis vested on the date of their retirement.

 

Material Information Regarding Directors’ Compensation

 

·                  Cash compensation for non-management Directors (may be deferred and invested in TCF Common Stock):

§                  Annual Retainer – $25,000; Committee Chairs receive an additional $20,000 annual retainer; and

§                  Board and Committee Meetings – $1,000 per meeting.

·                  Inside Directors (Messrs. Cooper, Dahl, Jasper, and Winslow) are not compensated for service as Directors.

·                  Directors Stock Grant Program:

§                  Annually, non-management Directors receive grants of TCF Common Stock equal to $45,000.  For Directors elected after a stock grant has been awarded, a pro-rata stock grant is awarded;

§                  The number of shares granted is determined by dividing $45,000 by the average of the high and low prices of TCF Common Stock on the grant date;

§                  The stock grant vests annually, when the next grant is made;

§                  Dividends are paid on unvested shares at the regular rate generally paid to holders of TCF Common Stock; and

§                  Unvested shares will vest if a change in control occurs.

·                  TCF Directors Deferred Compensation Plan (the “Directors Deferred Compensation Plan”) (for non-management Directors):

§                  Fees and stock grants may be deferred until service on the Board ends;

§                  All deferred fees are invested in TCF Common Stock;

§                  Dividends (market rate) are accumulated and invested in TCF Common Stock; and

§                  Distributions for pre-2005 accounts are in installments or lump sum, as elected by the Director.  For accounts accumulated in 2005 and after, all distributions are in a lump sum.

·                  The Directors Retirement Plan was frozen in 2011 and all participants received a lump sum payout in 2012.  Prior to being frozen, Directors with five or more years of service as a non-management Director received a retirement benefit based on the number of years of service and the annual Board retainer in effect at retirement.

·                  Stock Ownership Guidelines:

§                  Non-management Directors are required to own shares of TCF Common Stock worth an amount equal to five times their annual base retainer (excluding any supplementary retainer for Committee chairs);

§                  All shares of TCF Common Stock owned directly or indirectly by a Director will be considered in determining whether the Stock Ownership Guidelines have been met.  Stock options will not be counted toward the Stock Ownership Guidelines;

§                  The Directors have until the later of (i) January 16, 2017 or (ii) the fifth anniversary of their appointment to the Board to reach the applicable target ownership level; and

§                  Despite not being applicable until January 16, 2017, all Directors satisfied the Stock Ownership Guidelines as of February 25, 2013.

·                  TCF offers the TCF Matching Gift Program to supplement donations made by employees and Directors to charitable organizations of their choice up to a maximum of $10,000 annually.

·                  Indemnification rights are provided to Directors under TCF’s Certificate of Incorporation and Bylaws, to the extent authorized under Delaware General Corporation Law and TCF maintains Directors and Officers Insurance.

·                  TCF reimburses Directors for travel and other expenses to attend Board meetings or attend to other Board business as a business expense.

·                  TCF occasionally holds Board retreats at a remote location and pays Directors’ travel and lodging expenses incurred in connection with the meeting, as well as those of the Directors’ spouses.

 

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OWNERSHIP OF TCF STOCK

 

TCF Stock Ownership of Directors and Named Executives

 

Common Stock

 

The following table shows ownership as of January 31, 2013 of TCF Common Stock by those indicated, except for Mr. Brown whose ownership is shown as of November 19, 2012, the date of his resignation.

 

Name of Beneficial Owner

 

Amount and Nature of
       Beneficial Ownership
(1)(3)

 

Percent
of Class 
(4)

Directors who are not Named Executives:

 

 

 

 

Raymond L. Barton

 

     22,891

 

*

Peter Bell

 

     87,894

 

*

William F. Bieber

 

   949,558

 

*

Theodore J. Bigos

 

     30,526

 

*

Thomas A. Cusick

 

   224,905

 

*

Karen L. Grandstrand

 

     23,317

 

*

George G. Johnson

 

     96,681

 

*

Vance K. Opperman

 

     62,631

 

*

James M. Ramstad

 

     10,520

 

*

Gerald A. Schwalbach

 

      171,600(5)

 

*

Barry N. Winslow

 

      754,929(2)

 

*

Richard A. Zona

 

     23,240

 

*

Named Executives:

 

 

 

 

William A. Cooper

 

      3,505,560(2)(5)

 

2.1%

Michael S. Jones

 

   153,312

 

*

Thomas F. Jasper

 

         580,052(2)(5)

 

*

Craig R. Dahl

 

         716,106(2)(5)

 

*

Earl D. Stratton

 

      532,221(2)

 

*

Neil W. Brown

 

      448,556(2)

 

*

All Directors and Executive Officers combined (22 persons)

 

      8,273,377(2)(5)

 

5.0%

 

* Represents 1.0% or less of the outstanding TCF Common Stock.

(1)    All shares are directly owned and the person indicated has sole voting and dispositive power, except as indicated in this footnote and footnote (3) below.  Includes shares beneficially owned by family members who share the person’s household, with respect to which shares the indicated person disclaims any beneficial ownership, as follows: Mr. Bell, 8,295 shares; Mr. Bieber, 20,920 shares; Mr. Brown, 14,000 shares; Mr. Cusick, 99,700 shares; Mr. Stratton, 2,000 shares; Mr. Winslow, 397,475 shares; and all Directors and Executive Officers combined, 528,437 shares.

(2)    Includes shares which could be purchased by the indicated person upon the exercise of vested options within 60 days after January 31, 2013:  Mr. Brown, 282,000 shares; Mr. Cooper, 800,000 shares; Mr. Dahl, 225,000 shares; Mr. Jasper, 141,000 shares; Mr. Stratton, 118,000 shares; Mr. Winslow, 200,000 shares; and all Directors and Executive Officers combined, 1,484,000 shares.  Mr. Brown’s stock options expired unexercised on February 19, 2013.

(3)    Includes whole shares of TCF Common Stock allocated to accounts in the ESPP for which the Named Executives and certain Directors have shared voting power as follows: Mr. Bell, 7,058 shares; Mr. Brown, 9,942 shares; Mr. Cooper, 11,309 shares; Mr. Dahl, 10,842 shares; Mr. Jasper, 10,026 shares; Mr. Jones, 8,249 shares; Mr. Stratton, 53,495 shares; Mr. Winslow, 62,326 shares; and all Directors and Executive Officers combined, 271,419 shares.  Also includes whole shares of TCF Common Stock in the trust for the ESPP-Supplemental Plan for which the Named Executives and certain Directors do not have voting power, as follows:  Mr. Brown, 41,080 shares; Mr. Cooper, 45,481 shares; Mr. Dahl, 33,821 shares; Mr. Jasper, 8,991 shares; Mr. Jones, 3,563 shares; Mr. Stratton, 35,825 shares; Mr. Winslow, 19,648 shares; and all Directors and Executive Officers combined, 176,905 shares.  Also includes whole shares of TCF Common Stock (unvested) in the trust for the TCF Employees Deferred Stock Compensation Plan for which the Named Executives do not have voting power, as follows:  Mr. Cooper, 1,000,000 shares; Mr. Dahl, 300,000 shares; Mr. Jasper, 350,000 shares; Mr. Jones, 100,000 shares; Mr. Stratton, 50,000 shares; Mr. Winslow, 50,000 shares; and all Named Executives and other executive officers combined, 1,860,000 shares.  Also includes 24,516 shares for Mr. Bell in the trust for the Executive Deferred Compensation Plan for which he does not have voting power.  Also includes whole shares of TCF Common Stock

 

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(vested and unvested) in the trust for the Directors Deferred Compensation Plan for which the holder does not have voting power, as follows: Mr. Barton, 17,891 shares; Mr. Bieber, 86,238 shares; Mr. Bigos, 25,829 shares; Mr. Cooper, 9,089 shares; Mr. Cusick, 25,471 shares; Ms. Grandstrand, 23,317 shares; Mr. Johnson, 76,958 shares; Mr. Opperman, 32,542 shares; Mr. Schwalbach, 22,172 shares; Mr. Zona, 23,240 shares; and all Directors combined, 342,747 shares.

(4)    As of January 31, 2013, there were 163,537,098 shares of TCF Common Stock outstanding.  Each percentage has been calculated by treating as outstanding the shares which could be purchased upon the exercise of existing options within 60 days after January 31, 2013.  As of January 31, 2013, there were outstanding options with respect to 1,484,000 shares that were exercisable within 60 days for all executive officers combined.  There were no outstanding stock options for non-employee Directors.  Mr. Brown’s stock options expired on February 19, 2013.

(5)    Includes shares pledged as collateral for loans undertaken by Directors or Named Executives as follows:  Mr. Cooper, 1,640,000 shares; Mr. Dahl, 89,579 shares; Mr. Jasper, 42,080 shares; Mr. Schwalbach, 141,081 shares; and all Directors and Executive Officers combined, 1,912,740 shares.

 

Preferred Stock

 

The following table shows ownership as of January 31, 2013 of (i) depositary shares, each representing a 1/1000th interest in a share of 7.50% Series A Non-Cumulative Perpetual Preferred Stock (the “Depositary Shares”) and (ii) 6.45% Series B Non-Cumulative Perpetual Preferred Stock (the “Series B Preferred Stock”) by those indicated, except for Mr. Brown whose ownership is shown as of November 19, 2012, the date of his resignation.

 

 

 

Depositary Shares

 

Series B Preferred Stock

Name of Beneficial Owner

 

Amount and Nature
of Beneficial
    Ownership (1)

 

Percent
    of Class (3)

 

Amount and Nature
of Beneficial
    Ownership (1)

 

Percent
    of Class (3)

Directors who are not Named Executives:

 

 

 

 

 

 

 

 

 

 

 

 

Raymond L. Barton

 

 

-

 

 

*

 

 

-

 

 

*

Peter Bell

 

 

-

 

 

*

 

 

-

 

 

*

William F. Bieber

 

 

160,000

 

 

2.3%

 

 

-

 

 

*

Theodore J. Bigos

 

 

-

 

 

*

 

 

-

 

 

*

Thomas A. Cusick

 

 

20,000

 

 

*

 

 

-

 

 

*

Karen L. Grandstrand

 

 

-

 

 

*

 

 

-

 

 

*

George G. Johnson

 

 

-

 

 

*

 

 

-

 

 

*

Vance K. Opperman

 

 

40,000

 

 

*

 

 

-

 

 

*

James M. Ramstad

 

 

-

 

 

*

 

 

-

 

 

*

Gerald A. Schwalbach

 

 

-

 

 

*

 

 

-

 

 

*

Barry N. Winslow

 

 

20,000

 (2)

 

*

 

 

-

 

 

*

Richard A. Zona

 

 

20,000

 (2)

 

*

 

 

10,000

 (2)

 

*

Named Executives:

 

 

 

 

 

 

 

 

 

 

 

 

William A. Cooper

 

 

-

 

 

*

 

 

-

 

 

*

Michael S. Jones

 

 

1,000

 

 

*

 

 

-

 

 

*

Thomas F. Jasper

 

 

4,000

 (2)

 

*

 

 

-

 

 

*

Craig R. Dahl

 

 

-

 

 

*

 

 

-

 

 

*

Earl D. Stratton

 

 

30,000

 

 

*

 

 

3,600

 

 

*

Neil W. Brown

 

 

10,000

 

 

*

 

 

-

 

 

*

All Directors and Executive Officers (22 persons)

 

 

305,400

 (2)

 

4.3%

 

 

14,000

 (2)

 

*

 

* Represents 1.0% or less of the outstanding class of stock.

(1)    All shares are directly owned and the person indicated has sole voting and dispositive power, except as indicated in this footnote.  Includes shares beneficially owned by family members who share the person’s household, with respect to which shares the indicated person disclaims any beneficial ownership, as follows: Mr. Brown, 10,000 Depositary Shares; Mr. Stratton, 30,000 Depositary Shares; and all Directors and Executive Officers combined, 30,000 Depositary Shares.

(2)    Includes shares pledged as collateral for loans undertaken by Directors or Named Executives as follows: Mr. Jasper, 4,000 Depositary Shares; Mr. Winslow, 9,726 Depositary Shares; Mr. Zona, 20,000 Depositary Shares and 10,000 shares of Series B Preferred Stock; and all Directors and executive officers combined, 33,726 Depositary Shares and 10,000 Series B Preferred Stock.

(3)    As of January 31, 2013, there were 6.9 million Depositary Shares outstanding and 4.0 million shares of Series B Preferred Stock outstanding.

 

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TCF Common Stock Ownership of Certain Beneficial Owners

 

Name of Beneficial Owner

 

Amount and Nature of
Beneficial Ownership of
TCF Common Stock

 

Percent
of Class

FMR LLC

 

21,116,858

(1)

 

12.9%

 

 

 

 

 

 

T. Rowe Price Associates, Inc.

 

15,567,720

(2)

 

9.5%

 

 

 

 

 

 

State Street Corporation

 

9,845,316

(3)

 

6.0%

 

 

 

 

 

 

Advisory Committee of TCF Employees Stock Purchase Plan

 

8,595,680

(4)

 

5.3%

 

 

 

 

 

 

Blackrock, Inc.

 

8,505,652

(5)

 

5.2%

 

(1)    The information that follows is based upon the Schedule 13G/A filed with the SEC on behalf of FMR LLC on February 14, 2013.  Information is as of December 31, 2012.  Beneficial ownership of shares by FMR LLC is in the following manner: sole voting power, 2,695,929 shares; shared voting power, 0 shares; sole dispositive power, 21,116,858 shares; and shared dispositive power, 0 shares.  The address of FMR LLC is 82 Devonshire Street, Boston, MA 02109.

(2)    The information that follows is based upon the Schedule 13G/A filed with the SEC on February 6, 2013 on behalf of T. Rowe Price Associates, Inc. (“Price Associates”) and T. Rowe Price Mid-Cap Growth Fund.  Information is as of December 31, 2012.  Beneficial ownership of shares by Price Associates is in the following manner: sole voting power, 3,469,620 shares; shared voting power, 0 shares; sole dispositive power, 15,567,720 shares; and shared dispositive power, 0 shares.  These securities are owned by various individual and institutional investors (including the T. Rowe Price Mid-Cap Growth Fund (which owns 8,255,100 shares, representing 5.0% of the shares outstanding), which Price Associates serves as an investment adviser with power to direct investments and/or sole power to vote the securities.  For the purposes of the reporting requirements of the Exchange Act, Price Associates is deemed to be a beneficial owner of such securities.  However, Price Associates expressly disclaims that it is, in fact, the beneficial owner of such securities.  Beneficial ownership of shares by T. Rowe Price Mid-Cap Growth Fund is in the following manner:  sole voting power, 8,255,100 shares; sole voting power, 0 shares; shared dispositive power, 0 shares; and sole dispositive power, 0 shares.  The address of each of T. Rowe Price Associates, Inc. and T. Rowe Price Mid-Cap Growth Fund is 100 E. Pratt Street, Baltimore, MD 21202.

(3)       The information that follows is based upon the Schedule 13G filed with the SEC on behalf of State Street Corporation on February 12, 2013.  Information is as of December 31, 2012.  Beneficial ownership of shares by State Street Corporation is in the following manner: sole voting power, 0 shares; shared voting power, 9,845,316 shares; sole dispositive power, 0 shares; and shared dispositive power, 9,845,316 shares.  The address of State Street Corporation is State Street Financial Center, One Lincoln Street, Boston, MA 02111.

(4)    The Advisory Committee for the ESPP has shared voting power with participants of all allocated shares in such plan.  Advisory Committee members disclaim ownership of these shares.  The foregoing information is based upon the Schedule 13G/A filed with the SEC by TCF Financial Corporation on January 31, 2013.  Information is as of December 31, 2012.  Beneficial ownership of shares by the Advisory Committee for the ESPP is in the following manner:  sole voting power, 0 shares; shared voting power, 8,595,680 shares; sole dispositive power, 0 shares; and shared dispositive power, 0 shares.  The address of the Advisory Committee of the TCF Employees Stock Purchase Plan is c/o General Counsel, TCF Financial Corporation, 200 Lake Street East, Mail Code EX0-03-A, Wayzata, MN 55391-1693.

(5)    The information that follows is based upon the Schedule 13G filed with the SEC on behalf of Blackrock, Inc. on January 30, 2013.  Information is as of December 31, 2012.  Beneficial ownership of shares by Blackrock, Inc. is in the following manner: sole voting power, 8,505,652 shares; shared voting power, 0; sole dispositive power, 8,505,652 shares; and shared dispositive power, 0 shares.  The address of Blackrock, Inc. is 40 East 52nd Street, New York, NY 10022.

 

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

Section 16(a) of the Exchange Act requires TCF’s Directors, executive officers, and persons who beneficially own more than ten percent of the outstanding shares of TCF Common Stock to file certain stock ownership reports with the SEC.  Based upon representations signed by officers and Directors, TCF believes that all reports required by officers and Directors were filed on a timely basis during 2012.

 

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BACKGROUND OF EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS

 

The following describes at least the last five years of business experience of executive officers of TCF Financial, or its principal wholly-owned subsidiary TCF Bank, who are not Directors of TCF Financial.  The descriptions include any other directorships at public companies held during the past five years.

 

SUSAN D. BODE (age 50) (Principal Accounting Officer) was elected Senior Vice President and Chief Accounting Officer of TCF Financial in November 2012.  Ms. Bode has also served as Executive Vice President and Chief Accounting Officer of TCF Bank since November 2012.  Prior to being elected Executive Vice President in November 2012, she was a Senior Vice President of TCF Bank since April 2010.  She has served as Chief Accounting Officer of TCF Bank since April 2010.  Prior to joining TCF Bank, Ms. Bode served as Managing Director with the finance group of Residential Capital, LLC, a division of GMAC LLC, engaged principally in mortgage financing activities since 2007.

 

JOSEPH T. GREEN (age 58) has been Secretary of TCF Financial since 2011 and has been General Counsel of TCF Financial since 2009, and a Senior Vice President of TCF Financial since 2008.  Since 2001, Mr. Green has also served as General Counsel and Secretary of TCF Bank, and has been an Executive Vice President of TCF Bank since 2010.

 

MICHAEL S. JONES (age 44) became Executive Vice President and Chief Financial Officer of TCF Financial on January 1, 2012.  Mr. Jones has also been Executive Vice President and Chief Financial Officer of TCF Equipment Finance, Inc. since 2008 and Executive Vice President and Treasurer of Winthrop Resources Corporation since 2008 and 2011, respectively, each a wholly-owned subsidiary of TCF Bank.  From April 2008 to December 2008, prior to joining TCF, Mr. Jones was Operations Controller in charge of the finance function for PACCAR Financial Services, the finance arm of PACCAR, Inc., a manufacturer of premium commercial vehicles.  From October 2002 to April 2008, Mr. Jones worked at various subsidiaries of General Electric Company, a large diversified technology and financial services company, serving as the Chief Financial Officer of GE Real Estate Business Property from August 2005 to April 2008, and Global Controller of Fleet Service from October 2002 to August 2005.

 

MARK D. NYQUIST (age 56) has been Executive Vice President and Chief Lending Officer of TCF Bank since November 2012.  He has been an Executive Vice President of TCF Bank since January 2012.  Prior to becoming Chief Lending Officer, he had been Chief Credit Officer since January 2012.  Since 2000, he has also been Executive Vice President and Chief Credit Officer of TCF Equipment Finance, Inc. and Senior Vice President of Winthrop Resources Corporation.  In addition, he has had portfolio management responsibilities for TCF Equipment Finance, Inc.

 

BARBARA E. SHAW (age 57) has been Senior Vice President – Director of Corporate Human Resources of TCF Financial since December 1999 and is also Executive Vice President of Corporate Human Resources for TCF Bank.  From 1998 to her election in 1999, she was Vice President – Human Resources of TCF Financial.  As Director of Corporate Human Resources, Ms. Shaw oversees all human resources disciplines including recruiting, employee relations, payroll, benefits, compensation, and employee development.  Ms. Shaw assumed oversight of the TCF Foundation in January 2012.

 

DAVID M. STAUTZ (age 55) was elected the Chief Risk Officer in November 2012 for TCF Financial and TCF Bank.  He has responsibilities for Enterprise Risk Management and coordination with regulators and auditors.  Prior to becoming the Chief Risk Officer, Mr. Stautz had been the Senior Vice President, Controller and Managing Director of Corporate Development of TCF Financial and Executive Vice President, Controller and Managing Director of Corporate Development of TCF Bank since August 2011. Mr. Stautz had been the Senior Vice President and Controller of TCF Financial since 1999.  He had been an Executive Vice President of TCF Bank since 2007 and Controller of TCF Bank since 2000.  Additionally, Mr. Stautz was Assistant Treasurer of TCF Financial and TCF Bank from 1999 to August 2011.

 

EARL D. STRATTON (age 65) became Chief Operations Officer of TCF Financial and TCF Bank on January 1, 2012.  He has been an Executive Vice President of TCF Financial since 1995 and TCF Bank since 2011 and the Chief Privacy Officer of TCF Financial and TCF Bank since April 2008.  He was Chief Information Officer of TCF Financial from 1995 through 2011 and TCF Bank from 2001 until 2011.  Prior to that, he was a Senior Vice President of TCF Financial from 1985 to 1995 and a Senior Vice President of TCF Bank from 1985 to 2001.  Mr. Stratton is a member of the boards of directors of Cooper State Bank and Medica, a non-profit health care holding company operating in Minnesota, Wisconsin, North Dakota, and South Dakota.  In his current position, Mr. Stratton is responsible for branch banking, information technology, bank operations, facilities, ATMs, and card services.

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

Executive Summary

 

The past few years have been very challenging for TCF and the banking industry as a whole.  Banks have had to work through the deepest recession since the Great Depression, which included stressed home values and elevated unemployment, as well as many regulatory and legislative changes.

 

In this ever-changing and highly regulated business environment, the role of TCF’s executive team continues to grow increasingly more complex and challenging as TCF strives to meet and exceed stockholder expectations.  TCF’s experienced executive team has led the Company in its efforts to remain profitable and grow during these difficult times.  Executive management used 2012 as a building and investing year for TCF, as executive management led TCF through a balance sheet repositioning, a large deposit acquisition, the expansion of TCF’s national lending programs, the redemption of TCF’s trust preferred securities, and the return of free checking.  All this was done with a focus on improving TCF’s results for 2013 and beyond.

 

In its evaluation of the Named Executives and their performance, the Compensation/Nominating/Corporate Governance Committee (the “Committee”) has carefully considered the continued challenges TCF has faced over the past few years, and the importance of rewarding and retaining talented, experienced managers to continue to guide the Company through these difficult times.

 

2012 Compensation Decisions.  TCF’s financial performance, including its performance relative to peers, along with the individual performance of executive officers, served as key factors in determining compensation for 2012, including the following:

·      Thomas F. Jasper, Craig R. Dahl, Earl D. Stratton, and Neil W. Brown each received increases to their base salary in connection with their assumption of new duties on January 1, 2012.  The increases in base salary also provided for better internal pay equity among the Named Executives who report directly to the CEO, which include Messrs. Jasper and Dahl and included Mr. Brown until his resignation.

·     The salary of Michael S. Jones was set at $300,000 in connection with his election as Executive Vice President and Chief Financial Officer.

·      No annual cash incentives were paid to the Named Executives for 2012 because TCF did not achieve the performance target under the 2012 Management Incentive Plan (“MIP”).

·     Long-term incentive compensation awarded in 2012 (discussed in more detail below under “Key Decisions Made by the Committee in 2012 and Early 2013 – 2012 Long-Term Incentives”) comprised a majority of the compensation paid to Named Executives in 2012, and:

§                  96% of the shares awarded were performance-based equity awards with multi-year performance periods, further aligning the interests of the Named Executives with the Company’s long-term success and the interests of stockholders;

§                  Performance targets were set at levels that will require significant financial improvement by TCF in order for such awards to vest (none of the performance criteria had been achieved as of February 25, 2013, the record date); and

§                  Upon the achievement of the performance goals, one-half of the shares of performance-based restricted stock that vest will be deferred under the TCF Employees Deferred Stock Compensation Plan (the “Deferred Stock Plan”) for an additional two years, except in the case of a change in control, death or disability, which is intended to further strengthen the alignment between the interests of the Named Executives and TCF’s stockholders, by keeping the Named Executives focused on TCF’s long-term financial performance instead of short-term goals which could negatively affect TCF’s long-term stock performance.

·                  Mr. Cooper and TCF entered into an amended and restated employment agreement in January 2012 that, among other things, eliminated the automatic renewal and excise tax gross-up provisions, which were disfavored by stockholders.  In addition, the agreement extended the period of Mr. Cooper’s employment until December 31, 2015 and increased his base salary.  On February 19, 2013, Mr. Cooper and TCF entered into a new employment agreement that superseded his prior agreement.  Mr. Cooper’s employment agreement is described further under “Other Forms of Compensation – Payments in the Event of Termination.”

 

2012 Say on Pay Vote ResponseAll key decisions regarding executive compensation for 2012, including executive salary increases and grants of long-term incentives, were made prior to the advisory (non-binding) vote on executive compensation at TCF’s 2012 Annual Meeting (the “2012 Say on Pay Vote”).  Support for the 2012 Say on Pay Vote

 

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was strong, with over 70% of votes cast in favor of the resolution.  Although the level of majority support from stockholders for the 2012 Say on Pay Vote was strong, TCF has remained focused on stockholder communication.

 

Accordingly, during 2012 TCF continued to engage its stockholders to determine what issues were most important to them.  Through these efforts, TCF learned that stockholders believed that TCF’s ability to grant non-qualified stock options with an exercise price as low as 85% of fair market value was a key area of concern.  Although TCF has no outstanding options which had exercise prices below 100% of fair market value as of their grant date, TCF has included a management proposal, Proposal 2, to amend the Incentive Stock Program to eliminate TCF’s ability to grant non-qualified stock options with an exercise price below fair market value.

 

Governance EnhancementsThe following governance enhancements were made in 2012 and early 2013 to build upon the Company’s compensation goals and its overall pay-for-performance philosophy:

·                  TCF adopted a policy prohibiting Company personnel, including the Named Executives, from engaging in short sales, buying or selling put or call options, trading in short-term options or entering into hedging transactions with respect to their ownership of TCF securities.

·                  Stock Ownership Guidelines were implemented by the Board that require our CEO to maintain stock ownership of at least five times his base salary and each other Named Executive to maintain stock ownership of at least three times their annual base salary.  The Stock Ownership Guidelines are described further under “Analysis of Tools the Committee Uses – Stock Ownership Data.” Despite not being applicable until January 16, 2017, all Named Executives satisfied the Stock Ownership Guidelines as of February 25, 2013.

 

Realizable Pay.  To further strengthen the pay-for-performance culture at TCF, the Committee made a greater proportion of the Named Executives’ compensation for 2012 contingent on performance, or “at risk,” by granting 96% of the shares underlying the long-term incentive compensation awarded to Named Executives in 2012 in the form of performance-based restricted stock.  Because it is impossible for our Named Executives to earn all of the shares of performance-based restricted stock in one year, the Committee believes that the Summary Compensation Table does not provide a complete picture of the compensation available to our Named Executives, particularly in light of the fact that none of the performance criteria associated with the performance-based restricted stock were met in 2012.  Accordingly, the Committee is providing a presentation of Realizable Pay.

 

The term Realizable Pay describes the actual gains or “in the money” value that each Named Executive received for 2012.  For this purpose, Realizable Pay for any year consists of:

·                  Salary;

·                  Annual cash incentive earned for the year’s performance;

·                  Change in pension value;

·                  Other compensation;

·                  Gains realized on stock options granted in that year;

·                  Market value of vested and unvested service-based restricted stock grants awarded during each respective year at December 31 of the year granted; and

·                  Market value of performance-based restricted stock earned during the year as of December 31.

 

The Committee believes that this is a very expansive definition of Realizable Pay that fairly represents the value of the compensation that the Named Executives actually received for 2012.  The table below is not a substitute for the information disclosed in the Summary Compensation Table and related footnotes.  The primary difference between the Realizable Pay for each Named Executive and the total reported compensation on the Summary Compensation Table is that, while the Summary Compensation Table includes the grant date fair value of all equity awards granted during 2012, Realizable Pay includes only the amount realized during 2012 relating to such equity awards, as set forth above.

 

Using the closing stock price on December 31, 2012 of $12.15 per share, the information in the chart below illustrates how each Named Executive’s Realizable Pay compares to his compensation reported in the Summary Compensation Table for 2012.  The Realizable Pay for Messrs. Cooper, Jones, Jasper, Dahl, Stratton, and Brown represents 28.3%, 41.5%, 24.1%, 25.1%, 112.6%, and 52.7% of their reported compensation, respectively:

 

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Cooper

 

 

Jones

 

 

Jasper

 

 

Dahl

 

 

Stratton

 

 

Brown (1)

Realizable Pay (2)

 

 

$1,773,399

 

 

$   635,789

 

 

$  682,316

 

 

$  706,802

 

 

$937,310

 

 

$1,914,398

Total Reported Compensation (3)

 

 

$6,267,149

 

 

$1,530,753

 

 

$2,822,137

 

 

$2,816,030

 

 

$832,252

 

 

$3,635,438

 

(1)   Mr. Brown resigned effective November 19, 2012.

(2)   The 2012 performance-based restricted stock awards were valued at zero, since as of December 31, 2012, the performance conditions have not been achieved.  If the first performance goal had been achieved and one-half of the performance-based restricted stock awards were included at grant date fair value, Realizable Pay for the Named Executives who received the awards would have been $4,810,899, $1,243,289, $2,201,066, and $2,225,552 for Messrs.  Cooper, Jones, Jasper, and Dahl, respectively.  The performance-based restricted stock award to Mr. Brown was valued at zero because he forfeited his award upon his resignation.  The Realizable Pay of Mr. Stratton exceeds his Total Reported Compensation primarily because he did not receive a performance-based restricted stock award during 2012, a performance-based restricted stock award granted in 2009 was earned during 2012 and TCF’s year-end closing price of $12.15 per share exceeded $10.69 per share, the grant date fair value of his 2012 restricted stock award.

(3)   For a breakdown, see the Summary Compensation Table.

 

TCF encourages you to read this CD&A in its entirety for a detailed discussion and analysis of its executive compensation program, including information about the compensation of the Named Executives for 2012.

 

Objectives of TCF’s Executive Compensation Program

 

TCF’s executive compensation program is designed to:

·

Attract and retain experienced, highly qualified executives who are critical to the Company’s long-term success and to enhancement of stockholder value.

·

Link pay to individual and Company performance, while not encouraging unnecessary or excessive risk to the Company.

·

Provide for the majority of total compensation in the form of annual cash incentives and long-term incentives.

·

Align executives’ interests with those of stockholders through long-term ownership of TCF Common Stock.

 

Key Decisions Made by the Committee in 2012 and Early 2013

 

The Committee is responsible for all aspects of executive compensation, including evaluating management and its performance and for oversight of the Company’s compensation plans.  This section details key decisions made by the Committee in 2012 and early 2013 concerning compensation for the Named Executives.  A discussion regarding the compensation program objectives achieved with each of the following elements of compensation and how amounts are actually determined follows under “Elements of Executive Compensation.”

 

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Table of Contents

 

Base SalaryThe following base salaries were effective for 2011 and 2012:

 

Named Executive

 

 

2011
Base Salary

 

 

2012
Base Salary

William A. Cooper

 

 

$950,000

 

 

$1,500,000

Michael S. Jones

 

 

N/A

 

 

$   300,000

Thomas F. Jasper

 

 

$450,000

 

 

$   500,000

Craig R. Dahl

 

 

$450,000

 

 

$   500,000

Earl D. Stratton

 

 

$350,000

 

 

$   400,000

Neil W. Brown *

 

 

$460,000

 

 

$   500,000

 

* Resigned effective November 19, 2012.

 

Reasons for 2012 Base Salary Increases.

 

·

The annual salary of Mr. Jones was set at $300,000 in connection with his promotion to Chief Financial Officer, which the Committee believed was at a level competitive with that of chief financial officers with similar levels of experience at similar-sized financial institutions.

·

The base salaries of Messrs. Jasper, Dahl, Stratton, and Brown in 2012 were increased as a result of the assumption of new duties for each in connection with TCF’s management realignment, which was effective January 1, 2012.

·

The Committee also considered the annual compensation analysis conducted by Towers Watson in July 2011, which showed that the base salaries of the Named Executives as a group ranked in the bottom half of the peer group and the base salary of each Named Executive ranked well below the average for the peer group. The compensation analysis performed by Towers Watson in July 2011 was discussed in the Compensation Discussion and Analysis of TCF’s Proxy Statement for the 2012 Annual Meeting of Stockholders under “Analysis of Tools the Committee Uses – Towers Watson Analysis.”

·

The Committee decided to increase the base salary of Mr. Cooper as of January 1, 2012 in connection with his amended and restated employment agreement because the Committee determined that such an increase was appropriate given the value proposition of Mr. Cooper’s executive leadership skills in the particularly difficult environment in which TCF has operated and continues to operate.

 

2013 Base Salary Decisions.  In early 2013, the Committee approved base salary increases of $50,000 each for Messrs. Jasper and Dahl to $550,000.  The Committee determined that an increase to their base salaries was appropriate in light of the increased responsibilities of each as a result of the executive management changes in late 2012, their executive leadership skills, and their value to TCF’s rebuilding during 2012 and continued success for 2013 and beyond.  The 2013 base salaries for Messrs. Cooper, Jones, and Stratton remain unchanged.

 

Annual Cash Incentives

 

Performance GoalsThe Committee approved the 2012 MIP under the Performance-Based Compensation Policy for executives, including our Named Executives, on January 17, 2012, effective for services beginning on January 1, 2012.  The 2012 MIP goal was for TCF to exceed the mean ROCE (as defined in the Performance-Based Compensation Policy) of its 2012 Peer Group (defined below under “Analysis of Tools the Committee Uses – Peer Group Comparative Analysis – 2012 Peer Group”).  The Committee selected the ROCE performance metric for 2012 because (i) it believed that it is important to measure management’s efficiency in utilizing the Company’s equity base and management’s ability to earn a market return on stockholder capital; (ii) ROCE is publicly available and gives stockholders easy access to information that is used by the Committee to evaluate Named Executives; and (iii) comparing TCF’s ROCE to similar financial institutions provides an assessment of management’s ability to earn a return on stockholder capital as compared with its peers which are operating in the same environment and under the same constraints.

 

In early 2013, the Committee approved the 2013 MIP, effective for services beginning on January 1, 2013.  Under the 2013 MIP, participants will be eligible to receive annual cash incentive awards not to exceed 200% of their base salary based on the following criteria:

·

Pre-tax, Pre-Provision Return on Assets (100%). The participant is eligible to receive a cash incentive of an amount not to exceed:

 

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§

50% of base salary if pre-tax, pre-provision return on assets for 2013 is in the second quartile of the 2013 Peer Group (defined below under “Analysis of Tools the Committee Uses – Peer Group Comparative Analysis – 2013 Peer Group”); or

 

§

100% of base salary if pre-tax, pre-provision return on assets for 2013 is in the first quartile of the 2013 Peer Group.

·

Non-Performing Assets and Provision for Loan and Lease Losses (100%). The participant is eligible to receive a cash incentive of an amount not to exceed:

 

§

100% of base salary if both non-performing assets and provision for loan and lease losses at or for the year ended December 31, 2013 are lower than at or for the year ended December 31, 2012; or

 

§

50% of base salary if either non-performing assets or provision for loan and lease losses at or for the year ended December 31, 2013 is lower than at or for the year ended December 31, 2012.

 

Pre-tax, pre-provision return on assets, non-performing assets and provision for loan and lease losses will be calculated as provided in the Performance-Based Compensation Policy (excluding extraordinary items).

 

The use of pre-tax, pre-provision return on assets, non-performing assets and provision for loan and lease losses as the performance goals for the 2013 MIP is subject to approval by stockholders of Proposal 3, “Approve the Amended and Restated TCF Performance-Based Compensation Policy for Covered Executive Officers.”  If Proposal 3 is not approved by stockholders, then the Named Executives will be eligible to receive a cash incentive not to exceed 200% of base salary if TCF’s 2013 Net Income (as defined) exceeds $103.1 million, which represents an increase of at least 15% over 2012 Net Income (as adjusted, $89.6 million), which excludes from TCF’s 2012 GAAP (defined below) net loss of $218.5 million the effects of (i) the loss of $295.8 million in connection with the balance sheet repositioning in the first quarter of 2012, (ii) the negative impact of the implementation of clarifying bankruptcy-related guidance in the third quarter of 2012 in the net amount of $20.6 million; and the gain on the sale of Visa Class B Shares in the second quarter of 2012 in the net amount of $8.2 million (collectively, the “2012 Adjustments”).

 

The Committee selected the pre-tax, pre-provision return on assets performance metric for 2013 because it believes that the Company’s ability to generate capital and profits relative to its total assets and as compared to its peers that are operating in the same environment and under the same constraints is a good indicator of success.  The Committee believes that it is appropriate to eliminate the effect of taxes on net income because the performance goal is established relative to the performance of other banks and different banks in the 2013 Peer Group are differently impacted by taxes.  The Committee believes that it is appropriate to eliminate the effect of the provision for loan and lease losses on net income because the amount of provision for loan and lease losses, along with the levels of non-performing assets, will be analyzed under separate distinct criteria.  The Committee also selected non-performing assets and provision for loan and lease losses as performance metrics for 2013 because it believes that an improvement of the Company’s credit profile is another important indicator of TCF’s success.  The Committee believes that the combination of the two described criteria will allow for an appropriate assessment of management’s performance as it requires a distinctive review of improvement in credit quality, which has historically been driven by real estate losses on loans made prior to 2009, without having such losses overshadow management’s efforts to improve other aspects of the Company’s performance which are not tied directly to credit quality.  The Committee selected net income as the alternative performance metric for 2013 because it believes that the Company’s ability to generate profits is a good indicator of success.  The Committee also believes that a year over year improvement in net income will provide a good indication of the success of TCF’s 2012 rebuilding efforts and 2013 execution and results efforts.  All of the performance measures chosen by the Committee for 2013 are publicly available, giving stockholders easy access to information that is used by the Committee to evaluate Named Executives.

 

Pre-tax, pre-provision return on assets is not a measure of performance calculated in accordance with U.S. generally accepted accounting principles (“GAAP”).  Return on assets typically is calculated as net income (loss) divided by average total assets for a given performance period, and includes provision for loan and lease losses and tax expense (benefit).  Pre-tax, pre-provision return on assets excludes the provision for loan and lease losses and tax expense (benefit) from the net income amount in the numerator of the calculation for return on assets.  The Committee believes that pre-tax, pre-provision return on assets provides useful information in evaluating the Company’s financial results, and thus our management’s performance.  Pre-tax, pre-provision return on assets should not be considered a substitute for return on assets, or any other data prepared in accordance with GAAP.  In addition, we may calculate pre-tax, pre-provision return on assets differently from other companies reporting data with similar names.

 

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Peer Groups.  For 2012, the Committee elected to include in TCF’s peer group all publicly-traded banks and thrift institutions with assets between $10 billion and $50 billion as of December 31, 2011 that report at least one quarter of fiscal 2012 earnings results by January 31, 2013.  In 2013, TCF decided to change the timing of the determination of the peer group from 2012, which measured assets as of December 31, 2011.  The 2013 Peer Group will include all publicly-traded banks and thrift institutions of the same size (assets between $10 billion and $50 billion), but will measure such assets as of September 30, 2012.  This change was made in response to slow reporting in past years by peer group banks, which caused TCF to delay its determination of whether performance metrics were achieved.

 

Size of 2012 Annual Cash IncentiveUnder the 2012 MIP, Named Executives were eligible to receive an annual cash incentive award of an amount not to exceed 100% of base salary if TCF exceeded the mean ROCE of its 2012 Peer Group, subject to downward adjustment at the discretion of the Committee.

 

Pursuant to the terms of the Performance-Based Compensation Policy, the Committee was required to exclude certain items from the calculation of TCF’s net income, however, the Committee could choose not to exclude such items if not excluding the items would result in less incentive compensation being available to participants.  For 2012 results, the Committee excluded the effects of the 2012 Adjustments described above.  Had the Committee determined not to exclude the effects of the 2012 Adjustments, a net after-tax loss of $293 million would have resulted.  In early 2013, the Committee determined that TCF did not exceed the mean ROCE of its 2012 Peer Group and, thus, no awards were paid under the 2012 MIP to Named Executives.

 

The Committee can award discretionary bonuses to Named Executives outside of the MIP.  The Committee did not award any such bonuses to the Named Executives for 2012 performance.

 

Size of 2013 Annual Cash IncentiveIn early 2013, the Committee approved the 2013 MIP for certain executives, including all of the Named Executives.  Under the 2013 MIP, the Named Executives are eligible to receive a cash incentive award not to exceed 200% of base salary based on the achievement of the performance goals described above under “Performance Goals.”  The potential size of the annual cash incentive was increased from 100% to 200% of base salary in recognition of the Named Executives’ challenges in the current environment, the lack of any cash incentive paid for 2012, and to provide the Committee with greater flexibility.  The Committee adopted a tiered annual cash incentive structure in order to provide Named Executives with increasing compensation opportunities depending upon the level of Company performance.  As always, the Committee has the ability to reduce or eliminate the annual cash incentive for each executive in its discretion, which may include its subjective evaluation of TCF’s performance relative to its 2013 Peer Group, as well as individual performance.  If TCF does not achieve the threshold performance, no annual cash incentives will be paid under the 2013 MIP.

 

2012 Long-Term Incentives

 

Performance-Based Restricted Stock Subject to Additional Deferral.  The Committee granted the following performance-based restricted stock awards in 2012:

 

Named Executive

Shares Awarded

William A. Cooper

500,000

Michael S. Jones

100,000

Thomas F. Jasper

250,000

Craig R. Dahl

250,000

Earl D. Stratton

0

Neil W. Brown *

200,000

 

* Resigned effective November 19, 2012.

 

All shares were awarded on January 17, 2012, except the award to Mr. Jones, which was granted on July 19, 2012.  One-half of the shares subject to each award will vest following the first consecutive four quarter period commencing after December 31, 2011 (for Messrs.  Cooper, Jasper, Dahl, and Brown) or June 30, 2012 (for Mr. Jones), for which Return on Average Assets as defined in the Incentive Stock Program (“ROA”) averages 1.0% (the “First Performance Goal”).  The remaining shares will vest following the first consecutive four quarter period commencing after the achievement of the First Performance Goal for which ROA averages 1.2% (the “Second Performance Goal”).  TCF’s ROA for 2012 and 2011 were -1.14% and 0.61%, respectively.  As a result, achievement of these goals will require performance substantially better than that achieved by TCF in 2011 and 2012.

 

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Upon any vesting of the performance-based restricted stock awards, 50% of the shares then vesting will be immediately distributed from the Deferred Stock Plan to the recipient, while the remaining 50% of the shares then vesting will remain in the Deferred Stock Plan until two years from the date of vesting or immediately upon a change in control of TCF, or death or disability of the Named Executive.

 

The Committee believes that granting of the performance-based restricted stock subject to achievement of the ROA performance metric and the additional deferral further align the interests of each of the Named Executives with the interests of TCF’s stockholders, as follows:

·

The Board internally measures TCF’s performance and engages in goal setting based on ROA. The Board also uses ROA to measure TCF’s performance relative to other financial institutions.

·

ROA is publicly available and gives stockholders easy access to information that is used by the Committee to evaluate the recipients.

·

The value of the award continues to depend upon the price of TCF Common Stock during the subsequent deferral period.

 

In the event of a “change in control” (as defined in the respective award agreements) during the performance period, the maximum number of unvested shares that could still be earned based upon the amount of time available to achieve the performance goals will vest, and any shares which remain unvested following a change in control or the determination of results for the final quarter of the performance period will be forfeited.  The objective behind providing that long-term incentive awards vest in the event of a change of control is to provide the recipients with financial protection in the event of a change of control that could disrupt their careers, alleviate any concerns over possible loss of employment and allow them to stay focused on corporate performance and maximizing value for the benefit of stockholders.

 

The shares of performance-based restricted stock are not entitled to dividends until they vest.  If the recipient dies or becomes “disabled” (as defined under Section 409A of the Code) all unvested shares will immediately be forfeited.  All unvested shares will be forfeited if prior to vesting the recipient ceases to be employed in an executive role, except in the case of Mr. Cooper, who will forfeit his shares only if at any time prior to the expiration of his employment agreement, as then in effect, he serves as neither CEO of TCF nor as a member of the Board.

 

Restricted Stock.  On January 17, 2012, the Committee awarded 25,000 shares of restricted stock to Mr. Jones, which will vest in full on January 1, 2017, and 30,000 shares of restricted stock to Mr. Stratton, which will vest pro-rata on January 1, 2013, 2014, and 2015.  All unvested shares will also vest upon a “change in control” (as defined in each award agreement).  In addition, a pro-rata portion will vest if the executive dies, retires, or becomes “disabled” (as defined under Section 409A of the Code).  All unvested shares will be forfeited upon the executive’s termination of employment for any other reason.  The shares of restricted stock are not entitled to dividends until they vest.

 

Size and Timing of 2012 Long-Term Incentives.  The amount and timing of performance-based restricted stock and restricted stock awarded to each Named Executive was subjectively determined by the Committee based on its consideration of several factors, including base salary, length of service, cumulative ownership of TCF Common Stock and quantity, amount, and vesting schedule of previous stock grants.  The Committee does not target a specific number of shares, but believes that executives should own enough unearned or unvested TCF Common Stock to create a strong focus on long-term stockholder value and to discourage unnecessary risk taking or excessive focus on short-term goals.

 

The following shows the number of shares of unvested restricted stock outstanding for each of the Named Executives prior to the January 2012 awards:

 

Named Executive

 

Outstanding Unvested Restricted Shares
Prior to January 2012 Awards

William A. Cooper

 

500,000

Michael S. Jones

 

  16,500

Thomas F. Jasper

 

117,624

Craig R. Dahl

 

  72,659

Earl D. Stratton

 

  60,072

Neil W. Brown *

 

  62,589

 

* Resigned effective November 19, 2012.

 

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2013 Long-Term Incentives

 

Restricted Stock.  On January 24, 2013, the Committee awarded 19,142 shares of restricted stock each to Messrs. Jasper and Dahl.  The shares will vest in full on January 1, 2016.  All unvested shares will also vest upon a “change in control” (as defined in the award agreement).  In addition, a pro-rata portion will vest if Messrs. Jasper or Dahl dies, retires, or becomes “disabled” (as defined under Section 409A of the Code).  All unvested shares will be forfeited upon termination of employment for any other reason.  The shares of restricted stock are not entitled to dividends until they vest.

 

Size and Timing of 2013 Long-Term Incentives.  The amount and timing of restricted stock awarded to Messrs. Jasper and Dahl was subjectively determined by the Committee based on its consideration of several factors, including base salary, length of service, cumulative ownership of TCF Common Stock and quantity, amount, and vesting schedule of previous stock grants.  The Committee does not target a specific number of shares, but believes that executives should own enough unearned or unvested TCF Common Stock to create a strong focus on long-term stockholder value and to discourage unnecessary risk taking or excessive focus on short-term goals.

 

The following shows the number of shares of unvested restricted stock outstanding for Messrs. Jasper and Dahl prior to the January 2013 awards:

 

Named Executive

 

Outstanding Unvested Restricted Shares
Prior to January 2013 Awards

Thomas F. Jasper

 

358,813

Craig R. Dahl

 

311,330

 

Employment Agreements

 

Amended CEO Employment AgreementMr. Cooper and TCF entered into an amended and restated employment agreement on January 25, 2012 that superseded his prior agreement with TCF (the “2012 CEO Agreement”).  As part of the amendment and restatement, TCF eliminated the excise tax gross-up provision and replaced it with a “valley provision” that provides that if payments to be made to Mr. Cooper would subject him to an excise tax, then such payments will be reduced to a level that will put him in the best net after-tax position.  In addition, the automatic renewal feature was eliminated, the term was extended for one year to December 31, 2015 and, as described above, his base salary was increased to $1.5 million per year effective January 1, 2012.  On February 19, 2013, Mr. Cooper and TCF entered into a new employment agreement (the “2013 CEO Agreement”) that superseded the 2012 CEO Agreement.  The 2013 CEO Agreement amends the prior agreement to (i) provide for severance payment rights in line with those provided to Messrs. Dahl and Jasper (see below) at the level approved for the Chief Executive Officer and (ii) conform certain other provisions in the employment agreements.

 

Employment Agreements of Other Named Executives.  On February 19, 2013, TCF entered into employment agreements with Messrs. Dahl and Jasper.  Messrs. Dahl and Jasper will receive base salaries of at least $550,000 for the term of the agreement, which runs  through December 31, 2015.  The agreements contain a “valley provision” that provides that if payments to be made to either Mr. Dahl or Mr. Jasper would subject him to an excise tax, then such payments will be reduced to a level that will put him in the best net after-tax position.  The Committee believes that Messrs. Dahl and Jasper are critical to the Company’s long-term success and decided to enter into employment agreements with each of them as a retention tool.  See “Elements of Compensation – Other Forms of Compensation – Payments in the Event of Termination” in this CD&A for a discussion of severance benefits under the employment agreements with Messrs. Dahl and Jasper and the 2013 CEO Agreement.

 

Adoption of Stock Ownership Guidelines.  Stock Ownership Guidelines were implemented by the Board that require each Named Executive to maintain stock ownership at specified levels, as described in more detail below under “Analysis of Tools the Committee Uses – Stock Ownership Data.”

 

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Elements of Executive Compensation

 

Overview.  The Committee uses a variety of compensation elements to achieve its overall compensation goals, including base salary, annual cash incentives and long-term incentives (restricted stock and stock options).  This balanced use of the various elements not only rewards executives for performance, but discourages unnecessary or excessive risk-taking within the organization.  The Committee believes that above average Company financial performance should be rewarded through the use of variable elements of compensation such as annual cash incentives, restricted stock and stock option awards.  While the amount and percentage of long-term incentives are not formally tied to base salary, it is expected that increases in base salary for a Named Executive would generally result in an increase in the Named Executive’s long-term incentive potential.  Because annual cash incentives are expressed as a percentage of base salary, the potential size of such awards also increase with increases in base salary.  From time to time, the Committee uses different performance goals with annual cash incentives and long-term incentives to ensure that Named Executives do not become overly focused on a single measure of the Company’s performance.

 

The Committee reviews executive compensation at least annually in light of the Committee’s compensation objectives.  The Committee compares TCF’s levels of base salary, total direct compensation (defined as base salary plus annual cash incentive), long-term incentive and aggregate total compensation with that of TCF’s peer group.  A discussion of the tools that aid the Committee in making compensation decisions, including tally sheets, peer group comparative analysis and the annual compensation analysis by Towers Watson is found below under “Analysis of Tools the Committee Uses.” The peer groups used by the Committee are identified below under “Analysis of Tools the Committee Uses – Peer Group Comparative Analysis.”

 

Base Salary

 

Objective of Base SalaryBase salary is a fixed component that is intended to provide a level of compensation necessary to attract and retain highly qualified executives.

 

Determination of Base SalaryThe Committee reviews base salary market practices at least annually through the use of a peer group comparative analysis and an analysis prepared by its compensation consultant, Towers Watson.  Although the Committee does not seek to use peer group data to benchmark executive compensation, the Committee generally attempts to set base salaries at levels which it believes are appropriate to attract and retain highly qualified executives.  The Committee reviews the base salaries of the Named Executives both in the aggregate, as compared to the aggregate amounts paid to named executive officers at each peer group company, and individually, as compared to the named executive officer at each peer group company of the same rank in terms of relative pay (i.e., highest paid Named Executive for TCF, Mr. Cooper, as compared to the highest paid named executive officer for each company in the 2012 Peer Group, etc.).  The Committee infrequently adjusts base salaries, generally only doing so when it subjectively determines that adjustments are appropriate in light of market practices, to foster internal pay equity or in conjunction with the assumption of increased responsibilities.

 

Annual Cash Incentive

 

Objective of Annual Cash IncentivesThe annual cash incentive award program is designed to reward Named Executives for achieving short-term financial objectives that can potentially have a long-term financial impact on stockholder value.  Performance-based cash incentives awarded under the Performance-Based Compensation Policy are designed to meet the requirements for tax deductibility as “qualified performance-based compensation” for purposes of Section 162(m) of the Code.

 

Determination of Annual Cash IncentivesAnnual cash incentive awards under the Performance-Based Compensation Policy are contingent upon the Company achieving a predetermined performance goal.  The performance goal is based on one or more performance criteria chosen by the Committee from a list of measures previously approved by TCF’s stockholders (or subject to approval by TCF’s stockholders).  The performance goals are determined each year by the Committee, may vary from year to year and may be relative or absolute.  For the 2012 MIP, if the performance goal had been achieved, each Named Executive would have been eligible to receive an award equal to 100% of base salary, subject to reduction in the Committee’s discretion, including its subjective evaluation of Company and individual performance.  For the 2013 MIP, each Named Executive will be eligible to receive a cash incentive not to exceed 200% of base salary based on the achievement of certain performance goals,

 

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subject to reduction in the Committee’s discretion, including its subjective evaluation of Company and individual performance.  In accordance with the terms of the Performance-Based Compensation Policy, the Committee may eliminate the effect of certain extraordinary items in determining the level of performance achieved under the policy.  These permissible adjustments are set forth in the Performance-Based Compensation Policy.

 

Discretionary Bonuses.  The Committee may award discretionary bonuses to the Named Executives when it determines that such awards are appropriate based on factors that it deems relevant at the time of such an award.  The Committee has not awarded a discretionary bonus to any of the Named Executives since 2009.

 

Long-Term Incentives

 

Objectives of Long-Term IncentivesLong-term incentives are designed to align the interests of executives with those of the Company’s stockholders, and to retain and motivate talented executives in this continued challenging environment.  The Committee believes that having in place unearned or unvested awards better aligns management’s interests with stockholder value and discourages executives from sacrificing long-term objectives for short-term compensation.  In addition, the Committee has used additional deferral periods following the vesting of certain long-term awards to further align the value to the executive of the award with the long-term performance of TCF Common Stock.  As of February 25, 2013, 66% of the shares underlying all outstanding unvested long-term incentive awards to Named Executives were subject to additional deferral periods following vesting.

 

The long-term incentives are equity-based and are provided under the Incentive Stock Program, a stockholder-approved plan.  The Incentive Stock Program permits TCF to grant a variety of equity-based awards, including restricted stock and stock options.  Performance-based stock awards are intended to meet the requirements for tax deductibility as “qualified performance-based compensation” for purposes of Section 162(m) of the Code.

 

Timing of Long-Term IncentivesThe timing of these awards is based in part on the status of existing unvested awards.   The Committee will consider granting a new award when a previously unvested award is about to vest or be forfeited or if the Committee determines, in its subjective judgment, that further opportunity for stock ownership is appropriate.

 

Determination of Long-Term IncentivesThe Committee approves periodic discretionary awards upon recommendation of the CEO, except in the case of the CEO’s own awards.  The size and form of these awards is determined by the Committee based on a number of factors, including its evaluation of market practice (through use of the peer group comparative analysis and the Towers Watson analysis), base salary, length of service, cumulative ownership of TCF Common Stock and quantity, amount, and vesting schedule of previous grants.  The awards may be granted subject to achievement of one or more performance criteria chosen by the Committee from a list of measures previously approved by TCF’s stockholders (or subject to approval by TCF’s stockholders).  The Committee believes that executives should own enough unvested and unearned TCF Common Stock to create a strong focus on long-term stockholder value and to discourage unnecessary risk taking or excessive focus on short-term goals.

 

Other Forms of Compensation

 

Retirement and Other Benefits.  The Committee believes that benefits are an important aspect of TCF’s ability to attract and retain quality employees, and therefore, the Committee designs its benefits programs to be consistent with what it believes are market practices (based on its review of the peer group comparative analysis and the Towers Watson analysis).  Benefits, such as the service-weighted match formula of the ESPP, are designed to serve as a retention tool for the Company.  Each Named Executive generally has the same benefits as those provided to all full-time employees.  The amount of benefits awarded to a Named Executive has no impact on the amount of other elements of compensation awarded to the Named Executive.

 

ESPP and ESPP-Supplemental Plan.  TCF’s ESPP offers matching contributions made by the Company on the first 6% of pay contributed after the employee’s first year of service.  The match is 50%, 75%, or 100% of each dollar contributed, depending on an employee’s length of service with TCF.  The plan qualifies as an employee stock ownership plan and qualified tax or deferred compensation plan (“401(k) Plan”) under the Code.  In combination with the ESPP-Supplemental Plan, each Named Executive may contribute the same percentage of pay as any employee generally and receives the same match percentage based on length of service with TCF or its subsidiaries.

 

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A Named Executive’s length of service for this purpose includes only actual time of service with TCF or its subsidiaries and is calculated in the same way as for employees generally.  Covered pay does not include income from restricted stock vesting, stock option exercise or taxable perquisites.

 

The Code limits the amount of employee contributions and Company matching contributions under the ESPP for certain individuals, including each Named Executive.  The Company created the ESPP-Supplemental Plan, a nonqualified supplemental plan, which was approved by stockholders in 2006 to address these limitations.  For the approximately 238 participants, all amounts contributed over the ESPP Plan limit are credited to the ESPP-Supplemental Plan, the operation of which generally mirrors the ESPP.  The Committee approves and maintains the ESPP-Supplemental Plan as a matter of fairness for select highly compensated employees so they may contribute the same percentage of pay as other employees and receive the corresponding employer matching contributions.

 

Pension Benefits.  TCF discontinued pay credits to its pension plan in 2006.  Pension benefits are disclosed below in the “Pension Benefits in 2012” table and described in the narrative following that table.

 

Insurance Benefits.  Named Executives are eligible for the same group medical, dental, life insurance and other similar benefits that are generally available to TCF full-time employees.

 

Payments in the Event of Termination.  Mr. Cooper’s employment agreement, as amended and restated on January 25, 2012, provided for payment of his base salary for the term of the agreement if Mr. Cooper was terminated by TCF without “cause” or he terminated his employment for “good reason” as defined below under “Executive Compensation – Potential Payments upon Termination or Change in Control – Non-Change in Control Termination-Related Payments.”  A quantification and description of the benefits payable to Mr. Cooper and each other Named Executive, excluding Mr. Brown, under various change in control and termination scenarios assumed to have occurred on December 31, 2012, as well as a description of the payments received by Mr. Brown in connection with his resignation, are provided below under “Executive Compensation – Potential Payments Upon Termination or Change in Control.”

 

In early 2013, TCF entered into new employment agreements with Messrs. Cooper, Dahl, and Jasper.  The employment agreements provide for the following severance benefits:

 

Severance Trigger

 

 

Cash Termination Payments
(Cooper)

 

 

Cash Termination Payments
(Dahl and Jasper)

Termination by TCF Without Cause

Absent a Change of Control

 

 

3x base salary

 

 

2x base salary

Termination by TCF Without Cause

Following a Change of Control

 

 

3x the sum of base salary

and annual cash incentive

(assumed to equal base salary)

 

 

2x the sum of base salary

and annual cash incentive

(assumed to equal base salary)

Termination by Executive for Good Reason

Absent a Change of Control

 

 

3x base salary

 

 

2x base salary

Termination by Executive for Good Reason

Following a Change of Control

 

 

3x the sum of base salary

and annual cash incentive

(assumed to equal base salary)

 

 

2x the sum of base salary

and annual cash incentive

(assumed to equal base salary)

 

Additionally, at their election, TCF Financial will pay the monthly premiums for COBRA coverage for up to 12 months.  As used in connection with these employment agreements, the terms “Cause,” “Good Reason,” and “Change of Control” have the meanings provided under “Executive Compensation – Potential Payments upon Termination or Change in Control – Employment Agreements.”

 

The Committee adopted potential severance payment triggers and corresponding payment amounts as part of the employment agreements entered into with Messrs. Cooper, Dahl, and Jasper in February 2013.  The Committee consulted with its compensation consultant, Towers Watson, to develop trigger and payout amounts that it believed were consistent with market practices generally at the time it entered into such agreements.

 

Perquisites.  Perquisites received by Named Executives include use of Company-owned automobiles, club memberships, executive physicals, life insurance, incentive trips, and tax return preparation.  Mr. Cooper receives personal use of the Company airplane.  Mr. Cooper may also approve personal use of the Company airplane by other Named Executives on a case-by-case basis.  The purpose of these perquisites is to provide additional benefits,

 

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reduce security risks and enhance scheduling and efficient use of the Named Executives’ time.  The Committee will continue to review its perquisites program periodically.

 

Roles and Responsibilities of the Committee and Management

in Establishing Executive Compensation

 

The Committee is responsible for discharging the Board’s responsibilities with respect to compensation of each Named Executive, including the CEO.  Following the end of the calendar year, the Committee reviews the Company’s financial results for the previous year to determine if performance targets have been achieved for purposes of performance-based compensation for each Named Executive and to make other compensation decisions.

 

The CEO makes recommendations to the Committee concerning all elements of compensation for each Named Executive.  The CEO reviews the performance of each other Named Executive, future management changes and other matters relating to compensation with the Chair of the Committee regularly on an informal basis.  The other Named Executives generally do not make recommendations to the Committee concerning their own compensation, although they may provide the CEO with information used to support a recommendation to the Committee, such as an individual’s proposed goals, performance against those goals, and information concerning the structure of their compensation.

 

Compensation decisions by the Committee are subjective and are based upon evaluation of an individual’s overall performance and are not based on a statistical or formulaic analysis of particular results or criteria.  Rather, the Committee considers overall performance in areas of responsibility, management and communication skills, leadership qualities, innovation and creative abilities, risk controls and difficulties encountered in achieving results in light of industry conditions.  Taking the CEO’s recommendations into consideration, the Committee then establishes the compensation levels, annual cash incentive amounts and long-term incentive awards for each other Named Executive.  A similar process is followed by the Committee in determining the compensation for the CEO.

 

Analysis of Tools the Committee Uses

 

The Committee uses (1) tally sheets, (2) an annual peer group comparative analysis, (3) an annual compensation analysis prepared by Towers Watson, (4) a perquisite report and (5) total TCF Common Stock ownership data to determine whether the objectives of the Company’s executive compensation policies are being met.  The Committee used the following tools in making the compensation decisions described above under “Key Decisions Made by the Committee in 2012 and Early 2013.”

 

Tally Sheets.  The tally sheets show total compensation payable to each Named Executive in the event of various termination and change in control scenarios.  The tally sheets, together with the total compensation data from the peer group comparative analysis, provide a complete picture of the principal elements of executive compensation.  The Committee considers the tally sheet information, together with the peer group comparative analysis and Towers Watson analysis described below, to subjectively determine the amount and form of compensation and benefits to be awarded to each Named Executive.

 

Peer Group Comparative Analysis.  The peer group comparative analysis measures the relationship between the compensation for each Named Executive and TCF’s financial performance.  The peer group companies are ranked by financial performance for the relevant year.  The annual cash incentive of each Named Executive under the 2012 MIP and 2013 MIP depends, at least in part, on TCF’s performance relative to TCF’s peer group based on predetermined objective measures.  The Committee considers the peer group comparative analysis when making subjective determinations regarding the amount and form of compensation and benefits paid to each Named Executive.  The Committee does not benchmark compensation against the peer group, nor does it tie such compensation to a specific percentile of the peer group.  However, the Committee believes that there should be a relationship between the compensation paid to each Named Executive and TCF’s relative financial performance.  The Committee reviews the peer group comparative analysis to ensure that the compensation of each Named Executive sufficiently depends on TCF’s relative financial performance, and makes adjustments to compensation as it deems appropriate.

 

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In 2013, TCF decided to change the timing of the determination of the peer group from 2012, which measured assets as of December 31, 2011.  The 2013 Peer Group will include all publicly-traded banks and thrift institutions of the same size (assets between $10 billion and $50 billion), but will measure such assets as of September 30, 2012.  This change was made in response to slow reporting in past years by peer group banks, which caused TCF to delay its determination of whether performance metrics were achieved.

 

2012 Peer GroupThe peer group for 2012 consists of all publicly-traded banks and thrift institutions with assets between $10 billion and $50 billion as of December 31, 2011 that report at least one quarter of fiscal 2012 earnings results by January 31, 2013 (the “2012 Peer Group”), including: Hudson City Bancorp, Inc.; New York Community Bancorp, Inc.; Popular, Inc.; First Niagara Financial Group, Inc.; First Republic Bank; People’s United Financial, Inc.; Synovus Financial Corp.; BOK Financial Corporation; First Horizon National Corporation; City National Corporation; East West Bancorp, Inc.; Associated Banc-Corp; First Citizens BancShares, Inc.; Commerce Bancshares, Inc.; Cullen/Frost Bankers, Inc.; SVB Financial Group; Hancock Holding Company; Webster Financial Corporation; Astoria Financial Corporation; Fulton Financial Corporation; Wintrust Financial Corporation; Susquehanna Bancshares, Inc.; Signature Bank; FirstMerit Corporation; Valley National Bancorp; Bank of Hawaii Corporation; Washington Federal, Inc.; Flagstar Bancorp, Inc.; UMB Financial Corporation; First BanCorp; BancorpSouth, Inc.; PrivateBancorp, Inc.; IBERIABANK Corporation; International Bancshares Corporation; Umpqua Holdings Corporation; BankUnited, Inc.; TFS Financial Corporation (MHC); Investors Bancorp, Inc. (MHC); and Cathay General Bancorp.

 

2013 Peer GroupThe peer group for 2013 will consist of all publicly-traded banks and thrift institutions with assets between $10 billion and $50 billion as of September 30, 2012 that report at least one quarter of fiscal 2013 earnings results by January 31, 2014 (the “2013 Peer Group”), including: New York Community Bancorp, Inc.; Hudson City Bancorp, Inc.; Popular, Inc.; First Niagara Financial Group, Inc.; First Republic Bank; People’s United Financial, Inc.; BOK Financial Corporation; City National Corporation; Synovus Financial Corp.; First Horizon National Corporation; Associated Banc-Corp; Cullen/Frost Bankers, Inc.; East West Bancorp, Inc.; SVB Financial Group; First Citizens BancShares, Inc.; Commerce Bancshares, Inc.; Webster Financial Corporation; Hancock Holding Company; Susquehanna Bancshares, Inc.; Astoria Financial Corporation; Wintrust Financial Corporation; EverBank Financial Corp; Signature Bank; Fulton Financial Corporation; Valley National Bancorp; First National of Nebraska, Inc.; Flagstar Bancorp, Inc.; FirstMerit Corporation; Prosperity Bancshares, Inc.; Bank of Hawaii Corporation; UMB Financial Corporation; PrivateBancorp, Inc.; BancorpSouth, Inc.; First BanCorp; BankUnited, Inc.; IBERIABANK Corporation; Washington Federal, Inc.; International Bancshares Corporation; F.N.B. Corporation; Umpqua Holdings Corporation; TFS Financial Corporation (MHC); Investors Bancorp, Inc. (MHC); Cathay General Bancorp; and Central Bancompany, Inc.

 

Towers Watson Analysis.  Towers Watson has been engaged annually by the Committee since 1991 to review compensation data as compared with the selected peer group to determine: (1) whether and to what extent the overall level of total compensation for each Named Executive was aligned with financial performance and (2) whether, in its view, TCF’s compensation levels were appropriately aligned with financial performance based on the peer group data provided by SNL Financial.  The analysis measures base salary, annual cash incentives, and long-term incentives for the five highest-paid executives for each peer group institution, and for TCF, based on information obtained from proxy statements.  The peer group institutions are then ranked by aggregate total compensation, defined as the sum of base salary, annual cash incentives and long-term incentives (restricted stock and stock options).

 

June 2012 Review of Compensation for Named Executives as a GroupThe June 2012 review was based on executive compensation data for calendar year 2011 for both TCF and the 2012 Peer Group.  Since the review focused on 2011 compensation, a year when neither was a named executive officer, Mr. Jones and Mr. Stratton were excluded from the analysis and Barry N. Winslow, Vice Chairman of Corporate Development, was included.  Mr. Winslow and the Named Executives, excluding Mr. Jones and Mr. Stratton, are referred to as the “2011 Named Executives.”  One of the 39 companies from the 2012 Peer Group, International Bancshares, was excluded from this review because it disclosed only three executives.

 

TCF’s relative performance for 2011 ranked above the mean of the 2012 Peer Group for ROCE (defined above under “Executive Summary – 2012 Compensation Decisions”), the performance metric for the 2012 MIP.

 

For the 2011 Named Executives as a group: (i) 2011 base salaries ranked 18th of 39; (ii) total cash compensation (base salary plus annual cash incentive) ranked 15th of 39; (iii) long term incentives (grant date fair value of long

 

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term awards granted during 2011) ranked 4th of 39; and (iv) total compensation (total cash compensation plus long term incentives) ranked 5th of 39.  The results are indicative of TCF’s emphasis on long-term incentive compensation as TCF ranked near the median on the 2012 Peer Group for both base salary and total cash compensation, with a ranking in the top quartile of the 2012 Peer Group with regard to long-term incentive compensation.

 

June 2012 Review for Each Named ExecutiveThe Committee also compared TCF’s compensation of the Named Executives, including both base salary and aggregate total compensation, with the named executive officer at each peer group company of the same rank in terms of relative pay (i.e., highest paid Named Executive for TCF compared to highest paid named executive officer for each company in the 2012 Peer Group, etc.).  The comparative rankings of each Named Executive for base salary, total cash compensation, long-term incentives and total compensation were:

 

Name

 

 

Base Salary

 

 

Total Cash
Compensation

 

 

Long-Term
Incentives

 

 

Total
Compensation

William A. Cooper

 

 

15th

 

 

16th

 

 

  3rd

 

 

  3rd

Thomas F. Jasper

 

 

30th

 

 

18th

 

 

11th

 

 

14th

Neil W. Brown

 

 

12th

 

 

  6th

 

 

12th

 

 

  9th

Craig R. Dahl

 

 

  7th

 

 

  4th

 

 

  9th

 

 

  5th

 

On average, 2011 compensation for the 2012 Peer Group exhibits a large differential from the Second-Highest Paid to the Fifth-Highest Paid.  This is evidenced by the decrease in average total compensation from $2.6 million for the Second-Highest Paid to $947,000 for the Fifth-Highest Paid.  By contrast, TCF’s 2011 compensation exhibits strong internal pay equity, with only $484,000 separating Mr. Jasper, the Second-Highest Paid from Mr. Dahl, the Fifth-Highest Paid.  The strong internal pay equity results in the disparate rankings for total compensation for Messrs. Jasper, Brown, and Dahl as compared to the 2012 Peer Group, of 14th, 9th and 5th, respectively.

 

The results are indicative of TCF’s emphasis on long-term incentive compensation as it ranks near the median on the 2012 Peer Group for both base salaries and total cash compensation for Mr. Cooper, with a ranking in the top quartile of the 2012 Peer Group only with regard to long-term incentive compensation.

 

Review of Internal Pay EquityIn June 2012, the Committee reviewed the relationship of pay between Named Executives based on 2011 compensation data.  The Committee found the relationship between base salaries among the Named Executives to be reasonable compared to the relationship between the named executive officers in the 2012 Peer Group.  For 2011, the base salary data was:

 

 

 

 

2012 Peer Group

 

 

TCF

Average Highest Paid as a percentage of Average Second-Highest Paid

 

 

187%

 

 

211%

Average Highest Paid as a percentage of Average Second-through-Fifth-Highest Paid

 

 

234%

 

 

210%

Average Second-Highest Paid as a percentage of Average Third-through-Fifth-Highest Paid

 

 

136%

 

 

  99%

 

Although the average highest paid as a percentage of the average second-highest paid is somewhat elevated for TCF compared with the 2012 Peer Group, the Committee believes that the salary level of Mr. Cooper is warranted in view of his value to the Company, leadership skills and long tenure with the Company.  At that time, the Committee believed that TCF’s pay scale was reasonable in light of the market data.

 

On average, the 2012 Peer Group exhibits a large differential of base salary from the Second-Highest Paid to the Fifth-Highest Paid.  This is evidenced by the decrease in average base salary from $589,000 for the Second-Highest Paid to $387,000 for the Fifth-Highest Paid.  By contrast, TCF exhibits strong internal pay equity between each of the Named Executives.

 

Annual Perquisite Report.  The Committee annually reviews a report of executive perquisites.  The Committee uses the report to determine, in its own judgment, whether perquisites for TCF’s executives are reasonable.  The Committee will reduce or eliminate any perquisite if it is determined that the perquisite, or total perquisites, are excessive based on its judgment of industry norms.

 

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Stock Ownership Data.  On January 17, 2012, the Board adopted Stock Ownership Guidelines for the Directors, the CEO, the other Named Executives and certain other executives of TCF Financial.  The Stock Ownership Guidelines provide that the CEO is expected to own shares of TCF Common Stock worth an amount equal to five times his base salary and each other Named Executive is expected to own shares of TCF Common Stock equal to three times base salary.

 

All shares of TCF Common Stock owned directly or indirectly by a Named Executive will be considered in determining whether the Stock Ownership Guidelines have been met, including restricted stock (vested and unvested) and shares held in the ESPP and ESPP-Supplemental Plan.  Stock options will not count towards the Stock Ownership Guidelines.  The shares of TCF Common Stock are valued at the higher of fair market value or the executive’s cost basis.

 

The Named Executives have until the later of (i) January 16, 2017, or (ii) the fifth anniversary of his or her appointment to an executive officer position to reach the applicable target ownership level.  The Committee is responsible for monitoring the application of the Stock Ownership Guidelines and shall prepare and deliver a report to the Board annually.  Failure to meet, or in unique circumstances, to show sustained progress toward meeting the Stock Ownership Guidelines as determined by the Committee, may result in an individual being required to retain all shares obtained through restricted stock vesting or the exercise of stock options.  Although the Stock Ownership Guidelines are not effective for any of the Named Executives until January 2017, as of February 25, 2013, each Named Executive owned a sufficient number of shares of TCF Common Stock to be in compliance with the Stock Ownership Guidelines.

 

The Committee adopted the Stock Ownership Guidelines because it believes that it is in the best interest of TCF and its stockholders to further align the long-term financial interests of executive management with those of TCF’s stockholders by encouraging stock ownership among executives of TCF.  The Board believes that executive stock ownership demonstrates a long-term commitment to the growth and profitability of TCF.

 

TCF’s Insider Trading Policy prohibits Directors and employees, including executive officers, from hedging the economic risk of ownership of any TCF securities, including common and preferred stock, they own.

 

Tax Considerations

 

Section 162(m) of the Code limits the deductibility of compensation paid to the Named Executives to $1 million annually.  Compensation that is “qualified performance-based compensation” generally is not subject to the $1 million deduction limit.  Thus, amounts paid under TCF’s annual cash incentives, grants of stock options, and grants of performance-based restricted stock will generally be fully deductible for tax purposes.  Salary and service-based restricted stock awards are subject to the $1 million deduction limit of Section 162(m) of the Code.  As a result, $500,000 of Mr. Cooper’s annual salary for 2012 will not be deductible.  TCF considers the tax deductibility of any element of executive compensation as a factor in its overall compensation program.  It is TCF’s intent to qualify most compensation paid to the Named Executives for deductibility under the limits under Section 162(m) of the Code in order to maximize its income tax deductions.  However, the Committee may, as it has from time to time, approve compensation that may not qualify for the compensation deduction if, in light of all applicable circumstances, it would be in the best interest of TCF stockholders for such compensation to be paid.

 

Recovery (“Clawback”) of Performance-Based Compensation

 

The Public Company Accounting Reform and Investor Protection Act (“Sarbanes-Oxley”) requires recovery of certain compensation from the Principal Executive Officer and the Principal Financial Officer in the event of a restatement of financial results due to misconduct.  The Audit Committee is responsible for determining if annual cash incentive or long-term incentive compensation paid to the Principal Executive Officer or the Principal Financial Officer should be recovered in the event of a restatement.  The employment agreements of Messrs. Cooper, Dahl, and Jasper set forth their obligations to comply with these provisions of Sarbanes-Oxley.

 

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 created further obligations on companies to adopt mandatory clawback policies.  The SEC will direct the national securities exchanges and national securities associations to amend their listing standards to require that every listed company adopt a compensation recovery policy which requires adoption of a clawback policy to recover any incentive-based compensation paid out based on

 

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erroneous financial information reported.  Following an accounting restatement due to material noncompliance with any financial reporting requirements, companies must seek repayment from any current or former executive officer of any incentive-based compensation (including stock options) paid during the three-year period preceding the date that the company is required to prepare the accounting restatement.  There are a number of areas that require clarification and TCF expects to adopt a compensation recovery policy once the NYSE has clarified these issues and amended its listing standards.

 

Compensation Policies and Practices as They Relate to Risk Management

 

Annually, the Committee performs a review of TCF’s incentive compensation policies and practices for its senior executive officers and others, individually or in the aggregate, who may have the potential to expose the Company to material levels of risk.  The Committee bases this review in part on an analysis of such compensation arrangements by TCF’s incentive compensation risk officer.  The analysis and the Committee’s review consider, among other things, the balance between short-term and long-term components of incentive compensation for the senior executive officers, the factors used to determine eligibility for an award in the case of annual cash incentives, terms of vesting in the case of long-term incentive awards to the senior executive officers, risk adjustments available to the Company for all awards, and how these elements relate to TCF’s most significant risks.  In the case of senior executive officers, the Committee places significance on its ability to reduce or withhold an award if it determines that the executive incurred excessive risk.  Based on these reviews, the Committee determined that the risks arising from TCF’s incentive compensation arrangements, and its compensation policies and practices generally, are not reasonably likely to have a material adverse effect on TCF.

 

COMPENSATION COMMITTEE REPORT

 

The Compensation Committee has reviewed and discussed the preceding Compensation Discussion and Analysis with management.  Based on that review and discussion, the Committee recommended to the Board that the Compensation Discussion and Analysis be included in TCF’s proxy statement.

 

BY THE COMMITTEE:

 

Vance K. Opperman, Chair

Raymond L. Barton

William F. Bieber

 

Theodore J. Bigos

Gerald A. Schwalbach

 

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EXECUTIVE COMPENSATION

 

Summary Compensation Table

 

The following summary compensation table (the “Summary Compensation Table”) identifies the cash and non-cash compensation awarded to or earned by the Named Executives in 2012, 2011, and 2010.

 

Name and Principal Position

 

 

Year

 

 

Salary
($)

 

 

Bonus
($)

 

 

Stock
Awards
(1)
($)

 

 

Option
Awards
($)

 

 

Non-
Equity
Incentive
Plan
Compen-
sation
(2)
($)

 

 

Change in
Pension
Value and
Nonquali-
fied Deferred
Compen-
sation
Earnings
(3)
($)

 

 

All
Other
Compen-
sation
(6)
($)

 

 

Total
($)

William A. Cooper

Director, Chairman and CEO (Principal Executive Officer)

 

 

2012

2011

2010

 

 

$1,500,000

$   950,000

$   950,000

 

 

-

-

-

 

 

$4,493,750

$6,660,000

-

 

 

-

-

-

 

 

-

$950,000

$950,000

 

 

$36,215

$31,278

$37,077

 

 

$   237,184

$   313,901

$   236,999

 

 

$6,267,149

$8,905,179

$2,174,076

Michael S. Jones (4) 

Executive Vice President and Chief Financial Officer (Principal Financial Officer)

 

 

2012

 

 

$300,000

 

 

 

-

 

 

$1,198,714

 

 

-

 

 

-

 

 

$         0

 

 

$     32,039

 

 

$1,530,753

Thomas F. Jasper

Director, Vice Chairman and Executive Vice President, Funding, Operations and Finance

 

 

2012

2011

2010

 

 

$   500,000

$   450,000

$   350,007

 

 

-

-

-

 

 

$2,246,875

$   968,000

-

 

 

-

-

-

 

 

-

$450,000

$350,000

 

 

$  3,683

$         0

$  4,220

 

 

$     71,579

$     53,371

$     36,654

 

 

$2,822,137

$1,921,371

$   740,881

Craig R. Dahl

Director, Vice Chairman and Executive Vice President, Lending

 

 

2012

2011

2010

 

 

$   500,000

$   450,000

$   400,006

 

 

-

-

-

 

 

$2,246,875

$   484,000

-

 

 

-

-

-

 

 

-

$450,000

$400,000

 

 

$     607

$     469

$  6,358

 

 

$     68,548

$     68,572

$     51,194

 

 

$2,816,030

$1,453,041

$   857,558

Earl D. Stratton (4) 

Executive Vice President, Chief Operations Officer and Chief Privacy Officer

 

 

2012

 

 

$   400,000

 

 

 

-

 

 

$   320,605

 

 

-

 

 

-

 

 

$14,626

 

 

$     97,021

 

 

$   832,252

Neil W. Brown (5) 

Former Chief Risk Officer

 

 

2012

2011

2010

 

 

$   494,231

$   460,000

$   460,010

 

 

-

-

-

 

 

$1,797,500

$   484,000

-

 

 

-

-

-

 

 

-

$450,000

$400,000

 

 

$  3,812

$         0

$  8,718

 

 

$1,339,895

$     64,053

$   128,613

 

 

$3,635,438

$1,458,053

$   997,341

 

(1)  The amount shown is the aggregate grant date fair value and does not reflect compensation actually received by the Named Executive.  The amount consists of restricted stock awards and performance-based restricted stock awards at grant date fair value computed in accordance with FASB ASC Topic 718, as further discussed in the narrative below.  The fair value of the 2012 performance-based restricted stock awards is based on the maximum payout under the awards. The 2012 performance-based restricted stock awards made to Messrs. Cooper, Dahl, Jasper, and Jones were deferred into the Deferred Stock Plan.  The award made to Mr. Brown was forfeited upon his resignation, effective November 19, 2012.  None of the restricted stock awards are entitled to dividends until the awards vest.  TCF’s accounting policy and assumptions for stock-based compensation are described in Notes 1 and 16 of the Notes to Consolidated Financial Statements included in TCF’s Annual Report on Form 10-K for the year ended December 31, 2012.

(2)  Non-equity incentive plan compensation represents any awards in recognition of achievement of performance goals under TCF’s Management Incentive Plan (“MIP”) for the applicable year.  For 2012, none of the Named Executives earned an award. For a further description, see under “Key Decisions Made by the Committee in 2012 and Early 2013 – 2012 Annual Cash Incentive” in the CD&A.

(3)  Amounts shown reflect only the change in pension value.  Mr. Jones joined the Company after June 30, 2004 and therefore is not a participant in the Pension Plan.  Pay credits to the Pension Plan were discontinued effective April 1, 2006.  However, interest credits continue to be credited.  There were no above-market or preferential earnings on TCF’s nonqualified deferred compensation plans.

(4)  Messrs. Jones and Stratton were not Named Executives in 2011 or 2010.

(5)  Mr. Brown resigned effective November 19, 2012.

(6)  Amounts shown in the “All Other Compensation” column for 2012 consist of the following:

 

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Employer
Matching Contributions

 

 

 

 

 

 

Name

 

 

Perquisites (a)

 

 

ESPP
   Plan
(b)

 

 

ESPP-Supplemental
   Plan
(b)

 

 

Severance
   Payment
(c)

 

 

Total

William A. Cooper

 

 

$90,184

 

 

$15,000

 

 

$132,000

 

 

-

 

 

$    237,184

Michael S. Jones

 

 

$18,988

 

 

$  7,500

 

 

$    5,551

 

 

-

 

 

$      32,039

Thomas F. Jasper

 

 

$14,579

 

 

$15,000

 

 

$  42,000

 

 

-

 

 

$      71,579

Craig R. Dahl

 

 

$11,548

 

 

$15,000

 

 

$  42,000

 

 

-

 

 

$      68,548

Earl D. Stratton

 

 

$52,021

 

 

$15,000

 

 

$  30,000

 

 

-

 

 

$      97,021

Neil W. Brown

 

 

$13,598

 

 

$15,000

 

 

$  41,654

 

 

$1,269,643

 

 

$1,339,895

 

(a)   All of the Named Executives were eligible to receive the following perquisites, none of which individually exceeded $25,000 in 2012: imputed life insurance, executive tax service, personal use of club memberships, incentive trips, personal use of company car, and executive physical.  In addition, Messrs. Cooper and Stratton received personal use of company aircraft in the amount of $54,123 and $35,455, respectively (calculated on a pre-tax basis).  This amount is the aggregate incremental cost of non-business travel use, as determined based on the average weighted cost of fuel and maintenance, crew travel expense, on-board catering expense, landing fees, trip-related hangar/parking costs, and smaller variable costs.  In the event that a family member or guest accompanied him on a flight, the above amount also includes any incremental costs, such as on-board catering costs that may be associated with such travel.

(b)   Employer matching contributions to the ESPP were limited in 2012 to 100% of 6% of covered compensation up to the limit of $250,000 for employees eligible to participate in the ESPP-Supplemental Plan.  The balance of the employer matching contributions in 2012 was made to the ESPP-Supplemental Plan.

(c)   Severance payment made to Mr. Brown in connection with his resignation effective November 19, 2012.  See “Executive Compensation – Potential Payments Upon Termination or Change in Control – Non-Change in Control Termination-Related Payments – Payments to Mr. Brown in Connection with his Resignation” for a description of the payments made to Mr. Brown.

 

Employment Agreements

 

Provisions of the employment agreements of Messrs. Cooper, Dahl, and Jasper are described below under “Executive Compensation – Potential Payments Upon Termination or Change in Control – Employment Agreements.”  None of the other Named Executives has an employment agreement with TCF.

 

Amount of Salary and Bonus in Proportion to Total Compensation

 

The relationship of salary to the Named Executives’ total compensation will vary from year to year primarily depending on the amount of non-equity incentive compensation (annual cash incentive) and grant date fair value of stock awards, as discussed in the CD&A.

 

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Table of Contents

 

Grants Of Plan-Based Awards In 2012

 

The following table shows awards to the Named Executives that were granted in 2012:

 

Name

 

 

 

 

 

Estimated
Possible Payouts
Under Non-
Equity Incentive
Plan Awards
(1)

 

 

Estimated Future Payouts Under
Equity Incentive Plan Awards
(2)

 

 

All Other
Stock
Awards:
Number of
Shares of
   Stock
(3)
(#)

 

 

Grant Date
Fair Value
of Stock
    Awards
(4)
($)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grant
Date

 

 

Target
($)

 

 

Threshold
(#)

 

 

Target
(#)

 

 

Maximum
(#)

 

 

 

 

William A. Cooper

 

 

1/17/2012

 

 

$1,500,000

 

 

250,000

 

 

250,000

 

 

500,000

 

 

-

 

 

$4,493,750

Michael S. Jones

 

1/17/2012

 

 

$   300,000

 

 

-

 

 

-

 

 

-

 

 

25,000

 

 

$   237,964

 

7/19/2012

 

 

-

 

 

  50,000

 

 

  50,000

 

 

100,000

 

 

-

 

 

$   960,750

Thomas F. Jasper

 

 

1/17/2012

 

 

$   500,000

 

 

125,000

 

 

125,000

 

 

250,000

 

 

-

 

 

$2,246,875

Craig R. Dahl

 

 

1/17/2012

 

 

$   500,000

 

 

125,000

 

 

125,000

 

 

250,000

 

 

-

 

 

$2,246,875

Earl D. Stratton

 

 

1/17/2012

 

 

$   400,000

 

 

-

 

 

-

 

 

-

 

 

30,000

 

 

$   320,605

Neil W. Brown(5)

 

 

1/17/2012

 

 

$   500,000

 

 

100,000

 

 

100,000

 

 

200,000

 

 

-

 

 

$1,797,500

 

(1)   Amounts represent possible payments under the MIP as described in the CD&A under “Key Decisions Made by the Committee in 2012 and Early 2013 – 2012 Annual Cash Incentive” and “Elements of Executive Compensation – Objective and Determination of Each Element of Compensation – Annual Cash Incentive” which were effective January 1, 2012.  The target amounts would have been achieved if TCF had exceeded the mean ROCE of its 2012 Peer Group for 2012.  No award was earned for 2012; however, if an award had been earned, the amount of the award would have been presented in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table.

(2)   Awards represent half of the grants of performance-based restricted stock made under the Incentive Stock Program.  The material terms of the awards are described in the CD&A under the heading “Key Decisions Made by the Committee in 2012 and Early 2013 – 2012 Long-Term Incentives.”  The awards will vest in two parts upon achievement of two goals based on Return on Average Assets (“ROA”) as defined in the Incentive Stock Program.  For the 2012 performance-based awards, one-half of the shares will vest following the first consecutive four-quarter period commencing after December 31, 2011 (for Messrs. Cooper, Dahl, and Jasper) or June 30, 2012 (for Mr. Jones), for which ROA averages 1% (the “First Performance Goal”).  The remaining shares will vest following the first consecutive four-quarter period commencing after the achievement of the First Performance Goal for which ROA averages 1.2%.  Upon any vesting of the performance-based restricted stock awards, 50% of the shares then vesting will be immediately distributed from the Deferred Stock Plan to the recipient, while the remaining 50% of the shares then vesting will remain in the Deferred Stock Plan until two years from the date of vesting or immediately upon a change in control of TCF, death, or disability of the Named Executive.  If one or both of the goals is not achieved, the shares that have not vested will be forfeited.  The shares of restricted stock are not entitled to dividends until the awards vest.  Mr. Brown’s award was forfeited upon his separation from service.

(3)   Awards represent the grants of service-based restricted stock made under the Incentive Stock Program.  The material terms of the awards are described in the CD&A under the heading “Key Decisions Made by the Committee in 2012 and Early 2013 – 2012 Long-Term Incentives.”  The award to Mr. Jones will vest on January 1, 2017 and the award to Mr. Stratton will vest pro-rata on January 1 of 2013, 2014, and 2015.  The shares of restricted stock are not entitled to dividends until the awards vest.

(4)   The grant date fair values for the January performance-based restricted stock awards to Messrs. Cooper, Jasper, Dahl, and Brown are $10.26, $9.01, $8.95, and $7.73, with each grant date fair value applied to 25% of the award.  The grant date fair value for the January restricted stock awards to Messrs. Jones and Stratton are $9.52 and $10.69, respectively.  The grants date fair values for the July performance-based restricted stock award to Mr. Jones are $10.23, $9.34, $9.88, and $8.98, with each grant date fair value applied to 25% of the award.  The performance-based restricted stock awards have four grant date fair values because each award has two performance goals with 50% of the shares vesting upon achievement of each, and if a performance goal is achieved, 50% of the shares that vest are distributed immediately and 50% are deferred under the Deferred Stock Plan.

(5)   Mr. Brown resigned effective November 19, 2012.

 

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Outstanding Equity Awards At December 31, 2012

 

The following table shows all equity awards that were outstanding at December 31, 2012 for each Named Executive:

 

 

 

 

 

 

 

Option Awards

 

 

Stock Awards

Name

 

 

Year
of
Award

 

 

 

 

 

 

 

 

Option
Exercise
Price
($)

 

 

Option
Expiration
Date

 

 

Number
of
Shares
or Units
of Stock
That
Have
Not
Vested
(2)
(#)

 

 

Market
Value of
Shares or
Units of
Stock
That Have
Not
Vested
(3)
($)

 

 

Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares, Units
or
Other Rights
That Have
Not Vested
(4)
(#)

 

 

Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units
or
Other Rights
That Have Not
Vested
(3)
($)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of Securities
Underlying
Unexercised Options
(#)

 

 

Exer-
cisable
(1)

 

 

Unexer-
cisable

 

William A. Cooper

 

 

2008

 

 

800,000

 

 

-

 

 

$12.85

 

 

8/1/2018

 

 

-

 

 

-

 

 

-

 

 

-

 

 

2011

 

 

-

 

 

-

 

 

-

 

 

-

 

 

500,000

 

 

$6,075,000

 

 

-

 

 

-

 

 

2012

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

500,000

 

 

$6,075,000

Michael S. Jones

 

 

2009

 

 

-

 

 

-

 

 

-

 

 

-

 

 

    7,500

 

 

$     91,125

 

 

-

 

 

-

 

 

2010

 

 

-

 

 

-

 

 

-

 

 

-

 

 

    3,000

 

 

$     36,450

 

 

-

 

 

-

 

 

2011

 

 

-

 

 

-

 

 

-

 

 

-

 

 

    6,000

 

 

$     72,900

 

 

-

 

 

-

 

 

2012

 

 

-

 

 

-

 

 

-

 

 

-

 

 

  25,000

 

 

$   303,750

 

 

-

 

 

-

 

 

2012

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

100,000

 

 

$1,215,000

Thomas F. Jasper

 

 

2008

 

 

141,000

 

 

-

 

 

$15.75

 

 

1/22/2018

 

 

-

 

 

-

 

 

-

 

 

-

 

 

2009

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

    5,036

 

 

$     61,187

 

 

2009

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

    3,777

 

 

$     45,891

 

 

2011

 

 

-

 

 

-

 

 

-

 

 

-

 

 

100,000

 

 

$1,215,000

 

 

-

 

 

-

 

 

2012

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

250,000

 

 

$3,037,500

Craig R. Dahl

 

 

2008