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Section 1: DEF 14A (TCF FINANCIAL CORP - DEF 14A)

 

UNITED STATES

 

SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

 

SCHEDULE 14A

 

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Exchange Act of 1934 (Amendment No. )

 

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(PHOTO OF CRAIG R. DAHL)  (TCF LOGO)

TCF FINANCIAL CORPORATION

200 Lake Street East
Wayzata, MN 55391-1693
(952) 745-2760

 

Dear Stockholder:

 

On behalf of the Board of Directors of TCF Financial Corporation, I would like to invite you to attend TCF Financial Corporation’s Annual Meeting of Stockholders at the Marriott Minneapolis West, 9960 Wayzata Boulevard, St. Louis Park, Minnesota, on April 25, 2018 at 4:00 p.m. Central Time. The enclosed Notice of Annual Meeting of Stockholders provides additional details regarding the meeting.

 

TCF had a transformational year in 2017 with several significant actions impacting results while generating momentum for 2018 and beyond. During the year, we discontinued our indirect auto finance loan originations, which will allow us to invest capital in other higher return initiatives, and received a significant net tax benefit related to the Tax Cuts and Jobs Act. We have already begun putting this additional excess capital to work. Over the past several months we have launched a $150 million share repurchase program, increased the common stock dividend by 100 percent, optimized our capital position through preferred stock redemptions, and given back to our team members and communities.

 

With the momentum generated in 2017, I believe we are well-positioned for success in 2018 and beyond. I expect higher returns and an improving risk profile as our auto finance loan portfolio runs off. In addition, I look for additional opportunities for growth in our wholesale loan and lease portfolios, benefits from rising interest rates from our asset sensitive balance sheet, opportunities to meaningfully improve our efficiency ratio while making investments in our future, and a continued focus on capital optimization initiatives. We are committed to achieving our shared goal of improving returns to you, our stockholders.

 

I am also proud of the strong corporate governance program we currently have in place. We continue to actively engage with stockholders to understand evolving viewpoints and best practices regarding corporate governance. Thanks to the valuable feedback we have received, we have made significant enhancements to our corporate governance practices over the past several years. We look forward to continued engagement with our stockholders moving forward.

 

In closing, we want to thank you for your ownership in TCF. We value our partnership with you and remain committed to making TCF a premier investment choice.

 

Sincerely,
 
-s- Craig R. Dahl 
 
Craig R. Dahl
Chairman, President, and
Chief Executive Officer
March 14, 2018

 

 

 

 

 (TCF LOGO)

 

 Notice of Annual Meeting of Stockholders

 

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

 

April 25, 2018

4:00 p.m. Central Time

Marriott Minneapolis West, 9960 Wayzata Boulevard, St. Louis Park, MN 55426

 

Meeting Agenda

 

1.Elect 13 Directors, Each to Serve a One-Year Term;

2.Approve an amended and restated TCF Financial 2015 Omnibus Incentive Plan to increase the number of shares available under the plan by 4 million shares;

3.Approve an amended and restated Directors Stock Grant Program to increase the value of the annual grant of restricted stock to $55,000;

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

5.Advisory (Non-Binding) Vote to Ratify the Appointment of KPMG LLP as Independent Registered Public Accountants for the Fiscal Year Ending December 31, 2018; and

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

 

You are entitled to vote at the Annual Meeting if you owned TCF common stock at the close of business on the record date, February 26, 2018. If you plan to attend the Annual Meeting, you will need a valid form of photo identification to be admitted to the Annual Meeting.

 

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 2018 Annual Meeting of Stockholders and its 2017 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 25, 2018, at 4:00 p.m. Central Time.

 

Wayzata, Minnesota

March 14, 2018

 

By Order of the Board of Directors,
 
-s- Craig R. Dahl 
 
Craig R. Dahl
Chairman, President, and
Chief Executive Officer

 

 

 

 

Table of Contents

 

Proposal 1 Election of Directors 4
     
Corporate Governance 10
     
Director Compensation 17
     
Compensation Discussion and Analysis 19
     
Compensation Committee Report 31
     
Executive Compensation 32
     
Equity Compensation Plans Approved by Stockholders 42
     
Proposal 2 Approve the Amended and Restated TCF Financial 2015 Omnibus Incentive Plan to Increase the Number of Shares Available by 4 Million Shares 42
     
Proposal 3 Approve the Amended and Restated Directors Stock Grant Program to Increase the Value of the Annual Grant of Restricted Stock to $55,000 48
     
Proposal 4 Advisory (Non-Binding) Vote to Approve Executive Compensation (“Say on Pay”) 50
     
Proposal 5 Advisory (Non-Binding) Vote to Ratify the Appointment of KPMG LLP as Independent Registered Public Accountants 51
     
Audit Committee Report 51
     
Independent Registered Public Accountants 52
     
Background of Executive Officers who are not Directors 53
     
Ownership of TCF Stock 54
     
Section 16(a) Beneficial Ownership Reporting Compliance 56
     
Additional Information 57
     
Appendix I Amended and Restated TCF Financial 2015 Omnibus Incentive Plan 61
     
Appendix II Amended and Restated Directors Stock Grant Program 78

 

 

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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 2018 Annual Meeting of Stockholders (the “Annual Meeting”), which is being solicited on behalf of the Board and TCF. The Annual Meeting is scheduled for Wednesday, April 25, 2018 at 4:00 p.m. Central Time at the 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 14, 2018. Stockholders are entitled to vote at the Annual Meeting if they owned shares of TCF’s common stock at the close of business on February 26, 2018 (the “Record Date”). There were 170,832,137 shares of TCF common stock outstanding on the Record Date.

 

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

 

Item   Recommendation
1. Election of 13 Directors, Each to Serve a One-Year Term Vote FOR
2. Approve an amended and restated TCF Financial 2015 Omnibus Incentive Plan to increase the number of shares available under the plan by 4 million shares Vote FOR
3. Approve an amended and restated Directors Stock Grant Program to increase the value of the annual grant of restricted stock to $55,000 Vote FOR
4. Advisory (Non-Binding) Vote to Approve Executive Compensation as disclosed herein (“Say on Pay”) Vote FOR
5. Advisory (Non-Binding) Vote to Ratify the Appointment of KPMG LLP as Independent Registered Public Accountants for the Fiscal Year Ending December 31, 2018 Vote FOR

 

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. Richard A. Zona, a current member of our Board, has decided not to stand for re-election and will retire from the Board effective April 25, 2018.

 

Name Position(s) with TCF Financial Age Director
Since*
Peter Bell Director 66 2009
William F. Bieber Director 75 1997
Theodore J. Bigos Director 65 2008
Craig R. Dahl Director, Chairman, President, and Chief Executive Officer 63 2012
Karen L. Grandstrand Director 63 2010
Thomas F. Jasper Director, Vice Chairman, and Chief Operating Officer 49 2012
George G. Johnson Director 75 1998
Richard H. King Director 62 2014
Vance K. Opperman Lead Director 75 2009
James M. Ramstad Director 71 2011
Roger J. Sit Director 56 2015
Julie H. Sullivan Director 60 2016
Barry N. Winslow Director 70 2008

*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. The background of each candidate including relevant experience and why TCF believes each is a valuable member of the Board is set forth below.

 

Recommendation of the Board

 

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

 

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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 Directors, Nominees or executive officers of TCF.

   
(PHOTO OF PETER BELL) Peter Bell

Director of TCF Financial
Director Since: 2009

 

 

Peter Bell is currently a member of the BSA (Bank Secrecy Act) and Compliance, Compensation, Nominating, and Corporate Governance (“Compensation”), Finance, and Risk Committees. Since December 2010, Mr. Bell has served as Senior Advisor to the Center of the American Experiment, a public policy institution. From 2003 until December 2010, he was the Chair of the 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 University of Minnesota, and serves on the Board of Directors of the American Action Forum, Friends of Education, Greater Twin Cities United Way, Questscope, 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.

   
(PHOTO OF WILLIAM F. BIEBER) William F. Bieber

Director of TCF Financial
Director Since: 1997

 

 

William F. Bieber 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.

 

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(PHOTO OF THEODORE J. BIGOS) Theodore J. Bigos

Director of TCF Financial
Director Since: 2008

 

 

Theodore J. Bigos is currently a member of the Compensation, Finance, and Risk Committees and the Risk Management Subcommittee. 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.

   
(PHOTO OF CRAIG R. DAHL) Craig R. Dahl

Director and Chairman of TCF Financial
Director Since: 2012
Chairman Since: 2017

 

 

Craig R. Dahl is currently a member of the Executive and Technology Committees. Mr. Dahl was appointed Chairman of the Board on April 26, 2017 and had previously served as a Vice Chairman starting in 2012. He has been President and CEO of TCF Financial since January 1, 2016, and has been President of the Company since March 2015. Prior to that, Mr. Dahl had been an Executive Vice President of the Company since 1999. During his tenure, Mr. Dahl has also held numerous leadership positions with many of TCF’s wholly-owned lending subsidiaries, including Chairman of TCF Inventory Finance, Inc., Chairman and CEO of Winthrop Resources Corporation, and Chairman of Gateway One Lending and Finance, LLC. Mr. Dahl’s expertise in the lending and finance industries enables him to make meaningful contributions during Board discussions.

   
(PHOTO OF KAREN L. GRANDSTRAND)  Karen L. Grandstrand

Director of TCF Financial
Director Since: 2010

 

 

Karen L. Grandstrand is currently the Chair of the Risk Committee and the Risk Management Subcommittee 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 contributions as a Director include her insight into the regulatory environment in which TCF operates and expertise in regulatory compliance. As the banking industry is highly regulated, her knowledge, experience, and skills are invaluable to the Board’s decision making.

 

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(PHOTO OF THOMAS F. JASPER) Thomas F. Jasper

Director and Vice Chairman of TCF Financial
Director Since: 2012
Vice Chairman Since: 2012

 

 

Thomas F. Jasper has been the Chief Operating Officer of TCF Financial since January 1, 2016. Prior to that, Mr. Jasper had been an Executive Vice President of the Company since 2007 and was the 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 2015, Mr. Jasper served on the Board of Directors of CommonBond Communities, a large non-profit developer of affordable housing focused on serving the Midwest. During the last two years of his Board tenure at CommonBond he served as Board Chair. With his extensive financial, operational and risk management experience and expertise, Mr. Jasper provides an important level of insight to the Board and its review of the Company’s financial statements.

   
(PHOTO OF GEORGE G. JOHNSON) George G. Johnson

Director of TCF Financial
Director Since: 1998

 

 

George G. Johnson is currently a member of the Audit, BSA and Compliance, Finance, and Risk Committees. Mr. Johnson is a certified public accountant and Chairman of George Johnson & Company, a certified public accounting firm which he founded in 1971, and George Johnson Consultants and George Johnson Consultants, LLC, consulting firms which he founded in 1995 and 2017, respectively. Until July 1, 2016, he served as a board member and Chair of the Finance Committee of the American Alliance of Museums, which has over 4,000 member organizations, and he serves as a director for various civic and educational organizations in the Detroit, Michigan area. In addition to management and entrepreneurial experience, Mr. Johnson contributes accounting expertise to the Board grounded in his 40-plus year career as a certified public accountant. As TCF is a publicly traded financial services company, the Board is focused on the integrity of TCF’s financial statements, and Mr. Johnson’s financial acumen is invaluable in the Board’s reviews.

   
(PHOTO OF RICHARD H. KING) Richard H. King

Director of TCF Financial
Director Since: 2014

 

 

Richard H. King is currently the Chair of the Technology Committee and a member of the Audit, Finance, and Risk Committees. He is the Executive Vice President, Operations at Thomson Reuters Corporation, a global provider of intelligent information, a position he has held since 2017. Mr. King has been with Thomson Reuters since 2000 serving in various positions of leadership including Executive Vice President & Chief Information Officer from 2015 until 2017, Executive Vice President & Chief Operating Officer for Technology from 2012 to 2015, and 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 has completed the NACD Cyber-Risk Oversight Program and received the CERT Certificate in Cybersecurity Oversight issued by the Software Engineering Institute at Carnegie Mellon University. Mr. King’s extensive technology experience in the information industry is beneficial to the Board, and allows him to provide special insights with respects to TCF’s information technology and information security issues.

 

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(PHOTO OF VANCE K. OPPERMAN) Vance K. Opperman

Lead Director of TCF Financial
Director Since: 2009
Lead Director Since: 2014

 

 

Vance K. Opperman is currently the Chair of the Compensation Committee and a member of the Audit, Executive, Finance, Risk, and Technology Committees and the Risk Management Subcommittee. He is President and CEO 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 of Thomson Reuters since 1996 and has been Lead Director since 2013. 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.

   
(PHOTO OF JAMES M. RAMSTAD)  James M. Ramstad

Director of TCF Financial
Director Since: 2011

 

 

James M. Ramstad 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 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.

   
(PHOTO OF ROGER J. SIT) Roger J. Sit

Director of TCF Financial
Director Since: 2015

 

 

Roger J. Sit is currently Co-Chair of the Finance Committee and a member of the Audit, Compensation, 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 held various positions at Sit Investment Associates since 1998. Mr. Sit has over twenty-five years of financial services experience. He currently serves on the Boards of Convergent Capital, Minneapolis Institute of Art, 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.

 

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(PHOTO OF JULIE H. SULLIVAN)  Julie H. Sullivan

Director of TCF Financial
Director Since: 2016

 

 

Julie H. Sullivan is currently the Chair of the Audit Committee and a member of the Finance, Risk, and Technology Committees. Dr. Sullivan has been the President of the University of St. Thomas (MN) since July 2013. Prior to that, she served as Executive Vice President and Provost of the University of San Diego from 2005 to 2013, with responsibility over academic and budgetary affairs. She served as a director of SI Group, a privately owned global chemical company, from 2001 to 2016, and was also a member of the Audit, Compensation, and Pension Committees. Dr. Sullivan previously served on the boards of PICO Holdings Inc. from 2009 to 2015, Applied Micro Circuits Corp from 2005 to 2011, and United PanAm Financial Corporation from 2007 to 2008, serving as the Chair of the Audit Committee for each during her tenure. She also currently serves on the Boards of the non-profits Loyola University Chicago, Catholic Charities of St. Paul and Minneapolis, and the Greater Twin Cities United Way. Dr. Sullivan is a non-practicing certified public accountant and a member of the National Association of Corporate Directors. Dr. Sullivan brings a unique perspective to the Board given her long career in academia, as well as extensive financial experience and acumen which are invaluable in the Board’s review of TCF’s financial statements.

   
(PHOTO OF BARRY N. WINSLOW) Barry N. Winslow

Director of TCF Financial
Director Since: 2008

 

 

Barry N. Winslow is currently the Chair of the BSA and Compliance Committee and a member of the Finance and Risk Committees and the Risk Management Subcommittee. 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 planning related to mergers and acquisitions, as well as strategies for non-performing asset dispositions. He has served as a director of 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.

 

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(GRAPHIC)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, along with applicable rules of the New York Stock Exchange (the “NYSE”) and the Securities and Exchange Commission (the “SEC”), 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/About-TCF/Corporate-Governance/Corporate-Governance-Guidelines.

 

TCF’s corporate governance policies recognize the importance of sound governance practices in the financial services industry.

 

The Board currently consists of 14 members. After Mr. Zona’s retirement, the Board will consist of 13 members. The number of Directors is determined by the Board from time to time and may range in size from 7 to 25 members. The Board typically meets at least quarterly in January, April, July, and October.

 

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. The Board has adopted a Director Selection Policy, which sets forth 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.

 

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. After potential candidates are identified, 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 Compensation Committee’s consideration of diversity includes identifying candidates that can provide a range of talents, expertise and perspectives representative of the interests of the constituencies TCF serves. The candidates that best meet these criteria will then be interviewed by the Chair of the Compensation Committee, another committee member, the CEO, Lead Director, and the Chairman of the Board. 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.

 

The Board has also adopted amendments to the Bylaws to allow stockholders proxy access for Director nominations. Article II, Section 13(c) of the Bylaws permits a stockholder, or a group of up to 20 stockholders, which have owned shares of TCF representing an aggregate of at least three percent of the voting power entitled to vote in the election of directors continuously for at least three years to nominate and include in TCF’s annual meeting proxy materials director nominees in a number up to 25 percent of the Board. Such nominations are subject to certain eligibility, procedural and disclosure requirements set forth in Article II, Section 13(c), including the requirement that TCF must receive notice of such nominations between 150 and 120 calendar days prior to the anniversary date of the previous year’s annual proxy materials mailing, except as otherwise provided in Article II, Section 13(c).

 

Stockholders may submit nominations to the Compensation Committee for consideration at next year’s Annual Meeting prior to the deadlines set forth under “Additional Information – How can Stockholders Submit Proposals and Nominate Directors for Next Year’s Annual Meeting?” Any such nomination must include the information specified in Article II, Section 13 of TCF’s Bylaws and 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 in the next sentence. A copy of the Bylaws can be obtained from the Company’s Corporate Secretary at 200 Lake Street East, Mail Code EX0-01-G, Wayzata, MN 55391-1693. 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, including the CEO, 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. Vance K. Opperman currently serves as Lead Director.

 

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Craig R. Dahl currently serves as the President and CEO of the Company and as the 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. Dahl 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. This leadership structure 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 could 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 having a combined Chairman and CEO is beneficial to the Company’s performance.

 

The Company also places a significant emphasis on Board independence. Currently, 11 of the Board’s 14 members (79%) meet the independence requirements under NYSE rules and the Company’s own independence requirements. These independent Directors regularly meet in executive session without management present. Each member of the Board’s Audit, BSA and Compliance, Compensation, Finance, and Risk Committees and the Risk Management Subcommittee is independent (other than Mr. Winslow who serves on the BSA and Compliance, Finance, and Risk Committees, and the Risk Management Subcommittee and is expected to become independent in 2018) and, in addition to the 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, there are multiple 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. This process is discussed on TCF’s website at https://www.tcfbank.com/About-TCF/Corporate-Governance/Communications-with-Directors.

 

 

Regular Separate Non-Employee Director Meetings

 

 

The non-employee Directors, all of whom, except Mr. Winslow, who is expected to become independent in 2018, are independent under NYSE rules as of the date of this Proxy Statement, meet independently in executive sessions following the regularly scheduled meetings of the Board. The Lead Director presides over each executive session.

 

 

Code of Ethics

 

 

TCF has adopted a code of ethics applicable to the Principal Executive Officer (“PEO”), Principal Financial Officer (“PFO”), and Principal Accounting Officer (“PAO”) (the “Senior Financial Management Code of Ethics”), as well as a code of ethics generally applicable to all employees (including the PEO, PFO, and PAO) and Directors 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-Ethics-Policy and https://www.tcfbank.com/About-TCF/Corporate-Governance/Code-Ethics-Senior-Financial-Management, respectively. Any changes to either code will be posted on the website, and any waivers granted to or violations by the PEO, PFO, PAO, or any Director will be posted on TCF’s website. To date, there have been no waivers granted to or violations by 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 nine times in 2017. All Board members are expected to attend all Board meetings, as well as all committee meetings of which they are a member and are invited to attend meetings of committees of which they are not members. TCF requests Directors to attend the Annual Meeting if their schedules permit. Thirteen Directors attended the 2017 Annual Meeting.

 

During 2017, all Directors attended at least 75% of the combined meetings of the Board and the committees on which they served, and median Director attendance was 100% of the aggregate of Board and committee meetings.

 

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Board Committees, Committee Memberships, and Meetings in 2017

 

 

The following table identifies the principal responsibilities, number of meetings held in 2017, and the members for each of the standing Board committees (those which meet regularly) including those with audit, compensation, and nominating responsibilities. Messrs. Dahl and Jasper are executive officers of TCF and do not serve on any of the standing Board Committees, other than Mr. Dahl who serves on the Technology Committee. In addition to the committees reflected below, there is an Executive Committee of the Board consisting of Ms. Grandstrand, and Messrs. Bieber, Dahl, Opperman, and Zona. The Executive Committee, which serves as a liaison between management and the Board, met in January 2017.

 

Committee   Principal Responsibilities   Members (*Chair)

Audit

9 meetings in 2017

 

 

●   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

 

Grandstrand

Johnson

King

Opperman

Sit

Sullivan*

Zona

BSA and Compliance

4 meetings in 2017

 

 

●   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

Winslow*

Compensation,

Nominating, and

Corporate Governance

6 meetings in 2017

 

 

●   Review, recommend, and approve personnel-related matters

●   Evaluate the performance of the CEO

●   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*

Sit

Finance

4 meetings in 2017

 

 

●   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

 

Bell

Bieber

Bigos

Grandstrand

Johnson

King

Opperman

Ramstad

Sit* (Co-Chair)

Sullivan

Winslow

Zona* (Co-Chair)

Risk

4 meetings in 2017

 

 

●   Oversee TCF’s Enterprise Risk Management Program

●   Oversee and consult with management regarding the Company’s ongoing attention to its risk appetite governance

●   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

 

Bell

Bieber

Bigos

Grandstrand*

Johnson

King

Opperman

Ramstad

Sit

Sullivan

Winslow

Zona

Risk Management

Subcommittee

4 meetings in 2017

 

 

●   Assist the Risk Committee in its oversight of TCF’s risk management programs and processes

●   Delegated authority and responsibilities from the full Risk Committee

●   Report to the full Risk Committee at each Risk Committee meeting

 

Bigos

Grandstrand*

Opperman

Winslow

Zona

Technology

4 meetings in 2017

 

 

●   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

●   Oversee cyber security risk management

 

Dahl

King*

Opperman

Sullivan

 

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Audit Committee

 

 

All members of the Audit 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 audit committee independence standards under Section 36(g) of the Federal Deposit Insurance Act. The Board has determined that Dr. Sullivan and Messrs. 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 on our website at https://www.tcfbank.com/About-TCF/Corporate-Governance/Audit-Committee-Charter.

 

 

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 TCF Bank officer. The Compensation Committee operates under a formal charter that may be accessed on our website at https://www.tcfbank.com/About-TCF/Corporate-Governance/Compensation-Nominating-Corporate-Governance-Charter.

 

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;
Prepare the Compensation Committee Report required by 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;
Annually, review and approve the summary of perquisites for the CEO and review summaries of perquisites for the other senior executive officers; and
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 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 (the “Independent Subcommittee”) consisting of each member of the Compensation Committee other than Mr. Bell, a former TCF Bank officer, 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.

 

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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 Frederic W. Cook & Co. (“FW Cook”), 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”). During 2017, FW Cook was paid approximately $65,600 for these services to the Compensation Committee. FW Cook did not provide any other services to TCF other than those provided to the Compensation Committee during 2017. FW Cook 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 FW Cook, and that FW Cook was independent under applicable NYSE rules at the time services were provided to the Compensation Committee.

 

Process for Determining Director Compensation

 

The Compensation Committee generally meets in January, April, July, and October, with additional special meetings held as needed. Director compensation is reviewed from time to time on an informal basis by the CEO and Chair of the Compensation Committee. Their recommendations concerning any change in Director compensation are referred to the Compensation Committee and the Board.

 

Compensation Committee Interlocks and Insider Participation

 

Directors Bell, Bieber, Bigos, Grandstrand, Opperman, and Sit served on the Compensation Committee in 2017. 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 2017 under standards outlined below and under applicable NYSE rules. Certain relationships with Directors are disclosed below under “Director Independence and Related Person Transactions - What Transactions Were Considered Non-Material?”

 

 

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 on our website at https://www.tcfbank.com/About-TCF/Corporate-Governance/Corporate-Governance-Guidelines. 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”) 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, 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.

 

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What Transactions Were Considered Non-Material?

 

During 2015 through 2017, 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 for each Director who served during 2017 and for each Nominee.

 

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. Bieber or his related companies had commercial loans or leases and commercial deposit accounts with TCF beginning in 2016 and continuing through 2017;
Mr. Bigos or his related companies had commercial loans or leases and commercial deposit accounts with TCF during 2015 through 2017; and
The following Directors have, or had during 2015 through 2017, retail deposit accounts or consumer loans with TCF, all of which are on ordinary retail consumer terms and conditions: Messrs. Bell, Bigos, 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.

 

Related Person Transactions Involving Independent Directors

 

Mr. King is an executive officer of Thomson Reuters. During 2017, 2016, and 2015, the Company made payments to Thomson Reuters and its related entities in the ordinary course of business totaling $1.4 million, $1.5 million, and $1.4 million, respectively, under standard terms and conditions. Many of these payments are related to products and services first acquired before Mr. King joined the Board. Thomson Reuters’ total revenues for the years ended December 31, 2017, 2016, and 2015 were $11.3 billion, $11.2 billion, and $12.2 billion, respectively. Based on its various agreements with Thomson Reuters, the Company expects to make aggregate payments for goods and services to Thomson Reuters of approximately $4.7 million from 2018-2020. 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, and therefore determined that Mr. King is independent.

 

Other Business Relationships Involving Independent Directors

 

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

 

During 2017, 2016, and 2015, Mr. Bell received payments and distributions from the TCF Financial Corporation Executive Deferred Compensation Plan (the “Executive Deferred Compensation Plan”) of $0, $334,847, and $328,858, 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;
Dr. Sullivan is the President of the University of St. Thomas, a non-profit corporation. TCF made payments to the University of St. Thomas totaling $1,000, $27,454, and $33,106 in 2017, 2016, and 2015 respectively, for goods and services under standard terms and conditions. The board considered these payments and Dr. Sullivan’s status as President of the University of St. Thomas, and affirmatively determined (with Dr. Sullivan abstaining) that the payments were on ordinary market terms and would not impair the independent judgment of Dr. Sullivan;
Mr. Opperman sits on the board of Thomson Reuters. As discussed above, TCF made payments to Thomson Reuters totaling $1.4 million, $1.5 million and $1.4 million for 2017, 2016, and 2015, respectively, in the ordinary course of business. 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 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.

 

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Which Directors are Independent?

 

The evaluation of director independence under NYSE listing standards is based on the previous three-year period. On the basis of the foregoing categorical standards and review of the transactions and relationships between Directors and TCF during 2015 through 2017, the Compensation Committee and the Board each affirmatively determined in January 2018 that the following Directors or nominees have no material relationship with TCF and are considered to be independent: Ms. Grandstrand, Dr. Sullivan, and Messrs. Bell, Bieber, Bigos, Johnson, King, Opperman, Ramstad, Sit, and Zona. All members of the Audit, BSA and Compliance, Compensation, Finance, and Risk Committees and the Risk Management Subcommittee, other than Mr. Winslow, are independent under all applicable rules. The Board determined that the following Directors are not independent: Mr. Dahl (TCF Chairman, President, and CEO), Mr. Jasper (TCF Vice Chairman and Chief Operating Officer), and Mr. Winslow (former TCF Vice Chairman, Corporate Development) because current executives and former employees who have received employment compensation of more than $120,000 during any twelve-month period within the past three years are deemed to be non-independent under the NYSE standards. Mr. Winslow is expected to become independent in 2018.

 

Related Person Transactions

 

During 2017, 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 and all loans and leases with Directors, officers, and their related entities were on substantially the same terms, including 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, to 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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(GRAPHIC)Director Compensation

 

TCF’s compensation of non-employee Directors in 2017, including cash and other non-cash compensation, is shown in the following table. Messrs. Dahl and Jasper are executive officers of TCF and do not receive any compensation for their service as Directors.

 

Name  Fees Earned or Paid in Cash
($)
   Stock Awards
($)(1)(3)
   All Other Compensation
($)(2)
   Total ($)
Peter Bell  $80,000   $44,994   $20,000   $144,994
William F. Bieber  $70,000   $44,994   $20,000   $134,994
Theodore J. Bigos  $70,000   $44,994   $20,000   $134,994
Karen L. Grandstrand  $110,000   $44,994   $23,995   $178,989
George G. Johnson  $76,667   $44,994   $20,000   $141,661
Richard H. King  $90,000   $44,994   $32,500   $167,494
Vance K. Opperman  $110,000   $44,994   $20,000   $174,994
James M. Ramstad  $70,000   $44,994   $   $114,994
Roger J. Sit  $90,000   $44,994   $   $134,994
Julie H. Sullivan  $83,333   $44,994   $10,000   $138,327
Barry N. Winslow  $80,000   $44,994   $12,500   $137,494
Richard A. Zona  $90,000   $44,994   $23,000   $157,994
(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 2 and 17 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, 2017. Dividends are paid on the shares at the rate 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.” The totals for Ms. Grandstrand, Mr. King, and Mr. Zona reflect $5,995, $12,500, and $5,000 in contributions, respectively, made in 2016 that were matched by the TCF Foundation in 2017.

(3)Outstanding equity awards of non-employee Directors at December 31, 2017 consisted of the following:

 

  Name   Number of Shares of Unvested
Restricted Stock
(#)(a)
   Market Value of
Unvested Shares
($)(b)(c)
  Bell    2,365   $48,483
  Bieber    2,365   $48,483
  Bigos    2,365   $48,483
  Grandstrand    2,365   $48,483
  Johnson    2,365   $48,483
  King    2,365   $48,483
  Opperman    2,365   $48,483
  Ramstad    2,365   $48,483
  Sit    2,365   $48,483
  Sullivan    2,365   $48,483
  Winslow    2,365   $48,483
  Zona    2,365   $48,483
(a)Includes unvested restricted stock awards made on January 17, 2017 to each Director. All awards vested on January 17, 2018. Dividends are paid on unvested restricted shares granted under the Directors Stock Grant Program at the rate 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 29, 2017 of $20.50 per share.

(c)The total grant date fair value of the stock awards made in 2017 is shown on the Director Compensation table.

 

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Material Information Regarding Directors’ Compensation

 

 

Cash compensation for each non-employee Director consists of the following:

Annual Retainer of $70,000;

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 for 2017, which was increased to $25,000 for 2018.

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

Directors Stock Grant Program (approved by stockholders):

Annually, each non-employee Director receives a grant of TCF common stock equal to $45,000. For any Director 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 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.

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.

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 fifth anniversary of their appointment to the Board to reach the applicable target ownership level; and

All Directors satisfied the Stock Ownership Guidelines as of January 31, 2018, except for Dr. Sullivan, who joined the Board in 2016.

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.

 

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(GRAPHIC)Compensation Discussion and Analysis

 

 

Executive Summary

 

 

During 2017, our experienced executive team implemented several key initiatives and changes that created momentum in 2017 and which we believe will continue to deliver results for stockholders in 2018. In accordance with our compensation philosophy of aligning the interests of stockholders and executives, our compensation remained focused on performance, including the following metrics:

 

Return on average assets (“ROA”);
Return on average tangible common equity (“ROTCE”);
Net income available to common stockholders; and
Total stockholder return (“TSR”) over a three-year period.

 

To illustrate how performance in these metrics impacts executive compensation, below is our 2017 performance in these metrics, along with the executive compensation tied to the metrics:

ROA of 1.26%, or 29% above the 2017 Peer Group (defined below) average.
ROTCE of 15.73%, ranking us 3rd among the 2017 Peer Group.
TSR of 6.56%, ranking us 8th among the 2017 Peer Group.
Annual incentive awards determined based on ROA and ROTCE performance paid 200% of target for each NEO, or 200% of base salary for Mr. Dahl and 150% of base salary for each other NEO, and were paid out in the form of performance-based restricted stock which will vest in 2019 and 2020 based on net income available to common stockholders in 2018 and 2019, respectively, rather than as a cash payment as in prior years.
Performance-based awards which are tied to our TSR relative to the 2017 Peer Group for the three-year period ending December 31, 2020, accounted for 50% of the target value of equity awards granted to NEOs during 2017.

 

The Compensation Committee believes that its compensation plan, including its mix of both short- and long-term elements, provides appropriate incentives without promoting excessive risk taking.

 

 

Key Compensation and Governance Features

 

 

We regularly engage with stockholders to solicit feedback on a variety of subjects, including business, compensation, and governance issues. In total, TCF management conducted over 220 meetings with investors in 2017, representing over 60% of our institutional ownership as of December 31, 2017. In addition, our Compensation Committee has engaged an independent compensation consultant to assist our efforts to ensure that our compensation program achieves the goals and objectives discussed above and provides competitive compensation designed to align the interests of management and stockholders. Key features of our compensation program include:

 

Long-term equity awards tied to TSR;
Restricted stock awards for executives do not vest after a change in control unless the recipient’s employment is terminated (“double-trigger vesting”);
An Executive Severance Policy that limits maximum benefits payable to senior executives upon termination to 2.99x the sum of salary and target bonus unless stockholder approval is received;
No dividends are paid on unvested shares of TCF common stock held by employees; and
Performance-based awards play a central role in executive compensation, as shown below for the NEOs for 2017:

 

(PIE CHART) 

 

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Compensation Overview

 

 

Our CD&A provides an in-depth discussion of our compensation practices for the following NEOs: Craig R. Dahl (Chairman, President, and CEO), Brian W. Maass (Executive Vice President and Chief Financial Officer), William S. Henak (Executive Vice President, Wholesale Banking), Michael S. Jones (Executive Vice President, Consumer Banking), and Thomas F. Jasper (Vice Chairman and Chief Operating Officer).

 

We have designed our compensation to attract and retain experienced, highly qualified executives. We continually review and improve our practices in order to succeed in delivering consistent operating performance and ensuring alignment between the interests of stockholders and our executives. Our compensation objectives include:

 

Attracting, rewarding and retaining highly qualified executives;
Linking pay to individual and Company performance, while not encouraging excessive risk-taking;
Balancing compensation related to short- and long-term Company performance with weighting towards long-term performance; and
Aligning the interests of our executives and Directors with our stockholders through long-term ownership of TCF common stock as part of our stock ownership requirements applicable to Directors and officers.

 

Below is a summary of 2017 results and key actions taken, which are more fully detailed in the CD&A below:

 

Performance

 ROA of 1.26%, or 29% above the 2017 Peer Group average. 

 ROTCE of 15.73%, ranking us 3rd among the 2017 Peer Group. 

 TSR of 6.56%, ranking us 8th among the 2017 Peer Group. 

 Increased revenue by 4.5% from 2016. 

 Improved net interest margin for the year by 20 basis points to 4.54%. 

 Increased period-end loans and leases by 7.1% from December 31, 2016. 

 Increased average deposits by 2.7% over 2016. 

 Achieved strong above-peer 2017 average yield on loans and leases of 5.20%, an increase of 33 basis points from 2016. 

✔  Maintained strong credit quality with net charge-off ratio of .24% for 2017, down from .26% for 2016. 

2017 Compensation  

of Named Executive  

Officers

 

 Annual incentive awards were 200% of target for each NEO, or 200% of base salary for Mr. Dahl and 150% of base salary for each other NEO. Instead of being paid in cash, they were granted in early 2018 as performance-based restricted stock, which will vest in 2019 and 2020 based on net income available to common stockholders in 2018 and 2019, respectively. 

✔  A significant portion of 2017 NEO compensation was contingent on performance, or “at risk,” tied to financial performance metrics relative to our peers. 

✔  Performance-based awards covering ROTCE, ROA, and TSR played a central role in executive compensation. 

 Performance-based awards which are tied to our TSR relative to our peers for the three-year period ending December 31, 2020, accounted for 50% of the equity awards granted to NEOs during 2017. 

Compensation &  

Governance Best  

Practices

 

  All employee restricted stock awards include a “double-trigger” so that the awards do not vest after a change in control unless the recipient’s employment is terminated. 

  Our Executive Severance Policy limits the maximum termination benefits payable to senior executives as severance to 2.99x the sum of their salary and target bonus unless approved by stockholders. 

  We perform an annual review of compensation policies and practices as they relate to risk management. 

  We provide proxy access rights to our stockholders. 

✔  We follow strong, robust roles and responsibilities in establishing executive compensation, including a detailed compensation analysis, and have in place a planning process to establish appropriate financial and business performance metrics. 

  We maintain stock ownership guidelines in order to encourage executives to retain a significant long-term position in our common stock and thereby align their interests with the long-term interests of our stockholders. 

  We structure compensation to discourage our executives from taking excessive risk by providing varied and balanced performance targets while reserving the discretionary authority of the Compensation Committee to reduce award payouts. 

✔  We do not permit tax gross ups, hedging of our stock, or backdating or repricing of stock option awards. 

Why should  

stockholders approve  

our Say on Pay?

 

1.  The structure of our compensation program provides appropriate incentives to attract, retain, and motivate executives without encouraging excessive risk taking. 

2.   We continuously engage in investor outreach and have shown our responsiveness to stockholders by identifying a smaller and more representative peer group used to evaluate executive compensation, adopting TSR as a metric for equity awards, eliminating the use of single-trigger stock awards for executives, enacting our Executive Severance Policy, and adopting proxy access in recent years. 

3.  Our incentive compensation payouts for 2017 reflect TCF’s financial performance. 

4.  Our 2017 TSR was above that of the 2017 Peer Group median. 

 

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Performance

 

 

During 2017, we implemented several key initiatives and changes that began delivering results for stockholders while creating momentum heading into 2018. During 2017, management (i) successfully launched TCF’s new digital banking platform, (ii) implemented changes to its capital plan, including approval of a new share repurchase program, (iii) invested in the future by making strategic portfolio purchases and company acquisitions and refinancing outstanding preferred stock, (iv) discontinued indirect auto loan originations as part of a strategic focus on profitable growth, (v) maintained conservative underwriting standards and strong credit performance, and (vi) maintained strong capital ratios while increasing book value.

 

Since a substantial portion of the long-term incentives awarded to management are tied to our relative total stockholder return, the interests of management are aligned with those of the stockholders to bring improved stock price performance both in the short- and long-term.

 

 

Compensation of Named Executive Officers

 

 

Primary Elements of Compensation

 

The Compensation Committee uses several components to achieve its compensation goals, including base salary, annual incentives and long-term incentives. These elements are designed to reward individual performance, achievement of our financial and business goals, and the sustained creation of stockholder value. 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 positive Company performance should be rewarded through the use of variable elements of compensation such as annual incentives and stock awards. To achieve this, the Compensation Committee utilizes multiple performance goals to discourage NEOs from becoming overly focused on a single measure of performance. The Compensation Committee reviews executive compensation at least annually in light of its compensation objectives and compares levels of base salary, annual incentives, long-term incentives and aggregate total compensation with those of our peers.

 

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 its compensation consultant. The Compensation Committee reviews the base salaries of the NEOs individually, as compared to the named executive officer at each peer group company with the same relative pay ranking or position.
Annual Incentive Designed to (i) reward NEOs for achieving one-year financial objectives that the Compensation Committee believes will have a long-term financial impact on stockholder value, (ii) reward NEOs for stockholder value creation and (iii) align the interests of executives with those of our stockholders in the near term.

Annual incentive awards are contingent upon TCF and/or individuals 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.

 

In July 2017, the Compensation Committee, in order to further align executives’ compensation with stockholders’ interests, amended the form of payment of the 2017 annual incentive from a cash award to a performance-based restricted stock award of equal value, with the shares of restricted stock vesting in 2019 and 2020 based on 2018 and 2019 performance. 

Long-Term Incentive Designed to reward NEOs for stockholder value creation, to align the interests of executives with those of our stockholders, and to retain and motivate talented executives. Long-term incentives are equity-based and are provided under stockholder-approved plans which permit us to grant a variety of equity-based awards, including restricted stock, restricted stock units, and stock options, although stock options have not been granted since 2008. Long-term incentives are determined using a formula-based approach further described below under “Key 2017 and Early 2018 Compensation Events – 2017 Long-term Incentives.” The size, form and performance criteria, if any, of long-term incentive awards are determined by the Compensation Committee based on a number of factors, including its evaluation of market practice, base salary, length of service, responsibilities of the executive, ownership of TCF common stock and quantity, amount, and vesting schedule of previous grants.

 

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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 benefit programs are consistent with market practices based on its supervision of management’s analysis of industry peers and other local employers. Each NEO generally has access to the benefits provided to all full-time employees, including the TCF 401K Plan (the “401(k) Plan”). Standard benefits received by each NEO as a full-time employee have no impact on the amount of other elements of compensation awarded to the NEO.

 

401(k) Plan and SERP

 

Our 401(k) Plan offers matching contributions made after the employee’s first year of service. The plan qualifies as an employee stock ownership plan and qualified tax or deferred compensation plan, or 401(k) Plan, under the Code. In combination with the TCF 401K Supplemental Plan (the “SERP”) described below, each NEO may receive the same match percentage as any employee.

 

The Code limits the amount of employee contributions and Company matching contributions under the 401(k) Plan for certain individuals, including each NEO. The SERP, a nonqualified supplemental plan first approved by stockholders in 2006, was created to address these limitations. For the approximately 235 participants as of January 31, 2018, all amounts contributed over the 401(k) Plan limit are credited to the SERP, the operation of which generally mirrors the 401(k) Plan. All employer matching contributions in the SERP are invested in TCF common stock, which cannot be sold until the participant’s employment with TCF terminates. The Compensation Committee believes the SERP is an important tool to attract and retain executive talent and to further align the interests of executives with those of our stockholders by encouraging long-term stock ownership.

 

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 2017” 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 or car allowances, club memberships, executive physicals, life insurance, incentive trips, and tax return preparation. Mr. Dahl receives personal use of our airplane and may also approve personal use of our airplane by other NEOs on a case-by-case basis. The purpose of these perquisites is to provide competitive 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 annually.

 

NEO Pay Determinations

 

In overseeing executive compensation, the Compensation Committee seeks to construct a compensation structure that will attract and retain highly qualified personnel by providing compensation that is competitive relative to those companies with which TCF competes for executive talent.

 

The Compensation Committee considers overall performance in the 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. Taking the CEO’s recommendations into consideration, the Compensation Committee establishes base salary levels, annual incentive amounts and long-term incentive awards for each NEO other than the CEO. A similar process is followed by the Compensation Committee in determining the compensation for the CEO. While the Compensation Committee uses competitive market data as a reference point when setting each component of compensation and target compensation levels, 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, and generally attempts to set base salaries at levels which it believes are appropriate to attract and retain highly qualified executives using data provided by its compensation consultant and other sources, as appropriate. The Compensation Committee, however, does not set compensation components to meet specific benchmarks as compared to a peer group, such as targeting salaries at a specific percentile of our peer group. The Compensation Committee believes strongly in linking compensation paid to each NEO to TCF’s performance. In measuring 2017 performance, the Compensation Committee utilized the following performance metrics: ROA, ROTCE, and TSR (as defined under “Compensation Overview”).

 

FW Cook, which the Compensation Committee determined to be independent from TCF, is TCF’s independent executive compensation consultant. FW Cook reports directly to the Compensation Committee, which retains the sole authority to hire or terminate FW Cook, approve its professional fees, determine the nature and scope of services, and evaluate performance. Representatives of FW Cook attend Compensation Committee meetings and communicate with the Chair of the Compensation Committee between meetings as necessary. The Compensation Committee makes all final decisions with respect to compensation matters. FW Cook has been and will only be engaged for compensation-related services performed for the Compensation Committee.

 

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Analysis of Tools the Compensation Committee Uses

 

During 2017, the Compensation Committee used a compensation analysis prepared by FW Cook, which analyzed each element of compensation, as well as total compensation and included comparisons to peer data, an incentive compensation risk assessment, tally sheets, and a perquisite report to assist with determining whether the objectives of our executive compensation program are being met. The Compensation Committee had FW Cook review executive compensation at peer companies. The Compensation Committee reviewed the analyses to ensure that the compensation of each NEO sufficiently depends on our relative financial performance, and made adjustments to compensation as it deemed appropriate.

 

Incentive Compensation Risk Assessment

 

The Compensation Committee annually reviews an incentive compensation risk assessment of TCF’s incentive compensation plans performed by TCF’s Incentive Compensation Risk Officer. The purpose of the assessment is to: (i) identify any inherent material risks, (ii) identify individuals with significant influence over those risks (each, a “covered employee”), and (iii) review TCF’s incentive compensation plans to determine whether they incentivize inappropriate risk taking. The assessment for 2017 concluded that TCF’s incentive compensation plans (i) do not incentivize inappropriate risk taking; (ii) maintain an appropriate balance between short- and long-term components; and (iii) provide appropriate mechanisms to downwardly adjust compensation in the event excessive risk is undertaken by a covered employee.

 

Tally Sheets

 

The Compensation Committee reviews tally sheets annually to determine the total compensation that each NEO would receive in the event of various termination and change in control scenarios, and include amounts that would be paid to each NEO under employment agreements and outstanding equity award agreements.

 

Peer Groups

 

Prior to 2017, our stockholders consistently commented that our peer group, which included approximately 50 peers annually, was large compared to peer banks, which, on average, used fewer than 20 peers in their peer groups. As a result, the Compensation Committee identified a smaller, more representative peer group, consisting only of those banks with assets between $10 billion and $50 billion which are most similar to TCF. To accomplish this, all of the publicly-traded banks and thrift institutions with assets between $10 billion and $50 billion as of September 30, 2017 were compared against TCF based on key metrics including assets, market capitalization, revenue, balance sheet composition, branch and employee profile, and net interest margin. Each peer received a score for each metric based upon numerical criteria. The 21 highest scoring peers were included in the group, which consisted of the following institutions:

           
2017 Peer Group
Associated Banc-Corp First Citizens BancShares, Inc. Synovus Financial Corp.
BancorpSouth, Inc. First Horizon National Corporation UMB Financial Corporation
Bank of the Ozarks First National of Nebraska, Inc. Umpqua Holdings Corporation
Cathay General Bancorp Fulton Financial Corporation United Bankshares, Inc.
Chemical Financial Corporation Hancock Holding Company Valley National Bancorp
Commerce Bancshares, Inc. IBERIABANK Corporation Webster Financial Corporation
F.N.B. Corporation MB Financial, Inc. Wintrust Financial Corporation

 

The 2018 Peer Group was determined by the same process as the 2017 Peer Group and included the 20 highest scoring peers. The following changes were made to the 2017 Peer Group as a result of the scoring process:

     
Changes to 2017 Peer Group for 2018
Subtractions Additions
BancorpSouth, Inc. First Midwest Bancorp, Inc.
First Citizens BancShares, Inc. Texas Capital Bancshares, Inc.
Hancock Holding Company Washington Federal, Inc.
United Bankshares, Inc.    

 

After making the above changes to the 2017 Peer Group, the 2018 Peer Group will include the following institutions:

           
2018 Peer Group
Associated Banc-Corp First Midwest Bancorp, Inc. UMB Financial Corporation
Bank of the Ozarks First National of Nebraska, Inc. Umpqua Holdings Corporation
Cathay General Bancorp Fulton Financial Corporation Valley National Bancorp
Chemical Financial Corporation IBERIABANK Corporation Washington Federal, Inc.
Commerce Bancshares, Inc. MB Financial, Inc. Webster Financial Corporation
F.N.B. Corporation Synovus Financial Corp. Wintrust Financial Corporation
First Horizon National Corporation Texas Capital Bancshares, Inc.    

 

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Our total assets as of September 30, 2017 are at approximately the median of the 2018 Peer Group, and our 2017 revenue for the nine months ended September 30, 2017 was at the high end of the 2018 Peer Group, both as shown below:

 

(GRAPHIC)

 

Any institution which fails to report all four quarters of fiscal 2018 earnings, including as a result of merger or acquisition, or for which any necessary financial metric cannot be calculated by March 5, 2019 will be eliminated.

 

Key 2017 and Early 2018 Compensation Events

 

All key decisions by the Compensation Committee regarding executive compensation for 2017 were made prior to the 2017 Say on Pay vote, except for the decision to grant performance-based restricted stock as payment for the 2017 annual incentive. During 2017 and early 2018, the Compensation Committee took the following actions which are further detailed below:

Effective January 1, 2017, in consultation with TCF’s compensation consultant and in furtherance of TCF’s compensation philosophy to provide competitive compensation designed to attract and retain executives, the Compensation Committee increased the base salaries to the following levels: Dahl – $900,000; Maass - $370,000; Henak - $495,000; Jones - $560,000; and Jasper - $560,000. Each of these compensation changes is further described below under each individual’s compensation summary;

Granted long-term incentive awards in both 2017 and 2018 to Mr. Dahl equal to 162% and 170% of base salary, respectively, and to each other NEO equal to 125% of base salary at target performance, split equally between time-based restricted stock and performance-based restricted stock units (“RSUs”);

Granted annual incentive awards in both 2017 and 2018 to Mr. Dahl not to exceed 200% of base salary and to each other NEO not to exceed 150% of base salary, with the 2017 awards split equally between company achievement of relative ROTCE and relative ROA performance and the 2018 awards split so that 25% of the award is based on company achievement of each of relative ROTCE and relative ROA and 50% of the award is based on company achievement of diluted earnings per share performance goals;

In July 2017, the Compensation Committee, in order to further align executives’ compensation with stockholders’ interests, made a determination that performance-based restricted stock would be granted as payment for the 2017 annual incentive in lieu of the cash payments that would have been due to executives based on 2017 performance, as more fully described below under the heading “2017 Annual Incentive;”

In January 2018, performance-based awards previously granted by the Committee in 2012 and 2015 vested based on attainment of ROA of greater than 1.2% over four consecutive quarters;

Effective January 1, 2018, the Compensation Committee increased Mr. Dahl’s base salary to $927,000, Mr. Maass’ base salary to $405,000 and Mr. Henak’s base salary to $530,000. Each of these compensation changes is further described below under each individual’s compensation summary;

In January 2018, in recognition of Mr. Maass’ special contributions to TCF in 2017, including leading the refinancing of TCF’s preferred stock and his management of TCF’s capital levels, as well as his increased responsibilities and to help ensure his retention, the Compensation Committee awarded Mr. Maass a one-time $500,000 time-based restricted stock award; and

On March 1, 2018, TCF entered into Change in Control Severance Agreements with certain executives of the Company, including each of the NEOs other than Mr. Dahl. Under the terms of these agreements, if an executive’s employment is terminated by the Company without Cause or by the executive for Good Reason during the period beginning six months prior to a Change in Control and ending two years after a Change in Control, the executive will receive a lump sum payment equal to 1.5x the sum of the executive’s base salary and target annual bonus. These agreements are further described below under “Executive Compensation – Employment and Severance Agreements.”

 

2017 Annual Incentive

 

In January 2017, the Compensation Committee approved the 2017 Management Incentive Plan (“MIP”), effective for services beginning on January 1, 2017 for certain executives, including each NEO. Under the MIP, each NEO, other than Mr. Dahl, was 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. Dahl, as CEO, was eligible to receive an annual cash incentive award not to exceed 200% of his base salary.

 

In July 2017, in order to further align executives’ compensation with stockholders’ interests, the Compensation Committee amended the MIP (the “Amended 2017 MIP”) for each of the NEOs, so that following calculation of performance levels and payments amounts, each executive would receive performance-based restricted stock equal in value to the amount of the cash incentive

 

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that would have been payable under the MIP. These shares will vest in 2019 and 2020 if goals related to net income available to common stockholders in each of 2018 and 2019 are met. By doing this, the Compensation Committee both added further performance criteria in addition to the original MIP criteria, and increased the alignment of the interests of executives and stockholders by substituting equity awards for cash payments.

 

Pursuant to the Amended 2017 MIP, in March 2018 the Compensation Committee certified the results of TCF compared to its peers, as shown below, and made an award of performance-based restricted stock (the “MIP Shares”) with the same value as the cash payment that would have been due under the MIP. Half of the MIP Shares will vest in 2019 if TCF’s 2018 net income available to common stockholders exceeds $100 million, and the other half of the MIP Shares will vest in 2020 if TCF’s 2019 net income available to common stockholders exceeds $100 million. Each year’s performance will be measured independently, and in the event the specified performance is not achieved in either year, the applicable portion of the MIP Shares will be forfeited. As the MIP Shares were not granted until 2018, they will be included as 2018 compensation in the Summary Compensation Table in our 2019 Proxy Statement, however information is provided in the footnotes to the Summary Compensation Table in order to facilitate comparability between periods.

 

The Compensation Committee selected relative ROTCE and relative ROA as the performance criteria for determining awards under the Amended 2017 MIP because they are commonly used by stockholders and investment professionals when making investment decisions and evaluating our performance with that of our peers. Each performance goal represents 50% of the total award and each is evaluated independently of the other. The Compensation Committee believes that these performance goals measure key operational performance metrics of TCF against the 2017 Peer Group. The Compensation Committee regularly evaluates the appropriate criteria for incentive compensation.

 

The Compensation Committee established threshold, target, and maximum targets and corresponding award opportunities for the eligible NEOs expressed as a percentage of base salary paid during 2017, as follows:

 

  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
Dahl)
Dahl   NEOs
(other than
Dahl)
Dahl   NEOs
(other than
Dahl)
Dahl Payout as a
Percentage of
Target
Threshold 18.75%   25%   18.75%   25%     37.5%   50%   50%
Target 37.50%   50%   37.50%   50%     75.0% 100% 100%
Maximum 75.00% 100%   75.00% 100%   150.0% 200% 200%

 

Under the Amended 2017 MIP, participants were eligible to receive shares of restricted stock equal in value to an amount (i) not to exceed 150% of base salary for each NEO other than Mr. Dahl and (ii) not to exceed 200% of base salary for Mr. Dahl based on the following performance criteria:

ROTCE: Each participant was eligible to receive shares of restricted stock equal in value to the amount determined as follows:

Threshold payout if our ROTCE was at the 35th percentile of the 2017 Peer Group;

Target payout if our ROTCE was at the 50th percentile of the 2017 Peer Group; or

Maximum payout if our ROTCE was at or above the 80th percentile of the 2017 Peer Group.

ROA: Each participant was eligible to receive shares of restricted stock equal in value to the amount determined as follows:

Threshold payout if our ROA was equal to 80% of the average ROA of the 2017 Peer Group for 2017;

Target payout if our ROA was equal to the average ROA of the 2017 Peer Group for 2017; or

Maximum if our ROA was equal to or above 120% of the average ROA of the 2017 Peer Group for 2017.

 

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For results between payout levels, the payout was interpolated in a linear fashion, as shown below:

 

(LINE GRAPH)

 

Given the heavily regulated nature of the banking industry and regulatory focus on the impact of executive compensation on organizational risk, the Compensation Committee determined that it was prudent to set the target payout levels for ROTCE and ROA at median or average levels as it did not want to encourage excessive short-term risk taking by our NEOs by overweighting short-term performance at the expense of our long-term growth and performance.

 

ROTCE represents net income available to common stockholders adjusted for goodwill impairment and the after-tax effect of intangibles amortization and impairment divided into average tangible common equity, which is average total equity less average non-controlling interest in subsidiaries, preferred stock, goodwill and other intangible assets. TCF’s Amended 2017 MIP further provides that TCF’s ROA and ROTCE are calculated excluding extraordinary or non-recurring items as well as the results from any businesses newly acquired or commenced by TCF (or its subsidiaries) during fiscal 2017.

 

As shown above, TCF’s ROTCE for 2017 was above the 80th percentile, resulting in the maximum payout, and TCF’s ROA for 2017 was equal to approximately 129% of the average ROA of the 2017 Peer Group, resulting in the maximum payout for each component. As a result, Mr. Dahl received an Amended 2017 MIP award of 200% of base salary and each other NEO received 150% of base salary, in each case, paid in 2018 in the form of performance-based restricted stock.

 

The Compensation Committee had the power to reduce or eliminate the payments prescribed under the Amended 2017 MIP for each executive in its discretion, which could include its subjective evaluation of performance relative to the 2017 Peer Group or our relative TSR, as well as evaluation of each NEO’s individual performance and risk management considerations.

 

2017 Long-term Incentives

 

Because the Compensation Committee believed the amount, form and type of awards remained appropriate and furthered their goals by putting more weight on long-term incentive awards to further align stockholder interests with those of the NEOs, the Compensation Committee applied the same formula as in 2016 in determining the size of each NEO’s long-term incentive, granting a target long-term incentive opportunity to Mr. Dahl of 162% of base salary and a target long-term incentive opportunity to each NEO other than Mr. Dahl of 125% of base salary. The target long-term incentive opportunity for each NEO consisted of 50% time-based restricted stock vesting pro-rata over three years and 50% performance-based RSUs. The Compensation Committee again utilized TSR over a three-year period relative to TCF’s peer group for the vesting of the RSUs because it believed that is a meaningful long-term metric that is important to stockholders. The time-based restricted stock awards vest pro rata on January 1, 2018, 2019, and 2020. All unvested shares will also vest if the executive’s employment is terminated within one year following a “change in control.” All unvested shares will be forfeited upon a qualifying termination of employment for any other reason.

 

For the performance-based RSUs granted to each NEO, the Compensation Committee established threshold, target, and maximum targets, and corresponding vesting opportunities expressed as a percentage of base salary:

 

    Mr. Dahl   Other NEOs  
    Payout as a
Percentage of
Base Salary
  Payout as a
Percentage of
Target
  Payout as a
Percentage of
Base Salary
  Payout as a
Percentage of
Target
 
Threshold   40.50%   50%   31.25%   50%  
Target   81.00%   100%   62.50%   100%  
Maximum   121.50%   150%   93.75%   150%  

 

The performance goal for the performance-based RSUs granted in January 2017 is our TSR over the three-year performance period ending December 31, 2019 compared to our 2017 Peer Group, excluding peers which do not remain publicly traded for the full three-year performance period. The Compensation Committee selected relative TSR as the performance metric again because it is a direct measure of stockholder value creation which will increase the alignment of executive and stockholder interests, and was recommended by stockholders during TCF’s engagement process.

 

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The performance-based RSUs will vest as follows:

Threshold payout if our TSR for the performance period is at the 25th percentile of the 2017 Peer Group for the performance period;

Target payout if our TSR for the performance period is at the 50th percentile of the 2017 Peer Group for the performance period; or

Maximum payout if our TSR for the performance period is at or above the 75th percentile of the 2017 Peer Group for the performance period.

 

For results between payout levels, the payout will be interpolated in a linear fashion, as shown below:

 

(LINE GRAPH)

 

For levels below threshold, no units will vest. Given the heavily regulated nature of the banking industry and regulatory focus on the impact of executive compensation on organizational risk, the Compensation Committee determined that it was prudent to set the target payout levels for our three-year TSR at the median level to discourage excessive short-term risk taking by these NEOs to achieve three-year performance targets at the potential expense of our long-term growth and performance.

 

Following a “change in control” (as defined in the award agreement), all unvested shares will only vest if there is a qualifying termination of employment. The shares of restricted stock, both time- and performance–based, and performance-based RSUs are not entitled to dividends until they vest.

 

Looking Forward: 2018 Annual Incentive

 

For 2018, the Compensation Committee again set annual cash incentive awards at the same level for the CEO and for each other NEO as were set for the MIP in 2017. For 2018, the Compensation Committee, with input from FW Cook, determined that the appropriate metrics to measure TCF’s financial performance were diluted earnings per share, relative ROA, and relative ROTCE.

 

Looking Forward: 2018 Long-Term Incentives

 

For 2018, the Compensation Committee again set long-term incentive awards at the same levels, vesting, and with the same targets (in the case of the performance-based RSUs) used in 2017 for NEOs other than the CEO and increased the amount of the long-term incentive awards granted to Mr. Dahl to a target amount equal to 170% of base salary equally split between performance-based and time-based awards. The Compensation Committee, with input from FW Cook, determined that relative TSR remains the best metric to measure TCF’s financial performance for TCF’s long-term awards.

 

Craig R. Dahl

 

Mr. Dahl became the CEO effective January 1, 2016. His key accomplishments in 2017 and related compensation are provided below:

 

Key Accomplishments
  Delivered solid financial results and made significant progress against our strategic objectives
Reshaped indirect auto business strategy
Capitalized on prior risk investments and integrated risk and credit organizations to improve efficiency and effectiveness
Successfully implemented modern digital platform with other significant IT improvements across all business lines and enterprise groups
Reduced balance sheet risk through non-accrual loan sales
Capitalized on opportunities for strategic and tactical asset acquisitions
Successfully executed business plans with a focus on long-term strategies to drive shareholder value

 

2017 Compensation
Base Salary $ 900,000
Annual Incentive(1) $ 0
Restricted Stock(2) $ 1,435,896
Total Compensation $ 2,335,896
% Performance-Based 30.3%

(1)This amount does not include the value of the performance-based restricted stock granted in 2018 pursuant to the Amended 2017 MIP, which had an approximate value of $1,798,077.

(2)Represents time-based restricted stock and performance-based RSUs granted during 2017 and valued at the grant date fair value.

 

Following his election as CEO, the Compensation Committee entered into a new employment agreement with Mr. Dahl effective January 1, 2016. Effective January 1, 2017, in consultation with TCF’s compensation consultant and based on data and analysis including a competitive review, the Compensation Committee increased Mr. Dahl’s salary to $900,000 and effective January 1, 2018, the Compensation Committee increased his salary to $927,000. As shown below, the Compensation Committee set Mr. Dahl’s 2018 target compensation at a level that is slightly above the low end of the market range and under the CEO competitive median provided by FW Cook, which is also reflective of the compensation philosophy of the Company.

 

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(BAR GRAPH)

 

For information regarding Mr. Dahl’s 2017 long-term incentive awards, see “Key 2017 and Early 2018 Compensation Events – 2017 Long-term Incentives” in this CD&A. For information regarding Mr. Dahl’s employment agreement, see “Executive Compensation – Employment and Severance Agreements.”

 

Brian W. Maass

 

Mr. Maass became Chief Financial Officer on January 1, 2016. His key accomplishments in 2017 and related compensation are provided below:

 

Key Accomplishments
  Refinanced Preferred Stock ($3.2 million annual savings) and maintained strong capital levels for the organization
  Initiated common stock buyback
  Developed and executed strategies in 2017 to facilitate improving return on equity and decreasing efficiency ratio in 2018
  Effectively managed funding costs while maintaining strong levels of liquidity
Managed impact of 2017 Tax Reform

 

2017 Compensation
Base Salary $ 370,000
Annual Incentive(1) $ 0
Restricted Stock(2) $ 455,479
Total Compensation $ 825,479
% Performance-Based 27.2%
(1)This amount does not include the value of the performance-based restricted stock granted in 2018 pursuant to the Amended 2017 MIP, which had an approximate value of $553,846.

(2)Represents time-based restricted stock and performance-based RSUs granted during 2017 and valued at the grant date fair value.

 

Effective January 1, 2017, in consultation with TCF’s compensation consultant and based on data and analysis including a competitive review of compensation of Chief Financial Officers of TCF’s peers, the Compensation Committee increased the salary of Mr. Maass to $370,000, and effective January 1, 2018, the Compensation Committee increased his salary to $405,000. The Compensation Committee felt that these adjustments were warranted based on input from Mr. Dahl regarding the performance of Mr. Maass, competitive market data from FW Cook, Mr. Maass assuming increased responsibilities, including supervision of TCF’s Investor Relations, and to further TCF’s compensation goals to retain key talent and provide competitive compensation. Additionally, on January 24, 2018, in recognition of his special contributions to TCF in 2017, including refinancing TCF’s preferred stock and his leadership in managing TCF’s capital levels, including returning capital to stockholders, his increased responsibilities and to help ensure his retention, the Compensation Committee awarded Mr. Maass a one-time restricted stock award valued at $500,000 that will vest over three years.

 

For information regarding Mr. Maass’ 2017 long-term incentive awards, see “Key 2017 and Early 2018 Compensation Events – 2017 Long-term Incentives” in this CD&A.

 

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William S. Henak

 

Mr. Henak became Executive Vice President, Wholesale Banking on January 1, 2016 with responsibility over all wholesale business lines, including commercial banking, leasing and equipment finance, and inventory finance. His key accomplishments in 2017 and related compensation are provided below:

 

Key Accomplishments
Executed on multiple portfolio and corporate development acquisition opportunities in addition to adding new significant programs and customer relationships
Supported key strategic pillars of profitable growth and diversification by increasing Wholesale Banking assets
Delivered strong origination, net income and earning asset growth in the Wholesale Banking segment
Recruited, developed and retained key leadership and key producers in the Wholesale Banking units

 

2017 Compensation
Base Salary $ 495,000
Annual Incentive(1) $ 0
Restricted Stock(2) $ 609,382
Total Compensation $ 1,104,382
% Performance-Based   27.2%

(1)This amount does not include the value of the performance-based restricted stock granted in 2018 pursuant to the Amended 2017 MIP, which had an approximate value of $741,923.

(2)Represents time-based restricted stock and performance-based RSUs granted during 2017 and valued at the grant date fair value.

 

Effective January 1, 2017, in consultation with TCF’s compensation consultant and based on data and analysis including a competitive review, the Compensation Committee increased the salary of Mr. Henak to $495,000, and effective January 1, 2018, the Compensation Committee increased his base salary to $530,000. The Compensation Committee felt that these base salary increases were warranted due to his success in the role of Executive Vice President, Wholesale Banking, a critical segment of TCF’s business that has grown in importance in recent years. As a result of his importance to TCF’s future, the Compensation Committee believed it was important to place Mr. Henak’s compensation at the higher end of the peer range for similar roles in order to compensate him for his leadership and contributions to the Company, and to ensure his retention.

 

For information regarding Mr. Henak’s 2017 long-term incentive awards, see “Key 2017 and Early 2018 Compensation Events – 2017 Long-term Incentives” in this CD&A.

 

Michael S. Jones

 

Mr. Jones became Executive Vice President, Consumer Banking on January 1, 2016 with responsibility over all consumer-facing business lines, including retail banking and consumer lending. His key accomplishments in 2017 and related compensation are provided below:

 

Key Accomplishments
Completed the rollout of a new digital banking platform providing customers an upgraded experience
Grew average deposits, TCF’s core funding source, while maintaining a low cost of deposits in a competitive marketplace
Drove credit and portfolio performance for the residential mortgage portfolio including a significant reduction in non-performing assets
Improved net promoter score and interaction satisfaction for Retail Banking customers
Executed the repositioning of the Auto Finance business within TCF

  

2017 Compensation
Base Salary $ 560,000
Annual Incentive(1) $ 0
Restricted Stock(2) $ 689,372
Total Compensation $ 1,249,372
% Performance-Based   27.2%

(1)This amount does not include the value of the performance-based restricted stock granted in 2018 pursuant to the Amended 2017 MIP, which had an approximate value of $839,712.
(2)Represents time-based restricted stock and performance-based RSUs granted during 2017 and valued at the grant date fair value.

 

Effective January 1, 2017, in consultation with TCF’s compensation consultant and based on data and analysis including a competitive review, the Compensation Committee increased the salary of Mr. Jones to $560,000. When determining Mr. Jones’ compensation, the Compensation Committee took into consideration the fact that Mr. Jones is a key member of the executive team with extensive experience in all aspects of TCF’s business, including leading Consumer Banking, having worked for the lending businesses, and having served as TCF’s Chief Financial Officer. As a result of his importance to our future, the Compensation Committee believed it was important to place Mr. Jones’ compensation at the higher end of the peer range for similar roles in order to compensate him for his leadership and contributions to the Company, and to ensure his retention.

 

For information regarding Mr. Jones’ 2017 long-term incentive awards, see “Key 2017 and Early 2018 Compensation Events – 2017 Long-term Incentives” in this CD&A.

 

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Thomas F. Jasper

 

Mr. Jasper, Vice Chairman since 2012, assumed the additional role of Chief Operating Officer on January 1, 2016 with responsibility over TCF’s functional support areas, including bank operations, finance, investor relations, corporate development, legal and human resources. His key accomplishments in 2017 and related compensation are provided below: 

 

Key Accomplishments
Leadership over successful changes implemented in TCF’s ongoing strategic planning process with strong early returns
Effective investor and public relations leadership over quarterly results, indirect auto origination change and CFPB litigation
Successful execution of TCF’s Human Capital Management transformation

  

2017 Compensation
Base Salary $ 560,000
Annual Incentive(1) $ 0
Restricted Stock(2) $ 689,372
Total Compensation $ 1,249,372
% Performance-Based   27.2%

(1)This amount does not include the value of the performance-based restricted stock granted in 2018 pursuant to the Amended 2017 MIP, which had an approximate value of $839,712.

(2)Represents time-based restricted stock and performance-based RSUs granted during 2017 and valued at the grant date fair value.

 

Effective January 1, 2017, in consultation with TCF’s compensation consultant and based on data and analysis including a competitive review, the Compensation Committee increased the salary of Mr. Jasper to $560,000. 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 with extensive experience in all aspects of TCF’s business, including his having worked for the lending businesses, led Retail Banking and served as TCF’s Chief Financial Officer. As a result of his importance to our future, the Compensation Committee believed it was important to place Mr. Jasper’s compensation at the higher end of the peer range for similar roles in order to compensate him for his leadership and contributions to the Company, and to ensure his retention.

 

For information regarding Mr. Jasper’s 2017 long-term incentive awards, see “Key 2017 and Early 2018 Compensation Events – 2017 Long-term Incentives” in this CD&A.

 

 

Compensation & Governance Best Practices

 

 

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 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. Mr. Dahl’s employment agreement sets forth his obligations to comply with these provisions of Sarbanes-Oxley, if applicable.

 

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”) required the SEC to issue rules that require all public companies to adopt additional mandatory clawback policies to recover any incentive-based compensation paid to current and former executive officers based on financial information that was subsequently required to be restated due to material noncompliance with any financial reporting requirements. In 2015 the SEC issued proposed rules, however there are a number of areas addressed by the proposed rules that require clarification and will likely result in material changes from the proposed rule issued. As a result, the Compensation Committee believes it is appropriate to await comprehensive final rules and subsequent changes to the NYSE listing standards before it adopts a clawback policy. Mr. Dahl’s employment agreement sets forth his obligations to comply with these provisions of Dodd-Frank, when applicable.

 

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 us 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 considers, among other things, the balance between short- and long-term components of incentive compensation for the senior executive officers, the factors used to determine eligibility for annual incentive awards, terms of vesting for 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 TCF.

 

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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

 

TCF’s 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 401(k) Plan and SERP. 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 fifth anniversary of his or her appointment to an executive officer position to reach the applicable target ownership level. The stock ownership guidelines are currently applicable to each executive officer other than Messrs. Maass and Henak, who have until January 1, 2021 to reach their target ownership level. The Compensation Committee is responsible for monitoring the application of the Stock Ownership Guidelines and prepares and delivers a report to the Board annually. Failure to meet, or in unique circumstances, to show sustained progress toward meeting the Stock Ownership Guidelines as determined by the Compensation Committee, may result in an individual being required to retain all net shares obtained through equity awards. As of the Record Date, 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 our and our stockholders’ best interests 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 our growth and profitability.

 

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.

 

Executive Severance Policy

 

TCF has enacted an Executive Severance Policy that applies to all executive officers of TCF and limits amounts payable under severance agreements to 2.99x the sum of the executive’s salary and target bonus unless stockholder approval is received. The Executive Severance Policy is available on our website at https://tcfbank.com/About-TCF/Corporate-Governance/Executive-Officers-Severance-Policy. Mr. Dahl’s employment agreement and the Change in Control Severance Agreements entered into with the NEOs other than Mr. Dahl, which are described below under “Executive Compensation – Employment and Severance Agreements,” comply with this policy.

 

(GRAPHIC)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 Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in TCF’s Proxy Statement.

 

BY THE COMPENSATION COMMITTEE:

 

Vance K. Opperman, Chair  

Peter Bell 

William F. Bieber 

Theodore J. Bigos 

Karen L. Grandstrand 

Roger J. Sit

 

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(GRAPHIC)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 2017, 2016, and 2015.

 

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 ($)(4)  Total
$)
 
Craig R. Dahl  2017  $899,039  $  $1,435,896  $  $  $3,625  $110,254  $2,448,813 
Director, Chairman,  2016   846,923      1,343,455      884,161   1,293   93,564   3,169,396 
President, and CEO  2015   648,846      801,525      647,003      120,833   2,218,207 
Brian W. Maass(5)  2017   369,231      455,479            59,214   883,924 
Executive Vice President and  2016   328,678      402,442      257,347      40,139   1,028,606 
Chief Financial Officer  2015                         
William S. Henak(5)  2017   494,616      609,382         4,012   58,901   1,166,911 
Executive Vice President,  2016   472,082      1,101,398      369,628      57,330   2,000,438 
Wholesale Banking  2015                         
Michael S. Jones  2017   559,808      689,372            78,371   1,327,551 
Executive Vice President,  2016   549,231      670,752      430,035      93,764   1,743,782 
Consumer Banking  2015   467,212      2,006,074      514,018      102,398   3,089,702 
Thomas F. Jasper  2017   559,808      689,372         2,359   66,773   1,318,312 
Director, Vice Chairman, and  2016   550,000      670,752      430,637      67,958   1,719,347 
Chief Operating Officer  2015   550,000      678,203      547,464      125,784   1,901,451 
(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 and performance-based RSU awards at grant date fair value computed in accordance with FASB ASC Topic 718. The fair value of the 2017 performance-based RSU awards are based on the target payout under the awards. Assuming maximum payout on the RSU awards, total stock compensation to Messrs. Dahl, Maass, Henak, Jones, and Jasper would have been valued at $1,800,396, $571,102, $764,072, $864,368, and $864,368, respectively. None of the restricted stock or RSU awards are entitled to dividends until the awards vest. TCF’s accounting policy and assumptions for stock-based compensation are described in Notes 2 and 17 of the Notes to Consolidated Financial Statements included in TCF’s Annual Report on Form 10-K for the year ended December 31, 2017.

(2)Non-equity incentive plan compensation represents any awards in recognition of achievement of performance goals under TCF’s MIP for the applicable year. The awards for each NEO are further described in the CD&A under “2017 Compensation of Named Executive Officers - Key 2017 and Early 2018 Compensation Events – 2017 Annual Cash Incentive.” In lieu of a cash payment, the 2017 awards were paid through the grant of shares of performance-based restricted stock in 2018 and will be reflected as compensation for 2018 in the Summary Compensation Table in the 2019 Proxy Statement. The value of the performance-based restricted stock granted in 2018 pursuant to the Amended 2017 MIP was approximately as follows: Mr. Dahl, $1,798,077; Mr. Maass, $553,846; Mr. Henak, $741,923; Mr. Jones, $839,712; and Mr. Jasper, $839,712. The performance-based restricted stock awards are valued based on the probable outcome of the performance conditions, which assumes vesting of 100% of the shares in 2019 and 2020 if performance conditions are met. The shares of restricted stock are not entitled to dividends until the awards vest.

(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. Messrs. Maass and Jones joined the Company after June 30, 2004 and therefore are not participants in the Pension Plan. Although the amounts shown for Messrs. Henak, and Jasper are zero for 2016, the actual change in pension value for each was $(100), and $(285), respectively. Pay credits to the Pension Plan were discontinued effective April 1, 2006. However, interest credits continue to be credited.

(4)Amounts shown in the “All Other Compensation” column for 2017 consist of the following:

 

         Employer Matching Contributions      
Name   Perquisites(a)   401(k) Plan(b)   SERP(b)   Total 
Dahl   $21,094   $12,836   $76,323   $110,254 
Maass   $27,885   $13,500   $17,829   $59,214 
Henak   $15,689   $13,500   $29,712   $58,901 
Jones   $28,879   $13,500   $35,992   $78,371 
Jasper   $17,251   $3,173   $46,349   $66,773 
(a)NEOs were eligible to receive the following perquisites, none of which individually exceeded the greater of $25,000 or ten percent of the NEO’s total perquisites in 2017, except as set forth below: imputed life insurance, executive tax service, personal use of club memberships, incentive trips, personal use of company car or car allowance, personal use of company aircraft, and executive physicals. Messrs. Dahl and Jones received personal use of company aircraft in the amount of $12,563 and $3,624, 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 the NEO 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)TCF matches employee contributions up to 5% of the employee’s salary up to IRS limitations. The balance of the employer matching contributions in 2017 was made to the SERP.
(5)Messrs. Maass and Henak were not NEOs prior to 2016.

 

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Employment Agreements

 

Provisions of the employment agreement of Mr. Dahl, the only executive with an employment agreement, are described below under “Executive Compensation – Employment and Severance Agreements.”

 

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 long-term awards, as discussed in the CD&A.

 

Grants of Plan-Based Awards in 2017

 

The following table shows plan-based awards granted to the NEOs in 2017: 

                                     
       Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1)   Estimated Future Payouts Under Equity Incentive Plan Award   All Other Stock Awards: Number of Shares of    Grant Date Fair Value of Stock 
Name  Grant Date   Threshold
($)
   Target
($)
   Max
($)
   Threshold (#)   Target
(#)
   Max
(#)
   Stock
(#)(3)
   Awards
($)(4)
 
Dahl  01/25  $450,000   $900,000   $1,800,000               $ 
   01/25                       38,038    706,898 
      01/25(2)              19,019   38,038   57,057       728,998 
Maass  01/25   138,750    277,500    555,000                 
   01/25                       12,066    224,235 
      01/25(2)              6,033   12,066   18,099       231,245 
Henak  01/25   185,625    371,250    742,500                 
   01/25                       16,143    300,002 
      01/25(2)              8,072   16,143   24,215       309,381 
Jones  01/25   210,000    420,000    840,000                 
   01/25                       18,262    339,381 
      01/25(2)              9,131   18,262   27,393       349,991 
Jasper  01/25   210,000    420,000    840,000                 
   01/25                       18,262    339,381 
      01/25(2)              9,131   18,262   27,393       349,991 
(1)Represents range of possible payments for each NEO under the 2017 MIP made under the TCF Performance-Based Compensation Policy. In lieu of a cash payment, the 2017 awards were paid through the grant of shares of performance-based restricted stock which are eligible to vest based on TCF’s net income available to common stockholders in 2018 and 2019. The awards for each NEO are described in the CD&A under “2017 Compensation of Named Executive Officers - Key 2017 and Early 2018 Compensation Events – 2017 Annual Cash Incentive.” The value of the performance-based restricted stock granted in 2018 pursuant to the Amended 2017 MIP was approximately as follows: Mr. Dahl, $1,798,077; Mr. Maass, $553,846; Mr. Henak, $741,923; Mr. Jones, $839,712; and Mr. Jasper, $839,712. The performance-based restricted stock awards are valued based on the probable outcome of the performance conditions, which assumes vesting of 100% of the shares in 2019 and 2020 if performance conditions are met. The shares of restricted stock are not entitled to dividends until the awards vest.

(2)Represents awards of performance-based RSUs made to each NEO on January 25, 2017 under the TCF Financial 2015 Omnibus Incentive Plan (the “Omnibus Plan”). The awards are eligible to vest based on TCF’s TSR as compared to peers following the performance period which ends on December 31, 2019. The awards are further described in the CD&A under “2017 Compensation of Named Executive Officers - Key 2017 and Early 2018 Compensation Events – 2017 Long-Term Incentives.”

(3)Awards represent grants of time-based restricted stock made under the Omnibus Plan. The awards vest pro-rata on January 1, 2018, 2019, and 2020. The material terms of these awards are described in the CD&A under the heading “2017 Payments of Named Executive Officers – Key 2017 and Early 2018 Compensation Events – 2017 Long-term Incentives.” The shares of restricted stock are not entitled to dividends until the awards vest.

(4)The per share grant date fair values of the time-based restricted stock awards and performance-based RSU awards, respectively, computed in accordance with FASB ASC Topic 718 are as follows: Mr. Dahl, $18.548 and $19.156; Mr. Maass, $18.548 and $19.156; Mr. Henak, $18.548 and $19.156; Mr. Jones, $18.548 and $19.156; and Mr. Jasper, $18.548 and $19.156. The performance-based RSUs are valued based on the probable outcome of the performance conditions, payout at the target level.

 

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Outstanding Equity Awards at December 31, 2017

 

The following table shows all equity awards that were outstanding at December 31, 2017 for each NEO: 

                              
       Option Awards  Stock Awards 
   Year of    Number of Securities Underlying Unexercised Options (#)  Option Exercise Price  Option Expiration   Number of Shares or Units of Stock That Have Not Vested   Market Value of Shares or Units of Stock That Have Not Vested   Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested   Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested 
Name  Award    Exercisable(1)  Unexercisable  ($)  Date  (#)(2)  ($)(3)  (#)  ($)(3) 
Dahl  2008   225,000    $15.75  1/22/2018    $    $ 
   2012(4)                125,000   2,562,500 
   2015            9,302   190,691      
   2015(5)                27,902   571,991 
   2016            38,108   781,214      
   2016(6)                85,742   1,757,711 
   2017            38,038   779,779      
   2017(7)                57,057   1,169,669 
Maass  2013            2,500   51,250      
   2014            7,500   153,750      
   2015            20,000   410,000      
   2016            11,416   234,028      
   2016(6)                25,685   526,543 
   2017            12,066   247,353      
   2017(7)                18,099   371,030 
Henak  2013            6,000   123,000      
   2014            10,000   205,000      
   2015            10,000   205,000      
   2016            16,432   336,856      
   2016(6)                36,971   757,906 
   2016            26,667   546,674      
   2017            16,143   330,932      
   2017(7)                24,215   496,408 
Jones  2012(4)                50,000   1,025,000 
   2014            25,000   512,500      
   2015            5,367   110,024      
   2015(5)                16,097   329,989 
   2015            50,000   1,025,000      
   2015(5)                5,250   107,625 
   2015(4)                50,000   1,025,000 
   2016            19,026   390,033      
   2016(6)                42,809   877,585 
   2017            18,262   374,371      
   2017(7)                 27,393   561,557 
Jasper  2008   141,000     15.75  1/22/2018           
   2012(4)                125,000   2,562,500 
   2015            7,871   161,356      
   2015(5)                23,609   483,985 
   2016            19,026   390,033      
   2016(6)                42,809   877,585 
   2017            18,262   374,371      
   2017(7)                27,393   561,557 
(1)Represents stock options that vested pro-rata in two installments on January 1, 2011 and 2012, all of which were exercised on January 8, 2018.

(2)Represents restricted stock awards that vest as follows: the 2013 awards to Messrs. Maass and Henak will vest on April 1, 2018; the 2014 award to Mr. Jones will vest on February 1, 2019; the 2014 awards to Messrs. Maass and Henak will vest on April 1, 2019; the 2015 awards to Messrs. Dahl, Jones (5,367 remaining shares), and Jasper vest pro-rata on January 1, 2016, 2017, and 2018; the 2015 award to Mr. Jones (50,000 shares) will vest on April 1, 2018; the 2015 awards to Messrs. Maass and Henak will vest on April 1, 2020; the 2016 awards to Messrs. Dahl, Maass, Henak (36,971 shares), Jones, and Jasper vest pro-rata on January 1, 2017, 2018, and 2019; the 2016 award to Mr. Henak (26,667 shares) vest pro-rata on April 1, 2017, 2018, and 2019; and the 2017 awards to Messrs. Dahl, Maass, Henak, Jones, and Jasper vest pro-rata on January 1, 2018, 2019, and 2020.

(3)Market or payout value was determined using the year-end closing stock price of $20.50 per share.

 

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(4)Represents the unvested portion of the 2012 performance-based restricted stock awards to Messrs. Dahl, Jones, and Jasper and the 2015 performance-based restricted stock award to Mr. Jones, all of which vested on January 24, 2018, with 50% of the shares being distributed and 50% of the shares remaining in the Deferred Stock Plan for two years.

(5)Represents awards of performance-based RSUs granted with vesting based on TCF’s total stockholder return as compared against the 2015 Peer Group over the three-year performance period ending December 31, 2017 for Messrs. Dahl, Jones (16,097 units), and Jasper, and March 31, 2018 for Mr. Jones (5,250 units). Awards are included at the target level of performance based on the above-threshold performance under the terms of the award over the three year period ended December 31, 2017. The number of shares that actually vested on January 24, 2018 were as follows: Dahl – 19,016, Jones – 10,970, and Jasper – 16,090.

(6)Represents awards of performance-based RSUs granted with vesting based on TCF’s total stockholder return as compared against the 2016 Peer Group over the three-year performance period ending December 31, 2018. Awards are included at the maximum level of performance based on above-target performance under the terms of the award over the two year period ended December 31, 2017.

(7)Represents awards of performance-based RSUs granted with vesting based on TCF’s total stockholder return as compared against the 2017 Peer Group over the three-year performance period ending December 31, 2019. Awards are included at the maximum level of performance based on above-target performance under the terms of the award over the one year period ended December 31, 2017.

 

 

Option Exercises and Stock Vested in 2017

 

 

The following table shows information for option exercises and vesting of stock awards in 2017:

                           
    Option Awards   Stock Awards  
Name   Number of Shares
Acquired on
Exercise
(#)
  Value Realized
on Exercise
($)
  Number of Shares
Acquired on Vesting
(#)
  Value Realized
on Vesting
($)(1)
 
Dahl       $     28,353   $ 554,868  
Maass             5,707     111,686  
Henak             29,048     516,595  
Jones             39,878     780,412  
Jasper             17,382     340,166  

(1)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 2017

 

 

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
($)(2)
  Payments
During Last
Fiscal Year
($)
 
Dahl   Pension Plan   5.75   $ 79,938   $  
Maass(3)              
Henak   Pension Plan   5.25     66,648      
Jones(3)              
Jasper   Pension Plan   3.25     26,898      
(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, 2017.

(3)Messrs. Maass and Jones joined TCF after June 30, 2004 and therefore are not participants 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 the 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 were accrued under the cash balance formula in effect since September 1, 1990, as described below.

 

Cash Balance Formula 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.

 

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

               
  Applicable Percentage  
Sum of the Participant’s age plus years
of service on the last day of the month
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% 2.5% 0.0%  
Under 38 2.5% 2.5%  
Under 40 2.5%  
30 but less than 32 2.6%  
32 but less than 34 2.7%  
34 but less than 36 2.8% 2.6%  
36 but less than 38 2.9% 2.7% 2.6% 0.0%  
38 but less than 40 2.6% 3.0% 2.8% 2.7% 0.0%  
40 but less than 50 3.5% 3.5% 3.5% 3.5% 3.5% 0.0%  
50 but less than 60 4.5% 4.5% 4.5% 4.5% 4.5% 0.0%  
60 but less than 70 5.5% 5.5% 5.5% 5.5% 5.5% 0.0%  
70 but less than 80 6.5% 6.5% 6.5% 6.5% 6.5% 0.0%  
80 or more 7.5% 7.5% 7.5% 7.5% 7.5% 0.0%  

 

Interest credits are credited to the retirement accounts using the average 5-year U.S. Government bond rate from the preceding calendar year plus 0.25% and rounded to the nearest quarter of a percent.

 

Certified Earnings generally include earned income, wages, salaries, and fees (or other amounts) for services rendered in the course of employment. Also included are annual cash incentives, commissions paid to salespersons, compensation for services on the basis of profits, commissions on insurance premiums, tips and bonuses (but not including payments for referrals), and any pre-tax contributions to the 401(k). Restricted stock awards are not included in Certified Earnings.

 

Prior to the April 1, 2006 freeze, cash balance benefits became vested after five years of vesting service, being 0% vested beforehand.

 

The normal retirement date is age 65. A participant is eligible for early retirement if termination occurs after attainment of age 55 with at least five years of vesting service. A participant is eligible for vested terminated benefits if termination occurs after attainment of at least five years of vesting service. In either case, distribution of the cash balance account balance can occur immediately upon termination. The amount of the distribution depends upon the payment form elected and is actuarially equivalent to the account balance earned as of the date of distribution. The normal payment form is the life-only annuity. A variety of other payment forms are available (including the lump sum option), all equivalent in value if paid over an average lifetime. Mr. Dahl is currently eligible for early retirement under the Pension Plan. Additionally, an active employee is eligible for distributions beginning at age 62.

 

The present value of the accumulated benefit displayed in the Pension Benefits table is the discounted value of the projected account balance at age 65 (projected with interest credits only). The value of the accumulated benefit was determined using assumptions consistent with those used for 2017 financial reporting purposes under FASB ASC Topic 715, “Compensation – Retirement Benefits” (“Topic 715”) unless otherwise directed by Regulation S-K. Some of those assumptions are as follows:

 

Benefits were assumed to commence at age 65;

The assumed form of payment at distribution was the lump sum option;

All benefits and present values are determined as of December 31, 2017, the Topic 715 measurement date;

The discount rate used to determine present values was 3.30% at December 31, 2017;

The rate of future interest credits used was a select and ultimate assumption starting at 1.50% for 2017 and phasing to 3.25% for 2021 and beyond. For 2018, the rate was 2.25%; and

No pre-retirement mortality, termination, retirement, or disability was assumed.

 

See Note 18 of the Notes to Consolidated Financial Statements included in TCF’s Annual Report on Form 10-K for the year ended December 31, 2017 for additional information regarding TCF’s accounting policy and assumptions for employee benefit plans.

 

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Nonqualified Deferred Compensation in 2017

 

 

The following table shows certain information for TCF’s nonqualified account-type plans for the NEOs. The SERP shown below is a nonqualified supplemental program for the 401(k) Plan, a plan which is a qualified tax or deferred plan under Section 401(k) of the Code. The TCF contributions shown in the table for the SERP are matching contributions which are made at the same rate as under the 401(k) Plan. For further information about this plan, refer to the CD&A under “2017 Compensation of Named Executive Officers – Other Forms of Compensation – 401(k) Plan and SERP.” The Deferred Stock Plan provides the NEOs with supplemental retirement benefits by deferring certain transfers of TCF common stock awarded to them previously.

                                   
Name Plan   Executive
Contributions
in Last Fiscal
Year
($)(1)
  Registrant
Contributions
in Last Fiscal
Year
($)(1)
  Aggregate
Earnings
in Last Fiscal
Year
($)(2)
  Aggregate
Withdrawals/
Distributions
($)(3)
  Aggregate
Balance at
December 31,
2017
($)(4)
 
Dahl SERP   $ 142,339   $ 76,323   $ 142,072   $ (25,982 ) $ 1,880,196  
  Deferred Stock Plan             174,250     (15,000 )   3,587,500  
Maass SERP     13,329     17,829     11,418     (1,247 )   107,143  
Henak SERP     99,138     29,712     124,302     (5,720 )   1,072,448  
Jones SERP     31,492     35,992     39,236     (6,609 )   490,771  
  Deferred Stock Plan             45,500         1,025,000  
Jasper SERP     421,242     46,349     236,701     (7,898 )   2,013,577  
  Deferred Stock Plan             247,142         4,750,812  
(1)The amounts shown in this column are reported as compensation in the Summary Compensation Table.

(2)Consists of dividend equivalents and unrealized appreciation or depreciation on the deemed account investments, primarily TCF common stock. There were no above-market or preferential earnings or appreciation in 2017 or previous years.

(3)Consists of dividend equivalents on deemed investments in TCF common stock and distributions of vested shares from the Deferred Stock Plan which were included for each participant in the Summary Compensation Table in the years granted. The dividend equivalents are also included in the Aggregate Earnings in Last Fiscal Year column of this table.

(4)Includes aggregate salary and matching contributions to the SERP reported as compensation in the Summary Compensation Table for years prior to 2017 in the following amounts: Mr. Dahl, $1,043,581; Mr. Maass, $20,774; Mr. Henak, $77,586; Mr. Jones, $260,550; and Mr. Jasper, $976,079.

 

Material Information Regarding the SERP

 

The NEOs’ covered compensation and contributions under the 401(k) Plan are subject to certain limits imposed by the IRS. The SERP allows NEOs to make pre-tax contributions from their salary and annual cash incentives at the same rate as under the 401(k) Plan and up to a total of 50% of covered pay and to receive an employer matching contribution at the same rate as under the 401(k) Plan on their contributions up to 5% of pay.

Employee contributions to the SERP may be invested, at the employee’s election, in the same investment choices that are available in the 401(k) Plan. Employer matching contributions to the SERP are invested 100% in TCF common stock.

The amounts allocated to the accounts of each of the NEOs primarily consist of deemed TCF common stock. Earnings on deemed TCF common stock investments in the plan during 2017 consisted of $0.30 per share in dividend equivalents and appreciation during 2017 of $0.91 per share. Dividend-equivalent distributions are made from the SERP at the same time and at the same rate as to holders of TCF common stock generally.

Distributions from the SERP generally occur in a lump sum in the event of death, disability, or no sooner than six months after the termination of employment. Participants may also elect to receive a lump sum distribution on a date certain or in the event of a change in control, or may receive a series of annual payments following termination.

Deemed investments in TCF common stock selected by the NEOs generally cannot be changed during employment (except in certain change in control situations) and such investments are distributed in-kind upon termination of employment, either in a lump sum six months thereafter or in annual installments, as elected by the participant.

 

Material Information Regarding the Deferred Stock Plan

 

There were no contributions to the Deferred Stock Plan in 2017.

The accounts of the NEOs are deemed to be invested in shares of TCF common stock. Distributions are made in-kind in the form of TCF common stock.

Distributions are made in accordance with the terms of the restricted stock agreements applicable to the shares that have been deferred into the Deferred Stock Plan.

TCF’s cost of the Deferred Stock Plan in 2017 was $22,353 for record keeper and trustee expenses.

Shares of restricted stock contributed to the Deferred Stock Plan are not entitled to dividends until they vest.

TCF has established a trust fund to accumulate assets for the payment of benefits as they come due.

At December 31, 2017, the total investment in TCF common stock under the Deferred Stock Plan was 1,056,939 shares valued at $21,667,251.

 

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CEO Pay Ratio

 

 

The following pay ratio and supporting information compares the annual total compensation of our employees other than our CEO (including full-time, part-time, seasonal and temporary employees) and the annual total compensation of our CEO, as required by regulations promulgated pursuant to Section 953(b) of the Dodd-Frank Act. The pay ratio is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K.

 

For 2017, our last completed fiscal year:

 

The median of the annual total compensation of all employees of our company (other than our CEO) was $44,878; and

The annual total compensation of our CEO, as reported in the Summary Compensation Table included in this Proxy Statement, was $2,448,813.

 

Based on this information, the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all other employees was 54.6 to 1. To determine the pay ratio, we took the following steps:

 

We determined that as of December 31, 2017, the determination date, our employee population consisted of approximately 6,000 individuals, primarily located in the United States, but including our Canadian employees. This population consists of full-time, part-time, temporary and seasonal employees of TCF and each of its direct and indirect subsidiaries. To identify the median employee, we compared 2017 Form W-2 wages, salaries and tips, or the Canadian equivalent, for all employees as of December 31, 2017, excluding our CEO. Amounts paid in Canadian dollars were converted to U.S. dollars using the 2017 12 month average exchange rate as of the last day of each month. Once we identified our median employee, we calculated such employee’s annual total compensation for 2017 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in annual total compensation of $44,878. The calculation of the median employee’s annual total compensation pursuant to Item 402(c)(2)(x) includes salary (or wages plus overtime, where applicable), bonus, incentive compensation, and employer matching contributions to the 401(k) Plan and to the median employee’s health savings account.

 

With respect to the CEO, we used the amount reported as total compensation in the Summary Compensation Table included in this Proxy Statement. Any adjustments, estimates and assumptions used to calculate total annual compensation are described in footnotes to the Summary Compensation Table.

 

 

Potential Payments Upon Termination or Change in Control

 

 

Non-Change in Control Termination-Related Payments

 

Mr. Dahl had an employment agreement in effect at December 31, 2017. The following table sets forth the general estimated distributions that would have been made by TCF to Mr. Dahl in the event of a termination of employment not involving a change in control of the Company on December 31, 2017.

 

Type of Termination  Salary Payout(1)    Restricted Stock(2)    Stock Options(3)    Total(4)  
By Company Without Cause  $2,267,308   $   $   $2,267,308 
By Executive for Good Reason  $2,267,308   $   $   $2,267,308 
By Executive – Voluntary  $17,308   $   $   $17,308 
By Executive – Retirement  $17,308   $   $   $17,308 
By Company With Cause  $17,308   $   $   $17,308 
Death or Disability  $17,308   $   $   $17,308 
(1)For a termination by the Company without Cause or by Mr. Dahl for Good Reason, the amount includes earned but unpaid salary as of December 31, 2017, and a payment of two and one-half times his base salary. The last pay date in 2017 was December 22, 2017. For all other terminations (including by death or disability), the amount includes only earned but unpaid salary as of December 31, 2017. All amounts in this column would be payable in a lump sum payment.

(2)There would be no accelerated vesting of restricted stock awards upon termination absent a change in control. The amounts in this column do not include any value for vested deferred shares held in the Deferred Stock Plan.

(3)All outstanding stock options had vested as of December 31, 2017 and were exercised on January 8, 2018.

(4)In addition to the payments indicated, Mr. Dahl would be entitled to receive upon employment termination accumulated and vested benefits under the 401(k) Plan, SERP, Deferred Stock Plan, the Pension Plan, and continuation of benefits available to employees generally, as described in the CD&A under “2017 Compensation of Named Executive Officers – Other Forms of Compensation,” as well as monthly premiums for COBRA coverage for up to 12 months as described below under “Employment Agreements”. There is no enhancement or acceleration of these benefits upon any of the triggering events.

 

Except as set forth above, NEOs generally forfeit all outstanding unvested: (i) restricted stock awards; (ii) RSU awards; and (iii) stock options upon a termination absent a change in control, except in the case of retirement, death or disability for certain awards (as provided in individual award agreements). Each NEO would be entitled to receive payment of earned but unpaid salary as of December 31, 2017, as well as accumulated and vested benefits under the 401(k) Plan, SERP, Deferred Stock Plan, and the Pension Plan, as described in the CD&A under “2017 Compensation of Named Executive Officers – Other Forms of Compensation.” NEOs are not entitled to ongoing perquisites after termination of employment, but are entitled to continuation benefits coverage available to TCF employees generally. Additionally, in connection with the receipt of certain

 

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awards (as provided in individual award agreements), the NEOs would have been subject to non-solicitation, non-hire and confidentiality restrictions for the duration of their employment and for a period of 12 months thereafter. Mr. Dahl would have been subject to a two-year non-solicitation agreement in connection with a termination following a change in control.

 

The following table sets forth the general estimated distributions that would have been made by TCF to Messrs. Maass, Henak, Jones, or Jasper in the event of a termination of employment not involving a change in control of the Company due to retirement, death or disability on December 31, 2017:

 

PAYMENTS DUE UPON RETIREMENT, DEATH OR DISABILITY FOR OTHER NEOS

 

Name   Salary Payout(1)   Restricted Stock(2)   Stock Options   Total 
Maass   $7,115   $385,667   $   $392,782 
Henak   $9,519   $380,814   $   $390,333 
Jones   $10,769   $1,279,168   $   $1,289,937 
Jasper   $10,769   $   $   $10,769 

(1)Represents amount of salary earned but unpaid as of December 31, 2017. The last pay date in 2017 was December 22, 2017. Amounts in this column would be payable in a lump sum payment.

(2)Represents accelerated vesting of restricted stock that would vest pro-rata upon retirement, death or disability. The amounts in this column do not include vested deferred shares held in the Deferred Stock Plan. Restricted stock was valued at $20.50 per share, the year-end closing price.

 

Payments in the Event of a Change in Control

 

The table below shows estimated lump sum payments in the event of a change in control effective as of December 31, 2017, irrespective of whether the NEO was also terminated. Actual amounts can only be determined at an actual date of a change in control.

 

At December 31, 2017, NEOs would have been entitled to vesting of certain unvested stock grants upon a change in control. All equity awards granted since January 1, 2015 include a “double trigger,” such that the awards do not vest upon a change in control unless the NEO’s employment is terminated without Cause within one year following a change in control.

 

In consideration of benefits under his employment agreement, Mr. Dahl is subject to a two-year non-solicitation agreement in connection with a termination upon or following a change in control. Restricted stock awards entered into by NEOs would generally have been subject to a one-year non-solicitation agreement after termination of employment other than a termination by TCF without Cause or a termination by the executive for Good Reason. The amounts included in the “Restricted Stock” column represent the unvested portion of the 2012 performance-based restricted stock awards to Messrs. Dahl, Jones, and Jasper and the 2015 performance-based restricted stock award to Mr. Jones, all of which vested on January 24, 2018, with 50% of the shares being distributed and 50% of the shares remaining in the Deferred Stock Plan for two years.

 

ESTIMATED PAYMENTS IN THE EVENT OF A CHANGE IN CONTROL

 

Name   Salary(1)    Restricted Stock(2)    Stock Options(3)    Total(4)  
Dahl(5)    $17,308   $2,562,500   $   $2,579,808 
Maass   $7,115   $   $   $7,115 
Henak   $9,519   $   $   $9,519 
Jones   $10,769   $1,537,500   $   $1,548,269 
Jasper   $10,769   $2,562,500   $   $2,573,269 

(1)Represents the amount of salary earned but unpaid as of December 31, 2017. The last pay date in 2017 was December 22, 2017.
(2)Represents accelerated vesting of the unvested portion of the 2012 and 2015 performance-based restricted stock awards that would vest upon a change in control, all of which vested on January 24, 2018, with 50% of the shares being distributed and 50% remaining in the Deferred Stock Plan for two years, or until a change in control. This amount does not include “double trigger” restricted stock and RSU awards that will only vest if the NEO is terminated without Cause within one year following the change in control, which are valued as follows: Mr. Dahl, $5,537,040; Mr. Maass, $1,993,943; Mr. Henak, $3,001,754; Mr. Jones, $5,019,979; and Mr. Jasper, $3,090,867. Restricted stock was valued at $20.50 per share, the year-end closing price. The amounts in this column do not include vested deferred shares held in the Deferred Stock Plan.
(3)All outstanding stock options had vested as of December 31, 2017 and were exercised on January 8, 2018. Holders of vested stock options upon a change in control would have until the sooner of (i) the expiration of the options, or (ii) one year from the change in control to exercise their stock options.
(4)In addition to the payments indicated, the NEOs would have been entitled to receive accumulated and vested benefits under the 401(k) Plan, SERP, Deferred Stock Plan, and the Pension Plan following termination, as well as continuation benefits available to employees generally, as reported elsewhere in this proxy statement. Mr. Dahl would also have been entitled to monthly premiums for COBRA coverage for up to 12 months as described below under “Employment Agreements” in the event of a termination following a change in control without Cause or by Mr. Dahl for Good Reason.
(5)If upon or following a change in control Mr. Dahl would have been terminated by TCF without Cause or would have terminated his employment for Good Reason, he would have received $12.6 million, which includes his restricted stock and RSU awards mentioned above and two and one-half times his salary and bonus, contractually agreed to be equal to his salary.

 

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Definitions of “Change in Control”

 

For purposes of vesting of awards granted under the Incentive Stock Program, a change in control is generally defined as: (i) the acquisition by a party of 50% or more of the voting stock of TCF’s then-outstanding securities; (ii) a change in a majority of TCF’s Board of Directors over a two-year period (other than if such Directors were nominated by at least two-thirds of the Directors who were Directors at the beginning of the period); or (iii) holders of TCF common stock approving (a) a merger or acquisition that results in TCF’s voting stock representing less than 50% (70% for stock options granted to NEOs) of the shares outstanding immediately prior to such merger or acquisition, (b) a plan of complete liquidation of TCF, or (c) an agreement for the sale of all or substantially all of TCF’s assets (but, a change in control will not be deemed to have occurred if the merger, consolidation, sale or disposition of assets is not subsequently consummated).

 

For purposes of vesting of awards granted under the Omnibus Plan, a change in control is generally defined as: (i) the acquisition by a party of 50% or more of the total fair market value or total voting power of TCF’s stock; (ii) a change in the composition of TCF’s Board such that company-sponsored directors cease to comprise a majority of the Board; (iii) a merger or consolidation of TCF is consummated, other than (a) where following such transaction TCF’s historic stockholders retain at least 50% ownership of the surviving entity or the purchaser and individuals that comprise a majority of the Board prior to the transaction still constitute a majority of the Board thereafter, or (b) a recapitalization whereby no person acquires more than 50% of the voting power of TCF’s then outstanding securities; or (iv) stockholders approve a plan of complete liquidation or dissolution or there is consummated an agreement for the sale of all or substantially all of TCF’s assets, other than where following such transaction TCF’s historic stockholders retain at least 50% ownership of the purchaser in substantially the same proportions and individuals that comprise a majority of the Board of TCF prior to the transaction constitute a majority of the Board of the purchaser thereafter.

 

For purposes of Mr. Dahl’s employment agreement, a change of control is deemed to occur upon: (i) the acquisition by a party of 30% or more of the voting stock of TCF’s then-outstanding securities; (ii) a change in a majority of TCF’s Board of Directors over a two-year period (other than if such Directors were nominated by at least two-thirds of the Directors who were Directors at the beginning of the period, or whose nomination was so approved); or (iii) holders of TCF common stock approving (a) a merger or acquisition that results in TCF’s voting stock representing less than 70% of the shares outstanding immediately prior to such merger or acquisition, (b) a plan of complete liquidation of TCF, or (c) an agreement for the sale of all or substantially all of TCF’s assets (but, a change of control will not be deemed to have occurred if the merger, consolidation, sale or disposition of assets is not subsequently consummated).

 

Definitions of “Cause” and “Good Reason”

 

As of December 31, 2017, for purposes of Mr. Dahl’s employment agreement and his equity awards, “Cause” included: (i) engaging in willful and recurring misconduct in not following the legitimate and legal directions of the Board after fair written warning; (ii) conviction of a felony and all appeals from such conviction have been exhausted; (iii) engaging in habitual drunkenness after fair written warning; (iv) excessive absence from work which absence is not related to disability, illness, sick leave or vacations after fair written warning; or (v) engaging in continuous conflicts of interest between his personal interests and the interests of the Company after fair written warning.

 

As of December 31, 2017, for purposes of the equity awards held by the NEOs other than Mr. Dahl, “Cause” included (i) the commission of, or plea of guilty or no contest to, a felony or a crime involving moral turpitude or the commission of any other act involving willful malfeasance or material fiduciary breach with respect to the Company or an Affiliate; (ii) conduct that results in or is reasonably likely to result in harm to the reputation or business of the Company or any of its Affiliates; (iii) gross negligence or willful misconduct with respect to the Company or an Affiliate; or (iv) material violation of state or federal securities laws.

 

As of December 31, 2017, for purposes of all of the equity awards held by the NEOs and Mr. Dahl’s employment agreement, “Good Reason” included: (i) any material change in the executive’s authority, responsibility, title or reporting structure, including Mr. Dahl not being elected Chief Executive Officer of the Company; (ii) a material diminution in the executive’s salary or bonus opportunity; or (iii) a material change in geographic location at which the executive must perform the services. Additionally, under Mr. Dahl’s employment agreement and equity awards, “Good Reason” also includes (i) requiring Mr. Dahl to report to a supervisor other than the Company’s Board of Directors; (ii) a material diminution of Mr. Dahl’s benefits or perquisites; or (iii) any other action or inaction that constitutes a material breach by the Company of the executive’s agreement.

 

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Employment and Severance Agreements

 

 

Craig Dahl Employment Agreement

 

On October 28, 2015, TCF entered into an employment agreement with Mr. Dahl, effective January 1, 2016, in connection with his assumption of the role of CEO of TCF on that date, and will continue through December 31, 2018, pursuant to which he is entitled to receive:

 

An annual salary of at least $850,000;
Annual cash incentive opportunity, long-term incentive awards, and perquisites, each at the discretion of the Compensation Committee;
Participation in the same benefit plans as apply to TCF employees generally, and on the same terms and conditions; and
Severance payment rights as follows:

 

Severance Trigger Cash Termination Payments
Termination by TCF Without Cause Absent a Change of Control 2.5x base salary
Termination by TCF Without Cause Following a Change of Control 2.5x the sum of base salary and annual cash incentive (assumed to equal base salary)
Termination by the Executive for Good Reason Absent a Change of Control 2.5x base salary
Termination by the Executive for Good Reason Following a Change of Control 2.5x the sum of base salary and annual cash incentive (assumed to equal base salary)

 

In addition, if Mr. Dahl’s employment is terminated by TCF without Cause or by Mr. Dahl for Good Reason and such termination occurs after the end of the Company’s fiscal year but prior to the payment of any annual cash incentive applicable to such fiscal year, TCF shall pay Mr. Dahl the annual incentive earned under such incentive program when such amounts are paid to other participants in the program. In addition, at Mr. Dahl’s election, TCF will pay the monthly premiums for COBRA coverage for up to 12 months following a termination by the Company without Cause or by Mr. Dahl for Good Reason. “Cause,” “Good Reason,” and “Change of Control” have the meanings provided in Mr. Dahl’s employment agreement.

 

Non-CEO Executive Change in Control Severance Agreements

 

On March 1, 2018, TCF entered into Change in Control Severance Agreements with certain executives, including all of the NEOs other than Mr. Dahl. Under the terms of these agreements, if an executive’s employment is terminated by the Company without Cause or by the executive for Good Reason during the period beginning six months prior to a Change in Control and ending two years after a Change in Control (the “Change in Control Period”), the executive will receive a lump sum payment equal to 1.5x the sum of the executive’s base salary and target annual bonus and the amount of any earned but unpaid salary and bonus, and will also receive comparable insurance benefits for 24 months. To the extent necessary to avoid penalties under Section 280G of the Code, the payment will be reduced, provided such penalties are greater than the amount the payments would be reduced to avoid the penalties.

 

The Change in Control Severance Agreements also require the executives to provide TCF a general release of all legal claims prior to receiving any payments and prohibit the executive from soliciting employees or customers of TCF and its subsidiaries for 18 months if the executive’s employment is terminated without Cause or for Good Reason during the Change in Control Period. The Change in Control Severance Agreements’ term ends on December 31, 2018, but will automatically renew each year for a one year term until the second year after a Change in Control, unless terminated by TCF or the Executive. “Cause,” “Good Reason,” and “Change in Control” have the meanings provided in the Change in Control Severance agreements.

 

 

Indemnification Rights

 

 

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

 

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(GRAPHIC)Equity Compensation Plans Approved by Stockholders

 

The following table provides information regarding TCF’s equity compensation plans, including TCF’s current incentive plan, the Omnibus Plan and TCF’s former plan, the Incentive Stock Program as of December 31, 2017:

 

Plan Category Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
(a)
Weighted-average
exercise price of
outstanding options,
warrants and rights
(b)
Number of securities remaining
available for future issuance
under equity compensation plans
(excluding securities reflected in
column (a))
(c)
Equity compensation plans approved by security holders(1) 366,000(2) $15.75 1,446,047(3)
Equity compensation plans not approved by security holders
TOTAL 366,000 $15.75 1,446,047
(1)Includes the Omnibus Plan and the Incentive Stock Program.

(2)Represents options that were issued under the Incentive Stock Program, all of which were exercised on January 8, 2018.

(3)Represents shares available for issuance under the Omnibus Plan.

 

Proposal 2Approve the Amended and Restated TCF Financial 2015 Omnibus Incentive Plan to Increase the Number of Shares Available by 4 Million Shares

 

Background

 

At the 2015 Annual Meeting of Stockholders, the stockholders approved the TCF Financial 2015 Omnibus Incentive Plan (the “Omnibus Plan”). The Omnibus Plan authorizes the grant of awards based on shares of TCF common stock, including stock options, stock appreciation rights, restricted stock, restricted stock units, other stock-based awards, performance-based restricted stock, and performance-based restricted stock units. The maximum number of shares available for grant under the Omnibus Plan is equal to 2,000,000 shares, subject to certain adjustments, of which there are approximately 1,184,461 shares remaining as of February 28, 2018.

 

Description of Amendment

 

In January 2018, the Board approved, subject to stockholder approval, an amended and restated Omnibus Plan to increase the number of shares authorized for issuance under the Omnibus Plan by 4 million shares to 6 million shares.

 

Share Usage Under the Omnibus Plan

 

In proposing an increase in authorized shares, the Compensation Committee and the Board considered TCF’s historical equity compensation practices (including the total number of shares underlying existing equity awards) and TCF’s three-year average share usage. They also considered these factors in assessing the number of shares likely to be needed for future grants under the Omnibus Plan.

 

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Burn Rate

 

Burn rate, a measure of the rate at which companies use shares available for grant under their equity compensation plans, is an important factor for investors concerned about stockholder dilution. The burn rate is defined as, in a given year, the number of shares of Common Stock subject to equity awards granted, divided by the weighted average number of shares of Common Stock outstanding. Below are the Company’s burn rates for all grants of equity awarded by the Board under all stockholder approved equity plans of the Company for the past three fiscal years:

 

Fiscal Year Ended Shares of
Restricted Stock Granted
Performance-
Based Restricted Stock Units
Granted(1)
Total Shares
Granted
Weighted Average Number of Common Shares Outstanding Burn Rate
December 31, 2017 583,388 198,183 781,571 168,679,501 0.46%
December 31, 2016 899,000 234,016 1,133,016 167,219,964 0.68%
December 31, 2015 786,933 109,288 896,221 165,696,678 0.54%
(1)RSUs are included at the maximum level of performance. The actual number of shares earned will be determined based on achievement of the performance goals for each grant.

 

Overhang

 

Total potential dilution, or overhang, is a common measure to assess the dilutive impact of equity plans. Total potential dilution is equal to the number of shares available to be granted as future equity awards plus the number of shares subject to equity awards outstanding, divided by the sum of (a) the total of those shares plus (b) the total number of shares outstanding. The Company’s total potential dilution (which includes the number of shares available for issuance under the Omnibus Plan), with and without the additional shares requested in this proposal, is shown in the table below, as of February 28, 2018:

 

Total Potential Dilution Total Potential
Dilution
Omnibus Plan Remaining Shares 1,184,461
Shares Outstanding—Grants Under Omnibus Plan 2,256,437
Common Shares Outstanding 170,707,137
Total Current Dilution 1.98%
Share Authorization Request 4,000,000
Total Potential Dilution 4.18%

 

Summary of the Omnibus Plan

 

The following description of the Omnibus Plan is only a summary of certain provisions thereof and is qualified in its entirety by reference to the full text of the Omnibus Plan. A copy of the Omnibus Plan, as amended to reflect this proposal, is included as Appendix I to this Proxy Statement.

 

Purposes of the Omnibus Plan

 

The purposes of the Omnibus Plan are to (i) enable us to attract and retain the types of officers and employees who will contribute to our long-term success; (ii) provide incentives that align the interests of employees with those of our stockholders; and (iii) promote the success of our business.

 

Administration of the Omnibus Plan

 

The Omnibus Plan will be administered by a committee selected by the Board and composed of two or more directors. All members of the committee will be “non-employee directors” as defined under federal securities law and “outside directors” as defined by regulations promulgated under Section 162(m). Unless otherwise determined by the Board, the Independent Subcommittee of the Compensation Committee will administer the Omnibus Plan.

 

The Compensation Committee will have exclusive and final authority to administer and interpret the Omnibus Plan, including the power to:

Determine eligibility for participation;

Establish performance goals for each participant;

Determine the types of awards to be granted to participants; and

Interpret the terms and provisions of the Omnibus Plan and any award.

 

Any determination made by the Compensation Committee under the Omnibus Plan will be made in the sole discretion of the Compensation Committee, and such determinations will be final and binding on all persons.

 

The Compensation Committee may delegate any of its powers and responsibilities in respect of the Omnibus Plan, and our full Board may exercise any of the Compensation Committee’s powers and responsibilities. However, the Compensation Committee may not delegate any of its powers or responsibilities, and the full Board may not exercise any of those powers or responsibilities, to the extent that those actions would cause an award that is intended to be exempt from the limits on deductibility under Section 162(m) to lose that exemption or would cause an award to a director or executive officer to fail to be exempt from short-swing profit recovery under Section 16(b) of the Exchange Act.

 

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Eligible Participants in the Omnibus Plan

 

The Compensation Committee may select any or all of the following classes of persons to be granted awards under the Omnibus Plan:

Officers and employees of TCF Financial Corporation and/or any of our subsidiaries or affiliates; and

Individuals who have accepted offers of employment from TCF Financial Corporation, and/or from any of our subsidiaries or affiliates; provided, however, that no grant will be effective prior to the date on which such individual’s employment commences.

 

As of February 28, 2018, TCF had approximately 5,800 employees.

 

Limits on Awards We May Issue Under the Omnibus Plan

 

Share Limits

 

The maximum number of shares of TCF common stock that may be issued pursuant to awards granted under the Omnibus Plan will be the sum of (i) 2.0 million, (ii) the number of unallocated shares remaining available for grant immediately prior to the Annual Meeting under the Incentive Stock Program, and (iii) shares that become available for grants under the Omnibus Plan in accordance with its terms after the effective date of the Omnibus Plan. If the Amended and Restated Omnibus Plan is approved by our stockholders, we will have an additional 4,000,000 shares available for awards. No individual participant may be granted (i) stock options and stock appreciation rights under the Omnibus Plan relating to more than 800,000 shares during any fiscal year or (ii) awards other than stock options and stock appreciation rights under the Omnibus Plan relating to more than 500,000 shares during any fiscal year.

 

The number of shares reserved for issuance may be adjusted in the event of a stock or extraordinary cash dividend, stock split or reverse stock split, or an extraordinary corporate transaction, such as any recapitalization, reorganization, merger, consolidation, combination or exchange, or any other relevant change in capitalization occurring after the date of grant of an award under the Omnibus Plan. Any shares of common stock subject to an award that is canceled, forfeited or expires prior to exercise or realization, either in full or in part, shall again become available for issuance under the Omnibus Plan in accordance with the terms of the Omnibus Plan. However, the following shares will not again become available for issuance under the Omnibus Plan: (i) shares tendered in payment of an option, (ii) shares delivered or withheld by the Company to satisfy any tax withholding obligation, or (iii) shares covered by a stock-settled stock appreciation right or other awards that were not issued upon the settlement of the award.

 

Limits on Certain Cash Awards

 

The Omnibus Plan authorizes the Compensation Committee to grant awards entitling a participant to payment of cash amounts subject to the attainment of certain performance goals established in accordance with the requirements of Section 162(m). No participant may be paid more than $7.5 million in respect of such awards during any fiscal year, including any amounts earned during such fiscal year and deferred. Awards that are cancelled will continue to be counted towards this individual limitation.

 

Types of Awards We May Issue under the Omnibus Plan

 

The Omnibus Plan allows us to grant awards based on shares of TCF common stock, including stock options, stock appreciation rights, restricted stock, restricted stock units, other stock-based awards, performance-based restricted stock, and performance-based restricted stock units. The closing price of a share of our common stock on the New York Stock Exchange on February 28, 2018 was $22.30. The Plan will also allow us to grant performance cash awards that are denominated in cash and payable upon the attainment of performance goals established by the Compensation Committee.

 

Stock Options

 

The Omnibus Plan enables the Compensation Committee to grant options to purchase TCF’s common stock at specified exercise prices to participants. Options may be granted as “incentive stock options,” which are intended to qualify for favorable tax treatment under federal tax laws, or “nonqualified stock options,” which are not intended to receive such favorable treatment.

 

Under the Omnibus Plan, the Compensation Committee determines the number of options to be granted to each participant. Unless otherwise determined by the Compensation Committee, each option grant will be evidenced by a stock option agreement that specifies the option exercise price, whether the options are intended to be “incentive stock options” or “nonqualified stock options,” the duration of the options, the number of shares underlying the options, and any additional terms determined by the Compensation Committee.

 

Generally, options will be subject to vesting during a period of at least one year following the date of grant; provided, however, that the Compensation Committee may, but is not required to, provide for an acceleration of vesting and exercisability in the terms of any award agreement upon the occurrence of a specified event, such as a change in control or termination of employment due to death, disability or retirement.

 

The Omnibus Plan provides that the Compensation Committee may determine the exercise prices of options, but (except in limited circumstances involving awards assumed in certain corporate transactions) the exercise price of any option cannot be less than the fair market value of a share of common stock on the date of grant; provided that incentive stock options granted to a ten-percent stockholder in the Company will have an exercise price no less than 110% of the fair market value of a share of the common stock on the date of grant. All options we grant under the Omnibus Plan will expire no later than ten years from the date we grant them.

 

Stock options issued under the Omnibus Plan are nontransferable except by will or the laws of descent, except for “nonqualified options,” which will be transferable in certain circumstances to a “permitted transferee,” as defined in the Omnibus Plan, and on terms set by the Compensation Committee. The granting of an option under the Omnibus Plan does not give the participant the rights of a stockholder; the participant gains those rights only after the option is exercised and the shares underlying the option are issued.

 

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The Compensation Committee may not, without prior stockholder approval, seek to “reprice” any previously granted “underwater” options or stock appreciation rights by (i) amending or modifying the terms of the option or stock appreciation right to lower the exercise price; (ii) canceling the option or stock appreciation right and granting either replacement options or stock appreciation rights having a lower exercise price, or other awards or cash in exchange; or (iii) repurchasing the options or stock appreciation rights.

 

Stock Appreciation Rights

 

The Omnibus Plan enables the Compensation Committee to grant awards of stock appreciation rights to participants. A stock appreciation right entitles the participant to receive, upon exercise, an amount equal to the excess, if any, of the fair market value of a share of our common stock over the exercise price of the stock appreciation right.

 

The Omnibus Plan provides that the Compensation Committee may determine the exercise price of any stock appreciation right, but the exercise price cannot be less than the fair market value of a share of common stock on the date the stock appreciation right is granted. Stock appreciation rights we issue under the Omnibus Plan will, unless otherwise determined by the Compensation Committee, be evidenced by an award agreement, which will specify the exercise price, the number of shares underlying the rights, and other limitations, terms, and conditions determined by the Compensation Committee. Under the Omnibus Plan, we will be able to grant “tandem SARs,” which are stock appreciation rights granted in conjunction with an option, and “free-standing SARs,” which are stock appreciation rights not granted in conjunction with an option.

 

Stock appreciation rights will be subject to vesting during a period of at least one year following the date of grant; provided, however, that the Compensation Committee may, but is not required to, provide for an acceleration of vesting and exercisability in the terms of any award agreement upon the occurrence of a specified event, such as a change in control or termination of employment due to death, disability or retirement.

 

Stock appreciation rights issued under the Omnibus Plan will not be transferable except by will or the laws of descent.

 

Restricted Stock

 

The Omnibus Plan enables the Compensation Committee to grant awards of restricted stock to participants. Restricted stock awards are actual shares of TCF’s common stock issued to a participant, subject to conditions on grant, transferability, or vesting based on continued service of the participant, the satisfaction of performance goals, or both. We refer to awards of restricted stock subject to conditions on grant, transferability, or vesting based on the satisfaction of performance goals as “performance-based restricted stock.”

 

Generally, any award of restricted stock will be subject to vesting during a period of at least one year following the date of grant; provided, however, that the Compensation Committee may, but is not required to, provide for an acceleration of vesting in the terms of any award agreement upon the occurrence of a specified event, such as a change in control or termination of employment due to death, disability or retirement.

 

If provided for in an award agreement, a recipient of a grant of restricted stock has the rights of a stockholder with respect to the restricted stock, including the right to vote the stock and to receive all dividends and other distributions paid with respect to the restricted stock, provided, however, that in no event shall a dividend or other distribution or dividend equivalent be paid on performance-based restricted stock until all applicable performance goals have been attained and the award has vested. Subject to the applicable award agreement, the recipient may not sell, transfer, pledge, exchange, or otherwise encumber shares of restricted stock during the restriction period set by the Compensation Committee. Settlement will occur either at the time of vesting or on a deferred basis, as determined by the Compensation Committee or, if the Compensation Committee permits, by election of the recipient.

 

Restricted Stock Units

 

The Omnibus Plan enables the Compensation Committee to grant restricted stock units, which are awards representing a specified number of hypothetical shares of our common stock. The Omnibus Plan enables the Compensation Committee to issue restricted stock units subject to conditions on grant or vesting based on continued service of the participant, conditions based on the satisfaction of performance goals, or both.

 

Generally, any award of restricted stock units will be subject to vesting during a period of at least one year following the date of grant; provided, however, that the Compensation Committee may, but is not required to, provide for an acceleration of vesting in the terms of any award agreement upon the occurrence of a specified event, such as a change in control or termination of employment due to death, disability or retirement.

 

Because restricted stock units are not actual, issued shares of our common stock, recipients do not have the rights of a stockholder. Restricted stock units may not be sold, transferred, pledged, or otherwise encumbered before the units have vested. Restricted stock units that vest will be settled in cash or in shares of common stock or a combination thereof, as determined by the Compensation Committee. Settlement will occur either at the time of vesting or on a deferred basis, as determined by the Compensation Committee or, if the Compensation Committee permits, by election of the recipient.

 

Other Stock-Based Awards

 

The Omnibus Plan enables the Compensation Committee to grant other stock-based awards. Other stock-based awards are awards that are valued by reference to TCF’s common stock, including unrestricted stock, dividend equivalents and convertible debentures. Awards of unrestricted stock may only be granted in lieu of compensation that would otherwise be due and payable to the participant. Generally, other stock-based awards will be subject to vesting during a period of at least one year following the date of grant; provided, however, that the Compensation Committee may, but is not required to, provide for an acceleration of vesting and exercisability in the terms of any award agreement upon the occurrence of a specified event, such as a change in control or termination of employment due to death, disability or retirement.

 

Performance-Based Awards

 

As noted above, the Omnibus Plan authorizes the Compensation Committee to grant performance cash awards, performance-based restricted stock, and performance-based restricted stock units, and to determine that certain awards are qualified performance-based awards. We refer to these kinds of awards collectively as “performance-based awards.”

 

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The performance criteria selected by the Compensation Committee will be based on the attainment of specific levels of performance of the Company (or affiliate, division, business unit or operational unit of the Company). Additionally, any one or more of the performance criteria may be used on an absolute or relative basis to measure the performance of the Company and/or an affiliate as a whole or any division, business unit, operational unit or geographic unit of the Company and/or an affiliate or any combination thereof, as the Compensation Committee may deem appropriate, or as compared to the performance of a group of comparable companies, or published or special index that the Compensation Committee, in its sole discretion, deems appropriate, or the Compensation Committee may also select performance criteria as compared to various stock market indices. Any performance criteria may be used individually or in combination with any other performance criteria, and may be further defined in the applicable award agreement. The Compensation Committee also has the authority to provide for vesting of any award based on the achievement of performance goals pursuant to the performance criteria specified above.

 

The Compensation Committee may, in its sole discretion, provide that one or more objectively determinable adjustments shall be made to one or more of the performance goals, but only to the extent any such adjustment would not cause the award to fail to qualify as “performance-based compensation” under Section 162(m).

 

The provisions regarding Section 162(m) remain intact in the amended Omnibus Plan, although the Tax Reform and Jobs Act of 2017 generally eliminated the ability to deduct compensation qualifying for the “performance-based compensation” exception under Section 162(m) for tax years commencing after December 31, 2017, and we therefore do not expect to make future awards intended to qualify for this treatment. We expect that awards representing binding obligations under the Omnibus Plan prior to November 2, 2017 that were intended to qualify as “performance-based compensation” will generally remain eligible for deduction under that exception pursuant to a provision of the Tax Reform and Jobs Act providing relief for existing binding agreements, and the proposed Omnibus Plan amendment is intended not to modify the rules applicable to such existing awards in a manner that would result in such deduction ceasing to be available. However, the IRS has not yet provided any guidance addressing what would cause a “written binding contract” to be “modified in any material respect”, and therefore we cannot be certain that awards that were intended to qualify as “performance-based compensation” will remain eligible for deduction.

 

Deferral of Awards

 

The Compensation Committee may establish one or more programs under the Omnibus Plan to permit selected participants the opportunity to elect to defer receipt of consideration upon exercise of an award, satisfaction of performance criteria, or other event that, absent the election, would entitle the participant to payment or receipt of shares of common stock or other consideration under an award. The Compensation Committee may establish the election procedures, the timing of such elections, the mechanisms for payments of, and accrual of interest or other earnings, if any, on amounts, shares or other consideration so deferred, and such other terms, conditions, rules and procedures that the Compensation Committee deems advisable for the administration of any such deferral program.

 

Change in Control

 

The occurrence of a change in control (as defined in the Omnibus Plan) shall not alone result in the accelerated vesting of an award under the Omnibus Plan. Each award agreement will provide the terms and conditions that will govern in the event of a change in control, which could include the provision for full vesting and exercisability of an award in connection with a change in control.

 

Effective Date; Term; Amendment to Plan

 

The Amended and Restated Omnibus Plan will be effective as of April 25, 2018, subject to and contingent upon approval by at least a majority of the shares present in person or by proxy and entitled to vote on the subject matter in response to this Proposal. The Omnibus Plan has a term of ten years.

 

The Board may amend or terminate the Omnibus Plan, but no amendment or termination may be made that would materially impair the rights of a participant with respect to a previously granted award without the participant’s consent, except such an amendment made to comply with applicable law, including, without limitation, Section 409A of the Code, Section 162(m) of the Code, Section 422 of the Code, stock exchange rules or accounting rules. In addition, no amendment may be made without the approval of our stockholders to the extent that such approval is required by applicable law or by the listing standards of the applicable exchange.

 

Except as otherwise provided in the Omnibus Plan, the Compensation Committee at any time, and from time to time, may amend the terms of any one or more awards; provided, however, that the Compensation Committee may not adopt any amendment which would otherwise constitute an impairment of the rights under any award unless (a) the Company requests the consent of the participant and (b) the participant consents in writing.

 

Federal Income Tax Consequences

 

The following is a summary of certain U.S. federal income tax consequences of awards we may make under the Omnibus Plan. The discussion is general in nature; we have not taken into account a number of considerations which may apply in light of the circumstances of a particular participant. The income tax consequences under applicable state and local tax laws may not be the same as under U.S. federal income tax laws.

 

Non-Qualified Stock Options

 

The participant will not recognize taxable income at the time of a grant of a non-qualified stock option, and we will not be entitled to a tax deduction at that time. A participant will recognize compensation taxable as ordinary income (and be subject to tax withholding) upon exercise of a nonqualified stock option; the recognized compensation will be equal to the excess of the fair

 

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market value of the shares purchased over their exercise price. We generally will be entitled to a corresponding deduction upon exercise of a nonqualified stock option, except to the extent that the deduction limits of Section 162(m) apply.

 

Incentive Stock Options

 

The participant will not recognize taxable income at the time of a grant of an incentive stock option. The participant will also not recognize taxable income (except for purposes of the alternative minimum tax) upon exercise of an incentive stock option.

 

If the shares acquired by exercise of an incentive stock option are held for the longer of (i) two years from the date the option was granted and (ii) one year from the date the shares were purchased, any gain or loss arising from disposition of those shares, based on the excess of the amount realized upon the disposition over the original exercise price, will be taxed as a long term capital gain or loss, and we will not be entitled to any deduction. If, however, the shares acquired are not held for the periods described above, then in the year of disposition the recipient will recognize compensation taxable as ordinary income, equal to the excess of the lesser of (i) the amount realized upon such disposition and (ii) the excess of the fair market value of such shares on the date of exercise over the exercise price. We generally will be entitled to a corresponding deduction at that time, except to the extent that the deduction limits of Section 162(m) apply. The excess of any amount realized in the disposition over the fair market value of the stock on the exercise date will be treated as a capital gain.

 

Stock Appreciation Rights

 

The recipient will not recognize taxable income at the time of a grant of a stock appreciation right, and we will not be entitled to a tax deduction at that time. Upon exercise, however, the recipient will recognize compensation taxable as ordinary income (and subject to tax withholding) equal to the fair market value of any shares delivered and the amount of cash paid by us in settlement of the rights, and we generally will be entitled to a corresponding deduction at that time, except to the extent that the deduction limits of Section 162(m) apply.

 

Restricted Stock

 

The recipient of restricted stock will not recognize taxable income at the time of a grant of shares of restricted stock, and we will not be entitled to a tax deduction at such time, unless the participant makes an election under Section 83(b) of the Code to be taxed at that time. If that election is made, the participant will recognize compensation taxable as ordinary income (and subject to tax withholding) at the time of the grant, equal to the excess of the fair market value of the shares at such time over the amount, if any, paid for such shares. If such election is not made, the participant will recognize compensation taxable as ordinary income (and subject to tax withholding) at the time the restrictions lapse, in an amount equal to the excess of the fair market value of the shares at such time over the amount, if any, paid for such shares. We will generally be entitled to a corresponding deduction at the time the ordinary income is recognized by the recipient, except to the extent that the deduction limits of Section 162(m) apply.

 

In addition, a participant receiving dividends with respect to restricted stock for which the above-described election has not been made, and prior to the time the restrictions lapse, will recognize compensation taxable as ordinary income (and subject to tax withholding) rather than dividend income. We will generally be entitled to a corresponding deduction, except to the extent that the deduction limits of Section 162(m) apply.

 

Restricted Stock Units

 

The recipient will not recognize taxable income at the time of a grant of a restricted stock unit, and we will not be entitled to a tax deduction at that time. The recipient will recognize compensation taxable as ordinary income (and subject to tax withholding), however, at the time of the settlement of the award, equal to the fair market value of any shares delivered and the amount of cash paid by us. We will be entitled to a corresponding deduction, except to the extent that the deduction limits of Section 162(m) apply.

 

Unrestricted Stock

 

The recipient of unrestricted stock, and of restricted stock subject only to restrictions on transferability, will recognize compensation taxable as ordinary income (and subject to tax withholding) at the time of the grant, equal to the excess of the fair market value of the shares at such time over the amount, if any, paid for such shares. We will generally be entitled to a corresponding deduction at that time, except to the extent that the deduction limits of Section 162(m) apply.

 

The foregoing general tax discussion is intended for the information of our stockholders considering how to vote with respect to this proposal, and not as tax guidance to participants in the Omnibus Plan. We strongly urge participants to consult their own tax advisors regarding the federal, state, local, foreign, and other tax consequences of participating in the Omnibus Plan.

 

New Plan Benefits

 

All future grants under the Omnibus Plan are within the discretion of the Omnibus Plan administrator and are therefore not determinable. The grants made under the Omnibus Plan to our NEOs in the last fiscal year are described under the heading “2017 Payments of Named Executive Officers – Key 2017 and Early 2018 Compensation Events – 2017 Long-term Incentives” above.

 

What is the Board’s Recommendation on Voting on this Proposal?

 

The Board unanimously recommends that TCF Financial stockholders vote “FOR” this Proposal.

 

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Proposal 3 Approve the Amended and Restated Directors Stock Grant Program to Increase the Value of the Annual Grant of Restricted Stock to $55,000

 

 

Background

 

 

Stockholders approved the adoption of the amended and restated TCF Directors Stock Grant Program (the “Directors Stock Grant Program”) in 1996, its renewal in 2005 and its amendment in 2012. In January 2018, the Board approved an amendment to the Directors Stock Grant Program which is now being submitted to the stockholders for approval.

 

The Directors Stock Grant Program is intended to attract and retain qualified individuals to serve as Directors of TCF and to encourage and enhance ownership of TCF common stock by these individuals.

 

 

Description of Amendment

 

 

In January 2018, the Board approved, subject to stockholder approval, an amendment to the Directors Stock Grant Program to (i) increase the value of the annual grant of time-vesting restricted stock to each Director from $45,000 to $55,000, (ii) to make a one-time true-up grant of time-vesting restricted stock valued at $10,000 to each Director on May 1, 2018 if the Directors Stock Grant Program is approved by the stockholders at the Annual Meeting, and (iii) to make other technical and clarifying changes. Additionally, upon stockholder approval, the term of the Directors Stock Grant Program will be extended from April 25, 2022 to April 25, 2028.

 

 

Rationale for Approval

 

 

FW Cook, the Compensation Committee’s independent compensation consultant, conducted a director compensation assessment, reviewing both the design of TCF’s Director compensation, as well as its level of competitiveness. Taking into account the report’s recommendations, the Board amended the Directors Stock Grant Program, subject to stockholder approval, to increase the amount of the stock awards, which is intended to align Director compensation more closely with market practice and to make it more competitive.

 

 

Summary of the Directors Stock Grant Program

 

 

The following summary of the Directors Stock Grant Program is qualified in its entirety by reference to the full text of the Directors Stock Grant Program, a copy of which is set forth as Appendix II to this proxy statement with additions underlined and deletions indicated by strikeout. This discussion is only a summary. Stockholders are urged to read the complete text of the Directors Stock Grant Program for more complete information.

 

Purpose of Directors Stock Grant Program

 

The purpose of the Directors Stock Grant Program is to attract and retain qualified individuals to serve as directors of TCF, and to encourage and enhance ownership of TCF common stock by these individuals.

 

Eligible Participants in the Directors Stock Grant Program

 

Only non-employee Directors of TCF are eligible to receive awards under the Directors Stock Grant Program. As of February 28, 2018, there were 12 non-employee Directors.

 

Awards Under the Directors Stock Grant Program

 

If the Directors Stock Grant Program is approved, the non-employee Directors will receive annual restricted stock awards valued at $55,000, a $10,000 increase from the current Directors Stock Grant Program, that will vest on the next annual grant date, subject to continued service on the Board. In addition, a one-time grant of time-vesting restricted stock valued at $10,000 will be made to each non-employee Director on May 1, 2018 if the Directors Stock Grant Program is approved by stockholders at the Annual Meeting. This one-time grant will be in addition to the $45,000 grant made on January 16, 2018 so that the total value of the restricted stock granted to non-employee Directors in 2018 will be equal to $55,000.

 

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Change in Control

 

The Directors Stock Grant Program also provides for vesting of all shares in the event of a “change in control” not approved in advance by a majority of the Board. Under the Directors Stock Grant Program, a change in control occurs if:

 

any “person” as defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is or becomes the “beneficial owner,” as defined in Rule 13d-3 under the Exchange Act, of securities of TCF representing 30% or more of the combined voting power of TCF’s then outstanding securities;
during any period of two consecutive years there ceases to be a majority of the Board who were Directors at the beginning of the period or whose nomination for election by TCF’s stockholders was approved by a vote of at least two-thirds of the Directors then still in office who either were Directors at the beginning of the period or whose election or nomination for election was previously so approved; or
the stockholders approve a merger or consolidation of TCF with any other corporation, other than a merger or consolidation which would result in the voting securities of TCF outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 70% of the combined voting power of the voting securities of TCF or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of TCF approve a plan of complete liquidation of TCF of all or substantially all of TCF’s assets; provided, however, that no change in control will be deemed to have occurred if such merger, consolidation, sale or disposition of assets, or liquidation is not subsequently consummated.

 

Treatment Upon Retirement or Separation from Board

 

All shares immediately vest upon a Director’s retirement from service on the Board pursuant to the Board policy on Director retirement in effect at that time. Currently, the retirement age for the Board is 68 years old, and any Director who ceases service after reaching that age is deemed to have retired. If a non-employee Director of TCF ceases to be a member of the Board for any other reason (including, but not limited to death, disability, or early retirement), all unvested shares will be forfeited and returned to TCF.

 

Administration of the Directors Stock Grant Program

 

Full power to construe, interpret, and administer the Directors Stock Grant Program is vested with the Compensation Committee of the Board.

 

The number of shares awarded will be automatically adjusted to reflect any changes in the outstanding stock of TCF by reason of any reorganization, recapitalization, stock split, stock dividend, combination or exchange of shares, merger, consolidation, or any changes in the corporate structure of TCF or shares of TCF common stock.

 

Effective Date; Term; Amendment to Plan

 

If the amendments are approved by stockholders, the Directors Stock Grant Program will remain in effect until April 25, 2028, unless earlier terminated by the Board. The Board generally may amend, not more frequently than once every six months, or terminate the Directors Stock Grant Program at any time. No amendment or termination of the Directors Stock Grant Program by the Board may have the effect of impairing any awards previously granted to a participant, unless the participant consents to such impairment.

 

New Plan Benefits

 

If this Proposal is approved, the following table shows the benefits that are expected to be earned under the Directors Stock Grant Program over the next ten years:

 

Name and Position  Shares of Restricted
Stock Granted (#)
 
Craig R. Dahl, Director, Chairman, President and CEO    
Brian W. Maass, Executive Vice President and Chief Financial Officer    
William S. Henak, Executive Vice President, Wholesale Banking    
Michael S. Jones, Executive Vice President, Consumer Banking    
Thomas F. Jasper, Director, Vice Chairman and Chief Operating Officer    
Executive Officers Group    
Non-Executive Directors Group   300,498(1)
Non-Executive Officer Employees Group    

(1)The table assumes that stock awards will be made to 11 non-employee Directors for the ten year term of the Directors Stock Grant Program. The one-time grant of $10,000 to be made in 2018 and the annual grant of $55,000 to be made starting in 2019 until expiration are converted to shares of TCF Stock by dividing the total value of all expected future awards by $20.50, the year-end closing stock price. The table does not include any value for dividends, which if paid, will be paid at the regular rate paid to TCF stockholders generally.

 

 

What is the Board’s Recommendation on Voting on this Proposal?

 

 

The Board unanimously recommends that TCF Financial stockholders vote “FOR” this Proposal.

 

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Proposal 4 Advisory (Non-Binding) Vote to Approve Executive Compensation (“Say on Pay”)

 

In accordance with Section 14A of the Securities Exchange Act of 1934 (the “Exchange Act”), TCF is asking stockholders on an advisory (non-binding) basis to approve the executive compensation of TCF’s NEOs as described in the CD&A and tabular disclosure and accompanying narrative discussions of NEO compensation in this Proxy Statement and related material (“Say on Pay”). TCF conducts annual Say on Pay votes and expects to conduct the next Say on Pay vote at the 2019 Annual Meeting.

 

The Board believes that the balanced compensation mix consisting of base salary, annual cash incentives and long-term equity incentives achieves our compensation objectives, including attracting, rewarding, and retaining highly qualified executives, linking pay to individual and Company performance, aligning the interests of executives with stockholders, and providing the greatest pay opportunity for superior performance for sustained periods of time through business cycles.

 

We believe that stockholders have responded positively to the changes made over the last several years to our compensation program, with TCF receiving approximately 85% of votes cast FOR TCF’s 2016 compensation last year. The changes made by TCF in recent years include:

 

All equity awards granted after January 1, 2015 now include a “double trigger,” such that the award will not vest in connection with a change in control unless the executive’s employment is terminated without cause within one year thereof.
Annual cash incentives since 2015 have been based on performance metrics (ROA and ROTCE) that are widely used and tracked in the industry and demonstrate efficient use of capital and the 2017 annual cash incentives were paid out in performance-based restricted stock tied to net income available to common stockholders instead of cash.
Half of target long-term incentives beginning in 2015 have been based on our total stockholder return relative to our peers over a three-year performance period.
In 2015, TCF adopted an Executive Severance Policy limiting amounts payable under future severance agreements to 2.99 times the sum of an executive’s salary and target bonus unless stockholder approval is received. A copy of the Executive Severance Policy is available on our website at ht