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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 11, 2015

 

Dear Stockholder:

 

Two key responsibilities of TCF’s Board of Directors are to ensure that we have responsible corporate governance practices and an executive compensation program in place that attracts and retains the best executive workforce in our industry.  At the same time, we must operate as an efficient business, focusing on the long-term interests of our stockholders.  To this end, we believe that having the highest quality, most experienced leadership team in place is critical to our mission.

 

Given the substantial changes to the financial services industry, we are extremely fortunate to have a leadership team with significant experience in our industry.  For more than 30 years, Mr. Cooper and his team have delivered consistent financial results.  In recent years, this management team has had to contend with enormous challenges affecting the banking industry.  We believe that our executive compensation program has played a critical role in incentivizing this team to operate in a way that creates long-term value by rewarding performance as measured by criteria that we believe will deliver long-term stockholder value.

 

Through TCF’s say-on-pay vote last year, TCF stockholders expressed concerns related to some of TCF’s corporate governance practices, including those related to the compensation of TCF’s executives.  The Board of Directors takes these concerns very seriously.  As a result, the Chair of the Compensation, Nominating, and Corporate Governance Committee of TCF’s Board of Directors (the “Compensation Committee”) and members of TCF’s management team met with institutional investors owning approximately 47% of our institutional ownership as of December 31, 2014.  These meetings resulted in the Compensation Committee and the Board receiving specific feedback on compensation and other corporate governance issues.  The feedback provided was extremely valuable in helping us to better understand the concerns our stockholders have regarding our compensation practices and aided us in structuring our 2015 compensation.

 

As a result of these meetings, the Compensation Committee has taken several actions to better align our corporate governance practices with the expectations of our stockholders.  These changes include:

 

·                  Reducing target annual cash incentive levels.

·                  Maintaining long-term incentives as the largest percentage of executive compensation.

·                  Instituting a long-term equity plan where awards are tied to total shareholder return.

·                  Moving to double-trigger restricted stock awards to executives so that the awards do not vest after a change in control unless the recipient is terminated.

·                  Amending Mr. Cooper’s employment agreement regarding termination for “Good Reason” based on the failure to elect him Chairman.

·                  Offering a proposal to provide for the right of stockholders to call a special meeting.

·                  Revising the scope of engagement of TCF’s compensation consultant to focus exclusively on compensation-related matters for the Compensation Committee and discontinue any general benefits consulting for TCF.

 

We appreciate the opportunity to engage with our stockholders on these very important issues, and believe that the changes made in 2015 further align the interests of our executives with the long-term interests of our stockholders, while providing competitive compensation to executives that links pay with performance goals that will promote improved stockholder value.

 

Finally, we want to thank you for making TCF part of your investment portfolio. You can be confident in our commitment to deliver quality service to both our customers and our stockholders.

 

 

Sincerely,

 

 

 

TCF Board of Directors

 



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TCF FINANCIAL CORPORATION

200 Lake Street East

Wayzata, MN 55391-1693

(952) 745-2760

 

 

 

March 11, 2015

 

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 22, 2015, at 4:00 p.m. local time.

 

At the Annual Meeting you will be asked to elect 15 Directors.  You will also be asked to approve the TCF Financial 2015 Omnibus Incentive Plan and amendments to TCF’s Certificate of Incorporation that give stockholders the right to call a special meeting.  You will also be asked to give advisory (non-binding) votes to approve executive compensation and to ratify the Audit Committee’s appointment of KPMG LLP as the Company’s independent registered public accountants for 2015.  The Board of Directors recommends that you vote “FOR” each of these proposals.

 

You will also be asked to vote on two stockholder proposals at the meeting, if properly presented.  The Board of Directors recommends that you vote “AGAINST” each of these stockholder proposals.

 

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 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, which instructs stockholders how to access TCF’s proxy materials and vote their shares of TCF common stock online.

 

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,

 

GRAPHIC

 

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


 

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

 

Date:

April 22, 2015

Time:

4:00 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 TCF Financial 2015 Omnibus Incentive Plan;

3.               Approve an Amended and Restated Certificate of Incorporation to Provide Stockholders with the Right to Call a Special Meeting;

4.               Vote on a Stockholder Proposal, if properly presented, Regarding Proxy Access;

5.               Vote on a Stockholder Proposal, if properly presented, Regarding Severance;

6.               Advisory (Non-Binding) Vote to Approve Executive Compensation as disclosed herein (“Say on Pay”);

7.               Advisory (Non-Binding) Vote to Ratify the Appointment of KPMG LLP as Independent Registered Public Accountants for the Fiscal Year Ending December 31, 2015; and

8.     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 23, 2015.  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 access TCF’s proxy materials and vote your shares online by following the instructions on the Notice.  If you receive a proxy card, 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 Corporate 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 2015 Annual Meeting of Stockholders and its 2014 Annual Report to Stockholders available through 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 22, 2015, at 4:00 p.m. local time.

 

 

By Order of the Board of Directors,

 

GRAPHIC

 

William A. Cooper

 

Chairman and Chief Executive Officer

 

Wayzata, Minnesota

March 11, 2015

 



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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

21

Background of Executive Officers Who Are Not Directors

22

Compensation Discussion and Analysis

23

Compensation Committee Report

42

Executive Compensation

43

Equity Compensation Plans Approved by Stockholders

56

Proposal 2: Approve the TCF Financial 2015 Omnibus Incentive Plan

56

Proposal 3: Approve an Amended and Restated Certificate of Incorporation to Provide Stockholders with the Right to Call a Special Meeting

64

Proposal 4: Vote on a Stockholder Proposal, if properly presented, Regarding Proxy Access

65

Proposal 5: Vote on a Stockholder Proposal, if properly presented, Regarding Severance

69

Proposal 6: Advisory (Non-Binding) Vote to Approve Executive Compensation

72

Proposal 7: Advisory (Non-Binding) Vote to Ratify the Appointment of KPMG LLP as Independent Registered Public Accountants

75

Audit Committee Report

76

Independent Registered Public Accountants

76

Additional Information

77

Appendix I – TCF Financial 2015 Omnibus Incentive Plan

78

Appendix II – Amended and Restated Certificate of Incorporation

99

Appendix III – Bylaws

100

Appendix IV – Reconciliation of GAAP to Non-GAAP Financial Measures

102

 



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GRAPHIC

 

 

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,” “we,” “our” or the “Company”) requests your proxy for the 2015 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 22, 2015

Time:

4:00 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 11, 2015.

 

ABOUT THE ANNUAL MEETING

 

What Proposals are on the Agenda for the Annual Meeting?

 

The Board unanimously recommends that stockholders take the following actions at the Annual Meeting:

 

Item

 

Board’s
Recommendation

1.

 

Election of 15 Directors, Each to Serve a One-Year Term

 

Vote FOR

2.

 

Approval of the TCF Financial 2015 Omnibus Incentive Plan

 

Vote FOR

3.

 

Approval of the Amended and Restated Certificate of Incorporation to Provide Stockholders with the Right to Call a Special Meeting

 

Vote FOR

4.

 

Stockholder Proposal Regarding Proxy Access (if properly presented)

 

Vote AGAINST

5.

 

Stockholder Proposal Regarding Severance (if properly presented)

 

Vote AGAINST

6.

 

Non-Binding, Advisory Vote to Approve Executive Compensation (“Say on Pay”)

 

Vote FOR

7.

 

Ratification of the Appointment of KPMG LLP as Independent Registered Public Accountants for the Fiscal Year Ending December 31, 2015

 

Vote FOR

 

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 at the close of business on February 23, 2015 (the “Record Date”).  There were 167,957,489 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” with respect to each nominee for 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.

 



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“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 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, your proxies will vote in accordance with the Directors’ recommendations for each proposal for which you do not provide instructions.  If any other business comes before the Annual Meeting, your proxies 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 all actions other than Proposal 7, the Advisory (Non-Binding) Vote to Ratify the Appointment of KPMG LLP as Independent Registered Public Accountants for the Fiscal Year Ending December 31, 2015.  Investors who hold their stock in “street name” 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 access TCF’s proxy materials and submit your vote, but you cannot vote by marking the Notice and returning it.

 

I Have Already 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 showing you as the owner.  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.

 

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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; provided, however, that any Director nominee who receives a greater number of “WITHHOLD” votes from his or her election than votes “FOR” such election shall immediately offer his or her resignation to the Board, which will then decide whether to accept the resignation.  For Proposal 3, approval requires the affirmative vote of a majority of the shares entitled to vote at the Annual Meeting.  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 7, the Advisory (Non-Binding) Vote to Ratify the Appointment of KPMG LLP as Independent Registered Public Accountants for the Fiscal Year Ending December 31, 2015.

 

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 for 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 the independent inspector of election.

 

Are There Any Requirements to Attend the Annual Meeting?

 

Yes, holders of TCF common stock will be permitted to attend the Annual Meeting upon presentation of a valid form of photo identification.  Additionally, if your shares are held in “street name” by a broker or other nominee, we request that you bring with you to the Annual Meeting a legal proxy from them showing you as the owner, in addition to a valid form of photo identification.

 

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

 

Prior to the respective deadlines, stockholders are permitted to submit proposals or to nominate Directors to be acted on at the Annual Meeting.  The deadline for stockholders to submit proposals or a Director nomination for inclusion in this Proxy Statement was November 12, 2014, and the deadline to submit proposals or nominations not to be included in this Proxy Statement was February 21, 2015.

 

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 has been nominated by the Board 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 your proxies as recommended by the Compensation Committee or the Board.

 

Name

 

Position(s) with TCF Financial

 

Age

 

Director
Since *

 

 

 

 

 

 

 

Peter Bell

 

Director

 

63

 

2009

William F. Bieber

 

Director

 

73

 

1997

Theodore J. Bigos

 

Director

 

62

 

2008

William A. Cooper

 

Director, Chairman and Chief Executive Officer

 

71

 

1987

Thomas A. Cusick

 

Director

 

70

 

1988

Craig R. Dahl

 

Director, Vice Chairman and Executive Vice President

 

60

 

2012

Karen L. Grandstrand

 

Director

 

60

 

2010

Thomas F. Jasper

 

Director, Vice Chairman and Executive Vice President

 

46

 

2012

George G. Johnson

 

Director

 

72

 

1998

Richard H. King

 

Director

 

59

 

2014

Vance K. Opperman

 

Director

 

72

 

2009

James M. Ramstad

 

Director

 

68

 

2011

Roger J. Sit

 

Director

 

53

 

2015

Barry N. Winslow

 

Director

 

67

 

2008

Richard A. Zona

 

Director

 

70

 

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.  We believe that each Director brings unique abilities and insights and that the Board is comprised of a strong and diverse group of Directors.  In addition, two new members have joined the Board over the past year.  Mr. King brings extensive technology experience to the Board and Mr. Sit brings a wealth of financial services experience.

 

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.

 

PETER BELL has been a Director of TCF Financial since 2009 and is currently the Chair of the BSA (Bank Secrecy Act) and Compliance Committee, and a member of the Compensation, Nominating, and Corporate Governance Committee (the “Compensation Committee”), Finance Committee, and Risk Committee.  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 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.  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

 

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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 Greater Twin Cities 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 and Compliance, Compensation, Executive, Finance, and Risk 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 Compensation, Finance, and Risk 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 over 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 his 30-plus year tenure at TCF.  Mr. Cooper’s demonstrated ability to lead the Board in deliberations on a wide variety of topics in various economic cycles has been 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, Finance, Risk, and Technology Committees.  He was Chief Operating Officer of TCF Financial from 1997 to 2002 and Vice Chairman from 1993 to 2002.  Mr. Cusick also served as President of TCF Financial from its formation in 1987 until 1993 and 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-plus year career in banking with a special focus on retail banking and technology.  Mr. Cusick’s combination of retail and information technology experience is invaluable when the Board deals with 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 is currently a member of the Technology Committee.  He has been Vice Chairman and Executive Vice President of the Company since January 1, 2012 and has held the position of Executive Vice President of TCF Financial since 1999.  Mr. Dahl also holds leadership positions with many of TCF’s wholly-owned lending subsidiaries, including Chairman of TCF Inventory Finance, Inc. since 2008, Chairman and Chief Executive Officer of Winthrop Resources Corporation since 2003, and Chairman of Gateway One Lending and Finance, LLC since 2011.  Mr. Dahl’s expertise in lending and the specialty finance industry enables him to make meaningful contributions during Board discussions.

 

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KAREN L. GRANDSTRAND has been a Director of TCF Financial since 2010 and is currently the Chair of the Risk Committee and a member of the Audit, Compensation, Executive, and Finance 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 are invaluable 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 of TCF Financial since January 1, 2012.  He was the Executive Vice President and Chief Financial Officer of TCF Financial from 2007 to 2011.  From 2001 through 2007, Mr. Jasper served in various leadership positions, including chief financial officer, with TCF’s wholly-owned subsidiaries.   Prior to joining TCF, he held various positions at KPMG LLP, last serving as a Senior Manager.  From 2008 through February of 2015, Mr. Jasper served on the Board of Directors of CommonBond Communities (“CBC”), the largest non-profit developer of affordable housing in the Midwest.  The last two years of his Board tenure at CBC he served as Board Chair.  With his extensive financial, operational and risk management background and expertise, Mr. Jasper provides an important 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 and 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 is the treasurer and a board member serving as the chair of the finance committee of the American Alliance of Museums, which has over 3,800 member organizations, and 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-plus 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.

 

RICHARD H. KING has been a Director of TCF Financial since 2014 and is currently the Chair of the Technology Committee and a member of the Audit, Finance, and Risk Committees.  He is the Executive Vice President & Chief Operating Officer for Technology at Thomson Reuters Corporation, a global provider of intelligent information, a position he has held since 2012.  Mr. King has been with Thomson Reuters since 2000 serving in various positions of leadership including Chief Technology Officer of Thomson Reuters Professional Division and Executive Vice President and Chief Operating Officer of Thomson West from 2008 to 2012.  Mr. King’s extensive technology experience in the information industry is unique to the Board, and allows him to provide special insights with respects to TCF’s information technology and information security issues.

 

VANCE K. OPPERMAN has been a Director of TCF Financial since 2009 and Lead Director since January 2014.  He is currently the Chair of the Compensation Committee and a member of the Audit, Executive, Finance, Risk, and Technology 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, has been Lead Director since 2013, and is currently the chair of the audit committee for that board.  He also served on the Board of Directors of Blue Cross Blue Shield of Minnesota until June 2014.  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.

 

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JAMES M. RAMSTAD has been a Director of TCF Financial since October 2011 and is currently a member of the BSA and Compliance, Finance, and Risk 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 Subcommittee.  Mr. Ramstad is currently a Senior Policy Advisor to the National Association of Drug Court Professionals, Senior Advisor to alliantgroup, LLC, a provider of specialty tax services, and a Director of the National Center on Addiction at Columbia University.  After retiring from Congress in 2009, Mr. Ramstad was a teaching fellow at the Harvard University Kennedy School of Government.  He is also the founder of the Ramstad Recovery Fund of the Minneapolis Foundation, which provides grants for treatment of veterans suffering from addiction.  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.

 

ROGER J. SIT has been a Director of TCF Financial since January 2015 and is currently a member of the Audit, Finance, and Risk Committees.  He is the CEO, Global Chief Investment Officer and a Director of Sit Investment Associates, a privately-owned institutional investment management firm, positions he has held since 2008, and has been at Sit Investment in various positions since 1998.  Mr. Sit has nearly twenty-five years of financial services experience.  He currently serves on the boards of Convergent Capital, the Minneapolis Institute of Arts, the University of Minnesota Outreach, Research and Education Development LLC, and the McKnight Foundation.  As a CEO of a successful investment management firm, Mr. Sit has acquired managerial and analytical skills which enable him to provide valuable insight to the Board.

 

BARRY N. WINSLOW has been a Director of TCF Financial since 2008 and is currently a member of the Finance Committee.  Mr. Winslow served as Vice Chairman, Corporate Development of TCF Financial from January 2012 until  his retirement in July 2014, and had been a Vice Chairman of TCF since 2008.  Prior to his retirement, Mr. Winslow had held various leadership positions with TCF and its subsidiaries since 1993, with the exception of January 2008 to July 2008.  During that time, Mr. Winslow was a financial consultant for several banks, including TCF, with a primary focus on advice, analysis, and strategic plan input related to mergers and acquisitions, as well as strategies for non-performing asset dispositions.  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 distinguished career.  This knowledge and his experience as an advisor and former 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, Compensation, 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.  TCF’s Corporate Governance Guidelines provide the criteria used by TCF to make its independence determination for each Director.  The Corporate Governance Guidelines are available on TCF’s website at https://www.tcfbank.com/resources/images/5956.pdf.

 

TCF’s corporate governance policies recognize the importance of sound governance practices in the financial services industry.  The Board currently consists of 16 members.  Upon the retirement of Director Raymond L. Barton, the Board will be reduced to 15 members immediately prior to the Annual Meeting.  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 typically meets at least quarterly in January, April, July, and October.

 

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TCF’s Board has seven committees:  Audit; BSA and Compliance; Compensation, Nominating, and Corporate Governance; Executive; Finance; Risk; and Technology.  Directors are elected by a plurality vote of the stockholders, provided that, in an uncontested election, any Director nominee who receives a greater number of “WITHHOLD” votes from his or her election than votes “FOR” such election shall immediately offer his or her resignation to the Board.  The Board will then decide whether to accept the resignation.

 

Director Nominations

 

The Compensation Committee, which consists entirely of independent Directors as determined by the Board under applicable rules, is responsible for the nomination of Director candidates.  On January 23, 2015, the Board approved the Director Selection Policy to formalize the process by which the Compensation Committee will identify and nominate Director candidates and the criteria that the Compensation Committee will utilize to evaluate such candidates.  The Director Selection Policy is available on TCF’s website at https://www.tcfbank.com/about-tcf_corporate-governance_director-selection-policy.aspx.

 

The Compensation Committee will identify Director candidates based on suggestions from current Directors and senior management, recommendations from stockholders and the use of a search firm, if necessary.  TCF has not, to date, paid any fees to any firm in connection with locating or evaluating any Director candidates.  The Compensation Committee will then review the candidate’s qualifications to determine which candidates best meet the following criteria:  integrity, maturity and judgment, experience and reputation, collegiality, expertise, commitment, independence and diversity.  The candidates that best meet these criteria will then be interviewed by the Chair of the Compensation Committee, another committee member and the CEO.  Once the Compensation Committee selects a candidate, it provides the Board with a recommendation and the Board will then either formally nominate the candidate for election at an annual meeting or appoint the candidate to fill a current vacancy.

 

Stockholders may also submit nominations to the Compensation 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 EX0-01-G, Wayzata, MN 55391-1693.  Nominations should be mailed to the attention of the Compensation, Nominating, and Corporate Governance Committee, c/o TCF’s Corporate Secretary at the TCF address provided above.  The Compensation Committee will evaluate all recommended nominees, including those submitted by stockholders, based on the criteria set forth above.

 

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

 

TCF’s independent lead Director (the “Lead Director”) serves as the liaison between the Chairman and the independent Directors.  The Lead Director works with management to determine the information and materials that are provided to Board members.  The Lead Director also consults with the Chairman on other such 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.  In January 2015, Vance K. Opperman was elected Lead Director.

 

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 continued success, particularly in the context of the difficult environment in which TCF has been operating.  This leadership structure

 

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provides the Board with a leader with great substantive knowledge of the Company, and the financial industry generally, while having 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 this structure provides value for the Company’s stockholders.

 

TCF has had a combined Chairman and CEO in place most of the time since the Company’s inception.  While the possibility exists that the Board would separate the roles of Chairman and CEO in the future under appropriate circumstances, such as 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, 12 of the Board’s 16 members (75%) meet the independence requirements under NYSE rules and the Company’s own independence requirements.  Upon the retirement of Mr. Barton immediately prior to the Annual Meeting, the Board will have 11 of 15 members (73%) who meet the independence requirements.  These independent Directors regularly meet in executive session without management present.  Each member of the Board’s Audit, BSA and Compliance, Compensation, Finance, and Risk Committees is independent and, in addition to the Chairman and Lead Director, serve in oversight roles.  Through the Audit, Compensation and Risk Committees, the Board is actively involved in oversight of risk, compliance, potential conflicts of interest and related party transactions, and business results.  The Compensation 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 the Lead Director, any other Director, the full Board, or with independent Directors as a group, and the process is disclosed on TCF’s website at https://www.tcfbank.com/about-tcf_corporate-governance_communications-with-directors.aspx.

 

Regular Separate Non-Employee Director Meetings

 

The non-employee 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 Senior Management Code of Ethics applicable to the Principal Executive Officer (“PEO”), Principal Financial Officer (“PFO”), and Principal Accounting Officer (“PAO”), 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 https://www.tcfbank.com/about-tcf_corporate-governance_code-of-ethics-policy.aspx and https://www.tcfbank.com/about-tcf_corporate-governance_code-of-ethics-senior-financial-management.aspx, respectively.  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 TCF’s website.  To date, there have been no 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 five times in 2014.  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 2014, 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.  Thirteen Directors attended the 2014 Annual Meeting.

 

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Board Committees, Committee Memberships, and Meetings in 2014

 

The following table identifies the principal responsibilities, number of meetings held in 2014, 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, and Jasper 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, Bieber, Cusick (appointed January 2015), Opperman, Schwalbach (until his retirement from the Board in April 2014), and Zona.  The Executive Committee, which serves as a liaison between management and the Board, met once during 2014.

 

Committee

 

Principal Responsibilities

 

Members
(*Chair)

 

Audit (1) (2) (3)

 

4 meetings in 2014

 

 

·         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

 

 

 

Barton

Cusick

Grandstrand

Johnson *

King

Opperman

Sit

Zona

 

 

BSA and Compliance

6 meetings in 2014

 

 

·         Oversee BSA compliance, including reviewing reports on issues, trends, policies, processes, identification of risks, and other matters

·         Oversee TCF’s compliance efforts and programs designed to address relevant laws and regulations

·         Review reports on customer complaint activity

 

 

 

 

Bell *

Bieber

Johnson

Ramstad

 

 

Compensation,

Nominating, and

Corporate

Governance (1) (4)

 

9 meetings in 2014

 

 

·         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

 

 

 

Bell

Bieber

Bigos

Grandstrand

Opperman *

Zona

 

 

Finance (1) (3)

 

5 meetings in 2014

 

 

 

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

·         Oversee stress testing framework developed by management

·         Review and approve stress test results for submission to regulators

·         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

King

Opperman

Ramstad

Sit

Winslow

Zona *

 

 

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Committee

 

Principal Responsibilities

 

Members
(*Chair)

 

Risk (1) (3)

4 meetings in 2014

 

 

 

·         Oversee TCF’s Enterprise Risk Management Program

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

·         Oversee TCF’s relationships with regulatory agencies

·         Oversee TCF’s risk management function, including an annual evaluation of the performance of the Chief Risk Officer

 

 

 

Barton

Bell

Bieber

Bigos

Cusick

Grandstrand *

Johnson

King

Opperman

Ramstad

Sit

Zona

 

 

Technology (5)

1 meeting in 2014

 

 

·         Oversee TCF’s technology strategy

·         Review TCF’s technology risks and coordinate with management and other Board committees regarding TCF’s oversight of technology risk management and risk assessment guidelines and policies

 

 

 

Cusick

Dahl

King *

Opperman

 

(1)       Mr. Schwalbach was Chair of the Audit Committee and a member of the Compensation, Finance, and Risk Committees until his retirement from the Board on April 23, 2014.

(2)             Mr. Barton became Chair of the Audit Committee in April 2014 following Mr. Schwalbach’s retirement from the Board and Mr. Johnson became Chair of the Audit Committee in February 2015.

(3)             Mr. Sit was appointed to the Audit, Finance, and Risk Committees upon his election to the Board in January 2015.

(4)             Mr. Bell was appointed to the Compensation Committee in July 2014, and Ms. Grandstrand and Mr. Zona were appointed to the Compensation Committee in January 2015.

(5)             The Technology Committee was established in November 2014.

 

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. Barton, Cusick, Johnson, Opperman, Sit, 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 https://www.tcfbank.com/resources/images/5963.pdf.

 

Compensation, Nominating, and Corporate Governance Committee

 

All members of the Compensation Committee are listed above and are independent under the standards outlined below under “Director Independence and Related Person Transactions – How Does the Board Determine Which Directors are Independent?” and under the additional compensation committee independence standards under Section 303A.02(a)(ii) of the NYSE Listed Company Manual.  Each member of the Compensation Committee also 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”), other than Mr. Bell who is a former officer of TCF.  The Compensation Committee operates under a formal charter that may be accessed at https://www.tcfbank.com/resources/images/5959.pdf.

 

Scope of Authority.  Full authority is delegated from the Board to the Compensation Committee (or the Independent Subcommittee (defined below)) 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 executive officers.

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

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

 

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·                Prepare the Compensation Committee Report required by the Securities and Exchange Commission (the “SEC”) and NYSE rules to be included in the proxy statement, 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; and

§                  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;

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

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

 

Delegation of Authority.  The Compensation Committee may establish subcommittees from time to time, including an independent subcommittee consisting of some or all of the Compensation Committee members who are “outside directors” under Section 162(m) of the Code and are “non-employee directors” under Rule 16b-3 of the Exchange Act.  The Compensation Committee has delegated to an independent subcommittee consisting of each member of the Compensation Committee other than Mr. Bell (the “Independent Subcommittee”) all responsibility with regard to equity awards and performance-based compensation.  The Compensation Committee has the power to delegate such duties and authority to the subcommittees as it approves.

 

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 “NEOs”).  For a discussion of services performed by Towers Watson for the Compensation Committee in 2014, see “2014 Payment of Named Executive Officers - Analysis of Tools the Compensation Committee Uses” in the CD&A.  During 2014, Towers Watson was paid approximately $127,664 for these services to the Compensation Committee.  Also, Towers Watson and its affiliates were paid $10,615 for providing additional services to the Company (and its affiliates) in 2014 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.  In early 2014, TCF made the decision to no longer engage Towers Watson for general benefits consulting services, and decided that only the Compensation Committee will retain Towers Watson, and only for executive compensation-related services going forward.  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, and that Towers Watson was independent under Section 303A.05(c) of the NYSE Listed Company Manual.

 

Process for Determining Director Compensation.  The Compensation Committee generally meets in January, March, April, 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 (or the Independent Subcommittee) and the Board.

 

Compensation Committee Interlocks and Insider Participation.  Directors Barton (until January 2014), Bell (since July 2014), Bieber, Bigos, Opperman, and Schwalbach (prior to his retirement in April 2014) served on the Compensation Committee in 2014.  None of these Directors has ever served as an officer or employee of TCF or any of its subsidiaries, other than 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 2014 under standards outlined below and under Section 303A.02(a)(ii) of the NYSE Listed Company Manual.  Certain relationships with Directors are disclosed below under “What Transactions Were Considered Non-Material?” under the heading “Director Independence and Related Person Transactions.”

 

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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 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 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 https://www.tcfbank.com/resources/images/5956.pdf.  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; and

·                  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 2012 through 2014, 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:

·                  Mr. Bigos or his related companies had commercial loans or leases with TCF during 2012 through 2014;

·                  Messrs. Barton and Bigos or their related companies have, or had during 2012 through 2014, commercial deposit accounts with TCF; and

·                  The following Directors have, or had during 2012 through 2014, 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, King, Sit, 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 when required by Regulation O.

 

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Related Person Transactions Involving Independent Directors.  Mr. King has been a member of the Board since his election in July 2014.  Thomson Reuters’ total revenues for the 12 months ended December 31, 2014 were $12.6 billion.  During 2014, the Company made payments to Thomson Reuters and its related entities in the ordinary course of business totaling $1.1 million under standard terms and conditions.  Based on its various agreements with Thomson Reuters, the Company expects to make aggregate payments for goods and services to Thomson Reuters of approximately $4.0 million from 2015-2017.  Mr. King’s only interest in these transactions is as an officer of Thomson Reuters.  The  Board  considered  these  payments  in  light  of  the  annual  revenue  of  Thomson  Reuters and Mr. King’s status as an officer of Thomson Reuters, and affirmatively determined (with Mr. King abstaining) that the payments were on ordinary market terms and would not impair the independent judgment of Mr. King.

 

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:

·                  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, Stratton, and Winslow are shareholders in C Financial.  Messrs. Cooper, Stratton, and Winslow are also directors of both C Financial and Cooper State Bank.  During 2014, 2013 and 2012, Fredrikson and Byron, P.A., a law firm in which Ms. Grandstrand is a shareholder, provided legal services to C Financial in the amounts of $9,402, $56 and $894, respectively, and to Cooper State Bank in the amounts of $868, $4,509 and $4,110, respectively.  The Board has reviewed these relationships and affirmatively determined (with each Director abstaining from his or her own determination) that they do not constitute material relationships between each of the non-employee Directors, Mr. Bigos, Ms. Grandstrand, and Mr. Winslow, 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 2014, 2013 and 2012, Mr. Bell received payments and distributions from the TCF Financial Corporation Executive Deferred Compensation Plan (the “Executive Deferred Compensation Plan”) of $308,969, $266,324, and $225,629, respectively.  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;

·                  As discussed above, during 2014, 2013 and 2012, TCF made payments to Thomson Reuters’ related entities totaling $1.1 million, $350,849 and $382,851, respectively.  The Board considered these payments in light of the annual revenue of Thomson Reuters and Mr. Opperman’s status as a director of Thomson Reuters, and affirmatively determined (with Mr. Opperman abstaining) that the payments were on ordinary market terms and would not impair the independent judgment of Mr. Opperman; and

·                  The Board has also reviewed Director ownership of shares of TCF common stock and both series of preferred stock of TCF and affirmatively determined 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 2012 through 2014, the Compensation Committee and the Board affirmatively determined in January 2015 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, King, Opperman, Ramstad, Sit, and Zona.  All members of the Audit Committee, Compensation Committee, Finance Committee, and Risk Committee are independent under all applicable rules.  The Board determined that the following Directors are not independent:  Mr. Cooper (TCF CEO), Mr. Dahl (TCF Vice Chairman and Executive Vice President), Mr. Jasper (TCF Vice Chairman and Executive Vice President), and Mr. Winslow (former TCF Vice Chairman, Corporate Development), because current executives and employees who have terminated their employment within the past three years are deemed to be non-independent under the NYSE standards.

 

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Related Person Transactions.  During 2014, TCF sold $9.9 million of home equity line of credit (“HELOC”) loans to American Investors Bank and Mortgage (“American Investors”) at a premium of 4.25 percent.  A person deemed to be an immediate family member of Barbara Shaw, an executive officer of TCF, is an officer of and has an ownership interest in American Investors. The transaction was entered into on market terms and in the ordinary course of business for TCF as part of its $1.1 billion in HELOC loan sales during 2014.

 

Also during 2014, 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?”, 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 collectability 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 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-employee Directors in 2014, including cash and other non-cash compensation, is shown in the following table.  Messrs. Cooper, Dahl, and Jasper are executive officers of TCF and do not receive any compensation for their service as Directors.  Mr. Winslow did not receive any compensation until his retirement from TCF in July 2014.  Mr. Sit was elected to the Board in January 2015.

 

Name

 

 

Fees Earned or Paid in Cash
($)

 

 

Stock Awards
($)
(1)(3)

 

 

All Other Compensation
($)
(2)

 

 

Total
($)

Raymond L. Barton

 

 

$65,583

 

 

$44,996

 

 

$40,000

 

 

$150,579

Peter Bell

 

 

$71,250

 

 

$44,996

 

 

$  6,750

 

 

$122,996

William F. Bieber

 

 

$57,250

 

 

$44,996

 

 

$37,500

 

 

$139,746

Theodore J. Bigos

 

 

$57,250

 

 

$44,996

 

 

$20,000

 

 

$122,246

Thomas A. Cusick

 

 

$55,250

 

 

$44,996

 

 

$          -

 

 

$100,246

Karen L. Grandstrand

 

 

$82,250

 

 

$44,996

 

 

$29,035

 

 

$156,281

George G. Johnson

 

 

$56,250

 

 

$44,996

 

 

$20,000

 

 

$121,246

Richard H. King

 

 

$15,000

 

 

$22,501

 

 

$20,000

 

 

$ 57,501

Vance K. Opperman

 

 

$84,250

 

 

$44,996

 

 

$ 1,000

 

 

$130,246

James M. Ramstad

 

 

$56,250

 

 

$44,996

 

 

$         -

 

 

$101,246

Gerald A. Schwalbach

 

 

$44,917

 

 

$44,996

 

 

$25,000

 

 

$114,913

Barry N. Winslow

 

 

$15,000

 

 

$22,501

 

 

$     700

 

 

$ 38,201

Richard A. Zona

 

 

$76,250

 

 

$44,996

 

 

$21,000

 

 

$142,246

 

(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 15 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, 2014.  Dividends are paid on the shares at the rate generally paid to holders of TCF common stock.

(2)       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.”  Total amounts shown reflect carryovers from the prior year as follows:  Mr. Barton, $20,000; Mr. Bell, $3,000; Mr. Bieber, $17,500; Ms. Grandstrand, $12,885; Mr. Schwalbach, $5,000, and Mr. Zona, $20,000.

(3)       The following table shows the outstanding equity awards of non-employee Directors at December 31, 2014:

 

Name

 

 

Number of Shares of
Unvested Restricted Stock
(a)
(#)

 

 

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

Barton

 

 

4,082

 

 

$64,863

Bell

 

 

3,909

 

 

$62,114

Bieber

 

 

3,909

 

 

$62,114

Bigos

 

 

3,909

 

 

$62,114

Cusick

 

 

3,909

 

 

$62,114

Grandstrand

 

 

3,753

 

 

$59,635

Johnson

 

 

3,909

 

 

$62,114

King

 

 

1,425

 

 

$22,643

Opperman

 

 

3,909

 

 

$62,114

Ramstad

 

 

4,137

 

 

$65,737

Winslow

 

 

1,383

 

 

$21,976

Zona

 

 

4,082

 

 

$64,863

 

(a)       Consists of the unvested portion of performance-based restricted stock awards which will vest as soon as possible following the 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 2,668 shares made in January 2014 to each Director which vested on January 20, 2015, except for Messrs. King and Winslow who received 1,425 shares and 1,383 shares, respectively, in July 2014.  Dividends are paid on the shares at the rate generally paid to holders of TCF common stock.

(b)             Consists of the number of unvested shares shown in the previous column, multiplied by the closing stock price on December 31, 2014 of $15.89 per share.

(c)              Grant date fair value of the stock awards made in 2014 is shown on the Director Compensation table.

 

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Material Information Regarding Directors’ Compensation

 

·                  Cash compensation for non-employee Directors consists of the following:

§                  Annual Retainer of $60,000;

§                  An additional $20,000 annual retainer for each Committee or Subcommittee Chaired by a Director; and

§                  An additional $20,000 annual retainer for the Lead Director.

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

·                  Directors Stock Grant Program:

§                  Annually, non-employee 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 rate generally paid to holders of TCF common stock; and

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

·                  Non-employee Directors may defer fees and stock grants under the TCF Directors Deferred Compensation Plan (the “Directors Deferred Compensation Plan”) until the end of their Board service.

·                  Stock Ownership Guidelines:

§                  Non-employee 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;

§                  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 at the earliest, all Directors satisfied the Stock Ownership Guidelines as of February 23, 2015, except for Messrs. King and Ramstad.  Mr. King was elected to the Board in July 2014.  Mr. Ramstad did not qualify due to the increased requirement caused by the change to a higher annual retainer and elimination of meeting fees as of January 1, 2014.

·                  TCF offers the TCF Matching Gift Program to supplement donations made by non-employee Directors to charitable organizations of their choice up to a maximum of $20,000 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, and 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 or significant others.

 

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Table of Contents

 

OWNERSHIP OF TCF STOCK

 

TCF Stock Ownership of Directors and Executive Officers

 

Common Stock

 

The following table shows ownership as of January 31, 2015 of TCF common stock by those indicated.

 

Name of Beneficial Owner

 

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

 

Percent
of Class 
(4)

Directors who are not NEOs:

 

 

 

 

Raymond L. Barton

 

37,303

 

 

*

Peter Bell

 

85,014

 (5)

 

*

William F. Bieber

 

891,403

 

 

*

Theodore J. Bigos

 

51,962

 

 

*

Thomas A. Cusick

 

218,383

 (5)

 

*

Karen L. Grandstrand

 

40,832

 

 

*

George G. Johnson

 

92,202

 

 

*

Richard H. King

 

4,624

 

 

*

Vance K. Opperman

 

80,937

 

 

*

James M. Ramstad

 

16,378

 

 

*

Roger J. Sit

 

205,782

 

 

*

Barry N. Winslow

 

646,984

 (2)

 

*

Richard A. Zona

 

39,425

 

 

*

NEOs:

 

 

 

 

 

William A. Cooper

 

3,489,311

 (2)(5)

 

2.1%

Michael S. Jones

 

187,865

 

 

*

Thomas F. Jasper

 

556,171

 (2)(5)

 

*

Craig R. Dahl

 

723,148

 (2)(5)

 

*

Earl D. Stratton

 

535,947

 (2)

 

*

All Directors and Executive Officers combined (25 persons)

 

8,198,376

 (2)(5)

 

4.8%

 

* 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 affiliated trusts or family members who share the person’s household, with respect to which shares the indicated person disclaims any beneficial ownership, as follows:  Mr. Bell, 70,825 shares; Mr. Bieber, 789,638 shares; Mr. Cusick, 179,334 shares; Mr. Jones, 75,097 shares; Mr. Sit, 89,559 shares; Mr. Stratton, 2,000 shares; Mr. Winslow, 307,149 shares; and all Directors and Executive Officers combined, 1,513,649 shares.  Includes the following shares indirectly owned through related entities: Mr. Bigos, 8,000 shares; Mr. Sit, 100,000 shares; and all Directors and Executive Officers, 108,000 shares.  Mr. Sit disclaims any beneficial ownership in the shares owned by his related entity.

(2)             Includes shares which could be purchased by the indicated person upon the exercise of vested options within 60 days after January 31, 2015:  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.

(3)             Includes whole shares of TCF common stock allocated to accounts in the TCF Employees Stock Purchase Plan (“ESPP”)  for which the NEOs and certain Directors have shared voting power as follows:  Mr. Cooper, 16,082 shares; Mr. Dahl, 15,297 shares;  Mr. Jasper, 12,373 shares;  Mr. Jones, 11,826 shares;  Mr. Stratton, 58,766 shares; and all Directors and Executive Officers combined, 207,199 shares.  Also includes whole shares of TCF common stock in the trust for the ESPP-Supplemental Plan for which the NEOs and certain Directors do not have voting power, as follows:  Mr. Cooper, 87,404 shares; Mr. Dahl, 51,430 shares; Mr. Jasper, 15,388 shares; Mr. Jones, 8,219 shares; Mr. Stratton, 44,044 shares; and all Directors and Executive Officers combined, 238,508 shares.  Also includes whole shares of TCF common stock (vested and unvested) in the trust for the TCF Employees Deferred Stock Compensation Plan for which the NEOs do not have voting power, as follows:  Mr. Cooper, 1,375,000 shares; Mr. Dahl, 237,500 shares; Mr. Jasper, 289,173 shares; Mr. Jones, 75,160

 

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shares; Mr. Stratton, 50,000 shares; Mr. Winslow, 50,000 shares; and all NEOs and other Executive Officers combined, 2,086,833 shares.  Also includes 32 shares for Mr. Bell in trust for the Executive Deferred Compensation Plan for which he does not have voting power.  Also includes whole shares of TCF common stock (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, 32,303 shares;  Mr. Bieber, 101,165 shares;  Mr. Bigos, 39,265 shares;  Mr. Cooper, 9,332 shares;  Mr. Cusick, 39,049 shares;  Ms. Grandstrand, 40,832 shares;  Mr. Johnson, 88,645 shares;  Mr. King, 4,624 shares; Mr. Opperman, 50,848 shares;  Mr. Sit, 3,091 shares;  Mr. Zona, 39,425 shares;  and all Directors, 448,579 combined, shares.

(4)             As of January 31, 2015, there were 167,661,144 shares of TCF common stock outstanding.  The percentage for each Director and Executive Officer has been calculated by treating as outstanding the shares which could be purchased upon the exercise of outstanding options by such Director or Executive Officer within 60 days after January 31, 2015.  As of January 31, 2015, there were outstanding options with respect to 1,484,000 shares that were exercisable within 60 days for all Executive Officers combined.

(5)             Includes shares pledged as collateral for loans to Directors or NEOs as follows:  Mr. Bell, 62,530 shares;  Mr. Cooper, 1,201,493 shares;  Mr. Cusick, 179,134 shares;  Mr. Dahl, 120,485 shares; Mr. Jasper, 55,486 shares; and all Directors and Executive Officers combined, 1,619,128 shares.

 

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Table of Contents

 

Preferred Stock

 

The following table shows ownership as of January 31, 2015 of (i) depositary shares (the “Series A Preferred Stock”), each representing a 1/1000th interest in a share of 7.50% Series A Non-Cumulative Perpetual Preferred Stock and (ii) 6.45% Series B Non-Cumulative Perpetual Preferred Stock (the “Series B Preferred Stock”) by those indicated.

 

 

 

Series A Preferred Stock

 

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 NEOs:

 

 

 

 

 

 

 

 

Raymond L. Barton

 

-

 

*

 

-

 

*

Peter Bell

 

-

 

*

 

-

 

*

William F. Bieber .

 

160,000

 

   2.3%

 

-

 

*

Theodore J. Bigos

 

   4,000

 

*

 

-

 

*

Thomas A. Cusick

 

 21,600

 

*

 

-

 

*

Karen L. Grandstrand

 

-

 

*

 

-

 

*

George G. Johnson

 

-

 

*

 

-

 

*

Richard H. King

 

-

 

*

 

-

 

*

Vance K. Opperman

 

 40,000

 

*

 

-

 

*

James M. Ramstad

 

-

 

*

 

-

 

*

Roger J. Sit

 

-

 

*

 

-

 

*

Barry N. Winslow

 

 20,000

 

*

 

-

 

*

Richard A. Zona

 

    20,000 (2)

 

*

 

10,000 (4)

 

*

NEOs:

 

 

 

 

 

 

 

 

William A. Cooper

 

-

 

*

 

-

 

*

Michael S. Jones

 

  1,000

 

*

 

-

 

*

Thomas F. Jasper

 

     4,000 (2)

 

*

 

-

 

*

Craig R. Dahl

 

-

 

*

 

-

 

*

Earl D. Stratton

 

 30,000

 

*

 

3,600

 

*

All Directors and Executive Officers (25 persons)

 

   301,000 (2)

 

   4.4%

 

14,400 (4)

 

*

 

* 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 of Series A Preferred Stock 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. Stratton, 30,000 shares; and all Directors and Executive Officers combined, 34,000 shares.  Includes the following shares owned by related entities:  Mr. Bigos, 4,000 shares; and all Directors and Executive Officers combined, 4,000 shares.

(2)             Includes shares of Series A Preferred Stock pledged as collateral for loans undertaken by Directors or NEOs as follows:  Mr. Jasper, 4,000 shares; Mr. Zona, 20,000 shares; and all Directors and Executive Officers combined, 24,000 shares.

(3)             As of January 31, 2015, there were 6.9  million shares of Series A Preferred Stock outstanding and 4.0 million shares of Series B Preferred Stock outstanding.

(4)       Includes shares of Series B Preferred Stock pledged as collateral for loans undertaken by Directors and NEOs as follows:  Mr. Zona, 10,000 shares; and all Directors and Executive Officers combined, 10,000 shares.

 

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Table of Contents

 

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

 

17,259,207 (1)

 

 

10.3%

 

 

 

 

 

 

Blackrock Inc.

 

10,329,774 (2)

 

 

6.2%

 

 

 

 

 

 

State Street Corporation

 

9,291,123 (3)

 

 

5.6%

 

 

 

 

 

 

The Vanguard Group

 

9,056,801 (4)

 

 

5.4%

 

 

 

 

 

 

Advisory Committee of TCF Employees Stock Purchase Plan

 

8,785,592 (5)

 

 

5.3%

 

 

 

 

 

 

 

(1)             The information that follows is based upon the Schedule 13G/A filed with the SEC on behalf of FMR LLC, Fidelity Small Cap Discovery Fund, Edward C. Johnson 3d, and Abigail P. Johnson on February 13, 2015.  Information is as of December 31, 2014. Beneficial ownership of shares by FMR LLC is in the following manner: sole voting power, 2,325,729 shares; shared voting power, 0 shares; sole dispositive power, 17,259,207 shares; and shared dispositive power, 0 shares.  Beneficial ownership of shares by Fidelity Small Cap Discover Fund is in the following manner: sole voting power, 11,200,000 shares; shared voting power, 0 shares; sole dispositive power, 0 shares; and shared dispositive power, 0 shares.  Beneficial ownership of shares by Mr. Johnson is in the following manner: sole voting power, 0 shares; shared voting power, 0 shares; sole dispositive power, 17,259,207 shares; and shared dispositive power, 0 shares. Beneficial ownership of shares by Ms. Johnson is in the following manner: sole voting power, 0 shares; shared voting power, 0 shares; sole dispositive power, 17,259,207 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 behalf of Blackrock Inc. on January 30, 2015. Information is as of December 31, 2014. Beneficial ownership of shares by Blackrock Inc. is in the following manner: sole voting power, 9,796,541 shares; shared voting power, 0; sole dispositive power, 10,329,774 shares; and shared dispositive power, 0 shares.  The address of Blackrock Inc. is 40 East 52nd Street, New York, NY 10022.

(3)             The information that follows is based upon the Schedule 13G/A filed with the SEC on behalf of State Street Corporation on February 12, 2015. Information is as of December 31, 2014. Beneficial ownership of shares by State Street Corporation is in the following manner: sole voting power, 0 shares; shared voting power, 9,291,123 shares; sole dispositive power, 0 shares; and shared dispositive power, 9,291,123 shares. The address of State Street Corporation is State Street Financial Center, One Lincoln Street, Boston, MA 02111.

(4)             The information that follows is based upon the Schedule 13G filed with the SEC on behalf of The Vanguard Group on February 11, 2015. Information is as of December 31, 2014. Beneficial ownership of shares by The Vanguard Group is in the following manner: sole voting power, 110,692 shares; shared voting power, 0; sole dispositive power, 8,959,809 shares; and shared dispositive power, 96,992 shares. The address of The Vanguard Group is 100 Vanguard Blvd, Malvern, PA 19355.

(5)             The Advisory Committee for the ESPP has shared voting power with participants of all allocated shares in such plan. Advisory Committee members disclaim beneficial ownership of these shares. The foregoing information is based upon the Schedule 13G/A filed with the SEC by TCF Financial Corporation on February 12, 2015. Information is as of December 31, 2014. Beneficial ownership of shares by the Advisory Committee for the ESPP is in the following manner: sole voting power, 0 shares; shared voting power, 8,785,592 shares; sole dispositive power, 0 shares; and shared dispositive power, 0 shares. The address of the Advisory Committee is c/o General Counsel, TCF Financial Corporation, 200 Lake Street East, Mail Code EX0-01-G, Wayzata, MN 55391-1693.

 

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 2014, except for one late Form 4 filing by Mr. Cusick to report one transaction to transfer shares from a grantor retained annuity trust to a personal account.

 

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BACKGROUND OF EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS

 

The following describes the business experience of executive officers of TCF Financial, or its principal wholly-owned subsidiary TCF Bank, who are not Directors of TCF Financial.

 

MARK A. BAGLEY (age 54) has been Chief Credit Officer of TCF Financial since January 25, 2014 and TCF Bank since December 2, 2013. Prior to joining TCF Financial, Mr. Bagley was Chief Credit Officer at State Farm Bank F.S.B, a financial services institution and wholly-owned subsidiary of State Farm Mutual Automotive Insurance Company, from March 2012 to November 2013. From June 2008 to March 2012 and from July 1997 to September 2005, Mr. Bagley was employed by U.S. Bank National Association, a financial services institution, holding various positions including being responsible for credit approval for corporate banking and commercial banking lines of business as well as divisional management positions. From June 2007 through June 2008, Mr. Bagley was Chief Risk Officer for Toyota Savings Bank, a financial services institution and indirect subsidiary of Toyota Motor Corporation. From October 2005 to May 2007, he was Chief Risk Officer for Marquette Financial Companies, a financial services institution.

 

SUSAN D. BODE (age 52) (Principal Accounting Officer) has been Senior Vice President and Chief Accounting Officer of TCF Financial since 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, from 2007 to 2010, 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.

 

JAMES M. COSTA (age 46) has been the Chief Risk Officer since August 2013 for TCF Financial and TCF Bank. He has over 20 years of financial services experience, with 13 years in risk management. Prior to joining TCF Financial, from 2010 to 2013, Mr. Costa served as Executive Vice President of Risk and Head of Enterprise Portfolio Management at PNC Financial Services Group, Inc., a financial services institution, and before that, from 2004 to 2010, led enterprise credit strategy for Wachovia Corporation, a financial services institution.

 

JOSEPH T. GREEN (age 60) 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. Mr. Green has also served as General Counsel of TCF Bank since 1993 and Secretary of TCF Bank since 2001, and has been an Executive Vice President of TCF Bank since 2010.

 

ANDREW J. JACKSON (age 56) has been the Chief Audit Executive Officer since August 2012 for TCF Financial and TCF Bank. Prior to joining TCF Financial, from July 2006 to August 2012, Mr. Jackson was Executive Vice President and Corporate Auditor of First Tennessee Bank, a financial services institution, in charge of the Internal Audit function.

 

MICHAEL S. JONES (age 46) became Executive Vice President and Chief Financial Officer of TCF Financial on January 1, 2012 and has served in various leadership positions, including chief financial officer, with certain of TCF’s wholly-owned subsidiaries since 2008. Mr. Jones has over 15 years of financial experience in various functions including finance and operations. Prior to joining TCF, Mr. Jones held financial leadership positions with a subsidiary of PACCAR, Inc., a manufacturer of premium commercial vehicles, and various subsidiaries of General Electric Company, a large diversified technology and financial services company.

 

TAMARA K. SCHUETTE (age 47) has been Executive Vice President – Corporate Controller of TCF Bank since August 2014 and Senior Vice President – Corporate Controller of TCF Financial since October 2014. In her role, Ms. Schuette is responsible for the Accounting, Financial Planning and Analysis, and Tax functions. Ms. Schuette has over 16 years of financial experience in various functions including finance, operations, and enterprise & operational risk. Prior to joining TCF Financial, Ms. Schuette worked at GE Capital, the financial services division of General Electric Company, and its various subsidiaries, from May 1998 to July 2014 serving in various leadership positions such as SVP of Operations of GE Fleet Services from 2007 to 2009, Enterprise and Operational Risk Leader of GE Capital Americas from 2010 to 2012, and Operational Risk Leader of GE Capital from 2012 to 2014.

 

BARBARA E. SHAW (age 59) 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. 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.

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

Executive Summary

 

We design our compensation programs to attract and retain experienced, highly qualified executives who are critical to our long-term success and the enhancement of stockholder value. Our compensation program objectives include:

·                  Link pay to individual and Company performance, while not encouraging excessive risk-taking;

·                  Balance short- and long-term Company performance with a weighting towards long-term performance; and

·                  Align executives’ interests with those of stockholders through long-term ownership of TCF common stock.

 

We continually review and improve our pay practices to ensure that we (i) drive superior performance in an ever-changing operating environment and (ii) ensure alignment with stockholders’ interests. This is especially important following the 2014 Say on Pay vote given the less than majority support. Our Board and Compensation Committee carefully considered the results of the 2014 Say on Pay vote and as a result engaged extensively with our stockholders to solicit feedback. Based on stockholder engagement and feedback, we made several changes to our practices to better align our compensation programs with stockholder interests, discussed under “Compensation Practices” later in the CD&A. The CD&A is organized around four key areas:

 

Performance

 

ü        Pre-tax, pre-provision return on average assets of 2.0%, ranking us 6 of 47 among the 2014 Peer Group (defined below).

ü        Increased loan origination 12.2% over 2013.

ü        Achieved superior net interest margin of 4.61% ranking TCF 4 of 47 companies in the 2014 Peer Group, despite a continued low-rate lending environment.

ü        Earnings per share for 2014 increased by 14.6% compared to 2013.

ü        Decreased non-performing assets $63.5 million or 18.4% from December 31, 2013.

ü        Decreased 60+ day delinquencies 26.0% from December 31, 2013.

ü        Sold $405.9 million of residential Troubled Debt Restructuring (“TDR”) loans, significantly improving the risk profile of our balance sheet.

 

 

 

2014 Payment of Named Executive Officers (“NEO”)

 

ü     All key decisions regarding 2014 compensation were made prior to the 2014 Say on Pay vote.

ü       NEO compensation focused on retaining highly qualified executives as the Company establishes and executes a successful CEO succession plan.

ü       A significant portion of NEO compensation for 2014 was contingent on performance, or “at risk,” with a large portion of compensation tied to return on average assets (“ROA”) performance.

ü        The Compensation Committee awarded Annual Cash Incentives for 2014 to each NEO at 200% of base salary since every performance metric was met at the maximum level.

 

 

 

Compensation Practices

 

ü        Targeted stockholder outreach relating to corporate governance issues with Mr. Opperman, the Chair of the Compensation Committee, meeting with institutional investors owning approximately 47% of our institutional ownership as of December 31, 2014.

ü        Stockholder feedback valued and considered in improving our compensation practices.

ü        Made significant changes to 2015 pay practices to better align with stockholder interest:

ü         Reduction in maximum annual cash incentive payout from 200% to 150% of base salary and target payout from 100% to 75% of base salary for NEOs other than Mr. Cooper,

ü         Adopted relative profitability metrics for cash incentives, including relative ROA and relative return on tangible common equity (“ROTCE”),

ü         Linked vesting of a portion of equity awards to total stockholder return (“TSR”),

ü         Used performance-based awards for 74.6% of 2014 NEO Total Compensation (as reported in the Summary Compensation Table), and

ü         All equity awards beginning in 2015 will have double-trigger vesting.

 

 

 

Control and Risk Process

 

ü        Annual review of compensation policies and practices as they relate to risk management.

ü        Strong, robust roles and responsibilities followed in establishing executive compensation, including the engagement of Towers Watson to perform compensation analysis.

ü        Driving individual accountability of alignment of actions to stockholder value through mandatory stock ownership and retention.

 

 

 

Why should stockholders approve our Say on Pay?

 

1.         Significant stockholder outreach to obtain feedback.

2.         Significant changes to executive compensation practices to align with stockholder interests.

3.         Payouts for 2014 reflect ROA performance in the top quartile of the 2014 Peer Group.

4.         Compensation practices are incorporated into a risk control and management process.

 

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Performance

 

During 2014, our experienced executive team continued to lead the Company to improved performance, despite a very competitive lending market. We believe that management positioned the Company to succeed in a higher interest rate environment, continued the diversification of our business by expanding the auto finance business, improved nearly all of our credit metrics, and increased our capital and tangible book value per share. Our strong financial and operational performance in 2014 included the following:

 

·                  Pre-tax, pre-provision return on average assets of 2.0%, ranking us 6 of 47 among our peer group for 2014, which included all publicly-traded banks and thrift institutions with assets between $10 billion and $50 billion as of September 30, 2013 that reported at least one quarter of fiscal 2014 earnings results by January 31, 2015 (the “2014 Peer Group”).

·                  ROA of 0.96%, compared to the 2014 Peer Group average of 0.81%.

·                  ROTCE (1) of 10.08%, compared to the 2014 Peer Group average of 10.0%.

·                  Increased loan originations 12.2% over 2013.

·                  Achieved superior net interest margin of 4.61%, which ranks TCF 4 of 47 in the 2014 Peer Group, despite the continued low-rate lending environment.

·                  Diversified our interest and non-interest income through increased loan sales, completion of the Company’s first securitization, and ongoing servicing revenue generated by loan sales and securitization.

·                 Continued to grow deposits and checking accounts, despite increased competition.

·                  Earnings per share for 2014 increased by 14.6% compared to 2013.

·                  Decreased non-performing assets $63.5 million or 18.4% from December 31, 2013, to December 31, 2014.

·                  60+ day delinquencies decreased 26.0% from $30.2 million at December 31, 2013 to $22.3 million at December 31, 2014.

·                  Sold $405.9 million of residential TDR loans, reducing credit risk in our balance sheet.

·                  Implemented cost-cutting measures to reduce expenses, which included strategically rationalizing our branch and corporate office footprint.

 

Strong Segment Performance

 

Our operating segments achieved strong performance throughout 2014, driving the continued transformation of the Company in a very competitive and challenging banking environment. We continued to expand our origination capabilities through the expansion of our national lending businesses, while managing concentration risk through our loan sale process and funding asset growth with core retail deposits that have a very strong liquidity profile. Highlights of 2014 performance by segment are provided below:

 

Lending

 

 

Funding

 

 

Corporate

·                  Net income of $174.7 million, up 28.2% from prior year

·                  ROA of 1.08%, an increase of 18 bps from prior year

·                  Expansion of our loan origination and sale capabilities

·                  Completed the build-out of the auto finance origination teams and expanded the dealer network

 

 

·                  Net income of $6.1 million

·                  Cost of deposits of 0.26%

·                  Continued to support asset growth by growing core deposits

·                  Improved our customer experience, driving down our customer attrition rate

·                  Expanded our product capabilities in the branches

·                  Developed new liquidity source – asset securitization

 

 

·                  Significant investment in our enterprise risk management processes, including:

¡     Model development and validation

¡     Operational risk management

¡     Independent risk officers

·                  Developed robust stress testing processes

·                  Hired key talent to further expand bench strength

 

TCF Financial Corporation

·                  Net Income of $174.2 million; EPS of $0.94; ROTCE (1) of 10.08%

 

·                  Tier 1 Common Capital (1) of 10.07% (up from 9.63% at December 31, 2013)

·                  Tangible book value per share (1) of $9.72

 

·                  Three-year TSR of 61%

 

(1) See Appendix IV for a reconciliation of GAAP to non-GAAP financial measures, including ROTCE, Tangible book value per share, and Tier 1 Common Capital.

 

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Significant Investment in Enterprise Risk Management

 

During 2014, the Company made significant investments in its Enterprise Risk Management (“ERM”) structure by providing the resources for Messrs. Costa, Chief Risk Officer, and Bagley, Chief Credit Officer, to continue to build out their teams, focusing on enhancing our current processes in areas such as credit concentration management, operational risk management, and model development and validation.

 

Our risk management framework is built upon the concept of three lines of defense, with the first line of defense located in the line of business, and focused on preventing and mitigating risks at all our touch points with external customers and constituents. The second line of defense is our risk management team, which works with the businesses to inventory risks, ensure that controls exist to monitor and mitigate any excessive risks above our risk appetite, and test those controls to ensure that they are working as designed. The third line of defense is our internal audit function, which is forward-looking in delivering high quality assurance and internal investigation services across the Company. The internal audit function will be an independent and objective trusted business advisor to its stakeholders by:

·                  Having highly competent audit and fraud investigation professionals.

·                  Using best practices and proven technology tools to ensure high-quality and efficient delivery of assurance and investigation services.

·                  Fostering a culture of continuous improvement, adhering to professional standards and striving to fully meet regulatory requirements and expectations.

 

Our ERM functions maintain independence from risk-taking activities, and design and manage the holistic risk framework for the enterprise. The functions work both as a partner to the line of business, and as advocates of balanced growth by maintaining the risk/reward relationship. Additionally, internal audit and risk review validate and ensure the efficacy of the risk framework.

 

Strategic Priorities and Long Term Success

 

Over the years, we have continued to transform ourselves by proactively managing our diverse portfolio of businesses. In 2014, we achieved superior results against our established strategic priorities, continuing to position the Company for long-term success as outlined below:

 

Strategic Priorities

 

 

2014 Achievements

Lending

Continued disciplined growth across the businesses

 

 

ü  Continued growth in our national lending platforms – Leasing & Equipment Finance, Inventory Finance, Auto Finance, and Relationship Lending Unit

ü  Maintained a balanced portfolio with approximately 47% Retail and 53% Wholesale lending

Utilize loan sales to manage concentration and generate fee income

 

 

ü  Sold $2.8 billion of loans into the marketplace and recognized gains of $78.4 million

ü  Mitigated risk by transferring ownership of sold loans to third parties, while generating servicing income of $21.4 million, a 60.0% increase over 2013

ü  Expanded our investor base with the Company’s inaugural auto securitization

Maintain 2013 accelerated positive credit momentum

 

 

ü  Continued improvement of all credit metrics

ü  Reduced balance sheet risk with the sale of consumer TDR loans

Funding

Manage interest rate and liquidity risk

 

 

ü  Increased our asset sensitivity during the year and positioned the Company for rising interest rates

ü  Maintained asset and liability liquidity levels despite balance sheet growth

ü  Continued to fund the balance sheet with core low-cost insured deposits

ü  Developed an auto securitization strategy

Improve customer experience through product, service and branding enhancements

 

 

ü  Increased the availability of lending products in the branches by expanding first mortgage product options for our branch customers

ü  Implemented a front counter capture process to improve the customer experience and decrease operating costs

Complete channel optimization initiatives in branch, ATM, online, mobile and bill payment systems

 

 

ü  Upgraded our online banking, bill payment, on-line account opening and mobile platforms during the year

 

 

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Corporate

Manage corporate expenses

 

 

ü        Continued to focus on business unit leverage and obtaining economies of scale

ü        Executed 46 branch realignment to better leverage the branch network

ü        Executed expense review of the entire organization, setting targets for each function and line of business in order to produce more operating efficiency

Continue to emphasize enhancing our ERM functions

 

 

ü        Made several investments across the risk function to enhance our enterprise risk management processes

Identify and cultivate strategic corporate development opportunities

 

 

ü        Reviewed various corporate development opportunities – focused on depositories within our footprint along with asset generation platforms that will complement our risk profile

 

Long Term Financial Performance and Total Stockholder Return

 

The executive team has transformed the Company over the last three years, increasing earnings and tangible book value per share in a competitive and ever-changing operating environment. This performance resulted in TSR of 61% over that three-year period.

 

3 Year Total Stockholder Return

GRAPHIC

 

Tangible Book Value and Earnings Per Share (1)

GRAPHIC

(1)       Represents the annualized average TSR for the 2014 Peer Group.

 

(1)       See Appendix IV for a reconciliation of GAAP to non-GAAP financial measures.

(2)       Excludes a net, after-tax charge of $295.8 million, or $1.87 per share, related to balance sheet repositioning.

 

 

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2014 Payment of Named Executive Officers

 

NEO Pay Determinations

 

The Compensation Committee oversees our executive compensation program. The Compensation Committee uses competitive market data as described below as a reference when setting each component of compensation and target compensation levels. Although the Compensation Committee reviews and relies on this data in the course of its annual compensation review, the data only provides a reference point. The Compensation Committee ultimately uses its own business judgment and expertise to determine the appropriate components and levels of compensation for our executive officers, including the NEOs. The Compensation Committee seeks to construct a compensation structure that is competitive relative to compensation paid at similarly situated companies, which will attract and retain highly qualified personnel in a competitive employment environment.

 

The Compensation Committee considers overall performance in areas of scope of responsibility, management and communication skills, department objectives, 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 Compensation Committee then establishes base salary levels, annual cash incentive amounts and long-term incentive awards, if any, for each NEO other than the CEO. A similar process is followed by the Compensation Committee in determining the compensation for the CEO.

 

The Compensation Committee has retained an independent executive compensation consultant, Towers Watson, in accordance with the Compensation Committee’s charter. Towers Watson reports directly to the Compensation Committee, which retains the sole authority to hire or terminate Towers Watson, approve its professional fees, determine the nature and scope of services, and evaluate performance. A representative of Towers Watson regularly attends Compensation Committee meetings and communicates with the Compensation Committee Chair between meetings. The Compensation Committee makes all final decisions with respect to compensation matters. In response to stockholder concerns, in 2014 the Compensation Committee determined that Towers Watson would only be engaged for compensation-related services performed for the Compensation Committee going forward.

 

Analysis of Tools the Compensation Committee Uses

 

The Compensation Committee uses an annual compensation analysis prepared by Towers Watson, an annual peer group comparative analysis, and tally sheets to determine whether the objectives of the Company’s executive compensation program are being met, and also takes into consideration a perquisite report and total TCF common stock ownership data.

 

Towers Watson Analysis. The Compensation Committee has engaged Towers Watson annually since 1991 to compare our executive compensation with the selected peer group to determine: (1) whether and to what extent the overall level of total compensation for each NEO was aligned with financial performance and (2) whether, in its view, our compensation levels were appropriately aligned with financial performance based on the peer group data. 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 us, 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). Towers Watson also provides the Compensation Committee with guidance on executive compensation trends.

 

Peer Group Comparative Analysis. The peer group comparative analysis measures the relationship between the compensation for each NEO and TCF’s financial performance relative to its peers. The peer group companies are ranked by financial performance for the relevant year. Although the Compensation Committee does not seek to use peer group data to benchmark executive compensation, the Compensation Committee generally attempts to set base salaries at levels which it believes are appropriate to attract and retain highly qualified executives. The Compensation Committee believes that there should be a relationship between the compensation paid to each NEO and our relative financial performance. The Compensation Committee reviews the peer group comparative analysis to ensure that the compensation of each NEO sufficiently depends on our relative financial performance, and makes adjustments to compensation as it deems appropriate. A listing of the 2014 Peer Group and 2015 Peer Group can be found at the end of this CD&A.

 

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Tally Sheets. The tally sheets show total compensation payable to each NEO 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 Compensation 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 NEO.

 

Key 2014 and Early 2015 Compensation Decisions

 

All key decisions by the Compensation Committee regarding executive compensation for 2014 were made prior to the 2014 Say on Pay vote. During 2014 and early 2015, the Compensation Committee took the following actions:

 

·                  Made significant changes to our executive compensation practices for 2015 as a result of stockholder feedback as outlined below under Compensation Practices;

·                  Awarded Annual Cash Incentives to each NEO at 200% of base salary since every performance metric was met at the maximum level;

·                  Extended Mr. Cooper’s employment contract and granted 500,000 shares of performance-based restricted stock to Mr. Cooper in March 2014;

·                  As a result of stockholder feedback, changed the consequences resulting from a termination by Mr. Cooper for Good Reason as a result of Mr. Cooper not being elected Chairman by amending Mr. Cooper’s employment agreement to eliminate the lump sum cash payment in such case and amending the 2014 performance-based restricted stock award to eliminate accelerated vesting in such case; and

·                  Granted long-term equity awards of 25,000 shares to Mr. Jones in January 2014 and 15,000 shares to Mr. Stratton in April 2014.

 

2014 Annual Cash Incentive. In early 2014, the Compensation Committee approved the 2014 Management Incentive Plan (the “MIP”), effective for services beginning on January 1, 2015, for certain executives, including all of the NEOs. Under the 2014 MIP, participants were 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 Average Assets (up to 100% of base salary). The participant was eligible to receive a cash incentive of an amount not to exceed:

§                  50% of base salary if pre-tax, pre-provision return on average assets for 2014 was in the second quartile of the 2014 Peer Group; or

§                  100% of base salary if pre-tax, pre-provision return on average assets for 2014 was in the first quartile of the 2014 Peer Group.

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

§                  100% of base salary if both (i) non-performing assets as a percentage of total loans and leases plus other real estate owned was below 2.17% at December 31, 2014 and (ii) the portion of provision for loan and lease losses attributable to charge-offs was no greater than 0.80% of average loans and leases for the year ending December 31, 2014; or

§                  50% of base salary if either (i) non-performing assets as a percentage of total loans and leases plus other real estate owned was below 2.17% at December 31, 2014, or (ii) the portion of provision for loan and lease losses attributable to charge-offs was no greater than 0.80% of average loans and leases for the year ending December 31, 2014.

 

Pre-tax, pre-provision return on average assets, non-performing assets and provision for loan and lease losses were calculated as provided in the Performance-Based Compensation Policy. Charge-offs were calculated as the gross amount of loan or lease balance either partially or fully charged off as bad debt, less recoveries collected from previous charge-offs.

 

The Compensation Committee selected the pre-tax, pre-provision return on average assets performance metric for 2014 because this metric measures the core earning power of the Company. The Compensation Committee believes that the Company’s improvement in this metric in 2014 is a key indicator of the future profitability of the Company. Over the last several years, total return on assets for members of the 2014 Peer Group has been impacted by loan and lease loss releases and changes in tax rates, as companies have realized the value of deferred tax assets. Thus,

 

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the Compensation Committee believed that it was appropriate to eliminate the effect of taxes, because the performance goal was relative to the performance of other banks, and different banks in the 2014 Peer Group were differently impacted by tax rates and tax assets. The Compensation Committee also chose to eliminate the effect of the provision for loan and lease losses on net income because credit metrics made up a separate component of the Annual Cash Incentive. The Compensation Committee selected these credit metrics because it believed that continued strong performance of the Company’s credit metrics was an important indicator of our success. The targets for these metrics were set at a level that the Compensation Committee believed would support continued strong performance without encouraging excessive risk. The Compensation Committee believed that the combination of credit and return on assets allows for a balanced assessment of management’s performance.

 

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William A. Cooper

 

Mr. Cooper serves as Chairman and Chief Executive Officer with key accomplishments in 2014 and related compensation provided below:

 

Key Accomplishments

 

2014 Compensation

ü

Delivered on strong performance metrics, including 3 year TSR

 

Base Salary

 

$ 1,500,000

ü

Increased the investment in risk management functions across the enterprise

 

Annual Cash Incentive

 

$ 3,000,000

ü

Reduced balance sheet risk by selling a significant portion of TCF’s residential TDR loans

 

Restricted Stock (1)

 

$ 7,939,388

ü

Continued to develop second level of management to ensure successful succession

 

Total Compensation

 

$12,439,388

 

 

 

 

 

 

 

 

 

% Performance-Based

 

87.9%

 

(1) Represents restricted stock granted during 2014 and valued at the grant date fair value.

 

 

Mr. Cooper guided TCF during 2014 to a strong year with earnings per share increasing 14.6% to $0.94 for 2014. This earnings per share growth occurred despite charges related to a sale of TDR loans that decreased TCF’s credit and balance sheet risk. Overall, 2014 was highlighted by strong loan and lease originations, a focus on diversification of both revenue and earning assets, diversification of our funding options resulting from our inaugural auto loan securitization, one of the highest net interest margins in the industry and continued strong credit quality, particularly in our national lending businesses. Our focus remains on the future, and we believe that we have the team in place to fulfill our goals moving forward.

 

In connection with the 2014 amendment to Mr. Cooper’s employment agreement, the Compensation Committee granted 500,000 shares of performance-based restricted stock to Mr. Cooper because the Compensation Committee believed it was critical to retain Mr. Cooper as CEO through the end of 2015 to have the benefit of his experience, strategic thinking and guidance, and to assist our new CEO, when selected, during the transition period through the end of 2017. Through the leadership and forward thinking of Mr. Cooper, TCF responded to the lost revenue caused by the regulatory caps placed on interchange fees and within a few short years has substantially replaced that lost revenue through the growth of our national lending businesses.

 

Under the performance-based restricted stock award, as amended, vesting is subject to the achievement of pre-tax, pre-provision return on average assets for any calendar year beginning with 2014 that is in the first or second quartile of the group of publicly traded banks and thrifts that have $10 billion to $50 billion in assets as of September 30 of the preceding year and report at least one quarter of earnings for such calendar year by January 31 of the following year. Based on our results for 2014, the performance goal was achieved. As a result, 250,000 shares of restricted stock will vest on January 1, 2017, and 250,000 shares of restricted stock will vest on January 1, 2018, subject to Mr. Cooper’s continued employment and the terms of the agreement. For more information regarding Mr. Cooper’s employment agreement and 2014 performance-based restricted stock award agreement, see “Executive Compensation – Potential Payments Upon Termination or Change in Control – Employment Agreements.”

 

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Craig R. Dahl

 

Mr. Dahl’s responsibilities as Vice Chairman include direct oversight over all aspects of TCF’s national lending businesses, as well as oversight over branch banking, operations and information technology. His key accomplishments in 2014 and related compensation are provided below:

 

Key Accomplishments

 

2014 Compensation

ü

Continued to build out loan origination and loan sale capabilities across consumer platforms

 

Base Salary

 

$  550,000

ü

Continued to improve the overall risk profile of the Bank driving improvement in credit quality across the businesses

 

Annual Cash Incentive

 

$1,100,000

ü

Maintained asset yields superior to peers in this low rate and highly competitive environment

 

Restricted Stock

 

$               -

ü

Continued to develop our talent management function

 

Total Compensation

 

$1,650,000

 

 

 

 

 

 

 

 

 

% Performance-Based

 

66.7%

 

When determining Mr. Dahl’s compensation, the Compensation Committee took into consideration the fact that Mr. Dahl is a key member of the executive team and critical in the succession planning process, and as a result the Compensation Committee believed it was important to place Mr. Dahl’s compensation at the higher end of the peer range for similar roles.

 

No restricted stock was awarded to Mr. Dahl in 2014 because his long term performance remains tied to the second half of the 2012 performance-based restricted stock award which only vests if the Company achieves an average ROA of 1.20% for a four consecutive quarter period after June 30, 2014, an increase from 0.61% for the year ended December 31, 2011. The award will be forfeited if not earned prior to December 31, 2017. The first half of the 2012 performance-based restricted stock award vested during 2014 due to the Company achieving an average ROA of more than 1.0% for the four consecutive quarter period ended June 30, 2014.

 

In early 2015, the Compensation Committee approved a base salary increase to $650,000 for Mr. Dahl. The Compensation Committee determined that the increase was appropriate in light of his additional responsibilities for oversight over branch banking, operations and information technology beginning in July 2014.

 

For information regarding Mr. Dahl’s employment agreement, see “Executive Compensation – Potential Payments Upon Termination or Change in Control – Employment Agreements.”

 

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Thomas F. Jasper

 

Mr. Jasper’s areas of responsibility as Vice Chairman include the branch banking network, retail lending and commercial banking as well as corporate operations including information technology. His key accomplishments in 2014 and related compensation are provided below:

 

Key Accomplishments

 

2014 Compensation

ü

Effectively led Funding to maintain adequate levels of liquidity and efficiently grew deposits to support loan growth

 

Base Salary

 

$  550,000

ü

Executed the branch optimization to ensure this initiative was favorable to plan projections

 

Annual Cash Incentive

 

$1,100,000

ü

Executed on enhancements to electronic channels, including online banking, mobile banking and bill payment platforms

 

Restricted Stock

 

$               -

ü

Improved the customer experience through improvements of our service-oriented culture

 

Total Compensation

 

$1,650,000

 

 

 

 

 

 

 

 

 

% Performance-Based

 

66.7%

 

When determining Mr. Jasper’s compensation, the Compensation Committee took into consideration the fact that Mr. Jasper is a key member of the executive team and critical in the succession planning process, and as a result the Compensation Committee believed it was important to place Mr. Jasper’s compensation at the higher end of the peer range for similar roles.

 

No restricted stock was awarded to Mr. Jasper in 2014 because his long term performance remains tied to the second half of the 2012 performance-based restricted stock award which only vests if the Company achieves an average ROA of 1.20% for a four consecutive quarter period after June 30, 2014, 2014, an increase from 0.61% for the year ended December 31, 2011. The award will be forfeited if not earned prior to December 31, 2017. The first half of the 2012 performance-based restricted stock award vested during 2014 due to the Company achieving an average ROA of more than 1.0% for the four consecutive quarter period ended June 30, 2014.

 

For information regarding Mr. Jasper’s employment agreement, see “Executive Compensation – Potential Payments Upon Termination or Change in Control – Employment Agreements.”

 

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Earl D. Stratton

 

Mr. Stratton’s responsibilities as Chief Operations Officer, reporting to Mr. Jasper, included responsibility for corporate operations and information technology. Mr. Stratton retired from TCF effective January 31, 2015. His key accomplishments in 2014 and related compensation are provided below:

 

Key Accomplishments

 

2014 Compensation

ü

Drove cost savings through the implementation of a new front counter image capture system

 

Base Salary

 

$  400,000

ü

Executed an office space plan which cost effectively consolidated multiple sites

 

Annual Cash Incentive

 

$  800,000

ü

Provided leadership towards the successful first phase implementation of an imaged ATM solution to enhance retail distribution strategies

 

Restricted Stock (1)

 

$  239,402

ü

Execution of an effective business continuity plan

 

Total Compensation

 

$1,439,402

 

 

 

 

 

 

 

 

 

% Performance-Based

 

55.6%

 

(1) Represents restricted stock granted during 2014 and valued at the grant date fair value.

 

On April 23, 2014, the Compensation Committee awarded 15,000 shares of restricted stock to Mr. Stratton. The shares would have vested in three equal installments on April 1, 2015, 2016, and 2017, which vested pro rata upon Mr. Stratton’s retirement. The amount and timing of the restricted stock awarded to Mr. Stratton was subjectively determined by the Compensation Committee, with input from Mr. Cooper, 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, as well as Mr. Stratton’s performance.

 

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Michael S. Jones

 

Mr. Jones became Chief Financial Officer on January 1, 2012 and subsequently added responsibility for corporate finance, financial and regulatory reporting, treasury, legal, tax, investor relations and corporate development. His key accomplishments in 2014 and related compensation are provided below:

 

Key Accomplishments

 

2014 Compensation

ü

Completed TCF’s initial stress testing requirements and developed initial controls and process

 

Base Salary

 

$  324,808

ü

Completed TCF’s inaugural auto loan securitization of $256 million

 

Annual Cash Incentive

 

$  650,000

ü

Enhanced the strategic planning process incorporating stockholder value metrics to ensure strategies are aligned with driving stockholder value

 

Restricted Stock (1)

 

$  387,620

ü

Managed to strong levels of asset and liability liquidity

 

Total Compensation

 

$1,362,428

 

 

 

 

 

 

 

 

 

% Performance Based

 

47.7%

 

(1) Represents restricted stock granted during 2014 and valued at the grant date fair value.

 

On January 28, 2014, the Compensation Committee awarded 25,000 shares of restricted stock to Mr. Jones. The shares will vest in full on February 1, 2019. 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 Mr. Jones dies, retires, or becomes “disabled” as defined under Section 409A of the Internal Revenue Code of 1986, as amended (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. The amount and timing of the restricted stock awarded to Mr. Jones was subjectively determined by the Compensation Committee, with input from Mr. Cooper, 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, as well as Mr. Jones’ performance.

 

In early 2015, the Compensation Committee approved a base salary increase to $375,000 for Mr. Jones. The Compensation Committee determined that the increase was appropriate in light of his increased responsibilities in connection with Barry Winslow’s retirement in July 2014.

 

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Compensation Practices

 

Summary of Stockholder Engagement and Resulting Changes

 

Stockholder outreach is a central feature of our investor relations philosophy. Stockholders provide feedback on a variety of topics, including strategy, governance and compensation. Management speaks with and receives feedback frequently from investors through conversations and other forms of outreach. During 2014, we had over 200 conversations with investors through our attendance at over 20 investor conferences, roadshows, and on-site visits, as well as phone calls, where management met both individually and in small groups with investors representing approximately 76% of our institutional ownership as of December 31, 2014.

 

In addition to these meetings, the Compensation Committee systematically engaged with certain stockholders in order to understand and address the issues raised regarding our corporate governance and compensation practices expressed by the 2014 Say on Pay vote. In order to provide stockholders with perspective on the decisions made and the process by which they were reached, the Compensation Committee felt it was important that Mr. Opperman, the Chair of the Compensation Committee, meet personally with these certain stockholders. During the course of these meetings, all but two of which were in person, Mr. Opperman spoke with institutional investors owning approximately 47% of our institutional ownership as of December 31, 2014.

 

Set forth below were the primary concerns expressed by our stockholders through these meetings, and the actions the Compensation Committee took in response to those concerns:

 

Stockholder Concerns

Action Taken in Response to Stockholder Concerns

Single-Trigger awards provide an unjust enrichment to NEOs by providing a payout even in cases where NEOs do not lose their positions following a change in control.

In response to stockholder concerns, the Compensation Committee adopted a new omnibus plan subject to stockholder approval. Under the proposed plan, as further detailed under Proposal 2, equity awards would not automatically vest following a change in control. TCF plans to include a “double-trigger” change in control provision in all future equity awards, meaning that if, following a change in control of TCF, a participant’s employment is terminated without cause, all then-unvested time-based restricted stock awards will vest upon termination and all then-unvested performance-based awards will vest at the level corresponding to full performance.

 

Payment of the Annual Cash Incentive at the maximum level to all NEOs disconnects pay and performance if stockholder returns are not similarly high.

The Compensation Committee understands stockholders’ concerns and believes that aligning pay with stockholder return is an essential objective of TCF’s compensation program. The Compensation Committee is continuing to implement measures to more closely align compensation with stockholder returns, as evidenced by the adoption of TSR as the vesting criteria for performance awards granted under the long-term incentive plan beginning in 2015. Further, the Compensation Committee has revised the 2015 Annual Cash Incentives (i) to decrease the maximum payout as a percentage of base salary from 200% to 150% for NEOs other than Mr. Cooper and (ii) to create a tiered and more rigorous payment schedule for Annual Cash Incentives that it believes will more closely align Annual Cash Incentive payments with overall performance and with stockholder returns.

 

Stockholders believe that the inclusion of the failure by the Board to elect Mr. Cooper as Chairman in the definition of “Good Reason” triggering a severance payment under Mr. Cooper’s employment agreement was not reflective of best practices.

 

After engaging with stockholders, the Compensation Committee and Mr. Cooper agreed to amend Mr. Cooper’s employment agreement to eliminate lump sum payments to Mr. Cooper (other than accrued bonus) as a result of a termination by Mr. Cooper for Good Reason based on the failure to elect Mr. Cooper as Chairman.

 

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Stockholder Concerns

Action Taken in Response to Stockholder Concerns

The Company’s 2014 Annual Cash Incentives allow for significantly above average payouts for only average performance because even minimal improvements result in full payment.

The Compensation Committee has always had the power to exercise negative discretion to reduce award size. The Compensation Committee further responded to stockholders by basing our 2015 Annual Cash Incentive targets on relative ROA and relative ROTCE. The Compensation Committee believes that these metrics are widely used and tracked in the industry, and, as more fully discussed below, demonstrate efficient use of capital.

 

Use of certain metrics relative to our peers, and other metrics on an absolute basis create the perception that the Company may be trying to pick and choose metrics which are more favorable to it.

 

For 2015, all of the performance metrics chosen by the Compensation Committee are relative to the TCF’s peers. No absolute metrics were adopted.

Investors currently have no right to call a special meeting.

On January 23, 2015, the Board approved amendments to our Certificate of Incorporation and Bylaws, subject to stockholder approval of Proposal 3, to provide stockholders with the right to call a special meeting at the request of at least 25% of our common stock.

 

Engagement of Towers Watson other than by the Compensation Committee for compensation-related services creates a conflict of interest.

In early 2014, we made the decision to no longer engage Towers Watson for general benefits consulting services, and decided that only the Compensation Committee will retain Towers Watson, and only for executive compensation-related services.

 

 

In addition, stockholders expressed concern that Mr. Cooper’s 500,000 share grant was large and lacked rigorous performance goals. Mr. Opperman explained to stockholders the Compensation Committee’s use of the award to Mr. Cooper in the context of our overall succession planning. He underscored the importance of the award in retaining Mr. Cooper following his tenure as CEO in order to ensure a smooth transition, particularly in light of the fact that Mr. Cooper would not be eligible for annual or long-term incentives during that period. The Compensation Committee felt that it would be unfair to change the incentive target associated with the award after the award was granted and the performance period had commenced. We believe that stockholders were pleased with the background and perspective Mr. Opperman provided regarding the purpose of the award, and the fact that grants of this size and character are not intended to be routine in the future.

 

We believe that these changes address the concerns expressed by stockholders and incorporate current compensation and governance best practices. The Compensation Committee also engaged Towers Watson, its executive compensation consultant, to help the Committee redesign its compensation program in response to the 2014 Say on Pay vote.

 

The following details the changes to the annual cash and long-term incentives for NEOs for 2015:

 

2015 Annual Cash Incentive. In January 2015, the Compensation Committee approved the 2015 MIP, effective for services beginning on January 1, 2015 for certain executives, including each NEO other than Mr. Stratton. Under the 2015 MIP, the NEOs, other than Mr. Cooper and Mr. Stratton (retired), are eligible to receive an annual cash incentive award not to exceed 150% of base salary based on the achievement of performance goals described below. Mr. Cooper, who will not receive a long-term equity incentive award for 2014, is eligible to receive an annual cash incentive award not to exceed 200% of his base salary. The Compensation Committee, with input from Towers Watson, selected relative ROTCE and relative ROA as the performance criteria because they are commonly used by stockholders and investment professionals when evaluating the Company. The Compensation Committee established threshold, target and maximum targets and corresponding award opportunities expressed as a percentage of base salary paid during the fiscal year, as follows:

 

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Payout
as a
Percentage
of Target

Payout as a Percentage of
Base Salary – ROTCE

Payout as a Percentage of
Base Salary – ROA

Payout as a Percentage of
Base Salary – Total

NEOs
(other than
Mr. Cooper)

Mr.
Cooper

NEOs
(other than
Mr. Cooper)

Mr.
Cooper

NEOs
(other than
Mr. Cooper)

Mr.
Cooper

Threshold

 50%

18.75%

 25%

18.75%

 25%

 37.5%

 50%

Target

100%

37.50%

 50%

37.50%

 50%

 75.0%

100%

Maximum

200%

75.00%

100%

75.00%

100%

150.0%

200%

 

As always, the Compensation Committee will have the ability to reduce or eliminate the Annual Cash Incentive award for each executive in its discretion, which may include its subjective evaluation of our performance relative to the 2015 Peer Group or our relative TSR, as well as evaluation of each NEO’s individual performance and risk management considerations. If we do not achieve the threshold performance, no annual incentives will be paid under the 2015 MIP.

 

Under the 2015 MIP, participants will be eligible to receive annual cash incentive awards (i) not to exceed 150% of base salary for the NEOs other than Mr. Cooper and (ii) not to exceed 200% of his base salary for Mr. Cooper based on the following performance criteria:

 

·                  ROTCE (50%): The participant will be eligible to receive a cash incentive of an amount determined as follows:

§                  Threshold payout if our ROTCE for 2015 is at the 35th percentile of the 2015 Peer Group (defined below);

§                  Target payout if our ROTCE for 2015 is at the 50th percentile of the 2015 Peer Group; or

§                  Maximum payout if our ROTCE for 2015 is at or above the 80th percentile of the 2015 Peer Group.

·                  ROA (50%): The participant will be eligible to receive a cash incentive of an amount determined as follows:

§                  Threshold payout if our ROA for 2015 is equal to 80% of the average ROA of the 2015 Peer Group for 2015;

§                  Target payout if our ROA for 2015 is equal to the average ROA of the 2015 Peer Group for 2015; or

§                  Maximum if our ROA for 2015 is equal to or above 120% of the average ROA of the 2015 Peer Group for 2015.

 

For results between payout levels, the payout will be interpolated in a linear fashion. For performance below threshold, no payouts will be made.

 

The Compensation Committee believes that these performance goals measure the key operational performance metrics of TCF against its peers that are subject to similar regulatory requirements and have similar characteristics (e.g., revenue, assets, etc.). The Compensation Committee believes that measuring performance relative to peers which are subject to similar macroeconomic factors and regulatory requirements provides better insight into management performance.

 

The Compensation Committee believes that the payout levels above represent appropriate levels based on our performance relative to that of our peers. In connection with the long-term incentives discussed below, the Compensation Committee believes that its compensation plan provides balanced incentives between short- and long-term bases without promoting excessive short-term risk taking. ROTCE and ROA will be calculated as provided in the Performance-Based Compensation Policy, and will exclude extraordinary items.

 

For 2015, the Compensation Committee included in our peer group all publicly-traded banks and thrift institutions with assets between $10 billion and $50 billion as of September 30, 2014 that report at least one quarter of fiscal 2015 earnings results by January 31, 2016 (the “2015 Peer Group”).

 

2015 Long-term Incentives. As discussed above, the Compensation Committee responded to concerns raised by stockholders by making changes to many aspects of its compensation plan. The Compensation Committee determined that the NEOs’ target long-term incentive opportunity for 2015 would equal 125% of base salary and would consist of 50% time-based restricted stock and 50% performance-based restricted stock units. The Compensation Committee determined the size of the awards with a view to putting more weight on long-term equity

 

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awards that would further align stockholder interests with those of the NEOs. Due to Mr. Stratton’s retirement in early 2015, he did not receive an award. In addition, because of the 2014 grant provided to Mr. Cooper, he did not receive a long-term equity award. The time-based restricted stock units will vest pro-rata over three years on December 31, 2015, 2016, and 2017.

 

For the performance-based restricted stock units, the Compensation Committee established threshold, target, and maximum targets, and corresponding vesting opportunities expressed as a percentage of base salary as of January 25, 2015, as follows:

 

 

Payout as a
Percentage of Target

Payout as a
Percentage of Base Salary

Threshold

50%

31.25%

Target

100%

62.50%

Maximum

150%

93.75%

 

The performance goal for the performance-based restricted stock units is our TSR over the three-year performance period ending December 31, 2017 compared to our 2015 Peer Group, excluding peers which do not remain publicly traded for the full three-year performance period. The Compensation Committee, with input from Towers Watson, selected TSR as the performance metric because it is a direct measure of stockholder value creation which will increase the alignment of executive and stockholder interests, and is favored by stockholders.

 

The performance-based restricted stock units will vest as follows:

 

·                Threshold payout if our TSR for the performance period is at the 75th percentile of the 2015 Peer Group at the end of the performance period;

·                Target payout if our TSR for the performance period is at the 50th percentile of the 2015 Peer Group at the end of the performance period; or

·                Maximum payout if our TSR for the performance period is at or above the 25th percentile of the 2015 Peer Group at the end of the performance period.

 

For results between payout levels, the payout will be interpolated in a linear fashion. For example, if TCF achieved performance of 11th out of a 40 company peer group, or just outside the first quartile, then the payout would be at 145% of target (or units representing 90.625% of base salary would vest), while if TCF achieved performance of 29th out of a 40 company peer group, then the payout would be at 55% of target (or units representing 34.375% of base salary would vest). For levels below threshold, no units will vest.

 

Primary Elements of Compensation

 

The Compensation Committee uses a variety of compensatory arrangements to achieve its overall compensation goals, including base salary, annual cash incentives and long-term incentives. This balanced use of the various elements provides short- and long-term incentives to executives for individual and company performance while not encouraging excessive risk-taking within the organization. The Compensation Committee believes that above average Company 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 have historically not been formally tied to base salary, annual cash incentives are expressed as a percentage of base salary, so the potential size of such awards also increase with increases in base salary. The Compensation Committee utilizes a variety of performance goals for annual cash incentives and long-term incentives to discourage NEOs from becoming overly focused on a single measure of the Company’s performance. The Compensation Committee reviews executive compensation at least annually in light of its compensation objectives. The Compensation Committee compares levels of TCF executive base salary, annual cash incentives, long-term incentives and aggregate total compensation with that of our peer group.

 

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Compensation
Component

Objective

Determination

Base Salary

A fixed component that is intended to provide a competitive level of compensation necessary to attract and retain highly qualified executives.

The Compensation Committee reviews base salary market practices at least annually through the use of a peer group comparative analysis and an analysis prepared by Towers Watson. The Compensation Committee reviews the base salaries of the NEOs, 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 with the same relative pay ranking.

 

Annual Cash Incentive

Designed to reward NEOs for achieving short-term financial objectives that the Compensation Committee believes will have a long-term financial impact on stockholder value.

Annual cash incentive awards are contingent upon the Company achieving predetermined performance goals. The performance goals are based on one or more performance criteria chosen by the Compensation Committee from a list of measures approved by our stockholders.

 

Long-Term Incentive

Designed to align the interests of executives with those of the Company’s stockholders, and to retain and motivate talented executives. Long-term incentives are equity-based and are provided under stockholder-approved plans which permit the Company to grant a variety of equity-based awards, including restricted stock and stock options, although stock options have not been granted since 2008.

The size and form of these awards has historically been determined by the Compensation 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, ownership of TCF common stock and quantity, amount, and vesting schedule of previous grants. Awards may be granted subject to achievement of one or more performance criteria chosen by the Compensation Committee from a list of measures approved by our stockholders.

 

 

Other Forms of Compensation

 

Retirement and Other Benefits. The Compensation Committee believes that benefits are an important aspect of our ability to attract and retain quality employees, and believes our benefits programs are consistent with market practices based on its review of industry peers and other local employers. Benefits such as the service-weighted match formula of the TCF Employees Stock Purchase Plan (“ESPP”) are designed to serve as a retention tool. Each NEO generally has access to the benefits provided to all full-time employees. Standard benefits received by an NEO as a full-time employee have no impact on the amount of other elements of compensation awarded to the NEO.

 

ESPP and ESPP-Supplemental Plan. Our 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 percentage is based on an employee’s length of service with the Company. 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 NEO may contribute the same percentage of pay as any employee and receives the same match percentage based on length of service with the Company or its subsidiaries.

 

The Code limits the amount of employee contributions and Company matching contributions under the ESPP for certain individuals, including each NEO. 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 282 participants as of January 31, 2015, all amounts contributed over the ESPP Plan limit are credited to the ESPP-Supplemental Plan, the operation of which generally mirrors the ESPP. The Compensation Committee encourages executives to hold TCF common stock and believes the ESPP-Supplemental Plan is an important tool to allow executives to acquire more shares and further align the interests of executives with those of our stockholders.

 

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Pension Benefits. We froze our pension plan in 2004 and discontinued further pay credits in 2006. Pension benefits are disclosed below in the “Pension Benefits in 2014” table and described in the narrative following that table.

 

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

 

Perquisites. Perquisites received by NEOs include use of Company-owned or -leased automobiles, club memberships, executive physicals, life insurance, incentive trips, matching charitable contributions, 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 NEOs on a case-by-case basis. The purpose of these perquisites is to provide additional benefits, reduce security risks and enhance scheduling and efficient use of the NEOs’ time. The Compensation Committee reviews the perquisites of the NEOs and other officers on an annual basis.

 

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Control and Risk Process

 

Recovery (“Clawback”) of Performance-Based Compensation

 

The Sarbanes-Oxley Act of 2002 (“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 whether 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, if applicable.

 

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 will require companies to adopt additional mandatory clawback policies once new rules mandated by the Act become effective.  The SEC will direct the national securities exchanges and associations to amend their listing standards to require that every listed company adopt a compensation recovery policy that includes a clawback policy to recover any incentive-based compensation paid out based on 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 addressed by proposed rulemaking that require clarification and we expect 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

 

On an annual basis, the Compensation Committee performs a review of our incentive compensation policies and practices for 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 Compensation Committee bases this review in part on an analysis of such compensation arrangements by our incentive compensation risk officer.  The analysis and the Compensation 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 management considerations, and how these elements relate to our most significant risks.  In the case of senior executive officers, the Compensation Committee places significant reliance on its ability to reduce or withhold an award if it determines that the executive incurred excessive risk.  Based on these reviews, the Compensation Committee determined that the risks arising from our incentive compensation arrangements, and compensation policies and practices in general, are not reasonably likely to have a material adverse effect on the Company.

 

Annual Perquisite Report

 

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

 

Stock Ownership Guidelines for NEOs

 

On January 17, 2012, the Board adopted Stock Ownership Guidelines for the Directors, the CEO, the other NEOs and certain other executives.  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 NEO is expected to own shares of TCF common stock equal to three times his base salary.

 

All shares of TCF common stock owned directly or indirectly by an NEO 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.

 

Each NEO has until the later of January 16, 2017, or the fifth anniversary of his or her appointment to an executive officer position to reach the applicable target ownership level.  The Compensation 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

 

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Ownership Guidelines as determined by the Compensation 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  NEOs  until  January  2017,  as  of  February 23, 2015, each  NEO  owned  a  sufficient  number  of  shares  of  TCF  common  stock  to  be  in  compliance  with  the  Stock  Ownership  Guidelines.

 

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

 

Our Insider Trading Policy prohibits Directors and employees, including executive officers, from hedging the economic risk of ownership of any TCF securities they own, and requires prior approval from the General Counsel before any Director or employee, including executive officers, pledges any TCF securities.

 

Peer Groups

 

2014 Peer GroupThe 2014 Peer Group consists of all publicly-traded banks and thrift institutions with assets between $10 billion and $50 billion as of September 30, 2013 that reported at least one quarter of fiscal 2014 earnings results by January 31, 2015, 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; Trustmark Corporation; Umpqua Holdings Corporation; TFS Financial Corporation; Investors Bancorp, Inc.; Cathay General Bancorp; Texas Capital Bancshares, Inc.; and Central Bancompany, Inc.

 

2015 Peer GroupThe 2015 Peer Group will consist of all publicly-traded banks and thrift institutions with assets between $10 billion and $50 billion as of September 30, 2014 that report at least one quarter of fiscal 2015 earnings results by January 31, 2016, which may include: 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.; 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; Trustmark Corporation; Umpqua Holdings Corporation; TFS Financial Corporation; Investors Bancorp, Inc.; Cathay General Bancorp; Texas Capital Bancshares, Inc.; Central Bancompany, Inc.; PacWest Bancorp; MB Financial, Inc.; United Security Bancshares, Inc.; Old National Bancorp; and Western Alliance Bancorporation.

 

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

Peter Bell

William F. Bieber

Theodore J. Bigos

 

Karen L. Grandstrand

Richard A. Zona

 

 

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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 NEOs in 2014, 2013, and 2012.

 

 

Name and Principal Position

Year

Salary

($)

Bonus

($)

Stock

Awards (1)

($)

Option
Awards

($)

Non-

Equity
Incentive
Plan
Compensation
 (2)

($)

Change in
Pension Value
and
Nonqualified
Deferred
Compensation

Earnings (3)

($)

All

Other
Compensation
 (5)

($)

Total
($)

William A. Cooper

Director, Chairman and CEO  (Principal Executive Officer)

2014

2013

2012

 

$1,500,000

$1,500,000

$1,500,000

 

$   -

$   -

$   -

 

$7,939,388

$               -

$4,493,750

 

$   -

$   -

$   -

 

$3,000,000

$3,000,000

$              -

 

$46,907

$   5,681

$36,215

 

$479,036

$276,337

$237,184

 

$12,965,331

$ 4,782,018

$ 6,267,149

 

Michael S. Jones

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

2014

2013

2012

$    324,808

$    300,000

$    300,000

$   -

$   -

$   -

 

$  387,620

$              -

$1,198,714

$   -

$   -

$   -

 

$  650,000

$  600,000

$              -

$         -

$         -

$         -

 

$ 59,708

$ 21,831

$ 32,039

$ 1,422,136

$    921,831

$ 1,530,753

Thomas F. Jasper

Director, Vice Chairman and Executive Vice President

2014

2013

2012

$    550,000

$    549,808

$    500,000

 

$   -

$   -

$   -

 

$              -

$  238,622

$2,246,875

$   -

$   -

$   -

 

$1,100,000

$1,100,000

$              -

$ 4,379

$         -

$ 3,683

$124,300

$ 48,476

$ 71,579

$ 1,778,679

$ 1,936,906

$ 2,822,137

Craig R. Dahl

Director, Vice Chairman and Executive Vice President

2014

2013

2012

 

$   550,000

$   549,808

$   500,000

 

$   -

$   -

$   -

 

$              -

$  238,622

$2,246,875

 

$   -

$   -

$   -

 

$1,100,000

$1,100,000

$              -

 

$ 5,214

$         -

$    607

 

$  121,785

$    43,756

$    68,548

 

$ 1,776,999

$ 1,932,186

$ 2,816,030

 

Earl D. Stratton (4)

Former Executive Vice President, Chief Operating Officer and Chief Privacy Officer

2014

2013

2012

 

$   400,000

$   400,000

$   400,000

 

$   -

$   -

$   -

 

$  239,402

$              -

$  320,605

 

$   -

$   -

$   -

 

$  800,000

$  800,000

$              -

 

$ 9,305

$         -

$14,626

 

$160,594

$133,296

$ 97,021

 

$ 1,609,301

$ 1,333,296

$    832,252

 

 

(1)       The amount shown is the aggregate grant date fair value and does not reflect compensation actually received by the NEO.  The amount consists of time- and performance-based restricted stock awards at grant date fair value computed in accordance with FASB ASC Topic 718.  The fair value of the 2012 performance-based restricted stock awards to Messrs. Cooper, Jones, Jasper, and Dahl, and the 2014 performance-based restricted stock award to Mr. Cooper is based on the maximum payout under the awards.  The 2012 performance-based restricted stock awards made to Messrs. Cooper, Jones, Jasper, and Dahl and the 2014 performance-based restricted stock awards to Mr. Cooper were deferred into the TCF Employees Deferred Stock Compensation Plan (the “Deferred Stock Plan”).  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 15 of the Notes to Consolidated Financial Statements included in TCF’s Annual Report on Form 10-K for the year ended December 31, 2014.

(2)       Non-equity incentive plan compensation represents any awards in recognition of achievement of performance goals under TCF’s MIP for the applicable year.  For 2014, the NEOs earned awards of 200% of base salary as further described in the CD&A under “2014 Payment of Named Executive Officers - Key 2014 and Early 2015 Compensation Decisions – 2014 Annual Cash Incentive.”

(3)       Amounts shown reflect only the change in pension value, since there were no above-market or preferential earnings on TCF’s nonqualified deferred compensation plans.   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.

(4)       Mr. Stratton retired effective January 31, 2015.

 

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(5)             Amounts shown in the “All Other Compensation” column for 2014 consist of the following:

 

 

 

Employer
Matching Contributions

 

Name

Perquisites (a)

 

ESPP

    Plan (b)

ESPP-Supplemental

   Plan (b)

Total

Cooper

$209,036

$15,600

$254,400

$479,036

Jones

$   18,092

$11,700

$ 29,916

$   59,708

Jasper

$   25,300

$15,600

$ 83,400

$124,300

Dahl

$   22,785

$15,600

$ 83,400

$121,785

Stratton

$   88,594

$15,600

$ 56,400

$160,594

 

(a)              All of the NEOs were eligible to receive the following perquisites, none of which individually exceeded $25,000 in 2014, except as set forth below: imputed life insurance, executive tax service, personal use of club memberships, incentive trips, personal use of company car, personal use of company aircraft, matching charitable contributions, employer contributions to health savings accounts (subject to certain IRS rules), and executive physicals.  Messrs. Cooper and Stratton each received personal use of company aircraft in the amount of $167,270 and $53,222, respectively (calculated on a pre-tax basis).  These amounts are 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 2014 to 100% of 6% of covered compensation up to the limit of $260,000 for employees eligible to participate in the ESPP-Supplemental Plan for all NEOs other than Mr. Jones.  Employer matching contributions to the ESPP for Mr. Jones were limited to 75% of 6% due to his current length of service.  The balance of the employer matching contributions in 2014 was made to the ESPP-Supplemental Plan.

 

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.”  Mr. Jones does not have an employment agreement with TCF and Mr. Stratton did not have one prior to his retirement.

 

Amount of Salary and Bonus in Proportion to Total Compensation

 

The relationship of salary to the  NEOs’ 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 2014

 

The following table shows awards to the NEOs that were granted in 2014:

 

 

 

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

 

 

Estimated Future
Payouts Under

Equity Incentive
Plan Awards
(2)

All Other Stock
Awards: Number

Grant Date Fair

Name

Grant
Date

Threshold
($)

Target

($)

Maximum
($)

Target

(#)

of Shares of

Stock (3)

(#)

Value of Stock

Awards (4)

($)

Cooper

01/20/14

$750,000

$1,500,000

$3,000,000

-

-

$                -

03/10/14

$            -

$              -

$               -

500,000

-

$7,939,388

Jones

01/20/14

$150,000

$  300,000

$    600,000

-

-

$                -

01/28/14

$            -

$              -

$               -

-

25,000

$  387,620

Jasper

01/20/14

$275,000

$  550,000

$1,100,000

-

-

$              -

 

 

 

 

 

 

 

 

Dahl

01/20/14

$275,000

$  550,000

$1,100,000

-

-

$              -

 

 

 

 

 

 

 

 

Stratton

01/20/14

$200,000

$  400,000

$    800,000

-

-

$              -

04/23/14

$            -

$              -

$               -

-

15,000

$  239,402

 

(1)             Represents range of possible payments under the 2014 MIP made under the TCF Performance-Based Compensation Policy as described in the CD&A under “2014 Payment of Named Executive Officers - Key 2014 and Early 2015 Compensation Decisions – 2014 Annual Cash Incentive.”  The actual amount earned is presented in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table.

(2)             Represents an award of performance-based restricted stock made to Mr. Cooper under the TCF Financial Incentive Stock Program (the “Incentive Stock Program”) in connection with the extension of his employment agreement through December 31, 2017.  Vesting of the award is conditional on Mr. Cooper’s continued employment with TCF and performance criteria which have been met.  Based on 2014 results, the performance goal was achieved and 250,000 shares will vest on each of January 1, 2017 and January 1, 2018, subject to continued employment or accelerated vesting pursuant to the terms of the agreement.  The material terms of the award are described in the CD&A under the heading “2014 Payment of Named Executive Officers – William A. Cooper.”

(3)       Awards represent 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 “2014 Payment of Named Executive Officers.”  Mr. Jones’s award will vest in full on February 1, 2019 and a pro-rata portion of Mr. Stratton’s award vested upon his retirement.  The shares of restricted stock are not entitled to dividends until the awards vest.

(4)             The grant date fair values of the award made to Mr. Cooper are based on values of $16.02 and $15.74 per share.  The grant date fair values of the awards made to Messrs. Jones and Stratton are based on values of $15.50 and $15.96 per share, respectively.

 

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Table of Contents

 

Outstanding Equity Awards at December 31, 2014

 

The following table shows all equity awards that were outstanding at December 31, 2014 for each NEO:

 

 

 

Option Awards

Stock Awards

 

Year

 

 

 

 

 

 

 

 

Number of Securities
Underlying
Unexercised Options

(#)

Option
Exercise

Option

Number
of Shares
or Units
of Stock
That Have
Not

Market
Value

of Shares

or Units

of Stock

That Have

Not

Equity
Incentive

Plan Awards:
Number

of Unearned
Shares, Units
or

Other Rights
That Have

Equity
Incentive

Plan Awards:

Market or
Payout Value
of Unearned
Shares, Units
or

Other Rights
That Have

Name

of
Award

Exercisable(1)

Unexercisable

Price

($)

Expiration
Date

Vested(2)

(#)

Vested(3)

($)

Not Vested(4)

(#)

Not Vested(3)

($)

Cooper

2008

800,000

-

$12.85

8/1/2018

-

$              -

-

$               -

2012

-

-

-

-

-

$              -

250,000

$3,972,500

2014

-

-

-

-

-

$              -

500,000

$7,945,000

Jones

2010

-

-

-

-

    3,000

$    47,670

-

$               -

2011

-

-

-

-

    6,000

$    95,340

-

$               -

2012

-

-

-

-

  25,000

$  397,250

-

$               -

2012

-

-

-

-

-

$              -

  50,000

$    794,500

2014

-

-

-

-

  25,000

$  397,250

-

$               -

Jasper

2008

141,000

-

$15.75

1/22/2018

-

$              -

-

$               -

2012

-

-

-

-

-

$              -

125,000

$1,986,250

2013

-

-

-

-

  19,142

$  304,166

-

$               -

Dahl

2008

225,000

-

$15.75

1/22/2018

-

$              -

-

$               -

2012

-

-

-

-

-

$              -

125,000

$1,986,250

2013

-

-

-

-

  19,142

$  304,166

-

$               -

Stratton

2008

118,000

-

$15.75

1/22/2018

-

$              -

-

$               -

2012

-

-

-

-

  10,000

$  158,900

-

$               -

2014

-

-

-

-

  15,000

$  238,350

-

$               -

 

(1)             The stock options vested in two installments:  50% on January 1, 2011 and the remaining 50% on January 1, 2012.  In light of Mr. Stratton’s retirement on January 31, 2015, his options will expire after January 31, 2016.

(2)             Represents restricted stock awards that vest as follows:  the 2010 award will vest on April 1, 2015; the 2011 award will vest on April 1, 2016; the 2012 award to Mr. Jones will vest on January 1, 2017; the 2012 award to Mr. Stratton vested on January 1, 2015; the 2013 awards to Messrs. Jasper and Dahl will vest on January 1, 2016; and the 2014 award to Mr. Jones will vest on February 1, 2019.  In accordance with the terms of Mr. Stratton’s 2014 restricted stock award, the Compensation Committee provided for pro-rata vesting upon Mr. Stratton’s retirement.

(3)             Market or payout value was determined using the year-end closing stock price of $15.89 per share.

(4)             The unvested portion of the 2012 performance-based restricted stock awards will vest following the first consecutive four-quarter period beginning after June 30, 2014 that return on average assets (as defined in the Incentive Stock Program) averages at least 1.2%.  Upon vesting, 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  the  earlier  of  (i) two years from the date of vesting and (ii) the occurrence of either a change in control of TCF, or the death or disability of the NEO.  The performance goal related to Mr. Cooper’s 2014 award has been achieved, such that 250,000 shares will vest and be distributed on January 1, 2017 and the balance will vest and be distributed on January 1, 2018, subject to continued employment.

 

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Option Exercises and Stock Vested in 2014

 

The following table shows information for option exercises and vesting of stock awards in 2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Option Awards

 

 

Stock Awards

 

Name

 

 

Number of Shares
Acquired on Exercise
(#)

 

 

Value Realized
on Exercise
($)

 

 

Number of Shares
Acquired on Vesting
(1)
(#)

 

 

Value Realized
on Vesting
(2) 
($)

 

Cooper

 

 

-

 

 

$

-

 

 

750,000

 

 

$

12,130,000

 

Jones

 

 

-

 

 

$

-

 

 

57,500

 

 

$

927,963

 

Jasper

 

 

-

 

 

$

-

 

 

225,000

 

 

$

3,635,750

 

Dahl

 

 

-

 

 

$

-

 

 

175,000

 

 

$

2,826,000

 

Stratton

 

 

-

 

 

$

-

 

 

60,000

 

 

$

971,700

 

 

(1)             Includes shares of 2011 deferred restricted stock that vested in January 2014 that will be distributed upon the later of January 1, 2017 or six months following a separation from service, as follows:  Mr. Cooper, 500,000; Mr. Jasper, 100,000; Mr. Dahl, 50,000; and Mr. Stratton, 50,000.  Also includes shares of 2012 performance-based restricted stock that vested in July 2014 that will be deferred until July 2016, as follows:  Mr. Cooper, 125,000; Mr. Jones, 25,000; Mr. Jasper, 62,500; and Mr. Dahl, 62,500.

(2)             Amounts reflect the market value of TCF common stock on the day the stock vested, determined by multiplying the number of shares acquired on vesting by the average of the high and low sales prices on the NYSE for TCF common stock on the vesting date.

 

Pension Benefits in 2014

 

The following table shows information on the defined benefit pension plan benefits of the NEOs:

 

Name

 

 

Plan Name

 

 

Number of Years
Credited Service
(1) 
(#)

 

 

Present Value of
Accumulated Benefit
(2) 
($)

 

 

Payments During
Last Fiscal Year
($)

 

Cooper (3)

 

 

Pre-1990 Plan Benefit

 

 

5.67

 

 

$

292,749

 

 

$

24,153

 

Jones (4)

 

 

-

 

 

-

 

 

$

-

 

 

$

-

 

Jasper

 

 

Pension Plan

 

 

3.25

 

 

$

26,949

 

 

$

-

 

Dahl

 

 

Pension Plan

 

 

5.75

 

 

$

75,872

 

 

$

-

 

Stratton

 

 

Pre-1990 Plan Benefit

 

 

5.25

 

 

$

115,369

 

 

$

-

 

 

 

Pension Plan

 

 

15.58  

 

 

$

35,657

 

 

$

-

 

 

(1)             The number of years of credited service may be less than actual years of service with TCF or its subsidiaries because either the plan was not in effect or was frozen sometime during the NEO’s tenure with TCF or its subsidiaries.  None of the NEOs was given credited service other than for their actual years of service with TCF or its subsidiaries.

(2)             All values shown are determined using interest rate and mortality assumptions consistent with those used in the Consolidated Financial Statements included in TCF’s Annual Report on Form 10-K for the year ended December 31, 2014; however, the Pre-1990 Plan Benefit (defined below) is provided under a nonparticipating group annuity contract which is not included in TCF’s Consolidated Financial Statements.  See “Material Information Regarding Pension Benefits,” which follows this table.

(3)             Mr. Cooper commenced his benefit following his retirement in 2005 and prior to returning to TCF as CEO in 2008.  Mr. Cooper received his entire benefit from the Pension Plan in 2006.

(4)             Mr. Jones joined TCF after June 30, 2004 and therefore is not a participant in the Pension Plan.

 

Material Information Regarding Pension Benefits

 

TCF maintains a pension plan for all employees hired prior to July 1, 2004.  Pay credits to such plan were discontinued as of April 1, 2006.  At the time pay credits were discontinued, all active employees were deemed 100% vested in their benefits.  Benefits accrued under two distinct formulas:  a traditional final average pay formula in effect prior to September 1, 1990 (the “Pre-1990 Plan Benefit”) and a cash balance formula in effect since September 1, 1990 under the Pension Plan.  Both are described below.

 

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Pension Plan:  Cash Balance Formula – Post September 1, 1990 Benefit Accruals.  Benefits have been provided under a cash balance formula since September 1, 1990.  Pay credits equal to the Applicable Percentage (based on the sum of age and years of service) multiplied by Certified Earnings (as defined below) were credited to the retirement accounts periodically.  Pay credits were discontinued effective April 1, 2006.

 

The following table reflects the pay credits that were in effect for the periods indicated above each column:

 

Sum of the Participant’s
age plus years of service
on the last day of the
month

 

Applicable Percentage

 

 

Sept. 1, 1990
prior to
Jan. 1, 2002

 

 

Jan. 1, 2002
prior to
Jan. 1, 2004

 

 

Jan. 1, 2004
prior to
Jan. 1, 2005

 

 

Jan. 1, 2005
prior to
Jan. 1, 2006

 

 

Jan. 1, 2006
prior to
April 1, 2006

 

 

Beginning on
or after
April 1, 2006

Under 30

 

 

2.5%

 

 

2.5%

 

 

2.5%

 

 

2.5%

 

 

2.5%

 

 

-

Under 34

 

 

2.5%

 

 

2.5%

 

 

-

 

 

2.5%

 

 

2.5%

 

 

-

Under 36

 

 

2.5%

 

 

2.5%