UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT
PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Popular, Inc. | ||||
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NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS AND
PROXY STATEMENT
PROXY STATEMENT SUMMARY | 1 | |||
CORPORATE GOVERNANCE, DIRECTORS AND EXECUTIVE OFFICERS | 7 | |||
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EXECUTIVE AND DIRECTOR COMPENSATION | 31 | |||
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2017 Executive Compensation Tables and Compensation Information |
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | 62 | |||
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Shares Beneficially Owned by Directors and Executive Officers of Popular |
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PROPOSALS | 65 | |||
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Proposal 4: Ratification of Appointment of Independent Registered Public Accounting Firm |
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AUDIT COMMITTEE REPORT | 70 | |||
GENERAL INFORMATION ABOUT THE MEETING | 71 | |||
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APPENDIX APROPOSED AMENDMENT TO ARTICLE SEVENTH OF THE RESTATED CERTIFICATE OF INCORPORATION | 77 | |||
APPENDIX BPOPULAR, INC., RECONCILIATION OF NON-GAAP MEASURES | 78 |
This summary highlights information contained elsewhere in this Proxy Statement. You should read the entire Proxy Statement before voting.
Meeting Agenda and Voting Recommendations
PROPOSAL 1
Election of Directors
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR EACH NOMINEE. |
We are asking shareholders to elect four directors. Populars directors are elected for a term of three years by the affirmative vote of a majority of the shares represented at the annual meeting in person or by proxy and entitled to vote. The table below sets forth information with respect to our four nominees standing for election. All of the nominees are currently serving as directors. Additional information about the director candidates and their respective qualifications can be found on the Nominees for Election as Directors and Other Directors section of this Proxy Statement.
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IGNACIO ALVAREZ |
ALEJANDRO M. BALLESTER |
RICHARD L. CARRIÓN |
CARLOS A. UNANUE |
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Age 59
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Age 51
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Age 65
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Age 54
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President and CEO of Popular, Inc.
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President of Ballester Hermanos, Inc.
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Executive Chairman of Popular, Inc.
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President of Goya de Puerto Rico
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Director since July 2017
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Director since 2010
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Director since 1991 | Director since 2010 | |||||||||||||||||||||
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PROPOSAL 2
Amendment to Restated Certificate of Incorporation
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION. |
We are asking shareholders to approve an amendment to Article Seventh of Populars Restated Certificate of Incorporation to provide that directors shall be elected by a majority of the votes cast by shareholders at the annual meeting of shareholders, provided that if the number of nominees exceeds the number of directors to be elected, the director nominees shall be elected by a plurality of the votes cast. Additional information with respect to the proposed amendment can be found in Proposal 2: Amendment to Article Seventh of Populars Restated Certificate of Incorporation to Amend the Voting Standard for the Election of Directors to Provide that Directors Shall be Elected by a Majority of the Votes Cast by Shareholders at the Annual Meeting of Shareholders, Except that in Contested Elections Directors Shall be Elected by a Plurality of the Votes Cast. In addition, the text of the proposed amendment is set forth in Appendix A to this Proxy Statement.
2018 PROXY STATEMENT | 1
PROPOSAL 3
Advisory Vote to Approve Executive Compensation
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THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL. |
We are asking shareholders to approve, on an advisory basis, the compensation of our named executive officers (NEOs) as described in the sections titled Compensation Discussion and Analysis and 2017 Executive Compensation Tables and Compensation Information. We hold this advisory vote on an annual basis.
PROPOSAL 4
Ratification of Auditors
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THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR RATIFICATION. |
We are asking shareholders to ratify the Audit Committees appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2018. Information on fees paid to PricewaterhouseCoopers LLP during 2017 and 2016 appears on the Proposal 4: Ratification of Appointment of Independent Registered Public Accounting Firm section of this Proxy Statement.
PROPOSAL 5
Adjournment or Postponement of the Meeting
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THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ADJOURNMENT OR POSTPONEMENT OF THE MEETING IN THE EVENT THERE ARE NOT SUFFICIENT VOTES TO ADOPT PROPOSAL 2. |
We are asking shareholders to approve the adjournment of the meeting, if necessary or appropriate, in order to allow for the solicitation of additional proxies in the event that there are not sufficient votes at the time of the meeting to adopt Proposal 2. This Proposal relates to the amendment to Article Seventh of the Corporations Restated Certificate of Incorporation to provide that directors shall be elected by a majority of the votes cast by shareholders at the annual meeting of shareholders, provided that if the number of nominees exceeds the number of directors to be elected, the director nominees shall be elected by a plurality of the votes cast.
For additional information about the meeting please refer to the General Information About the Meeting section of this Proxy Statement.
2 | 2018 PROXY STATEMENT
2017 Financial Performance and Executive Compensation Highlights
2017 CORPORATE HIGHLIGHTS
During 2017, we demonstrated the continued strength of our franchise while operating in a challenging economic environment impacted by the unprecedented destruction and disruption caused by hurricanes Irma and Maria. Notwithstanding the hurricanes impact, we persevered to achieve year-over-year growth in our net interest income, stable credit indicators and strong capital levels. Despite the challenges posed by the Puerto Rico economy and the hurricanes that made landfall in 2017, our Puerto Rico business experienced growth in deposits, an increase in our customer base and strong net interest margins. In the United States, our total loan portfolio grew mainly driven by an increase in our commercial loan portfolio. During 2017, Populars capital level remained strong. Our quarterly common stock dividend increased from $0.15 to $0.25 per share, and a common stock repurchase program of $75 million was completed by the Corporation.
Popular also enhanced its employees physical, emotional and financial well-being through expanded services in our Health and Wellness Center and an increased retirement savings plan matching contribution. During 2017, Popular also implemented several initiatives to develop a robust pool of leadership talent and give our employees tools to improve efficiency and customer satisfaction.
True to Populars core value of social commitment, our Puerto Rico and U.S. foundations sourced and provided valuable financial and in-kind assistance to areas severely impacted by the hurricanes, including the distribution of water, food and medical supplies. We launched the Embracing Puerto Rico initiative, contributed to the Unidos por Puerto Rico fundraising campaign and co-sponsored the Somos Una Voz concert which raised funds for the benefit of earthquake victims in Mexico, and hurricane victims in Texas, Florida, Puerto Rico and the Caribbean.
2017 FINANCIAL HIGHLIGHTS
Our 2017 net income was $107.7 million, reflecting the adverse effect of the hurricanes and the U.S. Tax Cut and Jobs Acts impact on the value of Populars U.S. deferred tax asset (DTA). To provide meaningful information about the underlying performance of our ongoing operations, the $168.4 million DTA write-down is added back to net income to express our results on an adjusted net income basis, which is a non-GAAP measure; on this basis, our adjusted net income was $276.0 million. In addition, as outlined in the Compensation Discussion and Analysis section of this Proxy Statement, the Board of Directors Compensation Committee (the Committee) decided to make further net income adjustments, directly attributable to the hurricanes impact that was beyond the Corporations control, for purposes of certain incentive awards; on this basis, our adjusted net income for incentives was $348.7 million. Refer to GAAP to non-GAAP reconciliation in Appendix B.
Popular (BPOP) shares closed 2017 at $35.49, 19% lower than 2016. This performance compared negatively against our U.S. peers, which increased by 6%, and the KBW Nasdaq Regional Banking Index (KRX), which remained relatively unchanged, but compared favorably to other Puerto Rico banks. Despite concerns about Puerto Ricos economic and fiscal situation, including the Commonwealths May 3rd, 2017 bankruptcy filing under Title III of the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA), for the first nine months of 2017 the price of Populars shares correlated to the movement of the mainland KRX. However, following the impact of Hurricane Maria in September, Populars share price was severely affected, closing the year at levels below our U.S. peers and the KRX. During the first eight weeks of 2018, Populars share price increased by 21%, while the aggregate share price of the KRX, our U.S. peers and other Puerto Rico peer banks rose by 4%, 8% and 20%, respectively.
CEO TRANSITION
As part of a planned leadership transition, Mr. Carrión, after 26 years as Chief Executive Officer (CEO), was appointed Executive Chairman of the Board of Directors. Ignacio Alvarez, who had been President and Chief Operating Officer since 2014, was named President and CEO. Both changes were effective July 1, 2017. To ensure a seamless transition of our CEO role, Mr. Carrión collaborates closely with our new CEO on corporate strategy, with emphasis on mergers and acquisitions, innovation and technology, social responsibility initiatives and government and client relations.
2018 PROXY STATEMENT | 3
EXECUTIVE COMPENSATION PROGRAM HIGHLIGHTS
Our executive compensation program is designed to motivate and reward performance, align executives with shareholder interests, promote building long-term shareholder value, attract and retain highly qualified executives and mitigate conduct that may promote excessive or unnecessary risk taking. Our program is premised upon:
PAY-FOR-PERFORMANCE
w | Focus on variable, incentive-based pay (62%-74% of total target NEO pay is performance-based) |
w | Combination of short-term (cash) and long-term (equity) incentives |
w | Equity awards promote performance and retention of high-performing talent |
w | Total compensation opportunity targeted at median of our peer group |
w | No special retirement or severance programs |
w | Limited perquisites |
STRONG GOVERNANCE
w | Incentive risk mitigation through balanced compensation design and strong internal control framework |
w | No speculative transactions in Popular securities nor pledging of common stock (except for certain grandfathered loans) |
w | Clawback guideline |
w | Annual say-on-pay advisory vote |
w | Independent compensation consultant |
w | Compensation Governance Framework which includes internal guidelines covering compensation programs and incentive design |
EXECUTIVE ALIGNMENT WITH LONG-TERM SHAREHOLDER VALUE
w | Stock ownership requirements |
w | Extended equity vesting (including a portion at retirement) |
w | Double-trigger equity vesting upon change in control |
4 | 2018 PROXY STATEMENT
2017 COMPENSATION PROGRAM AND PAY DECISIONS
For 2017, the total compensation paid to or earned by our NEOs was as follows:
Name and Principal Position
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Salary
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Bonus
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Stock Awards
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Non-Equity
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Change in
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All Other
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Total
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Richard L. Carrión Executive Chairman since July 1, 2017 (formerly Chief Executive Officer through June 30, 2017) |
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$1,300,000
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$50,205
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$
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2,100,000
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$1,016,133
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$170,591
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$209,168
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$4,846,097
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Ignacio Alvarez President and Chief Executive Officer since July 1, 2017 (formerly President and Chief Operating Officer through June 30, 2017) |
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807,500
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37,535
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1,145,670
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831,387
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40,846
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2,862,938
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Carlos J. Vázquez Executive Vice President and Chief Financial Officer (CFO) |
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675,000
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28,225
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506,250
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537,030
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47,055
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21,089
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1,814,649
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Javier D. Ferrer Executive Vice President and Chief Legal Officer (CLO) |
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550,000
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22,932
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412,500
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437,953
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13,639
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1,437,078
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Lidio V. Soriano Executive Vice President and Chief Risk Officer (CRO) |
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500,000
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20,863
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375,000
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365,764
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12,855
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1,274,482
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Eli S. Sepúlveda Executive Vice President Commercial Credit Group |
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450,000
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18,905
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337,500
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363,050
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58,418
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22,342
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1,250,215
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BASE SALARY
Further to our CEO transition plan, changes in base pay were approved for Messrs. Carrión and Alvarez effective July 1, 2017. Upon assuming the Executive Chairman role, Mr. Carrións base pay was adjusted to $1,200,000 (14% reduction). Mr. Alvarezs base salary was increased to $900,000 (26% increase) due to his promotion to the position of President and CEO.
SHORT-TERM ANNUAL CASH INCENTIVE
The short-term annual cash incentive is awarded based on the achievement of corporate results, individual goals and leadership competencies. In 2017, it had a target of 93.1% of base pay for Mr. Carrión, 95.6% for Mr. Alvarez (both prorated for the period before and after the organizational changes) and 80% of base pay for the other NEOs. Actual payouts can range from zero to 1.5 times the target award. After considering all incentive components, the Compensation Committee granted annual cash incentive awards at 78.2% of base pay for Mr. Carrión, 103.0% for Mr. Alvarez, 79.6% for Mr. Vázquez, 79.6% for Mr. Ferrer, 73.2% for Mr. Soriano and 80.7% for Mr. Sepúlveda.
LONG-TERM EQUITY INCENTIVE
The annual equity grant rewards performance and aligns the interests of our NEOs with those of our shareholders. One half of the target award consists of performance shares, with actual earned shares determined at the end of a 3-year performance period based on total shareholder return and earnings per share metrics. The other half of this award consists of restricted stock granted based on corporate and individual performance, with a vesting period. At the time of grant, in February 2017, the target incentive opportunity was 160% of base pay for Mr. Carrión, 100% of base pay for Mr. Alvarez and 80% of base pay for the other NEOs. The actual long-term incentive awards range from zero to 1.5 times the target award. The 2017 long-term incentive awards were granted considering our performance in 2016, during which we strengthened credit quality and capital levels even though our $358.1 million adjusted net income was below our budgeted $401.4 million. Upon consideration of the corporate and individual performance factors, the Compensation Committee granted equity awards in 2017 of 150% of base pay for Mr. Carrión, 93.8% for Mr. Alvarez and 75% for the other NEOs.
2018 PROXY STATEMENT | 5
Our executive compensation programs are discussed in more detail in the Compensation Discussion and Analysis and 2017 Executive Compensation Tables and Compensation Information sections of this Proxy Statement.
PAY MIX IN THE COMPENSATION PROGRAM
Our executive compensation program focuses on the achievement of annual and long-term goals that generate sustained company performance and strong returns to our shareholders. As illustrated in the following chart, a significant portion of total target compensation is at-risk, subject to company and individual performance: 63% of total target compensation for the Executive Chairman, 74% for the President & CEO and 62% for the other NEOs.
PAY MIX IN THE EXECUTIVE COMPENSATION PROGRAM
Each element, at target, as a % of base pay
6 | 2018 PROXY STATEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Our Board of Directors believes that high standards of corporate governance are an essential component of strengthening our corporate culture and embedding our institutional values in our day-to-day business operations. The Boards Corporate Governance and Nominating Committee recommends to the Board the adoption of corporate governance guidelines to protect and enhance shareholder value and to set forth the principles as to how the Board, its various committees, individual directors and management should perform their functions. The Corporate Governance and Nominating Committee considers developments in corporate governance and periodically recommends to the Board changes to our corporate governance principles.
2018 PROXY STATEMENT | 7
BOARD OF DIRECTORS INDEPENDENCE
Lead Director Responsibilities
✓ | Preside over all meetings of the Board at which the Chairman is not present. |
✓ | Preside over executive sessions of the independent directors. |
✓ | Act as liaison between the independent directors and the Chairman. |
✓ | Have authority to call meetings of independent directors. |
✓ | Assist the other independent directors by ensuring that independent directors have adequate opportunities to meet in executive sessions and communicate to the Chairman, as appropriate, the results of such sessions and other private discussions among outside directors. |
✓ | Assist the Chairman and the remainder of the Board in assuming effective corporate governance in managing the affairs of the Board. |
✓ | Serve as the contact person to facilitate communications requested by major shareholders with independent members of the Board. |
✓ | Approve, in collaboration with the Chairman, meeting agendas and information sent to the Board. |
✓ | Approve, in collaboration with the Chairman, meeting schedules to assure that there is sufficient time for discussion of all agenda items. |
✓ | Serve temporarily as Chairman of the Board and the Boards spokesperson if the Chairman is unable to act. |
✓ | Interview Board candidates. |
✓ | Recommend to the Corporate Governance and Nominating Committee nominees to Board committees and sub-committees as may come to the Lead Directors attention. |
✓ | Ensure the Board works as a cohesive team. |
✓ | Be available for consultation and direct communication upon request of major shareholders. |
✓ | Make such recommendations to the Board as the Lead Director may deem appropriate for the retention of consultants who will report to the Board. |
✓ | Retain consultants, with the approval of the Board, as the Lead Director and the Board deem appropriate. |
8 | 2018 PROXY STATEMENT
The Board has four standing Committees: an Audit Committee, a Corporate Governance and Nominating Committee, a Risk Management Committee and a Compensation Committee. All committees operate under written charters which are posted in our website under the heading Corporate Governance at www.popular.com/en/investor-relations/. The following highlights some of the key responsibilities of each standing committee as well as information about committee members and their independence, number of meetings in 2017 and last charter revision date, among others. For additional information on the role of certain of the standing committees in connection with risk oversight, please see the Board Oversight of Risk Management section of this Proxy Statement.
AUDIT COMMITTEE
Members: Alejandro M. Ballester John W. Diercksen C. Kim Goodwin William J. Teuber, Jr. (Chair) Carlos A. Unanue
Independence: Each member of the committee is independent
Audit Committee Financial Expert: Messrs. Teuber and Diercksen and Ms. Goodwin are Audit Committee Financial Experts as defined by SEC rules
Meetings in 2017: 11 meetings of which 8 were devoted to the discussion of earnings releases, Form 10-K and Form 10-Q filings
Charter last revised: December 14, 2017 |
Primary Responsibilities:
Assists the Board in its oversight of:
the outside auditors qualifications, independence and performance;
the performance of Populars internal audit function;
the integrity of Populars financial statements, including overseeing the accounting and financial processes, principles and policies, the effectiveness of internal controls over financial reporting and the audits of the financial statements; and
compliance with legal and regulatory requirements.
In addition, the Audit Committee issues a report, as required by the U.S. Securities and Exchange Commission (the SEC) rules, for inclusion in Populars annual proxy statement. The Audit Committee was established in accordance with the requirements of the Securities Exchange Act of 1934. |
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CORPORATE GOVERNANCE AND NOMINATING COMMITTEE
Members: Joaquín E. Bacardí, III Alejandro M. Ballester (Chair) Maria Luisa Ferré William J. Teuber, Jr.
Independence: Each member of the committee is independent
Meetings in 2017: 5
Charter last revised: January 26, 2018 |
Primary Responsibilities:
The Corporate Governance and Nominating Committee is responsible for:
exercising general oversight with respect to the governance of the Board;
identifying and recommending individuals qualified to become Board members and recommending director nominees and committee members to the Board;
reviewing and reporting to the Board on matters of corporate governance and developing and recommending to the Board a set of corporate governance principles applicable to Popular;
leading the Board and assisting its committees in the annual assessment of their performance; and
recommending to the Board the form and amount of compensation for Populars directors.
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10 | 2018 PROXY STATEMENT
RISK MANAGEMENT COMMITTEE
Members: Joaquín E. Bacardí, III John W. Diercksen David E. Goel C. Kim Goodwin (Chair) William J. Teuber, Jr.
Independence: Each member of the committee is independent
Meetings in 2017: 11
Charter last revised: January 26, 2018 |
Primary Responsibilities:
Assists the Board in the oversight of:
Populars overall risk management framework; and
the monitoring, review and approval of the policies and procedures that measure, limit and manage Populars main risks, including operational, liquidity, interest rate, market, legal, compliance and credit risks. |
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COMPENSATION COMMITTEE
Members: David E. Goel Maria Luisa Ferré (Chair) William J. Teuber, Jr. Carlos A. Unanue
Independence: Each member of the committee is independent
Meetings in 2017: 5
Charter last revised: December 14, 2017 |
Primary Responsibilities:
Discharges the Boards responsibilities, subject to review by the full Board, relating to:
compensation of Populars Executive Chairman, CEO and all other executive officers;
adoption of policies that govern Populars compensation and benefit programs;
overseeing plans for executive officer development and succession;
overseeing, in consultation with management, compliance with federal, state and local laws as they affect compensation matters;
considering, in consultation with the CRO, whether the incentives and risks arising from the compensation plans for all employees are reasonably likely to have a material adverse effect on Popular and taking necessary actions to limit any risks identified as a result of the risk-related reviews; and
reviewing and discussing with management the Compensation Discussion and Analysis Section for Populars annual proxy statement in compliance with and to the extent required by applicable law, rules and regulations.
Compensation Committee Interlocks and Insider Participation:
None of the members of the Compensation Committee is or has been an officer or employee of Popular. In addition, none of our executive officers is, or was during 2017, a member of the board of directors or compensation committee (or other committee serving an equivalent function) of another company that has, or had during 2017, an executive officer serving as a member of our Compensation Committee. Other than as disclosed in the Certain Relationships and Transactions section of this Proxy Statement, none of the members of the Compensation Committee had any relationship with Popular requiring disclosure under Item 404 of Regulation S-K.
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2018 PROXY STATEMENT | 11
MEMBERSHIP IN BOARD COMMITTEES
Name
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Audit
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Compensation
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Corp. Gov. & Nominating
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Risk
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Class 1 |
Ignacio Alvarez
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Alejandro M. Ballester
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Richard L. Carrión
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Carlos A. Unanue
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Class 2 |
Joaquín E. Bacardí, III
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John W. Diercksen
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David E. Goel
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Class 3 |
Maria Luisa Ferré
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C. Kim Goodwin
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William J. Teuber, Jr. (Lead Director)
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Member | Chair | Financial Expert |
BOARD OVERSIGHT OF RISK MANAGEMENT
While management has primary responsibility for managing risk, the Board has a significant role in the risk oversight of Popular. The Board performs its risk oversight functions directly and through several Board committees, each of which oversees the management of risks that fall within its areas of responsibility, as described below. In discharging their responsibilities, Board committees have full access to management and independent advisors as they deem necessary or appropriate. Whenever it is deemed appropriate, management gives presentations to the full Board in connection with specific risks, such as those related to compliance and information security, among others. The principal roles and responsibilities of the Board committees in the oversight of risk management are described below:
Risk Management |
Responsibilities:
Review, approve and oversee managements implementation of Populars risk management program and related policies, procedures and controls to measure, limit and manage Populars risks, including operational, liquidity, interest rate, market, legal, compliance and credit risks, while taking into consideration their alignment with Populars strategic and capital plans.
Review and approve Populars capital plans.
Review and discuss with management Populars major financial risk exposures and the steps taken by management to monitor and control such exposures.
Review and receive reports on selected risk topics as management or the committee may deem appropriate.
After each meeting, report to the full Board regarding its activities.
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12 | 2018 PROXY STATEMENT
Audit Committee |
Responsibilities:
Oversight of accounting and financial reporting principles and policies, internal controls and procedures, and controls over financial reporting.
Review reports from management, independent auditors, internal auditors, compliance group, legal counsel, regulators and outside experts, as considered appropriate, that include risks Popular faces and Populars risk management function.
Evaluate and approve the annual risk assessment of the Internal Audit Division, which identifies the areas to be included in the annual audit plan.
After each meeting, report to the full Board regarding its activities.
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Compensation Committee |
Responsibilities:
Establish Populars executive compensation and other incentive-based compensation programs, taking into account the risks to Popular that such programs may pose.
Periodically evaluate, in consultation with the CRO, whether the incentives and risks arising from Populars compensation plans for all employees are likely to have a material adverse effect on Popular.
Take such action as the Committee deems necessary to limit any risks identified as a result of the risk-related reviews.
After each meeting, report to the full Board regarding its activities.
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Criteria for Nomination
✓ | Personal qualities and characteristics, accomplishments and reputation in the business community. |
✓ | Current knowledge and contacts in the communities in which Popular does business and in Populars industry or other industries relevant to Populars business. |
✓ | Ability and willingness to commit adequate time to Board and committee matters. |
✓ | The fit of the individuals skills and personality with those of other directors and potential directors in building a Board that is effective, collegial and responsive to the needs of Popular. |
✓ | Diversity of viewpoints, background, experience and other demographic factors. |
2018 PROXY STATEMENT | 13
BOARD DIVERSITY
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DIRECTORS EXPERIENCE AND SKILLS
The main skills and experience of our director nominees are presented below:
Global Business Experience |
Senior Management and Leadership Experience
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Business Operation Experience |
Financial, Investment and M&A | |||||||||
Audit and Risk Oversight Experience
|
Financial Expertise/ Literacy
|
Marketing and Media Communications
|
Telecommunications
| |||||||||
Technology Systems Experience
|
Public Company Governance Experience
|
Distribution and Sales
|
Knowledge and Understanding of Populars Main Markets
|
80% are female or ethnically diverse 1 is African-American 6 are Hispanic 1 is Asian 2 are women Tenure Years of Service 0-5 6-10 11-15 >15 Average tenure: 9.5 yrs. Independence 80% Independent (all directors are independent except the Executive Chairman and the CEO and President) Age Retirement Age: 72 Average Age: 57 0 2 4 6 46-50 51-55 56-60 61-65 66-70
14 | 2018 PROXY STATEMENT
WHERE TO FIND MORE INFORMATION ON GOVERNANCE
Popular maintains a corporate governance section on its website at www.popular.com/en/investor-relations/ where investors may find copies of its principal governance documents. The corporate governance section of Populars website contains, among others, the following documents:
| ||||||
✓ | Code of Ethics
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✓ |
Risk Committee Charter | |||
✓ | Audit Committee Charter
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✓ | Corporate Governance Guidelines
| |||
✓ | Corporate Governance and Nominating Committee Charter | ✓ | Insider Trading Policy | |||
✓ |
Compensation Committee Charter
|
16 | 2018 PROXY STATEMENT
Directors and Executive Officers
NOMINEES FOR ELECTION AS DIRECTORS AND OTHER DIRECTORS
Information relating to directors participation in Populars committees, age, principal occupation, business experience during the past five years (including positions held with Popular or its subsidiaries and the period during which each director has served in such capacity), directorships and qualifications is set forth below. All of Populars directors are also directors of the following subsidiaries of Popular: Banco Popular de Puerto Rico (BPPR), Popular North America, Inc. and Banco Popular North America, which operates under the name Popular Community Bank.
NOMINEES FOR ELECTION CLASS 1 DIRECTORS (TERMS EXPIRING 2018)
Director since July 2017
Age 59 |
IGNACIO ALVAREZ
BACKGROUND
Chief Executive Officer of Popular, BPPR and Popular Community Bank since July 2017. President of Popular, BPPR and Popular Community Bank since October 2014 and Chief Operating Officer of Popular and BPPR from October 2014 to July 2017. Executive Vice President and Chief Legal Officer of Popular from June 2010 to September 2014. President and CEO of Popular North America, Inc. and other direct and indirect wholly-owned subsidiaries of Popular. Director of Popular since July 2017 and of BPPR and Popular Community Bank since October 2014. Member of the Board of Trustees of Fundación Banco Popular, Inc. and of Popular Community Bank Foundation, Inc. since November 2015.
QUALIFICATIONS
Prior to joining Popular in 2010 as Chief Legal Officer, Mr. Alvarez was one of the six founding partners of the law firm Pietrantoni Méndez & Alvarez LLC, one of Puerto Ricos principal law firms. During his 27 years in private law practice, his main areas of expertise included banking, corporate and commercial law, corporate and public finance law, securities and capital markets. As President and Chief Operating Officer, Mr. Alvarez demonstrated his solid strategic and analytical skills, understanding of the markets in which we operate, business acumen and strength as a leader, delivering positive results in our Puerto Rico business despite challenging conditions and overseeing the repositioning of our operations in the United States. Mr. Alvarezs understanding of the Corporation and excellent business skills, as well as his background as an attorney with vast experience on corporate matters, including regulatory and corporate governance, have proven to be a great asset. |
2018 PROXY STATEMENT | 17
Director since 2010
Age 51
Committees
Audit Corporate Governance & Nominating (Chair) |
ALEJANDRO M. BALLESTER
BACKGROUND
President of Ballester Hermanos, Inc., a major food and beverage distributor in Puerto Rico, since 2007.
QUALIFICATIONS
Mr. Ballester has a comprehensive understanding of Puerto Ricos consumer products and distribution industries acquired through over 27 years of experience at Ballester Hermanos, Inc., a privately-owned business dedicated to the importation and distribution of grocery products, as well as beer, liquors and wine for the retail and food service trade in Puerto Rico. As of December 31, 2017, Ballester Hermanos had approximately $118 million in assets and annual revenues of approximately $320 million. Mr. Ballester is familiar with the challenges faced by family-owned businesses, which constitute an important market segment for Populars commercial banking units. He has proven to be a successful entrepreneur establishing the food service division of Ballester Hermanos in 1999, which today accounts for 35% of the firms revenues. During 2009, he was a director of the Government Development Bank for Puerto Rico and member of its audit and investment committees where he obtained experience in overseeing a variety of fiscal issues related to various government agencies, instrumentalities and municipalities. The experience, skills and understanding of the Puerto Rico economy and government financial condition acquired by Mr. Ballester have been of great value to the Board. |
Director since 1991
Age 65
Chairman since 1993
Executive Chairman since July |
RICHARD L. CARRIÓN
BACKGROUND
Executive Chairman of Popular since July 2017. CEO of Popular from 1994 to June 2017 and President from 1991 to January 2009 and from May 2010 to September 2014. Executive Chairman of BPPR since July 2017, Chairman since 1993 and CEO from 1989 to June 2017. President of BPPR from 1985 to 2004 and from May 2010 to September 2014. Chairman and CEO, until June 2017, of Popular North America, Inc. and other direct and indirect wholly-owned subsidiaries of Popular. Executive Chairman of BPNA since July 2017 and Chairman since 1998. Director of the Federal Reserve Bank of New York from January 2008 to December 2015. Chairman of the Board of Trustees of Fundación Banco Popular, Inc. since 1991. Chairman and Director of Popular Community Bank Foundation, Inc. since 2005. Member of the Board of Directors of Verizon Communications, Inc. since 1995. Member of the International Olympic Committee since 1990 and Chairman of the International Olympic Committee Finance Commission from 2002 to 2013. Managing Member of RCA3 Investments, LLC, an entity engaged in financial consulting since October 2017. Chairman of the Board of Vall Banc, an Andorra-based bank, since October 2017. Member of the of the Supervisory Board of NIBC Holding N.V. and NIBC Bank N.V., both entities engaged in banking in the Netherlands, since September 2017.
QUALIFICATIONS
Mr. Carrións 42 years of banking experience, 33 heading Popular, Puerto Ricos largest financial institution, give him a unique level of knowledge of the Puerto Rico financial system. Mr. Carrión is a well-recognized leader with a vast knowledge of the Puerto Rico economy, and is actively involved in major efforts impacting the local economy. His knowledge of the financial industry led him to become a director of the Federal Reserve Bank of New York for eight years. |
18 | 2018 PROXY STATEMENT
Director since 2010
Age 54
Committees
Compensation Audit |
CARLOS A. UNANUE
BACKGROUND
President of Goya de Puerto Rico, Inc. since 2003 and of Goya Santo Domingo, S.A. since 1994, food processors and distributors.
QUALIFICATIONS
Mr. Unanue has 31 years of experience at Goya Foods, Inc., a privately-held family business with operations in the United States, Puerto Rico, Spain and the Dominican Republic that is dedicated to the sale, marketing and distribution of Hispanic food, as well as to the food processing and canned food manufacturing business. Through his work with Goya Foods, Mr. Unanue has developed a profound understanding of Populars two main markets, Puerto Rico and the United States. His experience in distribution, sales and marketing has provided him with the knowledge and experience to contribute to the development of Populars business strategy, while his vast experience in management at various Goya entities has allowed him to make valuable contributions to the Board in its oversight functions. |
CLASS 2 DIRECTORS (TERMS EXPIRING 2019)
Director since 2013
Age 52
Committees
Corporate Governance & Nominating Risk |
JOAQUÍN E. BACARDÍ, III
BACKGROUND
Chairman and majority shareholder of Edmundo B. Fernández, Inc., a privately held producer and distributor of rum since November 2017. Private investor since 2016. President and Chief Executive Officer of Bacardi Corporation, a privately held business and major producer and distributor of rum and other spirits, from April 2008 to April 2016.
QUALIFICATIONS
On November 2017, Mr. Bacardí completed the acquisition of Edmundo B. Fernández, Inc., a 137 year old privately owned rum company. Mr. Bacardí has extensive experience in the development and implementation of international marketing, sales and distribution strategies acquired throughout more than 24 years at various Bacardi companies and 3 years as Product Manager of Nestlé of Puerto Rico. As President and Chief Executive Officer of Bacardi Corporation, Mr. Bacardí directed and managed all business operations with full profit and loss responsibilities and government relations for Bacardi in the Caribbean, Mexico, Central and South America. Prior to becoming President and Chief Executive Officer of Bacardi Corporation, Mr. Bacardí held positions in various Bacardi enterprises where, among other things, he was responsible for the development of all global communication strategies for Bacardi Limiteds whisky portfolio, with total sales of approximately $400 million, and supervision of marketing for all Bacardi brands globally. Mr. Bacardís vast experience in business operations in Puerto Rico and across various international markets, as well as his expertise in global communication strategies, have been of great benefit to the Board. |
2018 PROXY STATEMENT | 19
Director since 2013
Age 68
Committees
Audit (Financial Expert) Risk |
JOHN W. DIERCKSEN
BACKGROUND
Principal of Greycrest, LLC, a privately-held financial and operational advisory services company, since October 2013. Chief Executive Officer of Beachfront Wireless LLC, a privately-held investment entity organized to participate in a Federal Communications Commission airwaves auction, from December 2015 to November 2016, when it was sold. Senior Advisor at Liontree Investment Advisors, an investment banking firm, since April 2014. Executive Vice President of Verizon Communications, Inc. from January 2013 to September 2013. Director of Harman International Industries, Incorporated, an audio and infotainment equipment company, from June 2013 to June 2017, when it was sold, Intelsat, S.A., a communications satellite services provider, since September 2013 and Cyxtera Technologies, an entity that provides data center services, since May 2017.
QUALIFICATIONS
Mr. Diercksen has 29 years of experience in the communications industry. During his tenure at Verizon, a global leader in delivering consumer, enterprise wireless and wire line services, as well as other communication services, Mr. Diercksen was responsible for key strategic initiatives related to the review and assessment of potential mergers, acquisitions and divestitures and was instrumental in forging Verizons strategy of technology investment and repositioning its assets. He possesses a vast experience in matters related to corporate strategy, mergers, acquisitions and divestitures, business development, venture investments, strategic alliances, joint ventures and strategic planning. Mr. Diercksens extensive senior leadership experience, together with his financial and accounting expertise, position him well to advise the Board and senior management on a wide range of strategic and financial matters. |
Director since 2012
Age 48
Committees
Compensation Risk |
DAVID E. GOEL
BACKGROUND
Co-Founder and Managing General Partner of Matrix Capital Management Company, LP since 1999. Member of the Board of Directors of Univision Communications, Inc., a privately held media company, until January 2018 and of Adaptive Biotechnologies, Inc., a privately held company specializing in T-cell sequencing and immunotherapy since August 2016. Trustee of Philips Exeter Academy since 2013, of the Museum of Fine Arts, Boston, since 2010 and of The Winsor School, in Boston, Massachusetts, since April 2016.
QUALIFICATIONS
During his 25-year career as a fundamentals-focused value investor, Mr. Goel has developed a comprehensive understanding of corporate finance, venture capital and public investing. Having founded Matrix Capital Management in 1999, Mr. Goel has built an 19-year investment track record. Through sound and responsible investing for the Matrix Fund, he gained valuable insight into global financial markets and corporate best practices. His experience in the investment management industry allows him insight into the needs of the financial services business, providing extensive knowledge of risk management and corporate governance to the Board. Mr. Goels service as a fund manager, trustee, and board member of other organizations provides him with a unique expertise and global perspective to assist the Board with its oversight of Popular. |
20 | 2018 PROXY STATEMENT
CLASS 3 DIRECTORS (TERMS EXPIRING 2020)
Director since 2004
Age 54
Committees
Compensation (Chair) Corporate Governance & Nominating |
MARIA LUISA FERRÉ
BACKGROUND
President and CEO of FRG, Inc., a diversified family holding company with leading operations in media, real estate, contact centers and distribution in Puerto Rico, the United States and Chile, since 2001. Member of the Board of Directors of GFR Media, LLC since 2003 and Chair from 2006 to February 2016. Publisher of El Nuevo Día, Puerto Ricos most widely read and influential newspaper, and Primera Hora since 2006. Member of the Board of Directors of W.R. Berkley Corporation, an insurance holding company, since May 2017. President and Trustee of The Luis A. Ferré Foundation, Inc. since 2003. Trustee and Vice President of the Ferré Rangel Foundation, Inc. since 1999. President of the Board of Directors of Multisensory Reading Center of PR, Inc. since 2012. Member of the Latin American Caribbean Fund of The Museum of Modern Art since 2013 and of the Smithsonian National Board since 2017. Member of the Board of Directors of Endeavor Puerto Rico since January 2018 and of the Advisory Board of Boys & Girls Club of Puerto Rico since 2017.
QUALIFICATIONS
Ms. Ferré has 16 years of experience as the President and CEO of FRG, Inc., the largest communications and media group in Puerto Rico, with consolidated assets of approximately $310 million and annual net revenues of approximately $189 million as of December 31, 2017. She holds positions as director and officer of numerous entities related to FRG, Inc. She also serves as director and trustee of philanthropic and charitable organizations related to fine arts and education. As a result of these experiences, Ms. Ferré possesses a deep understanding of Populars main market and has developed management and oversight skills that allow her to make significant contributions to the Board. She also provides thoughtful insight regarding the communications needs of Popular.
|
|||||||
Director since 2011
Age 58
Committees
Risk (Chair) Audit (Financial Expert) |
C. KIM GOODWIN
BACKGROUND
Private investor since 2008. Non-executive director of PineBridge Investments, LLC, a global asset management boutique with over $88 billion in assets under management, since May 2011, and Chair of its Audit Committee. Director of Akamai Technologies, Inc., a technology and Internet corporation, from October 2008 to May 2013, and prior to that from January 2004 to November 2006, and member of the Audit Committee from 2004 to 2006 and from 2008 to 2011. Trustee-Director of various equity funds within the Allianz Global Investors family of funds from June 2010 to October 2014.
QUALIFICATIONS
Ms. Goodwins experience as chief investment officer at several global financial services firms provides the Board with insight into the perspective of institutional investors. Her analytical skills and understanding of global financial markets have proved to be valuable assets. As Head of Equities at Credit Suisse Asset Management from 2006 to 2008, Ms. Goodwin oversaw enterprise risk functions for her global department. Through her experiences as a member of the Audit Committee of Akamai Technologies, Chair of the Audit Committee of PineBridge Investments and Chair of Populars Risk Management Committee, Ms. Goodwin has developed profound knowledge of the risks related to our business. She has also developed expertise in identifying, assessing and managing risk exposure, successfully leading the Boards efforts on risk oversight. Finally, Ms. Goodwin also provides Popular with valuable insight regarding the use of technology by financial firms. |
2018 PROXY STATEMENT | 21
Director since 2004
Age 66
Lead Director
Committees
Audit (Chair and Financial Expert)
Risk
Compensation
Corporate Governance & Nominating |
WILLIAM J. TEUBER, JR.
BACKGROUND
Private investor since October 2016. Senior Operating Principal of Bridge Growth Partners, LLC, a private equity firm, since November 2016. Vice Chairman of EMC Corporation, a provider of information technology infrastructure solutions, from May 2006 to September 2016, when Dell Technologies acquired the company. Director of CRH Plc, a global diversified building materials group based in Ireland, since March 2016. Director of Inovalon Holdings, Inc., a provider of data driven healthcare solutions, since April 2013.
QUALIFICATIONS
Mr. Teuber has significant financial and financial reporting expertise, which he acquired as a Partner in Coopers & Lybrand LLP from 1988 to 1995 and then as Chief Financial Officer of EMC Corporation from 1996 to 2006. At EMC he demonstrated vast management and leadership skills as he led EMCs worldwide finance operation and was responsible for all of its financial planning and reporting, balance sheet management, foreign exchange, audit, tax, treasury, investment banking, governance and investor relations function. As Vice Chairman of EMC, he focused on strategy and business development in emerging markets, assisted with government relations and worked closely with the Board of Directors. In addition, he worked closely with EMCs Chairman, President and CEO in the day to day management of EMC as well as with the companys executive team to develop future leaders of the company. Mr. Teubers significant financial and accounting expertise, vast management experience and skills developed throughout the years that he provided strategic direction at a multinational public company provide the Board with invaluable insight and a unique global perspective. |
22 | 2018 PROXY STATEMENT
The following information sets forth the names of our executive officers, their age, business experience and directorships during the past five years, as well as the period during which each such person has served as executive officer of Popular.
|
RICHARD L. CARRIÓN AGE: 65
Mr. Carrión has been Chairman of the Board since 1993. He has served as Executive Chairman of Popular since July 2017, as CEO from 1994 to June 2017 and as President from 1991 to January 2009 and from May 2010 to September 2014. For additional information, please refer to the Nominees for Election as Directors and Other Directors section of this Proxy Statement. |
|
IGNACIO ALVAREZ AGE: 59
Mr. Alvarez has been Chief Executive Officer of the Corporation since July 2017 and President and Chief Operating Officer since October 2014. Prior to that he was Executive Vice President and Chief Legal Officer of Popular from June 2010 to September 2014. For additional information, please refer to the Nominees for Election as Directors and Other Directors section of this Proxy Statement. |
|
CAMILLE BURCKHART AGE: 38
Ms. Burckhart has been Executive Vice President and Chief Information and Digital Officer of Popular since July 2015. Prior to becoming Executive Vice President, Ms. Burckhart was the Senior Vice President in charge of the Technology Management Division from December 2010 to June 2015. She has been a member of the Board of Directors of Nuestra Escuela since August 2016. |
|
LUIS E. CESTERO AGE: 44
Mr. Cestero has been Executive Vice President of BPPR in charge of the Retail Banking Group since July 2017. Prior to becoming Executive Vice President, Mr. Cestero was the Senior Vice President in charge of Retail Banking Administration from May 2009 to June 2017. |
2018 PROXY STATEMENT | 23
|
MANUEL CHINEA AGE: 52
Mr. Chinea has been Executive Vice President of Popular since January 2016 and Chief Operating Officer of Popular Community Bank since February 2013. Prior to becoming Chief Operating Officer of Popular Community Bank, from April 2012 to January 2013, he was Executive Vice President and Chief Marketing and Product Executive at CertusBank. He has served as a Member of the Board of Trustees of Popular Community Bank Foundation, Inc. since October 2013, member of the Board of Directors of the Hispanic Federation, since June 2016 and member of the Board of Junior Achievement New York since October 2017 |
|
JAVIER D. FERRER AGE: 56
Mr. Ferrer has been the Executive Vice President, Chief Legal Officer and Secretary of the Board of Directors of Popular since October 2014 and a Director of BPPR since March 2015. Prior to joining Popular, Mr. Ferrer was a Partner at Pietrantoni Méndez & Alvarez LLC, a San Juan, Puerto Rico based law firm, were he worked from September 1992 to December 2012 and from August 2013 to September 2014. From January 2013 to July 2013, Mr. Ferrer served as President of the Government Development Bank for Puerto Rico and Vice Chairman of its Board of Directors as well as Chairman of the Economic Development Bank for Puerto Rico. From March 2001 to December 2012 and from September 2013 to September 2014, Mr. Ferrer was Secretary of the Board of Directors of the First Puerto Rico Family of Funds, which, as of September 2014, was comprised of 17 funds. |
|
JUAN O. GUERRERO AGE: 58
Mr. Guerrero has been an Executive Vice President of BPPR in charge of the Financial and Insurance Services Group since April 2004. He has been a Director of Popular Securities LLC since 1995, Popular Insurance LLC since 2004 and of other subsidiaries of Popular. Mr. Guerrero has served as a Director of SER de Puerto Rico since December 2010 and the Puerto Rico Open since October 2016. |
|
GILBERTO MONZÓN AGE: 58
Mr. Monzón has been an Executive Vice President of BPPR in charge of the Individual Credit Group since October 2010. He has also served as Member of the Board of Directors of the San Jorge Childrens Hospital Professional Board since 2011, Member of the Government Relations Council of the American Bankers Association since 2013 and director of the Center for a New Economy and of the Coalition for the Prevention of Colorectal Cancer of Puerto Rico since 2014. |
24 | 2018 PROXY STATEMENT
|
EDUARDO J. NEGRÓN AGE: 53
Mr. Negrón has been Executive Vice President of Popular since April 2008 and has been in charge of the Administration Group since December 2010. He became Chairman of Populars Benefits Committee on April 2008. He has served as Member of the Board of Trustees and Treasurer of Fundación Banco Popular, Inc. and of the Popular Community Bank Foundation, Inc. since March 2008. Mr. Negrón has been a Director of Fundación Angel Ramos since April 2012 and Chairman of its Investment and Finance Committee since March 2014. He has also been Director and Treasurer of the Fundación Puertoriqueña de las Humanidades since June 2017. |
|
ELI S. SEPÚLVEDA AGE: 55
Mr. Sepúlveda has been Executive Vice President of Popular since February 2010 and of BPPR since December 2009. He has been the supervisor in charge of the Commercial Credit Group in Puerto Rico since January 2010. Mr. Sepúlveda has been a member of the Board of Managers of the Puerto Rico Idea Seed Fund, LLC since December 2016. |
|
LIDIO V. SORIANO AGE: 49
Mr. Soriano has been the Executive Vice President and Chief Risk Officer of Popular since August 2011 and a Director of BPPR and Popular Community Bank since October 2014. |
|
CARLOS J. VÁZQUEZ AGE: 59
Mr. Vázquez has been the Chief Financial Officer of Popular since March 2013. He was President of Popular Community Bank from September 2010 to September 2014 and has been Executive Vice President of Popular since February 2010 and Senior Executive Vice President of BPPR since 2004. He has served as Director of BPPR and of Popular Community Bank since October 2010. He has been Vice Chairman of the Board of Directors of Popular Community Bank Foundation since November 2010, Director of the Federal Home Loan Bank of New York since November 2013 and Member of the National Board of Directors of Operation Hope since 2012. |
2018 PROXY STATEMENT | 25
2018 PROXY STATEMENT | 27
28 | 2018 PROXY STATEMENT
2018 PROXY STATEMENT | 29
30 | 2018 PROXY STATEMENT
Compensation Discussion and Analysis
In this section, we describe the key features of Populars executive compensation program and the factors that we considered in making 2017 compensation decisions regarding our named executive officers (NEOs).
For 2017, Populars NEOs were:
|
||
Richard L. Carrión |
Executive Chairman of the Board of Directors, since July 1, 2017 (formerly Chief Executive Officer through June 30, 2017)
| |
Ignacio Alvarez |
President & Chief Executive Officer (CEO), since July 1, 2017 (formerly President and Chief Operating Officer (COO) through June 30, 2017)
| |
Carlos J. Vázquez |
Executive Vice President and Chief Financial Officer (CFO)
| |
Javier D. Ferrer |
Executive Vice President and Chief Legal Officer (CLO)
| |
Lidio V. Soriano |
Executive Vice President and Chief Risk Officer (CRO)
| |
Eli S. Sepúlveda |
Executive Vice President, Commercial Credit Group, Banco Popular de Puerto Rico
|
Popular reports its financial results in accordance with generally accepted accounting principles in the United States (GAAP). A reconciliation of the GAAP to non-GAAP financial measures referred to below is provided in Appendix B to this Proxy Statement. This discussion includes statements regarding financial and operating performance targets in the specific context of Populars executive compensation program. Shareholders should not read these statements in any other context.
During 2017, we demonstrated the continued strength of our franchise while operating in a challenging economic environment impacted by the unprecedented destruction and disruption caused by hurricanes Irma and Maria. Prior to the hurricanes, the Corporations annual net income result was projected to achieve payout under our incentive program. Notwithstanding the hurricanes impact, we persevered to achieve year-over-year growth in our net interest income, stable credit indicators and strong capital levels. BPPRs Puerto Rico and Virgin Islands operations have substantially recovered from the impact of the storms. We also experienced high loan demand in our U.S. operation, with a 16% growth in commercial loans.
2018 PROXY STATEMENT | 31
2017 CORPORATE HIGHLIGHTS
Some of Populars key corporate accomplishments during 2017 included the following:
2017 FINANCIAL SUMMARY
Our 2017 net income was $107.7 million, reflecting the adverse effect of the hurricanes and the U.S. Tax Cut and Jobs Acts impact on the value of Populars U.S. deferred tax asset (DTA). To provide meaningful information about the underlying performance of our ongoing operations, the $168.4 million DTA write-down is added back to net income to express our results on an adjusted net income basis, which is a non-GAAP measure; on this basis,
32 | 2018 PROXY STATEMENT
Hurricanes Irma & Maria In September 2017, hurricanes Irma and Maria devastated Puerto Rico and the U.S. and British Virgin Islands causing catastrophic damage to infrastructure, including communications, fuel supplies, electric power and water. Immediately following the disaster, our main priority was to ensure the safety and wellbeing of our colleagues and support the stabilization and recovery needs of the most impacted communities. In the face of this dire crisis, our employees responded bravely and selflessly in support of their colleagues and communities, distributing survival supplies and restoring essential financial services that serve as the lifeline of economic activity. Within one week after hurricane Maria, our employees had reopened 32% of branches and made 24% of ATMs operational. By December 93% of our 177 branches were open and 82% of our 655 ATMs were operational. Also, our digital channels were not interrupted by the hurricanes. Following the hurricanes, we offered a 3-month payment moratorium for consumer, mortgage, and commercial loans and temporarily waived ATM surcharges and late payment fees. We increased our Employee Emergency Fund to support those colleagues that suffered severe hurricane damage. Credit Quality Non-performing loans decreased by $7 million (1%) compared to 2016. Non-performing assets as a percentage of total assets decreased from 2.0% at December 2016 to 1.7% at December 2017. We are closely monitoring asset quality measures on our loan portfolios and the moratorium granted to certain consumers and commercial borrowers. Capital Strategy In 2017, our quarterly common stock dividend increased from $0.15 to $0.25/share, and we executed a common stock repurchase of $75 million. Our capital levels remained robust, with year-end Common Equity Tier 1 capital equal to 16.3%. Puerto Rico Business We currently serve 1.68 million customers, reflecting an increase of 2% from 2016. Total deposits rose $4.3 billion (17%) from 2016. Net interest margins remained strong at 4.32%. Our commercial and auto loan portfolios increased during 2017. BPPRs commercial loan portfolio, excluding run-off from the Westernbank portfolio, increased by $135 million during the year, and auto loans grew by $122 million (8%). We remain focused on providing innovative solutions to our customers through our digital transformation. Digital deposits captured 40% of total deposit transactions, and Mi Banco active customers reached 751,000 in 2017, up 8% from 2016. United States Business Our total loan portfolio grew by 11%, mainly driven by a 16% increase in the commercial loan portfolio. We expanded our consumer lending to U.S. customers through initiatives such as White Label credit card alliances. We launched our private banking initiative to fulfill our customers credit, deposit, financial advisory and investment needs. Digital deposit transactions increased to 43% of all deposits in December 2017 from 35% in December 2016. Organizational Excellence We completed several initiatives to protect corporate assets, ensure cyber-security and mitigate against fraud (including chip technology on credit and debit cards). Our 3rd wave of Populars Leadership Academy was conducted, ensuring a robust pool of top-quality leadership talent. The 4th wave of our LEAN Six Sigma Academy was launched, providing employees with tools to seize opportunities to improve efficiency and customer satisfaction. We enhanced our employees physical, emotional and financial well-being through expanded services in our Health and Wellness Center, mindfulness programs and an increase in Populars savings plan matching contribution. Social Commitment Through Fundación Banco Popular and Popular Community Bank Foundation, valuable financial and in-kind assistance was provided to areas severely impacted by the hurricanes in Puerto Rico and the Virgin Islands. Over 500,000 pounds of water, food and medical supplies were disbursed to provide immediate relief to the most affected communities with the support of employees. We launched the Embracing Puerto Rico initiative, contributed to the Unidos por Puerto Rico fundraising campaign and co-sponsored the Somos Una Voz concert which raised $35 million for earthquake victims in Mexico, and hurricane victims in Texas, Florida, Puerto Rico and the Caribbean.
our adjusted net income was $276.0 million. In addition, as outlined later, the Board of Directors Compensation Committee (the Committee) decided to make further net income adjustments, directly attributable to the hurricanes impact that was beyond the Corporations control, for purposes of certain incentive awards; on this basis, our after-tax adjusted net income for incentives was $348.7 million. Refer to the GAAP to non-GAAP reconciliation in Appendix B.
Popular (BPOP) shares closed 2017 at $35.49, 19% lower than 2016. This performance compared negatively against our U.S. peers, which increased by 6%, and the KBW Nasdaq Regional Banking Index (KRX), which remained relatively unchanged, but compared favorably to other Puerto Rico banks. Despite concerns about Puerto Ricos economic and fiscal situation, including the Commonwealths May 3rd, 2017 bankruptcy filing under Title III of the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA), for the first nine months of 2017 the price of Populars shares correlated to the movement of the mainland KRX. However, following the impact of Hurricane Maria in September, Populars share price was severely affected, closing the year at levels below our U.S. peers and the KRX. During the first eight weeks of 2018, Populars share price increased by 21%, while the aggregate share price of the KRX, our U.S. peers and other Puerto Rico peer banks rose by 4%, 8% and 20%, respectively.
As described below, our executive compensation programs are designed to reward the achievement of annual and long-term goals that generate sustained company performance and strong returns to our shareholders.
OUR 2017 EXECUTIVE COMPENSATION PROGRAM AND ORGANIZATIONAL CHANGES
2018 PROXY STATEMENT | 33
2017 EXECUTIVE COMPENSATION PROGRAM
Target Incentive Opportunity
% of Base Pay
Short-Term (Cash) Incentive % of Base Pay
| ||||||||||||||||||||||
Richard L. Carrión |
Ignacio Alvarez |
|||||||||||||||||||||
CEO Jan. - Jun. |
Executive Chairman Jul. - Dec. |
President & COO Jan. - Jun. |
President & CEO Jul. - Dec. |
Other NEOs Jan.- Dec. | ||||||||||||||||||
Popular, Inc. Net Income
|
30.0%
|
25.0%
|
27.5%
|
30.0%
|
25.0%
| |||||||||||||||||
Annual Goals (Financial/Non-Financial)
|
50.0%
|
45.0%
|
45.0%
|
50.0%
|
40.0%
| |||||||||||||||||
Leadership
|
20.0%
|
15.0%
|
17.5%
|
20.0%
|
15.0%
| |||||||||||||||||
Total Short-Term (% of base pay)
|
100.0%
|
85.0%
|
90.0%
|
100.0%
|
80.0%
| |||||||||||||||||
Long-Term (Equity) Incentive % of Base Pay
| ||||||||||||||||||||||
Richard L. Carrión |
Ignacio Alvarez |
|||||||||||||||||||||
CEO Jan. - Jun. |
Executive Chairman Jul. - Dec. |
President & COO Jan. - Jun. |
President & CEO Jul. - Dec. |
Other NEOs Jan. - Dec. | ||||||||||||||||||
Performance Shares ( 1⁄2 Total Shareholder Return and 1⁄2 Earnings per Share) |
80.0% | 42.5% | 50.0% | 92.5% | 40.0% | |||||||||||||||||
Restricted Stock
|
80.0%
|
42.5%
|
50.0%
|
92.5%
|
40.0%
| |||||||||||||||||
Total Long-Term (% of base pay)
|
160.0%
|
85.0%
|
100.0%
|
185.0%
|
80.0%
| |||||||||||||||||
Total Short- and Long-Term Incentives
|
260.0%
|
170.0%
|
190.0%
|
285.0%
|
160.0%
| |||||||||||||||||
34 | 2018 PROXY STATEMENT
The following key features of our executive compensation program reflect our focus on balanced performance-based pay, long-term shareholder value and prudent risk taking:
WHAT WE DO | ||
✓ |
Use various performance metrics to deter excessive risk-taking by eliminating any incentive focus on a single performance goal. Also, the Committee may adjust incentive payouts if results are not aligned with Populars risk appetite and related tolerances. | |
✓ |
Balance short-term (cash) and long-term (equity) compensation to discourage short-term risk taking at the expense of long-term results. | |
✓ |
Use equity incentives to promote total return to shareholders, company performance and executive retention. | |
✓ |
Hold a portion of equity vesting until retirement, thereby reinforcing long-term risk management and alignment with shareholder interests. | |
✓ |
Apply clawback features to all executive officer variable pay in the event of a financial results restatement, a performance metric found to be materially inaccurate, or an executives misconduct.
| |
✓ |
Employ double-trigger vesting of equity awards in the event of a change of control (i.e., vesting is only triggered upon a qualifying termination of employment following a change of control). | |
✓ |
Conduct annual incentives and sales practices risk reviews in conjunction with Populars Chief Risk Officer. | |
✓ |
Engage an independent compensation consultant who advises and reports directly to the Committee. | |
✓ |
Require significant stock ownership from our executive officers. Our Executive Chairman and CEO have a requirement of six times their base salary, and the other NEOs must own three times their base salary. | |
WHAT WE DONT DO | ||
× |
No tax gross-ups provided for any compensation or benefits. | |
× |
No special executive retirement programs and no severance programs specific to executive officers. | |
× |
No speculative transactions in Popular securities by executive officers is permitted, including: hedging and monetization transactions, such as zero-cost collars, forward sale contracts and short sales; equity swaps; options; and other derivative transactions. | |
×
|
No pledging of common stock as collateral for margin accounts or for loans (except as grandfathered with respect to certain loans). | |
×
|
No employment or change of control agreements with our NEOs. | |
× |
No excessive perquisites for executives. |
COMPENSATION OBJECTIVES AND COMPONENTS
MOTIVATE AND REWARD HIGH PERFORMANCE
2018 PROXY STATEMENT | 35
As depicted in the following charts, our NEOs 2017 target incentive program had a strong focus on performance and shareholder alignment.
The bars below illustrate the components of each NEOs total target compensation opportunity (fixed pay plus variable performance-based pay). The variable portion of 63% for the Executive Chairman, 74% for the President and CEO and 62% for the other NEOs represents at-risk pay whose actual payout depends on company and individual performance. A breakdown of the target incentive elements is provided in the section titled Our 2017 Executive Compensation Program and Organizational Changes.
PAY MIX IN THE COMPENSATION PROGRAM
Each element, at target, as a % of base pay
36 | 2018 PROXY STATEMENT
Short-term Incentive Annual cash award linked to the corporate and business unit results, individual goals and leadership competencies. 100% Cash Incentive Aligned with pay-performance; based on Popular, Inc. net income results, each NEOs individual goals and leadership competencies. 50% Performance Shares One-half of the target equity award consists of performance shares, with actual earned shares determined at the end of a 3-year performance period: 1/2 based on Total Shareholder Return (TSR) - relative to an index of banks. 1/2 based on Earnings Per Share (EPS) an absolute 3-year cumulative goal. 50% Restricted Stock One-half of the target equity award is restricted stock granted upon consideration of corporate and individual performance. Supports NEO stock ownership and retention. Shares vest 20% annually over 4 years, holding the remaining 20% to vest upon retirement Long-term Incentive Annual equity grant that rewards performance and aligns Populars NEOs with the interests of our shareholders.
ALIGN EXECUTIVES WITH SHAREHOLDER INTERESTS AND BUILD LONG-TERM SHAREHOLDER VALUE
2017 Say on Pay Results
ATTRACT AND RETAIN HIGHLY QUALIFIED EXECUTIVES
2018 PROXY STATEMENT | 37
The following key components of our compensation program, combined with strong succession and development initiatives, drive our ability to secure top executive-level talent over the long term.
COMPENSATION COMPONENTSPURPOSE AND KEY DESIGN FEATURES
|
Base Pay
|
|||||||
Fixed compensation to reflect each executives role, contribution and performance, which provides the foundation of the total compensation program on which other incentives and benefits are based.
The reference point for base salaries is the median of the competitive market, with the ability to vary to reflect each executives performance, experience and contributions. |
||||||||
Executive Benefits and Perquisites
|
||||||||
Intended to represent an immaterial portion of total compensation, consistent with shareholder expectations and best practices. |
||||||||
|
Short-Term Cash Incentive
|
|||||||
Short-term incentive represents a balance of performance measures that are aligned with Populars annual goals and business strategy.
Annual incentive opportunity is targeted near the market median.
Actual pay depends on the achievement of performance goals (financial, operational, strategic and individual leadership).
Incentive plan has appropriate mitigating features to dissuade undue risk taking or improper sales practices (e.g., multiple measures, award caps, internal controls and compliance protocols, etc.). |
||||||||
Long-Term Equity Incentive
|
||||||||
Directly aligns executive interests with shareholders.
Annual long-term incentive opportunity is targeted near the market median.
Target award combines equal portions of performance-based and time-based vesting.
Measures and rewards long-term performance.
Allocated upon consideration of performance and potential.
Promotes retention of key executive talent through multi-year vesting, including a portion that vests upon retirement. |
||||||||
2017 COMPENSATION PROGRAM AND PAY DECISIONS
BASE SALARY
Effective July 2017, the Committee approved base pay adjustments for Messrs. Carrión and Alvarez related to their respective changes in organizational role. Mr. Carrións base salary was reduced in connection with his ceasing to be CEO and assuming the role of Executive Chairman, and Mr. Alvarezs base salary was increased when he assumed the position of President and CEO. Upon consideration of market-competitive pay for similar roles, and in consultation with its independent compensation consultant, the Committee approved the adjustments outlined below:
NEO | New Base Salary |
% of adjustment |
||||||
Richard L. Carrión
|
$
|
1,200,000
|
|
|
(14.3%
|
)
| ||
Ignacio Alvarez
|
|
900,000
|
|
|
25.9%
|
|
During 2017, no other base pay adjustments were made for the other NEOs.
38 | 2018 PROXY STATEMENT
Variable Fixed
SHORT- AND LONG-TERM INCENTIVE COMPENSATION OPPORTUNITY
Incentive opportunities under the executive compensation program for 2017, as a percent of base pay, are presented below. The short-term incentive targets and related parameters for the Executive Chairman and CEO reflect a prorated opportunity based on 6 months in the former role and 6 months in the new role.
Component | Level of Achievement |
Executive R. Carrión |
President / I. Alvarez |
Other NEOs | ||||||||||||||||||||||||||||
|
|
| ||||||||||||||||||||||||||||||
<Threshold
|
0.0%
|
0.0%
|
0%
| |||||||||||||||||||||||||||||
Corporate Net Income | Threshold (85%)
|
13.8%
|
13.9%
|
10%
| ||||||||||||||||||||||||||||
Target
|
27.7%
|
28.9%
|
25%
| |||||||||||||||||||||||||||||
Max (115%)
|
41.5%
|
43.9%
|
40%
| |||||||||||||||||||||||||||||
<Threshold
|
0.0%
|
0.0%
|
0%
| |||||||||||||||||||||||||||||
Individual Annual
Goals (financial/non-financial) |
Threshold
|
23.8%
|
23.9%
|
20%
| ||||||||||||||||||||||||||||
Target
|
47.7%
|
47.8%
|
40%
| |||||||||||||||||||||||||||||
Max
|
71.5%
|
71.7%
|
60%
| |||||||||||||||||||||||||||||
Min
|
0.0%
|
0.0%
|
0%
| |||||||||||||||||||||||||||||
Leadership | Target
|
17.7%
|
18.9%
|
15%
| ||||||||||||||||||||||||||||
Max
|
26.5%
|
27.8%
|
20%
| |||||||||||||||||||||||||||||
<Threshold
|
0.0%
|
0.0%
|
0%
| |||||||||||||||||||||||||||||
Total Short-Term Incentive | Threshold
|
37.6%
|
37.8%
|
30%
| ||||||||||||||||||||||||||||
Target
|
93.1%
|
95.6%
|
80%
| |||||||||||||||||||||||||||||
Max
|
139.5%
|
143.4%
|
120%
| |||||||||||||||||||||||||||||
For the long-term incentive, the parameters below indicate the prevailing structure at the time of grant in February 2017, before the role and compensation changes were implemented.
| ||||||||||||||||||||||||||||||||
<Threshold
|
0%
|
0%
|
0%
| |||||||||||||||||||||||||||||
Equity IncentivePerformance Shares | Min
|
40%
|
25%
|
20%
| ||||||||||||||||||||||||||||
Target
|
80%
|
50%
|
40%
| |||||||||||||||||||||||||||||
Max
|
120%
|
75%
|
60%
| |||||||||||||||||||||||||||||
<Threshold
|
0%
|
0%
|
0%
| |||||||||||||||||||||||||||||
Equity IncentiveRestricted Stock | Threshold
|
40%
|
25%
|
20%
| ||||||||||||||||||||||||||||
Target
|
80%
|
50%
|
40%
| |||||||||||||||||||||||||||||
Max
|
120%
|
75%
|
60%
| |||||||||||||||||||||||||||||
<Threshold
|
0%
|
0%
|
0%
| |||||||||||||||||||||||||||||
Total Long-Term Incentive | Threshold
|
80%
|
50%
|
40%
| ||||||||||||||||||||||||||||
Target
|
160%
|
100%
|
80%
| |||||||||||||||||||||||||||||
Max
|
240%
|
150%
|
120%
| |||||||||||||||||||||||||||||
<Threshold
|
0.0%
|
0.0%
|
0.0%
| |||||||||||||||||||||||||||||
Consolidated Total | Threshold
|
117.7%
|
87.8%
|
70.0%
| ||||||||||||||||||||||||||||
Target
|
253.1%
|
195.6%
|
160.0%
| |||||||||||||||||||||||||||||
Max
|
379.6%
|
293.4%
|
240.0%
|
2018 PROXY STATEMENT | 39
SHORT-TERM ANNUAL CASH INCENTIVE FOR 2017 (PAID IN 2018)
Our short-term incentive rewards the achievement of annual financial and non-financial goals that reinforce our business strategy and strategic priorities, as well as the demonstration of our leadership competencies. Actual payouts depend on performance and are capped at 1.5 times the target award. Certain threshold levels of performance are required to be achieved for any payouts to be awarded.
Awards are earned based on level of achievement of 2017 net income, as adjusted, pre-established goals and leadership.
The Committee assessed and awarded the 2017 short-term cash incentive as follows:
Corporate Adjusted Net Income Component
As previously discussed, 2017 was marked by significant corporate achievements in terms of loan and deposit growth, digital transformation, organizational excellence and continued strong capital levels. Prior to Hurricanes Irma and Maria, our annual net income was projected to achieve payout under this award component. In the past, we have used adjusted after-tax net income (a non-GAAP measure) for incentive compensation purposes, because we believe it better reflects the underlying performance of our ongoing operations.
In determining the 2017 adjusted after-tax net income for incentive purposes, the Committee, in consultation with its independent compensation consultant, viewed the combined effect of the hurricanes as an unprecedented catastrophic event that was outside the Companys control and not in the normal course of business. Therefore, for incentive purposes, the Committee decided to adjust its GAAP net income result for: (i) the previously described deferred tax asset write-down, and (ii) expenses specifically attributable to the hurricanes (net of insurance receivables) pertaining to the provision for loan losses, operating expenses and foregone revenue. For information about how we calculated 2017 net income for incentive compensation purposes, see Appendix B. The Committee believes that these adjustments result in a level of net income that more appropriately reflects Populars underlying business trends and recognizes the senior management teams performance during this extraordinarily challenging year.
The adjusted net income for incentive purposes of $348.7 million represented 94.2% of the 2017 target of $370.2 million, thereby yielding a partial award on this component of the short-term annual cash incentive, as follows: 22.3% of base pay for the Executive Chairman, 23.1% for the CEO and 19.2% for the other NEOs, reflecting below-target payouts related to net income performance.
40 | 2018 PROXY STATEMENT
Individual Annual Goals Component
In this individual performance component of the executive compensation program, the Committee assessed the achievements and effectiveness of each NEO against predetermined quantitative and qualitative goals related to financial performance, efficiency, milestones in key corporate strategic projects, etc. The following considerations were taken into account by the Committee in determining each NEOs award, expressed as a percent of base pay:
NEO % of Base Pay Earned |
||
Richard L. Carrión
CEO: January-June
Executive Chairman: July-December
38.2% of base pay |
Main Goals
Manage impact of the fiscal and economic situation in Puerto Rico.
Direct Populars capital strategy.
Oversee the execution of the Corporations business strategy.
Ensure that Popular has the right talent and systems to successfully execute its strategy.
Considerations
Led the Corporation through the fiscal and economic situation in Puerto Rico, closely monitoring the potential impact on customers, effectively managing the credit exposure to the government, identifying potential business opportunities, and continuing outreach efforts with key stakeholders. Directed negotiations for the $1.8 billion auto and commercial loan acquisition from Wells Fargos auto finance business in Puerto Rico announced in February 2018.
Guided the execution of the Corporations capital strategy, including an increase in the quarterly common stock dividend from $0.15 to $0.25 per share and the repurchase of $75 million in common stock. The Corporations capital base remained strong, closing the year with a Common Equity Tier 1 ratio of 16.3 percent.
Supported initiatives aligned with the Corporations business strategy. The Corporations leadership position in Puerto Rico was further strengthened, achieving an increase in the number of clients (reaching 1.68 million), a 17% year-over-year deposit growth and, in some segments, loan growth, despite economic weakness and the impact of the 2017 hurricanes. In the United States, Popular achieved strong commercial loan growth (16%), launched initiatives to grow fee income and continued making progress in the transformation of the retail branch network.
Supported recovery efforts for affected employees and communities in the aftermath of the hurricanes, and led our Puerto Rico and U.S. Foundations fundraising and community assistance initiatives.
Effectively supported the CEO transition plan in close collaboration with Populars new CEO.
Spearheaded efforts to attract, develop and retain talent, launching or strengthening initiatives in areas such as performance management, training, diversity and inclusion and wellness. Continued initiatives to simplify and modernize Populars technology infrastructure to drive efficiencies and improve our customers experience. | |
Ignacio Alvarez
President & COO: January-June
President & CEO: July-December
52.1% of base pay |
Main Goals
Maintain financial performance amid the impact of Puerto Ricos unstable fiscal and economic situation.
Improve Popular Community Banks profitability.
Continue cost savings and process optimization and initiatives.
Manage recovery efforts after the impact of hurricanes Maria and Irma.
Considerations
Delivered solid business results in Puerto Rico, despite the hurricanes financial impact. Maintained strong interest margins (4.32% in Puerto Rico and 3.99% for the Corporation) and stable credit quality. Grew our leading market position, including raising our deposit balances by $4.3 billion and increasing our customer base by 31,500. Achieved growth in commercial and auto loan portfolios, notwithstanding the difficult economic environment.
Directed efforts to manage the bank through Puerto Ricos fiscal and economic situation, including reducing direct credit exposure to the government and continued outreach to government officials, regulators, investors and clients.
|
2018 PROXY STATEMENT | 41
NEO % of Base Pay Earned |
||
Led negotiations and internal and external coordination among multiple stakeholders for the $1.8 billion auto and commercial loan acquisition from Wells Fargos auto finance business in Puerto Rico announced in February 2018.
Grew Populars U.S. operations strategically without departing from our desired risk appetite through focused loan and low-cost deposit growth, launching of initiatives to drive fee income and continuing the transformation of the retail network. Achieved a 16% growth in commercial loans, launched a private banking initiative and strengthened our mortgage origination capabilities.
| ||
Directed digital transformation initiatives to improve efficiency and convenience; digital deposit transactions surpassed 40% of total deposits in Puerto Rico and the U.S. in December 2017.
Guided multiple initiatives to increase our operational efficiency and promote a high-performance organization centered in the areas of performance management, engagement, wellness and leadership development.
Drove efforts to control salary expense and reduce fraud losses, while investing in strengthening risk controls and in new business initiatives.
Successfully managed recovery efforts to restore operations in Puerto Rico and the Virgin Islands after the passage of Hurricanes Irma and Marĺa by effectively addressing the needs of our clients, employees and regulators.
Achieved a smooth transition to the CEO role by working closely with Populars Executive Chairman.
| ||
Carlos J. Vázquez
45.4% of base pay |
Main Goals
Support business growth and efficiency initiatives.
Complete and file Populars stress test and the resulting capital plan.
Mentor and guide the Talent Management strategic project.
Manage and maintain adequate liquidity and capital resources.
Considerations
Guided the analysis, structuring and negotiation of multiple asset acquisition and business growth initiatives, including the $1.8 billion auto and commercial loan acquisition from Wells Fargos auto finance business in Puerto Rico announced in February, 2018.
Directed the completion and filing of the 2017 DFAST stress test.
Executed the increase in common stock dividend from $0.15 to $0.25 per share and $75 million common stock buyback, in line with the capital plan.
Continued to maintain strong liquidity in our Puerto Rico and U.S. banking subsidiaries, with minimal reliance on wholesale funding.
Guided key strategic initiatives related to talent management and leadership development. Assumed responsibility for the Strategic Sourcing and Procurement Division and the implementation of its strategic plan.
Led aggressive investor outreach efforts (including a steady increase in sell-side analyst events since 2015), achieving additional analyst coverage and enhancements to investor information. | |
Javier D. Ferrer
45.4% of base pay |
Main Goals
Support and advise management on Populars strategic and business initiatives, including material asset acquisitions, growth initiatives and new business ventures.
Strengthen legal function and manage external legal expenses.
Considerations
Provided strategic and legal advice on numerous strategic initiatives and critical legal matters throughout the year, including commercial and regulatory aspects. Major projects included the $1.8 billion auto and commercial loan acquisition from Wells Fargos auto finance business in Puerto Rico announced in February, 2018.
Strengthened partnerships between the Legal Group and business and support units to provide more efficient input, collaboration and oversight of initiatives.
Reorganized the legal function to leverage Populars legal resources and manage legal risk while aligning with business needs.
Led and enhanced expense management efforts, resulting in a 62% year-over-year reduction in outside legal expenses and below-budget internal legal operating expenses.
Drove improvements to corporate governance and disclosure practices. |
42 | 2018 PROXY STATEMENT
NEO % of Base Pay Earned |
||
Lidio V. Soriano
39.0% of base pay |
Main Goals
Implement enhancements to Populars compliance, financial, operational, model validation, and credit risk programs.
Guide technology initiatives to bolster our risk management framework.
Enhance quantitative analytics resources within the organization.
Considerations
Guided the policies, procedures and controls which yielded stable credit quality during the years challenging economic environment.
Expanded business continuity planning and testing under a wide range of potential situations, including disaster recovery implementation during hurricanes Irma and Maria.
Guided multiple large-scale technology enhancements to support anti-money laundering, risk data management and business continuity.
Led the betterment of models and processes related to stress testing.
Directed framework enhancements in the areas of compliance, financial, operational, credit, loan review, and model validation risks.
Supported and directed development of internal quantitative analytics expertise in the areas of model validation and compliance. | |
Eli S. Sepulveda
46.5% of base pay |
Main Goals
Grow commercial deposits and loan portfolio.
Manage commercial credit quality.
Support strategic initiatives promoting entrepreneurship. | |
Considerations
Oversaw credit underwriting standards, including credit review and risk rating accuracy, resulting in improved commercial credit performance.
Despite the Puerto Rico fiscal situation, credit quality remained stable year-over-year, with commercial net charge-offs at 0.31% (vs. 0.28% in 2016) and commercial non-performing loans flat at 2.22%.
Facilitated recovery efforts to mitigate charge-offs.
Oversaw initiatives to grow the commercial portfolio, with $1 billion in new money transactions originated. Managed a $3.4 billion year-over-year (December) increase in commercial deposits.
Developed projects to boost startup businesses throughout a diverse range of industries and municipalities. |
Leadership Component
2018 PROXY STATEMENT | 43
TOTAL EARNED 2017 SHORT-TERM CASH INCENTIVE
The following table summarizes the 2017 short-term cash incentive granted to the NEOs by the Committee, as a percent of base pay, related to the achievement of the corporate, individual and leadership goals described above:
NEO | Corporate Net Income |
Individual Performance |
Leadership | Total Earned (1) | Total Award ($) |
|||||||||||||||
Richard L. Carrión
|
|
22.3
|
%
|
|
38.2
|
%
|
|
17.7
|
%
|
|
78.2
|
%
|
|
$1,016,133
|
| |||||
Ignacio Alvarez
|
|
23.1
|
|
|
52.1
|
|
|
27.8
|
|
|
103.0
|
|
|
831,387
|
| |||||
Carlos J. Vázquez
|
|
19.2
|
|
|
45.4
|
|
|
15.0
|
|
|
79.6
|
|
|
537,030
|
| |||||
Javier D. Ferrer
|
|
19.2
|
|
|
45.4
|
|
|
15.0
|
|
|
79.6
|
|
|
437,953
|
| |||||
Lidio V. Soriano
|
|
19.2
|
|
|
39.0
|
|
|
15.0
|
|
|
73.2
|
|
|
365,764
|
| |||||
Eli S. Sepúlveda
|
|
19.2
|
|
|
46.5
|
|
|
15.0
|
|
|
80.7
|
|
|
363,050
|
|
(1) | Total target awards were 93.1% for Mr. Carrión, 95.6% for Mr. Alvarez and 80% for the other NEOs. |
LONG-TERM INCENTIVE FOR 2017 (GRANTED FEBRUARY 2017)
44 | 2018 PROXY STATEMENT
Restricted Stock | Performance Shares | Total Grant Date Fair Value | ||||||||||||||||
NEO | % of base pay |
$ | % of base pay |
$ | % of base pay |
$ | ||||||||||||
Richard L. Carrión
|
70.0%
|
|
$980,000
|
|
80.0%
|
|
$1,120,000
|
|
150.0%
|
|
$2,100,000
|
| ||||||
Ignacio Alvarez |
43.8
|
|
313,170
|
|
50.0
|
|
357,500
|
|
93.8
|
|
670,670
|
| ||||||
Carlos J. Vázquez
|
35.0
|
|
236,250
|
|
40.0
|
|
270,000
|
|
75.0
|
|
506,250
|
| ||||||
Javier D. Ferrer
|
35.0
|
|
192,500
|
|
40.0
|
|
220,000
|
|
75.0
|
|
412,500
|
| ||||||
Lidio V. Soriano
|
35.0
|
|
175,000
|
|
40.0
|
|
200,000
|
|
75.0
|
|
375,000
|
| ||||||
Eli S. Sepúlveda
|
35.0
|
|
157,500
|
|
40.0
|
|
180,000
|
|
75.0
|
|
337,500
|
|
Note: Total | target awards were 160% for Mr. Carrión, 100% for Mr. Alvarez and 80% for the other NEOs. |
SPECIAL EQUITY INCENTIVE AWARDED TO NEWLY APPOINTED CEO (GRANTED JUNE 2017)
In recognition of Mr. Alvarezs promotion to the position of CEO, in consultation with its independent compensation consultant, the Committee approved a special one-time restricted stock grant of $475,000. The Committee intended to raise Mr. Alvarezs 2017 total equity compensation to reflect the prorated value of his new long-term incentive target level. The grant corresponded to 12,202 shares (as per the closing price of $38.93 on the grant date of June 22, 2017), with vesting after Mr. Alvarezs completion of six months in his new role (January 1, 2018).
PERFORMANCE SHARES PAYOUT2015-2017 PERFORMANCE CYCLE
On February 27, 2015, the Committee approved a grant of performance shares designed to reward performance over the 3-year performance period (2015-2017). The potential payout of the 2015 performance shares ranged from 0%-150% of target, weighted 50% based on relative total shareholder return (TSR) among the comparative group and 50% based on absolute cumulative earnings per share (EPS) over the performance period. In January 2018, the Committee reviewed Populars 2015-2017 performance and determined the degree to which the goals were attained.
2015-2017 Relative TSR
Although the Company started 2017 (year 3 of the performance period) in the 58th percentile among banks with assets greater than $10 billion, its position relative to other banks in the comparative group declined during 2017 (particularly in the 4th quarter) due, significantly, to the effects of Puerto Ricos economic situation, federal tax reform, and Hurricanes Irma and Maria. Its final 3-year relative TSR of 15.2% ranked in the 5th percentile, below the threshold of the 25th percentile; therefore, no shares were earned for this component.
2015-2017 Absolute EPS, as Adjusted
Consistent with the previously described adjustments for special items applied to the GAAP net income results for our 2017 short-term annual cash incentive, the Committee adjusted Populars GAAP EPS results for 2015-2017. In addition, the Committee adjusted the 2017 EPS results to reverse the favorable impact of the $75 million common stock repurchase executed during the first quarter. For information about how we calculated adjusted EPS for purposes of the 2015-2017 performance shares, see Appendix B. The resulting 3-year cumulative EPS of $10.36 was between the threshold and target, yielding a payout of 58.7% of target on this component.
The above decisions yielded a payout of 29% of the total combined target number of performance shares that had been granted, as indicated below.
Payout (as Percentage of Target) 20152017 | ||||||||||||
Goal
|
0% of Target
|
50% of Target
|
100% Target
|
150% Target
|
Performance
|
Payout
| ||||||
Relative TSR (Weighted 50%)
|
< 25th Percentile
|
25th Percentile
|
50th Percentile
|
75th Percentile
|
5th Percentile (1)
|
0%
| ||||||
Absolute EPS (Weighted 50%)
|
< $10.25
|
$10.25
|
$10.88
|
$11.52
|
$10.36 (2)
|
58.7%
|
2018 PROXY STATEMENT | 45
Although the Committee exercises its independent judgment in reaching compensation decisions, it currently utilizes the advice of the following contributors:
Contributors | Role | |
Meridian Compensation Partners, LLC Compensation Committee Independent Advisor |
Provides independent advice and support to the Committee on relevant market trends, best practices in compensation governance, legislation and other requested compensation matters.
| |
Executive Chairman and President & CEO* |
Work with the Committee to ensure that the compensation programs are aligned with Populars strategic objectives. Discuss corporate strategy and business goals with the Committee, and provide feedback regarding NEO performance.
| |
Executive Vice President of Administration |
Supports the planning and conduct of Committee meetings. Advises on goal setting and performance evaluations, executive compensation and regulatory matters and proposes the design and modifications to the NEO compensation and benefit programs, plans and awards. Supports the annual risk assessment process.
| |
Chief Legal Officer |
Counsels on legal matters regarding compensation programs and regulatory affairs.
| |
Chief Accounting Officer/Corporate Comptroller |
Evaluates and advises on the compensation programs accounting and tax implications.
| |
Chief Risk Officer |
Reviews with the Committee all risk-related aspects of Populars incentive plans and sales practices.
| |
External Legal Counsel |
Provides information and advice on legal and regulatory aspects of executive compensation, employee benefits and board committee governance.
|
* Neither the Corporations Executive Chairman nor the President and CEO may be present during voting or deliberations on his or her respective compensation.
ROLE OF THE COMPENSATION CONSULTANT
2018 PROXY STATEMENT | 47
Peer Group
| ||
Associated Banc-Corp
|
New York Community Bancorp
| |
BankUnited, Inc.
|
Peoples United Financial
| |
BOK Financial Corporation
|
Signature Bank
| |
Comerica Incorporated
|
SVB Financial Group
| |
Commerce BancShares, Inc.
|
Synovus Financial Corp.
| |
Cullen/Frost Bankers Inc.
|
Umpqua Holdings Corporation
| |
East West Bancorp Inc.
|
Webster Financial Crop
| |
First Horizon National Corporation
|
Wintrust Financial Corporation
| |
First Republic Bank
|
Zions Bancorporation
|
OTHER ASPECTS OF OUR EXECUTIVE COMPENSATION PROGRAM
INCENTIVE RECOUPMENT GUIDELINE (CLAWBACK)
The Committee has established an Incentive Recoupment Guideline covering its executive officers and other employees designated by the Committee from time to time, which provides for the recoupment of certain cash- and equity-based incentive compensation awards and payments in the event of (i) a restatement of all or a portion of Populars financial statements; (ii) a performance goal or metric that is determined to be materially inaccurate; or (iii) an act or omission by the covered executive that constitutes misconduct.
TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION
As part of its role, the Committee considers the deductibility of executive compensation under Section 162(m) of the U.S. Internal Revenue Code. The Committee is cognizant of and will continue to consider the impact of the U.S. Tax Cuts and Jobs Act of 2017, which expanded the number of individuals covered by Section 162(m) of the Internal Revenue Code and eliminated the exception for performance-based compensation (generally effective beginning for the 2018 tax year) on the Companys compensation programs and design. In addition, for NEOs who are residents of Puerto Rico,
48 | 2018 PROXY STATEMENT
compensation is deductible for income tax purposes if it is reasonable. It is the Committees intention that the compensation paid to Populars NEOs be deductible, but the Committee reserves the ability to grant or pay compensation that is not deductible. For the fiscal year 2017, all NEOs were residents of Puerto Rico.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis (CD&A) with management and recommended to the Board that the CD&A be included in this Proxy Statement.
Respectfully submitted,
The Compensation Committee
Maria Luisa Ferré, Chair
David E. Goel
William J. Teuber, Jr.
Carlos A. Unanue
2018 PROXY STATEMENT | 49
2017 Executive Compensation Tables and
Compensation Information
The following table summarizes the compensation of our NEOs for the year ended December 31, 2017, which reflects the full year of the equity (stock) and non-equity (cash) components of our current executive compensation program.
Name and Principal Position | Year | Salary ($)(a) |
Bonus ($)(b) |
Stock Awards ($)(c) |
Non-Equity Incentive Plan Compensation ($)(d) |
Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(e) |
All Other Compensation ($)(f) |
Total ($) |
||||||||||||||||||||||||
Richard L. Carrión Executive Chairman since July 1, 2017 (formerly Chief Executive Officer)
|
|
2017
|
|
$
|
1,300,000
|
|
$
|
50,205
|
|
|
$2,100,000
|
|
|
$1,016,133
|
|
$
|
170,591
|
|
$
|
209,168
|
|
$
|
4,846,097
|
| ||||||||
2016 | 1,453,846 | 58,533 | 2,520,000 | 1,850,800 | | 266,141 | 6,149,320 | |||||||||||||||||||||||||
|
2015
|
|
|
1,400,000
|
|
|
58,528
|
|
|
2,800,000
|
|
|
2,276,073
|
|
|
|
|
|
281,848
|
|
|
6,816,449
|
| |||||||||
Ignacio Alvarez
President and Chief Executive Officer since July 1, 2017 (formerly President and Chief Operating Officer)
|
|
2017
|
|
|
807,500
|
|
|
37,535
|
|
|
1,145,670
|
|
|
831,387
|
|
|
|
|
|
40,846
|
|
|
2,862,938
|
| ||||||||
2016 | 742,500 | 29,822 | 804,375 | 845,155 | | 15,130 | 2,436,982 | |||||||||||||||||||||||||
|
2015
|
|
|
695,769
|
|
|
29,817
|
|
|
893,750
|
|
|
1,038,277
|
|
|
|
|
|
11,656
|
|
|
2,669,269
|
| |||||||||
Carlos J. Vázquez Executive Vice President and Chief Financial Officer
|
|
2017
|
|
|
675,000
|
|
|
28,225
|
|
|
506,250
|
|
|
537,030
|
|
|
47,055
|
|
|
21,089
|
|
|
1,814,649
|
| ||||||||
2016 | 700,962 | 28,220 | 607,500 | 709,250 | | 13,617 | 2,059,549 | |||||||||||||||||||||||||
|
2015
|
|
|
670,192
|
|
|
28,215
|
|
|
675,000
|
|
|
842,855
|
|
|
|
|
|
11,700
|
|
|
2,227,962
|
| |||||||||
Javier D. Ferrer Executive Vice President and Chief Legal Officer |
|
2017
2016 2015 |
|
|
550,000
571,154 550,000 |
|
|
22,932
22,927 22,922 |
|
|
412,500
495,000 550,000 |
|
|
437,953
477,950 583,697 |
|
|
|
|
|
13,693
14,296 10,162 |
|
|
1,437,078
1,581,327 1,716,781 |
| ||||||||
Lidio V. Soriano Executive Vice President and Chief Risk Officer
|
|
2017
2016 2015
|
|
|
500,000
519,231 476,923
|
|
|
20,863
20,858 20,853
|
|
|
375,000
450,000 500,000
|
|
|
365,764
526,500 617,300
|
|
|
|
|
|
12,855
12,524 8,734
|
|
|
1,274,482
1,529,113 1,623,810
|
| ||||||||
Eli S. Sepúlveda Executive Vice President Commercial Credit Group
|
|
2017
|
|
|
450,000
|
|
|
18,905
|
|
|
337,500
|
|
|
363,050
|
|
|
58,418
|
|
|
22,342
|
|
|
1,250,215
|
|
(a) | Includes salaries before deductions. On July 1, 2017, Mr. Alvarez, former President and Chief Operating Officer, was appointed President and Chief Executive Officer of the Corporation. Mr. Carrión, former Chief Executive Officer, was appointed Executive Chairman. In light of their new roles, Mr. Alvarez annualized base salary was increased to $900,000 and Mr. Carrións annualized base salary was reduced to $1,200,000. The base pay differences for the NEOs between 2015, 2016, and 2017 are attributable to the following: the calendar year 2016 contained 27 biweekly pay periods, as compared to 26 biweekly pay periods in 2015 and 2017. Annual salary as of December 31, 2017 was: R. Carrión, $1,200,000; I. Alvarez, $900,000; C. Vázquez, $675,000; J. Ferrer, $550,000; L. Soriano, $500,000; and E. Sepúlveda, $450,000. |
(b) | Includes Populars customary Christmas bonus provided to its Puerto Rico-based employees, equal to 4.17% of base pay. |
(c) | The awards reported in the Stock Awards column were provided in the form of restricted stock and performance shares, granted on February 24, 2017. The value in the column above represents the fair value of the restricted stock and performance shares determined in accordance with FASB ASC Topic 718 based on the closing price of Populars common stock on the grant date ($44.35) and the probable outcome of the applicable performance conditions. With regard to the restricted stock, 80% of the shares will vest (i.e., no longer be subject to forfeiture) in equal annual installments over four years, and the remaining 20% will vest upon retirement. The grant date fair value of the restricted stock award is as follows: R. Carrión, $980,000; I. Alvarez, $313,170; C. Vázquez, $236,250; J. Ferrer, $192,500; L. Soriano, $175,000; and E. Sepúlveda, $157,500. For Mr. Alvarez, it includes a one-time grant of $475,000 in restricted stock in recognition for his promotion to President and CEO, with a closing price of Populars common stock on the June 22, 2017 grant date of $38.93. |
The performance shares vest after the end of a 3-year performance cycle (2017-2019). The number of shares actually earned will depend on Populars achievement of goals related to: (i) TSR; and (ii) an absolute cumulative EPS goal. Each metric corresponds to one-half of the performance share incentive opportunity. Actual earned awards may range from 0 to 1.5 times the target opportunity based on performance. The amounts in the table reflect the target (or 100%) level of achievement, as follows: R. Carrión, $1,120,000; I. Alvarez, $357,500; C. Vázquez, $270,000; J. Ferrer, $220,000; L. Soriano, $200,000; and E. Sepúlveda, $180,000. The maximum potential value for each performance shares award is as follows: R. Carrión, $1,680,000; I. Alvarez, $536,250; C. Vázquez, $405,000; J. Ferrer, $330,000; L. Soriano, $300,000; and E. Sepúlveda, $270,000. |
(d) | The amounts reported in the Non-Equity Incentive Plan Compensation column reflect the amounts earned by each NEO under Populars annual short-term incentive. NEOs were eligible to participate in a 2017 annual cash incentive opportunity based on the achievement of their annual corporate, business unit and individual goals. The 2017 Compensation Program and Pay Decisions section of the Compensation Discussion and Analysis describes how the 2017 short-term incentive awards to the NEOs were determined. |
50 | 2018 PROXY STATEMENT
(e) | No additional benefits in the defined benefit Retirement and Restoration Plans were earned in 2017 as they have been frozen since 2009. This column contains the required accounting representation of the annual change in present value of the pension benefit as of December 31, 2017. With respect to 2015 and 2016, pursuant to proxy rules, the change in present value of accrued benefits is not reflected in this table since it decreased during the year, mainly due to the combined effect of a decrease in the discount rate used for measuring plan liabilities offset by changes in mortality assumptions. |
Present value for changes in pension value were determined using year-end Statement of Financial Accounting Standard Codification Topic 715, CompensationRetirement Benefits (ASC 715) assumptions with the following exception: payments are assumed to begin at the earliest possible retirement date at which benefits are unreduced. The age to receive retirement benefits with no reductions is 55 provided the participant has completed 10 years of service. Each participating NEO has reached the aforementioned unreduced retirement eligibility. |
(f) | The amounts reported in the All Other Compensation column reflect, for each NEO, the sum of (i) the incremental cost to Popular of all perquisites and other personal benefits, (ii) the amounts contributed by Popular to the Savings Plan, and (iii) the change in value of retiree medical insurance coverage. The following table outlines those perquisites received by those NEOs with an aggregate value exceeding $10,000: |
Types of Perquisites Received
|
Richard L. Carrión
|
Ignacio Alvarez
|
Carlos J. Vázquez
|
Javier D. Ferrer
|
Lidio V. Soriano
|
Eli S.
| ||||||
Non Work-Related Security (i)
|
X
|
X
|
||||||||||
Company-Owned Vehicle
|
X
|
X
|
X
|
X
|
X
|
X
| ||||||
Other (ii)
|
X
|
(i) | The incremental cost to Popular for the personal security of Messrs. Carrión and Alvarez was $194,186 and $23,460, respectively. |
(ii) | Includes benefits provided to certain NEOs, the value of which does not exceed the greater of $25,000 or 10% of the total amount of benefits received by each NEO, such as personal tickets to events sponsored by Popular. |
The following table shows Populars match under the Puerto Rico Savings and Investment Plan:
Employer Match to Savings Plan ($)
| ||
Richard L. Carrión
|
$8,250
| |
Ignacio Alvarez
|
8,250
| |
Carlos J. Vázquez
|
8,250
| |
Javier D. Ferrer
|
8,250
| |
Lidio V. Soriano
|
7,500
| |
Eli S. Sepúlveda
|
8,250
|
2018 PROXY STATEMENT | 51
The following table details all equity and non-equity plan-based awards granted to each of the NEOs during fiscal year 2017.
Estimated Future Payouts Under
|
Estimated Future Payouts Under Equity Incentive Plan Awards (b)
|
All Other
|
Grant Date
|
|||||||||||||||||||||||||||||||||
Name
|
Grant Date
|
Threshold ($)
|
Target ($)
|
Maximum ($)
|
Threshold (#)
|
Target (#)
|
Maximum (#)
|
|||||||||||||||||||||||||||||
Richard L. Carrión |
$2,100,000 | |||||||||||||||||||||||||||||||||||
2017 Short-Term Cash Incentive |
$490,000 | $1,210,000 | $1,815,000 | |||||||||||||||||||||||||||||||||
Restricted Stock |
24-Feb-17 | 22,097 | ||||||||||||||||||||||||||||||||||
Performance Shares
|
|
24-Feb-17
|
|
|
12,628
|
|
|
25,254
|
|
|
37,882
|
|
||||||||||||||||||||||||
Ignacio Alvarez |
1,145,670 | |||||||||||||||||||||||||||||||||||
2017 Short-Term Cash Incentive |
305,125 | 771,750 | 1,157,625 | |||||||||||||||||||||||||||||||||
Restricted Stock |
24-Feb-17 | 7,062 | ||||||||||||||||||||||||||||||||||
Restricted Stock |
22-Jun-17 | 12,202 | ||||||||||||||||||||||||||||||||||
Performance Shares
|
|
24-Feb-17
|
|
|
4,032
|
|
|
8,062
|
|
|
12,094
|
|
||||||||||||||||||||||||
Carlos J. Vázquez |
506,250 | |||||||||||||||||||||||||||||||||||
2017 Short-Term Cash Incentive |
202,500 | 540,000 | 810,000 | |||||||||||||||||||||||||||||||||
Restricted Stock |
24-Feb-17 | 5,327 | ||||||||||||||||||||||||||||||||||
Performance Shares
|
|
24-Feb-17
|
|
|
3,044
|
|
|
6,088
|
|
|
9,132
|
|
||||||||||||||||||||||||
Javier D. Ferrer |
412,500 | |||||||||||||||||||||||||||||||||||
2017 Short-Term Cash Incentive |
165,000 | 440,000 | 660,000 | |||||||||||||||||||||||||||||||||
Restricted Stock |
24-Feb-17 | 4,341 | ||||||||||||||||||||||||||||||||||
Performance Shares
|
|
24-Feb-17
|
|
|
2,482
|
|
|
4,962
|
|
|
7,444
|
|
||||||||||||||||||||||||
Lidio V. Soriano |
375,000 | |||||||||||||||||||||||||||||||||||
2017 Short-Term Cash Incentive |
150,000 | 400,000 | 600,000 | |||||||||||||||||||||||||||||||||
Restricted Stock |
24-Feb-17 | 3,946 | ||||||||||||||||||||||||||||||||||
Performance Shares
|
|
24-Feb-17
|
|
|
2,256
|
|
|
4,510
|
|
|
6,766
|
|
||||||||||||||||||||||||
Eli S. Sepúlveda |
337,500 | |||||||||||||||||||||||||||||||||||
2017 Short-Term Cash Incentive |
135,000 | 360,000 | 540,000 | |||||||||||||||||||||||||||||||||
Restricted Stock |
24-Feb-17 | 3,552 | ||||||||||||||||||||||||||||||||||
Performance Shares
|
|
24-Feb-17
|
|
|
2,030
|
|
|
4,060
|
|
|
6,090
|
|
(a) | This section includes the 2017 short-term cash incentive. The amounts shown in the Threshold column assume that the leadership component did not meet performance Threshold, but the NEOs are awarded with the minimum level for the Corporation and Business Unit goals; however, these portions are not guaranteed. The actual short-term annual incentive awards for 2017 performance were as follows: R. Carrión, $1,016,133; I. Alvarez, $831,387; C. Vázquez, $537,030; J. Ferrer, $437,953; L. Soriano, $365,764; and E. Sepúlveda, $363,050. |
Due to Mr. Alvarez new role as CEO effective July 1, 2017, the target opportunity under the short-term annual cash incentive was increased from 90% to 100% of his base salary. Mr. Carrións target opportunity under the short-term annual cash incentive was reduced from 100% to 85% of his base salary also effective July 1, 2017. The amounts shown in this section were prorated based on the corresponding plan design and salary that applied to their respective roles during the year. |
(b) | This section includes the performance shares awarded on February 24, 2017. The number of shares was determined based on the closing price of Populars common stock on the grant date of February 24, 2017 ($44.35). The shares will vest on the third anniversary of the grant date, subject to Populars achievement of certain performance goals during the performance cycle. The performance goals will be based on two performance metrics weighted equally: Total Shareholder Return and absolute cumulative Earnings Per Share. The performance cycle is a three-year period beginning on January 1 of the calendar year of the grant date and ending on December 31 of the third year. Each performance goal will have a defined minimum threshold (i.e., minimum result for which an incentive would be earned equal to one-half of target number of shares), target (i.e., result at which 100% of the incentive would be earned) and maximum level of performance (i.e., result at which 1.5 times the incentive target would be earned). |
(c) | This section includes the restricted stock awarded on February 24, 2017; the number of shares was determined based on the closing price of Populars common stock on the grant date of February 24, 2017 ($44.35). The shares will vest (i.e., no longer to be subject to forfeiture) as follows: 80% will vest in equal installments on each of the first four anniversaries of the grant date and 20% will vest upon retirement, defined as termination of employment after attaining age 55 with 10 years of service or age 60 with 5 years of service. This section also includes a one-time grant of 12,202 restricted stock for Mr. Alvarez in recognition for his promotion to President and CEO. The Compensation Committee awarded Mr. Alvarez a one-time grant of $475,000 in restricted stock based on the prorated value of his new long-term incentive target opportunity of 185% of his base salary. The grant corresponds to 12,202 shares based on the closing price of the Corporations common stock on the grant date of June 22, 2017, which was $38.93. The restricted stock was subject to forfeiture and restrictions on transferability until January 1, 2018, when it vested. |
(d) | The amounts reported in this column represent the grant date fair value of both performance shares and restricted stock. |
52 | 2018 PROXY STATEMENT
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
The following table sets forth certain information with respect to the value of all restricted stock and performance shares previously awarded to the NEOs (based on the closing price of Populars common stock as of December 29, 2017, the last trading day of 2017, which was $35.49).
Stock Awards | ||||||||||||||||
Name
|
Number of Shares or Units of Stock That Have Not Vested (#) (a) |
Market Value of Shares or Units of Stock That |
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) (b) |
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) |
||||||||||||
Richard L. Carrión
|
|
121,243
|
|
|
$4,302,914
|
|
|
70,764
|
|
|
$2,511,414
|
| ||||
Ignacio Alvarez
|
|
46,762
|
|
|
1,659,583
|
|
|
22,589
|
|
|
801,684
|
| ||||
Carlos J. Vázquez
|
|
26,697
|
|
|
947,477
|
|
|
17,060
|
|
|
605,459
|
| ||||
Javier D. Ferrer
|
|
21,264
|
|
|
754,659
|
|
|
13,902
|
|
|
493,382
|
| ||||
Lidio V. Soriano
|
|
19,331
|
|
|
686,057
|
|
|
12,637
|
|
|
448,487
|
| ||||
Eli S. Sepúlveda
|
|
16,546
|
|
|
587,218
|
|
|
10,887
|
|
|
386,380
|
|
(a) | Vesting dates of shares or units of stock that have not vested: |
2005
|
2006
|
2015 Restricted
|
2015 Shares
|
2016
|
2017
|
Total
|
||||||||||||||||||||||
Richard L. Carrión
|
|
6,069
|
|
|
6,931
|
|
|
30,207
|
|
|
10,429
|
|
|
45,510
|
|
|
22,097
|
|
|
121,243
|
| |||||||
Ignacio Alvarez
|
|
|
|
|
|
|
|
9,642
|
|
|
3,329
|
|
|
14,527
|
|
|
19,264
|
|
|
46,762
|
| |||||||
Carlos J. Vázquez
|
|
|
|
|
601
|
|
|
7,283
|
|
|
2,515
|
|
|
10,971
|
|
|
5,327
|
|
|
26,697
|
| |||||||
Javier D. Ferrer
|
|
|
|
|
|
|
|
5,934
|
|
|
2,049
|
|
|
8,940
|
|
|
4,341
|
|
|
21,264
|
| |||||||
Lidio V. Soriano
|
|
|
|
|
|
|
|
5,395
|
|
|
1,863
|
|
|
8,127
|
|
|
3,946
|
|
|
19,331
|
| |||||||
Eli S. Sepúlveda
|
|
|
|
|
70
|
|
|
4,532
|
|
|
1,565
|
|
|
6,827
|
|
|
3,552
|
|
|
16,546
|
|
(i) | The shares will vest upon termination of employment on or after age 55 and completing 10 years of service. |
(ii) | 80% of the shares will vest in equal installments on each of the first four anniversaries of the approval date (February 27, 2015) and 20% will vest upon retirement, defined as termination of employment after attaining age 55 with 10 years of service or age 60 with 5 years of service. |
(iii) | The number of shares shown in the tables above are actual shares earned based on the degree to which the goals were attained during the 20152017 performance cycle that ended on December 31st, 2017. The shares are subject to continued time-based vesting until February 27, 2018. The dividend equivalents earned and subject to continued time-based vesting until February 27, 2018, were as follows: R. Carrión, 578 shares; I. Alvarez, 185 shares; C. Vázquez, 140 shares; J. Ferrer, 114 shares; L. Soriano, 104 shares; and E. Sepúlveda, 87 shares. |
(iv) | 80% of the shares will vest in equal installments on each of the first four anniversaries of the grant date (January 27, 2016) and 20% will vest upon retirement, defined as termination of employment after attaining age 55 with 10 years of service or age 60 with 5 years of service. |
(v) | 80% of the shares will vest in equal installments on each of the first four anniversaries of the grant date (February 24, 2017) and 20% will vest upon retirement, defined as termination of employment after attaining age 55 with 10 years of service or age 60 with 5 years of service. For Mr. Alvarez, a portion of the restricted stock (12,202 shares) was subject to forfeiture and restrictions on transferability until January 1, 2018, when it became vested. |
2018 PROXY STATEMENT | 53
(b) | Vesting dates of unearned shares, units or other rights that have not vested: |
2016 Performance
|
2017
|
Total
|
||||||||||
Richard L. Carrión
|
|
45,510
|
|
|
25,254
|
|
|
70,764
|
| |||
Ignacio Alvarez
|
|
14,527
|
|
|
8,062
|
|
|
22,589
|
| |||
Carlos J. Vázquez
|
|
10,972
|
|
|
6,088
|
|
|
17,060
|
| |||
Javier D. Ferrer
|
|
8,940
|
|
|
4,962
|
|
|
13,902
|
| |||
Lidio V. Soriano
|
|
8,127
|
|
|
4,510
|
|
|
12,637
|
| |||
Eli S. Sepulveda
|
|
6,827
|
|
|
4,060
|
|
|
10,887
|
|
(i) | The number of performance shares shown in the tables above is based on achievement of target performance. The shares will vest on January 27, 2019, subject to the achievement of certain performance goals during the 20162018 performance cycle. Refer to note b of the Grants of Plan-Based Awards Table. |
(ii) | The number of performance shares shown in the tables above is based on achievement of target performance. The shares will vest on February 24, 2020, subject to the achievement of certain performance goals during the 20172019 performance cycle. Refer to note b of the Grants of Plan-Based Awards Table. |
OPTION EXERCISES AND STOCK VESTED TABLE FOR 2017
The following table includes certain information with respect to the vesting of stock awards during 2017.
Stock Awards
|
||||||||
Number of Shares
|
Value Realized
|
|||||||
Richard L. Carrión |
|
21,447
|
|
|
$962,576
|
| ||
Ignacio Alvarez
|
|
6,846
|
|
|
307,259
|
| ||
Carlos J. Vázquez
|
|
5,170
|
|
|
232,038
|
| ||
Javier D. Ferrer
|
|
4,213
|
|
|
189,086
|
| ||
Lidio V. Soriano
|
|
3,830
|
|
|
171,897
|
| ||