Stock Based Compensation

9 Months Ended

Sep. 30, 2019

Share-based Payment Arrangement [Abstract]

Before the Merger, Chemical and Legacy TCF granted share-based awards under their respective share-based compensation plans, including the Chemical Stock Incentive Plan of 2019 (the "Stock Incentive Plan of 2019”") and the TCF Financial 2015 Omnibus Incentive Plan (the "Legacy TCF Omnibus Incentive Plan"). At September 30, 2019, there were 2,270,795 shares reserved for issuance under the Legacy TCF Omnibus Incentive Plan and there were 1,914,083 shares reserved for issuance under the Stock Incentive Plan of 2019.

In connection with the Merger, each equity award granted under Legacy TCF’s equity plans, including the Legacy Omnibus Incentive Plan, was legally assumed by the combined company and adjusted so that its holder is entitled to receive a number of shares of TCF Financial's common stock equal to the product of (a) the number of shares of Legacy TCF common stock subject to such award multiplied by (b) the Exchange Ratio and (c) rounded, as applicable, to the nearest whole share, and otherwise subject to the same terms and conditions (including, without limitation, with respect to vesting conditions (taking into account any vesting that occurred at the Merger Date) and cash dividend equivalent rights). For any Legacy TCF equity awards that were subject to performance-based vesting at multiple achievement levels, the number of shares of Legacy TCF common stock underlying such award was calculated and fixed as of the Merger Date assuming achievement of the applicable performance conditions at the greater of target level performance or the actual level of achievement of Legacy TCF’s performance results through the latest practicable date before the Merger Date, and such awards converted into service-based vesting awards with the applicable vesting date to be the last day of the original performance period. For purposes of Legacy TCF equity awards for which performance was achievable at a single level, the performance condition was deemed satisfied as of the Merger Date.

In connection with the Merger, all outstanding stock options, performance-based restricted stock units and time-vesting restricted stock units of Chemical, which we refer to as the Chemical equity awards, which were outstanding immediately before the Merger Date continue to be awards in respect of TCF Financial common stock following the Merger, subject to the same terms and conditions that were applicable to such awards before the Merger Date, except with respect to performance-based restricted stock units. Because the Merger constituted a change in control for purposes of the Chemical equity awards, the performance-based restricted stock units for which performance results had not been measured were measured as of the latest practicable date before the Merger Date and the number of performance-based restricted stock units was fixed at the greater of the target (100%) performance level or actual performance, which we refer to as the “Chemical Earned Awards,” and such Chemical Earned Awards will continue to vest based on the executive’s continued service through the end of the applicable performance period.

The fair value of share-based awards is recognized as compensation expense over the requisite service or performance period. Compensation expense for share-based awards was $4.8 million and $9.5 million for the three and nine months ended September 30, 2019, respectively, and $3.5 million and $13.1 million for the same periods in 2018. The excess tax benefit realized from share-based compensation transactions during the three and nine months ended September 30, 2019 was a benefit of $0.7 million and $2.0 million, respectively, and $0.3 million and $2.4 million for the same periods in 2018.

Restricted Stock Units

We can grant performance-based restricted stock units ("PRSUs") and time-based restricted stock units ("TRSUs") (collectively referred to as "RSUs") under the Stock Incentive Plan of 2019 and the Legacy TCF Omnibus Incentive Plan; provided, that, RSUs granted under the Legacy TCF Omnibus Incentive Plan may only be granted to former employees of Legacy TCF. At September 30, 2019, there were no PRSUs outstanding dependent on achieving certain performance target levels and the grantee completing the requisite service period. The TRSUs vest upon satisfaction of a service condition. Upon achievement of the performance target level and/or satisfaction of a service condition, as applicable, the RSUs are converted into shares of TCF Financial's common stock on a one-to-one basis.

A summary of the activity for RSUs at and for the nine months ended September 30, 2019 is presented below:



	Number of Units		Weighted-average Grant Date Fair Value Per Unit
Outstanding at December 31, 2018	406,575		$	17.33
Outstanding at December 31, 2018 as adjusted for conversion	206,580		34.11
Granted	533,267		41.51
Converted in the Merger⁽¹⁾	55,022		42.06
Acquired in the Merger	824,757		47.71
Forfeited/canceled	(20,648	)	41.64
Vested	(104,652	)	28.85
Outstanding at September 30, 2019	1,494,326		$	38.46


(1)	In connection with the Merger, certain Legacy TCF PRSUs were converted at their maximum payout into 55,022 TRSUs.

Unrecognized compensation expense related to RSUs totaled $45.8 million and is expected to be recognized over the remaining weighted-average period of 2.4 years at September 30, 2019.

Restricted Stock Awards

TCF's restricted stock award transactions were as follows:



	Number of Awards		Weighted-Average Grant Date Fair Value Per Award
Outstanding at December 31, 2018	2,289,446		$	16.70
Outstanding at December 31, 2018 as adjusted for conversion	1,163,232		32.87
Granted	269,915		40.82
Forfeited/canceled	(135,760	)	34.15
Vested	(368,291	)	31.07
Outstanding at September 30, 2019	929,096		$	40.47

At September 30, 2019, there were no shares of performance-based restricted stock awards outstanding. Unrecognized stock compensation expense for restricted stock awards was $22.5 million with a weighted-average remaining amortization period of 2.5 years at September 30, 2019.

Stock Options

A summary of activity for TCF's stock options at and for the nine months ended September 30, 2019 is presented below:



	Non-Vested Stock Options Outstanding				Stock Options Outstanding
	Number of Options		Weighted-average Exercise Price		Number of Options		Weighted- average Exercise Price
Outstanding at December 31, 2018	—		$	—	—		$	—
Acquired⁽¹⁾	127,906		39.38		520,379		29.48
Forfeited/canceled	(3,094	)	32.81		—		—
Expired	—		—		(756	)	32.81
Vested	(1,144	)	46.95		1,144		46.95
Outstanding at September 30, 2019	123,668		$	39.47	520,767		$	29.51
Exercisable/vested at September 30, 2019					520,767		$	29.51


(1)	Options acquired in the Merger expire ten years from the date of grant and vest ratably over a five-year period.

The weighted-average remaining contractual term was 4.28 years for all outstanding stock options and 3.7 years for exercisable stock options at September 30, 2019. The intrinsic value of all outstanding in-the-money stock options and exercisable in-the-money stock options was $5.8 million and $5.3 million, respectively, at September 30, 2019. The aggregate intrinsic values of outstanding and exercisable options at September 30, 2019 were calculated based on the closing market price of TCF Financial's common stock on September 30, 2019 of $38.07 per share less the

exercise price. Options with intrinsic values less than zero, or "out-of-the-money" options, are not included in the aggregate intrinsic value reported.

No cash was received from option exercises during the nine months ended September 30, 2019 and for the same period in 2018.

At September 30, 2019, unrecognized compensation expense related to stock options totaled $0.7 million and is expected to be recognized over a remaining weighted average period of 1.88 years.