TCF Sets the Stage for Cooper's Exit
TCF Financial Corp. announced a surprise leadership change Monday, reinstalling its iconic former chief executive less than a week after reporting disappointing earnings plagued by deteriorating credit.
TCF Financial Corp. in Wayzata, Minn., has promoted its chief risk officer, Barry N. Winslow, to head of corporate development as part of a broad management realignment aimed at better competing in an increasingly challenging banking climate.
TCF Financial (TCB) in Wayzata, Minn., has set the stage for ending William Cooper's second act as its chief executive.
TCF disclosed in a regulatory filing that it had amended its employment agreement with Cooper, who came out of retirement in 2008 to guide the $18.4 billion-asset company through the financial crisis, to include verbiage tied to succession planning.
Cooper will remain TCF's chief executive through the end of 2015 or "until such time as the board appoints a successor," the filing said. He would remain chairman until the end of 2017.
The agreement's latest iteration provides for "an orderly succession plan," Mark Goldman, TCF's spokesman says, while also providing for the "future separation of the chairman and CEO roles." Goldman said that Cooper was unavailable to comment further.
Cooper, 70, strongly indicated when he succeeded Lynn Nagorske in mid-2008 that he would likely stay for about five years. In July, he will be marking the sixth anniversary since his return, weathering a financial crisis, regulatory overhaul and ongoing efforts to reinvent his company.
"This is his evolution of the bank," says Christopher McGratty at Keefe, Bruyette & Woods. "He has had to reinvent TCF multiple times. Over the last two to three years he has been focusing on diversification and pursuing businesses that were never originally part of the bank."
The decision to set up succession now makes a lot of sense, industry experts say. Over the years, it has proven difficult to separate TCF's identity from that of its feisty chief.
There are several executives who could be candidates for TCF's top job, including Thomas Jasper and Craig Dahl. Industry experts point to an October 2011 reshuffling where Jasper, TCF's former chief financial officer, became vice chairman of funding, operations and finance, and Dahl, once head of specialty finance, became vice chairman in charge of lending.
"I'd be very surprised if they looked externally because they have several long-tenured executives," McGratty says.
Still, there is always a chance TCF could instead decide to sell itself, industry experts say. They note that Cooper has admitted to coming close to selling TCF once in the past, and he has often acknowledged that he could sell if the right offer came along.
Selling a bank of TCF's size might be tough because it could potentially push the acquiring institution above $50 billion of assets, McGratty says. At that size, a bank would be considered a systemically important financial institution under the Dodd-Frank Act and face heightened regulatory scrutiny.
TCF has also had past regulatory issues that could make a buyer wary, particularly issues with the Bank Secrecy Act. Last year, the company agreed to pay a $10 million penalty to the Office of the Comptroller of the Currency after the OCC found that TCF had failed to file reports on more than $7 million of suspicious transactions over a nearly two-year period. The OCC removed an October 2010 order tied to BSA issues in December.
Still, all options must be on the table for directors. "This amended contract doesn't reveal all the strategic alternatives that are going on behind the scenes," says Rod Taylor, president of executive recruiting firm Taylor & Co. Taylor, who isn't working with TCF, says it is also possible that Cooper could change his mind and decide to remain CEO beyond December 2015.
The employment agreement only indicates that Cooper "wants to have the option" to retire, Taylor says.
Should Cooper retire from TCF a second time, there is a high likelihood he will remain in banking despite a noncompete clause that bars him from working at most financial firms for three years after retiring.
TCF and Cooper worked out a key exception; he can continue to work with his son at the $116 million-asset Cooper State Bank or its holding company, C Financial. Cooper helped his son form the Dublin, Ohio, bank in 2005. He is also the bank's controlling shareholder.
Cooper could also work with any company that agrees to buy Cooper State, provided the buyer has less than $500 million of assets.
"It shows that TCF doesn't view that bank as a competitive threat," McEvoy says. "And it shows that the board recognizes how important he has been to TCF and that they want to allow him to continue to work with the people he enjoys."